Exhibit 10.1
EXECUTION COPY
SETTLEMENT AND RELEASE AGREEMENT
This Settlement and Release Agreement (this "Agreement") by and
between Morgan Stanley, a Delaware
corporation (the "Company"), and Philip J.
Purcell (the "Executive"), is dated as of
June 30, 2005 (the "Execution
Date").
NOW, THEREFORE, the Company and the Executive hereby agree as
follows:
1. Resignation. Effective as of June 30, 2005 (the "Termination
Date"), the Executive's employment with the
Company shall terminate
voluntarily and the Executive shall cease
to serve as Chief Executive Officer,
Chairman of the Board of Directors of the
Company (the "Board") and a member
of the Board, and shall cease to serve in
all other positions the Executive
then holds as an employee, officer or
member of the board of directors of the
Company, its subsidiaries or affiliates
(the Company, its subsidiaries and
affiliates are hereinafter referred to as
the "Affiliated Entities"). The
Executive hereby agrees to execute any and
all documentation to effectuate
such terminations upon request by the
Company, but he shall be treated for all
purposes as having voluntarily terminated
his service with the Affiliated
Entities upon the Termination Date,
regardless of when or whether he executes
any such documentation. Notwithstanding the
foregoing, for a period of 30 days
following the Termination Date, the
Executive shall continue to receive
employee welfare benefits and perquisites
as if he had continued in the employ
of the Company during such period.
2. Executive's Consideration. In consideration for the covenants
set
forth in this Agreement, the Company shall
provide to the Executive the
following payments and benefits.
(a) Bonus Payment. The Company shall pay to the Executive an
amount in cash equal to the product of (a)
the product of (i) two and (ii) the
sum of (A) the Executive's annual base
salary, (B) the Executive's annual
bonus and (C) the market value of the
common stock of the Company underlying
the restricted stock units granted to the
Executive, in each case with respect
to the Company's 2004 fiscal year as
reported in the Company's most recent
annual proxy statement, and (b) the sum of
(i) one and (ii) the percentage
change (expressed as a positive or negative
decimal) from 2004 to 2005 in the
Company's "Pre-Tax Earnings" (as such term
is defined in Section 14 of the
1995 Equity Incentive Compensation Plan
(the "EICP")) as determined by the
Compensation Committee of the Board (the
"Bonus Payment").
For purposes of Section 14 of the EICP, "Extraordinary and
unusual" would include but not be limited
to:
(i) Write downs or sales of the aircraft portfolio,
(ii) Losses from a change in significant estimates used in
calculation of Pre-Tax Earnings e.g. loan
loss methodology, 02-03 reserves,
(iii) Introduction of a new compensation plan, retention
or other awards outside of the normal
compensation program as applied to 2004,
severance payments in excess of the amount
accrued in 2004 or other
compensation related changes,
<PAGE>
(iv) Compensation in excess of the payout rate in a range
established for the six months financials
ended May 31, 2005 as published with
the press release on June 22, 2005 ("2005
YTD financials") and the two
previous years,
(v) Legal or regulatory matters costs in excess of a
normal amount e.g. $200 million in addition
to the amounts accrued in the 2005
YTD financials, and
(vi) Losses associated with business decisions concerning
either owned or leased office space.
Fifty percent of the Bonus Payment shall be
paid to the Executive on January
15, 2006 and fifty percent of the Bonus
Payment shall be paid to the Executive
on January 15, 2007 or, in each case, on
such later date as may be required
pursuant to Section 409A of the Internal
Revenue Code of 1986, as amended (the
"Code")).
(b) Retiree Medical Benefits. Following the Termination Date,
the Executive will be provided with retiree
medical benefits provided to
former senior executives of the Company
generally pursuant to the terms of the
Morgan Stanley Retiree Medical Plan as may
be in effect from time to time.
(c) Annual Payment. In lieu of benefits that otherwise would
have been provided to the Executive
following the Termination Date, the
Executive shall receive an annual payment
equal to $250,000 payable on the
Termination Date (or on such later date as
may be required pursuant to Section
409A of the Code) and the first business
day following each anniversary of the
Termination Date for the remainder of the
Executive's life.
(d) Charitable Contributions. Following the Termination Date,
the Company shall provide a contribution of
$250,000 per year in the
Executive's name commencing in calendar
year 2006 for the remainder of the
Executive's life to charitable institutions
of the Executive's selection
consistent with the contributions made by
the Company on behalf of other
former Chief Executive Officers of the
Company on behalf of whom the Company
makes such contributions, provided that
such charitable institutions and
contribution are consistent with the
Company's charitable strategy.
(e) Administrative Support. Following the Termination Date, the
Company shall provide to the Executive
administrative support consistent with
the administrative support provided by the
Company to other former Chief
Executive Officers of the Company at the
sole expense of the Company for the
remainder of the Executive's life.
(f) Reimbursement for Expenses. The Company shall promptly
reimburse the Executive for any reasonable
expenses incurred by the Executive
in connection with his employment on or
before the Termination Date in
accordance with the Company's expense
reimbursement practices and policies,
provided that the Executive submits
appropriate documentation evidencing such
expenses.
(g) Other Benefits. Amounts that are vested benefits or that
the Executive is otherwise entitled to
receive under any plan, policy,
practice or program of or any other
contract or agreement with the Company or
the Affiliated Entities at or subsequent to
the Termination Date, including
under any qualified or non-qualified
retirement plan, shall be
2
<PAGE>
payable in accordance with such plan,
policy, practice or program or contract
or agreement, except as explicitly modified
by this Agreement. Notwithstanding
the foregoing, the Executive shall not be
entitled to any severance pay or
benefits under any severance plan, program
or policy of the Company and the
Affiliated Entities.
3. Equity and Performance Awards. Exhibit A hereto sets forth a
complete list of all of the Executive's
currently outstanding stock options
and other equity awards (together, "Stock
Incentives"), which shall vest
immediately upon the Termination Date and
shall otherwise be governed in
accordance with their terms, provided that,
following the Execution Date, the
only "Cancellation Events" with respect to
such Stock Incentives shall be
those events set forth on Exhibit B.
Notwithstanding any provision of this
Agreement to the contrary, in the event
that, following the Execution Date, the
Executive becomes an officer, agent,
employee, partner or director of any
corporation, partnership or other entity,
or otherwise renders services to or assist
or hold an interest (except as a
less than 1-percent shareholder of a
publicly traded company) in any Core
Competitor (as defined in the 1995 Equity
Incentive Compensation Plan), the
Executive shall cease to be entitled to the
payments and benefits to be paid
or provided to him or on his behalf under
Sections 2(a), 2(c), 2(d) or 2(e).
4. Releases.
(a) Executive's Release.
(i) General. In consideration of the payments and benefits
set forth in this Agreement, the Executive
for himself, his heirs,
administrators, representatives, executors,
successors and assigns
(collectively "Releasors") does hereby
irrevocably and unconditionally
release, acquit and forever discharge the
Company, its subsidiaries and
affiliates and their respective current and
former shareholders, subsidiaries,
parents, affiliates, divisions, trustees,
partners, agents, directors,
officers and employees, including without
limitation all persons acting by,
through, under or in concert with any of
them (collectively, "Releasees"), and
each of them from any and all charges,
complaints, claims, liabilities,
obligations, promises, agreements,
controversies, damages, remedies, actions,
causes of action, suits, rights, demands,
costs, losses, debts and expenses
(including attorneys' fees and costs) of
any nature whatsoever arising out of
or relating to his employment relationship,
or the termination of that
relationship, with the Company and its
Affiliated Entities, known or unknown,
whether in law or equity and whether
arising under federal, state or local law
and in particular including any claim for
discrimination based upon race,
color, ethnicity, sex, age (including the
Age Discrimination in Employment Act
of 1967, as amended ("ADEA"), national
origin, religion, disability, or any
other unlawful criterion or circumstance,
which the Executive and Releasors
had, now have, or may have in the future
against each or any of the Releasees
from the beginning of the world until the
date hereof relating to the
Executive's employment with the Company and
its subsidiaries and affiliates
("Claims").
(ii) Exclusions from Release. Anything herein to the
contrary notwithstanding, nothing herein
shall release the Company from any
claims or damages based on (A) any right or
claim that arises after the date
hereof, (B) any right the Executive may
have under this Agreement and under
any applicable plan, policy, program or
other agreement or arrangement with
the Company except as modified by this
Agreement or (C) the Executive's
3
<PAGE>
right to indemnification as set forth in
this Agreement. The parties agree
that this Agreement shall not affect the
rights and responsibilities of the
U.S. Equal Employment Opportunity
Commission (hereinafter "EEOC") to enforce
ADEA and other laws. In addition, the
parties agree that this Agreement shall
not be used to justify interfering with the
Executive's protected right to
file a charge or participate in an
investigation or proceeding conducted by
the EEOC. The parties further agree that
the Executive knowingly and
voluntarily waives all rights or claims
that arose prior to the date hereof
that the Releasers may have against the
Releasees, or any of them, to receive
any benefit or remedial relief (including,
but not limited to, reinstatement,
back pay, front pay, damages, attorneys'
fees, experts' fees) as a consequence
of any investigation or proceeding
conducted by the EEOC ("EEOC Claims").
(iii) ADEA Rights. The Executive acknowledges that: (A)
this entire Agreement is written in a
manner calculated to be understood by
him; (B) he has been advised to consult
with an attorney before executing this
Agreement; (C) he was given a period of
twenty-one days within which to
consider this Agreement; and (D) to the
extent he executes this Agreement
before the expiration of the twenty-one-day
period, he does so knowingly and
voluntarily and only after consulting his
attorney. The Executive shall have
the right to cancel and revoke this
Agreement during a period of seven days
following the date hereof, and this
Agreement shall not become effective, and
no money shall be paid hereunder, until the
day after the expiration of such
seven-day period. The seven-day period of
revocation shall commence upon the
date hereof. In order to revoke this
Agreement, the Executive shall deliver to
the Company's Chief Legal Officer, prior to
the expiration of said seven-day
period, a written notice of revocation.
Upon such revocation, this Agreement
shall be null and void and of no further
force or effect.
(iv) Acknowledgement. The Executive acknowledges and
agrees that the consideration provided to
him under the terms of this
Agreement exceeds anything to which he is
otherwise entitled and that he is
owed no wages, commissions, bonuses,
finder's fees, equity or incentive
awards, severance pay, vacation pay or any
other compensation or payments or
remuneration of any kind or nature other
than as specifically provided for in
this Agreement or the terms of any benefit
plan in which the Executive
participates as may be modified by this
Agreement.
(b) Company's Release. The Company, its subsidiaries,
affiliates, partnerships and joint ventures
and each of their predecessors and
successors also agree that, subject to this
Agreement becoming effective, they
hereby irrevocably and unconditionally
release, acquit and forever discharge
the Executive from any and all charges,
complaints, claims, liabilities,
obligations, promises, agreements,
controversies, damages, remedies, actions,
causes of action, suits, rights, demands,
costs, losses, debts and expenses
(including attorneys' fees and costs) of
any nature whatsoever, known or
unknown, whether in law or equity and
whether arising under federal, state or
local law that the Company had, now has, or
may have in the future against the
Executive from the beginning of the world
until the date hereof arising out of
or relating to the Executive's employment,
relationship, or the termination of
that relationship with the Company and its
Affiliated Entities, except that
this Section 4(b) shall not apply to any
act that is determined to be a
criminal act under any Federal, state or
local law committed or perpetuated by
the Executive during the course of the
Executive's employment with the Company
or its affiliates (including any criminal
act of fraud, misappropriation of
funds or embezzlement or any other criminal
action).
4
<PAGE>
(c) Exclusion from Both Releases. None of the foregoing
provisions of this Section 4 shall be
considered as releasing the Company's or
Executive's respective rights or
obligations with respect to any Stock
Incentives as modified by this
Agreement.
5. Mutual Nondisparaegment.
(a) Executive's Covenant. Following the Execution Date, the
Executive shall not make, participate in
the making of, or encourage or
facilitate any other person to make,
