<PAGE>
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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Morgan Stanley Group Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[X] 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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
MORGAN STANLEY GROUP INC.
1585 BROADWAY
NEW YORK, NEW YORK 10036
February 26, 1996
Dear Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of Morgan Stanley Group Inc. The meeting will be held on Wednesday, April 3,
1996 at 9:30 A.M. at 1585 Broadway, 41st Floor, New York, New York. We hope
that you will be able to attend. Enclosed you will find a notice setting forth
the business expected to come before the meeting, the Proxy Statement, a form
of proxy and a copy of the Company's 1995 Annual Report.
Whether or not you plan to attend the meeting in person, your shares should
be represented and voted at the meeting. Accordingly, after reading the
enclosed Proxy Statement, kindly complete, sign, date and promptly return the
proxy in the enclosed self-addressed envelope. No postage is required if it is
mailed in the United States. If you later decide to attend the meeting and
wish to vote your shares personally, you may revoke your proxy at any time
before it is exercised.
Very truly yours,
/s/ Richard B. Fisher
Richard B. Fisher
Chairman
/s/ John J. Mack
John J. Mack
President
<PAGE>
MORGAN STANLEY GROUP INC.
1585 BROADWAY
NEW YORK, NEW YORK 10036
----------------
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
February 26, 1996
The 1996 Annual Meeting of Stockholders of Morgan Stanley Group Inc. (the
"Company") will be held at 1585 Broadway, 41st Floor, New York, New York on
Wednesday, April 3, 1996 at 9:30 A.M. for the following purposes:
1. To elect directors.
2. To consider and vote upon the proposal to approve the Company's 1995
Equity Incentive Compensation Plan.
3. To consider and vote upon the proposal to amend the Restated
Certificate of Incorporation to increase from 300,000,000 to 600,000,000
the total number of shares of Common Stock, par value $1.00 per share,
which the Company will have the authority to issue.
4. To approve the selection of Ernst & Young LLP as independent auditors.
5. To transact such other business as may properly come before the
meeting.
The record date for the determination of stockholders entitled to vote with
respect to this solicitation is the close of business on February 7, 1996.
By Order of the Board of Directors,
/s/ Jonathan M. Clark
Jonathan M. Clark
General Counsel and Secretary
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Introduction.......................................................... 1
Election of Directors................................................. 3
Board of Directors Meetings, Committees and Fees...................... 5
Stock Ownership of Management......................................... 6
Principal Stockholders................................................ 7
Stockholders' Agreement............................................... 8
Interest of Management in Certain Transactions........................ 9
Compensation of Executive Officers.................................... 10
Compensation Committee Report on Executive Officer Compensation....... 14
Compensation Committee Interlocks and Insider Participation........... 18
Performance Graph..................................................... 19
The 1995 Equity Incentive Compensation Plan........................... 20
Amendment to the Restated Certificate Relating to the Number of
Authorized Shares of Common Stock.................................... 25
Appointment of Independent Auditors................................... 25
Stockholder Proposals................................................. 25
Other Matters......................................................... 25
Morgan Stanley Group Inc. 1995 Equity Incentive Compensation Plan..... Annex A
Amendment to the Restated Certificate Relating to the Number of
Authorized Shares of Common Stock.................................... Annex B
</TABLE>
<PAGE>
MORGAN STANLEY GROUP INC.
1585 BROADWAY
NEW YORK, NEW YORK 10036
----------------
PROXY STATEMENT
----------------
INTRODUCTION
This Proxy Statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Morgan Stanley Group Inc., a Delaware
corporation (together with its consolidated subsidiaries, the "Company",
unless the context indicates otherwise), to be used at the 1996 Annual Meeting
of Stockholders of the Company to be held on Wednesday, April 3, 1996 at 9:30
A.M. and at any adjournments thereof. The approximate date on which this Proxy
Statement and the accompanying form of proxy are first being sent to
stockholders is February 26, 1996.
Holders of the Company's Common Stock, par value $1.00 per share (the
"Common Stock"), as of the close of business on February 7, 1996 will be
entitled to vote at the 1996 Annual Meeting. On that date, there were
154,087,313 shares of Common Stock outstanding (excluding treasury shares),
each of which is entitled to one vote with respect to each matter to be voted
on at the meeting. The Company's transfer books will not be closed. In
addition, on February 7, 1996 there were 3,750,783 outstanding shares of the
Company's ESOP Convertible Preferred Stock (the "ESOP Stock"), each of which
is entitled to 2.7 votes with respect to each matter to be voted on at the
meeting. Generally, the Common Stock and the ESOP Stock vote together as a
single class.
A proxy in the accompanying form that is properly executed, duly returned
and not subsequently revoked will be voted in accordance with instructions
contained thereon. If no instructions are given with respect to the matters to
be acted on, proxies will be voted as follows: for the election of the
nominees for directors named below, for the approval of the Company's 1995
Equity Incentive Compensation Plan (the "1995 Equity Incentive Compensation
Plan"), for the approval of an amendment (the "Authorized Common Stock
Amendment") to the Restated Certificate of Incorporation, as amended (the
"Restated Certificate"), increasing the number of authorized shares of Common
Stock, for the approval of the selection of Ernst & Young LLP as independent
auditors of the Company and otherwise in accordance with the judgment of the
person or persons voting the proxy on any other matter properly brought before
the meeting.
A stockholder who executes a proxy (other than a proxy granted pursuant to
the Voting Agreements referred to below) may revoke it at any time before it
is exercised by giving written notice to the General Counsel and Secretary of
the Company, by subsequently filing another proxy or by attending the 1996
Annual Meeting and voting in person.
Each proposal (other than the Authorized Common Stock Amendment) presented
in this Proxy Statement will be approved if it is authorized by the
affirmative vote of a majority of the combined voting power of the shares of
Common Stock and ESOP Stock represented at the meeting. The Authorized Common
Stock Amendment will be approved if it receives the affirmative vote of a
majority of the voting power of the outstanding shares of Common Stock voting
as a separate class and the affirmative vote of a majority of the voting power
of the outstanding shares of Common Stock and ESOP stock voting together as a
single class. An abstention with respect to any proposal will be counted as
present for purposes of determining the existence of a quorum and will have
the practical effect of a negative vote as to that proposal. Brokers (other
than the Company's wholly owned subsidiary, Morgan Stanley & Co. Incorporated
("Morgan Stanley")) that do not receive instructions are entitled to vote on
the proposals relating to the election of directors, the amendment of the
Restated Certificate and selection of independent auditors presented in this
Proxy Statement. Under the rules of the New York Stock Exchange, Inc. (the
"NYSE"), if Morgan Stanley does not receive instructions it is entitled to
vote such shares only in the same proportion as the shares represented by
votes cast by all record holders with respect to such proposal. In the event
of a broker non-vote with respect to the proposal relating to the 1995 Equity
Incentive Compensation Plan or any other proposal coming before the meeting
arising from the absence of authorization by the beneficial owner to vote as
to that proposal if such proposal requires specific
1
<PAGE>
authorization, the proxy will be counted as present for purposes of
determining the existence of a quorum with respect to any issue requiring the
affirmative vote of a majority of the voting power of the shares represented
at the meeting but will not be deemed as present and entitled to vote as to
that proposal for purposes of determining the total number of shares of which
a majority is required for adoption, and with respect to any issue requiring
the affirmative vote of a majority of the total voting power of the Company,
will have the practical effect of a negative vote.
Certain stockholders of the Company hold their shares of Common Stock
subject to agreements relating to, among other things, the voting and
disposition of such shares. Such agreements include the Stockholders'
Agreement dated as of February 14, 1986, as amended (the "Stockholders'
Agreement"), among the Company and those persons who were stockholders (the
"Recapitalization Signatories") of the Company at the time of a
recapitalization effected in contemplation of the Company's initial public
offering (all of whom were Managing Directors or Principals of Morgan Stanley
and employees of the Company at such time) and certain agreements (the "MAS
Agreements") entered into between the Company and certain former general
partners of Miller Anderson & Sherrerd, LLP ("MAS") who received shares of
Common Stock in connection with the Company's purchase of MAS completed on
January 3, 1996. In addition, various voting agreements (the "Plan Agreements"
and, together with the Stockholders' Agreement and the MAS Agreements, the
"Voting Agreements") have been entered into between the Company, certain of
its employees and/or a trustee for a trust that holds shares of Common Stock
on behalf of such employees (together with the Recapitalization Signatories,
the "Signatories") in connection with the granting to such employees of stock
awards, stock unit awards and/or option awards under the Company's 1988 Equity
Incentive Compensation Plan (the "1988 Equity Incentive Compensation Plan"),
options under the Company's 1986 Stock Option Plan (the "Stock Option Plan")
and performance units under the Company's Performance Unit Plan (the
"Performance Unit Plan"). The shares of Common Stock subject to the Plan
Agreements have been issued pursuant to stock awards or stock unit awards and
performance units granted to eligible employees under the 1988 Equity
Incentive Compensation Plan and the Performance Unit Plan, respectively, and
upon the exercise of option awards and options granted to eligible employees
under the 1988 Equity Incentive Compensation Plan and the Stock Option Plan,
respectively. Shares of ESOP Stock are not subject to any of the Voting
Agreements.
The Voting Agreements provide that, before any vote of the stockholders of
the Company occurs, a preliminary vote (the "Preliminary Vote") will be taken
at which each Signatory who is an employee of the Company on such date may
vote all of his shares of Common Stock subject to the Voting Agreements in
such manner as such Signatory may determine in his sole discretion. At any
meeting of the stockholders called to vote with respect to any corporate
action, a Signatory who was an employee of the Company at the time of the
Preliminary Vote or a trustee for a trust that holds shares of Common Stock on
behalf of such employee must vote the shares of Common Stock that are subject
to the Voting Agreements in accordance with the vote of the majority of the
shares of Common Stock voted in the Preliminary Vote. Signatories who are no
longer employed by the Company on the date of the Preliminary Vote are not
required to vote such shares of Common Stock in accordance with the vote of
the majority of the shares of Common Stock voted in the Preliminary Vote. See
"Stockholders' Agreement".
At February 7, 1996, 47,650,342 shares of Common Stock (constituting
approximately 29% of the votes that are entitled to be cast at the 1996 Annual
Meeting) were subject to voting restrictions contained in the Voting
Agreements and will be required to be voted in accordance with the results of
this year's Preliminary Vote. A Preliminary Vote with respect to the proposals
presented in this Proxy Statement will be taken on or about March 20, 1996.
The expenses of the preparation of proxy materials and the solicitation of
proxies for the 1996 Annual Meeting will be borne by the Company. In addition
to the solicitation of proxies by mail, solicitation may be made by certain
employees of the Company by telephone, telegraph or other means and by
Georgeson & Company Inc. Employees will receive no additional compensation for
such solicitation, and Georgeson & Company Inc. will receive a fee of $15,000
for its services. The Company will reimburse brokers, including
2
<PAGE>
Morgan Stanley, and other nominees for costs incurred by them in mailing proxy
materials to beneficial holders in accordance with the rules of the NYSE.
As used herein, "Fiscal 1993" refers to the twelve month period from
February 1, 1993 to January 31, 1994 and "Fiscal 1994" refers to the twelve
month period from February 1, 1994 to January 31, 1995. In February 1995, the
Board of Directors approved a change in the Company's fiscal year-end from
January 31 to November 30, effective for the 1995 fiscal year. "Fiscal 1995"
refers to the ten month period from February 1, 1995 to November 30, 1995.
Unless otherwise indicated, all amounts of Common Stock, stock units and
stock options referred to herein have been adjusted to give effect to the
Company's two-for-one stock split effected in the form of a stock dividend on
January 26, 1996.
ELECTION OF DIRECTORS
Ten persons are to be elected to serve on the Board of Directors until the
Company's next Annual Meeting and their respective successors shall have been
elected and qualified.
If any nominee shall become unable to stand for election as a director at
the meeting, an event not now anticipated by the Board of Directors, the proxy
may be voted for a substitute designated by the Board of Directors. The
nominees for election as directors and a brief biography of each nominee are
listed below. There are no family relationships among any directors, executive
officers or nominees.
- -------------------------------------------------------------------------------
Richard B. Fisher
Mr. Fisher, age 59, has served as Chairman of the Board of Directors of the
Company and Morgan Stanley since January 1991. From January 1984 through
December 1990, he served as President of the Company and Morgan Stanley. He
has been a director and a Managing Director of the Company since July 1975 and
a director and a Managing Director of Morgan Stanley since July 1970. He was a
partner in Morgan Stanley & Co., the predecessor of Morgan Stanley, from July
1970 through June 1975.
- -------------------------------------------------------------------------------
John J. Mack
Mr. Mack, age 51, has served as President of the Company and Morgan Stanley
since June 1993. He has been a director and a Managing Director of the Company
since December 1987 and was a director and a Managing Director of the Company
from January 1979 to March 1986. Mr. Mack has been a director and a Managing
Director of Morgan Stanley since January 1979.
- -------------------------------------------------------------------------------
Barton M. Biggs
Mr. Biggs, age 63, has been a director and a Managing Director of the
Company since May 1991 and a director and a Managing Director of Morgan
Stanley since July 1973. He was a director and a Managing Director of the
Company from July 1975 to March 1986. He was a partner in Morgan Stanley & Co.
from June 1973 through June 1975. Mr. Biggs is chairman of the board of
directors of The Latin American Discovery Fund, Inc., Morgan Stanley Emerging
Markets Fund, Inc., Morgan Stanley Africa Investment Fund, Inc., Morgan
Stanley India Investment Fund, Inc., Morgan Stanley Emerging Markets Debt
Fund, Inc., Morgan Stanley Global Opportunity Bond Fund, Inc., The Morgan
Stanley High Yield Fund, Inc., The Pakistan Investment Fund, Inc., The Thai
Fund, Inc., The Turkish Investment Fund, Inc., The Brazilian Investment Fund,
Inc., The Malaysia Fund, Inc., Morgan Stanley Institutional Fund, Inc., Morgan
Stanley Fund, Inc., and PCS Cash Fund, Inc. He is also a director of Morgan
Stanley Asia-Pacific Fund, Inc.
- -------------------------------------------------------------------------------
Peter F. Karches
Mr. Karches, age 44, has been a director and Managing Director of the
Company since February 1994. He has also served as a director and a Managing
Director of Morgan Stanley since January 1985.
- -------------------------------------------------------------------------------
3
<PAGE>
Sir David A. Walker
Sir David Walker, age 56, has been a director of the Company since November
1994 and a Managing Director of the Company since May 1995. He has been a
director of Morgan Stanley since February 1995 and a Managing Director of
Morgan Stanley since November 1994. He has served as a director and the
Executive Chairman of Morgan Stanley Group (Europe) Plc since December 1994.
Before joining the Company, Sir David was Deputy Chairman of Lloyds Bank plc
in England. From 1988 to 1992 he was Chairman of the Securities and
Investments Board, the British authority that regulates the securities
markets. From 1982 to 1988 he was the executive director of the Bank of
England and remained as a non-executive director at the Bank until early 1993.
Sir David has been a non-executive director of Reuters Holdings PLC since
April 1994.
- -------------------------------------------------------------------------------
Robert P. Bauman
Mr. Bauman, age 64, has been the non-executive chairman of British Aerospace
PLC since May 1994. He served as chief executive officer of SmithKline Beecham
plc from 1989 until April 1994. Mr. Bauman is also a director of CIGNA
Corporation and Union Pacific Corporation. Mr. Bauman has been a non-executive
director of Reuters Holdings PLC since March 1994.
- -------------------------------------------------------------------------------
Daniel B. Burke
Mr. Burke, age 67, is retired. He served as chief executive officer of
Capital Cities/ABC, Inc. from 1990 until February 1994. He also served as
president and chief operating officer of that corporation from 1986 until
February 1994 and was one of its directors from 1967 until February 1996. Mr.
Burke is also a director of Avon Products, Inc., Consolidated Rail
Corporation, Darden Restaurants, Inc., and Rohm and Haas Company. Mr. Burke
has been a director of the Company since February 1994.
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S. Parker Gilbert
Mr. Gilbert, age 62, is retired. He served as Chairman of the Board of
Directors of the Company and Morgan Stanley from January 1984 through December
1990. He served as President of the Company and Morgan Stanley from January
1983 through December 1983. He was a Managing Director of the Company from
July 1975 through December 1990 and a director and a Managing Director of
Morgan Stanley from May 1970 through December 1990. From January 1969 through
June 1975, Mr. Gilbert was a partner in Morgan Stanley & Co. He has been a
director of the Company since July 1975. Mr. Gilbert is also a director of
Burlington Resources Inc., ITT Industries, Inc., and Taubman Centers, Inc.
- -------------------------------------------------------------------------------
Allen E. Murray
Mr. Murray, age 66, is retired. He served as chairman of the board of
directors and chief executive officer of Mobil Corporation from February 1986
until March 1994 and as one of its directors from May 1977 until March 1994.
Mr. Murray also served as president and chief operating officer of that
corporation from November 1984 until March 1993. He is also a director of
Lockheed Martin Corporation, Metropolitan Life Insurance Company and Minnesota
Mining & Manufacturing Company. Mr. Murray has been a director of the Company
since November 1992.
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Paul J. Rizzo
Mr. Rizzo, age 68, is retired. He served as vice chairman of the board of
directors of International Business Machines Corporation from January 1993
through December 1994 and from February 1983 to September 1987 and as a senior
vice president from 1974 until February 1983. He has been a partner in
Franklin Street Partners since 1992. From September 1987 until 1992, he was
dean of Kenan-Flagler Business School at the University of North Carolina-
Chapel Hill. Mr. Rizzo is also a director of Johnson & Johnson, McGraw-Hill,
Inc., and Ryder System, Inc. Mr. Rizzo was a director of the Company from July
1986 through December 1992 and has been a director since February 1995.
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4
<PAGE>
BOARD OF DIRECTORS MEETINGS, COMMITTEES AND FEES
The Board of Directors held three meetings and acted by unanimous written
consent on four occasions during Fiscal 1995. Messrs. Fisher, Mack, Biggs,
Karches and Walker currently are the members of the Executive Committee of the
Board of Directors, which is authorized to exercise all the powers of the
Board of Directors in the management of the business and affairs of the
Company to the fullest extent permitted by law and the Restated Certificate.
The Executive Committee of the Board of Directors held one meeting and acted
by unanimous written consent on six occasions during Fiscal 1995. In addition
to the Executive Committee, the Board of Directors has established a standing
Audit Committee and a standing Compensation Committee. The Company does not
maintain a standing nominating committee.
The Audit Committee, among other things, recommends to the Board of
Directors the Company's independent auditors, confers with the Company's
independent auditors and internal auditors concerning the scope of their
respective examinations, reviews the Company's financial statements and the
work of the Company's independent auditors and internal auditors and obtains
recommendations concerning internal controls. Messrs. Murray, Burke and Rizzo
are the current members of the Audit Committee. The Audit Committee held two
meetings during Fiscal 1995.
The Company's Compensation Committee determines the compensation policies
applicable to the senior officers of the Company and establishes the total
compensation for each senior officer in light of these policies. The
Compensation Committee also addresses all questions of interpretation,
administration and application of the Company's employee benefit plans,
including the 1988 Equity Incentive Compensation Plan, the Stock Option Plan,
the Performance Unit Plan and the 1988 Capital Accumulation Plan (the "Capital
Accumulation Plan"). The Compensation Committee held three meetings and acted
by unanimous written consent on five occasions during Fiscal 1995. The current
members of the Compensation Committee are Messrs. Rizzo, Burke, Gilbert and
Murray. See "Compensation Committee Report on Executive Officer Compensation";
"Compensation Committee Interlocks and Insider Participation".
During Fiscal 1995, each of the current Directors, except Messrs. Biggs and
Rizzo, attended at least seventy-five percent of the meetings of the Board of
Directors and the Committees on which he served.
Messrs. Fisher, Mack, Biggs, Karches and Walker do not receive any
additional compensation for acting as directors of the Company. Directors who
are not employees of the Company or a subsidiary (the "Outside Directors")
receive a director's fee of $40,000 for each full year served (prorated for
those directors serving part of a year); because of the shortened fiscal year,
the Outside Directors received a fee of $30,000 for Fiscal 1995. Each Outside
Director who served on the Board of Directors in Fiscal 1995 has been granted
400 shares of Common Stock pursuant to the Company's 1993 Stock Plan for
Outside Directors for services to the Company during Fiscal 1995 (prorated for
those directors serving part of Fiscal 1995) and in subsequent fiscal years
each Outside Director will be granted 400 shares of Common Stock for each full
fiscal year served (prorated for any director serving part of the year).
Directors receive no additional compensation for participation on committees
of the Board. Richard Cheney (who served as director of the Company until
December 31, 1995) was paid $75,000 pursuant to a consulting arrangement with
the Company for his consulting services during Fiscal 1995.
5
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table shows certain information concerning the number of
shares of the Company's capital stock beneficially owned, directly or
indirectly, as of February 7, 1996, by each director, nominee and named
executive officer and by all current directors and executive officers as a
group.
<TABLE>
<CAPTION>
COMMON STOCK
-------------------
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
BENEFICIAL OWNERS OWNERSHIP OF CLASS
----------------- ---------- --------
<S> <C> <C>
Richard B. Fisher(1)(2)(3)(4)........................ 4,212,742 2.7
John J. Mack(1)(2)(3)(4)............................. 2,568,548 1.7
Barton M. Biggs(1)(2)(3)(4).......................... 2,629,130 1.7
Peter F. Karches(1)(2)(3)(4)......................... 1,261,436 *
Philip N. Duff(1)(2)(3)(4)........................... 178,496 *
Sir David A. Walker(3)............................... 16,156 *
Robert P. Bauman(5).................................. 1,000 *
Daniel B. Burke...................................... 2,800 *
S. Parker Gilbert(2)(4).............................. 2,589,444 1.7
Allen E. Murray...................................... 6,500 *
Paul J. Rizzo........................................ 3,326 *
All current directors and executive officers as a
group (12 persons)(1)(2)(3)(4)...................... 13,609,938 8.8
</TABLE>
- --------
(1) Except as otherwise disclosed below, the voting and disposition of the
shares of Common Stock are subject to the terms of the Voting Agreements.
See "Introduction" and "Stockholders' Agreement".
(2) Includes 479,914; 466,226; 314,642; 330,066; 80,890; 245,008 and 1,977,240
shares for Messrs. Fisher, Mack, Biggs, Karches, Duff, Gilbert and all
current directors and executive officers as a group, respectively, that
may be acquired upon the exercise of options that are exercisable within
60 days after February 7, 1996. Such options were granted pursuant to the
1988 Equity Incentive Compensation Plan or the Stock Option Plan.
(3) Includes 419,134; 414,366; 271,184; 509,340; 94,272; 16,078 and 1,792,248
shares of Common Stock underlying stock unit awards granted Messrs.
Fisher, Mack, Biggs, Karches, Duff, Walker and all current directors and
executive officers as a group, respectively, as part of compensation
pursuant to the 1988 Equity Incentive Compensation Plan. With respect to
all such stock unit awards, an equivalent number of shares of Common Stock
held in trust will be voted in accordance with the results of the
Preliminary Vote.
(4) Includes 2,484; 2,484; 2,446; 2,484; 1,396; 688 and 14,174 shares of
Common Stock into which shares of ESOP Stock are convertible which have
been allocated to Messrs. Fisher, Mack, Biggs, Karches, Duff, Gilbert and
all current directors and executive officers as a group, respectively.
Each share of ESOP Stock is convertible into two shares of Common Stock.
Each share of ESOP Stock is entitled to 2.7 votes with respect to each
matter to be voted on at the 1996 Annual Meeting. ESOP participants have
the ability to direct the voting with respect to ESOP Stock allocated to
them. Such shares are not subject to the Voting Agreements.
(5) As of February 16, 1996.
- --------
* Indicates beneficial ownership of less than 1% of the outstanding Common
Stock.
6
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding each person or
group of persons known to the Company as of February 7, 1996 to be the
beneficial owner of more than 5% of any class of the Company's voting
securities.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
NAME OF PERSONS OR --------------------------------------
IDENTITY OF GROUP NUMBER PERCENT
------------------ -------------- -----------
<S> <C> <C>
Signatories to Voting Agreements(1)....... 60,223,186(2)(3)(4)(5) 36.3
</TABLE>
- --------
(1) The voting of the shares of Common Stock received in connection with the
Company's 1986 recapitalization is subject to the voting restrictions
contained in the Stockholders' Agreement. The voting of Common Stock
issued to employees in connection with the 1988 Equity Incentive
Compensation Plan, the Stock Option Plan, the Performance Unit Plan and
the Company's purchase of MAS is generally subject to similar voting
restrictions. The information provided relates to the voting power of such
securities. The Signatories to the Voting Agreements do not share
dispositive power. See "Introduction" and "Stockholders' Agreement".
(2) Includes 11,678,724 shares of Common Stock that may be acquired upon the
exercise of options that are exercisable within 60 days after February 7,
1996. Such options were granted pursuant to the 1988 Equity Incentive
Compensation Plan or the Stock Option Plan. Of these shares, 266,856 will
not be subject to the Voting Agreements.
(3) Includes 25,792,320 shares underlying stock unit awards granted pursuant
to the 1988 Equity Incentive Compensation Plan as part of compensation. An
equivalent number of shares of Common Stock held in trust will be voted in
accordance with the results of the Preliminary Vote.
(4) Includes 894,120 shares of Common Stock that are not subject to the Voting
Agreements.
(5) Does not include 814,164 shares of Common Stock into which shares of ESOP
Stock are convertible which have been allocated to the Signatories. Each
share of ESOP Stock is convertible into two shares of Common Stock. Each
share of ESOP Stock is entitled to 2.7 votes with respect to each matter
to be voted on at the 1996 Annual Meeting. Such shares are not subject to
the Voting Agreements.
7
<PAGE>
STOCKHOLDERS' AGREEMENT
Prior to a recapitalization effected in contemplation of the Company's
initial public offering on March 21, 1986, the Company and the
Recapitalization Signatories entered into the Stockholders' Agreement, which
relates to the disposition and voting of the shares of Common Stock acquired
by such Recapitalization Signatories pursuant to the recapitalization (the
"Recapitalization Common Stock"). The Stockholders' Agreement does not
prohibit or restrict the acquisition, ownership, disposition or voting by
Recapitalization Signatories of any shares of Common Stock not acquired in
connection with the Company's recapitalization. Shares acquired pursuant to
the Company's employee benefit plans and in connection with the Company's
purchase of MAS are generally subject to similar restrictions although not all
of such shares are subject to the age restrictions described below.
Except as otherwise determined by the Board of Directors of the Company and
subject to applicable legal requirements, Recapitalization Signatories
employed by the Company may dispose of their Recapitalization Common Stock
only as provided in the Stockholders' Agreement. The Stockholders' Agreement
permits each such Recapitalization Signatory to dispose of shares of such
Recapitalization Signatory's Recapitalization Common Stock and/or shares of
Common Stock acquired pursuant to the Company's Performance Unit Plan and/or
Stock Option Plan ("Plan Stock" and, together with the Recapitalization Common
Stock, "Total Restricted Stock") in the following amounts, representing the
percentage of Total Restricted Stock owned by such Recapitalization Signatory
that is permitted to be sold:
<TABLE>
<CAPTION>
% OF TOTAL RESTRICTED
AGE AT DATE OF SALE STOCK PERMITTED TO BE SOLD
------------------- --------------------------
<S> <C>
35 through 38 10%
39 through 42 Additional 10%
43 through 46 Additional 10%
47 through 49 Additional 10%
50 and above Additional 10%
</TABLE>
Such restrictions are in effect only while the Signatory is an employee of
the Company.
Pursuant to the revised terms of the Stockholders' Agreement, a
Recapitalization Signatory employed by the Company may pledge his shares of
Recapitalization Common Stock that are not otherwise permitted to be
transferred under the Stockholders' Agreement to a bank to secure a bona fide
full recourse loan for value. Any shares of Recapitalization Common Stock so
pledged would be free from the restrictions on disposition described above so
long as such shares of Recapitalization Common Stock are so pledged, but would
thereafter be once again subject to the restrictions on disposition described
above, unless the bank has sold such shares of Recapitalization Common Stock
pursuant to a bona fide foreclosure proceeding. Any such shares of
Recapitalization Common Stock sold pursuant to any such bona fide foreclosure
proceeding would be free from the provisions of the Stockholders' Agreement.
See "Introduction" for information concerning the voting restrictions
imposed on shares of Recapitalization Common Stock pursuant to the
Stockholders' Agreement.
8
<PAGE>
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Other than as described in this Proxy Statement, no director or executive
officer of the Company was indebted to the Company during Fiscal 1995 for any
amount in excess of $60,000, and there were no related party transactions
among the Company and its executive officers, directors and the holders of
more than 5% of the outstanding shares of Common Stock.
Mr. Mack, through a corporation which was dissolved in December 1995, owned
a car that was utilized in Company business. Aggregate payments made by the
Company to Mr. Mack's corporation for property and services during the period
from February 1, 1995 to December 26, 1995 were $103,240. Payments for
property and services were made on terms that the Company believes could have
been obtained from non-affiliated third parties for comparable transactions.
The Company extends, and in the ordinary course of its business during
Fiscal 1995 the Company extended, credit to certain directors, officers and
employees of the Company and Morgan Stanley, as well as to members of their
immediate families, in connection with their purchase of securities. Such
extensions of credit have been made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with non-affiliated third parties, and did not involve more than
normal risk of collectibility or present other unfavorable features. To the
extent that officers and employees of the Company and Morgan Stanley (and
members of their immediate families) wish to purchase securities in brokerage
transactions, they are ordinarily required to do so through Morgan Stanley,
which offers them a discount of 40% on its standard commission rate. Morgan
Stanley also, from time to time and in the ordinary course of its business,
enters into transactions involving the purchase or sale of securities from or
to certain directors, officers and employees of the Company and Morgan Stanley
and members of their immediate families, as principal. Such purchases and
sales of securities on a principal basis are effected at a discount from the
dealer mark-up or mark-down, as the case may be, charged to non-affiliated
third parties. Pursuant to its stock repurchase authorization, the Company
also may repurchase or acquire shares of Common Stock in the open market and
in privately negotiated transactions, including transactions with directors,
executive officers and employees. Such transactions are in the ordinary course
of business and at prevailing market prices.
The Company, from time to time, also makes advances to certain of its
directors, officers and employees against commissions and other compensation
that would otherwise be payable to them in the ordinary course of business and
loans in connection with housing and relocation expenses. No interest is
charged by the Company on such advances and loans.
Under the federal securities laws, the Company's directors and executive
officers and any person owning more than ten percent of the Company's Common
Stock are required to report their initial ownership of Common Stock and any
subsequent change in that ownership to the Securities and Exchange Commission
(the "SEC") and the NYSE and to provide copies of any such forms they file to
the Company. Based solely upon its review of copies of forms and written
representations from certain reporting persons, the Company believes that for
Fiscal 1995, each of its officers, directors and greater than ten percent
stockholders has complied with all such applicable filing requirements.
9
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Cash and Certain Other Compensation. The following table
summarizes the compensation paid by the Company and its subsidiaries to the
Company's five most highly compensated executive officers who were serving as
executive officers at November 30, 1995 (the "named executive officers") for
services rendered in all capacities to the Company and its subsidiaries for
Fiscal 1993, Fiscal 1994 and Fiscal 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------------
RESTRICTED SECURITIES
NAME AND STOCK UNDERLYING ALL OTHER
PRINCIPAL AWARD(S) OPTIONS COMPENSATION
POSITION YEAR (2) SALARY ($)(3) BONUS ($)(3)(4) ($)(5) (#)(6) ($)(7)
- --------------------- -------- ------------- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard B. Fisher: 1995 $477,329 $4,187,004 $2,072,349 -- $15,150
Chairman of the Board 1994 575,000 2,062,500 -- 198,276 15,000
of Directors and 1993 475,000 4,437,500 5,628,494 -- 23,584
Managing Director(1)
John J. Mack: 1995 $456,575 $4,140,308 $2,046,186 -- $15,150
President and 1994 550,000 2,025,000 -- 193,192 15,000
Managing Director 1993 450,000 4,325,000 5,463,488 -- 23,584
Barton M. Biggs: 1995 $373,562 $2,801,713 $1,294,128 -- $13,650
Managing Director 1994 450,000 1,700,000 -- 149,130 15,000
1993 450,000 2,950,000 3,446,770 -- 23,584
Peter F. Karches: 1995 $373,562 $3,891,267 $1,906,223 -- $15,150
Managing Director 1994 300,000 2,025,000 -- 193,192 15,000
Philip N. Duff: 1995 $136,973 $2,512,202 $1,131,507 -- $15,150
Chief Financial 1994 165,000 1,467,500 -- 117,610 15,000
Officer and Managing
Director
</TABLE>
- --------
For each of the above named executive officers, compensation information is
provided for years during which they served as executive officers of the
Company.
(1) The Company does not have an executive officer designated as "Chief
Executive Officer"; however, for purposes of complying with rules of the
SEC, Mr. Fisher is deemed the "CEO" in this table.
(2) In February 1995, the Board of Directors approved a change in the fiscal
year-end of the Company from January 31 to November 30. Figures for Fiscal
1995 relate to the ten month period commencing on February 1, 1995 and
ending on November 30, 1995.
(3) Includes amounts contributed by each of the named executive officers to
various deferred compensation plans of the Company.
(4) Includes for the years indicated amounts representing annual cash bonus.
The amounts reported also include the value of units awarded pursuant to
the Capital Accumulation Plan. The Capital Accumulation Plan provides
participation in certain investments that the Company has made directly or
indirectly in other entities.
(5) The amounts reported represent the market value of the Common Stock
underlying vested and unvested restricted stock units at the date of
grant, without taking into account any diminution in value attributable to
the restrictions on such stock units. Awards of restricted stock units
were made on December 11, 1995 for performance in Fiscal 1995; the closing
price of the Common Stock on that date as reported on the Consolidated
Transaction Reporting System was $42.75 per share. Awards of stock units
were made on February 25, 1994 for performance in Fiscal 1993; the closing
price of the Common Stock on that date as reported on the Consolidated
Transaction Reporting System was $33.375 per share.
10
<PAGE>
The vesting schedule for restricted stock units awarded as part of Fiscal
1993 and Fiscal 1995 compensation to all Managing Directors, including the
named executive officers, is as follows: 60% of each award reported in the
table above vested upon grant; the remaining 40% of the award will vest in
ten equal annual installments. Dividend equivalents are paid on restricted
stock units (including unvested units) at the same rate as dividends paid
to stockholders of Common Stock.
Vested and unvested restricted stock units awarded as part of Fiscal 1993
and Fiscal 1995 compensation generally do not convert into shares of Common
Stock and are not transferable for ten years after award. Restricted stock
units, whether vested or unvested, may not be sold, assigned, exchanged,
pledged, hypothecated or otherwise disposed of or encumbered prior to the
lapse of restrictions on transferability. Restricted stock units, whether
vested or unvested, are subject to forfeiture in certain circumstances
specified by the Compensation Committee.
The aggregate number of restricted stock units (including units awarded
prior to the years reported) and the market value ascribed thereto as of
November 30, 1995 for each of the named executive officers are as follows:
Mr. Fisher-419,134 ($18,140,119); Mr. Mack-414,366 ($17,933,760); Mr.
Biggs-271,184 ($11,736,843); Mr. Karches-509,340 ($22,044,235) and Mr.
Duff-94,272 ($4,080,092). Such number of restricted stock units and market
values ascribed to them give effect to restricted stock unit awards granted
subsequent to the end of Fiscal 1995 as part of compensation for that
period. For a discussion of the difference between the value ascribed to
restricted stock units pursuant to SEC rules and the value ascribed to
restricted stock units by the Compensation Committee, see "Compensation
Committee Report on Executive Officer Compensation".
(6) Awards of stock options were made for services performed in Fiscal 1994.
The vesting schedule for stock options awarded as part of Fiscal 1994
compensation to all Managing Directors, including the named executive
officers, is as follows: 60% of each award reported in the table above
vested and was exercisable upon grant, the remaining 40% of the award will
vest and be exercisable in nine annual installments. The expiration date
for the stock options is January 31, 2005. The terms of stock option
awards vary slightly in certain non-U.S. jurisdictions.
Stock options awarded as part of Fiscal 1994 compensation, whether vested
or unvested, may not be sold, assigned, exchanged, pledged, hypothecated or
otherwise disposed of or encumbered. Stock options, whether vested or
unvested, are subject to forfeiture in certain circumstances specified by
the Compensation Committee. Any shares acquired upon the exercise of
options generally may not be transferred or sold prior to January 31, 2005,
except to the extent required to cover the exercise price and tax liability
arising upon exercise.
(7) The amounts reported consist of contributions by the Company to the
Company's Deferred Profit Sharing Plan ("DPSP") and the Company's Employee
Stock Ownership Plan ("ESOP"). For amounts reported for Fiscal 1995, the
Company contributed 21% to the DPSP and 79% to the ESOP; for Mr. Biggs,
the Company contributed 23% to the DPSP and 77% to the ESOP. For amounts
reported for Fiscal 1994 and Fiscal 1993, the Company contributed 50% to
the DPSP and 50% to the ESOP. Contributions to the DPSP and the ESOP are
made on December 31 and relate to the preceding twelve months.
Compensation to Managing Directors and Principals of Morgan Stanley who are
not executive officers of the Company may exceed the compensation paid to the
named executive officers.
11
<PAGE>
The following table provides information concerning stock option exercises
in Fiscal 1995 and unexercised stock options held by each named executive
officer as of November 30, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FY-END (#)(2) FY-END ($)(3)
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard B. Fisher....... 154,512 $5,178,408 471,972 79,312 $11,416,354 $992,986
John J. Mack............ 102,996 2,926,932 556,702 77,278 14,504,850 967,521
Barton M. Biggs......... 60,318 1,246,471 308,666 59,652 7,570,605 746,843
Peter F. Karches........ 77,976 2,051,800 322,322 77,278 7,868,319 967,521
Philip N. Duff.......... -- -- 76,182 87,044 1,045,154 762,791
</TABLE>
- --------
(1) The valuation represents the difference between the average high and low
sale price of a share of Common Stock, as reported on the Consolidated
Transaction Reporting System, on the date of exercise and the exercise
price of the options exercised.
(2) The sale or disposition of shares of Common Stock underlying certain of
the options is restricted.
(3) The value of unexercised, in-the-money options is based upon the
difference between the exercise prices of all such options and $42.27, the
fair market value, as determined by the Compensation Committee, of a share
of Common Stock at the end of Fiscal 1995. The actual amount, if any,
realized upon exercise of stock options will depend upon the market price
of the Common Stock relative to the exercise price per share of Common
Stock of the stock option at the time the stock option is exercised. There
is no assurance that the values of unexercised in-the-money stock options
reflected in this table will be realized.
Pension Plans. Morgan Stanley's Pension Plan (the "Pension Plan") is a
defined benefit pension plan which covers all employees of Morgan Stanley who
have completed at least one year of service with Morgan Stanley or one of its
affiliates. There is no maximum age limit to the eligibility requirements. The
Pension Plan provides for normal retirement benefits beginning at age 65 but
permits earlier retirement at or after attaining age 55 with ten years of
Vesting Service as defined in the Pension Plan (five years if hired prior to
January 1, 1988), subject to a reduction in benefits if payments commence
earlier than age 60. Salary is defined to include the highest five years of
base compensation during the last ten years prior to retirement, excluding
bonuses, overtime and other supplemental compensation. All participants become
vested after completing five years of service.
In addition to the Pension Plan, Morgan Stanley has adopted an Excess
Benefit Plan for participants in the Pension Plan whose benefits are reduced
pursuant to limitations imposed by the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code") on pensions paid under Federal income
tax qualified plans. Employees covered by the Excess Benefit Plan receive a
benefit equal to the amount of benefit disallowed under the Pension Plan due
to such limitations, including for 1995 a $150,000 compensation limit (subject
to being increased in $10,000 increments based on annual rates of inflation)
on the amount of compensation that can be taken into account for qualified
pension plan purposes.
12
<PAGE>
Morgan Stanley also maintains a Supplemental Executive Retirement Plan
covering current and former Managing Directors and Principals of Morgan
Stanley who are not less than 55 years of age and have completed at least five
years of service and whose age plus years of service equals or exceeds 65.
Benefits without any reduction are paid if payment occurs at or after age 60.
Benefits payable under the Supplemental Executive Retirement Plan are also
reduced by benefits payable under the Pension Plan and the Excess Benefit Plan
and pension plans of affiliates of Morgan Stanley and of former employers. For
participants who commence receiving benefits in 1989 and beyond, the annual
benefit payable under the Supplemental Executive Retirement Plan (as reduced
in the preceding sentence) is further reduced to the extent that total
retirement benefits do not exceed $140,000. Participants are fully vested
under the Supplemental Executive Retirement Plan at all times. Messrs. Fisher
and Biggs currently meet the eligibility requirements of, and Mr. Gilbert is
currently receiving payments under, the Supplemental Executive Retirement
Plan.
Assuming that the participants in the chart below were eligible for the
Supplemental Executive Retirement Plan, the following table illustrates the
total estimated annual normal retirement pension benefits, including Excess
Benefit Plan and Supplemental Executive Retirement Plan amounts, payable upon
normal retirement at age 65 to participants for the specified remuneration and
years of credited service classifications set forth below. Benefit amounts are
computed on a straight life annuity basis. There is no off-set for the payment
of social security benefits although the calculation of benefits takes social
security covered compensation into consideration.
PENSION PLAN TABLE
ANNUAL PENSION BENEFITS BASED ON YEARS OF CREDITED SERVICE AT AGE 65
<TABLE>
<CAPTION>
FINAL
AVERAGE
SALARY 5 YRS. 10 YRS. 15 YRS. 20 YRS. 25 YRS. 30 YRS. 35 YRS.
------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 20,000 $ 30,000 $ 40,000 $ 50,000 $ 50,000 $ 55,000 $ 60,000
150,000 30,000 45,000 60,000 75,000 75,000 82,500 90,000
200,000 40,000 60,000 80,000 100,000 100,000 110,000 120,000
250,000 50,000 75,000 100,000 125,000 125,000 137,500 140,000
300,000 60,000 90,000 120,000 140,000 140,000 140,000 154,325
350,000 70,000 105,000 140,000 140,000 140,000 154,778 180,575
400,000 80,000 120,000 140,000 140,000 147,732 177,278 206,825
450,000 90,000 135,000 140,000 140,000 166,482 199,778 233,075
500,000 100,000 140,000 140,000 148,186 185,232 222,278 259,325
550,000 110,000 140,000 140,000 163,186 203,982 244,778 285,575
600,000 120,000 140,000 140,000 178,186 222,732 267,278 311,825
650,000 130,000 140,000 144,889 193,186 241,482 289,778 338,075
700,000 140,000 140,000 156,139 208,186 260,232 312,278 364,325
</TABLE>
The compensation of the individuals named in the Summary Compensation Table
for purposes of determining benefits under the Pension Plan, the Excess
Benefit Plan and the Supplemental Executive Retirement Plan during calendar
1995 is the amount reported as base salary in the Summary Compensation Table.
As of January 31, 1996, the credited years of service (rounded to the nearest
whole year) for each of the named executive officers are as follows: Mr.
Fisher-34; Mr. Mack-22; Mr. Biggs-21; Mr. Karches-20; and Mr. Duff-13.
13
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE OFFICER COMPENSATION
The Company's Compensation Committee determines the compensation policies
applicable to the senior officers of the Company, including Messrs. Fisher,
Mack, Biggs, Karches and Duff, who were the five highest paid executive
officers for Fiscal 1995 (collectively, the "Senior Executives"). The
Committee establishes the total compensation for each of the Senior Executives
in light of these policies and in accordance with certain requirements imposed
by Section 162(m) of the Internal Revenue Code ("Section 162(m)"), as
explained more fully below. In addition, the Compensation Committee reviews
proposed annual compensation packages of other executive officers and certain
Managing Directors, and administers and makes awards under the Company's
employee benefit plans, including the 1988 Equity Incentive Compensation Plan
and the Capital Accumulation Plan.
The Compensation Committee is composed of Paul J. Rizzo, Daniel B. Burke, S.
Parker Gilbert and Allen E. Murray, none of whom is, or during the previous
year has been, an officer or employee of the Company. The Compensation
Committee meets from time to time and also acts by unanimous written consent.
See "Board of Directors Meetings, Committees and Fees".
The Company does not have an executive officer designated as "Chief
Executive Officer". For purposes of this Report, Mr. Fisher is referred to as
the "Chief Executive Officer".
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS GENERALLY FOR FISCAL
1995. The Company's executive officer compensation program is designed to be
closely linked to corporate performance and returns to stockholders. To this
end, the Company has developed an overall compensation strategy and specific
compensation plans that tie a significant portion of executive officer
compensation to the Company's success in meeting annual and long-term
performance goals. The overall objectives of this strategy are to:
. support a pay-for-performance policy that differentiates compensation
based on corporate, business unit and individual performance;
. motivate executive officers to implement and achieve strategic business
initiatives and reward them for their achievement;
. provide compensation opportunities that are comparable to those offered
by other leading companies in the financial services industry, thus
allowing the Company to compete for and retain talented executive officers
who are critical to the Company's long-term success; and
. align the interests of executive officers with the long-term interests of
stockholders by paying a significant portion of executive officer
compensation with awards under the Company's equity compensation plans.
The compensation policies and strategic objectives that have been developed
for the Company's executive officers also are applied in determining
compensation and compensation plans for the Company's other Managing Directors
as well as for other officers and employees.
The total amount of compensation that the Compensation Committee authorizes
to be distributed to executive officers, Managing Directors and other
employees for Fiscal 1995 is primarily a function of the financial performance
of the Company as a whole. In determining the amount of compensation to be
paid to executive officers, the Compensation Committee (1) sets the parameters
to be used in allocating Total Reward (as defined below) between cash and non-
cash components for all executive officers, (2) determines the appropriate
Total Reward for each executive officer and (3) allocates the Total Reward for
each executive officer between cash and non-cash components based on the
previously determined parameters. In determining the size of aggregate annual
Total Reward payable to individuals other than the Senior Executives (whose
Total Reward is linked to a formula adopted in accordance with Section 162(m),
as more fully described below), no single performance factor or formula is
used since the Committee believes that rigid application of quantitative
performance measures would omit important qualitative considerations and could
discourage important long-term
14
<PAGE>
strategic decisions. Accordingly, the intent is to have the executive officer
compensation for each year vary in light of Company, business unit and
individual performance-related factors. The Compensation Committee takes into
consideration such factors as absolute levels of, and year-over-year changes
in, net revenues, net income, profit before taxes, earnings available to
common stockholders, earnings per share, book value per share and return on
stockholders' equity. The Compensation Committee also examines the ratios of
compensation to net revenue and compensation to pre-compensation profit before
taxes. Although the Compensation Committee considers the aforementioned
factors, the Compensation Committee does not assign specific weighting to the
factors. Instead, the determination of Total Reward is a more subjective
process which focuses on the financial performance factors of the Company and
business units as well as the performance of individuals.
The Compensation Committee also compares the financial performance of the
Company with the financial performance of the Financial Services Companies (as
defined below). For Fiscal 1995, the Compensation Committee recognized that
the Company's return on equity and earnings per share were above the estimated
mean return on equity and earnings per share for the Financial Services
Companies taken as a whole. While the Compensation Committee considers the
financial performance and chief executive officer compensation of competitors
in its determination of Total Reward, the Compensation Committee does not
attempt to set Total Reward in a range established by a comparison of the
financial performance and chief executive officer compensation of the
Financial Services Companies. For purposes of this Report, the term "Financial
Services Companies" refers collectively to the following companies in the
financial services industry: Bankers Trust New York Corporation, The Bear
Stearns Companies Inc., J.P. Morgan & Co. Incorporated, Merrill Lynch & Co.,
Inc., Paine Webber Group Inc., Salomon Inc. and The Travelers Inc. The
Financial Services Companies are the same companies that constitute the
MSCI(R) Domestic Financial Services/Banking Group Index. See "Performance
Graph".
COMPONENTS OF SENIOR EXECUTIVE AND EXECUTIVE OFFICER COMPENSATION. In
December 1995, executive officers were awarded Total Reward following a review
of the Company's Fiscal 1995 financial performance. The Compensation
Committee's policies applicable to each element of Fiscal 1995 compensation
for executive officers are discussed below.
The components of the executive officer compensation program are designed to
meet the Company's compensation policies. At present, the executive officer
compensation program is composed of two elements that make up the officer's
Total Reward: (A) base salary (plus fringe benefits typically offered to
executives of major corporations) and (B) incentive compensation which
consists of cash incentive compensation (bonus) and non-cash incentive
compensation (primarily restricted stock units). As Total Reward increases, an
increasing percentage of the total is in the form of the Company's restricted
stock units.
A. Base Salaries. Executive officer base salaries, which are established at
the beginning of the year, are a relatively small portion of overall
compensation. In determining base salaries individual experience,
responsibilities and tenure are taken into account. Base salaries are in the
mid-range of base salaries paid by the Financial Services Companies.
B. Incentive Compensation (Cash and Non-Cash). Executive officer incentive
compensation is based primarily on the Company's financial performance for the
year but also includes an assessment of individual and business unit
performance. The Company has consistently maintained the philosophy that
compensation of its executive officers and other key employees should be
directly and materially linked to operating performance. To achieve this
linkage, executive officer compensation is heavily weighted toward incentive
compensation paid on the basis of performance. Historically, in years in which
the Company's financial performance has been particularly favorable, its
executive officer incentive compensation has increased, and in less favorable
years such compensation has been reduced. For example, compensation for Fiscal
1995 is greater than Fiscal 1994, reflecting the more favorable financial
performance of the Company, while Fiscal 1994 incentive compensation was
substantially less than Fiscal 1993 compensation, reflecting the less
favorable financial performance of the Company.
15
<PAGE>
(i) SECTION 162(M) AND COMPENSATION POLICIES APPLICABLE TO THE SENIOR
EXECUTIVES. The Compensation Committee establishes the Total Reward for the
Senior Executives through the application of performance criteria. The
performance criteria were adopted in accordance with Section 162(m), which
limits the deductibility of compensation in excess of $1,000,000 paid to
the chief executive officer and the four other most highly compensated
officers, as determined pursuant to the rules of the SEC, unless the
payments are made under qualifying performance-based plans and upon the
attainment of certain performance goals. In April 1995, the Compensation
Committee established and approved performance criteria applicable to the
Senior Executives that determine the amount of Total Reward payable to each
of the Senior Executives. The performance criteria include a formula which
links compensation of the Senior Executives to the Company's return on
equity versus the Company's cost of equity capital and annual growth in
book value per share. The Compensation Committee has certified in
accordance with Section 162(m) that the Company's financial results for
Fiscal 1995 have satisfied the performance criteria for Fiscal 1995. After
an analysis of the considerations set forth above, for Fiscal 1995 the
Compensation Committee awarded Total Reward to the Senior Executives that
was substantially below the amounts of Total Reward yielded by the
application of the compensation formula contained in the performance
criteria.
Compensation payable to the Senior Executives has been paid partly in
cash and partly in the form of restricted stock units. The Compensation
Committee awarded an average of approximately 20%* of Senior Executives'
Total Reward in restricted stock units for Fiscal 1995.
(ii) RESTRICTED STOCK UNITS. As part of incentive compensation for Fiscal
1995, all Managing Directors, including all Senior Executives, received
awards of restricted stock units under the 1988 Equity Incentive
Compensation Plan. The value of restricted stock units awarded to each
Managing Director was a fixed percentage of Total Reward applied on the
same basis to all plan participants. The value of stock-based compensation
earned cannot be realized immediately and will be dependent on the market
value of the Company's stock well into the future. Thus, the ultimate value
of the restricted stock unit awards will depend on the continued success of
the Company and will provide a continuing incentive to an executive officer
long after the award has been granted.
The value ascribed to such restricted stock units by the Compensation
Committee was based on a 40% discount from the fair market value of the
Common Stock in order to compensate for significant restrictions on
disposition (by sale or otherwise) of these units. Accordingly, the value
ascribed to these units by the Compensation Committee differs from the
amounts reported in the Summary Compensation Table under the column headed
"Restricted Stock Awards" because those amounts are based on the price of
Common Stock on the date of grant. See "Compensation of Executive Officers-
Summary of Cash and Certain Other Compensation".
(iii) OTHER NON-CASH INCENTIVE COMPENSATION. As part of non-cash
incentive compensation for each of Fiscal 1993, Fiscal 1994 and Fiscal
1995, Managing Directors, including all Senior Executives, also received
awards of units under the Capital Accumulation Plan. The value of units
awarded to each Managing Director was a fixed percentage of incentive
compensation applied on the same basis to all plan participants. The
Capital Accumulation Plan provides participation in certain investments
that the Company has made directly or indirectly in other entities. Awards
under the Capital Accumulation Plan are designed to foster cross-divisional
cooperation, reduce the Company's holdings of illiquid investments, and
maximize the long-term value of these investments.
- --------
* Based on the Compensation Committee's valuation of Total Reward, stock-
based compensation and Capital Accumulation Plan units.
16
<PAGE>
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The amount of Total Reward
payable to the Chief Executive Officer was established consistent with the
provisions of the performance criteria set in accordance with Section 162(m),
as discussed above. In making the determination regarding the amount of Total
Reward to be awarded to the Chief Executive Officer for Fiscal 1995, the
Compensation Committee took into account the individual and Company
performance measures and policies described above. Specifically, the Committee
took into account the Chief Executive Officer's role in promoting the long-
term strategic growth of the Company, including the Company's focus on cross-
divisional cooperation and continuing expansion internationally. It noted that
the Company's Fiscal 1995 financial performance was more favorable than
performance in Fiscal 1994 and that the Company's return on stockholders'
equity increased to 16.2% (on an annualized basis) in Fiscal 1995 from 8.8% in
Fiscal 1994. In light of the foregoing, the Committee deemed it appropriate to
award the Chief Executive Officer incentive compensation in the form of cash
equal to $4,046,000, restricted stock units with a grant value of $1,229,640,
which translated into 48,476 restricted stock units, and an award of $141,000
under the Capital Accumulation Plan. The amount of Total Reward paid to the
Chief Executive Officer in connection with Fiscal 1995 is approximately 73%**
(on an annualized basis) above that awarded to him in Fiscal 1994.
The base salary for Mr. Fisher will remain at the same annual rate for
Fiscal 1996.
* * * * *
While the Committee intends to pursue a strategy of maximizing the
deductibility of compensation paid to executive officers for the 1996 and
future fiscal years, it also intends to maintain the flexibility to take
actions that it considers to be in the best interests of the Company and its
stockholders, and which may be based on considerations in addition to tax
deductibility. The Committee will review the performance program in effect for
the 1996 fiscal year and will determine at a subsequent date whether a similar
program, or some other program, will be appropriate for future fiscal years.
The Compensation Committee
Paul J. Rizzo, Chairman
Daniel B. Burke
S. Parker Gilbert
Allen E. Murray
- --------
** Based on the Compensation Committee's valuation of Total Reward, stock-
based compensation and Capital Accumulation Plan units.
17
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of Messrs. Rizzo, Burke,
Gilbert and Murray, none of whom is, or during the previous year has been, an
officer or employee of the Company. Mr. Gilbert had been a senior executive
officer of the Company until his retirement in December 1990. See "Election of
Directors".
During Fiscal 1995, no executive officer of the Company (i) served as a
member of the compensation committee (or other board committee performing
similar functions or, in the absence of any such committee, the entire board
of directors) of another entity, one of whose executive officers served on the
Company's Compensation Committee; (ii) served as a director of another entity,
one of whose executive officers served on the Company's Compensation
Committee; or (iii) served as a member of the compensation committee (or other
board committee performing similar functions or, in the absence of any such
committee, the entire board of directors) of another entity, one of whose
executive officers served as a director of the Company.
18
<PAGE>
PERFORMANCE GRAPH
The line graph which follows charts the yearly percentage change in
cumulative stockholder return on an investment in the Company's Common Stock
(MS) against each of the Standard & Poor's 500 Index(R) (the "S&P 500(R)") and
the MSCI(R)Domestic Financial Services/Banking Group Index (the "MSCI(R)
Index"), a peer group index consisting of major financial services companies*,
in each case, assuming an investment of $100 on January 31, 1990 (weighted on
the basis of market capitalization) and cumulation and reinvestment of all
dividends paid thereafter through November 30, 1995. The line graph is not
intended to be indicative of future stock performance.
[GRAPH APPEARS HERE]
<TABLE>
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning November 30, 1990
<CAPTION>
Nov-90 Nov-91 Nov-92 Nov-93 Nov-94 Nov-95
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Morgan Stanley Group Inc. $100 $205 $208 $286 $240 $354
S & P 500(R) $100 $120 $143 $157 $159 $217
MSCI(R) Domestic Financial
Services/Banking Group
Index $100 $167 $199 $268 $225 $334
</TABLE>
- -------
* The MSCI(R) Index was constructed by Morgan Stanley Capital International,
the Company's global financial information database. The MSCI(R) Index
consists of the following companies: Bankers Trust New York Corporation, The
Bear Stearns Companies Inc., J.P. Morgan & Co. Incorporated, Merrill Lynch &
Co., Inc., Morgan Stanley Group Inc., Paine Webber Group Inc., Salomon Inc.,
and The Travelers Inc.
19
<PAGE>
THE 1995 EQUITY INCENTIVE COMPENSATION PLAN
The Board of Directors has unanimously recommended the 1995 Equity Incentive
Compensation Plan for approval by stockholders.
The Morgan Stanley Group Inc. 1995 Equity Incentive Compensation Plan was
authorized by the Board of Directors on November 28, 1995 and is subject to
approval by the Company's stockholders. A copy of the 1995 Equity Incentive
Compensation Plan is attached hereto as Annex A and the following summary is
qualified in its entirety by reference thereto.
Purposes and Eligibility. The purposes of the 1995 Equity Incentive
Compensation Plan are to attract, retain and motivate key employees of the
Company, to compensate them for their contributions to the growth and profits
of the Company and to encourage ownership by them of stock of the Company. The
1995 Equity Incentive Compensation Plan authorizes the issuance of certain
awards ("Awards") to Managing Directors, Principals, Vice Presidents,
officers, other key employees and consultants of the Company and its
subsidiaries; non-employee directors of subsidiaries, and consultants of
certain business organizations in which the Company or a subsidiary has an
equity or similar interest, as well as former employees or former consultants
of the Company, its subsidiaries and such other business organizations are
also generally eligible to receive Awards. (Such persons are referred to
collectively as "Eligible Individuals".) As of February 7, 1996, the Company
estimates that there were approximately 2,600 Eligible Individuals.
Section 162(m) limits the deductibility of compensation in excess of
$1,000,000 paid to the chief executive officer and the four other most highly
compensated officers as determined pursuant to the rules of the SEC (the
"Section 162(m) Officers") unless the payments are made under qualifying
performance-based plans and upon the attainment of certain performance goals.
The 1995 Equity Incentive Compensation Plan contains special provisions
governing compensation paid to Section 162(m) Officers that are intended to
ensure that such compensation will be considered performance-based and hence
fully deductible. See "Awards to Section 162(m) Officers" below. In order for
the requirements of Section 162(m) to be met for compensation paid under the
1995 Equity Incentive Compensation Plan, the plan must be approved by a
majority of the votes cast by the stockholders of the Company.
Shares Available Under the 1995 Equity Incentive Compensation Plan. An
aggregate of 86,000,000 shares of Common Stock, plus the number of shares
remaining under the 1988 Equity Incentive Compensation Plan at such time that
the Compensation Committee determines that no further awards will be made
thereunder (which shall not exceed 5 million), are authorized for issuance
under the 1995 Equity Incentive Compensation Plan. Such shares may be either
treasury shares or newly issued shares.
In addition to this overall limit, the 1995 Equity Incentive Compensation
Plan contains limits on the number of shares that may be subject to stock
options and stock appreciation rights awarded in any single year, see "Awards
- -- Stock Options" below, and on the amount of annual bonus that may be paid in
respect of any fiscal year to any Section 162(m) Officer, see "Awards to
Section 162(m) Officers" below.
Administration. The Compensation Committee administers the 1995 Equity
Incentive Compensation Plan, approves the eligible participants who will
receive Awards, determines the form and terms of the Awards and has the power
to fix and accelerate vesting periods. Subject to certain limitations, the
Compensation Committee may from time to time delegate some or all of its
authority to an administrator consisting of one or more members of the
Compensation Committee or one or more officers of the Company.
Awards -- General. The 1995 Equity Incentive Compensation Plan authorizes a
broad array of awards based on the Company's Common Stock, including (i) stock
awards consisting of one or more shares of Common Stock granted or offered for
sale to Eligible Individuals ("Stock Awards"), (ii) stock units which are
settled by the delivery of shares of the Company's Common Stock ("Stock
Units"), (iii) stock options ("Stock Options"), (iv) stock appreciation rights
("SARs"), which may be granted in tandem with or independently of stock
20
<PAGE>
options, and (v) other forms of equity-based or equity-related Awards which
the Compensation Committee determines to be consistent with the purposes of
the 1995 Equity Incentive Compensation Plan and the interests of the Company
("Other Awards"). Such Other Awards may also include cash payments which may
be based on one or more criteria determined by the Compensation Committee
which are unrelated to the value of the Company's Common Stock.
Awards under the 1995 Equity Incentive Compensation Plan may, in the
discretion of the Compensation Committee, be made in substitution for cash or
other compensation payable to an Eligible Individual. The Compensation
Committee may establish rules pursuant to which an Eligible Individual may
elect to receive one form of Award permitted under the 1995 Equity Incentive
Compensation Plan in lieu of any other form of Award, or may elect to receive
an Award in lieu of other compensation that otherwise might have been payable
to the Eligible Individual. For purposes of determining the number of shares
of Common Stock subject to an Award, the Compensation Committee may value the
shares at a discount to fair market value to reflect the various restrictions,
conditions and limitations set forth in the 1995 Equity Incentive Compensation
Plan and the terms of the Award or otherwise applicable to the shares.
The vesting, exercisability, payment and other restrictions applicable to an
Award (which may include, without limitation, restrictions on transferability
or provision for mandatory resale to the Company) shall be determined by the
Compensation Committee. The Compensation Committee may accelerate (i) the
vesting or payment of any Award, (ii) the lapse of restrictions on any award
(including a Stock Award) or (iii) the date on which any Stock Option or SAR
first becomes exercisable. The Compensation Committee shall also have full
authority to determine the effect, if any, that a participant's termination of
employment will have on the vesting, exercisability, payment or lapse of
restrictions applicable to an outstanding Award.
The Company may require a participant to pay a sum to the Company as may be
necessary to cover any taxes or other charges imposed on the Company with
respect to property or income received by a participant pursuant to the 1995
Equity Incentive Compensation Plan. The Company may offer loans to
participants to satisfy withholding requirements on such terms as the
Compensation Committee may determine.
No Awards shall be made under the 1995 Equity Incentive Compensation Plan
after the tenth anniversary of the date of stockholder approval.
Awards -- Stock Awards and Stock Units. Recipients of Stock Awards are
entitled to exercise voting rights and receive dividends with respect to the
shares of Common Stock underlying such Awards upon receipt of such Awards.
The Company's practice with respect to awards of Stock Units under the 1988
Equity Incentive Compensation Plan has been to contribute to certain grantor
trusts a number of shares of Common Stock corresponding to the number of
shares subject to Stock Units; pending settlement of Stock Units by the
delivery of shares of Common Stock, recipients of Awards of Stock Units have
been entitled to exercise voting rights with respect to the corresponding
shares held in trust. The Company expects to continue these practices with
respect to Stock Units awarded under the 1995 Equity Incentive Compensation
Plan. In addition, the Compensation Committee may determine (and has
determined with respect to stock units awarded under the 1988 Equity Incentive
Compensation Plan) that recipients of Stock Units will receive amounts
equivalent to dividends with respect to the shares underlying such Awards
prior to receipt of such shares.
Voting rights relating to shares of Common Stock delivered in connection
with Awards (for example, shares constituting Stock Awards and shares
delivered upon exercise of Stock Options or settlement of Stock Units) and
shares of Common Stock underlying Stock Units that are held in the grantor
trusts referred to above are subject to restrictions which are substantially
similar to those contained in the Stockholders' Agreement. See "Introduction".
These restrictions do not currently apply, however, to Awards to Vice
Presidents of Morgan Stanley.
21
<PAGE>
Awards -- Stock Options. An award of Stock Options may consist of either
nonqualified stock options or incentive stock options within the meaning of
Section 422 of the Internal Revenue Code. A Stock Option entitles the
participant to acquire a specified number of shares of Common Stock at an
exercise price determined by the Compensation Committee. The exercise price
may be paid in cash or previously owned stock or a combination thereof and, if
the terms of the Stock Option so provide, in whole or in part through the
withholding of shares of Common Stock subject to the Stock Option with a value
equal to the exercise price. In addition, the Compensation Committee has
authorized a "cashless exercise" procedure that affords participants the
opportunity to sell immediately some or all of the shares underlying the
exercised portion of a Stock Option in order to generate sufficient cash to
pay the exercise price and/or to satisfy withholding tax obligations related
to the Stock Option. Stock Options that are intended to qualify as incentive
stock options within the meaning of Section 422 of the Internal Revenue Code
expire no later than ten years from the date of award.
The maximum number of shares of Common Stock that may be subject to Stock
Options or SARs granted to or elected by a participant in the current fiscal
year shall equal 3,340,000 shares, and in each subsequent fiscal year shall
equal 110% of such maximum number for the preceding fiscal year; this limit
does not apply, however, to Options the granting or vesting of which are
subject to certain objective performance criteria. A limitation on the number
of Stock Options or SARs that may be awarded to any individual is required
under regulations under Section 162(m).
Awards to Section 162(m) Officers. The 1995 Equity Incentive Compensation
Plan contains special provisions applicable to Section 162(m) Officers.
The 1995 Equity Incentive Compensation Plan provides that, unless the
Compensation Committee determines otherwise, all compensation (other than base
salary, dividend equivalents and distributions from the Company's deferred
compensation plans, capital accumulation or carried interest plans or other
compensation plans designated by the Compensation Committee) paid by the
Company to Section 162(m) Officers for a given fiscal year shall be paid under
the 1995 Equity Incentive Compensation Plan. For each fiscal year of the
Company (beginning with the fiscal year that began December 1, 1995 and
continuing for each fiscal year ending during the term of the 1995 Equity
Incentive Compensation Plan), each Section 162(m) Officer will be eligible to
earn an annual bonus amount whose value will be dependent upon the attainment
for the applicable fiscal year of specified performance targets related to
designated performance goals for such fiscal year selected by the Compensation
Committee from among the following performance criteria: (i) predicted
economic value per share of Common Stock, (ii) earnings per share, (iii)
return on average common equity, (iv) pre-tax income, (v) pre-tax operating
income, (vi) net revenue, (vii) net income, (viii) profits before taxes, (ix)
book value per share, (x) stock price and (xi) earnings available to common
stockholders.
No later than 90 days following the commencement of each fiscal year (or by
such other time as may be required or permitted by Section 162(m)), the
Compensation Committee shall, in writing, select the performance goal or goals
applicable to the fiscal year, establish the various targets and bonus amounts
which may be earned for such year by each Section 162(m) Officer and specify
the relationship between performance goals and targets and the bonus amount to
be earned by each Section 162(m) Officer for such year. The Compensation
Committee may specify that the annual bonus amount for a fiscal year will be
earned if the applicable target is achieved for one goal or for any one of a
number of goals. The Compensation Committee may provide that the annual bonus
amount for a fiscal year will be earned only if a target is achieved for more
than one performance goal. The Compensation Committee may also provide that
the annual bonus amount to be earned for a given fiscal year will vary based
upon different levels of achievement of the applicable performance targets.
Following the completion of each fiscal year, the Compensation Committee
shall certify in writing whether the applicable performance targets have been
achieved for such year and the bonus amounts, if any, payable to Section
162(m) Officers for such fiscal year. The bonus amounts payable to a Section
162(m) Officer will be paid annually following the end of the applicable
fiscal year after such certification by the Compensation Committee in the form
of cash or other permissible Awards with a value equal to the value of the
annual bonus
22
<PAGE>
amount earned by the Section 162(m) Officer for such fiscal year. In
determining the bonus amount earned by a Section 162(m) Officer for a given
fiscal year, the Compensation Committee shall have discretion to reduce (but
not to increase) the bonus amount payable at a given level of performance to
take into account additional factors that the Compensation Committee may deem
relevant to the assessment of individual or corporate performance for the
year.
The 1995 Equity Incentive Compensation Plan sets forth a maximum annual
bonus amount that may be earned by any Section 162(m) Officer. For the fiscal
year beginning December 1, 1995 such maximum shall equal $25 million and for
each subsequent fiscal year shall equal 110% of such maximum amount for the
preceding fiscal year. In the event that all or a portion of an annual bonus
awarded to a Section 162(m) Officer for a given fiscal year is paid in whole
or in part in the form of Awards under the 1995 Equity Incentive Compensation
Plan, then for purposes of determining the number of shares subject to such
Award, the Compensation Committee may value the shares at a discount to fair
market value to reflect the various restrictions, conditions and limitations
applicable to the Award, but such discount shall not exceed 50% of the fair
market value as of the relevant date of determination, as determined in
accordance with a valuation methodology approved by the Compensation
Committee.
In addition to the foregoing, the Compensation Committee may make Awards to
Section 162(m) Officers that vest or become exercisable upon the attainment of
performance targets related to one or more performance goals selected by the
Compensation Committee from among the goals specified above. The Compensation
Committee may also grant Section 162(m) Officers Stock Options or SARs with a
per share exercise price equal to the fair market value of a share of Common
Stock on the date of grant of the Option or SAR, subject to the overall limit
on the number of shares of Common Stock that may be made subject to Stock
Options and SARs. See "Awards -- Stock Options" above.
New Plan Benefits. With the exception of awards to Section 162(m) Officers,
Awards under the 1995 Equity Incentive Compensation Plan will be authorized by
the Compensation Committee in its sole discretion. For this reason it is not
possible to determine the benefits or amounts that will be received by any
particular employees or group of employees in the future.
The Company from time to time grants Stock Units and Stock Options to
certain newly hired employees. Any such awards under the 1995 Equity Incentive
Compensation Plan will be subject to stockholder approval of the 1995 Equity
Incentive Compensation Plan.
Awards under the 1995 Equity Incentive Compensation Plan to Section 162(m)
Officers will be determined under the special provisions described above under
"Awards to Section 162(m) Officers." Because the performance targets to be
applicable in any fiscal year will be determined by the Compensation Committee
at the beginning of that fiscal year, and the amount, if any, payable to any
Section 162(m) Officer will depend upon the extent to which such performance
targets are satisfied, it is not possible to determine the benefits or amounts
that will be received by any particular Section 162(m) Officer for the current
fiscal year or any fiscal year in the future. However, for Fiscal Year 1995
the Compensation Committee employed a methodology for determining the
compensation of the Company's Section 162(m) Officers that was substantially
similar to that which is expected to be used for the current fiscal year. The
amount of cash bonus and awards under the 1988 Equity Incentive Compensation
Plan to each of the Company's Section 162(m) Officers is reported in the
Summary Compensation Table above; an explanation of the basis on which such
compensation was paid is set forth in the "Compensation Committee Report on
Executive Officer Compensation" above.
FEDERAL INCOME TAX CONSEQUENCES
Nonqualified Stock Options. The grant of a nonqualified stock option will
not result in the recognition of taxable income by the participant or in a
deduction to the Company. Upon exercise, a participant will recognize ordinary
income in an amount equal to the excess of the fair market value of the Common
Stock purchased over the exercise price. The Company is required to withhold
tax on the amount of income so recognized, and a tax
23
<PAGE>
deduction is allowable equal to the amount of such income (subject to the
satisfaction of certain conditions in the case of Stock Options exercised by
Section 162(m) Officers). Gain or loss upon a subsequent sale of any Common
Stock received upon the exercise of a nonqualified stock option generally
would be taxed as capital gain or loss (long-term or short-term, depending
upon the holding period of the stock sold). Certain additional rules apply if
the exercise price for an option is paid in shares previously owned by the
participant.
Incentive Stock Options. Upon the grant or exercise of an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code, no
income will be realized by the participant for federal income tax purposes and
the Company will not be entitled to any deduction. However, the excess of the
fair market value of the Common Stock as of the date of exercise over the
exercise price will constitute an adjustment to taxable income for purposes of
the alternative minimum tax. If the shares of Common Stock are not disposed of
within the one-year period beginning on the date of the transfer of such
shares to the participant, nor within the two-year period beginning on the
date of grant of the Stock Option, any profit realized by the participant upon
the disposition of such shares will be taxed as long-term capital gain and no
deduction will be allowed to the Company. If the shares of Common Stock are
disposed of within the one-year period from the date of transfer of such
shares to the participant or within the two-year period from the date of grant
of the Stock Option, the excess of the fair market value of the shares on the
date of exercise or, if less, the fair market value on the date of
disposition, over the exercise price will be taxable as ordinary income of the
participant at the time of disposition, and a corresponding deduction will be
allowable. Certain additional rules apply if the exercise price for an option
is paid in shares previously owned by the participant. If a Stock Option
intended to qualify as an incentive stock option is exercised by a person who
was not continually employed by the Company or certain of its affiliates from
the date of grant of such Stock Option to a date not more than three months
prior to such exercise (or one year if such person is disabled), then such
Stock Option will not qualify as an incentive stock option and will instead be
taxed as a nonqualified stock option, as described above.
Stock Awards. A participant who is awarded a Stock Award will not be taxed
at the time of award unless the participant makes special election with the
Internal Revenue Service pursuant to Section 83(b) of the Internal Revenue
Code as discussed below. Upon lapse of the risk of forfeiture or restrictions
on transferability applicable to the Common Stock comprising the Stock Award,
the participant will be taxed at ordinary income tax rates on the then fair
market value of the Common Stock and a corresponding deduction will be
allowable (subject to the satisfaction of certain conditions in the case of
Stock Options exercised by Section 162(m) Officers). In such case, the
participant's basis in the Common Stock will be equal to the ordinary income
so recognized. Upon subsequent disposition of such Common Stock, the
participant will realize long-term or short-term capital gain or loss.
Pursuant to Section 83(b) of the Internal Revenue Code, the participant may
elect within 30 days of receipt of the Stock Award to be taxed at ordinary
income tax rates on the fair market value of the Common Stock comprising such
Stock Award at the time of award (determined without regard to any
restrictions which may lapse). In that case, the participant will acquire a
basis in such Common Stock equal to the ordinary income recognized by the
participant at the time of award. No tax will be payable upon lapse or release
of the restrictions or at the time the Common Stock first becomes
transferable, and any gain or loss upon subsequent disposition will be a
capital gain or loss. In the event of a forfeiture of Common Stock with
respect to which a participant previously made a Section 83(b) election, the
participant will not be entitled to a loss deduction.
Stock Units. A participant who receives Stock Units will be taxed at
ordinary income tax rates on the then fair market value of the shares of
Common Stock distributed at the time of settlement of such Stock Unit and a
corresponding deduction will be allowable to the Company at that time (subject
to the satisfaction of certain conditions in the case of Stock Options
exercised by Section 162(m) Officers). The participant's basis in the shares
of Common Stock will be equal to the amount taxed as ordinary income, and on
subsequent disposition the participant will realize long-term or short-term
capital gain or loss.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE 1995 EQUITY INCENTIVE COMPENSATION PLAN.
24
<PAGE>
AMENDMENT TO THE RESTATED CERTIFICATE RELATING
TO THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has unanimously recommended the Authorized Common
Stock Amendment for approval by the stockholders. Such approval would amend
Article IV, Section 1 of the Restated Certificate, which relates to the
Company's authorized Common Stock.
The Company currently has authorized 300,000,000 shares of Common Stock, of
which 154,087,313 shares (excluding treasury shares) are outstanding as of the
close of business on February 7, 1996. Since the Company's initial public
offering there have been a three-for-two stock split and two two-for-one stock
splits, each effected in the form of stock dividends paid on the Common Stock.
After taking into account the most recent stock split, Common Stock underlying
outstanding stock options and the reservation of Common Stock for issuance
under the 1995 Equity Incentive Compensation Plan, approximately 40,000,000 of
the 300,000,000 shares authorized in the Restated Charter remain available for
issuance. The Authorized Common Stock Amendment would increase the number of
authorized shares of Common Stock to 600,000,000 for a total number of shares
of capital stock authorized for issuance of 630,000,000. The Board of
Directors believes the Authorized Common Stock Amendment is advisable in order
to maintain the Company's financing and capital-raising flexibility as well as
to permit additional stock splits in the future.
The full text of the applicable portions of Article IV, Section 1 of the
Restated Certificate, as it would be amended by the Authorized Common Stock
Amendment, is set forth as Annex B to this Proxy Statement. The changes to the
applicable portions of Article IV, Section 1 of the Restated Certificate that
would result from the Authorized Common Stock Amendment are marked on such
Annex.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE AUTHORIZED COMMON STOCK AMENDMENT.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, based on the recommendation of the Audit Committee,
has voted to continue to retain Ernst & Young LLP to serve as independent
auditors for the 1996 fiscal year and is submitting its selection of such firm
to the stockholders for ratification. If the selection is not ratified, the
Board of Directors will reconsider its selection. Ernst & Young LLP will have
a representative at the meeting who will be available to answer appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS
The Company will not consider any stockholder proposal for inclusion in the
1997 Annual Meeting of Stockholders' proxy materials unless received by the
Company no later than October 29, 1996.
OTHER MATTERS
At the date of this Proxy Statement, management has no knowledge of any
proposal other than those described herein that will be presented for
consideration at the meeting. In the event any other proposal is presented at
the meeting, it is intended that the persons named in the enclosed proxy will
have authority to vote such proxy in accordance with their judgment on such
proposal.
February 26, 1996
25
<PAGE>
ANNEX A
MORGAN STANLEY GROUP INC.
1995 EQUITY INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purposes of the Morgan Stanley Group Inc. 1995 Equity
Incentive Compensation Plan are to attract, retain and motivate key employees
of the Company, to compensate them for their contributions to the growth and
profits of the Company and to encourage ownership by them of Stock of the
Company.
2. DEFINITIONS. As used in the Plan, the following capitalized words shall
have the meanings indicated below:
"Administrator" means the individual or individuals to whom the Committee
delegates authority under the Plan in accordance with Section 5(b).
"Award" means an award made pursuant to the terms of the Plan.
"Award Agreement" means a written agreement between Morgan Stanley or one of
its Subsidiaries which is approved in accordance with Section 12(d), which is
executed by the Participant and by an officer on behalf of Morgan Stanley or
such Subsidiary and which sets forth the terms and conditions of the Award to
the Participant.
"Award Certificate" means a written certificate issued by Morgan Stanley or
one of its Subsidiaries which is approved in accordance with Section 12(d),
which is executed by an officer on behalf of Morgan Stanley or such Subsidiary
and which sets forth the terms and conditions of an Award.
"Board" means the Board of Directors of Morgan Stanley.
"Code" means the Internal Revenue Code of 1986, as amended, and the
applicable rulings and regulations thereunder.
"Committee" means the Compensation Committee of the Board, any successor
committee thereto or any other committee appointed by the Board to administer
the Plan. The Committee shall consist of at least two individuals and shall
serve at the pleasure of the Board.
"Company" means Morgan Stanley and all of its Subsidiaries.
"Date of the Award" means the effective date of an Award (whether a
mandatory Award or an elected Award pursuant to Section 12(a)) as specified by
the Committee and set forth in the applicable Award Agreement or Award
Certificate.
"Eligible Individuals" means the individuals described in Section 6 who are
eligible for Awards under the Plan.
"Employee Trust" means any trust established by the Company in connection
with an employee benefit plan (including the Plan or the 1988 EICP) under
which current and former employees of the Company constitute the principal
beneficiaries.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the applicable rulings and regulations thereunder.
"Fair Market Value" means, with respect to a share of Stock, the fair market
value thereof as of the relevant date of determination, as determined in
accordance with a valuation methodology approved by the Committee.
"Morgan Stanley" means Morgan Stanley Group Inc.
A-1
<PAGE>
"1988 EICP" means the Morgan Stanley Group Inc. 1988 Equity Incentive
Compensation Plan, as amended.
"Option" means an option to purchase Stock, the terms of which are described
in Section 9.
"Option Award" means an Award of Options, pursuant to Section 9. An Option
Award may consist of Options, the receipt of which was elected pursuant to
Section 12(a).
"Other Award" means any other form of award authorized under Section 11 of
the Plan. An Other Award may consist of Awards, the receipt of which was
elected pursuant to Section 12(a).
"Participant" means an individual to whom an Award has been made.
"Plan" means the Morgan Stanley Group Inc. 1995 Equity Incentive
Compensation Plan, as the same may be amended from time to time in accordance
with Section 16(f) below.
"SAR" means a stock appreciation right, as described in Section 10.
"SAR Award" means an Award of SARs pursuant to Section 10. A SAR Award may
be freestanding or granted in tandem with another type of Award. A SAR Award
may consist of SARs, the receipt of which was elected pursuant to Section
12(a).
"Section 162(m) Participant" means, for a given fiscal year of Morgan
Stanley, any Participant designated by the Compensation Committee by not later
than 90 days following the start of such year as a Participant (or such other
time as may be required or permitted by Section 162(m) of the Code) whose
compensation for such fiscal year may be subject to the limit on deductible
compensation imposed by Section 162(m) of the Code.
"Shares" means the shares of Stock underlying, constituting, subject to, or
corresponding to an Award.
"Stock" means the common stock, par value $1.00 per share, of Morgan
Stanley.
"Stock Award" means an Award of Shares pursuant to Section 7. A Stock Award
may consist of Stock, the receipt of which was elected pursuant to Section
12(a).
"Stock Unit" means a restricted stock unit, as described in Section 8.
"Stock Unit Award" means an Award of Stock Units, pursuant to Section 8. A
Stock Unit Award may consist of Stock Units, the receipt of which was elected
pursuant to Section 12(a).
"Subsidiary" means (i) a corporation or other entity with respect to which
Morgan Stanley, directly or indirectly, has the power, whether through the
ownership of voting securities, by contract or otherwise, to elect at least a
majority of the members of such corporation's board of directors or analogous
governing body, or (ii) any other corporation or other entity in which Morgan
Stanley, directly or indirectly, has an equity or similar interest and which
the Committee designates as a Subsidiary for purposes of the Plan.
"Substitute Awards" means Awards granted upon assumption of, or in
substitution for, outstanding awards previously granted by a company or other
entity acquired by the Company or with which the Company combines.
"Term of the Plan" means the period beginning on the date that the Plan is
adopted by the Board and ending on the date that the Plan terminates in
accordance with Section 3 or 16(f) below.
3. EFFECTIVE DATE AND TERM. The Plan shall become effective upon its
adoption by the Board subject to its approval by the stockholders of Morgan
Stanley. Prior to such stockholder approval, the Committee may grant Awards
conditioned on stockholder approval. If such stockholder approval is not
obtained at or before the first annual meeting of stockholders to occur after
the adoption of the Plan by the Board, the Plan and any Awards made thereunder
shall terminate ab initio and be of no further force and effect. In no event
shall any Awards be
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made under the Plan after the tenth anniversary of the date of stockholder
approval; provided, however, that no incentive stock option, within the
meaning of Section 422 of the Code, may be granted under the Plan after the
tenth anniversary of the adoption of the Plan by the Board.
4. STOCK SUBJECT TO PLAN.
(a) [ ] shares of Stock* (whether issued or unissued) shall be authorized
for issuance under the Plan (the "Section 4 Limit").
(b) The number and kind of shares authorized for issuance hereunder,
including the maximum number of Shares subject to Options or SARs as provided
in Section 4(d) below, may be equitably adjusted in the discretion of the
Committee in the event of a stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, extraordinary dividend, split-up, spin-
off, combination, exchange of shares, warrants or rights offering to purchase
Stock at a price substantially below Fair Market Value or other similar
corporate event affecting the Stock in order to preserve the benefits or
potential benefits intended to be made available to Participants granted
Awards. In the event of any of the foregoing events, the number of outstanding
Awards and the number and kind of shares subject to any outstanding Award and
the purchase price per share, if any, under any outstanding Award may be
equitably adjusted (including by payment of cash to a Participant) in the
discretion of the Committee in order to preserve the benefits or potential
benefits intended to be made available to Participants granted Awards. Such
adjustments shall be made by the Committee, whose determination as to what
adjustments shall be made, and the extent thereof, shall be final. Unless
otherwise determined by the Committee, such adjusted Awards shall be subject
to the same vesting schedule and restrictions to which the underlying Award is
subject. No fractional shares of Stock shall be reserved or authorized by any
such adjustment.
(c) In calculating the number of shares of Stock remaining for issuance
under the Plan, the following rules shall apply:
1. The Section 4 Limit shall be reduced by the number of Shares subject
to outstanding Awards and, for Awards which are not denominated in Shares,
by the number of Shares delivered upon payment or settlement of the Award.
2. The Section 4 Limit shall be increased by the number of shares of
Stock tendered to pay the exercise price of any Option, SAR or Other Award
and by the number of Shares withheld from any Award to satisfy a
Participant's tax withholding obligation or, if applicable, withheld to pay
the exercise price of an Option, SAR or Other Award.
3. The Section 4 Limit shall be increased by the number of Shares subject
to an Award (or portion thereof) granted hereunder that is forfeited, is
settled through the issuance of consideration other than Shares or
otherwise terminates without the issuance of such Shares. With respect to
SAR Awards that are settled in whole or in part in Stock, this Section
4(c)(3) shall be applied by increasing the Section 4 Limit by the excess,
if any, of the number of Shares subject to the SAR Award over the number of
Shares delivered to the Participant upon exercise of such Award.
4. Any Shares underlying Substitute Awards shall not be counted against
the Section 4 Limit and shall not be subject to Section 4(d), except in the
case of Shares with respect to which Substitute Awards are granted to
officers or directors of the Company subject to the reporting obligations
of Section 16(a) of the Exchange Act.
In no event may the operation of the foregoing result in the issuance under
the Plan of a number of Shares in excess of the Section 4 Limit.
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* Such number shall equal 86,000,000 plus the number of Shares that remain
available under the Morgan Stanley Group Inc. 1988 Equity Incentive
Compensation Plan at such time as the Compensation Committee determines
that no further award shall be made under such Plan, which number shall
not exceed 5 million shares.
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(d) The maximum number of Shares that may be subject to Options or SARs
granted to or elected by a Participant (i) in the fiscal year in which the
Plan is approved by the stockholders of Morgan Stanley shall equal 3,340,000
Shares, and (ii) in each subsequent fiscal year shall equal 110% of such
maximum number for the preceding fiscal year; provided, however, that the
limitation imposed by this Section 4(d) shall not include Options or SARs
granted to a Section 162(m) Participant in accordance with Section 14(b) or
14(c) below.
5. ADMINISTRATION.
(a) The Plan shall be administered by the Committee, which shall have full
power and authority, subject to the express provisions hereof, (i) to select
Participants from among the Eligible Individuals, (ii) to make Awards in
accordance with the Plan, (iii) to determine the number of Shares subject to
each Award or the cash amount payable in connection with an Award, (iv) to
determine the terms and conditions of each Award, including, without
limitation, those related to vesting, forfeiture, payment, exercisability, and
the effect, if any, of a Participant's termination of employment with the
Company or a change in control of the Company on the outstanding Awards
granted to such Participant, and including the authority to amend the terms
and conditions of an Award after the granting thereof to a Participant in a
manner that is not prejudicial to the rights of such Participant in such
Award, (v) to determine whether the terms and conditions of each Award will be
set forth in an Award Agreement or Award Certificate and to specify and
approve the provisions of the Award Agreements and Award Certificates
delivered to Participants in connection with their Awards, (vi) to construe
and interpret any Award Agreement or Award Certificate delivered under the
Plan, (vii) to prescribe, amend and rescind rules and procedures relating to
the Plan, (viii) to vary the terms of Awards to take account of tax,
securities law and other regulatory requirements of foreign jurisdictions and
(ix) to make all other determinations and to formulate such procedures as may
be necessary or advisable for the administration of the Plan.
(b) The Committee may, but need not, from time to time delegate some or all
of its authority under the Plan to an Administrator consisting of one or more
members of the Committee or of one or more officers of the Company; provided,
however, that the Committee may not delegate its authority (i) to make Awards
to Eligible Individuals (A) who are subject on the Date of the Award to the
reporting rules under Section 16(a) of the Exchange Act, (B) who are Section
162(m) Participants or (C) who are officers of Morgan Stanley who are
delegated authority by the Committee hereunder, or (ii) under Sections 5(c),
14 and 16(f) of the Plan. Any delegation hereunder shall be subject to the
restrictions and limits that the Committee specifies at the time of such
delegation or thereafter. Nothing in the Plan shall be construed as obligating
the Committee to delegate authority to an Administrator, and the Committee may
at any time rescind the authority delegated to an Administrator appointed
hereunder or appoint a new Administrator. At all times, the Administrator
appointed under this Section 5(b) shall serve in such capacity at the pleasure
of the Committee. Any action undertaken by the Administrator in accordance
with the Committee's delegation of authority shall have the same force and
effect as if undertaken directly by the Committee, and any reference in the
Plan to the Committee shall, to the extent consistent with the terms and
limitations of such delegation, be deemed to include a reference to the
Administrator.
(c) The Committee shall have full power and authority, subject to the
express provisions hereof, to construe and interpret the Plan.
(d) All determinations by the Committee in carrying out and administering
the Plan and in construing and interpreting the Plan shall be final, binding
and conclusive for all purposes and upon all persons interested herein. In the
event of any disagreement between the Committee and the Administrator, the
Committee's determination on such matter shall be final and binding on all
interested persons, including the Administrator.
(e) No member of the Committee or the Administrator shall be liable for
anything whatsoever in connection with the administration of the Plan except
such person's own willful misconduct. Under no circumstances shall any member
of the Committee or the Administrator be liable for any act or omission of any
other member of the Committee or the Administrator. In the performance of its
functions with respect to the Plan, the Committee and the Administrator shall
be entitled to rely upon information and advice furnished by the Company's
officers, the
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Company's accountants, the Company's counsel and any other party the Committee
or the Administrator deems necessary, and no member of the Committee or the
Administrator shall be liable for any action taken or not taken in reliance
upon any such advice.
6. ELIGIBILITY. Eligible Individuals shall include all Managing Directors,
Principals, Vice Presidents, officers, other key employees and consultants of
the Company, non-employee directors of Subsidiaries and employees and
consultants of joint ventures, partnerships or similar business organizations
in which Morgan Stanley or a Subsidiary has an equity or similar interest,
other than those individuals who may be designated by the Committee from time
to time as ineligible for such period of time as the Committee shall
determine. In accordance with rules specified by the Committee, Eligible
Individuals may include former employees or former consultants of the Company
and such joint ventures, partnerships or similar business organizations.
Members of the Committee will not be eligible to participate in the Plan. An
individual's status as an Administrator will not affect his or her eligibility
to participate in the Plan.
7. STOCK AWARDS. Stock Awards shall consist of one or more Shares of Stock
granted or offered for sale to an Eligible Individual, and shall be subject to
the terms and conditions established by the Committee in connection with the
Award and specified in the applicable Award Agreement or Award Certificate.
The Shares subject to a Stock Award may, among other things, be subject to
vesting requirements or restrictions on transferability.
8. STOCK UNIT AWARDS. Stock Unit Awards shall consist of a grant of one or
more Stock Units, and shall be subject to the terms and conditions established
by the Committee in connection with the Award and specified in the applicable
Award Agreement or Award Certificate. Each Stock Unit awarded to a Participant
shall correspond to one Share. Upon satisfaction of the conditions to vesting
and payment specified in the applicable Award Agreement or Award Certificate,
a Stock Unit will be payable, at the discretion of the Committee, in Stock or
in cash equal to Fair Market Value on the payment date of one Share.
9. OPTION AWARDS.
(a) An Option Award shall consist of the grant of an Option to purchase such
number of Shares of Stock as determined by the Committee, and shall be subject
to the terms and conditions established by the Committee in connection with
the Award and specified in the applicable Award Agreement or Award
Certificate. Upon satisfaction of the conditions to exercisability specified
in the applicable Award Agreement or Award Certificate, a Participant shall be
entitled to exercise the Option in whole or in part and to receive, upon
satisfaction or payment of the exercise price or an irrevocable notice of
exercise in the manner contemplated by Section 9(b) below, the number of
Shares in respect of which the Option shall have been exercised. Such Options
may be either nonqualified stock options or incentive stock options within the
meaning of Section 422 of the Code.
(b) Subject to the provisions of the applicable Award Agreement or Award
Certificate, the exercise price of the Option may be paid in cash or
previously owned shares of Stock or a combination thereof and, if the
applicable Award Agreement or Award Certificate so provides, in whole or in
part through the withholding of Shares subject to the Option with a value
equal to the exercise price. In accordance with the rules and procedures
established by the Committee for this purpose, the Option may also be
exercised through a "cashless exercise" procedure approved by the Committee
that affords Participants the opportunity to sell immediately some or all of
the Shares underlying the exercised portion of the Option in order to generate
sufficient cash to pay the Option exercise price and/or to satisfy withholding
tax obligations related to the Option.
(c) Options which are intended to qualify as incentive stock options under
Section 422 of the Code shall expire no later than the tenth anniversary of
the date of the grant thereof.
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<PAGE>
10. SAR AWARDS. An SAR Award shall consist of the grant of one or more SARs,
and shall be subject to the terms and conditions established by the Committee
in connection with the Award and specified in the applicable Award Agreement
or Award Certificate. Upon satisfaction of the conditions to the payment
specified in the applicable Award Agreement or Award Certificate, each SAR
shall entitle a Participant to an amount, if any, equal to the Fair Market
Value of a Share on the date of exercise over the SAR exercise price specified
in the applicable Award Agreement or Award Certificate. At the discretion of
the Committee, payments to a Participant upon exercise of an SAR may be made
in Shares, cash or a combination thereof.
11. OTHER AWARDS. The Committee shall have the authority to specify the
terms and provisions of other forms of equity-based or equity-related Awards
not described above which the Committee determines to be consistent with the
purpose of the Plan and the interests of the Company, which Awards may provide
for cash payments based in whole or in part on the value or future value of
Stock, for the acquisition or future acquisition of Stock, or any combination
thereof. Other Awards shall also include cash payments (including the cash
payment of dividend equivalents) under the Plan which may be based on one or
more criteria determined by the Committee which are unrelated to the value of
Stock and which may be granted in tandem with, or independent of, other Awards
under the Plan.
12. AWARDS IN GENERAL.
(a) Awards under the Plan may, in the discretion of the Committee, be made
in substitution in whole or in part for cash or other compensation payable to
an Eligible Individual. In accordance with rules and procedures established by
the Committee, an Eligible Individual may elect to receive one form of Award
permitted under the Plan in lieu of any other form of Award, or may elect to
receive an Award under the Plan in lieu of all or part of any compensation
which otherwise might have been paid to such Eligible Individual; provided,
however, that any such election shall not require the Committee to make any
Award to such Eligible Individual. Any such substitute or elective Awards
shall have terms and conditions consistent with the provisions of the Plan
applicable to such Award. At the discretion of the Committee, Stock Units may
at any time be substituted for the portion of a Stock Award that has not
vested in accordance with the provisions of the applicable Award Agreement or
Award Certificate. The substitution contemplated by the previous sentence may
be made at any time prior to the applicable vesting date of the Stock Award.
(b) For purposes of determining the number of Shares subject to an Award,
the Committee may value the Shares at a discount to Fair Market Value to
reflect the various restrictions, conditions and limitations set forth in the
Plan and the applicable Award Agreement or Award Certificate or otherwise
applicable to the Shares.
(c) With respect to any dividend or distribution on the Shares corresponding
to an Award, the Committee may in its discretion authorize current or deferred
payments (payable in cash or Stock or a combination thereof) or appropriate
adjustments to the outstanding Award to reflect such dividend or distribution.
(d) In accordance with the procedures specified by, and subject to the
approval of, the Committee, Participants may be given the opportunity to defer
the payment or settlement of an Award to one or more dates selected by the
Participant. In connection with such deferral, the Committee may provide that
Awards so deferred may be credited with a notional return during the period of
deferral based upon the corresponding return on one or more investments
designated by the Committee or elected by the Participant in accordance with
the procedures established by the Committee for this purpose. The Committee
shall have the right at any time to accelerate the payment or settlement of
any Award granted under the Plan, including, without limitation, any Award
subject to a prior deferral election.
(e) The terms and provisions of an Award shall be set forth in a written
Award Agreement or Award Certificate approved by the Committee and delivered
or made available to the Participant as soon as practicable following the Date
of the Award.
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(f) The vesting, exercisability, payment and other restrictions applicable
to an Award (which may include, without limitation, restrictions on
transferability or provision for mandatory resale to the Company) shall be
determined by the Committee and set forth in the applicable Award Agreement or
Award Certificate. Notwithstanding the foregoing, the Committee may accelerate
(i) the vesting or payment of any Award, (ii) the lapse of restrictions on any
Award (including a Stock Award) or (iii) the date on which any Option or SAR
first becomes exercisable. The date of a Participant's termination of
employment for any reason shall be determined in the sole discretion of the
Committee. The Committee shall also have full authority to determine and
specify in the applicable Award Agreement or Award Certificate the effect, if
any, that a Participant's termination of employment for any reason will have
on the vesting, exercisability, payment or lapse of restrictions applicable to
an outstanding Award.
13. CERTAIN RESTRICTIONS.
(a) Except as otherwise provided by the terms of any applicable Employee
Trust, prior to the exercise of any Option or SAR Award or payment of Stock
pursuant to any Stock Unit Award or Other Award, the Participant shall not
have any rights as a stockholder with respect to any Shares of Stock subject
to such Option or SAR or corresponding to such Stock Unit or Other Award.
Subject to the terms of any applicable Employee Trust, each Participant shall
be the beneficial owner of any Shares actually issued by the Company in
connection with an Award. Unless otherwise determined by the Committee,
certificates representing the Participant's Shares shall be issued in the name
of a nominee holder to be designated by the Committee. Except for the risk of
forfeiture and the restrictions on transfer which may apply to certain Shares
(including restrictions relating to any dividends or other rights), the
Participant shall be entitled to all rights of ownership, including, without
limitation, the right (i) to vote such Shares, subject for as long as the
Participant is employed by the Company, except where the constraints of local
law dictate otherwise, to the preliminary voting procedures set forth in the
voting agreement, if any, set forth in the Award Agreement or Award
Certificate and (ii) to receive cash or stock dividends thereon.
(b) Unless the Committee determines otherwise, no Award granted under the
Plan shall be transferable other than by will or by the laws of descent and
distribution; provided, however, that the Committee may, subject to such terms
and conditions as the Committee shall specify, permit the transfer of an Award
to a Participant's family members or to one or more trusts established in
whole or in part for the benefit of one or more of such family members;
provided, further, that the restrictions in this sentence shall not apply to
the Shares received in connection with an Award after the date that the
restrictions on transferability of such Shares set forth in the applicable
Award Agreement or Award Certificate have lapsed. During the lifetime of the
Participant, an Option, SAR or similar-type Other Award shall be exercisable
only by him or by the family member or trust to whom such Option, SAR or Other
Award has been transferred in accordance with the previous sentence.
14. PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS.
(a) Anything in the Plan to the contrary notwithstanding, unless the
Committee determines otherwise, all compensation (other than base salary,
dividend equivalents and distributions from the Company's deferred
compensation plans, capital accumulation or carried interest plans or other
compensation plans designated by the Committee) paid by the Company to Section
162(m) Participants for a given fiscal year shall be paid under the Plan and
subject to the terms and provisions of this Section 14.
(b) (i) Commencing with the fiscal year of Morgan Stanley beginning December
1, 1995 and for each other fiscal year of Morgan Stanley ending during the
Term of the Plan, unless the Compensation Committee determines otherwise, each
Section 162(m) Participant will be eligible to earn under the Plan an annual
bonus amount whose value will be dependent upon the attainment for the
applicable fiscal year of specified performance targets related to designated
performance goals for such fiscal year selected by the Committee from among
the performance goals specified in Section 14(d) below. No later than 90 days
following the commencement of each fiscal year (or by such other time as may
be required or permitted by Section 162(m) of the Code), the Committee shall,
in writing, (A) designate each Section 162(m) Participant, (B) select the
performance goal or goals
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applicable to the fiscal year, (C) establish the various targets and bonus
amounts which may be earned for such year by each Section 162(m) Participant
and (D) specify the relationship between performance goals and targets and the
bonus amount to be earned by each Section 162(m) Participant for such year.
(ii) The Committee may specify that the annual bonus amount for a fiscal
year will be earned if the applicable target is achieved for one goal or for
any one of a number of goals. The Committee may also provide that the annual
bonus amount for a fiscal year will be earned only if a target is achieved for
more than one performance goal. The Committee may also provide that the annual
bonus amount to be earned for a given fiscal year will vary based upon
different levels of achievement of the applicable performance targets.
(iii) Following the completion of each fiscal year, the Committee shall
certify in writing whether the applicable performance targets have been
achieved for such year and the bonus amounts, if any, payable to Section
162(m) Participants for such fiscal year. The bonus amounts payable to a
Section 162(m) Participant will be paid annually following the end of the
applicable fiscal year after such certification by the Committee in the form
of cash or other permissible Awards with a value as of the Date of the Award,
determined in accordance with Section 12(b), equal to the value of the annual
bonus amount earned by the Section 162(m) Participant for such fiscal year. In
determining the bonus amount earned by a Section 162(m) Participant for a
given fiscal year, the Committee shall have the right to reduce (but not to
increase) the bonus amount payable at a given level of performance to take
into account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the year.
(iv) Anything in this Section 14(b) to the contrary notwithstanding, the
maximum annual bonus amount that may be earned by a Section 162(m) Participant
for (A) the fiscal year in which the Plan is approved by the stockholders of
Morgan Stanley shall equal $25 million and (B) each subsequent fiscal year
shall equal 110% of such maximum amount for the preceding fiscal year. In the
event that all or a portion of an annual bonus awarded to a Section 162(m)
Participant for a given fiscal year is paid in whole or in part in the form of
Awards under the Plan, then for purposes of determining the number of Shares
subject to such Award, the Committee may value the Shares at a discount to
Fair Market Value to reflect the various restrictions, conditions and
limitations set forth in the Plan and the applicable Award Agreement or Award
Certificate or otherwise applicable to the Shares, but such discount shall not
exceed 50% of the Fair Market Value as of the relevant date of determination,
as determined in accordance with a valuation methodology approved by the
Committee.
(c) In addition to any other compensation payable under Section 14(b) above,
the Committee may grant Awards to a Participant that vest or become
exercisable upon the attainment of performance targets related to one or more
performance goals selected by the Committee from among the goals specified in
Section 14(d) below. Subject to Section 4(d) above, the Committee may also
grant Section 162(m) Participants Options or SARs with a per share exercise
price equal to the Fair Market Value of a share of Stock on the date of grant
of the Option or SAR.
(d) For purposes of this Section 14, performance goals shall be limited to
one or more of the following: (i) predicted economic value per share of Stock,
(ii) earnings per share, (iii) return on average common equity, (iv) pre-tax
income, (v) pre-tax operating income, (vi) net revenue, (vii) net income,
(viii) profits before taxes, (ix) book value per share, (x) stock price and
(xi) earnings available to common stockholders.
(e) Without further action by the Board, the provisions of this Section 14
shall cease to apply on the effective date of the repeal of Section 162(m) of
the Code (and any successor provision thereto).
15. INVESTMENT REPRESENTATION. Each Award shall be conditioned on the
Participant making any representations required in the applicable Award
Agreement or Award Certificate. Each Award shall also be conditioned upon the
making of any filings and the receipt of any consents or authorizations
required to comply with, or required to be obtained under, applicable local
law.
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16. MISCELLANEOUS PROVISIONS.
(a) As a condition to the making of any Award, the vesting or payment of any
Award or the lapse of the restrictions pertaining thereto (including those
related to the exercise of an Option or SAR), the Company may require the
Participant to pay such sum to the Company as may be necessary to discharge
the Company's obligations with respect to any taxes, assessments or other
governmental charges imposed on property or income received by a Participant
pursuant to the Plan. In accordance with rules and procedures established by
the Committee and in the discretion of the Committee, such payment may be in
the form of cash or other property. In accordance with rules and procedures
established by the Committee, in satisfaction of such taxes, assessments or
other governmental charges the Company may, in the discretion of the
Committee, make available for delivery a lesser number of Shares in payment or
settlement of an Award or permit a Participant to tender previously owned
Shares to satisfy such withholding obligation. At the discretion of the
Committee, the Company may deduct or withhold from any payment or distribution
to a Participant whether or not pursuant to the Plan. In accordance with rules
and procedures established by the Committee, the Company may offer loans to
Participants to satisfy withholding requirements on such terms as the
Committee may determine, which terms may in the discretion of the Committee be
non-interest bearing.
(b) The Plan shall not give rise to any right on the part of any Participant
to continue in the employ of the Company.
(c) All expenses and costs in connection with the administration of the Plan
or issuance of Shares, Options, SARs, Stock Units or Other Awards hereunder
shall be borne by the Company.
(d) The headings of sections herein are included solely for convenience of
reference and shall not affect the meaning of any of the provisions of the
Plan.
(e) The Plan and all rights hereunder shall be construed in accordance with
and governed by the internal laws of the State of Delaware.
(f) The Board or Committee may modify, amend, suspend or terminate the Plan
in whole or in part at any time; provided, however, that such modification,
amendment, suspension or termination shall not, without a Participant's
consent, affect adversely the rights of such Participant with respect to any
Award previously made. No amendment to the Plan may render any member of the
Committee eligible to receive an Award at any time while such member is
serving on the Committee.
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ANNEX B
Article IV, Section 1 of the Restated Certificate shall be amended in its
entirety to read as follows:
SECTION 1. Shares and Classes Authorized. The total number of shares of all
classes of capital stock which the Corporation shall have authority to issue is
330,000,000* 630,000,000** shares, which shall include:
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(a) 30,000,000 shares of preferred stock of no par value each
(hereinafter referred to as "Preferred Stock"); and
(b) 300,000,000 600,000,000 shares of common stock of the par value of
-----------
$1.00 each (hereinafter referred to as "Common Stock");
such classes of Preferred Stock and Common Stock being sometimes hereinafter
collectively referred to as "capital stock".
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* Underscored language appears in the Restated Certificate as currently in
effect and will be deleted if the Authorized Common Stock Amendment is
adopted at the 1996 Annual Meeting.
** Language in bold type will be included in the Restated Certificate if the
Authorized Common Stock Amendment is adopted at the 1996 Annual Meeting.
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MORGAN STANLEY GROUP INC.
1585 BROADWAY
NEW YORK, NEW YORK 10036
February 26, 1996
Dear Employee Stockholder:
As an employee of one of the subsidiaries of Morgan Stanley Group Inc. (the
"Company") and a party to the Stockholders' Agreement dated as of February 14,
1986 among the Company and the persons listed on Appendix A thereto, as
amended, and/or similar agreements entered into pursuant to the grant of stock
awards, stock unit awards or stock option awards under the Company's 1988
Equity Incentive Compensation Plan, 1986 Stock Option Plan and/or Performance
Unit Plan, you are entitled to participate in a Preliminary Vote of certain of
the Company's employee stockholders concerning the matters to be voted on at
the Company's 1996 Annual Meeting of Stockholders. The Preliminary Vote will
be taken by written consent dated as of Wednesday, March 20, 1996. A
proxy/voting directive card is enclosed to enable you to participate in the
Preliminary Vote.
Employees of the Company who are entitled to vote shares of the Company's
Common Stock that are subject to the Preliminary Vote are required to grant
irrevocable proxies voting their shares of Common Stock subject to the
agreements in accordance with the vote of the majority of the shares voting in
the Preliminary Vote on all matters submitted to the Preliminary Vote and
granting to Jonathan M. Clark or Philip N. Duff authority to vote the shares
of Common Stock in such person's discretion on any other matter properly
coming before the 1996 Annual Meeting. It is therefore essential that you vote
your shares of Common Stock subject to the Preliminary Vote. After reading the
enclosed Proxy Statement, kindly complete, sign and promptly return the
proxy/voting directive card on or before March 20, 1996 in the enclosed
envelope. The same card serves as a directive to State Street Bank and Trust
Company, as Trustee (the "Trustee") of the Morgan Stanley Group Inc. "Rabbi"
trust (the "Trust"), instructing the Trustee how to vote the shares of Common
Stock held on your behalf in the Trust in the Preliminary Vote. The Trustee
will vote the shares at the 1996 Annual Meeting in accordance with the results
of the Preliminary Vote. The number of shares subject to the directive to the
Trustee corresponds to the number of stock units you received as part of
compensation.
Once the Preliminary Vote has been completed, pursuant to the enclosed
proxy/voting directive card we will have your shares of Common Stock that are
subject to the voting restrictions voted at the 1996 Annual Meeting in
accordance with the results. Shares of Common Stock not subject to the
Preliminary Vote that are held by you may be voted in your sole discretion,
following the procedures set forth in the following paragraph.
With respect to the shares of Morgan Stanley Group Inc. and Subsidiaries
Employee Stock Ownership Plan Convertible Preferred Stock ("ESOP Stock")
allocated to you, if any, or any shares of Common Stock owned by you that are
not subject to the Preliminary Vote, you should have already received a
separate mailing that includes a proxy/voting instruction card whereby you are
able to (i) direct Northern Trust Company, as Trustee of the ESOP, how to vote
shares of ESOP Stock at the 1996 Annual Meeting and (ii) vote the shares of
Common Stock that are not subject to the Preliminary Vote that are held by
you. In the separate mailing you will also find a letter to stockholders, a
notice setting forth the business expected to come before the 1996 Annual
Meeting, the Proxy Statement and a copy of the Company's 1995 Annual Report.
Please refer to the Proxy Statement for a description of the matters to be
voted on in the Preliminary Vote and at the 1996 Annual Meeting. If you have
not received the separate mailing, please contact Susan Krause in the Legal
and Compliance Department at (212) 761-4670.
<PAGE>
You are welcome to attend the 1996 Annual Meeting, which will be held on
Wednesday, April 3, 1996 at 9:30 A.M. at 1585 Broadway, 41st Floor, New York,
New York. You may also vote your shares of Common Stock that are not subject to
the Preliminary Vote in person at the 1996 Annual Meeting.
Very truly yours,
/s/ Richard B. Fisher
Richard B. Fisher
Chairman of the Board of Directors
/s/ John J. Mack
John J. Mack
President
2
<PAGE>
P R O X Y
- --------------------------------------------------------------------------------
V O T I N G
I N S T R U C T I O N
MORGAN STANLEY GROUP INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE 1996
ANNUAL MEETING OF STOCKHOLDERS, APRIL 3, 1996
The undersigned hereby appoints Jonathan M. Clark and Philip N. Duff, and
each of them, attorneys and proxies of the undersigned, with full power of
substitution, to vote the number of shares of common stock of the Company held
by the undersigned which shares the undersigned has power to vote at the 1996
Annual Meeting of Stockholders to be held on April 3, 1996 at 1585 Broadway,
New York, New York, and at any adjournments thereof, in accordance with the
instructions set forth in this Proxy and with the same effect as though the
undersigned were present in person and voting such shares. The proxies are
authorized in their discretion to vote upon such other business as may
properly come before the meeting.
With respect to the shares of Common Stock of the Company allocated to my
stock account pursuant to the Morgan Stanley Group Inc. 1988 Equity Incentive
Compensation Plan (the "EICP Stock"), I, the undersigned, direct State Street
Bank and Trust Company, as trustee under the Trust Agreement dated as of April
1, 1994 (a) to vote such shares of EICP Stock at the 1996 Annual Meeting and
any adjournments thereof in accordance with the directions set forth on the
reverse side and (b) to grant a proxy to Jonathan M. Clark or Philip N. Duff,
giving them discretion to vote such shares of EICP Stock in connection with
such other business as may come before the meeting. I understand that the
trustee will not vote any allocated shares of EICP Stock for which no
instruction is received.
With respect to the shares of preferred stock ("ESOP Stock") of the Company
allocated to my stock account pursuant to the Morgan Stanley Group Inc. and
Subsidiaries Employee Stock Ownership Plan (the "ESOP Plan") and a proportion
of shares of ESOP Stock held in the trust which have not been allocated to
participants in the ESOP Plan, I, the undersigned, direct Northern Trust
Company, as trustee, (a) to vote such allocated shares of ESOP Stock at the
1996 Annual Meeting and any adjournments thereof in accordance with the
directions set forth on the reverse side, (b) to vote such unallocated shares
of ESOP Stock in accordance with the provisions of the ESOP Plan, and (c) to
grant a proxy to Jonathan M. Clark or Philip N. Duff, giving them discretion
to vote such shares of ESOP Stock in connection with such other business as
may come before the meeting. I understand that the trustee will not vote any
allocated shares of ESOP Stock for which no instruction is received.
PLEASE DATE, SIGN AND MAIL THIS PROXY CARD IN THE ACCOMPANYING ENVELOPE NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES
<PAGE>
[X] PLEASE MARK YOUR 0306
VOTE AS IN THIS
EXAMPLE.
THIS PROXY/VOTING INSTRUCTION WILL BE VOTED AS DIRECTED. IF THIS PROXY/VOTING
INSTRUCTION IS SIGNED BUT NO DIRECTION IS MADE IT WILL BE VOTED "FOR" ALL ITEMS
SET FORTH BELOW. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, 3
AND 4.
FOR WITHHELD
1. Election of Directors [_] [_]
Nominees: Richard B. Fisher, John J. Mack, Barton M. Biggs, Peter F. Karches,
Sir David A. Walker, Robert P. Bauman, Daniel B. Burke, S. Parker Gilbert,
Allen E. Murray and Paul J. Rizzo.
FOR, except vote withheld from the following nominee(s)
- -------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the 1995 Equity Incentive [_] [_] [_]
Compensation Plan.
3. Approval of an amendment to the Restated [_] [_] [_]
Certificate of Incorporation increasing to
600,000,000 the total number of shares of
Common Stock authorized for issuance.
4. Approval of the selection of Ernst & Young [_] [_] [_]
LLP as independent auditors.
SIGNATURE(S) ______________________ DATED: ____________
Please sign EXACTLY as name(s) appears hereon. Executors, administrators,
trustees, guardians or attorneys should so indicate when signing. If signing for
a corporation, please indicate your title.
<PAGE>
P R O X Y
- --------------------------------------------------------------------------------
V O T I N G
D I R E C T I V E
MORGAN STANLEY GROUP INC.
THIS PROXY/VOTING DIRECTIVE IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND RELATES TO THE 1996 ANNUAL MEETING OF STOCKHOLDERS, APRIL 3, 1996
For purposes of a preliminary vote and in accordance with and pursuant to
(i) Article IV, Section 4.1 of the Stockholders' Agreement dated as of
February 14, 1986, as amended, among Morgan Stanley Group Inc., a Delaware
corporation (the "Company"), and the persons listed on Appendix A thereto
and/or (ii) Appendix A to the Morgan Stanley Group Inc. 1986 Stock Option
Plan, as amended, and/or (iii) Appendix A to the Morgan Stanley Group Inc.
Performance Unit Plan, as amended, and/or (iv) Appendix A to the award
agreements or certificates entered into pursuant to the Morgan Stanley Group
Inc. 1988 Equity Incentive Compensation Plan, as amended, and/or (v) Exhibit B
to the Trust Agreement (the "Trust Agreement") dated as of March 5, 1991
between the Company and State Street Bank and Trust Company, as trustee
(collectively, the "Voting Agreements"), the undersigned, being subject to
voting restrictions in one or more of such Voting Agreements, does hereby (A)
vote the shares of Common Stock of the Company held by the undersigned which
have been issued pursuant to, or are subject to, one or more of the Voting
Agreements (other than the number of such shares that corresponds to the
number of Stock Units awarded to the undersigned under the Morgan Stanley
Group Inc. 1988 Equity Incentive Compensation Plan (the "Trust Shares") and
are held by the trustee referred to above (the "Trustee")) in accordance with
any instructions on the reverse side, and (B) instruct the Trustee to vote
Trust Shares in accordance with any instructions on the reverse side.
With respect to shares of Common Stock (other than Trust Shares) of the
Company held by the undersigned which have been issued pursuant to, or are
subject to, one or more of the Voting Agreements (other than the Trust
Agreement), the undersigned hereby appoints Jonathan M. Clark and Philip N.
Duff, and each of them, attorneys and proxies of the undersigned, with full
power of substitution, to vote the number of such shares of Common Stock of
the Company which shares the undersigned has the power to vote at the 1996
Annual Meeting of Stockholders of the Company to be held on April 3, 1996 at
1585 Broadway, New York, New York, and at any adjournments thereof, in
accordance with the results of the preliminary vote referred to above
irrespective of the instructions on the reverse side and with the same effect
as though the undersigned were present in person and voting such shares. The
proxies are authorized in their discretion to vote upon such other business as
may properly come before the meeting.
I hereby agree that all power and authority hereby conferred is coupled with
an interest and is irrevocable and, to the extent not prohibited by law, shall
not be terminated by any act of the undersigned or by operation of law or by
the occurrence of any event whatsoever, including, without limitation, the
death, incapacity, dissolution, liquidation, termination, bankruptcy,
dissolution of marital relationship or insolvency of the undersigned or any
similar event. If, after the execution of this document, any such event shall
occur before the completion of the actions contemplated hereby, the above-
designated attorneys and Trustee are nevertheless authorized and directed to
complete all of such actions, to the extent required by the Voting Agreements.
In the event that the undersigned has executed this document, but has not
indicated his vote on any of the proposals on the reverse, the number of his
shares subject to the Voting Agreements or held on his behalf will be voted in
favor of any such above proposal for purposes of the preliminary vote among
employee stockholders of the Company who are subject to one or more Voting
Agreements.
The validity, enforceability, interpretation and construction of the
foregoing shall be determined in accordance with the substantive laws of the
State of Delaware. THIS PROXY/VOTING DIRECTIVE IS IRREVOCABLE.
<PAGE>
X PLEASE MARK YOUR
VOTE AS IN THIS 0562
EXAMPLE.
THIS PROXY/VOTING DIRECTIVE WILL BE VOTED AS DIRECTED. IF THIS PROXY/VOTING
DIRECTIVE IS SIGNED AND RETURNED BUT NO DIRECTION IS MADE, SHARES OF COMMON
STOCK OTHER THAN TRUST SHARES WILL BE VOTED "FOR" ALL ITEMS SET FORTH BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 2, 3 AND 4.
FOR WITHHELD
1. Election of Directors [_] [_]
Nominees: Richard B. Fisher, John J. Mack, Barton M. Biggs, Peter F. Karches,
Sir David A. Walker, Robert P. Bauman, Daniel B. Burke, S. Parker Gilbert,
Allen E. Murray and Paul J. Rizzo.
FOR, except vote withheld from the following nominee(s)
- -------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the 1995 Equity Incentive [_] [_] [_]
Compensation Plan.
3. Approval of an amendment to the Restated [_] [_] [_]
Certificate of Incorporation increasing
to 600,000,000 the total number of shares
of Common Stock authorized for issuance.
4. Approval of the selection of Ernst & Young [_] [_] [_]
LLP as independent auditors.
SIGNATURE(S) _____________________ DATED AS OF MARCH 20, 1996
Please sign EXACTLY as name(s) appears hereon.
