Exhibit 10
May 4, 2005
Mr. David W. Heleniak
Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022
Dear David,
I am pleased to extend to you an offer of employment as a Vice Chairman and a
Managing Director of Morgan Stanley. You will begin employment with Morgan
Stanley on May 16, 2005 (the "Start Date"). You will report to the Chief
Executive Officer and will be a member of the Firm's Management Committee or
any successor committee thereto (the "Management Committee"). Your principal
office will be located in Manhattan, New York in Morgan Stanley's principal
executive offices.
You will be responsible for working with the Chief Executive Officer on
corporate policy and direction - particularly strategy, clients, external
presence, and government relations and all legal and regulatory matters. You
will also have critical client responsibilities for investment banking
clients, focusing on U.S. clients (principally Fortune 100-type companies) and
on international clients, particularly in China, France and Italy, as well as
other locations we determine together in the future. You will have senior-most
global managerial responsibility for the Law Division, which is composed of
the law department, government affairs, compliance and regulatory affairs. The
general counsel, the law department and government affairs will report
directly to you, with compliance and regulatory affairs reporting to the
general counsel. You will have such additional duties and responsibilities,
consistent with your positions and responsibilities set forth herein, as may
be assigned to you by Morgan Stanley's Board of Directors or me.
Base Salary. Your annualized base salary for fiscal 2005 will be $425,000,
payable in semi-monthly installments.
Total Reward. For the current fiscal year, beginning December 1, 2004, your
minimum Total Reward (the "Fiscal 2005 Total Reward") will be $10,000,000
("CompAmount"), inclusive of the base salary received for the fiscal year.
Your Fiscal 2005 Total Reward in excess of the base salary received will be
payable as a year-end bonus 45% in cash and 55% in the form of an equity-based
award (or such other ratio generally applicable to members of the Management
Committee) (equity-based awards include Morgan Stanley restricted stock units
or other equity-based awards in effect at the time) under the Firm's Equity
Incentive Compensation Plan, or any other plan approved by the Compensation
Committee (the "EICP"). From time to time, we review with the Compensation
Committee the form and terms of equity-based compensation and the percentage
component that it constitutes of Total Reward. The ratio of cash to
equity-based awards that you receive in the future
will be the same as that applicable to members of the Management Committee.
Subject to the provisions of this letter, your actual award in any year will
vest and become payable subject to the same terms, conditions and cancellation
provisions as the equity awards made to other members of the Management
Committee in that year. Your Total Reward in respect of future years will have
a similar relationship relative to the compensation of other members of the
Management Committee as your Fiscal 2005 Total Reward bears to the fiscal 2005
Total Reward of other members of the Management Committee. Your fiscal 2005
year-end cash bonus will be payable in January 2006, provided that (1) you
remain employed through November 30, 2005, or (2) your employment is
terminated on or before such date by the Firm without "Cause" (as such term is
defined in Annex A) or by you for "Good Reason" (as such term is defined in
Annex A). If your employment terminates under circumstances described in
clause (2) of the immediately preceding sentence, then your remaining Fiscal
2005 Total Reward will be payable as soon as practicable after your
termination of employment, but in no event will payment be made later than
2-1/2 months after the end of the fiscal year in which the termination occurs.
All payments and awards (including payments and awards described below) are
subject to applicable withholdings and deductions.
Equity Grant. The Firm will award you a one-time Equity Grant of $10,000,000
in Morgan Stanley restricted stock units on your Start Date. The restricted
stock units will constitute a contingent and unsecured promise of the Firm to
pay you shares of Morgan Stanley common stock. The number of restricted stock
units in this award will be determined by dividing $10,000,000 by the "fair
market value" (the closing price) of Morgan Stanley common stock on the Start
Date. Twenty-five percent of the restricted stock units will vest on each of
the first four anniversaries of the Start Date, and any vested restricted
stock units will convert to shares of common stock and be payable on the fifth
anniversary of the Start Date; provided that if you die while employed by the
Firm, your Equity Grant will immediately vest and convert to shares of Morgan
Stanley common stock as soon as practicable. You will also be accorded Full
Career Retirement Status (as described below) for your Equity Grant. In
addition, for purposes of the non-Competition provision of the Equity Grant,
your engagement in the practice of law (other than as a lawyer with an entity
identified by Morgan Stanley as one of the "Core Competitors" in an EICP award
granted to members of the Management Committee generally), government service
or private equity investment shall not be deemed a violation of the
non-compete provision of such equity-based award. If the payment of any shares
would not then be tax deductible by the Firm, the Firm will defer their
conversion and payment until you are no longer employed by the Firm (or to the
extent required under Section 409A of the Internal Revenue Code, six months
after your termination of employment).
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Annual Equity-Based Awards. Any annual equity-based awards that the
Compensation Committee may grant to you during your employment with the Firm
shall provide that if you die while employed with the Firm, such equity-based
awards will immediately vest and convert to shares of Morgan Stanley common
stock as soon as practicable. In addition, for purposes of the non-Competition
provision of any equity-based award that may be granted to you during your
employment with the Firm, your engagement in the practice of law (other than
as a lawyer with an entity identified by Morgan Stanley as one of the "Core
Competitors" in an EICP award granted to members of the Management Committee
generally), government service or private equity investment shall not be
deemed a violation of the non-compete provision of such equity-based award. If
the payment of any shares would not then be tax deductible by the Firm, the
Firm will defer their conversion and payment until you are no longer employed
by the Firm (or to the extent required under Section 409A of the Internal
Revenue Code, six months after your termination of employment).
Severance Benefits. If either of the following conditions: (1) you are
terminated by the Firm for any reason other than Cause (as defined in Annex A)
or (2) you terminate employment for Good Reason (as defined in Annex A), occur
on or before November 30, 2005, the Firm will make a cash severance payment to
you in an amount equal to the CompAmount (this fiscal 2005 severance payment
will be in addition to the Fiscal 2005 Total Reward that is payable as
described above and any base salary earned through the date of termination);
if either of the preceding conditions (1) or (2) occur after November 30, 2005
but on or before November 30, 2006, the Firm will make a cash severance
payment to you in an amount equal to two times the CompAmount (this fiscal
2006 payment will be in lieu of any Total Reward, other than base salary
through the date of termination, for fiscal 2006); in each case, any payment
of a severance amount is conditioned on you executing a general release of
claims in form and substance reasonably satisfactory, and containing customary
terms reasonably acceptable, to both you and Morgan Stanley, including
provisions on non-competition, non-solicitation and non-disparagement.
(Notwithstanding the foregoing, your engagement in the practice of law (other
than as a lawyer with an entity identified by Morgan Stanley as one of the
"Core Competitors" in an EICP award granted to members of the Management
Committee generally), government service or private equity investment shall
not be deemed a violation of your agreement not to compete with Morgan
Stanley.). Any such payment will be made as soon as practicable following the
termination of your employment, but in no event later than 2-1/2 months after
the end of the fiscal year in which the termination occurs, provided that the
conditions of this paragraph are satisfied.
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Supplemental Pension. We recognize that you will be surrendering pension and
retirement benefits in order to take this position. In recognition of these
lost rights, you will be entitled to receive a supplemental annual retirement
benefit of $400,000, regardless of your years of service with the Firm. This
benefit will commence upon the later of your termination of employment or
attainment of age 65 and will continue for the remainder of your lifetime.
Full Career Retirement Status. You will be accorded Full Career Retirement
status for purposes of all non-qualified equity-based awards granted to you
during your employment at Morgan Stanley and for any other purpose for which
Full Career Retirement status is provided generally to other members of the
Management Committee. Full Career Retirement status provides that so long as
you do not engage in any conduct that constitutes a cancellation event under
the relevant equity-based award, such equity-based award will vest upon your
termination of employment. Transfer restrictions will lift on schedule (e.g.,
restricted stock units will convert to shares of Morgan Stanley common stock
on their scheduled conversion date). In the case of restricted stock units,
the cancellation and withholding provisions set forth in the applicable award
certificate will continue to apply until your stock units convert to Morgan
Stanley common stock.
Excise Tax Gross-up. In the event it shall be determined that any payment or
distribution you receive from Morgan Stanley (a "Payment") would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code, or any
interest or penalties are incurred by you with respect to such excise tax
(together, the "Excise Tax"), you shall be entitled to receive an additional
payment (the "Gross-Up Payment") in an amount such that after payment by you
of all taxes (including any interest or penalties imposed with respect to such
taxes), including any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, you
retain an amount on an after-tax basis of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment.
Management Committee Equity Ownership Commitment. The Management Committee
Equity Ownership Commitment will apply to Morgan Stanley common stock that you
own, including your Long-Term Retention Award and any future equity-based
awards that may be granted to you.
Vacation. You will be eligible for six weeks of vacation per calendar year.
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Employee Benefits. You will also be eligible for participation in the Firm's
benefits programs in accordance with the terms and conditions of those
programs. Details on all benefits plans, including the Summary Plan
Descriptions, will be provided to you, and we will arrange a meeting to
complete your benefits selections. In addition, you will be entitled to
participate in all perquisite and other plans, programs or arrangements on a
basis no less favorable than provided to all members of the Management
Committee to the extent such perquisites, plans, programs or arrangements are
offered to all members of the Management Committee.
You are eligible for immediate participation in the Firm's Health and Welfare
benefits program, under which you may elect an individualized package of
medical, dental, disability, life and accidental death and dismemberment
insurance coverage, for which the Firm pays a substantial portion of the cost.
Upon your hire, you also will be eligible to participate in the Firm's 401(k)
Plan, and you will be eligible for the Firm's 401(k) Match. Generally, you
must remain employed through December 31 to receive a 401(k) Match for that
year. Enrollment with respect to your own contributions to the 401(k) Plan is
ongoing. You may elect to contribute to the 401(k) Plan from your base salary
and bonus at any time.
On the first of the month following your completion of one year of service,
you may elect to participate in the Firm's Employee Stock Purchase Plan, which
allows eligible participants to purchase Morgan Stanley common stock at a
discount with after-tax payroll deductions.
Also on the first of the month following your completion of one year of
service, you will be eligible to participate in the Firm's Pension Plan.
Enrollment is automatic. You will be vested in your 401(k) Match after three
years of service, and you will be vested under the Pension Plan after five
years of service.
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Additional Terms and Conditions. We remind you that this offer is contingent
upon certain additional steps in the employment process, including, but not
limited to, background and reference checking and a drug screening test. You
are also required to show appropriate proof of authorization to commence work
in the United States. If you are not legally able to work for the Firm in the
United States in the position offered to you, or if any part of the screening
process proves unsatisfactory to the Firm or you are unable to complete Part 1
of the Form I-9, the Firm reserves the right to rescind any outstanding offer
of employment or terminate your employment without notice or severance
benefits and rescind any restricted stock unit or stock option awards
described herein. Further, this offer is contingent upon your obtaining and
retaining all licenses and registrations from the NASD, exchanges, state
securities commissions and other regulatory bodies as Morgan Stanley shall
determine necessary for your position.
You acknowledge that in the course of your employment with the Firm, you are
not permitted to make any unauthorized use of documents or other information
that are the confidential, trade secret or proprietary information
("Confidential Information") of another individual or company. Likewise, you
may not bring onto Firm premises any Confidential Information, whether
documents or other tangible forms, relating to any prior employer's business.
In the event of your termination of employment, you will not be required to
seek other employment or take any other action by way of mitigation of amounts
payable to you under any provision of this letter or otherwise, and such
amounts shall not be reduced whether or not you obtain other employment.
Except as expressly set forth in this letter, nothing in this letter should be
construed as a guarantee of any particular level of benefits, or of your
participation in any benefit plan, or of your continued employment for any
period of time. You understand that your employment will be "at will", which
means that Morgan Stanley reserves the right, subject to the terms of this
letter, to amend, modify or terminate, in its sole discretion, all benefit and
compensation plans in effect from time to time. This offer will constitute the
entire understanding and contain a complete statement of all agreements
between you and Morgan Stanley and will supersede all prior or contemporaneous
verbal or written agreements, understandings or communications. If there is
any conflict with the benefit information included in this letter or any
verbal representation and the plan documents or insurance contracts, the plan
documents and insurance contracts control. The terms of this letter shall be
governed by and construed in accordance with the laws of the State of New
York.
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We ask that you confirm your willingness to accept this offer upon its
approval by the Compensation Committee by signing and dating the letter in the
area designated below and returning the letter to me. Your signature below
confirms that you are subject to no contractual or other restriction or
obligation that is inconsistent with your accepting this offer of employment
upon such approval and performing your duties. Please retain a copy of this
offer letter for your reference. We are looking forward to your joining Morgan
Stanley. If you have any questions, please feel free to call me.
Very truly yours,
/s/ Philip J. Purcell
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Philip J. Purcell
Chairman and Chief Executive Officer
Confirmed and Agreed to:
Signed: /s/ David W. Heleniak
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Date: May 4, 2005
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Annex A
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Cause means:
o any act or omission which constitutes a material breach of your material
obligations to the Firm of which you have been made aware in writing or
of the provisions of this letter or your continued failure or refusal to
perform substantially any material duties reasonably required of you,
other than any such breach, failure or refusal resulting from incapacity
due to physical or mental illness, which breach (if susceptible to cure),
failure or refusal is not corrected (other than failure to correct by
reason of your incapacity due to physical or mental illness) within ten
(10) business days after written notification thereof to you by the Firm;
o your willful commission of any dishonest or fraudulent act which has
caused or may reasonably be expected to cause material and demonstrable
injury to the interest or business reputation of the Firm; or
o your material violation of any securities, commodities or banking laws,
any rules or regulations issued pursuant to such laws, or rules or
regulations of any securities or commodities exchange or association of
which the Firm is a member or of any policy of the Firm relating to
compliance with any of the foregoing.
For purposes of this provision, no act or failure to act on your part will be
considered "willful" unless done, or omitted to be done, by you in bad faith
or without reasonable belief that your action or omission was in the best
interests of Morgan Stanley or was done or omitted to be done with reckless
disregard of the consequences. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Management
Committee or upon instructions of the Chairman and Chief Executive Officer of
Morgan Stanley or based upon advice of counsel for Morgan Stanley shall be
conclusively presumed to be done, or omitted to be done, by you in good faith
and in the best interests of Morgan Stanley.
Good Reason means a voluntary termination by you following (i) removal from
the Firm's Management Committee or from the Vice Chairman position, (ii) a
material diminution of your duties and responsibilities as the Vice Chairman
that is not agreed to by the parties or the assignment to you of any duties
materially inconsistent with your position (including status, offices, titles
and reporting requirements), duties or responsibilities as contemplated
herein, or any other material action by Morgan Stanley which is materially
inconsistent or materially reduces such position, duties or responsibilities;
(iii) any material breach by Morgan Stanley of its material obligations to
provide payments or benefits as required in this agreement; (iv) Morgan
Stanley's requiring your principal office to be based at any office or
location other than as provided in this agreement; provided that you agree
that the Firm may relocate your principal office to Westchester, NY and that
such relocation will not be an event giving rise to Good Reason so long as the
Chief Executive Officer's principal office is also located in Westchester, NY
at that time; or (v) a failure by Morgan Stanley to require any successor
(whether direct or indirect, by purchase, merger, consolidation, spin-off or
otherwise) to all or substantially all of the business and/or assets of Morgan
Stanley to assume expressly and agree to perform the terms herein as if no
such succession had taken place. It is further provided that you shall not be
entitled to terminate your employment for Good Reason unless you have given
the Chief Executive Officer written notification of your intention to
terminate your employment for Good Reason describing the factual basis for
such "Good Reason" and the event giving rise to "Good Reason" is not cured by
the Firm within ten (10) business days after the receipt of such notice by the
Chief Executive Officer.