<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Confidential, for Use of the
[_]Preliminary Proxy Statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MORGAN STANLEY DEAN WITTER & CO.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_]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:
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(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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<PAGE>
MORGAN STANLEY DEAN WITTER & CO.
1585 Broadway
New York, New York 10036
February 19, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of Morgan Stanley Dean Witter & Co. The meeting will be held on Friday, April
9, 1999 at 9:00 a.m., local time, at the offices of Morgan Stanley Dean Witter
Trust FSB, Harborside Financial Center, Plaza Two, Jersey City, New Jersey
07311. 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 1998 Annual Report.
Whether or not you plan to attend the meeting in person, your shares should
be represented and voted at the meeting. 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. Alternatively, you may wish to submit your proxy by touch-
tone phone or the Internet as indicated on the proxy. Submitting the proxy
will not preclude you from voting in person at the meeting should you later
decide to do so.
Your cooperation in promptly submitting your proxy is greatly appreciated.
Very truly yours,
/s/ Philip J. Purcell /s/ John J. Mack
Philip J. Purcell John J. Mack
Chairman and Chief Executive Officer President and Chief Operating Officer
<PAGE>
MORGAN STANLEY DEAN WITTER & CO.
1585 Broadway
New York, New York 10036
----------------
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
February 19, 1999
The 1999 Annual Meeting of Stockholders of Morgan Stanley Dean Witter & Co.
(the "Company") will be held at the offices of Morgan Stanley Dean Witter
Trust FSB, Harborside Financial Center, Plaza Two, Jersey City, New Jersey
07311, on Friday, April 9, 1999 at 9:00 a.m., local time, for the following
purposes:
1. To elect to the Board of Directors for a three-year term one class of
directors, consisting of three (3) directors;
2. To approve an amendment to the Company's Employee Stock Purchase Plan
increasing the number of shares of the Company's Common Stock reserved for
issuance thereunder by 25,000,000 shares;
3. To ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for the 1999 fiscal year;
4. To consider three stockholder proposals, if properly presented by the
respective stockholder proponents or their qualified representatives; and
5. To transact such other business as may properly come before the
meeting.
The record date for the determination of the stockholders entitled to vote
at the Annual Meeting, or any adjournments or postponements thereof, was the
close of business on February 9, 1999. Additional information regarding the
matters to be acted on at the Annual Meeting can be found in the accompanying
Proxy Statement.
By Order of the Board of Directors,
/s/ Christine A. Edwards
Christine A. Edwards
Executive Vice President,
Chief Legal Officer and Secretary
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE OR SUBMIT YOUR PROXY
BY PHONE OR THE INTERNET.
<PAGE>
MORGAN STANLEY DEAN WITTER & CO.
1585 Broadway
New York, New York 10036
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
April 9, 1999
----------------
INTRODUCTION
This Proxy Statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Morgan Stanley Dean Witter & Co., a
Delaware corporation (the "Company"), to be used at the 1999 Annual Meeting of
Stockholders of the Company on Friday, April 9, 1999 at 9:00 a.m., local time,
and at any adjournments or postponements of the Annual Meeting. The
approximate date on which this Proxy Statement and the accompanying form of
proxy are first being sent to stockholders is February 19, 1999.
Holders of the Company's Common Stock, par value $0.01 per share (the
"Common Stock"), as of the close of business on February 9, 1999 will be
entitled to vote at the Annual Meeting. On that date, there were 571,119,667
shares of Common Stock outstanding, each of which is entitled to one vote with
respect to each matter to be voted on at the Annual Meeting. In addition, on
February 9, 1999, there were 3,569,845 outstanding shares of the Company's
ESOP Convertible Preferred Stock (the "ESOP Stock"), each of which is entitled
to 4.455 votes with respect to each matter to be voted on at the Annual
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 on
it. If you do not give instructions 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 amendment to the Company's
Employee Stock Purchase Plan, FOR the ratification of the appointment of
Deloitte & Touche LLP as independent auditors of the Company for the 1999
fiscal year, AGAINST each of the stockholder proposals described herein 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 executing 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 Executive Vice President, Chief
Legal Officer and Secretary of the Company, by subsequently filing another
proxy or by attending the Annual Meeting and voting in person. Merely
attending the Annual Meeting will not revoke your proxy.
Participants in the Dean Witter START Plan (Saving Today Affords Retirement
Tomorrow) (the "DW START") may, on or before April 6, 1999, instruct the
trustee of the DW START as to the voting of Common Stock in their accounts in
the DW START. If timely voting instructions are not received, the trustee of
the DW START will, subject to the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), vote all shares for which
timely instructions have not been received in direct proportion to the voting
of shares for which timely instructions are received. In addition,
participants in the Morgan Stanley Dean Witter & Co. and Subsidiaries Employee
Stock Ownership Plan (the "ESOP") may, on or before April 6, 1999, instruct
the trustee of the ESOP as to the voting of ESOP Stock allocated to their ESOP
accounts. The ESOP trustee will, subject to the requirements of ERISA, vote
the ESOP Stock that is not allocated to participant accounts in the same
proportion as the allocated shares of ESOP Stock for which voting instructions
are received.
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The presence, in person or by proxy, of a majority in voting power of the
shares of Common Stock and ESOP Stock outstanding on February 9, 1999 shall
constitute a quorum for the transaction of business at the Annual Meeting. The
election of directors requires a plurality of the votes cast. The affirmative
vote of a majority in voting power of the shares of Common Stock and ESOP
Stock represented at the Annual Meeting and entitled to vote thereon is
required to approve each of the amendment to the Company's Employee Stock
Purchase Plan, the appointment of Deloitte & Touche LLP and the stockholder
proposals.
Abstentions may be specified on all proposals except the election of
directors. Abstentions will be counted as present for purposes of the item on
which the abstention is noted and, thus, have the effect of a vote against the
proposal. With regard to the election of directors, votes may be cast in favor
of or withheld with respect to any or all nominees; votes that are withheld
will be excluded entirely from the vote and will have no effect. Under the
rules of the National Association of Securities Dealers, Inc. (the "NASD"),
member brokers generally may not vote shares held by them in street name for
customers unless they are permitted to do so under the rules of any national
securities exchange of which they are a member. Under the rules of the New
York Stock Exchange, Inc. ("NYSE"), member brokers who hold shares in street
name for customers have the authority to vote on certain items in the event
that they have not received instructions from beneficial owners. NYSE member
brokers (other than the Company's wholly-owned subsidiaries, Morgan Stanley &
Co. Incorporated ("MS&Co.") and Dean Witter Reynolds Inc. ("DWR")) who do not
receive instructions are entitled to vote on the proposals presented in this
Proxy Statement, other than the stockholder proposals. Under NYSE rules,
stockholder proposals are "non-discretionary" items, which means that NYSE
member brokers, including MS&Co. and DWR, who have not received instructions
from the beneficial owners, do not have discretion to vote on these items, and
such broker "non-votes" will not be counted in determining their outcomes.
With respect to discretionary items, under NYSE policy, if MS&Co. and DWR do
not receive instructions regarding shares held by them in street name for
customers, each 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
each such proposal. Discover Brokerage Direct Inc. ("Discover Brokerage"), a
wholly-owned subsidiary of the Company, is not a member of the NYSE or any
other national securities exchange. Accordingly, shares held by Discover
Brokerage in street name for its customers will only be voted on proposals
coming before the Annual Meeting if its customers vote their shares. A broker
non-vote will have no effect on the outcome of the vote on the election of
directors, the amendment to the Employee Stock Purchase Plan, the appointment
of Deloitte & Touche LLP or the stockholder proposals.
The Company will pay the expenses of the preparation of proxy materials and
the solicitation of proxies for the Annual Meeting. In addition to the
solicitation of proxies by mail, solicitation may be made by certain
directors, officers or employees of the Company by telephone or other means of
communication and by Georgeson & Company Inc. ("Georgeson"). Directors,
officers and employees will receive no additional compensation for such
solicitation, and Georgeson will receive a fee of $19,000 for its services.
The Company will reimburse brokers, including MS&Co., DWR and Discover
Brokerage, and other nominees for costs incurred by them in mailing proxy
materials to beneficial holders in accordance with applicable rules.
On May 31, 1997, Morgan Stanley Group Inc. ("Morgan Stanley Group") merged
with and into Dean Witter, Discover & Co. ("Dean Witter Discover") in a merger
of equals (the "Merger"). At that time, Dean Witter Discover changed its
corporate name to Morgan Stanley, Dean Witter, Discover & Co. After receiving
stockholder approval at last year's annual meeting, the Company changed its
corporate name to Morgan Stanley Dean Witter & Co. References to the Company
include Dean Witter Discover prior to the Merger.
Prior to the Merger, Dean Witter Discover's fiscal year ended on December 31
and Morgan Stanley Group's fiscal year ended on November 30. After the Merger,
the Company adopted the fiscal year-end of November 30. As used herein,
"Fiscal 1998" refers to the twelve-month period from December 1, 1997 to
November 30, 1998; "Fiscal 1997" refers to the twelve-month period from
December 1, 1996 to November 30, 1997; and "Fiscal 1996" refers to the twelve-
month period from January 1, 1996 to December 31, 1996. All information
regarding the Common Stock has been adjusted to reflect the Company's stock
splits.
2
<PAGE>
The Voting Agreements
Certain stockholders hold their shares of Common Stock subject to agreements
relating to, among other things, the voting and disposition of such shares.
Such agreements include a Stockholders' Agreement dated as of February 14,
1986, as amended (the "Stockholders' Agreement"), among Morgan Stanley Group
and those persons who were stockholders (the "Recapitalization Signatories")
of Morgan Stanley Group at that time (all of whom were Managing Directors or
Principals of MS&Co. at such time), certain agreements (the "MAS Agreements")
between Morgan Stanley Group and certain former general partners of Miller
Anderson & Sherrerd, LLP, and certain agreements (the "VK Agreements") between
Morgan Stanley Group and certain senior officers of Van Kampen Investments
Inc. Such agreements also include various voting agreements (such agreements,
together with the Stockholders' Agreement, the MAS Agreements and the VK
Agreements, the "Voting Agreements") entered into by Morgan Stanley Group and
the Company with certain 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 certain
grants to such employees of stock awards, stock unit awards and/or option
awards under the 1995 Equity Incentive Compensation Plan (the "1995 EICP") and
the 1988 Equity Incentive Compensation Plan (the "1988 EICP") and options and
performance units under other plans. Pursuant to the Merger, the Company
succeeded to all of the rights and obligations of Morgan Stanley Group under
the Voting Agreements. Shares of ESOP Stock are not subject to any of the
Voting Agreements.
The Voting Agreements, which will cease to have further effect on May 31,
2022, 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 the date of the Preliminary
Vote may vote all of his or her shares of Common Stock subject to the Voting
Agreements in such manner as such Signatory may determine in his or her sole
discretion. A Signatory who is an employee may also direct the trustee of the
trust referred to below how to vote in the Preliminary Vote the shares of
Common Stock that are held in the trust and that correspond to stock units
awarded to the Signatory under the 1988 EICP or the 1995 EICP. At any meeting
of the stockholders called to vote with respect to any corporate action, the
shares of Common Stock of any Signatory who participated in the Preliminary
Vote will be voted in accordance with the vote of the majority of the shares
of Common Stock voted in the Preliminary Vote, and a Signatory who was an
employee of the Company at the time of the Preliminary Vote but who did not
participate in the Preliminary Vote must, if such Signatory desires to vote
the Signatory's shares of Common Stock that are subject to the Voting
Agreements, vote such shares in accordance with the vote of the majority of
the shares of Common Stock voted in the Preliminary Vote. In addition, a
trustee for a trust that holds shares of Common Stock corresponding to stock
units awarded under the 1988 EICP or the 1995 EICP (including any such stock
units awarded to former employees who do not participate in the Preliminary
Vote) must vote the shares of Common Stock that are in the trust 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 their shares of Common
Stock in accordance with the vote of the majority of the shares of Common
Stock voted in the Preliminary Vote. At February 9, 1999, 71,303,320 shares of
Common Stock (constituting approximately 12.15% of the votes that are entitled
to be cast at the Annual Meeting) were subject to voting restrictions
contained in the Voting Agreements. A Preliminary Vote with respect to the
proposals presented in this Proxy Statement will be taken on or about March
17, 1999.
Except as otherwise determined by the Board of Directors and subject to
applicable legal requirements, Recapitalization Signatories may only dispose
of or transfer in accordance with the terms of the Stockholders' Agreement any
shares of Common Stock they received in the Merger in exchange for shares of
the common stock of Morgan Stanley Group they acquired in connection with the
1986 recapitalization of Morgan Stanley Group and certain other shares. A
Recapitalization Signatory's ability to dispose of such shares depends upon
his or her age and the amount of such shares of which he or she has previously
disposed. Restrictions on disposition are in effect only while the
Recapitalization Signatory remains an employee of the Company.
3
<PAGE>
ITEM 1--ELECTION OF DIRECTORS
Introduction
The Board of Directors is divided into three classes. At each annual meeting
of the stockholders, a class of directors shall be elected for a term expiring
at the third succeeding annual meeting of stockholders after its election, to
succeed that class of directors whose term then expires. Each director shall
hold office until his or her successor has been duly elected and qualified, or
the director's earlier resignation, death or removal. Currently, the Board of
Directors consists of fifteen members. However, Richard B. Fisher and Thomas
C. Schneider, who are currently directors and members of the class of
directors whose term expires at the Annual Meeting, have informed the Company
that they will not stand for reelection at the 1999 Annual Meeting. The Board
of Directors intends to reduce the size of the Board from fifteen to thirteen
and the size of the class of directors whose term expires at the Annual
Meeting from five to three, effective as of the election of directors at the
Annual Meeting.
Based on the recommendation of its Nominating and Directors Committee, the
Board of Directors proposes the election as directors of the three persons
named below under "Nominees for Election to the Board of Directors For a
Three-Year Term Expiring in 2002," to hold office for a term ending at the
annual meeting of stockholders to be held in 2002. The Company has inquired of
each nominee and has ascertained that each will serve if elected. The
remaining ten directors named below will continue in office. While the Board
of Directors does not anticipate that any of the nominees will be unable to
stand for election as a director at the Annual Meeting, if that is the case,
proxies will be voted in favor of such other person or persons designated by
the Board of Directors.
All nominees are current directors of the Company. Set forth below is a
brief description of the background of the nominees for election as directors
and directors continuing in office.
Nominees for Election to the Board of Directors For a Three-Year Term Expiring
in 2002
Charles F. Knight
Mr. Knight, age 63, has been a director since January 1, 1999 and has served
as the Chief Executive Officer of Emerson Electric Co., a St. Louis-based
manufacturer of electronics and electrical products, since 1973, and its
Chairman since 1974. Mr. Knight also served as President of that corporation
from 1995 until March 1997, and as a director since December 1972. Mr. Knight
is also a director of Anheuser-Busch Companies, Inc., International Business
Machines Corporation, SBC Communications, Inc. and BP Amoco p.l.c.
Miles L. Marsh
Mr. Marsh, age 51, has been a director since May 1997 and served as a
director of Dean Witter Discover from December 1996 to May 1997. Mr. Marsh has
served as Chairman and Chief Executive Officer of Fort James Corporation, a
manufacturer and marketer of consumer paper products, since August 1997, when
it was created upon the merger of Fort Howard Corporation and James River
Corporation of Virginia. From January 1996 until August 1997, he served as
Chairman of James River and was James River's President and Chief Executive
Officer from October 1995 until August 1997. From March 1991 to February 1995,
Mr. Marsh served as Chairman and Chief Executive Officer of Pet Food Inc., a
leading prepared foods company. Mr. Marsh is also a director of GATX
Corporation and Whirlpool Corporation.
Laura D'Andrea Tyson
Dr. Tyson, age 51, has been a director since May 1997 and served as a
director of Morgan Stanley Group from April 1997 to May 1997. Dr. Tyson has
been the Dean of the Walter A. Haas School of Business at the University of
California, Berkeley since July 1998. She previously held the Class of 1939
Chair in Economics and Business Administration at the University from January
1997 until July 1998. Dr. Tyson served in President Clinton's first
Administration from January 1993 through March 1995 as the 16th Chair of the
White House
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Council of Economic Advisors, and from April 1995 through December 1996 as
Chair of the President's National Economic Council and the President's
National Economic Advisor. She is also a director of Ameritech Corporation,
Eastman Kodak Company and Human Genome Sciences, Inc.
The Board of Directors recommends a vote FOR the election of all three
nominees to the Board of Directors.
Directors Continuing in Office -- Term Expiring in 2000
Philip J. Purcell
Mr. Purcell, age 55, has been Chairman of the Board and Chief Executive
Officer since May 1997 and served as Chairman of the Board and Chief Executive
Officer of Dean Witter Discover from 1986 to May 1997. Mr. Purcell is also a
director or trustee of approximately 90 registered investment companies for
which Morgan Stanley Dean Witter Advisors Inc., a wholly-owned subsidiary of
the Company, serves as investment manager or investment adviser.
John J. Mack
Mr. Mack, age 54, has been President, Chief Operating Officer and a director
since May 1997 and served as President of Morgan Stanley Group from June 1993
to May 1997. From March 1992 until the Merger, he served as Chairman of the
Operating Committee of Morgan Stanley Group, which was responsible for
management of that corporation. Mr. Mack served as a director and a Managing
Director of Morgan Stanley Group from December 1987 to May 1997.
Daniel B. Burke
Mr. Burke, age 70, has been a director since May 1997 and served as a
director of Morgan Stanley Group from February 1994 to May 1997. He served as
Chief Executive Officer of Capital Cities/ABC, Inc. from 1990 until he retired
in 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 Darden
Restaurants, Inc., Rohm and Haas Company and The Washington Post Company.
C. Robert Kidder
Mr. Kidder, age 54, has been a director since May 1997 and served as a
director of Dean Witter Discover from July 1993 to May 1997. Mr. Kidder has
served since January 1995 as Chairman of the Board and Chief Executive Officer
of Borden, Inc., a consumer and specialty products company. He served from
August 1991 to October 1994 as Chairman and Chief Executive Officer of
Duracell International Inc., a consumer battery company. Mr. Kidder is also a
director of AEP Industries Inc. and Electronic Data Systems Corporation.
Michael A. Miles
Mr. Miles, age 59, has been a director since May 1997 and served as director
of Dean Witter Discover from February 1993 to May 1994 and from January 1995
to May 1997. Mr. Miles has served since January 1995 as a special limited
partner in Forstmann Little & Co., a private investment firm with interests in
electronics, aerospace, publishing and other industries. From September 1991
to July 1994, he was Chairman of the Board and Chief Executive Officer of
Philip Morris Companies Inc., a holding company engaged primarily in the
manufacture and sale of various consumer products. He is also a director of
Sears, Roebuck and Co., The Allstate Corporation, Time Warner Inc. and Dell
Computer Corporation.
Allen E. Murray
Mr. Murray, age 69, has been a director since May 1997 and served as a
director of Morgan Stanley Group from November 1992 to May 1997. Mr. Murray
served as Chairman of the Board of Directors and Chief
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Executive Officer of Mobil Corporation from February 1986 until his retirement
in 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 and Manufacturing Company.
Directors Continuing in Office -- Term Expiring in 2001
Robert P. Bauman
Mr. Bauman, age 67, has been a director since May 1997 and served as a
director of Morgan Stanley Group from April 1996 to May 1997. Mr. Bauman has
been the non-executive Chairman of BTR plc, a manufacturing and engineering
business with global operations, since May 1998 and served as its Deputy
Chairman and non-executive director from October 1997 until May 1998. He
served as Chief Executive Officer of SmithKline Beecham Plc from 1989 until
May 1994 and as the non-executive Chairman of British Aerospace PLC from May
1994 until May 1998. Mr. Bauman is also a director of CIGNA Corporation and
Union Pacific Corporation. Mr. Bauman is also a non-executive director of
Reuters Holdings PLC.
Edward A. Brennan
Mr. Brennan, age 65, has been a director since May 1997 and served as a
director of Dean Witter Discover from February 1993 to May 1997. Mr. Brennan
is the former Chairman of the Board, President and Chief Executive Officer of
Sears, Roebuck and Co., having served in such capacities for more than five
years until his retirement in August 1995. Mr. Brennan is also a director of
AMR Corporation, Minnesota Mining and Manufacturing Company, The Allstate
Corporation, Unicom Corporation, Dean Foods Company and The SABRE Group
Holdings, Inc.
Diana D. Brooks
Mrs. Brooks, age 48, has been a director since December 1997. Mrs. Brooks
has served since April 1994 as the President and Chief Executive Officer of
Sotheby's Holdings, Inc., parent company of the world-renowned auction house
with global operations. Previously, Mrs. Brooks served as President and Chief
Executive Officer of Sotheby's Worldwide Auction Business from April 1993 to
April 1994 and of Sotheby's Inc., responsible for North and South American
operations, from November 1990 to April 1993. She has been a director of
Sotheby's Holdings, Inc. since 1992.
Clarence B. Rogers, Jr.
Mr. Rogers, age 69, has been a director since May 1997 and served as a
director of Dean Witter Discover from February 1993 to May 1997. Mr. Rogers
served as Chief Executive Officer of Equifax Inc., a provider of information-
based administrative services, from October 1992 until December 1995, and has
served since October 1992 as its Chairman of the Board. He is also a director
of Sears, Roebuck and Co., Briggs & Stratton Corporation, Oxford Industries,
Inc. and ChoicePoint Inc.
Board of Directors Meetings and Committees
The Board of Directors held seven (7) meetings during Fiscal 1998. The
Company has standing Audit, Compensation and Nominating and Directors
Committees.
The Audit Committee, among other things, confers with the Company's
independent auditors and internal auditors concerning their respective audits
and reviews the accounting principles employed in financial reporting. Messrs.
Brennan (Chair), Kidder and Murray and Dr. Tyson are the members of the Audit
Committee. During Fiscal 1998, the Audit Committee held four (4) meetings.
The Compensation Committee, among other things, determines the compensation
policies applicable to the senior officers of the Company and of its
subsidiaries and establishes the total compensation for each senior officer in
light of these policies. The Compensation Committee also addresses questions
of interpretation,
6
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administration and application of the Company's or any subsidiary's employee
benefit plans. The members of the Compensation Committee are Messrs. Burke
(Chair), Brennan, Murray and Rogers. During Fiscal 1998, the Compensation
Committee held four (4) meetings.
The Nominating and Directors Committee, among other things, evaluates and
recommends candidates for election to the Company's Board of Directors and
assesses the Board of Directors' performance not less frequently than every
three (3) years, recommends director compensation and benefits philosophy, and
periodically reviews the Company's corporate governance profile. Messrs. Miles
(Chair), Bauman and Marsh and Mrs. Brooks are the members of the Nominating
and Directors Committee. The Nominating and Directors Committee held two (2)
meetings during Fiscal 1998. The Company's current Bylaws include provisions
setting forth specific conditions under which persons may be nominated as
directors of the Company at an annual meeting of stockholders. A copy of such
provisions is available upon request to the Company's Executive Vice
President, Chief Legal Officer and Secretary, 1585 Broadway, New York, New
York 10036.
During Fiscal 1998, each of the current directors attended at least seventy-
five percent (75%) of the meetings of the Board of Directors and the
Committees on which he or she served (during the period that he or she
served).
Director Compensation
Directors who are not employees of the Company or a Company affiliate ("Non-
Employee Directors") receive annual cash retainers and meeting fees as
follows:
<TABLE>
<S> <C>
Board Member.................................................... $35,000
Committee Chair................................................. 7,500
Committee Member................................................ 5,000
Attendance at Board or Committee Meeting........................ 1,000
</TABLE>
Non-Employee Directors also participate in the Company's Directors' Equity
Capital Accumulation Plan ("DECAP"). Under DECAP, Non-Employee Directors
receive formula-based awards of stock options covering 4,000 shares of Common
Stock and a grant of 600 shares of Common Stock upon initially joining the
Board of Directors and after each annual meeting of stockholders after which
they continue to serve. DECAP further provides that each Non-Employee Director
may elect to receive all or a portion of his or her annual cash retainers and
meeting fees, on a current or deferred basis, in shares of Common Stock at a
fair market value equal to the cash retainers or fees that would otherwise
have been paid and may elect to defer receipt of formula-based Common Stock
grants. Each Non-Employee Director also may elect under DECAP to receive
options to purchase Common Stock in lieu of that director's annual $35,000
retainer. If a Non-Employee Director makes this election, the number of shares
of Common Stock subject to each such option will be equal to the number of
whole shares of Common Stock obtained by multiplying three by the quotient
obtained by dividing $35,000 by the fair market value of a share of Common
Stock on the award date. Non-Employee Directors are not eligible to receive
retirement benefits from the Company.
The Company matches certain charitable gifts to educational institutions
made by Non-Employee Directors up to a maximum of $2,000 per year. During
Fiscal 1998, the Company matched charitable gifts in the amount of $2,000 each
on behalf of Mr. Kidder and Mr. Rogers.
Directors who are also employees of the Company or an affiliate receive no
compensation for serving as a director of the Company.
7
<PAGE>
STOCK OWNERSHIP
Stock Ownership of Management
The following table sets forth, as of January 19, 1999, the beneficial
ownership of the Company's capital stock by current directors, nominees for
director, the Chief Executive Officer, each of the four other named executive
officers, and all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount of Common Stock
Name of Beneficial Owner Beneficially Owned(/1/)
- ------------------------ -----------------------
<S> <C>
Philip J. Purcell(/2/)(/3/)(/4/)(/5/)(/6/)(/7/)....... 2,919,561
John J. Mack(/2/)(/3/)(/4/)(/7/)...................... 3,861,591
Thomas C. Schneider(/2/)(/3/)(/4/)(/6/)(/7/).......... 1,205,346
Richard B. Fisher(/2/)(/3/)(/4/)(/6/)(/7/)............ 4,316,122
Robert P. Bauman(/8/)................................. 12,370
Edward A. Brennan(/8/)................................ 139,349
Diana D. Brooks(/8/).................................. 8,000
Daniel B. Burke(/8/).................................. 16,152
C. Robert Kidder(/8/)................................. 27,942
Charles F. Knight(/9/)................................ 1,006
Miles L. Marsh(/8/)................................... 15,600
Michael A. Miles(/8/)................................. 34,736
Allen E. Murray(/8/).................................. 21,915
Clarence B. Rogers, Jr.(/8/).......................... 34,528
Laura D'Andrea Tyson(/8/)............................. 10,663
Christine A. Edwards(/2/)(/3/)(/4/)(/6/)(/7/)......... 661,239
Robert G. Scott(/2/)(/3/)(/4/)(/7/)................... 1,638,347
John H. Schaefer(/2/)(/3/)(/4/)(/6/)(/7/)............. 201,044
All executive officers and directors as a group (18
persons)(/2/)(/3/)(/4/)(/10/)........................ 15,125,511
</TABLE>
- --------
(1) Each officer and director beneficially owns less than 1% of the shares
outstanding based on 571,113,010 shares of Common Stock, except that all
officers and directors as a group beneficially own approximately 2.65% of
the Common Stock.
(2) Except as otherwise disclosed below, the voting and disposition of the
shares of Common Stock beneficially owned by the executive officers, Mr.
Schneider and Mr. Fisher are subject to the Voting Agreements. See
"INTRODUCTION--The Voting Agreements."
(3) Includes 122,564, 764,219, 17,117, 676,886, 19,327, 420,736, 12,540 and
2,033,389 shares of Common Stock underlying stock unit awards granted to
Mr. Purcell, Mr. Mack, Mr. Schneider, Mr. Fisher, Mrs. Edwards, Mr.
Scott, Mr. Schaefer and all current directors and executive officers as a
group, respectively, as part of compensation. Except for 5,565 shares of
Common Stock underlying the stock unit awards granted to Mr. Schaefer
that are not subject to the Voting Agreements, all the shares of Common
Stock underlying such stock unit awards are subject to the Voting
Agreements and are held in trust to be voted in accordance with the
results of the Preliminary Vote.
(4) Includes 5,067, 5,067, 5,067, 179, 179, 179, 158 and 15,896 shares of
Common Stock into which shares of ESOP Stock are convertible that have
been allocated to Messrs. Mack, Fisher, Scott, Purcell, Schneider and
Schaefer, Mrs. Edwards and all current directors and executive officers
as a group, respectively. Each share of ESOP Stock is convertible into
3.3 shares of Common Stock. Each share of ESOP Stock is entitled to 4.455
votes with respect to each matter to be voted on at the 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) Includes 22,682 shares of Common Stock owned by Mr. Purcell's spouse and
11,959 shares held in custodial accounts on behalf of Mr. Purcell's
children for which he is custodian, which are not subject to the Voting
Agreements, as to which Mr. Purcell disclaims beneficial ownership.
(6) Includes 1,191,348, 612,292, 241,143, 25,410 and 22,285 shares of Common
Stock beneficially held by Mr. Purcell, Mr. Schneider, Mrs. Edwards, Mr.
Fisher and Mr. Schaefer, respectively, that are not subject to the Voting
Agreements (including shares for which such individuals are disclaiming
beneficial ownership).
(7) Includes 1,605,470, 575,758, 439,091, 400,611, 298,535, 223,685 and
166,040 shares of Common Stock subject to options that are exercisable
within 60 days after January 19, 1999 held by Mr. Purcell, Mr. Schneider,
Mr. Mack, Mrs. Edwards, Mr. Fisher, Mr. Scott and Mr. Schaefer,
respectively. Of these, only 87,733, 12,030, 439,091, 13,767, 298,535,
172,109, and 5,233 shares, respectively, will be subject to the Voting
Agreements, and the remaining shares will not be subject to the Voting
Agreements.
8
<PAGE>
(8) Includes the following shares of Common Stock subject to options that are
exercisable within 60 days after January 19, 1999: (i) 25,342 shares held
by each of Messrs. Brennan, Kidder, Miles and Rogers; (ii) 12,000 shares
held by Mr. Marsh; (iii) 9,342 shares held by each of Messrs. Bauman and
Burke and Dr. Tyson; and (iv) 8,000 shares held by each of Mr. Murray and
Mrs. Brooks.
(9) Includes 1,000 shares acquired on January 19, 1999 during the Company's
first window period for transactions in Company stock after Mr. Knight
became a director.
(10) Includes 2,257,345 shares of Common Stock that are not subject to the
Voting Agreements. Includes 3,866,584 shares of Common Stock subject to
options that are exercisable within 60 days after January 19, 1999, of
which 2,838,086 shares will not be subject to the Voting Agreements.
Principal Stockholders
The following table sets forth certain information regarding each person or
group of persons known to the Company as of January 19, 1999 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/).................. 104,242,538(/2/)(/3/)(/4/)(/5/) 17.42%
</TABLE>
- --------
(1) The voting of the shares of Common Stock subject to the Voting Agreements
is subject to the restrictions on voting contained therein. The
information provided relates to the voting power of such securities. The
Signatories to the Voting Agreements do not share dispositive power. See
"INTRODUCTION--The Voting Agreements."
(2) Includes 27,261,921 shares of Common Stock that may be acquired upon the
exercise of options that are exercisable within 60 days after January 19,
1999. Of these shares, 5,613,947 will not be subject to the Voting
Agreements.
(3) Includes 43,948,895 shares of Common Stock, underlying stock unit awards
granted pursuant to equity-based employee compensation plans, that will
be voted in accordance with the results of the Preliminary Vote.
(4) Includes 5,299,767 shares of Common Stock, including shares underlying
stock unit awards granted pursuant to equity-based employee compensation
plans, that are not subject to the Voting Agreements.
(5) Does not include 2,058,656 shares of Common Stock into which shares of
ESOP Stock allocated to the Signatories are convertible. Each share of
ESOP Stock is convertible into 3.3 shares of Common Stock. Each share of
ESOP Stock is entitled to 4.455 votes with respect to each matter to be
voted on at the Annual Meeting. Such shares are not subject to the Voting
Agreements.
9
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes the compensation paid by the Company and its
subsidiaries to the Chief Executive Officer and the Company's four other most
highly compensated executive officers who were serving as executive officers
at November 30, 1998 (the "named executive officers") for services rendered in
all capacities to the Company and its subsidiaries for Fiscal 1998, Fiscal
1997 and Fiscal 1996. Amounts reported for Messrs. Mack and Scott for Fiscal
1997 and Fiscal 1996, as applicable, include compensation received from Morgan
Stanley Group prior to the Merger.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------------------ ---------------------------
Restricted Securities
Other Annual Stock Underlying
Name and Fiscal Compensation Award(s) Options/
Principal Position Year(/1/) Salary($)(/2/) Bonus($)(/2/) ($) ($) SARS(#)
- ------------------ --------- -------------- ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Philip J. Purcell 1998 $775,000 $8,112,500 -- $4,435,319(/3/) 149,645(/4/)
Chairman of the 633,862(/5/)
Board and ---------
Chief Executive 783,507
Officer
1997 775,000(/7/) 9,698,750 799,996(/8/) 3,135,577(/9/) 126,126(/4/)
330,000(/10/)
663,875(/5/)
---------
1,120,001
1996 750,000 2,560,000 -- 895,405(/12/) --
John J. Mack 1998 $775,000 $8,112,500 -- $4,435,319(/3/) 149,645(/4/)
President and Chief
Operating Officer
1997 775,000 9,698,750 -- 3,135,577(/9/) 126,126(/4/)
1996 550,000 5,771,875(/13/) -- 4,154,366(/14/) 299,636(/15/)
Robert G. Scott* 1998 $300,000 $3,725,000 -- $1,699,264(/3/) 57,333(/4/)
Executive Vice
President and
Chief Financial
Officer
1997 300,000 4,956,875 -- 1,553,944(/9/) 62,505(/4/)
206,304(/16/)
---------
268,809
Christine A. Edwards 1998 $270,000 $1,908,000 $ 55,397(/8/) $ 637,266(/3/) 21,502(/4/)
Executive Vice 200,095(/5/)
President, ---------
Chief Legal Officer 221,597
and Secretary
1997 270,000(/7/) 1,936,925 -- 546,565(/9/) 21,987(/4/)
100,000(/10/)
83,869(/5/)
137,536(/16/)
---------
343,392
1996 255,000 560,000 -- 195,870(/12/) --
John H. Schaefer** 1998 $260,000 $1,494,000 -- $ 465,145(/3/) 15,695(/4/)
Executive Vice 21,439(/5/)
President and Chief ---------
Strategic and 37,134
Administrative
Officer
<CAPTION>
Name and All Other
Principal Position Compensation
- ------------------ ----------------
<S> <C>
Philip J. Purcell $23,100(/6/)
Chairman of the
Board and
Chief Executive
Officer
3,731(/11/)
3,633(/11/)
John J. Mack $23,100(/6/)
President and Chief
Operating Officer
25,500(/6/)
19,650(/6/)
Robert G. Scott* $23,100(/6/)
Executive Vice
President and
Chief Financial
Officer
25,500(/6/)
Christine A. Edwards $21,600(/6/)
Executive Vice
President,
Chief Legal Officer
and Secretary
3,731(/11/)
3,633(/11/)
John H. Schaefer** $23,100(/6/)
Executive Vice
President and Chief
Strategic and
Administrative
Officer
</TABLE>
- --------
* Not an executive officer of Morgan Stanley Group or Dean Witter Discover
prior to the Merger.
** Not an executive officer of the Company until 1998.
10
<PAGE>
(1) Information for Mr. Mack for Fiscal Year 1996 is presented based on the
fiscal year of Morgan Stanley Group prior to the Merger, which was the
12-month period from December 1, 1995 to November 30, 1996.
(2) Includes amounts contributed to various deferred compensation plans of
the Company.
(3) The market value of the Common Stock underlying vested and unvested
restricted stock units (which generally convert into shares of Common
Stock) ("RSUs") at the date of grant, without taking into account any
diminution in value attributable to the restrictions on such RSUs. Awards
of RSUs were granted under the 1995 EICP on December 11, 1998 for
performance in Fiscal 1998; the closing price per share of the Common
Stock on that date as reported on the New York Stock Exchange Composite
Transaction Tape (the "NYSE Composite Tape") was $66.6875 per share.
The aggregate number of RSUs awarded on December 11, 1998 to each of the
named executive officers is as follows: Mr. Purcell--66,509; Mr. Mack--
66,509; Mr. Scott--25,481; Mrs. Edwards--9,556; and Mr. Schaefer--6,975.
These RSUs vest ratably over three years beginning January 2, 1999.
Dividend equivalents are paid on the RSUs at the same rate that dividends
are paid on shares of Common Stock. The RSUs are neither distributed in the
form of shares of Common Stock nor transferable for five years after the
grant date and are subject to forfeiture in certain circumstances. The RSUs
provide that in the event a "change in control" or a "change in ownership"
of the Company occurs or the recipient terminates employment with the
Company as a result of a "full career retirement" or death, all such RSUs
will vest. In addition, in the case of a "change in ownership," "full
career retirement" or death, all such RSUs will generally convert into
shares of Common Stock.
The aggregate number of RSUs (including RSUs awarded on December 11, 1998,
TDEPP Units (as defined in footnote 12 below) and RSUs awarded prior to the
years reported) and the market value ascribed thereto as of November 30,
1998 owned by each of the named executive officers are as follows: Mr.
Purcell--214,536 ($14,937,069); Mr. Mack--764,219 ($53,208,748); Mr.
Scott--420,736 ($29,293,744); Mrs. Edwards --39,893 ($2,777,550); and Mr.
Schaefer--46,717 ($3,252,671). The value ascribed to RSUs and TDEPP Units
has been reported based on the value of the Common Stock at fiscal year
end, in accordance with SEC rules. The value ascribed to RSUs awarded in
respect of Fiscal 1998 by the Compensation Committee differs from the
amounts reported herein. For a discussion of the differences between the
value ascribed to such RSUs pursuant to SEC rules and the values ascribed
by the Compensation Committee to such RSUs, see "COMPENSATION OF EXECUTIVE
OFFICERS--Report of the Compensation Committee on Executive Compensation."
(4) Awards under the 1995 EICP of stock options for services performed in the
fiscal year shown. These options generally provide that any unvested
portion of the award will immediately vest and become exercisable under
certain circumstances, such as a "change in control" or "change in
ownership" of the Company or the recipient's termination of employment
with the Company as a result of a "full career retirement" or death. In
the case of a "change in ownership," "full career retirement" or death,
shares of Common Stock acquired upon exercise of such options will
generally no longer be subject to restrictions on transfer. Restoration
Option Rights ("RORs") were granted with respect to such options. An ROR
entitles the grantee in respect of an underlying option (an "Underlying
Option"), upon exercise of such Underlying Option at a time when the
grantee is an employee of the Company, and upon tendering shares of
Common Stock to the Company in satisfaction of the exercise price of such
Underlying Option, to the automatic grant of an additional option (a
"Restoration Option") to acquire the number of shares of Common Stock
equal to the number of shares of Common Stock delivered to pay the
exercise price of the Underlying Option, and delivered or withheld to pay
taxes owed as a result of such exercise, at a per share price equal to
the closing price of a share of Common Stock as reported on the NYSE
Composite Tape on the exercise date of such Underlying Option.
(5) Restoration Options granted upon exercise of RORs.
(6) Contributions made to the Deferred Profit Sharing Plan ("DPSP") and the
Employee Stock Ownership Plan ("ESOP"). For amounts reported for Fiscal
1998, the Company contributed 45% of such amount to the DPSP and 55% to
the ESOP for Messrs. Purcell, Mack, Scott and Schaefer, and 48.15% of
such amount to the DPSP and 51.85% to the ESOP for Mrs. Edwards. For
amounts reported for Fiscal 1997, the Company contributed 50.2% of such
amount to the DPSP and 49.8% to the ESOP. For amounts reported for Fiscal
1996, Morgan Stanley Group contributed 39% of such amount to the DPSP and
61% to the ESOP for Mr. Mack.
(7) Due to the Company's change in fiscal year, the amount reported for
Fiscal 1997 for Mr. Purcell and Mrs. Edwards includes salary for the
month of December 1996, approximately $62,500 and $21,250, respectively,
that is also included in the amount reported for Fiscal 1996.
(8) Payments received upon the exercise of options pursuant to tax benefit
rights granted in connection with such options. The tax benefit rights
entitled the optionee to an amount equal to the amount of compensation
realized upon the exercise of the option multiplied by the then
applicable federal corporate income tax rate.
(9) The market value of the Common Stock underlying vested and unvested RSUs
at the date of grant, without taking into account any diminution in value
attributable to the restrictions on such RSUs. Awards of RSUs were
granted under the 1995 EICP on December 12, 1997 for performance in
Fiscal 1997; the closing price per share of the Common Stock on that date
as reported on the NYSE Composite Tape was $55.9375 per share.
The aggregate number of RSUs awarded on December 12, 1997 to each of the
named executive officers is as follows: Mr. Purcell--56,055; Mr. Mack--
56,055; Mr. Scott--27,780; and Mrs. Edwards--9,771. Seventy-five percent of
the RSUs vest ratably over three years beginning January 2, 1999; the
remaining 25% vest in five equal annual installments beginning January 2,
1999. Dividend equivalents are paid on these RSUs at the same rate that
dividends are paid on shares of Common Stock. The RSUs are neither
11
<PAGE>
distributed in the form of shares of Common Stock nor transferable for five
years after the grant date and are subject to forfeiture in certain
circumstances. The RSUs provide that, in the event a "change in control" or
a "change in ownership" of the Company occurs or the recipient terminates
employment with the Company as a result of a "full career retirement" or
death, all such RSUs will vest. In addition, in the case of a "change in
ownership," "full career retirement" or death, all such RSUs will generally
convert into shares of Common Stock.
(10) Awards of stock options made before the Merger by Dean Witter Discover
during Fiscal 1997, consistent with historic Dean Witter Discover
compensation practices. These options provide that, in the event of a
"change in control" of the Company, any unvested portion of the award
will immediately vest and become exercisable. The Merger did not
constitute a "change in control" for purposes of these options. RORs were
granted with respect to such options.
(11) The Company's matching contribution under the DW START.
(12) The market value at the date of grant of the Common Stock underlying
awards of restricted stock units ("TDEPP Units") made under the Company's
Tax Deferred Equity Participation Plan ("TDEPP") for Fiscal 1996, without
taking into account any diminution in value attributable to restrictions
on such TDEPP Units. The awards were made on January 17, 1997. The
closing price per share of the Common Stock as reported on the NYSE
Composite Tape for that date was $35.50.
The aggregate number of TDEPP Units awarded on January 17, 1997 to Mr.
Purcell was 25,222 and to Mrs. Edwards was 5,517. TDEPP Units vest two
years after the award date and are payable in Common Stock five years after
the award date. TDEPP Units also provide that, in the event of a "change in
control" of the Company, the vesting and distribution of such awards will
be accelerated. The Merger did not constitute a "change in control" for
purposes of TDEPP Units. Dividend equivalents are allocated to the account
of each holder of TDEPP Units on all such units at the same rate that
dividends are paid on shares of Common Stock. TDEPP Units may not be
disposed of or encumbered prior to the lapse of restrictions on
transferability and are subject to forfeiture under certain circumstances.
(13) Includes amounts representing annual cash bonus and the value of units
awarded pursuant to the 1988 Capital Accumulation Plan, a plan that
provides participation in certain investments that the Company has made
directly or indirectly in other entities.
(14) The market value at the date of grant of the common stock of Morgan
Stanley Group underlying vested and unvested awards of RSUs made by
Morgan Stanley Group in Fiscal 1996 for performance in the year, without
taking into account any diminution in value attributable to restrictions
on each RSU. The market value of such awards has been calculated based
upon the closing price of the common stock of Morgan Stanley Group on the
date the awards were made.
The aggregate number of RSUs awarded for Fiscal 1996 performance for Mr.
Mack was 118,184. Seventy-five percent of these RSUs vested on January 2,
1997; the remaining 25% vest in five equal annual installments. Dividend
equivalents are paid on these RSUs at the same rate that dividends are paid
on shares of Common Stock. These RSUs are subject to forfeiture under
certain circumstances and are neither distributed in the form of shares of
Common Stock nor transferable for five years after the date of grant,
except that if the recipient terminates employment with the Company as a
result of a "full career retirement" or death, the RSUs awarded for Fiscal
1996 will vest and such RSUs will generally convert into shares of Common
Stock after such termination of employment.
(15) Awards of stock options made by Morgan Stanley Group to certain key
employees, including Mr. Mack, considered supplemental to year-end
compensation. Twenty percent of these options vest annually on January 2
from 1998 through 2000; the remaining 40% will vest in 2001. The options
become exercisable upon vesting and expire on February 26, 2003. The
numbers of shares of Common Stock underlying the options reflect
adjustment of the options pursuant to the Merger to give effect to the
conversion terms of the Merger. The options, whether vested or unvested,
may not be sold, assigned, exchanged, pledged, hypothecated or otherwise
disposed of or encumbered and are subject to forfeiture under certain
circumstances.
(16) Awards of stock options made on June 27, 1997 to certain key employees to
address special equity, retention or pay transition issues related to the
Merger. These options provide that, in the event of a "change in control"
of the Company, any unvested portion of the award will immediately vest
and become exercisable. RORs were granted with respect to such options.
Compensation to employees who are not executive officers of the Company may
exceed compensation paid to the named executive officers.
12
<PAGE>
Stock Options
The table below provides information concerning stock options granted to the
named executive officers during Fiscal 1998 (giving effect to awards of stock
options on December 11, 1998 for services performed in Fiscal 1998).
Option Grants in the Last Fiscal Year
<TABLE>
<CAPTION>
Number of Securities Percent of
Underlying Options Total Options
Granted(#) Granted to Grant Date
------------------------- Employees Exercise Present
Restoration in Fiscal Price Expiration Value
Name Options(/1/) Options(/2/) Year ($/Sh) Date ($)(/3/)
---- ------------ ------------ ------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Philip J. Purcell....... 149,645 0.96 71.29 1/02/09 3,555,734
79,964 0.51 59.125 2/21/03 1,553,671
553,898 3.54 59.125 1/19/05 12,616,950
John J. Mack............ 149,645 0.96 71.29 1/02/09 3,555,734
Robert G. Scott......... 57,333 0.37 71.29 1/02/09 1,362,297
Christine A. Edwards.... 21,502 0.14 71.29 1/02/09 510,912
59,875 0.38 59.125 2/21/03 1,163,349
135,935 0.87 59.125 1/19/05 3,096,392
4,285 0.03 59.125 7/31/98 24,781
John H. Schaefer........ 15,695 0.10 71.29 1/02/09 372,931
21,439 0.14 41.6875 2/21/03 281,910
</TABLE>
- --------
(1) Awards under the 1995 EICP for services performed in Fiscal 1998. The
Compensation Committee approved the grant on December 11, 1998 with an
exercise price, determined pursuant to its authority under the 1995 EICP,
equal to the average of the closing prices of a share of Common Stock, as
reported on the NYSE Composite Tape, for the last seven trading days of
Fiscal 1998. These stock options vest and become exercisable in three
equal installments on January 2, 1999, 2000 and 2001. These options, which
are exercisable upon vesting, are not transferable and are subject to
forfeiture under certain circumstances. Shares of Common Stock acquired
upon the exercise of such options generally may not be transferred or sold
prior to January 2, 2004, except to the extent required to cover the
exercise price and tax liability arising upon exercise. The stock options
generally provide that any unvested portion of the award will vest and
become exercisable under certain circumstances, such as a "change in
control" or "change in ownership" of the Company or the recipient's
termination of employment with the Company as a result of a "full career
retirement" or death. In the case of a "change in ownership," "full career
retirement" or death, shares of Common Stock acquired upon exercise of
such options will generally no longer be subject to restrictions on
transfer. RORs were granted with respect to these options.
(2) Restoration Options received upon the exercise of RORs. Each such option
is vested upon grant and has the same expiration date and transferability
provisions as its Underlying Option. All of the Restoration Options listed
were granted on December 31, 1997, the date of exercise of the Underlying
Options, except that the 21,439 Restoration Options were granted to Mr.
Schaefer on October 6, 1998, the date of exercise of the Underlying Option
respecting such Restoration Options.
(3) Options described in Footnote (1) are valued using a modified Black-
Scholes option pricing model. The following assumptions were used in
employing the model: the risk-free rate of return was the average
continuous yield, calculated over the last seven trading days of Fiscal
1998, of a zero coupon U.S. Treasury Bond having a remaining term equal to
the subject option; the Company's estimated annualized dividend yield for
Fiscal 1998 during the month preceding November 30, 1998 was assumed to be
constant over the life of the option; option life was assumed to be equal
to the term of the option, assuming exercise at the end of the option
term; and stock price volatility was calculated based on the daily price
volatility of the Common Stock for the one-year period prior to November
30, 1998. A discount of 25% was applied to reflect the transfer
restrictions on the underlying Common Stock.
Options described in Footnote (2) are valued using a modified Black-Scholes
option pricing model. The following assumptions were used in employing the
model: the risk-free rate of return was the average continuous yield,
calculated over the ten-day period preceding the grant date, of a zero
coupon U.S. Treasury Bond having a remaining term equal to the subject
option; the Company's estimated annualized dividend yield during the month
preceding the grant date was assumed to be constant over the life of the
option; option life was assumed to be equal to the term of the option,
assuming exercise at the end of the option term; and stock price volatility
was calculated based on the daily price volatility of the Common Stock for
the one-year period prior to the grant date.
The hypothetical values are presented pursuant to SEC rules and there is no
assurance that such values will be realized. The actual amount, if any,
realized upon the exercise of an option will depend upon the market price of
the Common Stock relative to the exercise price of the option at the time it
is exercised.
13
<PAGE>
Option Exercises and Fiscal Year-End Holdings
The following table provides information concerning stock option exercises
in Fiscal 1998 and unexercised stock options held by each named executive
officer as of November 30, 1998 (giving effect to awards of stock options on
December 11, 1998 for services performed in Fiscal 1998).
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(#)(/3/) FY-End($)(/4/)
Shares Acquired Value ------------------------------ ------------------------------
Name on Exercise(#)(/1/) Realized($)(/2/) Exercisable(/5/) Unexercisable Exercisable(/5/) Unexercisable
---- ------------------- ---------------- ---------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip J. Purcell....... 979,694 40,051,461 1,495,460 408,048 31,048,049 9,415,274
John J. Mack............ 277,200 13,943,160 377,192 516,981 15,358,022 16,181,601
Robert G. Scott......... 118,357 5,786,391 189,811 383,901 6,740,121 11,444,881
Christine A. Edwards.... 331,680 13,808,702 383,236 199,543 8,194,881 5,508,421
John H. Schaefer........ 41,643 1,539,258 156,040 90,394 6,879,457 2,288,546
</TABLE>
- --------
(1) Reflects the number of shares underlying options exercised in Fiscal 1998
by the named executive officers. The actual number of shares received from
options exercised in Fiscal 1998 by each named executive officer who
exercised options during Fiscal 1998 (net of shares surrendered to cover
the exercise price and tax liability) was: Mr. Purcell--345,832; Mr.
Mack--137,197; Mr. Scott--66,797; Mrs. Edwards--128,949; and Mr.
Schaefer--20,204.
(2) The difference between the market price on the exercise date and the
option exercise price.
(3) The sale or disposition of shares of Common Stock underlying certain of
the options is restricted.
(4) The value of unexercised, in-the-money options is based upon the
difference between the exercise prices of all such options and $71.29, the
fair market value, as determined by the Compensation Committee, of a share
of Common Stock at the end of Fiscal 1998, which is equal to the average
of the closing prices of a share of Common Stock, as reported on the NYSE
Composite Tape, for the last seven trading days of Fiscal 1998. The actual
amount, if any, realized upon exercise of an option will depend upon the
market price of the Common Stock relative to the exercise price of the
option at the time it is exercised. There is no assurance that these
values will be realized.
(5) Includes options awarded for Fiscal 1998 performance and for Fiscal 1997
performance that vested and became exercisable on January 2, 1999.
Pension Plans
The named executive officers are covered under various pension plans,
principally because of the Company's corporate history. The following
paragraphs discuss estimated annual benefits payable upon retirement to each
of the named executive officers.
Mr. Purcell. The following table indicates the estimated annual benefits
payable upon retirement as a single-life annuity to Mr. Purcell for the
specified compensation and years of service classifications under the
retirement plans of the Company in which he participates, assuming that Mr.
Purcell remains in service with the Company until his retirement at age 65.
Mr. Purcell participates in retirement plans which are defined benefit pension
plans intended to qualify under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and in plans which are nonqualified, unfunded
defined benefit pension plans that provide benefits to certain key executives
of the Company.
14
<PAGE>
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
----------------------------------------------------
Final
Average
Compensation 15 20 25 30 35
------------ -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 500,000 $ 94,802 $ 130,936 $ 164,376 $ 208,247 $ 241,205
750,000 143,694 198,490 249,180 315,673 365,597
1,000,000 192,585 266,045 333,983 423,098 489,989
1,500,000 290,368 401,154 503,591 637,949 738,772
2,000,000 388,151 536,263 673,198 852,800 987,556
2,500,000 485,934 671,372 842,805 1,067,651 1,236,340
3,000,000 583,717 806,481 1,012,412 1,282,502 1,485,124
3,500,000 681,500 941,590 1,182,020 1,497,353 1,733,908
4,000,000 779,283 1,076,699 1,351,627 1,712,204 1,982,691
</TABLE>
"Compensation" or "earnings" under the plans generally refers to total
annual cash compensation for services rendered to the Company and its
subsidiaries and affiliates, including pre-tax salary deferrals, but excluding
certain specified items such as incentive and long-term executive compensation
plan awards, the value of stock awards, and employer contributions to profit-
sharing plans. Current covered compensation for Mr. Purcell under the terms of
the principal non-qualified retirement plan in which he participates was
limited for 1998 to $3,200,000. As of November 30, 1998, Mr. Purcell's
credited years of service (rounded to the nearest whole year) under the plans
was 21 years. The amounts shown in the table are prior to reduction on account
of benefits payable under retirement plans of Sears, Roebuck and Co. The
offset of Social Security benefits on plan benefits varies among the plans in
which Mr. Purcell participates and is reflected in the estimated amounts in
the table above.
Messrs. Mack, Scott and Schaefer and Mrs. Edwards. Messrs. Mack, Scott and
Schaefer and Mrs. Edwards are participants in retirement plans which are
defined benefits plans intended to qualify under Section 401(a) of the Code
and plans which are nonqualified, unfunded plans for certain key executives.
Assuming that the participants in the chart below are eligible for all of
the retirement plans, the following table illustrates the total estimated
annual normal retirement pension benefits payable as a single-life annuity
under the retirement plans upon normal retirement at age 65 to participants
for the specified remuneration and years of credited service classifications
set forth below. The chart below does not include benefits payable from any
plan of an unrelated employer.
Pension Plan Table
Annual Pension Benefit Based on Years of Credited Service at Age 65.
<TABLE>
<CAPTION>
Final Years of Service
Average --------------------------------------------------------------
Compensation 5* 10 15 20 25 30 35
- ------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 40,000 $ 60,000 $ 80,000 $100,000 $100,000 $110,000 $120,000
300,000 60,000 90,000 120,000 140,000 140,000 140,000 153,687
400,000 80,000 120,000 140,000 140,000 147,276 176,732 206,187
500,000 100,000 140,000 140,000 147,821 184,776 221,732 258,687
600,000 120,000 140,000 140,000 177,821 222,276 266,732 311,187
700,000 140,000 140,000 155,866 207,821 259,776 311,732 363,687
800,000 140,000 140,000 178,366 237,821 297,276 356,732 416,187
900,000 140,000 140,000 200,866 267,821 334,776 401,732 468,687
1,000,000 140,000 148,911 223,366 297,821 372,276 446,732 521,187
</TABLE>
* Amounts payable for credited service of less than five years are the same as
shown in this column.
15
<PAGE>
The compensation of Messrs. Mack, Scott and Schaefer and Mrs. Edwards for
purposes of determining benefits under the plans during Fiscal 1998 is the
amount reported as base salary in the Summary Compensation Table, limited to
$200,000 in the case of Mr. Schaefer and Mrs. Edwards. As of November 30,
1998, the credited years of service (rounded to the nearest whole year) under
the plans for Mr. Mack and Mr. Scott are 26 and 28 years, respectively. As of
November 30, 1998, the credited years of service (rounded to the nearest whole
year) under the plans for Mr. Schaefer and Mrs. Edwards are 1 and 1,
respectively; however, for vesting service and eligibility for participation
and early retirement, the years of service (rounded to the nearest whole year)
under the plans for Mr. Schaefer and Mrs. Edwards are 11 and 29, respectively.
Severance Arrangement
The Company's Key Executive Employment Plan ("KEEP") was adopted by Dean
Witter Discover prior to the Merger and covers approximately 20 key executives
of Dean Witter Discover, including Messrs. Purcell and Schneider and Mrs.
Edwards. KEEP provides for payments and other benefits if, within two years of
a change in control, Dean Witter Discover or its successor terminates a
covered employee's employment (other than for cause or disability) or if the
employee resigns for certain defined reasons such as an adverse change in
responsibilities, a reduction in total compensation or certain required
geographic relocations. The Merger constituted a "change in control" for
purposes of KEEP.
Under KEEP, a covered employee may receive a lump sum payment of up to two
times the covered employee's average salary plus total bonus for the three
years prior to either the occurrence of a change in control or the termination
of the covered employee's employment, whichever produces the greater benefit.
When combined with the value of employee stock options that vest and deferred
compensation that is paid as a result of a change in control, cash payments
under KEEP may not exceed an amount that would not be subject to the excise
tax provisions of the applicable sections of the Code. In addition to a cash
payment, covered employees may also receive continued healthcare coverage for
the employee and the employee's spouse and dependent children by continuing to
pay the then-current employee contribution to the Company's healthcare plans.
16
<PAGE>
Set forth below is the report of the Compensation Committee of the Board of
Directors regarding executive compensation for Fiscal 1998.
Report of the Compensation Committee on Executive Compensation
Compensation Governance. The Compensation Committee consists of the four
non-employee directors listed below. We are responsible to the Company's Board
of Directors and to stockholders for establishing and administering
compensation programs for the Company's senior officers ("Senior Officers"),
including Messrs. Purcell, Mack, Schaefer and Scott and Mrs. Edwards, the
Company's five most highly paid executive officers (the "Senior Executives"),
and for making awards under the Company's equity-based employee compensation
plans.
Compensation Policies. Our fundamental policy is to closely link total
compensation for Senior Officers with the achievement of annual and long-term
performance goals. We design our policies to:
. Base compensation on Company, business unit and individual performance;
. Motivate Senior Officers and employees to achieve strategic business
objectives;
. Provide total compensation comparable to that of the Company's
competitors, thereby enabling the Company to attract, recruit and retain
Senior Officers critical to the Company's long-term success; and
. Include a significant equity component in total compensation, thereby
aligning the long-term interests of Senior Officers with those of
stockholders.
We utilize both quantitative and qualitative factors when determining total
compensation for Senior Officers and when awarding equity-based compensation
to employees. Quantitative factors include, among others, absolute levels of,
and year-to-year changes in, return on equity ("ROE"), net revenues, net
income, profit before taxes, earnings per share, book value per share and
market share. Qualitative factors include achievement of pre-established
performance goals, client satisfaction and others. We utilize ROE as a key
measure of corporate performance. We also examine the ratios of compensation
to net revenues and compensation to pre-compensation profit before taxes. We
review survey data regarding peer companies (including data from the Financial
Service Companies, as defined below) for purposes of monitoring compensation
levels for Senior Officers in relation to performance. We receive competitive
information from internally generated studies. We also utilize the services of
independent consultants who review management's data and provide us with
independent analyses and viewpoints. We generally do not assign specific
weighting to the factors, but determine total compensation based upon a more
subjective process, focusing on Company and business unit financial
performance as well as individual performance.
Our policy is to maximize the tax deductibility of compensation payments to
Senior Executives under Section 162(m) of the Code and the regulations
thereunder ("Section 162(m)"). To this end, our stockholders have approved our
incentive plans designed and administered to qualify compensation awarded
thereunder as "performance-based." We may, however, authorize payments to
Senior Executives that may not be fully deductible if we believe it is in our
stockholders' interests to do so.
Compensation Program. Our Senior Officers receive total compensation,
excluding employee benefits, composed of base salary and incentive
compensation consisting of cash bonus and equity-based components (such as
restricted stock units and stock options). Together, the base salary and
incentive compensation constitute a Senior Officer's "Total Reward." In
general, the greater the Total Reward, the greater the percentage of the total
that is in the form of non-cash, equity-based compensation.
1. Base Salaries. Base salaries are a relatively small portion of overall
compensation for Senior Officers. We consider individual experience,
responsibilities and tenure when determining base salaries. Base salaries are
generally in the range of median base salaries paid by the Financial Service
Companies to employees having duties and responsibilities comparable to those
of Senior Officers.
2. Incentive Compensation. Consistent with our compensation policies linking
Senior Officer compensation with Company, business unit and individual
performance, compensation for Senior Officers is heavily weighted toward
performance-based incentive compensation. Senior Officers are eligible for
annual incentive compensation, which varies by Company, business unit and
individual performance. Generally, a
17
<PAGE>
portion of the annual incentive compensation is paid in cash, and a
significant portion is paid in equity-based compensation, the value of which
cannot be realized immediately and depends upon the future market value of the
Company's stock. We believe that since the ultimate value of the equity-based
compensation is tied to the continued success of the Company, equity-based
compensation provides a continuing incentive to Senior Officers to foster the
Company's success long after the compensation is awarded.
For Senior Executives, we award incentive compensation through the
application of performance criteria adopted in accordance with the
requirements of Section 162(m). The performance criteria include a formula
that links compensation of the Senior Executives to the Company's ROE versus
the Company's cost of equity capital and annual growth in book value per
share.
Actions in Fiscal 1998. In Fiscal 1998, the Company's internal Management
Committee reviewed the historical terms of the Company's equity-based awards
for all of the Company's business units and recommended aligning the terms of
the awards for all Management Committee members. The Management Committee's
goal was to design a "Common Currency" for equity-based awards, meaning that
all members of the Management Committee would receive equity-based awards with
the same terms. As a result of the review, the Company's senior management
recommended to us important changes in equity-based incentive compensation for
Management Committee members, designed to incent and retain these officers who
are critical to the Company's overall success. Based on these recommendations,
the incentive compensation we awarded to the members of the Management
Committee (which includes all five Senior Executives) included a greater
percentage of equity-based compensation than the incentive compensation we
awarded to other Senior Officers. In addition, we established identical terms
and conditions, including vesting schedules, for the equity-based awards for
all members of the Management Committee. For some members of the Management
Committee, 50% of their incentive compensation above established threshold
amounts consisted of equity-based awards that will vest over time and are
therefore subject to market risk. We believe equity-based awards with these
features provide a continuing incentive to foster the Company's success into
the future. We encourage the Company to continue to review the equity
components of incentive compensation for its employees, particularly its
Senior Officers. We believe, in general, that equity-based compensation serves
to align employees' interests with the interests of stockholders. We also
believe that having equity-based awards vest over time further aligns
employees' interests with the interests of stockholders because it encourages
employees to remain with the Company and continue to participate in its
success.
Compensation for Fiscal 1998. In determining the annual incentive
compensation we awarded to the Senior Officers for Fiscal 1998, we reviewed
the Company's achievements and financial performance for Fiscal 1998, as well
as individual and business unit performance. We also compared the Company's
financial performance to the financial performance of the Financial Service
Companies and certain other competitors. For Fiscal 1998, we recognized that
the Company's ROE (exclusive of gains on sales of certain businesses) was
above the estimated mean ROE for the Financial Service Companies. In addition,
we considered the compensation levels of executives of the Financial Service
Companies and other competitors when we determined Total Rewards for Senior
Officers. These factors were not, however, the sole factors we considered, and
we did not attempt to set Total Rewards in a range established by a comparison
of the financial performance of, or compensation levels of, the Financial
Service Companies or the other competitors. Such entities operate in the same
or similar businesses as the Company. For purposes of this Report, the term
"Financial Service Companies" refers collectively to the following companies
(or subsidiaries thereof) in the financial services industry: A.G. Edwards,
Inc.; American Express Company; American International Group, Inc.; Bankers
Trust Corporation; The Bear Stearns Companies Inc.; The Charles Schwab
Corporation; Citigroup Inc.; Donaldson, Lufkin & Jenrette, Inc.; Franklin
Resources, Inc.; J.P. Morgan & Co. Incorporated; Lehman Brothers Holdings
Inc.; MBNA Corporation; Merrill Lynch & Co., Inc.; Paine Webber Group Inc.; T.
Rowe Price Associates, Inc.; and United Asset Management Corporation.
We believe the Company performed very well in Fiscal 1998 in a business
environment characterized by unprecedented volatility and turbulence in the
global securities market and a challenging, increasingly competitive, credit
services market.
18
<PAGE>
The Company's Fiscal 1998 financial results, in light of the volatility in
the global financial markets, particularly in the second half of the fiscal
year, were excellent. The Company's net operating income was $3.0 billion and
its operating ROE was 22.7%, greater than all of its key institutional
securities competitors. We excluded the net gains on the Company's sales of
businesses and the one-time accounting charge in our review of the Company's
and the Senior Officers' performance.
In the fall of 1998, when several competitors were experiencing substantial
financial losses, the Company's senior debt ratings were reaffirmed by the key
debt rating agencies. In November, Moody's upgraded the Company's senior debt
rating to Aa3 from A1. We believe this action reflects independent
confirmation of the Company's performance in Fiscal 1998.
The Company also managed its capital position very well in Fiscal 1998. The
Company successfully returned $2.9 billion in capital to stockholders through
a common stock repurchase program. The Company's capital strength and diverse
revenue streams allowed it to continue the repurchase program throughout its
fiscal year.
Since the merger in 1997 of Morgan Stanley Group and Dean Witter Discover,
the Company has continued to realize significant business benefits from the
merger and achieved its key merger-related challenge goals for Fiscal 1998.
Its Institutional Securities business has maintained or improved its market
share positions in several key areas in Fiscal 1998 over Fiscal 1997.
Worldwide equity and high yield underwritings maintained their leadership
positions and gained market share. M&A rankings remained in the top three in
completed transactions. The Company also benefited from effective risk
management in the Institutional Securities business in the third and fourth
quarters, as reflected in the financial results of such quarters.
The Individual Securities business has also continued to benefit from the
merger. Morgan Stanley Dean Witter financial advisors (FAs) and their clients
benefited from a broader array of products, including significantly more
syndicate products and stronger equity research. New issue equity syndicate
sales credits were up 25% from Fiscal 1997 and 81% from Fiscal 1996 pre-merger
levels. Equity research is currently covering approximately 2,000 companies,
and is ranked #1 on a weighted average basis in the most recent Institutional
Investor poll and #1 for First Team analysts. FAs and their clients also
benefited from the increased availability of Van Kampen and Morgan Stanley
asset management products. Van Kampen sales through the Morgan Stanley Dean
Witter retail system more than doubled in Fiscal 1998 over Fiscal 1997.
Individual Securities achieved a net gain of more than 1,000 FAs, considerably
higher than plan. The retail salesforce was further strengthened with the
transition of Private Wealth Management FAs to Individual Securities.
In Credit and Transaction Services, the Company refocused on its core
Discover(R) Card brand and successfully transitioned into new leadership. It
discontinued poor performing brands and posted record net income. Its on-line
broker, Discover Brokerage Direct, posted significant gains in transaction
volume and customer accounts and was named the number one on-line broker by
Barrons for the third consecutive year.
In addition to achieving excellent financial performance, the Company
refocused its strategic direction in Fiscal 1998 and took several strategic
steps to augment its competitive and strategic position. In Institutional
Asset Management, the sales of its global custody and correspondent clearing
businesses allow management to focus on growing the Company's core businesses.
In Credit and Transaction Services, the sale of its interest in the operations
of SPS Transaction Services Inc., the sale of the Prime Option portfolio and
the discontinuance of the BRAVO card brand enabled management to strengthen
its focus on the Company's core Discover brand.
All of the factors discussed above led us to conclude that the Senior
Officers performed very well in Fiscal 1998. Net operating income of $3.0
billion and operating ROE of 22.7% compared favorably with the Company's goal
of 18-20% over the course of the business cycle. The Company's overall
financial performance was very good in a securities environment characterized
by unprecedented volatility and the withdrawal of investors from many market
segments and a continuing challenging credit services environment.
19
<PAGE>
We certified in accordance with Section 162(m) that the Company's financial
results for Fiscal 1998 satisfied the performance criteria set in accordance
with Section 162(m) for Fiscal 1998. After an analysis of the considerations
set forth above, we awarded Total Rewards to the Senior Executives for Fiscal
1998 that were equal to or below the Total Rewards yielded by the application
of the compensation formula contained in the performance criteria. We awarded
incentive compensation to the Senior Officers, including the Senior
Executives, partly in cash and partly in the form of long-term equity
components (restricted stock units and options). We awarded an average of
approximately 38% of each Senior Officer's Total Reward in long-term equity.
The value we ascribed to restricted stock units was based on a 25% discount
from the fair market value of the Common Stock in order to compensate for the
vesting characteristics and the significant restrictions on disposition of
these units. Accordingly, the value we ascribed to these units differs from
the amounts reported in the Summary Compensation Table under the column headed
"Restricted Stock Award(s)" because the amounts contained in the Table are
based on the price of Common Stock on the date of grant. We valued stock
option awards based on a modified Black-Scholes methodology, including a 25%
discount to reflect the vesting characteristics of the options and the
transfer restrictions on the underlying Common Stock.
CEO and President Compensation for Fiscal 1998. The CEO and the President
each received the same salary in Fiscal 1998. The base salary reflects their
positions' duties and responsibilities and is based on the criteria described
in this report. Based upon competitive data, we did not increase in Fiscal
1998 the salary of either the CEO or the President. Year-end incentive
compensation makes up a large percentage of their Total Reward. We kept all
elements of the CEO's and the President's compensation equal.
We determined the incentive compensation for Mr. Purcell and Mr. Mack in
accordance with the policies described above relating to all Senior Executives
based on substantially the same factors and Section 162(m) performance
criteria as for the other Senior Executives. We approved equal annual
incentive compensation for Mr. Purcell and Mr. Mack, in an amount equal to or
below the amounts of Total Reward yielded by the application of the
compensation formula containing the performance criteria. Based on their
individual and Company performance, we decided to award Mr. Purcell and Mr.
Mack incentive compensation consisting of a cash bonus of $8,112,500, 66,509
restricted stock units and options to acquire 149,645 shares of Common Stock,
an increase of 7% from Fiscal 1997. The equity-based awards contain the terms
and conditions discussed above at page 18 and in the Summary Compensation
Table. We note that 47% of the incentive compensation for Mr. Purcell and Mr.
Mack was equity-based (compared to 32% in Fiscal 1997) and therefore subject
to the vesting characteristics discussed previously. Such compensation,
therefore, is at risk, because it is tied to the Company's future performance
and to each employee's continued employment with the Company. Such
compensation reflects the leadership and management exhibited throughout the
year as the Company recorded strong financial results, gained market share in
several of its key businesses and maintained its financial strength in a
challenging business environment.
Conclusion. We believe that attracting and retaining management and
employees of high caliber is essential to maintaining a high-performing
organization that creates long-term value for its stockholders. We also
believe offering a competitive, performance-based compensation program with a
large equity component helps to achieve this objective by aligning the
interests of executives and other key employees with those of stockholders. We
believe that the Company compensation program during Fiscal 1998 met these
objectives.
Respectfully submitted,
Morgan Stanley Dean Witter & Co.
Compensation Committee
Daniel B. Burke, Chair
Edward A. Brennan
Allen E. Murray
Clarence B. Rogers, Jr.
20
<PAGE>
Stock Performance Graph
The following performance graph compares the cumulative total stockholder
returns of the Company (MWD), the Standard & Poor's 500 Stock Index (S&P 500)
and the Standard & Poor's Financial Index (S&P Financial) for the last five
fiscal years of the Company. The graph assumes $100 invested on November 30,
1993 in MWD Common Stock and each of the indices, and reinvestment of
dividends on the date of payment without commissions, and is rounded to the
nearest whole dollar.
CUMULATIVE TOTAL RETURNS
November 30, 1993 to November 30, 1998
MWD S&P500 S&P Financial
Nov. 1993 100 100 100
Nov. 1994 93.33 101.04 97.08
Nov. 1995 137.82 138.36 149.72
Nov. 1996 187.56 176.89 212.11
Nov. 1997 301.49 227.32 288.33
Nov. 1998 390.69 281.11 330.62
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that, under the SEC's rules for reporting of securities
transactions by directors and executive officers, all required reports have
been timely filed.
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 1998 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.
The Company and its subsidiaries extend, and in the ordinary course of its
business during Fiscal 1998 the Company's subsidiaries extended, credit to
certain directors, officers and employees of the Company, as well as to
members of their immediate families, in connection with margin account loans,
mortgage loans, revolving lines of credit and other extensions of credit by
the Company's subsidiaries. Such extensions of credit were made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons,
and they did not involve more than the normal risk of collectability or
present other unfavorable features. To the extent that officers and employees
of the Company's securities and
21
<PAGE>
asset management businesses or the Company's wholly-owned subsidiary Discover
Brokerage (and members of their immediate families living in the same
household) wish to purchase securities in brokerage transactions, they are
ordinarily required to do so through MS&Co., DWR or Discover Brokerage, each
of which may offer them discounts on its standard commission rate. MS&Co. and
DWR also, from time to time and in the ordinary course of its business, enter
into transactions involving the purchase or sale of securities from or to
certain directors, officers and employees of the Company 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
stock repurchase authorizations in effect from time to time, 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, may also make 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, relocation and other expenses. In some
cases, the Company does not charge interest on such advances and loans.
ITEM 2--AMENDMENT TO THE MORGAN STANLEY DEAN WITTER & CO.
EMPLOYEE STOCK PURCHASE PLAN
General. At the Annual Meeting, the stockholders will be asked to approve
the adoption of an amendment to the Company's Employee Stock Purchase Plan
(the "Plan") increasing the number of shares of Common Stock reserved for
issuance thereunder by a total of 25,000,000 shares. The following is a
summary of the principal provisions of the Plan, but it is not intended to be
a complete description of all the terms and provisions of the Plan. A copy of
the Plan will be furnished to any stockholder upon oral or written request to:
Investor Relations and Shareholder Services, Morgan Stanley Dean Witter & Co.,
1221 Avenue of the Americas, New York, New York 10020 (Telephone No. (212)
762-8131).
History. In 1994, the Plan was adopted by the Board of Directors and
approved at the Company's annual meeting, with a total of 2,000,000 shares of
Common Stock reserved for issuance thereunder (does not reflect the two-for-
one stock split on January 14, 1997). The Plan has been amended from time to
time. As of November 30, 1998, and without taking into account the proposed
amendment to the Plan, 1,048,416 shares remained eligible for purchase under
the Plan. On December 18, 1998, upon recommendation of the Compensation
Committee of the Board of Directors (the "Committee"), the Board of Directors
amended the Plan to increase the total number of shares of Common Stock
reserved for issuance thereunder. It is anticipated that, based on the current
participation in the Plan and the Merger-related extension of the Plan to
eligible employees of certain additional subsidiaries, the number of shares
currently available for issuance will soon be depleted.
Administration. The Plan is administered by the Committee. The Committee has
the authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations necessary or
advisable in administering the Plan.
Purpose. The purpose of the Plan is to provide eligible employees of the
Company, and of subsidiaries of the Company that have been designated by the
Committee as eligible to participate in the Plan (each a "Subsidiary"), with
an opportunity to purchase Common Stock through payroll deductions. The Plan
is neither subject to the provisions of ERISA nor qualified under Section 401
of the Code.
Eligibility. All employees of the Company and each Subsidiary are eligible
to participate in the Plan, except for employees (i) who are highly
compensated employees within the meaning of Section 414(q) of the Code and
receive income from a non-U.S. payroll company or are based outside the United
States or (ii) whose
22
<PAGE>
customary employment or service is for not more than five months in any
calendar year and who is categorized as an intern or a summer associate
(collectively referred to herein as "Eligible Employees"). Eligible Employees
may participate in the Plan beginning on the later of (i) their date of hire
by the Company or any Subsidiary and (ii) the date such employee becomes an
Eligible Employee, and for as long as such person remains an Eligible
Employee. The Committee may revise the eligibility requirements from time to
time provided that it may neither permit nor deny participation in the Plan
contrary to the requirements of the Code or the regulations thereunder. An
Eligible Employee may not participate in the Plan to the extent that
participation would permit the Eligible Employee to purchase stock under all
employee stock purchase plans of the Company and its subsidiaries in any
calendar year in an amount which, in the aggregate, would exceed $25,000 based
on the fair market value of such stock, or if the participation would cause
the Eligible Employee to own stock equaling five percent (5%) or more of the
combined voting power or value of all classes of stock of the Company or any
subsidiary.
Participation in the Plan is voluntary and is dependent upon each Eligible
Employee's election to participate (each Eligible Employee electing to
participate in the Plan is referred to herein as a "Participant") and his or
her determination as to the level of payroll deductions, subject to the Plan
limits. Accordingly, future purchases under the Plan are not determinable.
Employees of approximately 16 subsidiaries of the Company are currently
eligible to participate in the Plan. As of January 1, 1999, approximately
43,836 employees were eligible to participate in the Plan.
Enrollment. Each Participant directs the Company to deduct between 1% and 8%
(subject to a maximum of $8,000) of the Participant's eligible compensation.
The Participant may increase or decrease this percentage once per calendar
quarter, or may discontinue participation in the Plan at any time. Eligible
compensation includes: cash compensation paid as salary, commission and bonus;
any amounts contributed to, or elective deferrals made to, any qualified cash
or deferred arrangement under Section 401(k) of the Code maintained by the
Company or any subsidiary; and any employee contribution to a plan maintained
by the Company or any subsidiary that is intended to meet the requirements of
Section 125 of the Code. A Participant who has discontinued participation may
participate again in any subsequent calendar quarter. Participants continue to
participate in the Plan each year on the same basis unless the Participant
notifies the Company to the contrary.
Purchase of Common Stock. Each payroll deduction of a Participant shall be
used to purchase Common Stock on each Investment Date (defined as each day
that a Participant receives eligible compensation). Each Participant shall be
deemed, on each of the Participant's Investment Dates, to have been granted a
nontransferable option to purchase, and to have exercised such option and
purchased, the number of shares of Common Stock determined by dividing the
amount of the Participant's payroll deduction by the then-current purchase
price for such shares. The purchase price shall be determined from time to
time by the Committee, but shall not be less than eighty-five percent (85%) of
the fair market value of a share of Common Stock on the Investment Date. The
Company shall advise employees in advance of any change in the means by which
the purchase price will be computed (i.e., the discount rate from the fair
market value). Participants have an opportunity to change the percentage of
eligible compensation subject to payroll deduction or discontinue
participation in the Plan in advance of every change in the discount rate,
regardless of whether such Participants have already made a change in their
payroll deduction rates during the calendar quarter.
All Common Stock purchased under the Plan must be held in an account
administered by a custodian. The account will be governed by the terms and
conditions of an agreement between the Company and the custodian. Each
Participant is the beneficial owner of the Common Stock held in the
Participant's account.
Dividends. All cash dividends paid on Common Stock held in a Participant's
account shall be invested automatically in Common Stock purchased at one
hundred percent (100%) of fair market value on the dividend payment date. Non-
cash distributions paid on Common Stock held in the Participant's account will
be paid to the Participant as soon as practicable.
Withdrawal and Transfer. Prior to termination of employment with the Company
and its subsidiaries, a Participant may withdraw whole shares of Common Stock
held in the Participant's account. However, in general,
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<PAGE>
no Participant may withdraw from such Participant's account or otherwise
transfer any shares of Common Stock purchased under the Plan for 12 months
from the date the shares are purchased. In addition, in general, no shares of
Common Stock purchased under the Plan shall be transferable for an additional
succeeding 12 months without prior notice to the Company.
Termination of Employment; Leave of Absence. Upon termination of the
Participant's employment with the Company and its subsidiaries, all Common
Stock credited to such Participant's account and any uninvested cash credited
to the Participant pursuant to payroll deductions shall be distributed to the
Participant or, in the event of the Participant's death, to his or her estate
as soon as practicable. Unless otherwise determined by the Committee, a
Participant on a paid leave of absence will continue to be a Participant in
the Plan and a Participant on an unpaid leave of absence will not be entitled
to any offering of Common Stock under the Plan during such unpaid leave of
absence.
Amendment and Termination of the Plan. Subject to the provisions of Section
423 of the Code, the Board of Directors has the power to amend or terminate
the Plan in its sole discretion at any time in any respect, except that any
amendment may not retroactively impair or otherwise adversely affect the
rights of any person to benefits that have already accrued under the Plan. The
Plan shall terminate at such time as Participants become entitled to purchase
a number of shares of Common Stock greater than the number of shares of Common
Stock remaining available for such purchase.
Certain Federal Income Tax Information. Set forth below is a general
summary of certain of the principal federal income tax consequences to the
Company and Participants of participation in the Plan. The following
discussion is general in nature and is not intended to be a complete analysis
of all potential tax consequences to the Company or Participants of
participation in the Plan. This discussion is based on the Code as currently
in effect.
The Plan is intended to qualify under Sections 421 and 423 of the Code.
Under Section 423 of the Code, a Participant who purchases Common Stock
through the Plan will not recognize any income, and the Company will not be
entitled to a deduction for tax purposes, at the time of the purchase for the
difference between the fair market value of the Common Stock at the time of
purchase and the purchase price (i.e., the discount below fair market value).
Generally, if the Participant holds the Common Stock for at least two years
after the date of purchase, the Participant will include as compensation in
the Participant's taxable income at the time of sale or other taxable
disposition of the Common Stock the lesser of: (i) the amount by which the
fair market value of the Common Stock when purchased exceeds the purchase
price (i.e., the discount below fair market value); or (ii) the amount, if
any, by which the Common Stock's fair market value at the time of the sale or
other taxable disposition exceeds the purchase price. The Participant's tax
basis in the Common Stock will be increased by the amount recognized as
compensation and any further gain recognized on the sale or other taxable
disposition will be treated, under current tax rules, as long-term capital
gain. In general, no deduction will be allowed to the Company with respect to
any such disposition. However, if the Participant disposes of shares of Common
Stock acquired under the Plan within two years after the date of purchase (a
"disqualifying disposition"), the Participant will recognize compensation
income, and the Company (or one of its affiliates) will be entitled to a
deduction for tax purposes, in the amount of the excess of the fair market
value of the shares on the date of purchase over the purchase price (i.e., the
discount below fair market value) regardless of the amount received by the
Participant in connection with the disqualifying disposition. The
Participant's tax basis in the shares disposed of will be increased by the
amount recognized as compensation and any further gain or loss realized upon
the disqualifying disposition will be short-term or long-term capital gain or
loss, depending upon the length of time between the purchase and the
disqualifying disposition of the shares.
If an affected Participant's total compensation from the Company (including
compensation related to purchases of Common Stock under the Plan) exceeds
$1,000,000, such compensation in excess of $1,000,000 may not be deductible by
the Company under Section 162(m) of the Code. Affected Participants are
generally the Company's Chief Executive Officer and the four most highly
compensated executive officers of the Company
24
<PAGE>
(other than the Chief Executive Officer) at the end of the Company's taxable
year. Excluded from the calculation of total compensation for this purpose is
compensation that is "performance-based" within the meaning of Section 162(m)
of the Code. It is expected that compensation realized upon the purchase of
Common Stock under the Plan may not be "performance-based" and, therefore,
that such compensation may only be deductible in accordance within the limits
of Section 162(m) of the Code.
The Board of Directors recommends a vote FOR approval of the amendment to
the Company's Employee Stock Purchase Plan.
ITEM 3--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Based on the recommendation of the Audit Committee, the Board of Directors
has appointed Deloitte & Touche LLP as independent auditors to examine the
consolidated financial statements of the Company for the fiscal year ending
November 30, 1999 and to perform other appropriate accounting services.
A proposal will be presented at the Annual Meeting to ratify the appointment
of Deloitte & Touche LLP as the Company's independent auditors. A
representative of Deloitte & Touche LLP is expected to be present at the
meeting and will be available to respond to appropriate questions and make
statements if the representative so desires. If the stockholders do not ratify
this appointment, the Board of Directors will reconsider the appointment.
The Board of Directors recommends a vote FOR ratification of the appointment
of Deloitte & Touche LLP as the Company's independent auditors.
ITEM 4--STOCKHOLDER PROPOSALS
In accordance with the rules of the Securities and Exchange Commission, the
Company has set forth below three stockholder proposals and their supporting
statements, for which the Board of Directors and the Company accept no
responsibility.
Each of these proposals is required to be voted upon at the Annual Meeting
only if properly presented at the Annual Meeting by the stockholder proponent
or the proponent's qualified representative.
The proposals are set forth in turn, with the Board of Directors'
recommendation immediately following each.
First Proposal
Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Ave. NW, Suite
215, Washington, D.C. 20037, owner of 100 shares of Common Stock, has notified
the Company that she intends to present the following proposal and related
supporting statement at the Annual Meeting:
Proposal
RESOLVED: "That the shareholders of Morgan Stanley Dean Witter recommend
that the Board of Directors take the necessary steps to instate the
election of directors ANNUALLY, instead of the stagger system which was
adopted."
REASONS:
"The majority of New York Stock Exchange listed corporations elect all
their directors each year."
"This insures that ALL directors will be more accountable to ALL
shareholders each year and to a certain extent prevents the self-
perpetuation of the Board."
"If you AGREE, please mark your proxy FOR this resolution."
25
<PAGE>
Directors' Recommendation
THE BOARD OF DIRECTORS RECOMMENDS VOTING AGAINST THIS PROPOSAL.
The Board of Directors opposes this proposal because it believes the
Company's policy of electing directors for three-year terms ensures that a
majority of directors will always be familiar with the Company's global,
complex business. The proposal suggests that annual elections of all directors
"to a certain extent" prevent the self-perpetuation of the Board and make
directors more accountable. The Company's directors are already fully
accountable to stockholders and annual elections of all directors are not
necessary to prevent self-perpetuation of the Board.
Staggered elections enable the directors to gain, over time, greater
familiarity with the Company's business. This knowledge assists directors in
fulfilling their duties to stockholders. Staggered terms also give new
directors an opportunity to gain knowledge about the Company's business from
continuing directors. If all directors were elected annually, a majority of
directors could be replaced each year resulting in directors unfamiliar with
the Company. This could jeopardize long-term strategies and growth plans.
The Board is responsible to promote sustained, long-term returns to the
Company's stockholders. The Board believes electing directors to three-year
terms can also benefit stockholders if the Company faces a hostile, coercive
takeover attempt. First, it can provide the Board with the time needed to
evaluate any takeover proposal. Second, it encourages potential acquirers to
negotiate with the Board and allows the Board time to review alternatives with
a goal of maximizing stockholder value. Finally, it reduces an outsider's
ability to effect a sudden change in the Company's directors without Board
support. Electing directors for three-year terms does not, however, preclude a
takeover offer.
Electing directors to three-year terms does not reduce their accountability
to stockholders. All directors have the same duties to stockholders regardless
of their term. The directors' compensation program fosters accountability by
aligning the directors' own interests with the interests of the stockholders.
A substantial portion of all directors' compensation is equity-based, in the
form of restricted stock units and options to acquire the Company's common
stock. This long-term equity-based compensation provides a continuing
incentive to the directors to promote the Company's long-term success.
Stockholder approval of this proposal would not result in annual elections
of directors because it is only a recommendation. Annual elections of
directors could only occur if stockholders approved an amendment to the
Company's Certificate of Incorporation in a separate stockholder vote.
The Board of Directors recommends a vote AGAINST this proposal. The proxy
holders will vote all proxies received AGAINST this proposal unless otherwise
instructed.
Second Proposal
Emil Rossi, P. O. Box 249, Boonville, CA 95415, owner of 2,564 shares of
Common Stock, has notified the Company that he intends to present the
following proposal and related supporting statement at the Annual Meeting:
Proposal
"The shareholders of Morgan Stanley, Dean Witter, Discover & Co. [sic]
request the Board of Directors take the necessary steps to amend the
company's governing instruments to adopt the following: Beginning on the
2000 Morgan Stanley, Dean Witter, Discover & Co. [sic] fiscal year the
policy of the company shall be to tie at least half of Executive
Management's compensation to the amount of comon [sic] shareholder's
dividend paid out each year."
"Dividends are the real gauge of how a corporation is doing and it behooves
management to pay out at least a certain percentage of earnings in
dividends to the shareholders who have faithfully held on to their
26
<PAGE>
shares. There has to be a reward. That's what the whole American economic
system is all about. While Morgan Stanley, Dean Witter pays a dividend, the
payout ratio is very low. Management wants big money up front. They don't
want promises or total return or other hocus pocus. They want cash so they
can go forth and enjoy the finer things of life. Like limosines [sic],
mansions and yachts. The little things of life that make one's existence
bearable."
Directors' Recommendation
THE BOARD OF DIRECTORS RECOMMENDS VOTING AGAINST THIS PROPOSAL.
The Board believes that the proposal is not in the best interests of the
Company's stockholders. The proposal suggests that dividends are "the real
gauge" of a corporation's performance. The Board is very aware of the
importance of creating value for the Company's stockholders, but it believes
that total stockholder return (stock price appreciation plus dividends) is the
true measure of a corporation's performance. The Company's total stockholder
return has been quite high. Since the Merger, the Company's stock price has
risen approximately 107% from $41 1/2 per share on May 31, 1997 to $85 3/4 per
share on February 9, 1999.
The Company's compensation policies currently link senior officer
compensation to total stockholder return. These policies more effectively
align the long-term interests of senior officers and stockholders than the
proposal. Equity-based awards (e.g., stock options and restricted stock units)
are a significant component of each senior officer's compensation, so the
compensation is linked to total stockholder return, not just dividends.
The Board disagrees that dividends are the "real gauge of how a corporation
is doing." The Board, however, regularly considers the appropriate level of
the Company's dividends. Contrary to the proponent's suggestion, the Company's
percentage of earnings paid out as dividends is well within the range of its
peer group competitors. In fact, the Board has raised the Company's quarterly
dividend 71% in two years, from $0.14 per share in Fiscal Year 1997 to $0.20
per share in Fiscal Year 1998 to $0.24 in the first quarter of Fiscal Year
1999.
The proposal would also harm the Company because it would limit the
Company's ability to manage its capital. By encouraging dividends over other
uses of capital (such as a stock repurchase program), the proposal would
restrict the Board's flexibility and judgment regarding capital management. In
addition, the proposal would impair the Company's ability to manage its assets
and cash flow.
The Board of Directors recommends a vote AGAINST this proposal. The proxy
holders will vote all proxies received AGAINST this proposal unless otherwise
instructed.
Third Proposal
The Franklin Research & Development Corporation on behalf of Ms. Sarah
Mustin and Mr. Craig Stockwell, each of whom is a stockholder of the Company,
has given notice of its intention to present the following proposal and
related supporting statement at the Annual Meeting. Ms. Mustin and Mr.
Stockwell own 150 and 175 shares of Common Stock, respectively. Their address
is c/o Franklin Research & Development Corp., 711 Atlantic Avenue, Boston, MA
02111.
Proposal
"WHEREAS: In January 1997, Morgan Stanley underwrote bonds for China's
State Development Bank, whose second largest unfunded loan commitment,
according to the bond prospectus, was to the Three Gorges Development
Corporation;
Morgan Stanley Dean Witter (MSDW) owns a 35% stake in its joint venture,
the China International Capital Corporation (CICC), and has transferred to
CICC technology and expertise, including MSDW chief executives and key
department heads;
27
<PAGE>
CICC is reportedly drawing up plans for a possible bond and/or stock issues
for the Three Gorges Project Corporation and/or entities related to the
Three Gorges Dam;
Despite being imprisoned for ten months for speaking out against the
project, the Chinese journalist and author Dai Qing has compiled and
published numerous essays and field reports from Chinese scientists and
intellectuals that outline the irreversible economic and environmental
impacts, technical problems, loss of cultural antiquities, and potential
catastrophic failure of the Three Gorges Dam;
In February 1995, Human Rights Watch reported how the Chinese government
has planned to suppress dissent and forcibly relocate nearly two million
people to make way for the Three Gorges Dam;
In a memo dated September 1995, the US National Security Council advised
the US Export-Import Bank not to finance contracts connected to the Three
Gorges Dam because of environmental problems and human rights abuses
connected to the project, and because it was "concerned about the project's
financial strength."
In March 1998, Chinese sociologist Wu Ming revealed significant corruption
and falsification of resettlement figures as well as a lack of sufficient
farmland, money or employment for the nearly two million people that must
be moved to make way for the Three Gorges Dam, thus indicating that the
Chinese government may well require military force to relocate the people;
Amid tremendous economic and political upheaval in Asia, Standard & Poor's
Rating Services, in July 1988 [sic], warned of a possible downgrade in
China's credit worthiness if economic conditions worsen and social tensions
increase;
Even through indirect involvement in the Three Gorges Dam, Morgan Stanley
Dean Witter risks exposing itself to negative publicity and possible
boycotts of its consumer business, such as its brokerage services and the
Discover Card;
BankAmerica has pledged not to commit any direct lending to the Three
Gorges Project and not to finance an entity whose primary business is
construction of the Three Gorges project;
Over 100 financial institutions have endorsed the United Nations
Environmental Program (UNEP) Statement by Banks on the Environment, which
states that "we recognize that identifying and quantifying environmental
risks should be part of the normal process of risk assessment and
management, both in domestic and international operations."
BE IT RESOLVED: the shareholders request the Board to issue a report to
shareholders and employees by October 1999, reviewing the underwriting,
investing and lending criteria of Morgan Stanley Dean Witter--including its
joint ventures such as the China International Capital Corporation Ltd.--
with the view to incorporating criteria related to a transaction's impact
on the environment, human rights and risk to the company's reputation."
Directors' Recommendation
THE BOARD OF DIRECTORS RECOMMENDS VOTING AGAINST THIS PROPOSAL.
The Board of Directors opposes this proposal because it could damage the
Company's competitive position and interfere with its business without
addressing the proponents' concerns.
The proposal would require the Board to issue a report detailing the
criteria the Company uses to evaluate its investment banking transactions.
Whenever the Company reviews a transaction, the most important consideration
is whether the transaction will create value for the Company and its
stockholders. In determining this, the Company considers many complex factors,
including the management, financial condition, industry, and prospects of the
particular issuer. It also considers legal and regulatory issues, prevailing
market conditions, customer demands and many other factors. All the factors
the Company considers reflect the flexibility the Company needs to conduct its
business. Limitations on this flexibility could damage the Company's ability
to conduct its business. In addition, a report discussing the factors could
damage the Company's competitive position and profitability, since its
competitors do not disclose this information.
28
<PAGE>
The proposal's requirement to issue a report would not address the
proponents' concerns. Based on their supporting statement, the proponents'
primary concern is alleged abuses related to the Three Gorges Dam Project in
China. However, the Company has not been directly involved in financing the
Three Gorges Dam Project. In addition, the proposal would not require the
Company to take any action regarding that project.
The Company also believes the proposal's supporting statement is misleading
because it suggests the Company controls China International Capital
Corporation. The Company does not control CICC. CICC is an independent
investment banking firm, based in the Peoples Republic of China. Although the
Company owns a minority interest (35%) in CICC, the Company does not control
CICC, does not control CICC's decisions on what business to pursue or accept
and has no veto power over such decisions.
The Board of Directors recommends a vote AGAINST this proposal. The proxy
holders will vote all proxies received AGAINST this proposal unless otherwise
instructed.
SUBMITTING PROXIES AND VOTING INSTRUCTIONS BY PHONE OR INTERNET
If you are a registered stockholder (you hold your stock in your own name),
you may submit a proxy by touch-tone telephone or through the Internet. If you
are a beneficial stockholder (you hold your shares through a nominee, such as
a broker), your nominee can advise you whether you will be able to submit
voting instructions by telephone or through the Internet. Some nominees
participate in the telephone and Internet voting programs provided by ADP
Investor Communication Services. Procedures to submit proxies or voting
instructions by telephone or through the Internet are designed to authenticate
stockholder identities, to allow stockholders to submit their proxies or
voting instructions and to confirm that such proxies or voting instructions
have been properly recorded. If you submit a proxy or voting instructions
through the Internet, you may be required to bear associated costs, such as
usage charges from Internet access providers and telephone companies.
If you are a registered stockholder, you may submit your proxy by touch-tone
telephone by calling 1-800-690-6903 in the United States and following the
directions provided. You may also submit your proxy by following the
directions provided at the following addresses on the World Wide Web:
www.msdwt.com or www.proxyvote.com. Proxies must be received by the deadline
set forth on the proxy card you receive. The Company has been advised by
counsel that these procedures for the submission of proxies by telephone and
through the Internet are consistent with the requirements of applicable law.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2000 annual
meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, must be received by the Secretary of the Company, 1585 Broadway, New
York, New York 10036, not later than October 22, 1999 to be considered for
inclusion in the Company's proxy materials for that meeting.
A stockholder that intends to present business at the 2000 annual meeting
other than pursuant to Rule 14a-8 must comply with the requirements set forth
in the Company's Bylaws. To bring business before an annual meeting, the
Company's Bylaws require, among other things, that the stockholder submit
written notice thereof complying with the Bylaws, to the Secretary of the
Company not less than 90 days nor more than 120 days prior to the anniversary
of the preceding year's annual meeting. Therefore, the Company must receive
notice of a stockholder proposal submitted other than pursuant to Rule 14a-8
no sooner than December 11, 1999 and no later than January 10, 2000. If the
notice is received before December 11, 1999 or after January 10, 2000, it will
be considered untimely and the Company will not be required to present such
proposal at the 2000 annual meeting.
OTHER MATTERS
On the date of this Proxy Statement, management did not know of any other
matters to be brought before the Annual Meeting other than those described in
this Proxy Statement. If any matters properly come before the Annual Meeting
that are not specifically set forth on the proxy card and in this Proxy
Statement, the persons appointed as proxies will vote thereon in accordance
with their best judgment.
29
<PAGE>
ADDITIONAL INFORMATION
The Company will furnish without charge to each person whose proxy is being
solicited, upon the written request of any such person, a copy of the
Company's Annual Report on Form 10-K for the fiscal year ended November 30,
1998, including the financial statements and schedules thereto. Requests for
copies should be directed to the Company's Office of Investor Relations, 1221
Avenue of the Americas, 33rd Floor, New York, New York 10020 (Telephone 800-
733-2307).
30
<PAGE>
MORGAN STANLEY DEAN WITTER & CO.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS, APRIL 9, 1999
The undersigned hereby appoints Christine A. Edwards, Robert G. Scott
and Ronald T. Carman, and each of them, attorneys and proxies, with full power
of substitution, to represent and to vote on behalf of the undersigned all of
the shares of common stock of the Company which the undersigned is entitled in
any capacity to vote if personally present at the 1999 Annual Meeting of
Stockholders to be held on April 9, 1999 at 9:00 A.M., local time, at the
offices of Morgan Stanley Dean Witter Trust FSB, Harborside Financial Center,
Plaza Two, Jersey City, New Jersey, and at any adjournments or postponements
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 for the election
of a person to the Board of Directors if any nominee named herein becomes unable
to serve or for good cause will not serve, upon all matters incident to the
conduct of the Annual Meeting, and upon such other business as may properly come
before the Annual Meeting.
PLEASE FOLLOW THE INSTRUCTIONS ON THE BACK OF THIS CARD TO GRANT YOUR PROXY BY
PHONE OR BY INTERNET, OR RETURN THIS PROXY CARD IN THE ACCOMPANYING ENVELOPE
AFTER SIGNING AND DATING IT ON THE OTHER SIDE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
<PAGE>
YOU MAY GRANT A PROXY BY TOUCH-TONE PHONE OR BY INTERNET
- ---------------------------------------------------------
(See enclosed insert for further instructions)
TO GRANT A PROXY BY PHONE, call Toll-Free in the U.S.: 1-800-690-6903
- -------------------------
TO GRANT A PROXY BY INTERNET, visit the Website(s): WWW.MSDWT.COM or
- ----------------------------
WWW.PROXYVOTE.COM
OR PLEASE MARK VOTES AS IF YOU PLAN TO ATTEND
- -- IN THE EXAMPLE USING THE ANNUAL MEETING,
BLACK OR BLUE INK [X] PLEASE CHECK THIS BOX [_]
THIS PROXY WILL BE VOTED AS DIRECTED. IF THIS PROXY IS SIGNED, BUT NO DIRECTION
IS MADE, IT WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE MORGAN
STANLEY DEAN WITTER & CO. BOARD OF DIRECTORS AS SET FORTH BELOW:
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.
---
<S> <C> <C> <C>
FOR ALL
FOR WITHHOLD EXCEPT
1. To elect as directors all nominees listed (except as marked [_] [_] [_]
to the contrary below):
NOMINEES: 01 Charles F. Knight 02 Miles L. Marsh 03 Laura D' Andrea Tyson
INSTRUCTION: To withhold authority to vote for any individual nominee,
mark "For All Except" box and strike a line through the nominee's name.
2. To amend the Company's Employee Stock Purchase Plan to increase FOR AGAINST ABSTAIN
the number of shares of Common Stock reserved for issuance [_] [_] [_]
thereunder by a total of 25,000,000 shares.
FOR AGAINST ABSTAIN
3. To ratify the appointment of Deloitte & Touche LLP as the Company's [_] [_] [_]
independent auditors for the fiscal year ending November 30, 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" STOCKHOLDER PROPOSALS 4, 5
AND 6. -------
4. Stockholder proposal to declassify the Board of Directors. FOR AGAINST ABSTAIN
[_] [_] [_]
5. Stockholder proposal to tie executive compensation to the FOR AGAINST ABSTAIN
amount of dividends paid. [_] [_] [_]
6. Stockholder proposal to issue a report by October 1999 FOR AGAINST ABSTAIN
reviewing the Company's underwriting, investing [_] [_] [_]
and lending criteria with the view to incorporating
criteria related to a transaction's impact on the
environment, human rights and the Company's reputation.
</TABLE>
Please sign exactly as imprinted (do not print). If shares are held jointly,
EACH holder should sign. Executors, administrators, trustees, guardians and
others signing in a representative capacity should indicate the capacity in
which they sign. An authorized officer may sign on behalf of a corporation and
should indicate the name of the corporation and his or her capacity.
Please make sure to sign and date
this card. Dated_________, 1999
- ---------------------------------- -------------------------------
Signature Co-Owner (if any) Signature
- -------------------------------------------------------------------------------
PLEASE DETACH AT PERFORATION ALONG DOTTED LINES
MORGAN STANLEY DEAN WITTER & CO.
- --------------------------------------------------------------------------------
IMPORTANT
USE ONE OF THE THREE EASY WAYS TO GRANT YOUR PROXY
1. BY INTERNET. HAVE YOUR PROXY CARD AT HAND. GO TO THE "VOTE YOUR PROXY HERE"
LINK ON THE WEBSITE WWW.MSDWT.COM OR GO DIRECTLY TO WWW.PROXYVOTE.COM. ENTER
------------- ------------------
YOUR 12-DIGIT CONTROL NUMBER LOCATED ON THE PROXY CARD AND FOLLOW THE SIMPLE
INSTRUCTIONS.
2. BY TELEPHONE. HAVE YOUR PROXY CARD AT HAND. IN THE U.S. CALL 1-800-690-6903
ON A TOUCH-TONE PHONE. ENTER YOUR 12-DIGIT CONTROL NUMBER LOCATED ON THE
PROXY CARD AND FOLLOW THE SIMPLE RECORDED INSTRUCTIONS.
3. BY MAIL. PLEASE DATE, SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
SUBMIT YOUR PROXY TO ENSURE RECEIPT NO LATER THAN 5:00 P.M. ON APRIL 8, 1999.
<PAGE>
MORGAN STANLEY DEAN WITTER & CO.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS, APRIL 9, 1999
The undersigned hereby appoints Christine A. Edwards, Robert G. Scott
and Ronald T. Carman, and each of them, attorneys and proxies, with full power
of substitution, to represent and to vote on behalf of the undersigned all of
the shares of common stock of the Company which the undersigned is entitled in
any capacity to vote if personally present at the 1999 Annual Meeting of
Stockholders to be held on April 9, 1999 at 9:00 A.M., local time, at the
offices of Morgan Stanley Dean Witter Trust FSB, Harborside Financial Center,
Plaza Two, Jersey City, New Jersey, and at any adjournments or postponements
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 for the election
of a person to the Board of Directors if any nominee named herein becomes unable
to serve or for good cause will not serve, upon all matters incident to the
conduct of the Annual Meeting, and upon such other business as may properly come
before the Annual Meeting.
PLEASE RETURN THIS PROXY CARD IN THE ACCOMPANYING ENVELOPE AFTER
SIGNING AND DATING IT ON THE OTHER SIDE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
PLEASE MARK VOTES AS IF YOU PLAN TO ATTEND
IN THE EXAMPLE USING THE ANNUAL MEETING,
BLACK OR BLUE INK [X] PLEASE CHECK THIS BOX [_]
THIS PROXY WILL BE VOTED AS DIRECTED. IF THIS PROXY IS SIGNED, BUT NO DIRECTION
IS MADE, IT WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE MORGAN
STANLEY DEAN WITTER & CO. BOARD OF DIRECTORS AS SET FORTH BELOW:
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSALS 1, 2 AND 3. ---
<S> <C> <C> <C>
FOR ALL
FOR WITHHOLD EXCEPT
1. To elect as directors all nominees listed (except as marked [_] [_] [_]
to the contrary below):
NOMINEES: 01 Charles F. Knight 02 Miles L. Marsh 03 Laura D' Andrea Tyson
INSTRUCTION: To withhold authority to vote for any individual nominee,
mark "For All Except" box and strike a line through the nominee's name.
FOR AGAINST ABSTAIN
2. To amend the Company's Employee Stock Purchase Plan to [_] [_] [_]
increase the number of shares of Common Stock reserved
for issuance thereunder by a total of 25,000,000 shares.
FOR AGAINST ABSTAIN
3. To ratify the appointment of Deloitte & Touche LLP as [_] [_] [_]
the Company's independent auditors for the fiscal year
ending November 30, 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST"
STOCKHOLDER PROPOSALS 4, 5 AND 6. -------
FOR AGAINST ABSTAIN
4. Stockholder proposal to declassify the Board of [_] [_] [_]
Directors.
FOR AGAINST ABSTAIN
5. Stockholder proposal to tie executive compensation [_] [_] [_]
to the amount of dividends paid.
FOR AGAINST ABSTAIN
6. Stockholder proposal to issue a report by [_] [_] [_]
October 1999 reviewing the Company's underwriting,
investing and lending criteria with the view to
incorporating criteria related to a transaction's
impact on the environment, human rights and the
Company's reputation.
</TABLE>
Please sign exactly as imprinted (do not print). Executors, administrators,
trustees, guardians and others signing in a representative capacity should
indicate the capacity in which they sign. An authorized officer may sign on
behalf of a corporation and should indicate the name of the corporation and his
or her capacity.
Please make sure to sign and date
this card. Dated _____, 1999
________________ ___________________________
Signature Co-Owner (if any) Signature
- --------------------------------------------------------------------------------
PLEASE DETACH AT PERFORATION ALONG DOTTED LINES
MORGAN STANLEY DEAN WITTER & CO.
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE DATE, SIGN AND RETURN YOUR PROXY CARD IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
SUBMIT YOUR PROXY CARD SO THAT IT IS RECEIVED NO
LATER THAN 5:00 P.M. ON APRIL 8, 1999.
- --------------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY DEAN WITTER & CO.
1999 VOTING INSTRUCTION FORM ("VIF") FOR MORGAN STANLEY DEAN WITTER & CO.
BENEFIT PLAN PARTICIPANTS
The undersigned hereby directs the following to vote, as indicated on the
reverse side of this VIF, in person or by proxy, all of the shares of common
stock or preferred stock of Morgan Stanley Dean Witter & Co. (the "Company"),
not subject to any voting agreements, in the undersigned's plan account(s) with
any of the following at the 1999 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held on April 9, 1999 at 9:00 A.M., local time, and
at any and all adjournments or postponements thereof, upon the proposals listed
on the reverse side of this VIF and more fully described in the Company's Notice
of Annual Meeting of Stockholders dated February 19, 1999 and the accompanying
Proxy Statement and, in its (or the proxies') discretion, for the election of a
person to the Board of Directors if any nominee named herein becomes unable to
serve or for good cause will not serve, upon all matters incident to the conduct
of the Annual Meeting, and upon such other business as may properly come before
the Annual Meeting.
. Morgan Stanley Dean Witter Trust FSB, as custodian (the "Custodian") under
the (i) Dean Witter Reynolds Inc. Financial Advisor Productivity Compensation
Plan, (ii) Dean Witter Reynolds Inc. Branch Manager Compensation Plan, and/or
(iii) Morgan Stanley Dean Witter & Co. Employee Stock Purchase Plan. The
undersigned understands that the Custodian will not vote or grant proxies
with respect to the shares in my account if I do not sign, date and return
this VIF. The undersigned also understands that if I sign, date and return
this VIF, the Custodian or its proxy intends to vote in accordance with the
Board of Directors' recommendation as to each proposal for which I do not
give voting instructions and in its discretion on all other matters that may
properly come before the Annual Meeting.
. Mellon Bank, N.A., as trustee (the "START Trustee") under the Dean Witter
START Plan (Saving Today Affords Retirement Tomorrow). The undersigned
understands that (A) unless otherwise required by law, the START Trustee
intends to vote or grant proxies with respect to all undirected shares held
under the plan in the same proportion as the shares of all plan participants
of the Dean Witter START Plan who have timely delivered properly executed
voting instructions, (B) the START Trustee or its proxy will vote in its
discretion on all other matters that may properly come before the Annual
Meeting, and (C) the START Trustee will hold the voting instructions
indicated on the reverse side of this VIF in confidence.
. The Northern Trust Company, as trustee (the "ESOP Trustee") under the Morgan
Stanley Dean Witter & Co. and Subsidiaries Employee Stock Ownership Plan (the
"ESOP Plan"). The undersigned understands that, subject to the terms of its
trust agreement, the ESOP Trustee will not vote or grant proxies with respect
to any shares for which no instruction is received. The undersigned further
understands that the ESOP Trustee intends to vote or grant proxies with
respect to all unallocated shares held under the ESOP Plan in the same
proportion as the shares of all ESOP Plan participants who have timely
delivered properly executed voting instructions (with neither an abstention
nor noninstruction being deemed a voting instruction to the ESOP Trustee for
this purpose), unless otherwise required by law.
. State Street Bank and Trust Company, as trustee (the "Award Trustee") under
the Trust Agreement dated as of April 1, 1994, as amended, in connection with
the Company's 1988 Equity Incentive Compensation Plan, as amended, the
Company's 1995 Equity Incentive Compensation Plan, as amended, and the
Company's Employees' Equity Accumulation Plan, as amended. The undersigned
understands that, subject to the terms of its trust agreement, the Award
Trustee will not vote or grant proxies with respect to any shares for which
no instruction is received.
The undersigned further understands that this VIF or the telephone or Internet
voting instructions, properly completed, must be received no later that 5:00
P.M. on April 6, 1999 for my shares to be voted in accordance with my
instructions.
PLEASE FOLLOW THE INSTRUCTIONS ON THE BACK OF THIS CARD TO DIRECT YOUR VOTE BY
PHONE OR BY INTERNET, OR RETURN THIS VIF AFTER SIGNING AND DATING IT ON THE
OTHER SIDE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
YOU MAY DIRECT YOUR VOTE BY TOUCH-TONE PHONE OR BY INTERNET
- -----------------------------------------------------------
(See enclosed insert for further instructions)
TO DIRECT YOUR VOTE BY PHONE, call Toll-Free in the U.S.: 1-800-690-6903
- ----------------------------
TO DIRECT YOUR VOTE BY INTERNET, visit the Website(s): WWW.MSDWT.COM or
- -------------------------------
WWW.PROXYVOTE.COM
OR
- --
PLEASE MARK VOTES AS IF YOU PLAN TO ATTEND
IN THE EXAMPLE USING THE ANNUAL MEETING,
BLACK OR BLUE INK [X] PLEASE CHECK THIS BOX [_]
<TABLE>
<CAPTION>
THE MORGAN STANLEY DEAN WITTER & CO. BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
---
PROPOSALS 1, 2 AND 3.
<S> <C> <C> <C>
FOR ALL
FOR WITHHOLD EXCEPT
1. To elect as directors all nominees listed (except as marked [_] [_] [_]
to the contrary below):
NOMINEES: 01 Charles F. Knight 02 Miles L. Marsh 03 Laura D' Andrea Tyson
INSTRUCTION: To withhold authority to vote for any individual nominee,
mark "For All Except" box and strike a line through the nominee's name.
FOR AGAINST ABSTAIN
2. To amend the Company's Employee Stock Purchase Plan to [_] [_] [_]
increase the number of shares of Common Stock reserved
for issuance thereunder by a total of 25,000,000 shares.
FOR AGAINST ABSTAIN
3. To ratify the appointment of Deloitte & Touche LLP as the [_] [_] [_]
Company's independent auditors for the fiscal year ending
November 30, 1999.
THE MORGAN STANLEY DEAN WITTER & CO. BOARD OF DIRECTORS RECOMMENDS A VOTE
"AGAINST" STOCKHOLDER PROPOSALS 4, 5 AND 6.
- --------
FOR AGAINST ABSTAIN
4. Stockholder proposal to declassify the Board of Directors. [_] [_] [_]
FOR AGAINST ABSTAIN
5. Stockholder proposal to tie executive compensation to [_] [_] [_]
the amount of dividends paid.
FOR AGAINST ABSTAIN
6. Stockholder proposal to issue a report by October 1999 [_] [_] [_]
reviewing the Company's underwriting, investing
and lending criteria with the view to incorporating
criteria related to a transaction's impact on the
environment, human rights and the Company's reputation.
</TABLE>
Please sign exactly as imprinted (do not print). If shares are held jointly,
EACH holder should sign. Executors, administrators, trustees, guardians and
others signing in a representative capacity should indicate the capacity in
which they sign. An authorized officer may sign on behalf of a corporation and
should indicate the name of the corporation and his or her capacity.
Please make sure to sign and date
this card. Dated ________, 1999
____________________ ____________________________
Signature Co-Owner (if any) Signature
- --------------------------------------------------------------------------------
PLEASE DETACH AT PERFORATION ALONG DOTTED LINES
MORGAN STANLEY DEAN WITTER & CO.
- --------------------------------------------------------------------------------
IMPORTANT
USE ONE OF THE THREE EASY WAYS TO DIRECT YOUR VOTE
1. BY INTERNET. HAVE YOUR VIF AT HAND. GO TO THE "VOTE YOUR PROXY HERE" LINK ON
THE WEBSITE WWW.MSDWT.COM OR GO DIRECTLY TO WWW.PROXYVOTE.COM. ENTER YOUR 12-
------------- ------------------
DIGIT CONTROL NUMBER LOCATED ON THE VIF AND FOLLOW THE SIMPLE INSTRUCTIONS.
2. BY TELEPHONE. HAVE YOUR VIF AT HAND. IN THE U.S. CALL 1-800-690-6903 ON A
TOUCH-TONE PHONE. ENTER YOUR 12-DIGIT CONTROL NUMBER LOCATED ON THE VIF AND
FOLLOW THE SIMPLE RECORDED INSTRUCTIONS.
3. BY MAIL. PLEASE DATE, SIGN AND RETURN YOUR VIF IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
SUBMIT YOUR VIF OR VOTING INSTRUCTIONS TO ENSURE RECEIPT NO LATER
THAN 5:00 P.M. ON APRIL 6, 1999.
- --------------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY DEAN WITTER & CO.
1999 VOTING INSTRUCTION FORM ("VIF")
Morgan Stanley Dean Witter Trust FSB, as custodian (the "Custodian") for
certain shares beneficially owned by the undersigned, is hereby directed to
vote, as indicated on the reverse side of this VIF, in person or by proxy, all
of the undersigned's shares of Common Stock of Morgan Stanley Dean Witter & Co.
(the "Company") in the undersigned's account with the Custodian, not subject to
any voting agreement, at the 1999 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held on April 9, 1999 at 9:00 A.M., local time, and
at any and all adjournments or postponements thereof, upon the proposals listed
on the reverse side of this VIF and more fully described in the Company's Notice
of Annual Meeting of Stockholders dated February 19, 1999 and the accompanying
Proxy Statement and, in its (or the proxies') discretion, for the election of a
person to the Board of Directors if any nominee named herein becomes unable to
serve or for good cause will not serve, upon all matters incident to the conduct
of the Annual Meeting, and upon such other business as may properly come before
the Annual Meeting. The undersigned understands that this VIF or the telephone
or Internet voting instructions, properly completed, must be received not later
than 5:00 P.M. on April 8, 1999 or the Custodian will not vote the stock.
PLEASE FOLLOW THE INSTRUCTIONS ON THE BACK OF THIS CARD TO DIRECT
YOUR VOTE BY PHONE OR BY INTERNET, OR RETURN THIS VIF AFTER
SIGNING AND DATING IT ON THE OTHER SIDE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
YOU MAY DIRECT YOUR VOTE BY TOUCH-TONE PHONE OR BY INTERNET
- -----------------------------------------------------------
(See enclosed insert for further instructions)
TO DIRECT YOUR VOTE BY PHONE, call Toll-Free in the U.S.: 1-800-690-6903
- ----------------------------
TO DIRECT YOUR VOTE BY INTERNET, visit the Website(s): WWW.MSDWT.COM or
- -------------------------------
WWW.PROXYVOTE.COM
OR PLEASE MARK VOTES AS IF YOU PLAN TO ATTEND
- -- IN THE EXAMPLE USING THE ANNUAL MEETING,
BLACK OR BLUE INK [X] PLEASE CHECK THIS BOX [_]
<TABLE>
<CAPTION>
THE MORGAN STANLEY DEAN WITTER & CO. BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.
---
<S> <C> <C> <C>
1. To elect as directors all nominees listed (except as marked to the contrary FOR ALL
below): FOR WITHHOLD EXCEPT
[_] [_] [_]
NOMINEES: 01 Charles F. Knight 02 Miles L. Marsh 03 Laura D' Andrea Tyson
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"For All Except" box and strike a line through the nominee's name.
2. To amend the Company's Employee Stock Purchase Plan to increase the number FOR AGAINST ABSTAIN
of shares of Common Stock reserved for issuance thereunder by a total of [_] [_] [_]
25,000,000 shares.
3. To ratify the appointment of Deloitte & Touche LLP as the Company's FOR AGAINST ABSTAIN
independent auditors for the fiscal year ending November 30, 1999. [_] [_] [_]
THE MORGAN STANLEY DEAN WITTER & CO. BOARD OF
DIRECTORS RECOMMENDS A VOTE "AGAINST" STOCKHOLDER
-------
PROPOSALS 4, 5 AND 6.
4. Stockholder proposal to declassify the Board of Directors. FOR AGAINST ABSTAIN
[_] [_] [_]
5. Stockholder proposal to tie executive compensation to the amount of FOR AGAINST ABSTAIN
dividends paid. [_] [_] [_]
6. Stockholder proposal to issue a report by October 1999 reviewing the FOR AGAINST ABSTAIN
Company's underwriting, investing and lending criteria with the view to [_] [_] [_]
incorporating criteria related to a transaction's impact on the environment,
human rights and the Company's reputation.
</TABLE>
Please sign exactly as imprinted (do not print). If shares are held jointly,
EACH holder should sign. Executors, administrators, trustees, guardians and
others signing in a representative capacity should indicate the capacity in
which they sign. An authorized officer may sign on behalf of a corporation and
should indicate the name of the corporation and his or her capacity.
Please make sure to sign and date
this card. Dated ______________, 1999
- ------------------------------ ------------------------------------
Signature Co-Owner (if any) Signature
- --------------------------------------------------------------------------------
PLEASE DETACH AT PERFORATION ALONG DOTTED LINES
MORGAN STANLEY DEAN WITTER & CO.
- --------------------------------------------------------------------------------
IMPORTANT
USE ONE OF THE THREE EASY WAYS TO DIRECT YOUR VOTE
1. BY INTERNET. HAVE YOUR VIF AT HAND. GO TO THE "VOTE YOUR PROXY HERE" LINK ON
THE WEBSITE WWW.MSDWT.COM OR GO DIRECTLY TO WWW.PROXYVOTE.COM. ENTER YOUR 12-
------------- ------------------
DIGIT CONTROL NUMBER LOCATED ON THE VIF AND FOLLOW THE SIMPLE INSTRUCTIONS.
2. BY TELEPHONE. HAVE YOUR VIF AT HAND. IN THE U.S. CALL 1-800-690-6903 ON A
TOUCH-TONE PHONE. ENTER YOUR 12-DIGIT CONTROL NUMBER LOCATED ON THE VIF AND
FOLLOW THE SIMPLE RECORDED INSTRUCTIONS.
3. BY MAIL. PLEASE DATE, SIGN AND RETURN YOUR VIF IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
SUBMIT YOUR VIF OR VOTING INSTRUCTIONS TO ENSURE RECEIPT NO LATER THAN 5:00 P.M.
ON APRIL 8, 1999.
- --------------------------------------------------------------------------------
MSDW003
<PAGE>
[GRAPHIC]
<TABLE>
<CAPTION>
NOW TWO NEW AND EASY WAYS
TO SUBMIT YOUR VOTE/PROXY
<S> <C> <C>
24 HOURS A DAY 7 DAYS A WEEK
Fast and Convenient Immediate Posting and Confirmation
TO VOTE BY INTERNET TO VOTE BY TELEPHONE
Go to either website: In the U.S., call toll-free
www.msdwt.com or 1-800-690-6903 using
www.proxyvote.com a touch-tone phone
Follow these four easy steps: Follow these four easy steps:
Read the accompanying Proxy Read the accompanying Proxy
Statement and have your proxy card 1 Statement and have your proxy card
or voting instruction form at hand or voting instruction form at hand
Go to the "Vote Your Proxy Here" link In the U.S., call the toll-free number
on the website www.msdwt.com 2 1-800-690-6903 using a touch-tone phone
or directly to www.proxyvote.com
Enter the 12-digit control Enter the 12-digit control number
number listed on your proxy card 3 listed on your proxy card
or voting instruction form or voting instruction form
Follow the simple instructions and click on 4 Follow the simple recorded instructions
"Final Submission" when you are finished
</TABLE>
Thank you for submitting your vote/proxy.
If you vote by telephone or Internet, you need not return the proxy card or
voting instruction form.
MORGAN STANLEY DEAN WITTER & CO.
<PAGE>
[GRAPHIC]
<TABLE>
<CAPTION>
NOW TWO NEW AND EASY WAYS
TO SUBMIT YOUR VOTE/PROXY
<S> <C> <C>
24 HOURS A DAY 7 DAYS A WEEK
Fast and Convenient Immediate Posting and Confirmation
TO VOTE BY INTERNET TO VOTE BY TELEPHONE
Go to website: Call the toll-free number listed on
www.proxyvote.com your proxy card or voting instruction
form using a touch-tone phone
Follow these four easy steps: Follow these four easy steps:
Read the accompanying Proxy 1 Read the accompanying Proxy
Statement and have your proxy card Statement and have your proxy card
or voting instruction form at hand or voting instruction form at hand
Go directly to 2 Call the toll-free number listed on your
www.proxyvote.com proxy card or voting instruction form
Enter the 12-digit control 3 Enter the 12-digit control
number listed on your proxy card number listed on your proxy card
or voting instruction form or voting instruction form
Follow the simple instructions and click on 4 Follow the simple recorded instructions
"Final Submission" when you are finished
</TABLE>
Thank you for submitting your vote/proxy.
If you vote by telephone or Internet, you need not return the proxy card or
voting instruction form.
MORGAN STANLEY DEAN WITTER & CO.
<PAGE>
P R O X Y / V O T I N G D I R E C T I V E
MORGAN STANLEY DEAN WITTER & CO.
THIS PROXY/VOTING DIRECTIVE IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND RELATES TO THE 1999 ANNUAL MEETING OF STOCKHOLDERS, APRIL 9, 1999
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 Dean Witter & Co. (as
successor to Morgan Stanley Group Inc.), a Delaware corporation (the "Company"),
and the persons listed on Appendix A thereto and/or (ii) certain agreements
entered into between the Company and certain former general partners of Miller
Anderson & Sherrerd, LLP and/or (iii) certain agreements entered into between
the Company and certain officers of Van Kampen Investments Inc. and/or (iv)
Appendix A to the Company's 1986 Stock Option Plan, as amended, and/or (v)
Appendix A to the Company's Performance Unit Plan, as amended, and/or (vi)
Appendix A to the award agreements or certificates entered into pursuant to the
Company's 1988 Equity Incentive Compensation Plan, as amended (the "1988 EICP")
and/or (vii) Appendix A to the award agreements or certificates entered into
pursuant to the Company's 1995 Equity Incentive Compensation Plan, as amended
(the "1995 EICP") and/or (viii) Exhibit B to the Trust Agreement (the "Trust
Agreement") dated as of March 5, 1991, as amended, 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 1988 EICP and the 1995 EICP (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 the Trust
Shares in the preliminary vote 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 Christine A. Edwards, Robert G.
Scott and Ronald T. Carman, 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 1999 Annual Meeting of Stockholders of the Company (the "Annual
Meeting") to be held on Friday, April 9, 1999 at 9:00 A.M., local time, at the
offices of the Morgan Stanley Dean Witter Trust FSB, Harborside Financial
Center, Plaza Two, Jersey City, New Jersey, and at any adjournments or
postponements 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 for the election
of a person to the Board of Directors if any nominee named herein becomes unable
to serve or for good cause will not serve, upon all matters incident to the
conduct of the Annual Meeting, and upon such other business as may properly come
before the Annual 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 or her vote on any of the proposals on the reverse, the number
of his or her shares (other than Trust Shares) subject to the Voting Agreements
or held on his or her behalf will be voted in accordance with the Board of
Directors' recommendations as to each proposal, as indicated on the reverse side
of this card, for purposes of the preliminary vote among employee stockholders
of the Company who are subject to one or more Voting Agreements.
<PAGE>
YOU MAY VOTE/GRANT A PROXY BY TOUCH-TONE PHONE OR BY INTERNET
- ------------------------------------------------------------
(See enclosed insert for further instructions)
TO VOTE/GRANT A PROXY BY PHONE, call Toll-Free in the U.S.: 1-800-690-6903
- ------------------------------
TO VOTE/GRANT A PROXY BY INTERNET, visit the Website(s): WWW.MSDWT.COM or
- ---------------------------------
WWW.PROXYVOTE.COM
OR PLEASE MARK VOTES AS IF YOU PLAN TO ATTEND
- -- IN THE EXAMPLE USING THE ANNUAL MEETING,
BLACK OR BLUE INK [X] PLEASE CHECK THIS BOX [_]
THIS PROXY/VOTING DIRECTIVE CARD WILL BE VOTED AS DIRECTED IN THE PRELIMINARY
VOTE. IF THIS PROXY/VOTING DIRECTIVE CARD IS SIGNED AND RETURNED, BUT NO
DIRECTION IS MADE, SHARES OF COMMON STOCK OTHER THAN THE TRUST SHARES WILL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE MORGAN STANLEY DEAN WITTER &
CO. BOARD OF DIRECTORS AS SET FORTH BELOW:
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSALS 1, 2 AND 3.
---
<S> <C> <C> <C>
1. To elect as directors all nominees listed (except as marked to the contrary FOR ALL
below): FOR WITHHOLD EXCEPT
[_] [_] [_]
NOMINEES: 01 Charles F. Knight 02 Miles L. Marsh 03 Laura D'Andrea Tyson
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"For All Except" box and strike a line through the nominee's name.
2. To amend the Company's Employee Stock Purchase Plan to increase the number FOR AGAINST ABSTAIN
of shares of Common Stock reserved for issuance thereunder by a total of [_] [_] [_]
25,000,000 shares.
3. To ratify the appointment of Deloitte & Touche LLP as the Company's FOR AGAINST ABSTAIN
independent auditors for the fiscal year ending November 30, 1999. [_] [_] [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST"
STOCKHOLDER PROPOSALS 4, 5 AND 6. -------
4. Stockholder proposal to declassify the Board of Directors. FOR AGAINST ABSTAIN
[_] [_] [_]
5. Stockholder proposal to tie executive compensation to the amount of FOR AGAINST ABSTAIN
dividends paid. [_] [_] [_]
6. Stockholder proposal to issue a report by October 1999 reviewing the FOR AGAINST ABSTAIN
Company's underwriting, investing and lending criteria with the view to [_] [_] [_]
incorporating criteria related to a transaction's impact on the environment,
human rights and the Company's reputation.
</TABLE>
Please sign exactly as imprinted (do not print). If shares are held jointly,
EACH holder should sign. Executors, administrators, trustees, guardians and
others signing in a representative capacity should indicate the capacity in
which they sign. An authorized officer may sign on behalf of a corporation and
should indicate the name of the corporation and his or her capacity.
Please make sure to sign and date
this card. Dated __________________, 1999
- ----------------------------- ---------------------------------------
Signature Co-Owner (if any) Signature
- --------------------------------------------------------------------------------
PLEASE DETACH AT PERFORATION ALONG DOTTED LINES
MORGAN STANLEY DEAN WITTER & CO.
- --------------------------------------------------------------------------------
IMPORTANT
USE ONE OF THE THREE EASY WAYS TO DIRECT YOUR VOTE/PROXY
1. BY INTERNET. HAVE YOUR PROXY/VOTING DIRECTIVE CARD AT HAND. GO TO THE
"VOTE YOUR PROXY HERE" LINK ON THE WEBSITE WWW.MSDWT.COM OR GO DIRECTLY TO
-------------
WWW.PROXYVOTE.COM. ENTER YOUR 12-DIGIT CONTROL NUMBER LOCATED ON THE
------------------
PROXY/VOTING DIRECTIVE CARD AND FOLLOW THE SIMPLE INSTRUCTIONS.
2. BY TELEPHONE. HAVE YOUR PROXY/VOTING DIRECTIVE CARD AT HAND. IN THE U.S.
CALL 1-800-690-6903 ON A TOUCH-TONE PHONE. ENTER YOUR 12-DIGIT CONTROL
NUMBER LOCATED ON THE PROXY/VOTING DIRECTIVE CARD AND FOLLOW THE SIMPLE
RECORDED INSTRUCTIONS.
3. BY MAIL. PLEASE DATE, SIGN AND RETURN YOUR PROXY/VOTING DIRECTIVE CARD IN
THE ENCLOSED POSTAGE PAID ENVELOPE.
SUBMIT YOUR PROXY/VOTING DIRECTIVE CARD OR VOTING INSTRUCTIONS TO ENSURE RECEIPT
NO LATER THAN 5:00 P.M. ON MARCH 17, 1999.
- --------------------------------------------------------------------------------
MSDW002
<PAGE>
MORGAN STANLEY DEAN WITTER & CO.
1585 Broadway
New York, New York 10036
February 19, 1999
Dear Employee Stockholder:
You are entitled to participate in the Preliminary Vote of certain of the
Company's employee stockholders concerning the matters to be voted on at the
Company's 1999 Annual Meeting of Stockholders. The Preliminary Vote will be
taken on Wednesday, March 17, 1999. A proxy/voting directive card and the
Proxy Statement describing the matters to be voted on in the Preliminary Vote
and at the Annual Meeting are enclosed. Kindly submit your proxy/voting
directive either electronically (by Internet or telephone as per the enclosed
instructions) or by completing, signing and returning the proxy/voting
directive card in the enclosed envelope on or before March 17, 1999.
The outcome of the Preliminary Vote will determine how shares of the
Company's Common Stock that are subject to the Preliminary Vote will be voted
at the Annual Meeting, so it is essential that you vote in the Preliminary
Vote. At the Annual Meeting, the following procedures will apply to shares of
Common Stock subject to the Preliminary Vote.
. All of the shares of Common Stock held in the Company's "rabbi" trust
which are subject to the Preliminary Vote, including shares corresponding
to your stock units, will be voted at the Annual Meeting by State Street
Bank and Trust Company, as Trustee of the "rabbi" trust, in accordance
with the vote of the majority of the Common Stock voted in the
Preliminary Vote.
. If you wish to vote any shares of Common Stock you own that are subject
to the Preliminary Vote, you must grant an irrevocable proxy to Christine
A. Edwards, Robert G. Scott and Ronald T. Carman to vote such shares at
the Annual Meeting in accordance with the vote of the majority of the
Common Stock voted in the Preliminary Vote on all matters submitted to
the Preliminary Vote and in the proxies' discretion on any other matter
properly coming before the Annual Meeting. You will not be able to vote
your shares of Common Stock subject to the Preliminary Vote in any other
manner.
By electronically submitting your proxy/voting directive or by completing,
signing and returning the enclosed proxy/voting directive card, you are
participating in the Preliminary Vote and granting the proxy.
If you own shares of Common Stock that are not subject to the Preliminary
Vote, or if you have shares of ESOP Stock allocated to you in the ESOP, you
may vote these shares in your discretion at the Annual Meeting. You should
receive separate mailings containing materials (e.g., proxy or voting
directive card, and the Company's 1998 Annual Report to Stockholders) so you
can vote these shares. ESOP Stock may be voted by directing The Northern Trust
Company, as Trustee of the ESOP, to vote. Common Stock that is not subject to
the Preliminary Vote may be voted in the manner described in the Proxy
Statement. If you own Common Stock that is not subject to the Preliminary
Vote, or if you have ESOP Stock allocated to you, and you have not received
the appropriate mailings, please contact Susan Krause in Law, Compliance and
Governmental Affairs at (212) 762-6710.
Of course, you are welcome to attend the Annual Meeting. Thank you for your
participation in the Preliminary Vote.
Very truly yours,
/s/ Philip J. Purcell /s/ John J. Mack
Philip J. Purcell John J. Mack
Chairman and Chief Executive Officer President and Chief Operating
Officer
<PAGE>
APPENDIX A
MORGAN STANLEY DEAN WITTER & CO.
EMPLOYEE STOCK PURCHASE PLAN
Amended December 18, 1998, Effective January 1, 1999
SECTION 1 - PURPOSE
- -------------------
The purpose of the Plan is to secure for the Company and its stockholders the
benefits of the incentive inherent in the ownership of Common Stock by current
and future Eligible Employees. The Plan is intended to comply with the
provisions of Code Section 423 and shall be administered, interpreted and
construed in accordance with such provisions.
SECTION 2 - DEFINITIONS
- -----------------------
When used herein, the following terms shall have the following meanings:
2.1 "Board of Directors" means the Board of Directors of the Company, or any
------------------
committee of such Board of Directors, as the Board of Directors may
determine from time to time.
2.2 "Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, or any successor statute thereto.
2.3 "Committee" means the committee appointed by the Board of Directors to
---------
administer the Plan pursuant to Section 12.
2.4 "Common Stock" means common stock, par value $0.01 per share, of the
------------
Company.
2.5 "Common Stock Account" means the account established with, and maintained
--------------------
by, the Custodian for the purpose of holding Common Stock purchased
pursuant to this Plan.
2.6 "Company" means Morgan Stanley Dean Witter & Co., a Delaware corporation,
-------
and its successors and assigns.
2.7 "Custodian" means the agent selected by the Company to hold Common Stock
---------
purchased under the Plan.
2.8 "Disability" means disability as defined under any qualified, defined
----------
benefit plan sponsored by the Company or any Subsidiary in which an
Eligible Employee is a participant on the date such Eligible Employee
terminates employment with the Company or any Subsidiary.
2.9 "Eligible Compensation" means the sum of the types and amounts of
---------------------
compensation determined from time to time by the Committee in its sole
discretion to be eligible to be taken into account under the Plan, provided
that no such determination shall include or exclude any type or amount of
compensation contrary to the requirements of Section 423 of the Code and
any regulations promulgated thereunder.
2.10 "Eligible Employee" means all employees of the Company and its
-----------------
Subsidiaries that have been designated as eligible to participate in the
Plan pursuant to and in accordance with rules prescribed by the Committee
from time to time, which rules, however, shall neither permit nor deny
participation in the Plan contrary to the requirements of the Code
(including, but not limited to, Section 423(b)(3), (4), (5), and (8)
thereof) and the regulations promulgated thereunder.
1
<PAGE>
2.11 "Fair Market Value" means the average of the high and low sales prices of
-----------------
a share of Common Stock as reported on the New York Stock Exchange
Composite Tape on the date in question or, if the Common Stock shall not
have been traded on such date, the average of the high and low sales prices
on the first day prior thereto on which the Common Stock was so traded or,
if the Common Stock was not so traded, such other amount as may be
determined by the Committee in its sole discretion.
2.12 "Investment Date" means for each Eligible Employee, each date on which he
---------------
receives his Eligible Compensation in each Plan Year, or such other dates
as may be determined by the Committee in its sole discretion.
2.13 "Participant" means an Eligible Employee who has met the requirements of
-----------
Section 3 and has elected to participate in the Plan pursuant to Section
4.1.
2.14 "Payroll Deduction Account" means the bookkeeping entry established by the
-------------------------
Company for each Participant pursuant to Section 4.3.
2.15 "Plan" means the Morgan Stanley Dean Witter & Co. Employee Stock Purchase
----
Plan as set forth herein and as amended from time to time.
2.16 "Plan Year" means a calendar year.
---------
2.17 "Retirement" means retirement as defined by any qualified or non-qualified
----------
defined benefit plan sponsored by the Company or a Subsidiary in which an
Eligible Employee is a participant on the date such Eligible Employee
terminates employment with the Company or any Subsidiary.
2.18 "Subsidiary" means any corporation designated by the Committee which
----------
constitutes a "subsidiary" of the Company, within the meaning of Code
Section 424(f).
SECTION 3 - ELIGIBILITY
- -----------------------
3.1 General Rule. Subject to Section 3.3, each Eligible Employee shall be
- -----------------
eligible to participate in the Plan beginning on the later of (i) the
Eligible Employee's date of hire by the Company or any Subsidiary and (ii)
the date such employee becomes an Eligible Employee.
3.2 Leave of Absence. Unless the Committee otherwise determines, a Participant
- ---------------------
on a paid leave of absence shall continue to be a Participant in the Plan
so long as such Participant is on such paid leave of absence. Unless
otherwise determined by the Committee, a Participant on an unpaid leave of
absence shall not be entitled to participate in any offering commencing
after such unpaid leave has begun but shall not be deemed to have
terminated employment for purposes of the Plan. A Participant who, upon
failing to return to work following a leave of absence, is deemed not to be
an employee, shall not be entitled to participate in any offering
commencing after such termination of employment, and such Participant's
Payroll Deduction Account shall be paid out in accordance with Section 6.1.
3.3 Common Stock Account. As a condition to participation in this Plan, each
- -------------------------
Eligible Employee shall be required to hold shares purchased hereunder in a
Common Stock Account and such employee's decision to participate in the
Plan shall constitute the appointment of the Custodian as custodial agent
for the purpose of holding such shares. Such Common Stock Account will be
governed by, and subject to, the terms and conditions of a written
agreement between the Company and the Custodian.
2
<PAGE>
SECTION 4 - PARTICIPATION AND PAYROLL DEDUCTIONS
- ------------------------------------------------
4.1 Enrollment. Each Eligible Employee may elect to participate in the Plan
- ---------------
for a Plan Year by completing a Company-specified enrollment process. Upon
completing the enrollment process, an Eligible Employee shall commence
participation in the Plan on the next practicable Investment Date. Each
Eligible Employee shall be advised of the purchase price (expressed as a
percentage of Fair Market Value) determined under Section 5.2(b) before
enrolling in the Plan.
4.2 Amount of Deduction. When enrolling, the Eligible Employee shall specify a
- ------------------------
payroll deduction amount of a percentage (in whole numbers) of Eligible
Compensation which shall be withheld from such Eligible Employee's regular
paychecks, including bonus paychecks, for the Plan Year, provided, however,
-----------------
that the Committee may determine and specify, from time to time, (i) the
range of permissible percentages of Eligible Compensation an Eligible
Employee may specify to be withheld and (ii) the maximum amount, if any, of
Eligible Compensation that may be deducted for an Eligible Employee in any
Plan Year, and provided further, that no such determination shall be
contrary to the requirements of Code Section 423 and the regulations
promulgated thereunder.. The Committee, in its sole discretion, may
authorize payment in respect of any option exercised hereunder by personal
check.
4.3 Payroll Deduction Accounts. Each Participant's payroll deduction shall be
- -------------------------------
credited, as soon as practicable following the relevant pay date, to a
Payroll Deduction Account, pending the purchase of Common Stock in
accordance with the provisions of the Plan. All such amounts shall be
assets of the Company and may be used by the Company for any corporate
purpose. No interest shall accrue or be paid on amounts credited to a
Payroll Deduction Account.
4.4 Subsequent Plan Years. Unless otherwise specified prior to the beginning
- --------------------------
of any Plan Year by completing a Company-specified process, a Participant
shall be deemed to have elected to participate in each subsequent Plan Year
for which the Participant is eligible to the same extent and in the same
manner as at the end of the prior Plan Year.
4.5 Changes in Participation.
- -----------------------------
(a) At any time during a Plan Year, a Participant may cease participation in
the Plan by completing a Company-specified process. Such cessation will
become effective as soon as practicable following completion of such
process, whereupon no further payroll deductions will be made and the
Company shall pay to such Participant an amount equal to the balance in the
Participant's Payroll Deduction Account as soon as practicable thereafter.
To the extent then an Eligible Employee, any Participant who ceased to
participate may elect to participate again as of any subsequent Investment
Date in any calendar quarter after the quarter in which such Participant
ceased to participate.
(b) At any time during a Plan Year (but not more than once in any calendar
quarter), a Participant may increase or decrease the percentage of Eligible
Compensation subject to payroll deduction within the limits approved by the
Committee pursuant to Section 4.2 by completing a Company-specified
process. Such increase or decrease shall become effective with the first
pay period following the completion of such process to which it may be
practically applied. Notwithstanding any increase in the percentage of
Eligible Compensation subject to pay deduction pursuant to this Section
4.5(b), in no event may the amount of Eligible Compensation deducted for an
Eligible Employee for any Plan Year exceed the maximum amount authorized to
be deducted pursuant to Section 4.2.
(c) Notwithstanding anything herein to the contrary, in the event the Committee
determines under Section 5.2(b) to change the purchase price of a share of
Common Stock,
3
<PAGE>
each Participant shall be advised in advance of the effective date of such
change and afforded the opportunity to make a change in participation under
Section 4.5(a) or 4.5(b) before such change in the purchase price takes
effect.
SECTION 5 - OFFERINGS
---------------------
5.1 Maximum Number of Shares. The Plan will be implemented by making offerings
- -----------------------------
of Common Stock on each Investment Date until the maximum number of shares
of Common Stock available under the Plan have been issued pursuant to the
exercise of options.
5.2 Grant and Exercise of Options
- ----------------------------------
(a) Subject to Section 5.3, on each Investment Date, each Participant shall be
deemed, subject to Section 5.4, to have been granted an option to purchase,
and shall be deemed, without any further action, to have exercised such
option and purchased the number of shares of Common Stock determined by
dividing the amount credited to the Participant's Payroll Deduction Account
on such date by the purchase price (as determined in paragraph (b) below).
All such shares shall be credited to the Participant's Common Stock
Account.
(b) The purchase price for each share of Common Stock shall be expressed as a
percentage of Fair Market Value on the Investment Date and shall be
determined from time to time by the Committee, but in no event shall such
purchase price be less than 85 percent of the Fair Market Value of such
share on the Investment Date.
5.3 Oversubscription of Shares. If the total number of shares for which
- -------------------------------
options are exercised on any Investment Date exceeds the maximum number of
shares available for the applicable offering, the Company shall make an
allocation of the shares available for delivery and distribution among the
Participants in as nearly a uniform manner as shall be practicable, and the
balance of all amounts credited to the Payroll Deduction Accounts shall be
applied to the next offering.
5.4 Limitations on Grant and Exercise of Options
- -------------------------------------------------
(a) No option granted under this Plan shall permit a Participant to purchase
stock under all employee stock purchase plans (as defined by Code Section
423(b)) of the Company and any Subsidiary in an amount which, in the
aggregate, would exceed $25,000 based on the Fair Market Value of such
stock (determined at the time the option is granted) for each calendar year
in which the option is outstanding at any time.
(b) No employee who would own, immediately after the option is granted, stock
possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or any Subsidiary (a "5%
Owner") shall be granted an option. For purposes of determining whether an
employee is a 5% Owner, the rules of Code Section 424(d) shall apply in
determining the stock ownership of an individual and stock which the
employee may purchase under outstanding options shall be treated as stock
owned by the employee.
SECTION 6 - DISTRIBUTIONS OF COMMON STOCK ACCOUNT
- -------------------------------------------------
6.1 Termination of Employment. If a Participant's employment with the Company
- ------------------------------
and its Subsidiaries terminates for any reason during a Plan Year, all
shares credited to the Participant's Common Stock Account shall be
distributed to the Participant, and any amount credited to the
Participant's Payroll Deduction Account shall be refunded to the
Participant or, in the event of the Participant's death, to the
Participant's estate, as soon as practicable.
4
<PAGE>
6.2 During Employment. Prior to the Participant's termination of employment
- ----------------------
with the Company and its Subsidiaries, a Participant may withdraw some or
all of the whole shares credited to the Participant's Common Stock Account,
subject to the provisions of Section 10.3, provided, however, that a
------------------
Participant may not withdraw shares from the Participant's Common Stock
Account (other than shares acquired upon the automatic reinvestment of
dividends pursuant to Section 7) for a period of 12 months immediately
following the Investment Date on which they were purchased.
SECTION 7 - DIVIDENDS ON SHARES
- -------------------------------
All cash dividends paid with respect to shares of Common Stock held in a
participant's Common Stock Account shall be invested automatically in shares of
Common Stock purchased at 100 percent of Fair Market Value on the date such
dividend is paid. All non-cash distributions paid on Common Stock held in a
Participant's Common Stock Account shall be paid to the Participant as soon as
practicable.
SECTION 8 - RIGHTS AS A STOCKHOLDER
- -----------------------------------
When a Participant purchases Common Stock pursuant to the Plan or when Common
Stock is credited to a Participant's Common Stock Account, subject to the
restrictions set forth in Sections 6.2 and 10.3, the Participant shall have all
of the rights and privileges of a stockholder of the Company with respect to the
shares so purchased or credited, whether or not certificates representing shares
shall have been issued.
SECTION 9 - OPTIONS NOT TRANSFERABLE
- ------------------------------------
Neither a Participant's Payroll Deduction Account nor any options granted under
the Plan to a Participant may be transferred, pledged or otherwise disposed of
in any way (other than by will or the laws of descent and distribution) by a
Participant and such options are exercisable during the Participant's lifetime
only by the Participant. Any attempt at such assignment, transfer, pledge or
other disposition shall be without effect.
SECTION 10 - COMMON STOCK
- -------------------------
10.1 Reserved Shares. There shall be reserved for issuance and purchase under
- ---------------------
the Plan an aggregate of 1,048,416 shares of Common Stock (as of November
30, 1998), subject to adjustment as provided in Section 11. Shares subject
to the Plan may be shares now or hereafter authorized but unissued,
treasury shares, or both.
10.2 Restrictions on Exercise. In its sole discretion, the Board of Directors
- ------------------------------
may require as conditions to the exercise of any option that shares of
Common Stock reserved for issuance upon the exercise of an option shall
have been duly listed on any recognized national securities exchange, and
that either a registration statement under the Securities Act of 1933, as
amended, with respect to said shares shall be effective, or the Participant
shall have represented at the time of purchase, in form and substance
satisfactory to the Company, that it is the Participant's intention to
purchase the shares for investment only and not for resale or distribution.
10.3 Restriction on Sale. Shares of Common Stock purchased hereunder (other
- -------------------------
than shares of Common Stock acquired upon the automatic investment of
dividends pursuant to Section 7) shall not be transferable by a Participant
for a period of 12 months immediately following the Investment Date on
which such shares were purchased. In addition, upon the expiration of such
12-month period, shares of Common Stock purchased hereunder (other than
shares of Common Stock acquired upon the automatic investment of dividends
pursuant to Section 7) shall not be transferable by a Participant for an
additional succeeding 12-month period, without prior notice to the Company
in the manner approved by the Company.
5
<PAGE>
SECTION 11 - ADJUSTMENT UPON CHANGES IN CAPITALIZATION
- ------------------------------------------------------
In the event of a subdivision or consolidation of the outstanding shares of
Common Stock, or the payment of a stock dividend thereon, the number of shares
reserved or authorized to be reserved under this Plan shall be increased or
decreased, as the case may be, proportionately, and such other adjustments shall
be made as may be deemed necessary or equitable by the Board of Directors. In
the event of any other change affecting the Common Stock, such adjustments shall
be made as may be deemed equitable by the Board of Directors, in its sole
discretion, to give proper effect to such event, subject to the limitations of
Code Section 424.
SECTION 12 - ADMINISTRATION
- ---------------------------
12.1 Appointment. The Plan shall be administered by the Committee. The
- -----------------
Committee shall consist of two or more members who shall serve at the
pleasure of the Board of Directors. The Board of Directors may from time
to time appoint members of the Committee in substitution for, or in
addition to, members previously appointed and may fill vacancies, however
caused, in the Committee.
12.2 Authority. Subject to the express provisions of the Plan, the Committee
- ---------------
shall have authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, and to make all other determinations
necessary or advisable in administering the Plan, all of which
determinations shall be final and binding upon all persons. If and to the
extent required by Securities and Exchange Commission Rule 16b-3 or any
successor exemption under which the Committee believes it is appropriate
for the Plan to qualify, the Committee may restrict a Participant's ability
to participate in the Plan or sell any Common Stock received under the Plan
for such period as the Committee deems appropriate or may impose such other
conditions in connection with participation or distributions under the Plan
as the Committee deems appropriate.
12.3 Duties of Committee. The Committee shall provide for the establishment
- -------------------------
and maintenance of records of the Plan and of each Payroll Deduction
Account and Common Stock Account established for any Participant hereunder.
12.4 Plan Expenses. The Company shall pay the fees and expenses of accounts
- -------------------
and counsel to the Company or the Committee, agents and other personnel and
all other costs of administration of the Plan.
12.5 Indemnification. To the maximum extent permitted by law, no member of the
- ---------------------
Committee shall be personally liable by reason of any contract or other
instrument executed by such member or on such member's behalf in such
member's capacity as a member of the Committee or for any mistake of
judgment made in good faith, and the Company shall indemnify and hold
harmless, directly from its own assets (including the proceeds of any
insurance policy the premiums of which are paid from the Company's own
assets), each member of the Committee and each other officer, employee or
director of the Company to whom any duty or power relating to the
administration or interpretation of the Plan or to the management or
control of the assets of the Plan may be delegated or allocated, against
any cost or expense (including fees, disbursements and other charges of
legal counsel) or liability (including any sum paid in settlement of a
claim with the approval of the Company) arising out of any act or omission
to act in connection with the Plan unless arising out of such person's own
fraud, willful misconduct or bad faith. The foregoing shall not be deemed
to limit the Company's obligation to indemnify any member of the Committee
under the Company's Certificate of Incorporation or By-laws, or any other
agreement between the Company and such member.
6
<PAGE>
SECTION 13 - AMENDMENT AND TERMINATION
- --------------------------------------
13.1 Amendment. Subject to the provisions of Code Section 423, the Board of
- ---------------
Directors may amend the Plan in any respect; provided, however, that the
-----------------
Plan may not be amended in any manner that will retroactively impair or
otherwise adversely affect the rights of any person to benefits under the
Plan which have accrued prior to the date of such action.
13.2 Termination. The Plan will terminate on the Investment Date that
- -----------------
Participants become entitled to purchase a number of shares greater than
the number of shares remaining available for purchase. In addition, the
Plan may be terminated at any prior time, at the sole discretion of the
Board of Directors.
SECTION 14 - GOVERNMENTAL AND OTHER REGULATIONS
- -----------------------------------------------
The Plan and the grant and exercise of options to purchase shares hereunder, and
the Company's obligation to sell and deliver shares upon the exercise of options
to purchase shares, shall be subject to all applicable Federal, state and
foreign laws, rules and regulations, and to such approvals by any regulatory or
governmental agency as, in the opinion of counsel to the Company, may be
required.
SECTION 15 - NO EMPLOYMENT RIGHTS
- ---------------------------------
The Plan does not create, directly or indirectly, any right for the benefit of
any employee or class of employees to purchase any shares from the Company
(other than as expressly provided in, and subject to the terms and conditions
of, the Plan), or create in any employee or class of employees any right with
respect to continuation of employment by the Company or any Subsidiary, and it
shall not be deemed to interfere in any way with the Company's or any
Subsidiary's right to terminate, or otherwise modify, an employee's employment
at any time.
SECTION 16 - WITHHOLDING
- ------------------------
As a condition to receiving shares hereunder, the Company may require the
Participant to make a cash payment to the Company of, or the Company may
withhold from any shares distributable under the Plan, an amount necessary to
satisfy all Federal, state, city or other taxes required to be withheld in
respect of such payments pursuant to any law or governmental regulation or
ruling.
SECTION 17 - OFFSETS
- --------------------
To the extent permitted by law, the Company shall have the absolute right to
withhold any amounts payable to any Participant under the terms of the Plan to
the extent of any amount owed for any reason by such Participant to the Company
or any Subsidiary and to set off and apply the amounts so withheld to payment of
any such amount owed to the Company or any Subsidiary, whether or not such
amount shall then be immediately due and payable and in such order or priority
as among such amounts owed as the Committee, in its sole discretion, shall
determine.
SECTION 18 - NOTICES, ETC.
- --------------------------
All elections, designations, requests, notices, instructions and other
communications from a Participant to the Committee or the Company required or
permitted under the Plan shall be in Company-specified form, and if required to
be in writing shall be mailed by first-class mail or delivered to such Company-
specified location and shall be deemed to have been given and delivered only
upon actual receipt thereof at such location.
SECTION 19 - CAPTIONS, ETC.
- ---------------------------
The captions of the sections and paragraphs of this Plan have been inserted
solely as a matter of convenience and in no way define or limit the scope or
intent of any provision of the Plan. References to
7
<PAGE>
sections herein are to the specified sections of this Plan unless another
reference is specifically stated. Wherever used herein, a singular number shall
be deemed to include the plural unless a different meaning is required by the
context.
SECTION 20 - EFFECT OF PLAN
- ---------------------------
The provisions of the Plan shall be binding upon, and inure to the benefit of,
all successors of the Company and each Participant, including, without
limitation, such Participant's estate and the executors, administrators or
trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy or
representative of creditors of such Participant.
SECTION 21 - GOVERNING LAW
- --------------------------
The internal laws of the State of New York shall govern all matters relating to
this Plan except to the extent superseded by the laws of the United States.
8
