SC 13D/A 1 dsc13da.txt AMENDMENT #2 TO SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 2) Morgan Stanley Dean Witter & Co. ------------------------------- (Name of Issuer) Common Stock, $.01 par value ----------------------------- (Title of Class of Securities) 617446448 ---------- (CUSIP Number) Christine A. Edwards, Esq. Executive Vice President, Chief Legal Officer and Secretary Morgan Stanley Dean Witter & Co. 1585 Broadway New York, NY 10036 (212) 761-4000 ------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) January 2, 1999 ------------------------------------------------------- (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box: [_] ---------------------- SCHEDULE 13D ---------------------- - ----------------------------------- ----------------------------------- CUSIP No. 617446448 - ----------------------------------- ----------------------------------- - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NUMBER OF ABOVE PERSON Each of the persons described on Appendix A. - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] (Applies to each person listed on Appendix A) - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS* 00 (Applies to each person listed on Appendix A) - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) (Applies to each person listed on Appendix A) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION As stated on Appendix A - -------------------------------------------------------------------------------- Number of 7. SOLE VOTING POWER Shares less than 1% (Applies to each person listed on Appendix A) Beneficially -------------------------------------------------------------- Owned by 8. SHARED VOTING POWER Each 93,573,413 (Applies to each person listed on Appendix A) Reporting -------------------------------------------------------------- Person 9. SOLE DISPOSITIVE POWER With Less than 1% (Applies to each person listed on Appendix A) -------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON As stated on Appendix A. - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* (Applies to each person listed on Appendix A) [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) As stated on Appendix A. - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN (Applies to each person listed on Appendix A) - -------------------------------------------------------------------------------- 2

49 Item 1. Security and Issuer. ------------------- This statement relates to the Common Stock, par value $.01 per share (the "MSDW Shares"), of Morgan Stanley Dean Witter & Co., a Delaware corporation. The merger (the "Merger") of Morgan Stanley Group Inc. ("Morgan Stanley") with and into Dean Witter, Discover & Co. ("Dean Witter Discover") was effective as of May 31, 1997. Pursuant to the Merger, Dean Witter Discover, the surviving corporation of the Merger, changed its name to "Morgan Stanley, Dean Witter, Discover & Co." ("MSDWD"). As a result of the Merger, each issued and outstanding share of Morgan Stanley common stock, par value $1.00 per share (the "MS Shares"), was converted (subject to certain exceptions) into 1.65 MSDW Shares. On March 24, 1999, MSDWD changed its corporate name to Morgan Stanley Dean Witter & Co. (the "Company"). The address of the principal executive office of the Company is 1585 Broadway, New York, New York 10036. Item 2. Identity and Background. ----------------------- (a)-(c), (f) The cover sheets to this statement and Appendix A hereto contain the names of the persons (the "Reporting Persons") who beneficially own MSDW Shares that are subject to the voting and any disposition restrictions set forth in (1) the employee Stockholders' Agreement and/or any of the Plan Agreements or (2) the MAS Agreements or (3) the VKAC Agreements (collectively, the "Restrictive Agreements"), all as described in Item 6, to which such persons are party to and on whose behalf this filing is made. The cover sheets to this statement and Appendix A provide the name, citizenship and aggregate amount beneficially held by each Reporting Person. The business address of each of the Reporting Persons is 1585 Broadway, New York, NY 10036. (d)-(e) No Reporting Person during the last five years has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. ---------------------------- The MSDW Shares held by the Reporting Persons are beneficially owned pursuant to one or more of the following: (1) Pursuant to the recapitalization (the "Recapitalization") effective February 14, 1986 in which holders of Morgan Stanley's then outstanding privately-held common stock and non-cumulative preferred stock received MS Shares, and holders of Morgan Stanley's outstanding $8 cumulative senior preferred stock received shares of $8 Cumulative Convertible Preferred Stock, stated value $100 per share (the "Convertible Preferred Shares"), all of which were subsequently converted into MS Shares (the MSDW Shares beneficially owned by the Reporting Persons and resulting from the conversion in the Merger of MS Shares (including the MS Shares received upon conversion of the Convertible Preferred Shares) obtained pursuant to the Recapitalization are referred to herein as "Recapitalization Shares"); (2) Pursuant to participation in the Company's 1986 Stock Option Plan (the "Option Plan"), the Company's Performance Unit Plan (the "PUP Plan"), the Company's 1988 Equity Incentive Compensation Plan (the "1988 Equity Incentive Plan"), the Company's 1995 Equity Incentive Compensation Plan (the "1995 Equity Incentive Plan" and, together with the 1988 Equity Incentive Plan, the "Equity Incentive Plans") and/or the Company's U.K. Group Profit Sharing Scheme and Plan (the "U.K. Profit Sharing Scheme") and/or similar employee benefit plans or arrangements (the Option Plan, the PUP Plan and the Equity Incentive Plans are referred to collectively as the "Plans", and the MSDW Shares beneficially owned pursuant to participation in such Plans and the U.K. Profit Sharing Scheme being referred to herein as "Benefit Plan Shares"); (3) Pursuant to the acquisition of MS Shares (which were subsequently converted in the Merger into MSDW Shares) as part of the purchase price paid to certain of the Reporting Persons (the "Former MAS General Partners") in respect of the sale on January 3, 1996 of their general partnership interests in Miller Anderson & Sherrerd, LLP, a Pennsylvania registered limited liability partnership ("MAS"), to Morgan Stanley Asset Management Holdings Inc., an indirect wholly- owned subsidiary of the Company ("MSAMHI") (such MSDW Shares being referred to herein as the "MAS Shares"); and (4) Pursuant to the acquisition of MSDW Shares resulting from the conversion of Series A 4% Exchangeable Redeemable Preferred Stock of MSAM Holdings II, Inc., a wholly-owned subsidiary of the Company ("MSAMHII"), stated value $100 per share (the "MSAMHII Convertible Preferred"), acquired as part of the purchase price paid to certain of the Reporting Persons (the "Former VKAC Officers") in exchange for the contribution on October 31, 1996 of their interest in VK/AC Holding, Inc. ("VKAC") to MSAMHII in conjunction with MSAMHII's acquisition of VKAC (such MSDW Shares being referred to herein as the "VKAC Shares"); and (5) Pursuant to privately negotiated or open market transactions or participation in various employee benefit and executive compensation plans of Dean Witter Discover (the "DWD Plans") (the MSDW Shares beneficially owned pursuant to such transactions being referred to herein as "Separately Acquired Shares"). In addition, many of the Reporting Persons are participants in the Company's Employee Stock Ownership Plan (the "ESOP"), under which they have been allocated shares of the Company's ESOP Convertible Preferred Stock (the "ESOP Stock") (including shares of Morgan Stanley ESOP Convertible Preferred Stock that were converted in the Merger into ESOP Stock). Each share of ESOP Stock is convertible into 3.3 MSDW Shares, and each share of ESOP Stock is entitled to 4.455 votes on all matters submitted to a vote of the holders of MSDW Shares, voting together with the holders of MSDW Shares as one class. The ESOP Stock and the MSDW Shares into which they are convertible are not included in the amounts beneficially owned by Reporting Persons. The MS Shares that were converted in the Merger into each Reporting Person's Recapitalization Shares, if any, were acquired in exchange for such Reporting Person's shares of Morgan Stanley's privately-held common stock and non-cumulative preferred stock and/or as a result of the conversion of the Convertible Preferred Shares; each Reporting Person's Benefit Plan Shares and shares of ESOP Stock, if any (including the MS Shares that were converted in the Merger into each Reporting Person's Benefit Plan Shares and shares of ESOP Stock, if any), were acquired pursuant to the terms of the Plans, the U.K. Profit Sharing Scheme and the ESOP in consideration of services rendered and, in the case of MSDW Shares to be acquired pursuant to an exercise of options granted under a Plan, will be acquired by payment of the exercise price of the option; the MS Shares that were converted in the Merger into each Former MAS General Partner's MAS Shares were acquired as part of the purchase price paid in connection with the sale of their general partnership interests in MAS as described above; the VKAC Shares were acquired by the Former VKAC Officers upon their exchange of their shares of MSAMHII Convertible Preferred which were acquired in consideration for the contribution of their interests in VKAC to MSAMHII in conjunction with MSAMHII's acquisition of VKAC as described above; and each Reporting Person's Separately Acquired Shares, if any (including the MS Shares that were converted in the Merger into each Reporting Person's Separately Acquired Shares, if any), were acquired by payment of personal funds or as a gift or pursuant to the terms of various DWD Plans in consideration of services rendered and, in the case of MSDW Shares to be acquired pursuant to an exercise of options granted under a DWD Plan, will be acquired by payment of the exercise price of the option. Item 4. Purpose of Transaction. ---------------------- Recapitalization Shares The Recapitalization was effected as of February 14, 1986, and the Recapitalization Shares were acquired in order to facilitate an initial public offering of the MS Shares. Prior to the Recapitalization, the then Managing Directors and Principals of Morgan Stanley & Co. Incorporated, a subsidiary of the Company (and, at the time of the Recapitalization, a subsidiary of Morgan Stanley), owned all of Morgan Stanley's common stock. After the Recapitalization and the initial public offering of the MS Shares, such Managing Directors and Principals (as a group) owned approximately 79% of the MS Shares, the voting and disposition of which were subject to the Stockholders' Agreement (defined below in Item 6). The voting and disposition restrictions currently applicable to the Recapitalization Shares are discussed in Item 6. Benefit Plan Shares Subsequent to April 3, 1996 up to an aggregate of 87,466,484 MS Shares corresponding to 144,319,698 MSDW Shares following the Merger, were authorized for issuance pursuant to the 1995 Equity Incentive Plan. Awards may no longer be granted under the Option Plan, the PUP Plan and the 1988 Equity Incentive Plan, although MSDW Shares beneficially owned pursuant to such plans (as a result of the conversion of MS Shares in the Merger) remain outstanding. Each of the Plans is administered by the Compensation Committee of the Board of Directors (the "Compensation Committee"), which selects the particular eligible persons who will receive awards under the Plans and many of the DWD Plans and determines the size and terms of such awards. All members of the Compensation Committee are outside directors. Option Plan The purpose of the Option Plan was to provide an incentive to certain Managing Directors, Principals, officers, key employees and consultants of the Company and its subsidiaries ("Certain Personnel") to remain in the employ of the Company and such subsidiaries and to increase their interest in the success of the Company by offering them an opportunity to obtain a proprietary interest in the Company through the grant of options to purchase MS Shares (all options outstanding at the time of the Merger were converted into options to purchase MSDW Shares). Awards were granted under the Option Plan from 1986-1988 ("SOP Options"); awards may no longer be granted under the Option Plan. The exercise price of an SOP Option was not permitted to be less than 100% of the fair market value of the MS Shares subject to the SOP Option as of the grant date, as determined by the Compensation Committee. An SOP Option became exercisable at a rate of one-third of the number of MS Shares covered by such option grant after each of the first three anniversaries of the date of grant, unless the Compensation Committee otherwise provided. All SOP Options have been exercised or have expired. The individual option agreement entered into by any Reporting Person pursuant to the Option Plan contains restrictions on voting of any MS Shares (or following the Merger, MSDW Shares) acquired pursuant to the Option Plan as discussed in Item 6. PUP Plan The purpose of the PUP Plan was to benefit and advance the interests of the Company and its subsidiaries by rewarding Certain Personnel for their contributions to the financial success of the Company and thereby motivate them to continue to make such contributions in the future by awarding performance units (the "Performance Units") whose value was determined by reference to earnings per share of the MS Shares over a stated period of time. Awards were granted under the PUP Plan from 1986-1988; awards may no longer be granted under the PUP Plan. The value of a Performance Unit is equal to the Company's consolidated earnings per share (as determined by the Compensation Committee in accordance with the terms of the PUP Plan) during the period commencing on the first date of the Company's fiscal quarter which includes the date as of which a Performance Unit was awarded (the "Base Date") and ending on the earlier of (i) the last day of the Company's fiscal year which includes the date on which such Performance Unit was awarded and (ii) the last day of the Company's fiscal quarter in which a participant's employment is terminated by reason of death, long-term disability or retirement, or to such other date as is determined by the Compensation Committee (the "Valuation Date"). After the value of Performance Units was determined, such value generally was distributed to the recipient in equal installments on or as soon as practicable following each of the first and second anniversaries of the Valuation Date. The PUP Plan provides that 50% of each installment of such value is paid in MS Shares, and the balance is paid in cash, although the Compensation Committee may increase the percentage paid in cash or in MS Shares. All MS Shares paid to participants in the PUP Plan were converted into MSDW Shares in the Merger. The individual PUP Plan agreement entered into by a Reporting Person pursuant to the PUP Plan contains restrictions on voting and disposition of any MSDW Shares acquired as discussed in Item 6. Equity Incentive Plans The purpose of the Equity Incentive Plans is to attract, retain and motivate Certain Personnel, to compensate them for their contributions to the growth and profits of the Company and to encourage ownership by them of MSDW Shares (or, prior to the Merger, MS Shares). Under the 1995 Equity Incentive Plan the following individuals are also eligible to receive awards: nonemployee directors of subsidiaries of the Company; employees and consultants of joint ventures, partnerships or similar business organizations in which the Company has an equity or similar interest; and former employees or former consultants of the Company and of such joint ventures, partnerships or similar business organizations. The 1995 Equity Incentive Plan was adopted in accordance with the requirements of Section 162(m) of the Code, as amended, and Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Awards under the Equity Incentive Plans may be in the form of (i) stock awards consisting of one or more MSDW Shares granted or offered for sale to eligible individuals ("Restricted Shares"), (ii) stock units which are settled by delivery of MSDW Shares ("Stock Units") and/or (iii) nonqualified options to purchase MSDW Shares ("EIP Options"). Awards under the 1995 Equity Incentive Plan may also be in the form of incentive stock options, stock appreciation rights and other forms of equity-based or equity-related awards as determined by the Compensation Committee; to date, these types of awards have not been granted. MSDW Shares issued pursuant to the Equity Incentive Plans may, in the discretion of the Compensation Committee, be made subject to the same voting restrictions that are set forth in the Stockholders' Agreement and in the Plan Agreements (as defined in Item 6). Awards under the Equity Incentive Plans may, in the discretion of the Compensation Committee, be made in substitution for cash or other compensation payable to an eligible individual. The Compensation Committee may establish rules pursuant to which an eligible individual may elect to receive one form of award in lieu of any other form of award, or may elect to receive additional awards in lieu of some or all of the cash portion of his compensation. An EIP Option entitles the participant to acquire a specified number of MSDW Shares at an exercise price as determined by the Compensation Committee. The exercise price may be paid in cash or MSDW Shares or a combination thereof. The Compensation Committee has also authorized a "cashless" exercise procedure that affords participants the opportunity to sell immediately some or all of the MSDW Shares underlying the unexercised portion of an EIP Option in order to generate sufficient cash to pay the exercise price and/or to satisfy withholding tax obligations related to the EIP Option. EIP Options expire not later than ten years from the date of award. Restoration Option Rights ("RORs") have been granted with respect to certain EIP 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 MSDW Shares to the Company in satisfaction of the exercise price of such Underlying Option, to the automatic grant of an additional EIP Option (a "Restoration Option") to acquire the number MSDW Shares equal to the number of MSDW Shares delivered to pay the exercise price of the Underlying Option, and delivered or withheld to pay taxes owed as a result of such exercise. The exercise price of a Restoration Option shall be the closing price of an MSDW Share on the date of exercise of the Underlying Option. All other terms and conditions of a Restoration Option, including the expiration date, shall be the same as the Underlying Option. Awards were granted under the 1988 Equity Incentive Plan from 1988-1996; awards may no longer be granted under the 1988 Equity Incentive Plan. No awards shall be made under the 1995 Equity Incentive Plan after April 3, 2006 or, in the case of incentive stock options, November 28, 2005. U.K. Profit Sharing Scheme MSDW Shares purchased on behalf of certain Reporting Persons pursuant to the U.K. Profit Sharing Scheme are purchased with profit-sharing awards and are held pursuant to the terms of the U.K. Profit Sharing Scheme for investment purposes. Such MSDW Shares are not subject to the restrictions on voting and disposition contained in any of the Restrictive Agreements. MAS Shares The acquisition of MAS by MSAMHI (together with two of its affiliates) was effected on January 3, 1996, and the MAS Shares were acquired by the Former MAS General Partners as part of the purchase price paid in connection with the sale of their general partnership interests in MAS. The voting and disposition of the MAS Shares are subject to the MAS Agreements (as defined in Item 6). The voting and disposition and other restrictions currently applicable to the MAS Shares are discussed in Item 6. VKAC Shares The acquisition of VKAC by MSAMHII was effected on October 31, 1996, and the VKAC Shares were acquired by the Former VKAC Officers upon their conversion of MSAMHII Convertible Preferred which they had acquired in exchange for the contribution of their interest in VKAC to MSAMHII in conjunction with MSAMHII's acquisition of VKAC. The voting and disposition of the VKAC Shares are subject to the VKAC Voting Agreements (as defined in Item 6). The voting and disposition and other restrictions currently applicable to the VKAC Shares are discussed in Item 6. Separately Acquired Shares Separately Acquired Shares are held by Reporting Persons for investment purposes or pursuant to the DWD Plans. Such MSDW Shares are not subject to the restrictions on voting and disposition contained in any of the Restrictive Agreements. * * * Except for (i) the acquisition of MSDW Shares issued by the Company in the ordinary course of business pursuant to the Plans and the U.K. Profit Sharing Scheme, (ii) the acquisition of MSDW Shares by the Former VKAC Officers upon their exchange of the MSAMHII Preferred Stock (as defined in Item 6) and (iii) the possible acquisition from time to time of additional Separately Acquired Shares for investment purposes or pursuant to the DWD Plans, none of the Reporting Persons has any plans or proposals which relate to or would result in their acquisition of additional MSDW Shares. Subject to the restrictions described in Item 6, dispositions of MSDW Shares by Reporting Persons may be made from time to time pursuant to (i) Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), (ii) a registration statement filed under the Securities Act or (iii) any available exemption from registration under the Securities Act, and in accordance with the individual investment objectives of the Reporting Person disposing of such MSDW Shares. Except as previously described in this Item 4, the Reporting Persons as a group do not have any plans or proposals that relate to or would result in any of the matters described in subparagraphs (a)-(j) of Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer. ------------------------------------ (a) Items (11) and (13) of the cover page of the Reporting Persons are hereby incorporated by reference. As of January 19, 1999, the Reporting Persons as a group may be deemed to beneficially own an aggregate of 104,074,146 MSDW Shares(1), or approximately 17.40%, which represents a 0.5% increase from the amount reported in Amendment No. 1 of Schedule 13D dated January 2, 1998 (the "Last Filing"). Since the Last Filing, the Company granted awards under the Equity Incentive Plans (principally in connection with fiscal 1998 awards which commenced vesting on January 2, 1999), which increased aggregate beneficial ownership by approximately 1.3%, and certain former Dean Witter Discover employees became Reporting Persons. In addition, since the Last Filing, the retirement or termination of certain employees became effective with the result that they are no longer Reporting Persons, certain Reporting Persons disposed of MSDW Shares and the voting restrictions relating to MSDW Shares that were issued to certain retired or terminated employees upon the conversion of Stock Units previously awarded under the Equity Incentive Plans lapsed. The Reporting Persons as a group hereby disclaim beneficial ownership of any MSDW Shares held by any Reporting Person as to which such Reporting Person has sole voting and dispositive power. Each Reporting Person hereby disclaims beneficial ownership of any MSDW Shares which may be deemed to be beneficially owned by other Reporting Persons as members of a group. Except as described in Schedule I, no Reporting Person has the right to acquire MSDW Shares during the period of 60 days following January 19, 1999. - ----------------- (1) Includes 5,097,285 MSDW Shares owned by the Reporting Persons that are not subject to any of the Restrictive Agreements and excludes 2,058,656 MSDW Shares into which shares of ESOP Stock allocated to the Reporting Persons are convertible. (b) Items (7) - (10) of the cover page or the information provided on Appendix A for each of the Reporting Persons are hereby incorporated by reference. (c) Except as described in Schedule II, no Reporting Person has effected any transactions in any MSDW Shares during the period of 60 days preceding January 19, 1999. (d) None. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. ---------------------------------------- Reporting Persons who own Recapitalization Shares have entered into a Stockholders' Agreement dated as of February 14, 1986 (the "Stockholders' Agreement") (Exhibits A and B hereto) which contains restrictions regarding the voting and disposition of the Recapitalization Shares. Pursuant to the terms of the Plans, the Compensation Committee has required that certain participants in such Plans enter into agreements that place restrictions on the voting and disposition of MSDW Shares acquired pursuant to such Plans similar to those restrictions set forth in the Stockholders' Agreement. Reference is hereby made to the terms of the agreements or certificates that impose such restrictions pursuant to the Plans (collectively, the "Plan Agreements"), the forms of which are included as Exhibits G, H, I , J and K. Reporting Persons who own MAS Shares have entered into a Purchase Agreement dated as of June 29, 1995, as amended (the "MAS Purchase Agreement"), the relevant provisions of which relating to transfer and other restrictions with respect to the MAS Shares are described under "MAS Shares" below, and have executed (or agreed to become subject to) voting agreements (the "MAS Voting Agreements" (substantially in the form of Exhibit K hereto) and collectively with the MAS Purchase Agreement, the "MAS Agreements"), that place restrictions on voting and disposition of the MAS Shares that are substantially similar to restrictions contained in the Plan Agreements. Former VKAC Officers who own VKAC Shares have executed (or agreed to become subject to) voting agreements (the "VKAC Voting Agreements" (substantially in the form of Exhibit K hereto)), that place restrictions on voting of the VKAC Shares that are substantially similar to restrictions contained in the Plan Agreements. The following descriptions are qualified in their entirety by reference to the Stockholders' Agreement, the Plan Agreements, the MAS Agreements and the VKAC Voting Agreements. Voting Restrictions and Arrangements Each of the individuals listed on the cover page to this report and Appendix A hereto is a party to one or more of the Stockholders' Agreement and the Plan Agreements, the MAS Agreements (in the case of the Former MAS General Partners), and the VKAC Voting Agreements (in the case of the Former VKAC Officers). Pursuant to the voting restrictions contained in the Stockholders' Agreement, the Plan Agreements, the MAS Voting Agreements and the VKAC Voting Agreements, the Reporting Persons, prior to any vote of the stockholders of the Company at a meeting called with respect to any corporate action or before action is taken by written consent (a "Stockholders' Meeting"), may vote all MSDW Shares subject to the voting restrictions in a preliminary vote in such manner as each Reporting Person may determine in his sole discretion (the "Preliminary Vote"). At the subsequent Stockholders' Meeting, the Reporting Persons must then vote all such MSDW Shares which were voted in the Preliminary Vote on the matter at issue in accordance with the vote of the majority of the MSDW Shares present and voting in the Preliminary Vote. Reporting Persons who cease to be employed by the Company or any of its subsidiaries on or prior to the date of the Preliminary Vote do not participate in and are not bound by the Preliminary Vote. Recipients of Restricted Shares under the Equity Incentive Plans are entitled to exercise voting rights with respect to the MSDW Shares underlying such awards upon receipt of such awards. On March 6, 1991 the Company established a trust (the "Trust") pursuant to the Trust Agreement between the Company and State Street Bank and Trust Company, as Trustee (the "Trustee"), dated March 5, 1991 (the "Trust Agreement") (Exhibits L, M and N) pursuant to which the MSDW Shares that correspond to Stock Units are placed in the Trust pending vesting and conversion. Subject to the Company's right to amend or terminate the Trust at any time, the terms of the Trust Agreement permit the active employees of the Company who are holders of Stock Units (other than Certain Personnel in certain non-U.S. jurisdictions as described below) to direct the vote of the MSDW Shares held in the Trust for purposes of the Preliminary Vote. In accordance with the terms of the Voting Agreement between the Trustee and the Company dated March 5, 1991 (Exhibit O), the Trustee has the obligation to vote the MSDW Shares held in the Trust (including MSDW Shares corresponding to Stock Units held by former employees, who do not participate in the Preliminary Vote) in accordance with the result of the Preliminary Vote. Restrictions on Disposition and Other Arrangements Recapitalization Shares, PUP Plan The Stockholders' Agreement and certain Plan Agreements presently permit each Reporting Person that is a party thereto to dispose of Recapitalization Shares and/or MSDW Shares acquired pursuant to certain of the Plans (together with the Recapitalization Shares, "Total Restricted Stock") in the following amounts: % of Total Restricted Stock Age at Date of Sale Permitted to be Sold ------------------- --------------------------- 35 through 38 10% 39 through 42 Additional 10% 43 through 46 Additional 10% 47 through 49 Additional 10% 50 and above Additional 10% If a Reporting Person ceases to be an employee of the Company or any of its subsidiaries, the Stockholders' Agreement and certain of the Plan Agreements permit such Reporting Person to dispose of his Total Restricted Stock without restriction. Reporting Persons may dispose of their Total Restricted Stock Shares at any time, in any amount regardless of the foregoing restrictions, with the consent of the Board of Directors of the Company. MSDW Shares issued to recipients under the PUP Plan and under the jurisdiction of the United Kingdom, are not subject to voting or disposition restrictions. Equity Incentive Plans A participant will vest in any Restricted Shares, Stock Units or EIP Options, the restrictions on the transferability of Restricted Shares will lapse, Stock Units will convert into MSDW Shares, and any EIP Options awarded will become exercisable, all in accordance with a schedule established by the Compensation Committee. The Compensation Committee may, however, accelerate the vesting of any award, the lapse of restrictions on the transferability of any Restricted Shares, the date on which Stock Units convert into MSDW Shares and the date on which any EIP Option first becomes exercisable. Prior to vesting and the lapse of restrictions on transferability, none of the awards under the Equity Incentive Plans may be sold, assigned, exchanged or transferred, pledged, hypothecated or otherwise disposed of or encumbered. Certain awards under the Equity Incentive Plans, whether vested or unvested, are also subject to forfeiture in circumstances specified by the Compensation Committee. The Company may require a participant to pay a sum to the Company or, pursuant to reduced MSDW Share delivery provisions, the Company may retain the number of MSDW Shares having an equivalent value as may be necessary to cover any taxes or charges imposed with respect to property or income received by a participant pursuant to the Equity Incentive Plans. In addition, upon conversion of Stock Units into MSDW Shares or exercise of EIP Options, the Company may withhold a number of MSDW Shares sufficient to satisfy any obligation a participant owes to the Company resulting from any payment made on the participant's behalf under the tax equalization program for expatriate employees. Under the terms of awards made under the 1995 Equity Incentive Plan, upon payment of an award of Stock Units or exercise of EIP Options, the Company may withhold a number of MSDW Shares sufficient to satisfy any obligation an award recipient owes the Company. From time to time the Compensation Committee has adopted certain additional and/or different terms and conditions for the grant of Restricted Shares and Stock Units to Certain Personnel in certain non-U.S. jurisdictions (including to Japanese local employees or expatriates working in Japan) to permit such persons to qualify for favorable tax treatment under, or otherwise to comply with, the laws of such non-U.S. jurisdictions. In such cases the Company may not issue MSDW Shares corresponding to Stock Units and recipients may not have the ability to vote or the underlying MSDW Shares may not be subject to the restrictions on voting described under "Voting Restrictions and Arrangements" above. The Compensation Committee also has adopted certain additional and/or different terms and conditions for the grant of EIP Options to Certain Personnel in certain non-U.S. jurisdictions in order to permit such persons to qualify for favorable tax treatment under the laws of such non-U.S. jurisdictions. U.K. Profit Sharing Scheme The U.K. Profit Sharing Scheme provides that MSDW Shares awarded to the participants are held by a trustee in the name and on behalf of each participant for a period of two years from the date of such award (the "Retention Period"). Each participant is fully vested in, and is the beneficial owner of, the MSDW Shares held on his behalf as of the award date of the MSDW Shares. During the Retention Period, a participant may not assign, pledge or otherwise dispose of such MSDW Shares; however, a participant is able to instruct the trustee how to vote such MSDW Shares on his behalf. MAS Shares The MAS Shares are subject to the following transfer and other restrictions under the MAS Purchase Agreement. The MAS Shares issued to each Former MAS General Partner generally vest in accordance with the following vesting schedule: (i) one-sixth of such shares vested on January 3, 1996 (the "MAS Closing Date"); and (ii) one-sixth of such shares shall vest on each of the next five succeeding anniversaries of the MAS Closing Date (each date referred to in this clause (ii), a "Vesting Date"); provided, that no shares registered in the name of any Former MAS General Partner shall vest on any Vesting Date unless such Former MAS General Partner is actively employed by Morgan Stanley Asset Management Inc. ("MSAM") on such Vesting Date pursuant to an employment agreement with MSAM, unless such failure to be so employed is (a) as a result of such Former MAS General Partner's death or disability, or (b) as a result of the termination of such Former MAS General Partner's employment by MSAM without "Cause" or by the Former MAS General Partner for "Good Reason," as such terms are defined in such employment agreement. Notwithstanding the foregoing, in the case described in clause (b) of the foregoing proviso, the continued vesting of shares as aforesaid shall be subject to the Former MAS General Partner's continued compliance with the noncompetition, nonsolicitation and confidentiality provisions of his or her employment agreement with MSAM for a period of one year from the date of termination of employment, or if shorter, for a period from the date of termination of employment to December 1, 2000. If the Former MAS General Partner does not comply continuously with the provisions for such period, any remaining unvested shares shall be forfeited as of the date of the first failure to so comply. Any shares so vested shall thereafter be free of any such vesting requirements, and any shares which are so forfeited shall be returned to the Company. Prior to vesting, all MAS Shares shall be nontransferable. In accordance with the MAS Voting Agreements, so long as a MAS General Partner is an employee of the Company or any of its subsidiaries, such MAS General Partner will be subject to the voting restrictions and procedures described in the first paragraph under "Voting Restrictions and Arrangements" above in this Item 6. VKAC Shares The Former VKAC Officers also acquired, in exchange for the contribution of their interests in VKAC to MSAMHII in conjunction with MSAMHII's acquisition of VKAC, shares of MSAMHII Convertible Preferred that were issued in four series (Series A through D) and are exchangeable into MSDW Shares. The Series A, Series B, Series C and Series D MSAMHII Convertible Preferred may be exchanged, in whole or in part at the option of the holder thereof, during a 30-day period beginning November 1, 1997, 1998, 1999 and 2000, respectively (provided that the holder is an employee of the Company or any subsidiary thereof on the first day of the applicable exercise period). Each share of MSAMHII Convertible Preferred is exchangeable into 3.3915725 MSDW Shares, subject to adjustment from time to time to take into account certain events relating to the Company or the MSDW Shares that may occur, including stock dividends or distributions, stock splits, combinations or reclassifications, consolidations or mergers. Generally, the right of a holder to exchange shares of a series of the MSAMHII Convertible Preferred expires at the close of business on the last day of the exercise period applicable to such series. However, upon the occurrence of certain events, such as termination of employment without cause, death or long term disability, or a change of control of MSAMHII or the Company, the holder of the MSAMHII Convertible Preferred has the right to exchange shares of any series of MSAMHII Convertible Preferred for MSDW Shares, provided that the exercise period applicable to such series has not expired prior to the date of such event. The Merger constituted an event which entitled the holders of MSAMHII Convertible Preferred to exchange their MSAMHII Convertible Preferred for MSDW Shares. Pursuant to a Registration Rights Agreement dated as of October 31, 1996 among Morgan Stanley and the Former VKAC Officers, the Former VKAC Officers have certain limited registration rights in respect of MSDW Shares received upon an exchange of the MSAMHII Convertible Preferred and are subject to certain transfer restrictions on their shares of MSAMHII Convertible Preferred Stock. Item 7. Material to be Filed as Exhibits. --------------------------------- Certain of the following exhibits, as indicated parenthetically, were previously filed as exhibits to registration statements or reports filed by the Company or Morgan Stanley under the Securities Act or the Exchange Act, respectively, or reports filed by the Reporting Persons under the Exchange Act, and are hereby incorporated by reference to such statements or reports. The Exchange Act file number of the Company is 1-11758. Prior to the Merger, the Exchange Act file number of Morgan Stanley was 1-9085. Exhibit A Stockholders' Agreement dated February 14, 1986 among certain Reporting Persons and Morgan Stanley (Morgan Stanley's Annual Report on Form 10-K for the fiscal year ended January 31, 1993). Exhibit B Form of Consent and Amendment dated as of January 31, 1996 between Morgan Stanley and certain signatories to the Stockholders' Agreement referred to in Exhibit A (Morgan Stanley's Annual Report on Form 10-K for the fiscal period ended November 30, 1995). Exhibit C Morgan Stanley Group Inc. 1986 Stock Option Plan, as amended and restated to date (Morgan Stanley's Annual Report on Form 10-K for the fiscal year ended January 31, 1993). Exhibit D Morgan Stanley Group Inc. Performance Unit Plan, as amended and restated to date (Morgan Stanley's Annual Report on Form 10-K for the fiscal year ended January 31, 1993). Exhibit E Morgan Stanley Group Inc. 1988 Equity Incentive Compensation Plan, as amended and restated to date (Morgan Stanley's Annual Report on Form 10-K for the fiscal year ended January 31, 1993). Exhibit F Morgan Stanley Group Inc. 1995 Equity Incentive Compensation Plan (Morgan Stanley's Proxy Statement for 1996 Meeting of Stockholders). Exhibit G Form of Nonqualified Stock Option Agreement Under the Morgan Stanley Group Inc. 1986 Stock Option Plan (Morgan Stanley's Registration Statement on Form S-8 (No. 33-42464)). Exhibit H Form of Award Agreement Under the Morgan Stanley Group Inc. Performance Unit Plan (Morgan Stanley's Registration Statement on Form S-8 (No. 33-42464)). Exhibit I Form of Stock Unit Certificate Under the Morgan Stanley Group Inc. 1988 Equity Incentive Compensation Plan (previously filed as Exhibit V with Amendment No. 5 to the Reporting Persons' Schedule 13D dated December 31, 1990 relating to MS Shares). Exhibit J Form of Stock Option Certificate Under the Morgan Stanley Group Inc. 1988 Equity Incentive Compensation Plan (previously filed as Exhibit W with Amendment No. 5 to the Reporting Persons' Schedule 13D dated December 31, 1990 relating to MS Shares). Exhibit K Form of Voting Agreement Under the Morgan Stanley Group Inc. 1988 Equity Incentive Compensation Plan (previously filed as Exhibit X with Amendment No. 5 to the Reporting Persons' Schedule 13D dated December 31, 1990 relating to MS Shares). Exhibit L Trust Agreement between Morgan Stanley and State Street Bank and Trust Company dated March 5, 1991 (Morgan Stanley's Annual Report on Form 10-K for the fiscal year ended January 31, 1993). Exhibit M First Amendment to Trust Agreement dated April 3, 1996 between Morgan Stanley and State Street Bank and Trust Company (Morgan Stanley's Annual Report on Form 10-K for the fiscal year ended November 30, 1996). Exhibit N Second Amendment to Trust Agreement dated May 31, 1997 between the Company and State Street Bank and Trust Company. (previously filed as Exhibit O with Amendment No. 1 to the Reporting Persons' Schedule 13D dated May 31, 1997 relating to MS Shares). Exhibit O Voting Agreement among Morgan Stanley, State Street Bank and Trust Company and Other Persons Signing Similar Agreements dated March 5, 1991 (Morgan Stanley's Annual Report on Form 10-K for the fiscal year ended January 31, 1993). Exhibit P Trust Deed and Rules of the Morgan Stanley International Profit Sharing Scheme dated November 12, 1987 of the Company, Morgan Stanley International and Noble Lowndes Settlement Trustees Limited (Morgan Stanley's Annual Report on Form 10-K for the fiscal year ended January 31, 1993). Exhibit Q Trust Deed and Rules of the Morgan Stanley UK Group Profit Sharing Plan dated November 3, 1998 of the Company, Morgan Stanley UK Group, Morgan Stanley International Incorporated and Noble Lowndes Settlement Trustees Limited. (The Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1998.) Exhibit R Amendment to Trust Deed and Rules of Morgan Stanley UK Group Profit Sharing Plan (adopted September 25, 1998) (The Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1998.) Exhibit S Amendments to the Rules of the Morgan Stanley UK Group Profit Sharing Plan (adopted October 30, 1998) (The Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1998.) Schedule I RIGHTS TO ACQUIRE MSDW SHARES ----------------------------- As of March 20, 1999 (60 days from January 19, 1999), 1,947 Reporting Persons have the right to acquire 27,063,452 MSDW Shares pursuant to the exercise of options. No Reporting Person individually has options presently exercisable covering more than 1% of the MSDW Shares outstanding as of the date hereof. Schedule II RECENT TRANSACTIONS ------------------- During the period of 60 days preceding January 19, 1999, 171 Reporting Persons sold an aggregate of 948,053 MSDW Shares at average prices ranging from $59.08 to $87.28 per MSDW Share, and/or effected a transfer by gift of an aggregate of 189,425 MSDW Shares. Such sales were effected pursuant to exemptions under the Securities Act of 1933, as amended. During such period, no Reporting Person individually disposed of a number of MSDW Shares exceeding 1% of the MSDW Shares outstanding. During such period, no Reporting Person individually acquired MSDW Shares in excess of 1% of the MSDW Shares outstanding. After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: March 22, 1999 By: /s/ Martin M. Cohen ------------------------ Martin M. Cohen Attorney-in-Fact

AFFILIATE STKHLDRS OF MORGAN STANLEY DEAN WITTER DISCOVER&CO SC 13D/A