Document:

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                             PAINE WEBBER GROUP INC.
                               EQUITY PLUS PROGRAM

            1. PURPOSE. The purpose of the Program is to assist PaineWebber in
increasing the share ownership of Eligible Employees of PaineWebber and to
enable such Eligible Employees to acquire or increase a proprietary interest in
PaineWebber. Subject to the terms of the Program, Participants will be given the
opportunity under the Program to purchase shares of Common Stock and be granted
a Related Option based on the number of Program Shares they purchase.

            2. DEFINITIONS AND RULES OF CONSTRUCTION.

            (a) For purposes of the Program, the following capitalized words
shall have the meanings set forth below:

            "Account" means an account established by PaineWebber in accordance
with Section 9 to record a Participant's Cash Contributions, Program Shares and
Related Options.

            "Account Balance" means, collectively, a Participant's Cash Account
Balance, Program Shares and outstanding Related Options.

            "Board" means the Board of Directors of PWG.

            "Cash Account Balance" means, as of a given date, the sum of the
Cash Contributions credited to a Participant's Account and not applied to the
purchase of Program Shares.

            "Cash Contributions" means the portion of a Participant's
Compensation that the Participant has elected to contribute to the Program in
accordance with Section 6.

            "Change in Eligibility Status" has the meaning set forth in Section
8(c)(i).

            "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the rulings and regulations promulgated thereunder.

            "Committee" means the Compensation Committee of the Board, or such
other committee of the Board as may be designated by the Board to administer the
Program.

            "Common Stock" means the common stock, par value $1.00 per share, of
PWG.
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            "Compensation" has the same meaning as the definition of
"compensation" under the PaineWebber 401(k) Plus Plan, as amended from time to
time.

            "Contribution Percentage" means the percentage of Compensation that
a Participant has elected to contribute to the Program.

            "Effective Date" means October 16, 1998.

            "Eligible Employee" means any individual who is eligible to
participate in the PaineWebber 401(k) Plus Plan, as amended from time to time,
or such other individuals as may be determined by the Committee who are employed
outside the United States. Eligible Employee shall not include any individual
who is characterized by PaineWebber as an "independent contractor" regardless of
whether or not such classification is substantially upheld by a court or
governmental authority. Eligible Employee shall not include any individual who
is covered by a collective bargaining agreement. Eligible Employee shall also
exclude any individual whose employment contract, offer letter or similar
agreement with PaineWebber provides that such individual shall not be eligible
to participate in the Program.

            "Enrollment Form" means a written form prescribed by the Committee
and meeting the requirements of Section 6(b) which is signed by an Eligible
Employee and pursuant to which an Eligible Employee elects to participate in the
Program, specifies his applicable Contribution Percentage(s) and authorizes
PaineWebber to withhold Cash Contributions from his Compensation.

            "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rulings and regulations promulgated thereunder.

            "Fair Market Value" means, with respect to a share of Common Stock,
the average of the high and low sales prices of Common Stock on the New York
Stock Exchange on the date as of which such value is being determined.

            "Long-Term Disability Status" has the meaning set forth in Section
8(c)(iii).
            "Multiplier" means two, or such other number as may be approved by
the Chairman of PaineWebber (or, in the case of officers of PWG who are subject
to the reporting requirements of Section 16(a) of the Exchange Act, the
Committee) for all Participants or for a specified class or classes of
Participants. More than one Multiplier may be in effect for different
Participants or different classes of Participants for each Program Year.

            "PaineWebber" means PWG and each direct or indirect subsidiary
thereof.

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            "Participant" means an Eligible Employee of PaineWebber who has
elected to participate in the Program in accordance with Section 6. A
Participant includes any individual who has an Account Balance under the
Program.

            "Program" means this Paine Webber Group Inc.  Equity Plus Program.

            "Program Administrator" means any agent appointed by the Committee
(i) to maintain Program records and Participant Accounts, (ii) to hold the
shares that remain subject to the Transfer restriction described in Section
6(d), (iii) to purchase shares on behalf of the Program in the open market or
(iv) to whom authority under the Program is delegated, including a third-party
administrator. Notwithstanding anything to the contrary, the person appointed
pursuant to clause (iii) shall not be an affiliate of PaineWebber.

            "Program Limitations" means the minimum limitation set forth in
Section 6(c)(iii) and the maximum limitation set forth in Section 6(c)(iv).

            "Program Shares" means the shares of Common Stock purchased by a
Participant that are subject to the transfer restrictions set forth in Section
6(e).

            "Program Year" means, unless the Committee determines otherwise,
January 1, 1999 through November 30, 1999 and each twelve-month period
commencing on each December 1st thereafter prior to termination of the Program
in accordance with Section 11.

            "Purchase Date" means the date as of which the Cash Account Balances
of Participants are applied to the purchase of Program Shares. Unless the
Committee determines otherwise, the Purchase Dates shall be the last business
day in each February, May, August, and November. A Quarterly Participation
Period will end on the occurrence of a Purchase Date.

            "PWG" means Paine Webber Group Inc., a Delaware corporation, and any
successor thereto.

            "Quarterly Participation Period" means a period of approximately
three months ending on a Purchase Date during any part of which Cash
Contributions are collected by PaineWebber for the purpose of purchasing Program
Shares; provided, however, that the first Quarterly Participation Period shall
commence on January 1, 1999 and end on the next following Purchase Date.

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            "Related Option" means the stock options granted to a Participant
under the Stock Option Plans in connection with the Participant's purchase of
Program Shares and which are subject to the vesting, forfeiture and other
provisions of Section 7.

            "Share Holding Period" means, with respect to a Program Share, the
period beginning on the Purchase Date related to such share and ending on the
earliest to occur of (i) the second anniversary of such Purchase Date, (ii) the
date of a Change in Control, (iii) the date that a Participant's employment with
PaineWebber ends for any reason and (iv) such earlier date specified by the
Committee.

            "Stock Option Plans" means, collectively, the Paine Webber Group
Inc. 1994 Executive Stock Award Plan, the Paine Webber Group Inc. 1994 Stock
Award Plan and the Paine Webber Group Inc. Investment Executive Stock Option
Plan, as amended and in effect immediately prior to the Effective Date, and any
other plan designated by the Committee for the grant of Related Options.

            "Transfer" means to sell, assign, transfer, distribute, pledge,
mortgage, encumber, otherwise dispose of or create an interest in any property.

            (b) Rules of Construction. Unless the context requires otherwise,
the masculine form of a word shall be deemed to include the feminine and the
singular form of a word shall be deemed to include the plural. Section
references are, unless otherwise noted, to sections of the Program.

            (c) Stock Option Plans. Certain provisions of the Program are to be
read in conjunction with the provisions of the Stock Option Plans. In the event
of any discrepancy between the provisions of the Program concerning the Related
Options and the provisions of the Stock Option Plans, the provisions of the
applicable Stock Option Plan will prevail.

            3.    ADMINISTRATION.

            (a) Authority of the Committee. The Program shall be administered by
the Committee, no member of which shall be eligible to participate in the
Program. The Committee shall have full and final authority, in each case subject
to and consistent with the provisions of the Program, (i) to establish rules and
regulations for the administration of the Program, (ii) to construe and
interpret the Program and the forms of award documents and to correct defects,
supply omissions or reconcile inconsistencies therein, (iii) to make factual
determinations in connection with the administration or interpretation of the
Program, and (iv) to make all other decisions or interpretations as the
Committee may deem necessary or advisable for the administration of the Program.
Any decision of the Committee in the administration of the Program shall be
final and

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conclusive on all interested persons. Notwithstanding the above, the grant of
Related Options under the Program shall be made in accordance with the terms and
provisions of the applicable Stock Option Plan.

            (b) Delegation. The Committee may delegate its responsibility with
respect to the administration of the Program to the Chief Administrative
Officer, to the Director of Human Resources, to one or more members of the
Committee or to one or more members of the Board or to one or more Program
Administrators; provided, however, that the Committee may not delegate its
responsibility (i) with respect to Participants who are subject to Section 16 of
the Exchange Act or Section 162(m) of the Code or (ii) to amend or terminate the
Program in accordance with Section 11. The Committee may also appoint agents to
assist in the day-to-day administration of the Program and may delegate the
authority to execute documents under the Program to one or more members of the
Committee or to one or more officers of PaineWebber.

            (c) Reliance and Indemnification. The Committee shall be entitled to
rely in good faith upon any report or other information furnished to it by
PaineWebber or from the financial, accounting, legal or other advisers of
PaineWebber. Each member of the Committee, each individual to whom the Committee
delegates authority hereunder, each individual designated by the Committee to
administer the Program and each other person acting at the direction of or on
behalf of the Committee shall not be liable for any determination or anything
done or omitted to be done by him or by any other member of the Committee or any
other such individual in connection with the Program, except for his own willful
misconduct or as expressly provided by statute, and, to the extent permitted by
law and the by laws of PWG, shall be fully indemnified and protected by
PaineWebber with respect to such determination, act or omission. The provisions
of this Section 3(c) shall not apply to any third-party who is not affiliated
with PaineWebber.

            4. ELIGIBILITY. Each Eligible Employee of PaineWebber may
participate in the Program by completing and filing with PaineWebber an
Enrollment Form in accordance with Section 6(b). PaineWebber will begin
deducting Cash Contributions beginning with the first payment of Compensation in
the Program Year. A newly hired Eligible Employee may elect to participate in
the Program at any time prior to October lst of the Program Year in which occurs
their date of hire by completing an Enrollment Form and filing it with
PaineWebber's payroll office. PaineWebber will begin deducting Cash
Contributions beginning as soon as practicable following the date of enrollment.
A newly hired employee who is hired on or after October 1st may participate in
the Program Year following the Program Year in which occurs their date of hire
by completing an Enrollment Form in accordance with Section 6(b).

            5. COMMON STOCK SUBJECT TO THE PROGRAM. PaineWebber is authorized to
issue up to three million shares of Common Stock annually as Program

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Shares under the Program. Such shares of Common Stock may be newly issued shares
of Common Stock, reacquired shares of Common Stock held in the treasury of PWG,
or shares purchased by the Program Administrator in the open market on behalf of
the Program. Shares of Common Stock issued in connection with the Related
Options shall not be subject to the limit set forth above but shall be subject
to any applicable limit in the Stock Option Plan pursuant to which the Related
Option is granted.

            6.    PURCHASES OF PROGRAM SHARES.

            (a) Program Years. The Program shall be implemented by consecutive
(but not concurrent) Program Years. The Committee shall have the authority to
delay the start of a Program Year, to curtail, suspend or terminate a Program
Year or to cancel the start of one or more Program Years during the Term of the
Program with respect to some or all of the Participants. In addition, the
Committee may curtail, suspend or terminate one or more Quarterly Participation
Periods or cancel the start of one or more Quarterly Participation Periods
related to a Program Year with respect to some or all of the Participants. If
the Committee suspends or terminates a Program Year or a Quarterly Participation
Period, the Committee may (i) apply the Cash Contributions credited to each
Participant's Account to the purchase of Program Shares as of the next
applicable Purchase Date, (ii) as promptly as practicable, remit to the
Participant the Participant's Cash Account Balance or (iii) undertake a
combination of clauses (i) and (ii) in accordance with procedures established by
the Committee for this purpose.

            (b) Elections. An Eligible Employee shall become a Participant by
completing an Enrollment Form which (i) specifies the Eligible Employee's
Contribution Percentage(s) and authorizes PaineWebber to deduct Cash
Contributions from the Eligible Employee's Compensation based on such
Contribution Percentage and to apply these Cash Contributions to the purchase of
Program Shares, (ii) contains an agreement by the Eligible Employee not to
Transfer any Program Shares during the Share Holding Period applicable to such
Program Shares and (iii) sets forth such other terms and conditions as the
Committee deems necessary or advisable. Unless the Committee determines
otherwise, an Enrollment Form will be effective only if filed with PaineWebber
at least thirty days prior to the start of the applicable Program Year or as
otherwise provided in Section 4.

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            (c)   Cash Contributions.

            (i) Participants shall specify on their Enrollment Form applicable
      to a Program Year the Contribution Percentage(s) that shall be withheld on
      an after-tax basis as Cash Contributions. The Contribution Percentage(s)
      elected by a Participant shall be in whole percentages from one to ten
      percent and, subject to the Program Limitations set forth below, such
      Contribution Percentage(s) shall be applied to the pre-tax amount of each
      payroll, bonus or other installment of Compensation paid to the
      Participant during the Program Year. In accordance with procedures
      established by the Committee, if the Committee so elects, a Participant
      may be permitted to make different elections of Contribution Percentage(s)
      for different components of Compensation; provided, however, that any
      Contribution Percentage election regarding bonus compensation is
      irrevocable once made; and provided, further, that, after the Purchase
      Date in a Program Year during which the Compensation attributable to a
      bonus is applied to purchase Program Shares, a Participant may elect to
      withdraw and sell such Program Shares due to a Financial Hardship, if the
      Participant so qualifies, under the provisions of Section 8(b). The
      special procedures established by the Committee under this Section 6(c)(i)
      may vary each Program Year.

            (ii) Unless the Committee determines otherwise, a Participant must
      complete an Enrollment Form no less than thirty days prior to the start of
      each Program Year or as otherwise provided in Section 4. The complete
      Enrollment Form shall be deemed to be an election to participate in the
      Program for the entire Program Year to which it relates, unless the
      Participant elects to withdraw from participation in accordance with
      Section 8(a) or 8(b).

            (iii) Notwithstanding Section 6(c)(i) and any Enrollment Form filed
      by the Participant, the minimum amount of Cash Contribution to be withheld
      from any payment of Compensation shall not be less than $50 for those
      Participants who receive a paycheck on a bi-weekly or semi-monthly basis
      and $100 for those Participants who receive a paycheck on a monthly basis,
      unless such minimum amount would cause the Participant to exceed the
      maximum Program Limitation set forth in Section 6(c)(iv).

            (iv) Notwithstanding Section 6(c)(i) and any Enrollment Form filed
      by the Participant; in no event may a Participant acquire more than 1,000
      Program Shares during any Program Year. In the event a Participant's Cash
      Contributions exceed the 1,000 Program Share maximum, any excess Cash
      Contributions will be refunded to the Participant as soon as practicable
      following the purchase of the 1,000th Program Share and no remaining Cash
      Contributions will be withheld from the Participant's Compensation for the
      balance of the Program Year.

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            (d)   Purchase of Program Shares.

            (i) Cash Contributions shall be credited to a Participant's Account
      under the Program and shall be applied on the next Purchase Date to the
      purchase of whole Program Shares; provided, however, that if a
      Participant's Cash Account Balance as of a Purchase Date is less than
      $300, then, unless the Committee determines otherwise, no portion of the
      Participant's Cash Account Balance shall be applied to the purchase of
      Program Shares on such Purchase Date but shall continue to be credited to
      the Participant's Account until the next Purchase Date on which such Cash
      Account Balance equals or exceeds $300; and provided further, that the
      previous proviso shall not apply to the first Purchase Date following the
      Effective Date. If a Participant elects to participate in successive
      Program Years, his Cash Account Balance (regardless of the amount) will be
      carried forward at the end of each Program Year and applied to successive
      Purchase Dates. If a Participant chooses not to participate in the next
      Program Year, then the remainder of the Participant's Cash Account
      Balance, if any, shall be refunded to the Participant as soon as
      practicable following the purchase of Program Shares on the last Purchase
      Date in the Program Year in which he is participating and no further Cash
      Contributions will be withheld from the Participant's Compensation
      following the last day of the Program Year in which he was participating.
      No partial shares of Common Stock shall be purchased or delivered under
      the Program, and any portion of the Cash Account Balance that is not
      sufficient to purchase a whole share shall remain credited to the Account
      and shall be applied to the purchase of Program Shares at a subsequent
      Purchase Date in accordance with the provisions of this Section 6.

            (ii) The per share purchase price for Program Shares shall be the
      Fair Market Value of a share of Common Stock on the Purchase Date.
      Anything in the Program to the contrary notwithstanding, unless the
      Committee determines otherwise, Program Shares allocated to Participants
      who are subject to Section 16(a) of the Exchange Act by virtue of their
      status as a director or officer of PWG shall only be purchased from
      PaineWebber and not through open-market purchases of Common Stock by the
      Program Administrator.

            (e)   Restrictions and Rights with Respect to Program Shares.

            (i) During the Share Holding Period applicable to a Participant's
      Program Shares, the Participant shall not be permitted to Transfer the
      Program Shares, unless such Transfer is permitted in accordance with the
      hardship provisions of Section 8(b). Program Shares held in certificate or
      book entry form shall, to the extent the Committee deems advisable,
      contain an appropriate legend or notation indicating this Transfer
      restriction.

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            (ii) During the Share Holding Period, Program Shares shall be held
      by the Program Administrator for the benefit of the Participant and the
      Participant shall have the right to vote such Program Shares and to
      receive all dividends and other distributions in respect thereof. In the
      event of a stock split, stock dividend or distribution of property other
      than cash affecting the Program Shares, the shares of Common Stock
      received in connection with such stock dividend or stock split and the
      property received in such distribution shall, unless the Committee
      determines otherwise, be subject to the Transfer restrictions set forth in
      this Section 6(e)(i).

            (iii) Following the expiration of the Share Holding Period, all
      restrictions on the transfer of Program Shares (other than those
      restrictions imposed by applicable securities laws or the policies on
      trading of PaineWebber) shall cease and the Program Shares shall be made
      available to the Participant.

            (iv)  Program Shares shall at all times be fully vested and
      nonforfeitable.

            7.    RELATED OPTION GRANTS.

            (a) Grant of Related Options. On a Purchase Date, each Participant
who acquires Program Shares on such date shall be granted a Related Option under
the Stock Option Plan applicable to the Participant to purchase Common Stock.
The Related Option shall have a per share exercise price equal to the Fair
Market Value of a share of Common Stock as of the Purchase Date. The number of
shares subject to the Related Option shall equal the number of Program Shares
acquired by the Participant on the Purchase Date multiplied by the approved
Multiplier.

            (b) Terms and Vesting of Related Options. Unless the Committee
determines otherwise, Related Options shall have a seven-year term and shall
vest and become exercisable on the third anniversary of the date of grant
thereof, provided that the Participant is in the employ of PaineWebber on such
anniversary date. Related Options shall be nonqualified stock options and not
incentive stock options within the meaning of Section 422 of the Code. The
Related Options shall contain such other terms and conditions as may be required
by the Stock Option Plan pursuant to which the Related Options are granted or
that the Committee determines to be necessary or advisable.

            (c) Forfeiture of Related Options. Unless the Committee determines
otherwise, a Related Option shall be immediately forfeited without further
action by PaineWebber if the Participant Transfers the corresponding Program
Shares prior to the expiration of the Share Holding Period, if the Program
Shares are delivered to the

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Participant prior to the end of the Share Holding Period, or pursuant to any
forfeiture provision of the Stock Option Plans or related stock option
agreements.

            8. WITHDRAWALS; REPAYMENTS OF CASH CONTRIBUTIONS; EFFECT OF
TERMINATION OF EMPLOYMENT.

            (a) Withdrawal of Cash Contributions. Participants shall have the
right to elect once in writing during any Program Year, by the fifteenth day of
the last month of any Quarterly Participation Period, to cease participating in
the Program beginning with the first paycheck of the Quarterly Participation
Period following the Quarterly Participation Period in which the withdrawal
request occurs; provided, however, this Section 8(a) will not apply to Cash
Contributions attributable to bonus compensation. If a Participant chooses to
withdraw from participation and, the Participant's Cash Account Balance as of
the last Quarterly Participation Period in which the Participant is
participating, equals or exceeds $300, then the Participant's Cash Account
Balance shall be used to purchase Program Shares for that Quarterly
Participation Period. If the Participant's Cash Account Balance is less than
$300, then no portion of the Participant's Cash Account Balance shall be applied
to the purchase of Program Shares, but shall be refunded to the Participant as
soon as practicable following the end of the Quarterly Participation Period in
which he was participating, but in no event later than thirty days following the
end of such Quarterly Participation Period. Anything in the Program to the
contrary notwithstanding, in the event a Participant makes an election to
withdraw due to Financial Hardship in accordance with Section 8(b), Cash
Contributions will be suspended as soon as administratively practicable
following the date of the approval of the Financial Hardship request and no
portion of the Participant's Cash Account Balance shall be applied to purchase
Program Shares on the next Purchase Date, regardless of the amount of the
Participant's Cash Account Balance, but shall be refunded to Participant as soon
as practicable following the date of withdrawal. Any withdrawal election by a
Participant shall be irrevocable once made. A Participant who makes such a
withdrawal election shall be precluded from participating in the Program again
until the start of the next Program Year, provided the Participant files a new
Enrollment Form for such Program Year in accordance with Section 6(b). No
withdrawal by a Participant under this Section 8(a) shall affect any Program
Shares purchased on behalf of the Participant prior to the date the withdrawal
election is received by PaineWebber.

            (b) Sale of Program Shares. A Participant may file a written
election with the Committee, in accordance with procedures established by the
Committee for this purpose, to request PaineWebber to sell on his behalf all or
a portion of the Program Shares credited to his Account as a result of a
Financial Hardship (as defined below). If Program Shares are sold as a result of
a Financial Hardship, all Related Options shall be immediately forfeited as of
the date of such sale without further action by PaineWebber.

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In addition, the Participant will not be eligible to participate in the Program
again until the next Program Year following the Program Year during which such
sale occurs, provided the Participant files a new Enrollment Form for such
Program Year in accordance with Section 6(b).

            If a Participant elects a Financial Hardship sale from his Account,
PaineWebber will stop deducting Cash Contributions and refund the balance of the
Participant's Cash Account Balance to the Participant as soon as
administratively practicable following the date of the approval of the Financial
Hardship request. The additional amounts needed with respect to the Financial
Hardship may be satisfied from the Program Shares purchased in any Quarterly
Participation Period prior to the date of the request. The Participant must
identify, by Purchase Date, the Program Shares to be sold on his behalf and,
anything in the Program to the contrary notwithstanding, in no event may a
Participant have PaineWebber sell less than 100% of the Program Shares credited
to his Account related to a specific Purchase Date. The identified Program
Shares will be sold by PaineWebber on behalf of the Participant and a check
equal to the amount of the proceeds of the sale, minus any costs, will be
remitted to the Participant as soon as practicable following the date of the
approval of the Financial Hardship request. The timing of all sales of Program
Shares sold due to a Financial Hardship will be determined in the sole
discretion of the Program Administrator.

            For purposes of this Section 8(b), a "Financial Hardship" means any
of the following: (i) tuition payments for post-secondary education of the
Participant or his spouse or dependents incurred within four months of such
Financial Hardship request; (ii) costs directly related to the purchase or
construction of a Participant's principal residence; (iii) expenses for medical
care previously incurred by a Participant or his spouse or dependents, or
necessary for these persons to obtain such medical care, that are not reimbursed
by the Participant's medical carrier; (iv) amounts necessary to prevent the
eviction of a Participant from his principal residence or the need to prevent
foreclosure on the mortgage of his principal residence; or (v) any other type of
expenses that are deemed by the Committee and the Commissioner of the Internal
Revenue Service through revenue rulings, notices and other administrative
pronouncements of general applicability to constitute immediate and heavy
financial burden for purposes of Section 401(k) of the Code. The Participant
must provide to the Director of Human Resources credible evidence in writing of
the Financial Hardship and the amount necessary to be withdrawn under the
Program to alleviate the Financial Hardship. The Director of Human Resources
shall have sole discretion to determine whether the evidence presented (i)
constitutes a Financial Hardship under the Program and (ii) demonstrates a need
for the dollar amount requested by the Participant.

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            (c)   Termination of Employment.

            (i) Anything in the Program to the contrary notwithstanding, unless
      the Committee determines otherwise, no Program Shares shall be purchased
      on behalf of a Participant, and no Related Option shall be granted to a
      Participant, who is not an employee of PaineWebber on the applicable
      Purchase Date. Unless the Committee determines otherwise, in the event a
      Participant ceases to be an Eligible Employee but is still an employee of
      PaineWebber (a "Change in Eligibility Status"), all Cash Contributions
      will cease to be collected on the date the Change in Eligibility Status
      occurs. In addition, for the purposes of the Participant's Cash Account
      Balance, the date of such Change in Eligibility Status shall be treated as
      a withdrawal request under Section 8(a). No Change in Eligibility Status
      under this Section 8(c)(i) shall affect any Program Shares purchased on
      behalf of the Participant prior to the date the Change in Eligibility
      Status occurs, unless otherwise determined by the Committee.

            (ii) In the event of a Participant's termination of employment for
      any reason, PaineWebber shall pay to the Participant, in a lump sum as
      soon as practicable following the date of such termination of employment
      but in no event later than thirty days following the last day of the
      Quarterly Participation Period in which the termination of employment
      occurs, the full amount of the Participant's Cash Account Balance. The
      Program Shares credited to the Participant's Account shall continue to be
      subject to the restrictions on Transfer until the expiration of the
      applicable Share Holding Period. Following the expiration of the Share
      Holding Period applicable to the Program Shares, such Program Shares shall
      be made available to the Participant.

            (iii) All Cash Contributions will cease to be deducted from a
      Participant's Compensation on the date that the Participant begins
      receiving disability benefit payments as a result of the Participant's
      long-term disability status under the PaineWebber long-term disability
      plan applicable to such Participant ("Long-Term Disability Status"). If
      the Participant's Cash Account Balance as of the Quarterly Participation
      Period in which the Long-Term Disability Status commences equals or
      exceeds $300, then the Participant's Cash Account Balance shall be used to
      purchase Program Shares for that Quarterly Participation Period. If such
      Participant's Cash Account Balance is less than $300 on such date, then no
      portion of the Participant's Cash Account Balance shall be applied to the
      purchase of Program Shares, but shall be refunded to the Participant as
      soon as practicable following the end of the Quarterly Participation
      Period in which the Long-Term Disability Status commences, but in no event
      later than thirty days following the end of such Quarterly Participation
      Period. Unless otherwise determined by the Committee, Program Shares
      purchased on behalf of a

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      Participant on Long-Term Disability Status will be released to the
      Participant at the end of the Share Holding Period.

            (iv) The Committee shall have discretion to determine how approved
      leaves of absence will be treated under the Program.

            (v) The effect of a Participant's termination of employment for any
      reason on the Related Options shall be governed by the terms of the
      applicable Stock Option Plan and corresponding option agreement.

            9.    ACCOUNTS.

            (a) Establishment of Accounts. PaineWebber shall establish and
maintain (or cause to be established and maintained) an Account for each
Participant to record increases and decreases in the Participant's Cash Account
Balance, Program Shares and Related Options.

            (b) Account Statements. PaineWebber shall provide Participants with
a statement of their Account no less frequently than annually.

            (c) Cash Contributions. PaineWebber shall not be obligated to
segregate the Cash Contributions from its other assets or to establish any trust
or separate fund to hold such Cash Contributions. No interest shall accrue with
respect to the Cash Contributions held in the Participant's Account regardless
of the period of time for which such Cash Contributions are held and regardless
of whether Program Shares are actually purchased with such Cash Contributions.

            10.   CHANGE IN CONTROL.

            (a) Effect of a Change in Control. In the event of a Change in
Control of PWG, (i) all Transfer restrictions will immediately lapse on all
Program Shares, (ii) all Cash Contributions will cease to be withheld from
Participant Compensation and all purchases of Program Shares on behalf of a
Participant will terminate and (iii) each Participant's Cash Account Balance
will be paid to the Participant as soon as practicable following the date of the
Change in Control. The effect of a Change in Control on the Related Options will
be governed by the terms and conditions of the Stock Option Plans and the
corresponding stock option agreements under which each Related Option is
granted.

            (b) Change in Control Defined. For the purposes of this Program,
"Change in Control" shall mean the occurrence of any of the following events:

                                      -13-
<PAGE>   14
            (i) Any "person" (as such term is used in Sections 13(d) and 14(d)
      of the Exchange Act), other than PWG, a subsidiary, any trustee or other
      fiduciary holding securities under an employee benefit plan of PaineWebber
      or a subsidiary, or any corporation owned, directly or indirectly, by the
      stockholders of PWG in substantially the same proportions as their
      contemporaneous ownership of voting securities of PWG, is or becomes a
      "20% Beneficial Owner." For purposes of this provision, a "20% Beneficial
      Owner" shall mean a person who is or becomes the "beneficial owner" (as
      defined in Rule 13 d-3 under the Exchange Act), directly or indirectly, of
      securities of PWG representing 20% or more of the combined voting power of
      PWG's then-outstanding voting securities; provided that (A) the term "20%
      Beneficial Owner" shall not include any Beneficial Owner who has crossed
      such 20% percent threshold solely as a result of an acquisition of
      securities directly from PWG, or solely as a result of an acquisition by
      PWG of PWG securities, until such time thereafter as such person acquires
      additional voting securities other than directly from PWG and, after
      giving effect to such acquisition, such person would constitute a 20%
      Beneficial Owner; and (B) with respect to any person who is and remains
      eligible to file a Schedule 13G pursuant to Rule 13d-l(b)(l) under the
      Exchange Act with respect to PWG securities, there shall be excluded from
      the number of securities deemed to be beneficially owned by such person
      for purposes of determining whether such person is a 20% Beneficial Owner
      a number of securities representing 10% of the combined voting power of
      PWG's then-outstanding voting securities;

            (ii) During any period of two consecutive years, individuals who at
      the beginning of such period constitute the Board of Directors of PWG,
      together with any new director (other than a director designated by a
      person who has entered into an agreement with PWG to effect a transaction
      described in paragraph (i), (iii), or (iv) hereof) whose election by the
      Board or nomination for election by PWG's stockholders was approved by a
      vote of at least two-thirds (2/3) of the directors then still in office
      who either were directors at the beginning of the period or whose election
      or nomination for election was previously so approved (the "Continuing
      Directors"), cease for any reason to constitute at least a majority
      thereof

            (iii) The stockholders of PWG approve a merger, consolidation,
      recapitalization or reorganization of PWG, or a reverse stock split of any
      class of voting securities of PWG, or the consummation of any such
      transaction of stockholder approval is not obtained, other than any such
      transaction which would result in at least 80% of the total voting power
      represented by the voting securities of PWG or the surviving entity
      outstanding immediately after such transaction, with the relative voting
      power of each such continuing holder compared to the voting power of each
      other continuing holder not substantially altered as a result

                                      -14-
<PAGE>   15
      of the transaction; provided that, for purposes of this paragraph (iii),
      such continuity of ownership (and preservation of relative voting power)
      shall be deemed to be satisfied if the failure to meet such 80% threshold
      (or to substantially preserve such relative voting power) is due solely to
      the acquisition of voting securities by an employee benefit plan of PWG or
      its subsidiaries, such surviving entity, or of any subsidiary of PWG or
      such surviving entity;

            (iv) The stockholders of PWG approve a plan of complete liquidation
      of PWG or an agreement for the sale or disposition by PWG of all or
      substantially all of PWG's assets (or any transaction having a similar
      effect); or

            (v) Any other event which the Board of Directors (or the Committee,
      if and to the extent that the Committee must exercise sole discretion over
      the matter in order to comply with applicable requirements of Rule 16b-3
      under the Exchange Act), determines shall constitute a Change in Control
      for purposes of this Program.

            11. AMENDMENT AND TERMINATION. The Board or Committee may at any
time and for any reason suspend, amend or terminate the Program at any time,
except that no such termination will adversely affect Program Shares previously
purchased or Related Options previously granted.

            12.   MISCELLANEOUS PROVISIONS.

            (a) Rights Not Transferable. A Participant's right to participate in
the Program may not be subject to any assignment, transfer, pledge or other
disposition.

            (b) No Right to Continued Employment. Neither the creation of the
Program nor the purchase of Program Shares nor the granting of Related Options
hereunder shall be deemed to create a condition of employment or right to
continued employment with PaineWebber or affect an employee's status as an
"employee at will," and each Participant shall be and shall remain subject to
discharge by PaineWebber as though the Program had never come into existence.

            (c) Consent to Program. By filing an Enrollment Form with
PaineWebber and accepting any Program Share or Related Option or other benefit
under the Program, each Participant and each person claiming under or through
him shall be conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Program by
PaineWebber, the Board or the Committee.

            (d) Wage and Tax Withholding. Nothing in the Program shall preclude
PaineWebber from withholding from a Participant's Compensation or from any

                                      -15-
<PAGE>   16
other remuneration payable to the Participant any amounts that are required to
be withheld under federal, state and local income and payroll tax withholding
laws.

            (e) Compliance with Securities Laws. No Program Shares may be
purchased under the Program or delivered to a Participant unless and until
PaineWebber determines that such purchase and delivery complies with all
applicable securities laws. A Related Option may not be exercised, and no shares
of Common Stock may be issued in connection with such options, unless
PaineWebber determines that the issuance of such shares has been registered
under the Securities Act of 1933, as amended, and qualified under applicable
state "blue sky" laws, or an exemption from registration and from qualification
under such state "blue sky" laws is available.

            (f) Capital Changes. In the event of changes in the Common Stock of
PWG due to a stock split, reverse stock split, stock dividend, combination,
reclassification, or like change in PWG's capitalization, or in the event of any
merger, sale or other reorganization, appropriate adjustments shall be made by
the Committee to preserve the original intent of the Program.

            (g) Beneficiary Designation. In the event of the death of a
Participant, PaineWebber shall pay or deliver the Account Balance to the
executor or administrator of the estate of the Participant.

            (h) Awards to Individuals Subject to Non-U.S. Jurisdictions. To the
extent that Program Shares or Related Options are purchased or granted to
Participants who are domiciled or resident outside of the United States or to
persons who are domiciled or resident in the United States but who are subject
to the tax laws of a jurisdiction outside of the United States, the Committee
may adjust the terms of the purchases of the Program Shares and the Related
Options to the extent reasonably necessary (i) to comply with the laws of such
jurisdiction and (ii) to permit the grant of the Related Options and the
purchase of the Program Shares not to be a taxable event to the applicable
Participant. The authority granted under the previous sentence shall include the
discretion for the Committee to adopt, on behalf of PaineWebber, one or more
sub-plans applicable to separate classes of Eligible Employees who are subject
to the laws of jurisdictions outside of the United States.

            (i) Expenses. Except as otherwise determined by the Committee, the
costs and expenses of administering and implementing the Program shall be borne
by PaineWebber.

            (j) Effective Date. The Program shall become effective on the
Effective Date and shall remain in effect until terminated in accordance with
Section 11.

                                      -16-
<PAGE>   17
            (k) Governing Law. The validity, construction and effect of the
Program, any rules and regulations relating to the Program, and any option or
share documentation shall be determined in accordance with the laws of the State
of New York applicable to contracts executed and performed within such state and
without giving effect to principles of conflicts of laws.

                                      -17-<PAGE>   1
                                                                     Exhibit 4.3

                                   PAINEWEBBER

                          PUERTO RICO SAVINGS PLUS PLAN
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                            Page
                                                                                                            ----
<S>                                                                                                        <C>
                                                        ARTICLE I

INTRODUCTION

Section 1.1       Name..................................................................................     1
Section 1.2       Purpose...............................................................................     1
Section 1.3       Effective Date........................................................................     1
Section 1.4       Type of Plan..........................................................................     1
Section 1.5       Transfers from the PaineWebber 401(k) Plus Plan.......................................     1

                                                        ARTICLE II

DEFINITIONS

Section 2.1       Definitions...........................................................................     1
                  Accounts..............................................................................     1
                  Affiliated Employer...................................................................     1
                  After-Tax Contributions...............................................................     2
                  Automated Response System.............................................................     2
                  Basic Profit Sharing Contributions....................................................     2
                  Before-Tax Contributions..............................................................     2
                  Beneficiary...........................................................................     2
                  Benefits Administration Committee.....................................................     2
                  Board.................................................................................     2
                  Business Day..........................................................................     2
                  Cash-Out Amount.......................................................................     2
                  Committee.............................................................................     2
                  Common Stock..........................................................................     2
                  Common Stock Fund.....................................................................     3
                  Company...............................................................................     3
                  Company Account.......................................................................     3
                  Company Contributions.................................................................     3
                  Compensation..........................................................................     3
                  Direct Rollover.......................................................................     3
                  Disability............................................................................     4
                  Early Retirement Date.................................................................     4
                  Effective Retirement Date.............................................................     4
                  Electing Grandfathered Participant....................................................     4
                  Eligible Employee.....................................................................     4
                  Eligible Retirement Plan..............................................................     5
</TABLE>

                                       i
<PAGE>   3
<TABLE>
<S>                                                                                                        <C>
                  Employee..............................................................................     5
                  Employee Account......................................................................     5
                  Employer..............................................................................     5
                  Employment Commencement Date..........................................................     5
                  ERISA.................................................................................     5
                  Financial Hardship....................................................................     5
                  Five-Percent Owner....................................................................     6
                  Five-Year Period of Severance.........................................................     6
                  Highly Compensated Employee...........................................................     6
                  Hour of Service.......................................................................     6
                  Investment Committee..................................................................     6
                  Investment Funds......................................................................     6
                  Loan Need.............................................................................     6
                  Five-Percent Owner....................................................................     6
                  Five-Year Period of Severance.........................................................     7
                  Highly Compensated Employee...........................................................     7
                  Hour of Service.......................................................................     7
                  Investment Committee..................................................................     7
                  Investment Funds......................................................................     7
                  Loan Need.............................................................................     7
                  Matching Contribution Account.........................................................     7
                  Military Leave........................................................................     7
                  Non-Highly Compensated Employee.......................................................     8
                  PaineWebber...........................................................................     8
                  Parental Leave........................................................................     8
                  Participant...........................................................................     8
                  Period of Service.....................................................................     8
                  Period of Severance...................................................................     8
                  Plan..................................................................................     8
                  Plan Administrator....................................................................     9
                  Plan Loan.............................................................................     9
                  Plan Year.............................................................................     9
                  PR Code...............................................................................     9
                  Profit Sharing Contribution Account...................................................     9
                  Profit Sharing Contributions..........................................................     9
                  PWG...................................................................................     9
                  PWG Profit............................................................................     9
                  Qualified Domestic Relations Order or QDRO............................................     9
                  Reemployment Commencement Date........................................................     9
                  Required Beginning Date...............................................................     9
                  Retirement Age........................................................................     9
                  Returning Veteran.....................................................................     9
                  Rollover Account......................................................................    10
                  Rollover Contribution.................................................................    10
</TABLE>

                                       ii
<PAGE>   4
<TABLE>
<S>                                                                                                        <C>
                  Service...............................................................................    10
                  Severance Date........................................................................    11
                  Spousal Consent.......................................................................    11
                  Spouse................................................................................    11
                  Supplemental Profit Sharing Contributions.............................................    11
                  Trust Agreement.......................................................................    11
                  Trust Fund............................................................................    11
                  Trustee...............................................................................    11
                  US Code...............................................................................    12
                  USERRA................................................................................    12
                  Valuation Date........................................................................    12
                  Vested Account Balance................................................................    12
Section 2.2       Rules of Construction.................................................................    12

                                                        ARTICLE III

ELIGIBILITY AND PARTICIPATION
Section 3.1       Eligibility...........................................................................    12
Section 3.2       Commencement of Participation.........................................................    12
Section 3.3       Ineligible Employees..................................................................    12

                                                        ARTICLE IV

BEFORE-TAX CONTRIBUTIONS AND AFTER-TAX CONTRIBUTIONS
Section 4.1       Before-Tax Contributions..............................................................    13
Section 4.2       After-Tax Contributions...............................................................    13
Section 4.3       Election Procedures for Participant Contributions.....................................    13
Section 4.4       Contribution to Trust Fund of Before-Tax Contributions and After-Tax Contributions....    13
Section 4.5       Rollover Contributions................................................................    13
Section 4.6       Direct Transfers from Other Eligible Retirement Plans.................................    14

                                                        ARTICLE V

COMPANY CONTRIBUTIONS
Section 5.1       Eligibility for Matching Contribution.................................................    14
Section 5.2       Amount of Matching Contribution.......................................................    15
Section 5.3       Limitations on Matching Contribution..................................................    15
Section 5.4       Eligibility for Basic Profit Sharing Contribution.....................................    15
Section 5.5       Amount of Basic Profit Sharing Contribution...........................................    15
Section 5.6       Eligibility for Supplemental Profit Sharing Contribution..............................    16
Section 5.7       Amount of Supplemental Profit Sharing Contribution....................................    16
Section 5.8       Limitations on Supplemental Profit Sharing Contribution...............................    16
Section 5.9       QNECs and QMACs.......................................................................    17
</TABLE>

                                       iii
<PAGE>   5
<TABLE>
<S>                                                                                                        <C>

Section 5.10      Contributions for Participants Returning from Military Leave..........................    17

                                                        ARTICLE VI

LIMITATIONS ON ALLOCATIONS AND CONTRIBUTIONS
Section 6.1       Compliance with Section 1165(e)(7)(A) of the PR Code..................................    18
Section 6.2       Compliance with Section 1165(e)(3) of the PR Code.....................................    19
Section 6.3       Reserved..............................................................................    21
Section 6.4       Reserved..............................................................................    21
Section 6.5       Changes Effected by the Plan Administrator............................................    21
Section 6.6       Reserved..............................................................................    21
Section 6.7       Special Definitions...................................................................    21

                                                        ARTICLE VII

VESTING

Section 7.1       Employee Account......................................................................    22
Section 7.2       Retirement............................................................................    22
Section 7.3       Death or Disability...................................................................    22
Section 7.4       Vesting in Company Account............................................................    22
Section 7.5       Forfeitures...........................................................................    23

                                                        ARTICLE VIII

DISTRIBUTIONS

Section 8.1       Distribution of Vested Account Balance................................................    23
Section 8.2       Cash-Outs.............................................................................    23
Section 8.3       Form and Amount of Distribution.......................................................    23
Section 8.4       Elections.............................................................................    24
Section 8.5       Reemployment..........................................................................    25
Section 8.6       Minimum Required Distributions........................................................    26
Section 8.7       Death of a Participant................................................................    26
Section 8.8       Rollovers.............................................................................    26

                                                        ARTICLE IX

IN-SERVICE WITHDRAWALS AND LOANS
Section 9.1       Withdrawal on Account of Attaining Age Fifty-Nine and One Half........................    27
Section 9.2       Withdrawals of After-Tax and Rollover Contributions...................................    27
Section 9.3       Withdrawals on Account of Financial Hardship..........................................    27
Section 9.4       Plan Loans............................................................................    28
Section 9.5       Order of Liquidation of Investment Funds..............................................    32
Section 9.6       Valuation.............................................................................    32
Section 9.7       Death.................................................................................    32
</TABLE>

                                       iv
<PAGE>   6
<TABLE>
<S>                                                                                                        <C>

                                                        ARTICLE X

ADMINISTRATION OF THE PLAN
Section 10.1      In General............................................................................    32
Section 10.2      Appointment of Committees.............................................................    32
Section 10.3      Chairman, Secretary, Agents...........................................................    33
Section 10.4      Meetings..............................................................................    33
Section 10.5      Quorum and Voting.....................................................................    33
Section 10.6      Expenses..............................................................................    33
Section 10.7      Powers and Duties of the Benefits Administration Committee............................    33
Section 10.8      Powers and Duties of the Plan Administrator...........................................    34
Section 10.9      Powers and Duties of the Investment Committee.........................................    36
Section 10.10     Delegation of Authority...............................................................    36
Section 10.11     Benefit Claims Procedures.............................................................    37
Section 10.12     Named Fiduciary.......................................................................    37
Section 10.13     Indemnification.......................................................................    37
Section 10.14     Reliance on Reports and Certificates..................................................    38
Section 10.15     Members' Own Participation............................................................    38

                                                        ARTICLE XI

TRUST FUND AND INVESTMENT FUNDS
Section 11.1      Trustee...............................................................................    38
Section 11.2      Investment of Trust Fund..............................................................    38
Section 11.3      Election of Investment Funds..........................................................    38
Section 11.4      Allocation and Investment of Contributions............................................    39
Section 11.5      Valuation of Accounts.................................................................    40
Section 11.6      Purchase and Sales of Common Stock....................................................    40
Section 11.7      Non-Reversion.........................................................................    40
Section 11.8      Return of Certain Company Contributions...............................................    40
Section 11.9      Voting of Common Stock................................................................    40

                                                        ARTICLE XII

AMENDMENT OR TERMINATION
Section 12.1      Right to Amend or Terminate...........................................................    41
Section 12.2      Mergers, Consolidations and Transfers.................................................    41
Section 12.3      Vesting and Distribution upon Plan Termination........................................    42
Section 12.4      Distributions upon Sale or Disposition of Substantially All of the Company's Assets or
                  of a Subsidiary.......................................................................    42
Section 12.5      Withdrawal of an Employer.............................................................    43
</TABLE>

                                        v
<PAGE>   7
<TABLE>
<S>                                                                                                        <C>

                                                        ARTICLE XIII

GENERAL PROVISION
Section 13.1      No Guarantee of Employment............................................................    43
Section 13.2      Payments to Minors and Incompetents...................................................    44
Section 13.3      Nonalienation of Benefits.............................................................    44
Section 13.4      Evidence of Survivor..................................................................    44
Section 13.5      Titles and Headings...................................................................    44
Section 13.6      Governing Law.........................................................................    44
</TABLE>

                                       vi
<PAGE>   8
                                   ARTICLE I

                                  INTRODUCTION

      SECTION 1.1 NAME. The name of the Plan is the "PaineWebber Puerto Rico
Savings Plus Plan."

      SECTION 1.2 PURPOSE. The purpose of the Plan is to attract and retain
qualified individuals by providing them with an opportunity to accumulate assets
for their retirement, to permit them to derive benefits commensurate with the
financial results of the Company, and to acquire an equity interest in the
Company.

      SECTION 1.3 EFFECTIVE DATE. Except as otherwise provided in the Plan, the
effective date of this Plan is January 1, 2000 (the "Effective Date").

      SECTION 1.4 TYPE OF PLAN. The Plan is intended to be a "profit sharing
plan" for all purposes of the PR Code.

      SECTION 1.5 TRANSFERS FROM THE PAINEWEBBER 401(K) PLUS PLAN. Subject to
the approval of the Puerto Rico Treasury Department, the Plan Administrator may
accept the transfer of all the balances held to the credit of an Eligible
Employee in the PaineWebber 401(k) Plus Plan (formerly known as the PaineWebber
Savings Investment Plan, as the same may be amended from time to time). In such
case, the Employee and Employer accounts similar to the Employee and Company
Accounts maintained under this Plan will be credited to the corresponding
account under this Plan, and will be subject to the vesting provisions already
accrued at the time of the transfer and will further accrue vesting pursuant to
the provisions of this Plan.

                                   ARTICLE II

                                   DEFINITIONS

      SECTION 2.1 DEFINITIONS.

      "Accounts" means a Participant's (i) Employee Account, (ii) Matching
Contribution Account, (iii) Profit Sharing Contribution Account, and (iv) other
accounts which may be established under the Plan. Each Account may include
subaccounts and, to the extent subaccounts are so established, separate
accounting shall be maintained for each such subaccount.

      "Affiliated Employer" means any entity which is a member of a controlled
group of entities as described in Section 1028 of the PR Code which includes the
Company.
<PAGE>   9
      "After-Tax Contributions" means the contributions made by a Participant
pursuant to Section 4.2 of the Plan.

      "Automated Response System" means any automated telephone, computer,
internet, intranet or other electronic or automated system adopted by
PaineWebber and communicated to Participants for purposes of Plan
administration, including, without limitation, for receiving and processing
enrollments and instructions with respect to the investment of assets allocated
to a Participant's Accounts and for such other purposes as may be designated
from time to time by the Benefits Administration Committee.

      "Basic Profit Sharing Contributions" means the contributions to the Plan
by an Employer pursuant to Section 5.5.

      "Before-Tax Contributions" means that part of a Participant's Compensation
which, in the absence of a Participant's election under Section 4.1, would have
been paid to the Participant.

      "Beneficiary" means (i) in the case of a Participant who has a Spouse at
the time of his death, his Spouse (unless the Participant obtains Spousal
Consent to a designate another person as his Beneficiary), or (ii) in the case
of a Participant who does not have a Spouse at the time of his death, the person
designated as the Beneficiary by the Participant on a form supplied by, and last
filed in writing with, the Plan Administrator, who shall receive the benefits
payable under the provisions of Section 8.2 upon the death of the Participant.
If (i) no designation is in effect at the time of the death of the Participant
or if no person designated as a Beneficiary survives the Participant, and (ii)
the Participant has no Spouse at the time of his death, the Beneficiary shall be
the estate of the Participant determined in accordance with the provisions of
the Puerto Rico Civil Code.

      "Benefits Administration Committee" means the committee appointed by the
Board with the powers, duties and responsibilities described in Article X.

      "Board" means the Board of Directors of the Company.

      "Business Day" means each day in New York City on which the New York Stock
Exchange is open for the trading of securities.

      "Cash-Out Amount" means $5,000.

      "Committee" means, as the context requires, the Benefits Administration
Committee, the Investment Committee, or both.

      "Common Stock" means the common stock, $1.00 par value, of PWG.

                                       2
<PAGE>   10
      "Common Stock Fund" means an Investment Fund provided under the Plan into
which Matching Contributions will be directed and into which Before-Tax
Contributions, After-Tax Contributions, Profit Sharing Contributions and
Rollover Contributions may be directed by a Participant, and which is primarily
invested in shares of Common Stock and cash or cash equivalents.

      "Company" means PaineWebber Incorporated of Puerto Rico, a Puerto Rico
corporation, or any corporation or entity which may succeed to all or
substantially all of its business.

      "Company Account" means the separate Account maintained for each
Participant to which Matching Contributions and Profit Sharing Contributions are
credited, together with the income and expenses and realized and unrealized
gains and losses of the Trust Fund allocable thereto.

      "Company Contributions" means the Matching Contributions and the Profit
Sharing Contributions made to the Plan by an Employer pursuant to Article V.

      "Compensation" means the total compensation paid to an Employee by an
Employer, which is, or in the absence of the Employee's election under Section
4.1 hereof would be, reportable on the Employee's Puerto Rico Income Tax
Withholding Statement (Form 499-R-2/W-2PR). Notwithstanding anything herein to
the contrary, "Compensation" (i) shall include (A) an amount equal to the
Supplemental Profit Sharing Contribution made on behalf of such Employee, (B)
all other amounts which are deferred on a Before-Tax basis (1) under the Partner
Plus Plan or the Executive Deferred Compensation Plan, or (2) pursuant to the
Business Builder and PR Business Expense policies, and (C) an amount equal to
the cost-of-living adjustments provided to third party nationals and expatriates
pursuant to the Hypo Tax and Hypo Housing policies, and (ii) shall exclude (A)
any non-cash items (such as amounts realized upon the exercise of a stock option
or related to the use of an Employer-provided automobile), (B) any unusual or
nonrecurring payments (such as non-deductible moving expenses and sign-on
bonuses), (C) any prizes and awards (other than production/length of service
awards and asset awards), and (D) any distributions from the Partner Plus Plan
or any other nonqualified retirement plan. The earnings of an Employee paid in a
currency other than United States dollars shall be converted, for purposes of
the Plan, to United States dollars using the exchange rates employed in
preparing the applicable Form 499-R-2/W-2PR.

      The Compensation of each Participant taken into account under the Plan for
any Plan Year shall not exceed $160,000, as such amount may be adjusted pursuant
to Section 401(a)(17) of the US Code for cost-of-living increases in effect for
the calendar year.

      "Direct Rollover" means a payment by the Plan to an Eligible Retirement
Plan specified by an Employee pursuant to Section 8.8.

                                       3
<PAGE>   11
      "Disability" means the status of any individual who has been absent from
employment for a period of more than 180 consecutive days; provided that, (i)
the absence during such 180-day period was considered by PaineWebber to qualify
for "short term disability" benefits, and (ii) such individual's absence from
employment after such 180-day period is due to the same illness or injury which
permitted the individual to receive short term disability benefits during such
180-day period, regardless of whether such individual qualifies for long term
disability benefits under PaineWebber's long term disability plan.

      "Early Retirement Date" means the later of the date that a Participant,
while in Service, (i) attains age fifty-five, and (ii) completes a Period of
Service of ten years.

      "Effective Retirement Date" has the meaning set forth in Section 1.3.

      "Electing Grandfathered Participant" means an individual (i) who was an
Eligible Employee and a participant in the PaineWebber Pension Plan immediately
prior to January 1st, 1999, (ii) who, as of January 1st, 1999 or the sixty-day
period following such date, (A)(1) had attained at least age fifty, and (2) had
been credited under the PaineWebber Pension Plan with at least ten Years of
Continuous Employment (as defined in such plan) (a "50/10 Pension Plan
Participant") or (B)(1) had attained at least age sixty-five and (2) whose
Employment Commencement Date is on or prior to December 1st, 1997 (a "65 Pension
Plan Participant"), (iii) who was not "disabled," within the meaning of the
Pension Plan as of January 1st, 1999 or who was on short term disability on such
date and on June 30th, 1999 was "disabled" within the meaning of the Plan
("Pension Disabled"), and (iv) who irrevocably elected in writing, in accordance
with procedures established by the Plan Administrator for this purpose, to be
eligible for benefit accruals under the PaineWebber Pension Plan from and after
January 1st, 1999, and (ii) who is Pension Disabled shall be deemed to be an
Electing Grandfathered Participant during the time such individual continues to
be Pension Disabled. Furthermore, any Pension Disabled individual who is a 50/10
Pension Plan Participant or a 65 Pension Plan Participant who is deemed to be an
Electing Grandfathered Participant shall continue to be an Electing
Grandfathered Participant if, and when, he is no longer a Pension Disabled
individual and returns to active Service with PaineWebber, provided that his
return to active employment coincides with his ceasing to be Pension Disabled.

      "Eligible Employee" means each Employee of an Employer who is a resident
of Puerto Rico (within the meaning of Section 1022(i)(1) of ERISA) who receives
regular and stated compensation for other than a pension, retainer, or
remuneration in the nature of a consulting fee, excluding any person who is (i)
classified by an Employer as a "leased employee" of any Employer (including,
without limitation, a leased employee as defined in Section 414(n) of the US
Code), an independent contractor or a consultant or (ii) a provider of services
to an Employer pursuant to a contractual arrangement, either with that person or
with a third party. If any person excluded as an Eligible Employee pursuant to
the preceding clauses (i) and (ii) shall be determined by a court or a federal,

                                       4
<PAGE>   12
state, or local regulatory or administrative authority to have served as a
common law employee of the Employer, such determination shall not alter this
exclusion as an Eligible Employee for purposes of this Plan. No person shall be
considered an Eligible Employee by reason of service with an Employer solely as
a director.

      "Eligible Retirement Plan" means an individual retirement account
described in Section 1169 of the PR Code or a qualified retirement plan
described in Section 1165 of the PR Code.

      "Employee" means any person who is employed as a common law employee of
PaineWebber.

      "Employee Account" means the separate Account maintained for each
Participant to which his After-Tax Contributions, Before-Tax Contributions, and
Rollover Contributions are credited, together with the income and expenses and
realized and unrealized gains and losses of the Trust Fund allocable thereto.

      "Employer" means the Company and any Affiliated Employer (i) which has
adopted the Plan, and (ii) whose participation in the plan has been approved by
the Board or the Benefits Administration Committee. Each Employer who
participates in the Plan shall be deemed to appoint the Company, each Committee,
the Plan Administrator and the Trustee with all the power and authority
conferred hereby, or by the Trust Agreement, upon such parties. Such power and
authority to act as such agents for the Employer shall continue until the Plan
is completely terminated as to the Employer and the relevant portion of the
Trust Fund has been distributed from the Trust as provided in Section 12.3.

      "Employment Commencement Date" means the date upon which an individual
first performs an Hour of Service with any Employer.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the applicable rulings and regulations thereunder.

      "Financial Hardship" means, as determined by the Committee in accordance
with the PR Code, any of the following:

      (a) tuition payments for the next twelve months of post-secondary
education of the Participant or his Spouse or dependents;

      (b) costs directly related to the purchase (excluding mortgage payments)
of a Participant's principal residence;

      (c) expenses for medical care described in Section 1023(aa)(2)(P) of the
PR Code previously incurred by a Participant or his Spouse or dependents, or
necessary for these persons to obtain such medical care;

                                       5
<PAGE>   13
      (d) amounts necessary to prevent the eviction of a Participant from his
principal residence or the need to prevent foreclosure of the mortgage of his
principal residence; or

      (e) any other type of expenses that are deemed by the Puerto Rico
Secretary of the Treasury through revenue rulings, notices, and other
administrative pronouncements of general applicability to constitute immediate
and heavy financial burden for purposes of Section 1165(e) of the PR Code.

      "Five-Percent Owner" means an Employee who at any time during the Plan
Year was a five-percent owner as defined in Section 416(i)(1) of the US Code.

      "Five-Year Period of Severance" means a Period of Severance of sixty or
more consecutive months.

      "Highly Compensated Employee" means any Employee who for the Plan Year is
more highly compensated than two-thirds (2/3) of all Eligible Employees, taking
into account only his Compensation for purposes of the Plan.

      "Hour of Service" means an "hour of service" within the meaning of 29
C.F.R. Section 2530.200b-2(a)(1).

      "Investment Committee" means the committee appointed by the Board with the
powers, duties and responsibilities described in Article X.

      "Investment Funds" means the various investment options designated from
time to time by the Investment Committee for the investment of the assets of the
Trust Fund.

      "Loan Need" means, as determined by the Committee any of the following.

      (c) expenses for medical care described in Section 1023(aa)(2)(P) of the
PR Code previously incurred by a Participant or his Spouse or dependents, or
necessary for these persons to obtain such medical are;

      (d) amounts necessary to prevent the eviction of a Participant from his
principal residence or the need to prevent foreclosure of the mortgage of his
principal residence; or

      (e) any other type of expenses that are deemed by the Puerto Rico
Secretary of the Treasury through revenue rulings, notices, and other
administrative pronouncements of general applicability to constitute immediate
and heavy financial burden for purposes of Section 1165(e) of the PR Code.

      "Five-Percent Owner" means an Employee who at any time during the Plan
Year was a five-percent owner as defined in Section 416(i)(1) of the US Code.

                                       6
<PAGE>   14
      "Five-Year Period of Severance" means a Period of Severance of sixty or
more consecutive months.

      "Highly Compensated Employee" means, any Employee who for the Plan Year is
more highly compensated than two-thirds (2/3) of all Eligible Employees, taking
into account only his Compensation for purposes of the Plan.

      "Hour of Service" means an "hour of service" within the meaning of 29
C.F.R. Section 2530.200b-2(a)(1).

      "Investment Committee" means the committee appointed by the Board with the
powers, duties and responsibilities described in Article X.

      "Investment Funds" means the various investment options designated from
time to time by the Investment Committee for the investment of the assets of the
Trust Fund.

      "Loan Need" means, as determined by the Committee, any of the following:

      (a) a Financial Hardship;

      (b) tuition payments for the next four years of post-secondary education
of the Participant, his Spouse or dependents;

      (c) costs related to the improvement of a Participant's principal
residence;

      (d) costs related to funeral expenses;

      (e) costs related to payments required by a court order with respect to a
Participant's personal bankruptcy;

      (f) costs related to the payment of Participant's delinquent taxes;

      (g) costs related to the payment by a Participant or his Spouse of
delinquent child support payments; and

      (h) costs related to Participant's debt consolidation.

      "Matching Contribution Account" means the separate Account maintained for
each Participant to which Matching Contributions are credited, together with the
income and expenses and realized and unrealized gains and losses of the Trust
Fund allocable thereto.

      "Military Leave" means an absence from employment with PaineWebber due to
the performance of duty, on a voluntary or involuntary basis, in a uniformed
service of the United States under competent authority and includes active duty,
active duty for training, initial active duty for training, inactive duty
training, full-time National Guard

                                       7
<PAGE>   15
duty and an examination to determine the fitness of the person to perform any
such duty. A person shall not be deemed to have been absent due to Military
Leave unless (i) such person has given advance written or verbal notice of such
uninformed service to PaineWebber, (ii) the cumulative length of the absence and
all previous Military Leaves from PaineWebber does not exceed five years or such
other period of time permitted by USERRA, and (iii) such person reports to, or
submits an application for reemployment to, PaineWebber in accordance with
paragraphs (e) and (f) of Section 4312 of USERRA. Notwithstanding anything
contained herein to the contrary, the Committee may, on a uniform and
nondiscriminatory basis, deem a person's absence to be a Military Leave if such
absence would qualify for a Military Leave but for the fact that the time period
exceeds the maximum period of Military Leave set forth in clause (ii) above.

      "Non-Highly Compensated Employee" means an Employee who is not a Highly
Compensated Employee.

      "PaineWebber" means the Company and each Affiliated Employer.

      "Parental Leave" means a period in which the Employee is absent from work
(i) by reason of the pregnancy of the Employee, (ii) by reason of the birth of a
child of the Employee, (iii) by reason of the placement of a child with the
Employee in connection with adoption of the child by the Employee, or (iv) for
purposes of caring for a child born to, or placed with, the Employee during the
period immediately following such birth or placement. At the request of the Plan
Administrator, any Employee invoking the provisions of this paragraph shall
promptly furnish to the Plan Administrator such information that the Plan
Administrator may reasonably require to establish (i) the number of days the
Employee was absent in connection with the claimed Parental Leave and (ii) that
such Period of absence in fact constituted a Parental Leave as defined above.

      "Participant" means any individual for whom an Account is maintained under
the Plan, including, without limitation, any alternative payee under any
Qualified Domestic Relations Order for whom an Account is maintained. Following
the date of death of a Participant described in the previous sentence,
Participant shall also include any Beneficiary of such Participant who is
entitled to benefits under the Plan.

      "Period of Service" means a Participant's aggregate years, months, and
days of Service taken into account under the Plan.

      "Period of Severance" means a continuous period of time during which a
period is not an Employee. Except as provided in the definition of Service, such
period shall commence on an Employee's Severance Date.

      "Plan" means this "PaineWebber Puerto Rico Savings Plus Plan," as the same
may be amended from time to time.

                                       8
<PAGE>   16
      "Plan Administrator" means the Company or any other person appointed by
the Benefits Administration Committee.

      "Plan Loan" means a loan granted under Section 9.4.

      "Plan Year" means the calendar year, which shall be the basis on which the
records of the Plan are kept.

      "PR Code" means the Puerto Rico Internal Revenue Code of 1994, as amended,
and the applicable rulings and regulations thereunder.

      "Profit Sharing Contribution Account" means the separate Account
maintained for each Participant to which Basic Profit Sharing Contributions and
Supplemental Profit Sharing Contributions are credited, together with the income
and expenses and realized and unrealized gains and losses of the Trust Fund
allocable thereto.

      "Profit Sharing Contributions" means Basic Profit Sharing Contributions
and Supplemental Profit Sharing Contributions.

      "PWG" means PaineWebberGroup Inc., a Delaware corporation, or any other
corporation or entity which may succeed to all or substantially all of its
business.

      "PWG Profit" means "Earnings Before Taxes on Income" for the PWG's fiscal
year of reference as reported in the PWG's consolidated statements of operations
in its annual report to stockholders.

      "Qualified Domestic Relations Order" or "QDRO" means a domestic order
issued by a court of competent jurisdiction which the Plan Administrator
determines complies with the requirements of Section 206(d) of ERISA.

      "Reemployment Commencement Date" means the date following an Employee's
last Severance Date on which the Employee first performs an Hour of Service.

      "Required Beginning Date" means (i) with respect to each Participant who
is a Five-Percent Owner, the April 1st of the calendar year following the year
in which the Participant attains age seventy and one-half, and (ii) for each
other Participant, April 1st following the later to occur of (A) the
Participants Severance Date and (B) the year in which the Participant attains
age seventy and one-half.

      "Retirement Age" means the date of an Employee's sixty-fifth birthday.

      "Returning Veteran" means a Participant or former Participant who is
absent due to Military Leave and thereafter performs an Hour of Service.

                                       9
<PAGE>   17
      "Rollover Account" means a subaccount maintained as part of a
Participant's Employee Account to which a Participant's Rollover Contribution is
allocated or was previously allocated in accordance with Section 4.6.

      "Rollover Contribution" means a contribution by, or on behalf of, an
Eligible Employee to a Rollover Account which the Plan Administrator determines
qualifies for a rollover under the provisions of the PR Code.

      "Service" means the period commencing on an Employee's Employment
Commencement Date or Reemployment Commencement Date, as the case may be, and
ending on his next Severance Date. The following rules shall apply in
calculating Service:

      (a) If, after an Employee's Severance Date, the Employee performs an Hour
of Service before the earlier of the first anniversary of (i) his Severance Date
and (ii) the first date of any absence from employment for a reason described in
clause (b) of the definition of Severance Date, the period between his Severance
Date and the date he thereafter completed an Hour of Service shall be included
as Service.

      (b) If, after an Employee's Severance Date, the Employee has a
Reemployment Commencement Date after a Five-Year Period of Severance, the
Employee's Service after such Five-Year Period of Severance shall be disregarded
for the purpose of determining the vested amount of the Company Contributions
made on behalf of such Participant prior to the Five-Year Period of Service.

      (c) If, after an Employee's Severance Date, the Employee has a
Reemployment Commencement Date after a Five-Year Period of Severance and, at the
time of such Participant's Severance Date, he has a Vested Account Balance which
is attributable in part to Company Contributions, then the Employee's Service
prior to the Five-Year Period of Severance will count in determining the vested
amount of the Company Contributions made on behalf of such Participant after the
Five-Year Period of Severance and will count in determining the amount of the
Employee's Basic Profit Sharing Contribution.

      (d) If, after an Employee's Severance Date, the Employee has a
Reemployment Commencement Date after a Five-Year Period of Severance and, at the
time of such Employee's Severance Date, he does not have a Vested Account
Balance which is attributable in part to Company Contributions, then the
Employee's Service prior to the Five-Year Period of Severance will not count in
determining the vested amount of the Company Contributions made on behalf of
such Employee after the Five-Year Period of Severance.

      (e) In determining the length of an Employee's Service, Periods of
Military Leave shall be taken into account in accordance with USERRA.

                                       10
<PAGE>   18
      (f) Solely for purposes of determining a Participant's nonforfeitable
rights to his Accounts under Article VII, the Severance Date of an Employee who
is absent from Service beyond the first anniversary of the first day of absence
by reason of Parental Leave shall be the first anniversary of the first day of
such absence. The period between the first and second anniversaries of the first
day of such absence is neither a Period of Service nor a Period of Severance.

      (g) Nothing in the Plan shall be construed as requiring the double
crediting of Service for any period of time.

      "Severance Date" mean the earlier of:

      (a)   the date on which an Employee quits, retires, is discharged, is
absent from employment due to a Disability, or dies; and

      (b) the first anniversary of the first date of absence for any other
reason, such as layoff or leave of absence.

      "Spousal Consent" means a Spouse's consent to the Participant's election
to designate someone other than his Spouse as his Beneficiary; provided,
however, that (i) the Spouse's consent to such election is in writing, (ii) the
Participant's election designates a specific Beneficiary (including any class of
Beneficiaries) or any contingent Beneficiaries, which may not be changed without
the Spouse's consent (or the Spouse expressly permits a change in designation by
the Participant without any further consent by the Spouse), (iii) the Spouse's
consent acknowledges the effect of the Participant's election and (iv) the
Spouse's consent is witnessed by the Plan Administrator, another authorized Plan
representative, or a notary public.

      "Spouse" means, as of the date of determination, the individual to whom
the Participant is legally married.

      "Supplemental Profit Sharing Contributions" means the contributions made
to the Plan by an Employer pursuant to Section 5.7.

      "Trust Agreement" means the "PaineWebber Puerto Rico Savings Plus Plan
Trust Agreement" entered into between the Company and the Trustee, as amended,
and any successor agreement thereto.

      "Trust Fund" means the cash and other property of the Plan held and
administered by the Trustee in accordance with the provisions of the Trust
Agreement and the Plan.

      "Trustee" means PaineWebber Trust Company of Puerto Rico or any successor
Trustee.

                                       11
<PAGE>   19

         "US Code" means the United States Internal Revenue Code of 1986, as
amended, and the applicable rulings and regulations thereunder.

         "USERRA" means the Uniformed Service Employment and Reemployment Rights
Act of 1994, as amended, and the applicable rulings and regulations thereunder.

         "Valuation Date" means each Business Day.

         "Vested Account Balance" means, as of each Valuation Date, the sum of
the value of a Participant's (i) Employee Account and (ii) the portion of the
Matching Contribution Account and Profit Sharing Account in which the
Participant has vested in accordance with Article VII.

         SECTION 2.2 RULES OF CONSTRUCTION. The use of the masculine gender
herein shall be deemed to encompass the feminine, and the use of the singular
form of a word shall be deemed to encompass the plural form, unless the context
requires otherwise. Unless otherwise noted, section references are to sections
of the Plan.

                                  ARTICLE III

                          ELIGIBILITY AND PARTICIPATION

         SECTION 3.1 ELIGIBILITY. Each Employee who is an Eligible Employee
shall be eligible to participate in the Plan on the date he first performs an
Hour of Service for an Employer.

         SECTION 3.2 COMMENCEMENT OF PARTICIPATION. An Eligible Employee who is
eligible to participate in the Plan in accordance with Section 3.1 shall begin
participating in the Plan for purposes of Article IV effective as of the first
day of the first payroll period coinciding with or immediately following, the
date on or after he is both eligible to participate, in accordance with rules
and procedures adopted by Plan Administrator which shall be uniformly applied to
all Eligible Employees, to make Before-Tax Contributions, After-Tax
Contributions or Rollover Contributions.

         SECTION 3.3 INELIGIBLE EMPLOYEES. The following Employees shall not be
eligible to participate in the Plan: (i) any non-Puerto Rico resident individual
who is employed outside Puerto Rico or that does not receive from the Employer
any earned income from sources within Puerto Rico, or is employed in Puerto Rico
on temporary assignment only (and his remuneration for such employment shall not
be treated as Compensation with respect to which he may make or share in
contributions under the Plan); (ii) any Employee who is subject to a labor
agreement or collective bargaining agreement unless the applicable collective
bargaining agreement specifically authorized such participation; (iii) any
Employee who is employed by an Employer on a temporary

                                       12
<PAGE>   20
basis for a period of time which is intended not to exceed five (5) months; and
(iv) any Employee who is eligible to participate in the PaineWebber 401(k) Plus
Plan.

                                   ARTICLE IV

              BEFORE-TAX CONTRIBUTIONS AND AFTER-TAX CONTRIBUTIONS

         SECTION 4.1 BEFORE-TAX CONTRIBUTIONS. For each Plan Year, each Eligible
Employee shall be permitted to elect to reduce the amount of his Compensation
payable during each Plan year in whole percentages from one percent to ten
percent. Any election made by an Eligible Employee shall be valid only with
respect to Compensation thereafter paid to him during the period his election is
in effect. Notwithstanding the above, the amount of Eligible Employee's Before
Tax Contributions will be limited as provided in Section 6.1.

         SECTION 4.2 AFTER-TAX CONTRIBUTIONS. For each Plan Year, each Eligible
Employee shall be permitted to elect to make After-Tax Contributions from his
Compensation payable during the Plan Year in whole percentages from one percent
to ten percent. Any election made by an Eligible Employee shall be only with
respect to the Compensation thereafter paid to him during the period his
election is in effect.

         SECTION 4.3 ELECTION PROCEDURES FOR PARTICIPANT CONTRIBUTIONS.
Before-Tax Contributions and After-Tax Contributions shall be made through
payroll deductions. A Participants election as to the rate of his Before-Tax
Contributions and After-Tax Contributions or a Participant's election to suspend
his Before-Tax Contributions or After-Tax Contributions shall be made by
utilizing the Automated Response System in accordance with the procedures of
such system. A Participant's election shall remain in effect until changed or
revoked. Any election of a Participant as to his rate of Before-Tax
Contributions or After-Tax Contributions shall terminate upon his termination of
employment for any reason.

         SECTION 4.4 CONTRIBUTION TO TRUST FUND OF BEFORE-TAX CONTRIBUTIONS AND
AFTER-TAX CONTRIBUTIONS. All Before-Tax Contributions and After-Tax
Contributions withheld as payroll deductions shall be credited to the Employee
Account of the Participant for the Plan Year in which such Before-Tax
Contributions and After-Tax Contributions are withheld and shall be paid over to
the Trustee on the earliest date that they can be reasonably segregated from
PaineWebber's general assets, but in no event later than fifteen Business Days
following the end of the month in which such amounts would otherwise have been
payable to the Participant as Compensation, unless an extension is applicable
pursuant to 29 C.F.R. 2510.3-102.

         SECTION 4.5 ROLLOVER CONTRIBUTIONS. Any Eligible Employee may file a
written request with the Plan Administrator requesting that the Trustee accept
the transfer of a Rollover Contribution with respect to the Eligible Employee.
The Plan

                                       13
<PAGE>   21
Administrator may decline to accept a proposed Rollover Contribution to the Plan
for any reason or for no stated reason. In addition, the Plan Administrator may
permit a Rollover Contribution prior to the time that any other amounts are
credited to an Eligible Employee's Account. The Plan Administrator, in its sole
discretion and in accordance with the PR Code and procedures which shall be
uniformly applied to all similarly situated individuals, shall as soon as
practicable after receipt by it of the Eligible Employee's written request
determine whether the transfer of the Rollover Contribution shall be permitted.
Any written request filed pursuant to this Section 4.5 shall set forth the fair
market value of such Rollover Contribution, the nature of the property contained
in the Rollover Contribution and a statement satisfactory to the Plan
Administrator that the amount to be transferred constitutes a Rollover
Contribution, which may include a statement from the distributing plan that such
plan has received a favorable determination letter from the Puerto Rico Treasury
Department. In the event the Plan Administrator permits the transfer of a
Rollover Contribution, the Plan Administrator shall instruct the Trustee to
accept such Rollover Contribution and the transfer of such Rollover Contribution
shall be deemed to have been made on the Valuation Date next following the date
on which it was paid over to the Trustee. The Rollover Contribution shall be
maintained in a separate fully vested Rollover Account for the benefit of the
contributing Eligible Employee.

         SECTION 4.6 DIRECT TRANSFERS FROM OTHER ELIGIBLE RETIREMENT PLANS.
Subject to the provisions of the PR Code, the Plan Administrator may accept the
transfer of the account balances in a qualified retirement plan described in
Section 1165 of the PRC Code held to the credit of an Eligible Employee. Such
balance shall generally be credited and/or maintained in the vested Rollover
Account of the Eligible Employee.

                                   ARTICLE V

                              COMPANY CONTRIBUTIONS

         SECTION 5.1 ELIGIBILITY FOR MATCHING CONTRIBUTION. Each individual who
(i) is an Eligible Employee at the end of a Plan Year or who, during such Plan
Year and while an Eligible Employee, dies, incurs a Disability or terminates
Service on or after his Early Retirement Date or Retirement Age, and (ii) made
Before-Tax Contributions or After-Tax Contributions to the Plan during such Plan
Year shall be eligible to receive a Matching Contribution for such Plan Year in
accordance with Section 5.2. If a Participant makes both Before-Tax
Contributions and After-Tax Contribution, the match for the year will first be
deemed made on the Participation's Before-Tax Contributions and then on
After-Tax Contributions. Notwithstanding anything in the Plan to the contrary,
an individual who (i) would have been an Eligible Employee at the end of the
Plan Year, but for the fact that, during such Plan Year such individual ended
his employment with the Employer and (ii) continues to be employed by
PaineWebber at the end of such Plan Year, shall be eligible to receive a
Matching Contribution for such Plan Year in accordance with Section 5.2.

                                       14
<PAGE>   22
         SECTION 5.2 AMOUNT OF MATCHING CONTRIBUTION. With respect to each
individual who is eligible for a Matching Contribution in accordance with
Section 5.1 above, the Employer shall make a Matching Contribution equal to the
lesser of (i) fifty percent of the sum of such Participants Before-Tax
Contributions and After-Tax Contributions, and (ii) the applicable limit on
Matching Contributions for such Plan Year imposed by Section 5.3.

         SECTION 5.3 LIMITATIONS ON MATCHING CONTRIBUTION. In no event will an
Eligible Employee receive a Matching Contribution for a Plan Year in an amount
greater than the lesser of (i) three percent of such Eligible Employee's
Compensation for such Plan Year, and (ii) the amount determined in accordance
with the schedule set forth below based upon PWG Profits for such Plan Year.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                             ANNUAL MAXIMUM AMOUNT OF MATCHING
              PWG PROFITS                            CONTRIBUTIONS
-------------------------------------------------------------------------------
<S>                                          <C>
Less than $450 million                                $    0
-------------------------------------------------------------------------------
$50 million, but less than $750 million               $1,200
-------------------------------------------------------------------------------
$750 million, but less than $850 million              $1,800
-------------------------------------------------------------------------------
$850 million, but less than $1 billion                $2,400
-------------------------------------------------------------------------------
$1 billion or more                                    $3,000
-------------------------------------------------------------------------------
</TABLE>

         SECTION 5.4 ELIGIBILITY FOR BASIC PROFIT SHARING CONTRIBUTION. Each
individual who (i) is an Eligible Employee at the end of a Plan Year, or who
during such Plan Year and while an Eligible Employee, dies, incurs a Disability
or terminates Service on or after his Early Retirement Date or Retirement Age,
and (ii) is not an Electing Grandfathered Participant, shall be eligible to
receive a Basic Profit Sharing Contribution for such Plan Year in an amount
determined in accordance with Section 5.5. Notwithstanding anything in the Plan
to the contrary, an individual who (i) would have been an Eligible Employee at
the end of the Plan Year, but for the fact that, during such Plan Year such
individual ended his employment with the Employer, (ii) continues to be employed
by PaineWebber at the end of such Plan Year, and (iii) is not an Electing
Grandfathered Participant, shall be eligible to receive a Basic Profit Sharing
Contribution for such Plan Year in accordance with Section 5.5.

         SECTION 5.5 AMOUNT OF BASIC PROFIT SHARING CONTRIBUTION. Each
individual who is eligible for a Basic Profit Sharing Contribution under Section
5.4 for a Plan Year shall receive a Basic Profit Sharing Contribution for such
plan Year equal to a specified percentage of the Eligible Employee's
Compensation for such year. The amount of Basic Profit Sharing Contribution for
Plan Year shall be determined in accordance with the following schedule based
upon the Participant's Compensation for such Plan Year and the Eligible
Employee's attained Period of Service as of the first day of such Plan Year:

                                       15
<PAGE>   23
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
    NUMBER OF YEARS IN THE PERIOD OF       PERCENTAGE OF COMPENSATION TO BE
SERVICE AS OF THE FIRST DAY OF THE PLAN   CONTRIBUTED AS BASIC PROFIT SHARING
                  YEAR                         CONTRIBUTION FOR THE PLAN
--------------------------------------------------------------------------------
<S>                                       <C>
Less than 5                                            1.5
--------------------------------------------------------------------------------
5, but less than 10                                    2.0
--------------------------------------------------------------------------------
10, but less than 15                                   3.0
--------------------------------------------------------------------------------
15, but less than 20                                   4.0
--------------------------------------------------------------------------------
20, but less than 25                                   5.5
--------------------------------------------------------------------------------
25 or more                                             6.5
--------------------------------------------------------------------------------
</TABLE>

         SECTION 5.6 ELIGIBILITY FOR SUPPLEMENTAL PROFIT SHARING CONTRIBUTION.

         (a) Eligibility Requirement. Each individual (i) who is an Eligible
Employee and whose Compensation, determined without regard to the limitations
set forth in the second paragraph of such definition, exceeds the threshold
described in Section 5.6(b) for the Plan Year, and (ii) who is an Eligible
Employee at the end of a Plan Year shall be eligible to receive a Supplemental
Profit Sharing Contribution for such Plan Year in an amount determined in
accordance with Section 5.7.

         (b) Threshold. The threshold for Compensation for a Plan Year shall be
$400,000 or such other amount as shall be specified by an amendment to the Plan
adopted by the Board prior to the end of the applicable Plan Year.

         SECTION 5.7 AMOUNT OF SUPPLEMENTAL PROFIT SHARING CONTRIBUTION. Each
individual is eligible for a Supplemental Profit Sharing Contribution under
Section 5.6 for a Plan Year shall receive a Supplemental Profit Sharing
Contribution for such Plan Year equal to a specified dollar amount determined in
accordance with the schedule below based upon the Eligible Employee's attained
age as of the first day of such Plan Year:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
          AGE OF THE FIRST DAY           AMOUNT OF SUPPLEMENTAL PROFIT SHARING
            OF THE PLAN YEAR                CONTRIBUTION FOR THE PLAN YEAR
--------------------------------------------------------------------------------
<S>                                      <C>
25, but less than 36                                 $2,500
--------------------------------------------------------------------------------
36, but less than 41                                 $5,000
--------------------------------------------------------------------------------
41, but less than 51                                 $10,000
--------------------------------------------------------------------------------
51 or more                                           $20,000
--------------------------------------------------------------------------------
</TABLE>

         SECTION 5.8 LIMITATIONS ON SUPPLEMENTAL PROFIT SHARING CONTRIBUTION. In
no event will an Eligible Employee receive a Supplemental Profit Sharing
Contribution for a Plan Year in an amount greater than the amount determined in
accordance with the schedule set forth above.

                                       16
<PAGE>   24
         SECTION 5.9 QNECS AND QMACS. Each Employer may contribute for a Plan
Year QNECs and QMACs in order to comply with the applicable provisions of
Article VI.

         SECTION 5.10 CONTRIBUTIONS FOR PARTICIPANTS RETURNING FROM MILITARY
LEAVE.

         (a) General Rule. Notwithstanding any other provisions of the Plan, a
Returning Veteran shall be entitled to make Before-Tax Contribution and
After-Tax Contributions and to receive Company Contributions in accordance with
the applicable provisions of USERRA.

         (b) Compensation of a Returning Veteran. A Returning Veteran shall be
treated as having received Compensation during such Military Leave in an amount
equal to the Compensation such Returning Veteran would have received from an
Employer, but for the Military Leave; provided, however, that, if a Returning
Veteran's Compensation during Military Leave would not have been reasonably
certain, such Returning Veteran shall be treated as having received Compensation
during such Military Leave based upon the Returning Veteran's average
Compensation from the Employer either (i) during the twelve-month period
preceding the Military Leave, or (ii) if shorter, the Returning Veteran's
service preceding the Military Leave.

         (c) Amount of Before-Tax Contributions and After-Tax Contributions. A
Returning Veteran may make Before-Tax Contributions and After-Tax Contributions
without regard to any limitations that would otherwise apply in the year such
contributions are actually made. The Before-Tax Contributions and After-Tax
Contributions must meet the applicable limitations for the year with respect to
which such contributions relate. PaineWebber shall permit the Returning Veteran
to make additional Before-Tax Contributions to the Plan during the period which
begins on the date of reemployment and ends on the sooner or (i) three times the
period of qualified military service, or (ii) five years.

         (d) Amount of Company Contributions and Earnings. The Employer shall
make contributions which satisfy any obligation of the Plan to provide an
"accrued benefit" within the meaning of Section 3(23) of ERISA to a Returning
Veteran. For this purpose, make-up Company Contributions shall be allocated on
behalf of the Returning Veteran with respect to each Plan Year in which the
Returning Veteran was absent on Military Leave as of the last day of the Plan
Year and shall not be subject to any limitations that would otherwise apply in
the years that such Company Contributions are made. The Employer shall neither
be required to credit earnings to the Returning Veteran with respect to
Before-Tax, After-Tax, or Company Contributions before such contributions are
made, nor to allocate forfeitures which occurred during the period of qualified
military service to a Returning Veteran.

         (e) Annual Additions. Make-up Company Contributions on behalf of a
Returning Veteran shall not be considered Annual Additions for the Plan Year
which

                                       17
<PAGE>   25
such make-up Company Contributions are made, but shall be considered Annual
Additions for the Plan Year to which the Company Contribution relates.

         (f) No Duplicating Payments. Nothing in this Section 5.10 shall in any
way be construed as obligating the Employer to make any duplicate contributions
in respect of any Returning Veteran or any other person.

                                   ARTICLE VI

                  LIMITATIONS ON ALLOCATIONS AND CONTRIBUTIONS

         SECTION 6.1 COMPLIANCE WITH SECTION 1165(e)(7)(A) OF THE PR CODE.

         (a) Limitation. No Eligible Employee shall be permitted to have
Before-Tax Contributions made on his behalf under the Plan if those Before-Tax
Contributions, when added to elective deferrals (as defined in the regulations
issued under the PR Code) under any other plans for such calendar year, would
cause the Eligible Employee to exceed the Section 1165(e)(7)(A) Limit.

         (b) Correction. If any amount of elective deferrals in excess of the
Section 1165(e)(7)(A) Limit is made for any Eligible Employee in any calendar
year, notwithstanding any provisions of the Plan to the contrary:

         (i)      not later than the December 31st following the close of the
                  calendar year, the Eligible Employee may allocate the amount
                  of such excess elective deferrals among the Plan and, as
                  applicable, any other plans under which the elective deferrals
                  were made, and may notify the Plan Administrator, and, as
                  applicable, each other plan's administrator of the portion
                  allocated to it; and

         (ii)     not later than the December 31st following the close of the
                  calendar year, the Plan and, as applicable, each such other
                  plan shall distribute to the Participant any amount allocated
                  to it under clause (i) plus any income on such amount through
                  the close of the calendar year in respect of which the
                  deferrals were made.

         The notice required pursuant to clause (i) above shall be made in
writing to the Plan Administrator in such form as the Plan Administrator shall
require; provided, however, that if the elective deferrals in excess of the
Section 1165(e)(7)(A) limit arise solely under plans maintained by the Employer,
the Participant shall be deemed to have notified the Plan Administrator of any
such excess elective deferrals.

                                       18
<PAGE>   26
         SECTION 6.2 COMPLIANCE WITH SECTION 1165(e)(3) OF THE PR CODE.

         (a) Requirements of the Average Actual Deferral Percentage Tests. For
each Plan Year, the Plan shall comply with, in a manner consistent with the
applicable provisions of the PR Code, one of the following ADP Tests with
respect to Before-Tax Contributions made to the Plan:

         (i)      the Average Actual Deferral Percentage for the group of
                  Eligible Employees who are Highly Compensated Employees for
                  the Plan Year shall not exceed the Average Actual Deferral
                  Percentage for the group of Eligible Employees who are
                  Non-Highly Compensated Employees for the Plan Year multiplied
                  by 1.25; or

         (ii)     the Average Actual Deferral Percentage for the group of
                  Eligible Employees who are Highly Compensated Employees for
                  the Plan Year shall not exceed the Average Actual Deferral
                  Percentage for the group of Eligible Employees who are
                  Non-Highly Compensated Employees for the Plan Year multiplied
                  by two; provided, however, that the Average Actual Deferral
                  Percentage for the group of Eligible Employees who are Highly
                  Compensated Employees for the Plan Year does not exceed the
                  Average Actual Deferral Percentage for the group of Eligible
                  Employees who are Non-Highly Compensated Employees by more
                  than two percentage points.

         (b) Method of Complying with the ADP Test. The Plan Administrator shall
cause the Plan to comply with the ADP Test for a Plan Year by undertaking, as
necessary, any one or more of the following measures:

         (i)      The Plan Administrator may recharacterize Excess Before-Tax
                  Contributions, pursuant to Section 6.2(c).

         (ii)     The Plan Administrator may reduce Before-Tax Contributions of
                  Highly Compensated Employees and then distribute any Excess
                  Before-Tax Contributions and earning thereon, pursuant to
                  Section 6.2(d).

         (iii)    The Company may make QNECs or QMACs that are treated as
                  Before-Tax Contributions for purposes of the ADP Test and
                  that, when combined with other Before-Tax Contributions, cause
                  the ADP Test to be satisfied, pursuant to Section 6.2(e).

         (c) Recharacterization. To the extent that the Plan Administrator
chooses to recharacterize Excess Before-Tax Contributions as After-Tax
Contributions, pursuant to

                                       19
<PAGE>   27
the requirements of PR Code regulations, such Excess Before-Tax Contributions
shall remain nonforfeitable.

         (i)      Excess Before-Tax Contributions shall not be recharacterized
                  to the extent that such amount exceeds the maximum amount of
                  After-Tax Contribution permitted under the Plan.

         (ii)     Recharacterization of Before-Tax Contributions shall occur not
                  later than two and one-half months after the last day of the
                  Plan Year in which such Excess Before-Tax Contributions arose
                  and shall be deemed to occur no earlier than the date on which
                  the last Highly Compensated Employee is informed in writing of
                  the amount recharacterized and the consequences thereof.

         (iii)    Recharacterized amounts are taxable to the Highly Compensated
                  Employee for the taxable year in which the Highly Compensated
                  Employee would have received such amounts in cash.

         (d) Distribution of Excess Before-Tax Contributions. To the extent that
the Plan Administrator chooses to distribute Excess Before-Tax Contributions to
comply with the ADP Test for a Plan Year, then the Plan Administrator shall
reduce Excess Before-Tax Contributions and the earnings thereon through the end
of the Plan Year for which such Excess Before-Tax Contributions were made, as
may be necessary to reduce the Deferral Percentages of the Highly Compensated
Employees with the largest amounts of Before-Tax Contributions. Such Excess
Before-Tax Contributions shall be distributed to the Highly Compensated
Employees with the largest amounts of Before-Tax Contributions taken into
account in calculating the ADP Test for the year in which the excess arose,
beginning with the Highly Compensated Employee with the largest dollar amount of
such Before-Tax Contributions and continuing in descending order until all of
the Excess Before-Tax Contributions have been distributed. For purpose of the
preceding sentence, largest amount is determined after distribution of any
Excess Before-Tax Contribution.

         (i)      To the extent practicable, any distribution shall be made from
                  a Participant's Accounts in the following order: first, from
                  amounts attributable to unmatched Before-Tax Contributions and
                  second, from amounts attributable to matched Before-Tax
                  Contributions.

         (ii)     Any distributions and the earnings thereon shall be
                  distributed, to the extent feasible, within two and one-half
                  months after the end of the Plan Year to which such Excess
                  Before-Tax Contributions relate, but no later than twelve
                  months thereafter.

         (iii)    The earnings on Excess Before-Tax Contributions is the amount
                  of the allocable gain or loss for the Plan Year. The method
                  used

                                       20
<PAGE>   28
                  to determine earnings on Excess Before-Tax Contributions shall
                  be consistently used for all Participants and for all
                  corrective distributions.

         (e) QNECS and QMACs. If the Company chooses to make QNECs and QMACs,
the Company shall do so before the end of the twelve-month period immediately
following the Plan Year to which the contributions relate.

         SECTION 6.3 RESERVED.

         SECTION 6.4 RESERVED.

         SECTION 6.5 CHANGES EFFECTED BY THE PLAN ADMINISTRATOR. Notwithstanding
the preceding provisions of this Article VI, the Plan Administrator is
authorized to take such action with respect to Before-Tax Contributions,
After-Tax Contributions, and Company Contributions of any Participant or groups
of Participants as may be necessary to avoid the disqualification of the Plan,
the loss of any tax deduction, or the imposition of any excise tax; provided,
however, that any such action shall generally be applied in a uniform and
nondiscriminatory manner.

         SECTION 6.6 RESERVED.

         SECTION 6.7 SPECIAL DEFINITIONS.

         "ADP Test" means the Average Actual Deferral Percentage Test, as
described in Section 6.2.

         "Annual Addition" means the sum of the following amounts credited to a
Participant's Accounts for the Plan Year:

         (a) Before-Tax Contributions;

         (b) After-Tax Contributions;

         (c) Matching Contributions;

         (d) Profit Sharing Contributions; and

         (e) forfeitures, if any.

         "Average Actual Deferral Percentage" means the average of the Deferral
Percentage of each of the Participants of any designated group of Participants
and shall be determined utilizing the data for the Plan Year in reference.

         "Deferral Percentage" means the ratio, expressed as a percentage, of
the amount of Before-Tax Contributions made to the Plan on behalf of an Eligible
Employee for a

                                       21
<PAGE>   29
Plan Year and any QNECs and QMACs treated as Before-Tax Contribution for such
Plan Year to the Eligible Employee's Compensation (within the meaning of Section
2.1) for any portion of such Plan Year during which the Eligible Employee was a
Participant.

         "Excess Before-Tax Contribution" means, for a Highly Compensated
Employee, the amount by which the Before-Tax Contributions of a Highly
Compensated Employee must be decreased so that the Deferral Percentage of the
Highly Compensated Employee will cause the ADP test to be satisfied.

         "QMAC" or "Qualified Matching Contribution" means Matching
Contributions which are subject to the distribution and nonforfeitability
requirements under Section 1165(e) of the PR Code when made.

         "QNEC" or "Qualified Non-Elective Contribution" means contributions
(other than Matching Contributions or Qualified Matching Contributions) made by
the Employer and allocated to Participants' Accounts that (i) the Participants
may not elect to receive in cash until distributed from the Plan, (ii) are
nonforfeitable when made, and (iii) are distributable only in accordance with
the distribution provisions that are applicable to Before-Tax Contributions.

         "Section 1165(e)(7)(A) Limit" means the lesser of ten percent (10%) of
the Employee's Compensation or $8,000 (or greater amount as may be permitted by
reason of the application of Section 1165(e) of the PR Code).

                                  ARTICLE VII

                                     VESTING

         SECTION 7.1 EMPLOYEE ACCOUNT. A Participant shall be 100 percent vested
in all amounts in his Employee Account at all times.

         SECTION 7.2 RETIREMENT. A Participant shall be 100 percent vested in
his Company Account upon attaining his Retirement Age while in Service.

         SECTION 7.3 DEATH OR DISABILITY. A Participant shall be 100 percent
vested in his Company Account upon the occurrence of the Participant's death or
Disability while in Service.

         SECTION 7.4 VESTING IN COMPANY ACCOUNT. A Participant's interest in the
Company Contributions and earnings attributable thereto credited to his Company
Account shall be 100 percent vested as of the date a Participant shall have
completed, and its credited with under the Plan, a Period of Service of five
years.

                                       22
<PAGE>   30
         SECTION 7.5 FORFEITURES.

         (a) Rules Applicable to Forefeitures. A Participant who has not
attained a Period of Service of five years as of his Severance Date shall
forfeit all Company Contributions and earnings thereon as of such Severance
Date. Any forfeitures under this Article VII shall be allocated to a forfeiture
suspence account under the Plan as of the applicable Participant's Severance
Date and shall be applied to reduce succeeding Company Contributions by the
Employees made after such Severance Date. If a Participant who incurs a
Severance Date subsequently resumes Service prior to the completion of a
Five-Year Period of Severance, the amount of Company Contributions and earnings
thereon previously forfeited shall be restored as of the date of such return to
Service.

         (b) Deemed Forfeiture Distribution. A Participant who forfeits Company
Contributions by operation of this Article VIII shall be deemed to have a
distribution of zero as of his Severance Date of his Company Contributions.

                                  ARTICLE VIII

                                  DISTRIBUTIONS

         SECTION 8.1 DISTRIBUTION OF VESTED ACCOUNT BALANCE.

         (a) Eligibility for Distribution. Following the occurrence of a
Participant's Severance Date for any reason other than death, the Participant
shall be entitled to receive a distribution of his Vested Account Balance.

         (b) Right to Defer. A Participant (i) who is eligible for a
distribution under Section 8.1(a) above, and (ii) whose Vested Account Balance
exceeds the Cash-Out Amount may elect to defer distribution of his Vested
Account Balance until the last day of any month selected by the Participant
after the month in which his Severance Date occurs, but in no event later than
his Required Beginning Date.

         SECTION 8.2 CASH-OUTS. Any other provision in the Plan to the contrary
notwithstanding, if on a Participant's Severance Date the Participant's Vested
Account Balance does not exceed the Cash-Out Amount, then (i) the Participant
shall not be eligible to make an election to delay payment described in Section
8.1(b), and (ii) the entire Vested Account Balance shall be distributed to the
Participant in a cash lump sum as soon as practicable following the
Participant's Severance Date.

         SECTION 8.3 FORM AND AMOUNT OF DISTRIBUTION.

         (a) Valuation. The amount of each distribution under this Article VII
shall be valued as of the Valuation Date immediately prior to the date such
distribution is made, and no interest or other earnings shall be credited on the
amount of the distribution from

                                       23
<PAGE>   31
such Valuation Date to the date that the proceeds of the distribution are
received by the Participant or transferred to an Eligible Retirement Plan
designated by the Employee.

         (b) Payment Options. A Participant may elect to receive his
distribution either (i) as a single lump sum or (ii) in monthly, quarterly,
semiannual or annual installments over a period not to exceed ten years, with
each installment being determined by dividing the total value of the
Participant's Account as of the Valuation Date immediately prior to the date
such installment is made by the total number of such remaining installments
(including that installment).

         (c) Payment Form. If a Participant elects to receive his distribution,
then, with respect to the Participant's Company Account and the portion, if any,
of the Participant's Employee Account invested in the Common Stock Fund, the
Participant may elect to receive such distribution in either (i) cash equal to
the value of the portion of the Vested Account Balance invested in the Common
Stock Fund, determined as of the Valuation Date immediately prior to the date of
such distribution, or (ii) a number of shares of Common Stock (and cash
representing any fractional shares) determined in accordance with Section
8.3(d). The remainder of the Participant's Employee Account not invested in the
Common Stock Fund shall be paid in cash.

         (d) Methodology for Calculating Shares of Common Stock. Shares of
Common Stock shall be in accordance with procedures applicable to all
Participants on a uniform basis. To determine the number of Shares of Common
Stock a Participant is entitled to on a Valuation Date, the amount of a
Participant's Account balance attributable to Shares of Common Stock will be
divided by the closing Share price for such Valuation Date. All fractional
Shares of Common Stock shall be paid in cash.

         (e) Certain Limitations on Distributions. If a Participant elects to
receive a distribution but the Participant does not elect a form of distribution
under Section 8.3(c) within the prescribed period, the value of the Vested
Account Balance shall be paid in cash.

         SECTION 8.4 ELECTIONS.

         (a) Election Procedures. To the extend permitted by the PR Code and
ERISA, a Participant may elect a distribution or a form of distribution
permitted by Section 8.3 by utilizing the Automated Response System in
accordance with the applicable procedures of such system. In the event the
Automated Response System is not available for a distribution election, the
Participant shall complete a form provided for this purpose by the Plan
Administrator, which shall be delivered to the Participant no earlier than
ninety days and no later than thirty days prior to the commencement of a
distribution. A distribution to a Participant will not commence before the
expiration of the thirty-day period beginning on the date that the Participant
is provided with the written notice and explanation contemplated by United
States Treas. Reg. Section 411(a)-11(c) (the "Notice"), unless the requirements
of Section 8.4(b) are satisfied.

                                       24
<PAGE>   32
         (b) Waiver of Thirty-Day Notice. Notwithstanding Section 8.4(a), if (i)
the Committee informs the Participant that the Participant has the right to a
period of at least thirty days after receiving the Notice to consider the
decision of whether to elect a distribution and (ii) the Participant, after
receiving the Notice, affirmatively elects, in writing or such other method
permitted by the US Code, to receive an immediate distribution and to waive the
remainder of the thirty-day period, then a distribution of the Participant's
Vested Account Balance may commence at any time following the expiration of the
seven-day period beginning on the date that the Notice was first delivered to
the Participant.

         (c) Beneficiary Designation. Subject to Section 8.4(d) below, a
Participant shall have the right to designate the Beneficiary who shall receive
the unpaid portion of his Vested Account Balance upon the death of the
Participant. Subject to Section 8.4(d) below, a Participant may from time to
time revoke or change his Beneficiary designation without the consent of any
prior Beneficiary by filing a new beneficiary designation form with the
Committee. The last such designation received by the Committee shall be
controlling; provided, however, that no designation form, or change or
revocation thereof, shall be effective unless received by the Plan Administrator
prior to the Participant's death, and in no event shall it be effective as of
any date prior to such receipt. In the absence of an effective designation,
payment shall be made to the Participant's surviving Spouse, or if the
Participant has no surviving Spouse, to the Participant's estate in accordance
with the provisions of the Puerto Rico Civil Code.

         (d) Spouse as Beneficiary. Anything in Section 8.4(c) to the contrary
notwithstanding, the designation by a Participant who has a Spouse at the time
of such designation of a non-Spouse Beneficiary or Beneficiaries shall be
effective only with Spousal Consent. Any such Spousal Consent shall be
irrevocable by the Spouse. Any Spousal Consent shall be effective as of the date
of such consent and shall be valid only with respect to the Spouse who signs
such consent. Spousal Consent will be deemed satisfied if it is established to
the satisfaction of the Plan Administrator that Spousal Consent cannot be
obtained because (i) the Participant in fact has no Spouse, (ii) the
Participant's Spouse cannot be located, or (iii) of other circumstances as the
Plan Administrator may determine in accordance with applicable law.

         (e) QDROs. Notwithstanding any other provision of the Plan to the
contrary, benefits awarded to any alternate payeee (as defined in Section
206(d)(3) of ERISA) pursuant to a Qualified Domestic Relations Order may be
distributed to the alternate payee at any time upon the request of such
alternate payee and without regard to any limitation in the Plan as to the time
when such benefits would otherwise have been distributable.

         SECTION 8.5 REEMPLOYMENT. If a Participant is entitled to a
distribution pursuant to this Article VIII but does not receive such
distribution prior to resuming

                                       25
<PAGE>   33
Service, then no distribution will be made to him as a result of the
Participant's prior Severance Date and the distributable amounts shall be
retained in his Accounts.

         SECTION 8.6 MINIMUM REQUIRED DISTRIBUTIONS. Notwithstanding any other
provision of the Plan, distributions under the Plan shall be made in accordance
with the amount and timing requirements of Section 401(a)(9) of the US Code.
Furthermore, a Participant who (i) is not a Five-Percent Owner, (ii) attains age
seventy and one-half on or after January 1, 1999 and (iii) is an Employee on
April 1st of the year following the year in which the Participant attains age
seventy and one-half shall not receive a distribution of his Vested Account
Balance until the Participant's Severance Date, but in no event later than April
1st following the year in which such Severance Date occurs.

         SECTION 8.7 DEATH OF A PARTICIPANT.

         (a) Death in Service. If a Participant's Service with PaineWebber ends
by reason of the Participant's death, the Participant's Beneficiary shall
receive a distribution of his Vested Account Balance in a lump sum as soon as
practicable after the date of death of the Participant. Notwithstanding anything
to the contrary, if the Vested Account Balance equals or exceeds the Cash-Out
Amount, the Beneficiary may elect to defer distribution of the Vested Account
Balance until the Participant's Required Beginning Date. The amount of the lump
sum shall be valued as of the Valuation Date immediately prior to the date of
the distribution. If a portion of the Vested Account Balance is invested in the
Common Stock Fund, the Beneficiary may elect to receive shares of Common Stock
in connection with such lump sum distribution in the manner contemplated by
Section 8.3(c) as if, solely for such purpose, the Beneficiary were the electing
Participant.

         (b) Death After Distributions Commence. If a Participant who is
currently receiving an installment distribution dies before his entire Vested
Account Balance is distributed to him, then the remaining portion of his Vested
Account Balance, if any, shall be distributed at least as rapidly as under the
method of distributions being used prior to the date of the Participant's death;
provided, however, that if a Beneficiary so elects, the Participant's remaining
Vested Account Balance may be paid to the Beneficiary in a lump sum. If a
Participant who has incurred a Severance Date and elected a lump sum payment
dies before such payment is made to the Participant, such prior election by the
Participant shall be void and the provisions of Section 8.7(a) shall apply as if
the Participant had died in Service.

         SECTION 8.8 ROLLOVERS. An Eligible Employee may elect, at the time and
in the manner prescribed the Committee, to have the distributable amounts under
the Plan paid directly to an Eligible Retirement Plan specified by the Employee
in a Direct Rollover. The Committee may establish or change reasonable
procedures from time to time to effectuate Direct Rollovers.

                                       26
<PAGE>   34
                                   ARTICLE IX

                        IN-SERVICE WITHDRAWALS AND LOANS

         SECTION 9.1 WITHDRAWAL ON ACCOUNT OF ATTAINING AGE FIFTY-NINE AND ONE
HALF. Any Participant who has attained age fifty-nine and one-half and who is in
Service may withdraw any or all of his Vested Account Balance in the following
order (i) After-Tax Contributions and the earnings attributable to After-Tax
Contributions, (ii) Rollover Contributions, (iii) Vested Supplemental Profit
Sharing Contributions, (iv) Vested Basic Profit-Sharing Contributions, (v)
Vested Matching Contributions and (vi) Before-Tax Contributions.

         SECTION 9.2 WITHDRAWALS OF AFTER-TAX AND ROLLOVER CONTRIBUTIONS. A
Participant who is in Service may withdraw at any time the portion of his
After-Tax Contributions contributed to his Account. A Participant who is in
Service may also withdraw, at any time, any amount of his Rollover
Contributions.

         SECTION 9.3 WITHDRAWALS ON ACCOUNT OF FINANCIAL HARDSHIP.

         (a) Contributions Available for Hardship Withdrawals. A Participant who
is in Service and who has made all permissible withdrawals under Sections 9.1.
and 9.2, and who has received all permissible loans under Section 9.4 may
withdraw in a hardship withdrawal under this Section 9.3(a) (i) all or any
amount of his Before-Tax Contributions, (ii) any earnings credited on Before-Tax
Contributions prior to December 31, 1988 and (iii) all or any amount of his
vested Company Contributions and any earnings thereon.

         (b) Purpose for Hardship Withdrawal. Hardship withdrawals shall be
limited to the amount necessary to satisfy the Financial Hardship of the
Participant and not reasonably available from other resources. In determining
whether a request for a withdrawal from the Plan is necessary to satisfy a
Financial Hardship of the Participant, the Plan Administrator shall rely on a
written representation by the Participant that (i) the need cannot be reasonably
met (x) through reimbursement or compensation by insurance or otherwise, (y) by
liquidation of the Participant's assets, and (z) by borrowing from commercial
sources on reasonable commercial terms in an amount sufficient to satisfy the
Financial Hardship, and (ii) the Participant has taken all available
distributions and loans from the Plan and will suspend, for a period of not less
than twelve months, his Before-Tax Contributions to the Plan.

         (c) Order of Plan Interests. Hardship withdrawals shall be deemed to be
paid in the following order of the Participant's interest in his Accounts: (i)
from the portion of his Company Account which is attributable to Profit Sharing
Contributions and Matching Contributions and in which the Participant is 100
percent vested, (ii) from the portion of his Employee Account which is
attributable to Before-Tax Contributions, and (iii) from

                                       27
<PAGE>   35
the portion of his Employee Account which is attributable to earnings, if any,
on Before-Tax Contributions which were credited to the Employee Account as of
December 31, 1988.

         SECTION 9.4 PLAN LOANS.

         (a) Persons Eligible for Plan Loans. Upon approval by the Committee or
its delegate that a Participant has a Loan Need, and to the extent permitted by
applicable law, Plan Loans may be granted under the terms of the Plan to the
following persons:

         (i)      each Participant prior to his separation from Service; and

         (ii)     each former officer or director or other "party-in-interest"
                  as defined by Section 3(14) of ERISA.

         Notwithstanding anything in the preceding sentence to the contrary, a
Plan Loan will be granted regardless of whether the Participant has a Loan Need
if (i) the proceeds of the Plan Loan are paid from the Participant's Rollover
Account, or (ii) the Participant has attained at least age fifty-nine and
one-half.

         (b) Number of Plan Loans. Each person who is eligible for a Plan Loan
under this Article shall be precluded from having more than one Plan Loan
outstanding at a time.

         (c) Amount of Plan Loan. The amount of any Plan Loan shall be governed
by the following rules:

         (i)      Each Plan Loan must be for an amount equal to at least $1,000.

         (ii)     The amount of a Participant's other Plan Loans may not exceed
                  the lesser of:

                  (A)      fifty percent of the value of the Participant's
                           Vested Account Balance, or

                  (B)      $50,000, reduced by the excess, if any, of:

                           (y)      the highest outstanding balance of a
                                    Participant's Plan Loans during the one-year
                                    period ending the day before a new Plan Loan
                                    is to be made or a Plan Loan is to be
                                    renegotiated, over

                           (z)      the outstanding balance of a Participant's
                                    Plan Loans on the day before the day the new
                                    Plan Loan

                                       28
<PAGE>   36
                                    is to be made, or a Plan Loan is to be
                                    renegotiated, or

                  (C)      the value of the Participant's Employee Account.

         (iii)    For the purpose of determining any outstanding Plan Loan
                  balances, the Plan Administrator may use the amortization
                  schedule included in the Participant's loan agreement, unless
                  the Plan Administrator has reason to know of a material
                  discrepancy between the amount set forth on the amortization
                  schedule and the actual outstanding Plan Loan balance.

         (d) Term of Plan Loan. All Plan Loans, other than those for the purpose
of purchasing or constructing the dwelling unit which is, or within a reasonable
time will be, the principal residence of the Participant ("Principal Residence
Loans"), must be repaid over a period of one, two, three, four of five years.
Principal Residence Loans must be repaid over a period of five, ten or twenty
years. All Plan Loans must be repaid within ninety days after the Participant's
Severance Date.

         (e) Interest Rate. Each Plan Loan granted or renewed hereunder shall
bear a reasonable rate of interest on the unpaid balance. The interest rate,
which shall remain in effect for the term of the Plan Loan, shall accrue on the
Principal amount of a Plan Loan up to and including the date on which the
earliest of the following occurs: a prepayment, a deemed distribution, or an
offset against an actual distribution, as applicable.

         (f) Repayment.

         (i)      The terms of the Plan Loan shall be evidenced by written
                  documentation including, without limitation, a loan
                  application form, any required truth-in-lending disclosure
                  statement, a promissory note, a payroll deduction
                  authorization and an amortization schedule signed by the
                  Participant specifying the amount of the Plan Loan, the term
                  of the Plan Loan, the repayment schedule, the Participant's
                  consent to a distribution in the event of Default (as defined
                  below), and such other information as the Plan Administrator
                  determines is necessary to describe the terms of the Plan
                  Loan. If the Benefits Administration Committee so provides,
                  Plan Loans may be originated, processed, and administered
                  through the Automated Response System, in accordance with the
                  procedures of such system which shall be uniformly applied to
                  all similarly situated Participants.

         (ii)     The Plan Loan must be repaid in a series of substantially
                  level installments as determined by the Plan Administrator
                  (not less

                                       29
<PAGE>   37
                  frequently than quarterly) over the term of the Plan Loan,
                  except for the last repayment.

         (iii)    Notwithstanding anything in this paragraph to the contrary,
                  but subject to Section 9.4(h) below, recipients of a Plan Loan
                  who are no longer on the payroll because of an uncompensated
                  leave of absence, Disability, or Military Leave or who are
                  transferred to a work location where payroll deductions are
                  not possible, shall make cash payments to the Trustee of the
                  Plan.

         (iv)     Proceeds from the repayment of a Participant Loan shall be
                  allocated among the Investment Funds in the same proportion,
                  if any, that the Participant has elected to invest new Plan
                  contributions at the time of each such repayment.

         (g) Prepayments. Full cash prepayments of a Plan Loan may be made to
the Trustee of the Plan, without imposition of any penalty. Notwithstanding
anything contained herein to the contrary, with respect to a Participant who has
an outstanding Plan Loan at his termination of employment, such Participant may
make a cash prepayment in any amount.

         (h) Unpaid Absences. If a Participant who has a Plan Loan outstanding
is no longer on the payroll because of an uncompensated leave of absence,
Disability, or Military Leave such that payroll deductions are not possible,
such Participant may continue to make payments in accordance with Section
9.4(f)(iii) above or may submit a request for suspension of such payments during
such unpaid leave of absence to the Plan Administrator. If a Participant
requests a suspension, such Participant's payments may be suspended for up to
one year in the sole discretion of the Plan Administrator; provided, however,
that any Compensation paid by PaineWebber to such Participant during the leave
of absence is insufficient to make the payments required on the Plan Loan for
the duration of such period; and provided further that the Plan Administrator's
decision shall be made pursuant to procedures uniformly applied to all similarly
situated Participants. The term of a Plan Loan shall not be extended beyond the
limits imposed by Section 9.4(d) by reason of this Section 9.4(h), regardless of
whether a Participant's payments are suspended hereunder. Installments due on a
Plan Loan will be increased proportionately upon expiration of the Participant's
leave of absence to compensate for the period of suspension, if necessary.

         (i) Defaults. If a Participant fails to comply with the terms of this
Section 9.4 or fails to make any installment payment of any Plan Loan within
ninety days of the date when due ("Default"), the entire unpaid principal amount
of such Plan Loan, together with any accrued and unpaid interest thereon, shall
immediately become due and payable.

         (j) Remedies. If a Participant Defaults on a Plan Loan and such
Participant is not entitled to a distribution from his Accounts, then the Plan
Administrator will declare a

                                       30
<PAGE>   38
deemed distribution to have occurred with respect to such Plan Loan, effective
as of the ate of the Default. Such deemed distribution shall be applied toward
the satisfaction of the Participant's Plan Loan at the time a distribution is
made to the Participant in accordance with the terms of the Plan and the balance
of the Participant's Accounts will be reduced accordingly at such time. If a
Participant Defaults on a Plan Loan and such Participant is eligible for a
distribution from any of the Participant's Accounts in accordance with the terms
of the Plan, the Plan Administrator shall cause a distribution from the
Participant's Accounts to be applied towards satisfaction of the Participant's
Plan Loan Default effective as of the date of Default and the balance of the
Participant's Accounts will be reduced accordingly.

         (k) Source and Application of Funds.

         (i)      All Plan Loans shall be made from and considered assets of the
                  Trust. All Plan Loans shall be secured, as of the date of the
                  Plan Loan, by the portion of a Participant's Vested Account
                  Balance under the Plan which is equal to the outstanding Plan
                  Loan balance.

         (ii)     A Participant's application for a Plan Loan submitted to the
                  Plan Administrator shall constitute an investment direction to
                  sell or liquidate from Investment Funds in the Participant's
                  Employee Account an amount sufficient to yield the amount of
                  the Plan Loan approved by the Plan Administrator, regardless
                  of whether the Participant subsequently declines the Plan
                  Loan.

         (iii)    Until disbursed by the Trustee to the Participant as a Plan
                  Loan, the proceeds of the liquidation of the Investment Funds
                  in a Participant's Account shall be held uninvested. If a
                  Participant declines a Plan Loan after such Plan Loan has been
                  approved by the Plan Administrator, the proceeds of the
                  liquidation shall be reinvested in the Investment Funds in the
                  same proportion as the amounts in the Participant's Account
                  were invested in such Investment Funds immediately before
                  liquidation.

         (iv)     Upon the disbursement of the Plan Loan to the Participant, the
                  Participant's Account shall be deemed invested (and each
                  Participant's application for a Plan Loan shall constitute an
                  election to invest), to the extent of the unpaid balance of
                  such Plan Loan, in the Plan Loan extended to the Participant.
                  The unpaid balance of any Plan Loan shall not reduce the
                  amount credited to the Participant's Account.

         (l) Plan Loan Application and Processing. Plan Loan applications are
made by completing the required forms constituting the Loan Agreement and
submitting such

                                       31
<PAGE>   39
forms and any additional required documentation to the Plan Administrator. The
Plan Administrator may, but shall not be required to, direct the Trustee to make
a Plan Loan to such Participant from the Plan. The Plan Administrator may
establish or change from time to time the standards or requirements for making
any Plan Loan; provided, however, that the standards or requirements shall be
nondiscriminatory, uniformly applicable to all Participants similarly situated,
and shall permit Plan Loans to be available to all Participants on a reasonably
equivalent basis.

         SECTION 9.5 ORDER OF LIQUIDATION OF INVESTMENT FUNDS. In connection
with each withdrawal or loan under this Article IX, the Participant's
investments in each Investment Fund shall be liquidated pro rata from each
Investment Fund.

         SECTION 9.6 VALUATION. The valuation of a Participant's Accounts for
purposes of any withdrawal or Plan Loan under this Article IX shall be
determined as of the Valuation Date immediately prior to the date of the Plan
Loan or withdrawal, and no interest or other earnings shall be credited on the
amount of such withdrawal from such Valuation Date to the date the proceeds of
the withdrawal or Plan Loan are received by the Participant or transferred, if
applicable, to an Eligible Retirement Plan designated by the Employee.

         SECTION 9.7 DEATH. If a Participant should die prior to the payment of
any withdrawal or the disbursement of the proceeds of any Plan Loan requested
under this Article IX, the Participant's withdrawal or loan request shall be
void as of the date of death.

                                    ARTICLE X

                           ADMINISTRATION OF THE PLAN

         SECTION 10.1 IN GENERAL. The administration, management, and operation
of the Plan, and the responsibility for the management and investment of the
assets of the Trust Fund shall be allocated among the Investment Committee, the
Benefits Administration Committee, the Plan Administrator, the Trustee and their
respective delegates, agents and appointees in the manner described in this
Article X and in Article XI.

         SECTION 10.2 APPOINTMENT OF COMMITTEES. The Board shall appoint the
members of each Committee, and each Committee shall consist of such number of
individuals as have been appointed from time to time by the Board and who are
then serving on the Committee. Committee members shall serve at the pleasure of
the Board and may be removed by the Board for any reason or for no stated reason
upon written notice to the individual Committee member. Such removal shall be
effective upon delivery of the written notice to the member of the Committee or
as of the date of removal specified in such written notice, if later. If an
individual who is serving on a

                                       32
<PAGE>   40
Committee terminates Service with PaineWebber for any reason, the individual
will automatically be deemed to be removed as a Committee member as of the date
of such termination of Service without further action by the Board or such
individual. An individual may resign as a member of the Committee on thirty
days' prior written notice to the Board, or such lesser period as the Board
shall allow on a case-by-case basis.

         SECTION 10.3 CHAIRMAN, SECRETARY, AGENTS. Each Committee shall have a
Chairperson appointed by the Board or, if no such Chairperson is appointed by
the Board, elected from among its members. Each Committee shall appoint a
Secretary who may, but need not, be one of the members of the Committee. Each
Committee may appoint agents who may, but need not, be members of the Committee.
Any person who is appointed as an agent of the Committee may be delegated such
powers and duties as the Committee may deem expedient or appropriate. No member
of the Committee will receive any compensation for his services as such.

         SECTION 10.4 MEETINGS. A Committee shall hold meetings upon such
notice, at such place or places, and at such intervals as it may from time to
time determine. Meetings of a Committee may be held in person, by telephone,
through other suitable communications media, or in any combination thereof.

         SECTION 10.5 QUORUM AND VOTING. If the number of members of the
Committee in office at the relevant time is an odd number, then a majority of
such members shall constitute a quorum for the transaction of business. If the
number of members of the Committee in office at the relevant time is an even
number, then one-half of such members shall constitute a quorum for the
transaction of business. Any action taken by a majority of the members of a
Committee at a meeting at which a quorum is present shall constitute for all
purposes of the Plan an act of the Committee. Each Committee shall have the
authority to ratify and approve any prior actions taken on behalf of the
Committee.

         SECTION 10.6 EXPENSES. The reasonable expenses incident to the
operation of the Plan, including the compensation of the Trustee, attorneys,
fiduciaries, and such other technical and clerical assistance as may be
required, shall be paid by PaineWebber; provided, however, that PaineWebber, in
its discretion and in accordance with applicable law, may elect at any time to
have such expenses paid out of the Trust Fund.

         SECTION 10.7 POWERS AND DUTIES OF THE BENEFITS ADMINISTRATION
COMMITTEE.

         (a) General Authority. Except as otherwise provided in Sections 10.8
and 10.9, the Benefits Administration Committee shall have responsibility for
the interpretation and construction of the Plan and shall be the final authority
with respect to the operation and administration of the Plan. The Benefits
Administration Committee shall have the power and the duty to take all actions
and to make all decisions necessary or proper to carry out its responsibilities
under the Plan. All determinations of the Benefits Administration Committee as
to any question involving its responsibilities under

                                       33
<PAGE>   41
the Plan, including, but not limited to, interpretation of the Plan, or as to
any discretionary actions to be taken under the Plan, shall be solely in the
Benefits Administration Committee's discretion and shall be final, conclusive,
and binding on all persons claiming to have any right or interest in or under
the Plan.

         (b) Additional Power and Responsibilities. In addition to any implied
powers and duties which may be needed to carry out the provisions of the Plan,
the Benefits Administration Committee shall have the following specific powers
and duties:

         (i)      To a make and enforce such rules and regulations as it shall
                  deem necessary or proper for the efficient administration of
                  the Plan;

         (ii)     To construe and interpret the terms and provisions of the Plan
                  and all documents which relate to the Plan and to decide any
                  and all matters arising thereunder, including the right to
                  remedy possible ambiguities, inconsistencies, or omissions;

         (iii)    To determine the eligibility for benefits under the Plan;

         (iv)     To investigate and make factual determinations with regard to
                  any matter related to the Plan;

         (v)      To appoint one or more Plan record keepers and third-party
                  administrators;

         (vi)     To review appeals of claims for benefits in accordance with
                  Section 10.11, and to approve or deny any such benefit claim;

         (vii)    To undertake any action that Section 10.8 allows the Plan
                  Administrator to undertake; and

         Notwithstanding anything to the contrary in this Section 10.9, the
Benefits Administration Committee may delegate any of its administration
functions to the Plan Administrator.

         (c) Residual Authority. Any power, duty or responsibility with respect
to Plan administration and operation not specifically allocated hereunder shall
reside with the Benefits Administration Committee.

         SECTION 10.8 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR.

         (a) General Authority. The Plan Administrator shall have day-to-day
responsibility for the operation and administration of the Plan. The Plan
Administrator shall have the power and the duty to take all actions and to make
all decisions necessary or proper to carry out its responsibilities under the
Plan.

                                       34
<PAGE>   42
         (b) Additional Powers and Responsibilities. In addition to any implied
powers and duties which may be needed to carry out the provisions of the Plan,
the Plan Administrator shall have the following specific powers and duties:

         (i)      To monitor and supervise the activities of any Plan record
                  keepers and third-party administrators appointed for the Plan;

         (ii)     To review benefit claims in accordance with Section 10.11 and
                  to approve or deny any benefit claim;

         (iii)    To review domestic relations orders and to determine whether
                  any such domestic relations order constitutes a QDRO;

         (iv)     To approve Plan Loans, hardship withdrawals, other-in-service
                  withdrawals or Plan distributions;

         (v)      To determine the eligibility for benefits under the Plan;

         (vi)     To investigate and make factual determinations with regard to
                  any matter related to the Plan;

         (vii)    To compute the Account balance or the amount which shall be
                  payable to any Participant or Beneficiary in accordance with
                  the provisions of the Plan or to review the computation or
                  amount computed by any third-party administrator;

         (viii)   To supervise the employees of PaineWebber who are retained in
                  connection with the operation of the Plan;

         (ix)     To determine which Plan expenses shall be charged to the Trust
                  Fund; and

         (x)      To authorize disbursements from the Trust Fund.

         (c) Voting and Investment Direction. The Plan Administrator shall be
responsible for supervising the implementation of all investment directions by
Participants and their Beneficiaries, and the actions necessary to permit the
exercise by Participants and Beneficiaries of voting and other rights with
respect to any Investment Fund, including, without limitation, the Common Stock
Fund. Furthermore, the Plan Administrator shall use his best efforts to ensure
the confidentiality of all information relating to Participants' investments and
the exercise of voting and other rights. In furtherance thereof, the Plan
Administrator shall be permitted to delegate all or any of the foregoing
responsibilities to any other fiduciary of the Plan whenever the Plan
Administrator, in his judgment, determines that such delegation is in the bets
interests of Participants and their Beneficiaries.

                                       35
<PAGE>   43
         (d) QDRO Procedures. The Plan Administrator shall establish, and may
change from time to time, reasonable rules and procedures to determine the
qualified status of any domestic relations orders (as defined in Section
206(d)(3) of ERISA).

         SECTION 10.9 POWERS AND DUTIES OF THE INVESTMENT COMMITTEE.

         (a) General Authority. The Investment Committee shall have
responsibility for the selection of the Investment Funds, the periodic review
and performance of the manager of each Investment Fund, and the direction of the
Trustee with respect to the investment of the assets of the Plan to the extent
that such direction is not delegated to Participants under the terms of the
Plan. The Investment Committee shall have the power and the duty to take all
actions and to make all decisions necessary or property to carry out its
responsibilities under the Plan.

         (b) Additional Powers and Responsibilities. In addition to any implied
powers and duties which may be needed to carry out the provisions of the Plan,
the Investment Committee shall have the following specific powers and duties:

         (i)      To determine the number and category of Investment Funds that
                  will be offered under the Plan;

         (ii)     To appoint, remove or change, from time to time, persons
                  constituting "Investment Managers," as defined in Section
                  3(38) of ERISA, to manage the assets of an Investment fund,
                  and to delegate to such Investment Managers the exclusive
                  authority to manage (including the power to acquire and
                  dispose of) all or such portion of the Trust Fund as the
                  Committee shall designate at any time or from time to time as
                  constituting such Investment Fund or as may be allocated to
                  such Investment Fund by Participants;

         (iii)    To investigate and make factual determinations with regard to
                  any matter related to the Trust Fund; and

         (iv)     To make and enforce such rules and regulations as it shall
                  deem necessary or proper for the efficient investment of the
                  Trust Fund.

         Subject to ERISA and the PR Code, an Investment Manager appointed
hereunder may be the Company or an Affiliated Employer.

         SECTION 10.10 DELEGATION OF AUTHORITY. Notwithstanding anything in this
Article X to the contrary, each Committee and the Plan Administrator may
authorize or delegate one or more persons to perform the routine administrative
functions of the Committee or the Plan Administrator, and to sign on behalf
thereof any statements of the Committee or instructions to the Trustee, or
notices or other communications to Participants, Beneficiaries or other persons.

                                       36
<PAGE>   44
         SECTION 10.11 BENEFIT CLAIMS PROCEDURES.

         (a) Initial Review. In the event any person disputes the amount of, or
his entitlement to, any benefits under the Plan or their method of payment, such
person shall file a claim in writing (identified as a claim) for the benefits to
which he believes he is entitled with the Plan Administrator, setting forth the
reason for his claim. The Plan Administrator shall consider the claim and, if he
shall deny such claim in whole or in part, within ninety days he shall give to
such person (and if such person has designated in writing any representative, he
shall also give a copy to such representative) (i) a written notice setting
forth the specific reason or reasons for the denial of the claim, including
references to the applicable provisions of the Plan, (ii) a description of any
additional material or information necessary to perfect such claim along with an
explanation of why such material or information is necessary, and (iii)
appropriate information as to the procedure to be followed for review of such
claim by the Committee. If the Plan Administrator shall fail to respond to such
claim within ninety days after its receipt, such claim, for purposes of seeking
review by the Benefits Administration Committee, shall be deemed denied.

         (b) Appeal. Any person whose claim is denied by the Plan Administrator
may request that the Benefits Administration Committee review the Plan
Administrator's decision by filing a written request with the Benefits
Administration Committee for such review within sixty days after such claim is
denied. In connection with that review, such person (or his authorized
representative) may examine pertinent documents and submit such written comments
as may be appropriate. The Benefits Administration Committee shall render its
decision within sixty days after the receipt of the request for review, unless
special circumstances require an extension of time up to an additional sixty
days. Any decision of the Benefits Administration Committee shall be in writing
and shall include specific reasons for the decision and references to the
pertinent provisions of the Plan on which the decision is based.

         SECTION 10.12 NAMED FIDUCIARY. The Benefits Administration Committee
shall be the "named fiduciary" for purposes of Section 402(c) of ERISA.

         SECTION 10.13 INDEMNIFICATION. PaineWebber shall indemnify and hold
harmless, to the extent permitted by law, the Plan Administrator, each
Committee, each individual member of a Committee and each person to whom
fiduciary responsibilities are delegated by the Plan Administrator or a
Committee from and against any liability, damage, cost and expense (including
attorneys' fees and amounts paid in settlement of any claim approved by
PaineWebber) incurred by or asserted against him by reason of his occupying or
having occupied fiduciary positions in connection with the Plan, except that no
indemnifications shall be provided if an indemnified person personally profits
from any act or transaction in respect of which indemnification is sought.
Neither the Plan Administrator nor any member of a Committee shall be liable for
any act or omission by him unless such act or omission constitutes a breach of
his fiduciary duty under ERISA.

                                       37
<PAGE>   45
         SECTION 10.14 RELIANCE ON REPORTS AND CERTIFICATES. Each Committee and
Plan Administrator will be entitled to rely conclusively upon all tables,
valuations, certificates, opinions and reports which will be furnished by
PaineWebber, any accountant controller, counsel, the Trustee or other person who
is employed or engaged for such purposes.

         SECTION 10.15 MEMBERS' OWN PARTICIPATION. Neither the Plan
Administrator nor any member of a Committee may act, vote or otherwise influence
a decision specifically relating to his own participation under the Plan. Any
person or group of persons may serve in more than one fiduciary capacity with
respect to the Plan, including without limiting the generality of the foregoing,
service as both Plan Administrator and a member of the Committee.

                                   ARTICLE XI

                         TRUST FUND AND INVESTMENT FUNDS

         SECTION 11.1 TRUSTEE. A Trustee shall be designated by the Company and
a Trust Agreement shall be executed between the Company and such Trustee under
the terms of which a Trust Fund shall be established to receive and hold
contributions, dividends, and other income, to invest the assets of the Trust
Fund, and to pay the expenses of, and the benefits provided by, the Plan.

         SECTION 11.2 INVESTMENT OF TRUST FUND. The Trustee shall invest and
reinvest the Trust Fund as follows:

         (a) all Matching Contributions and the earnings thereon shall be
invested exclusively in the Common Stock Fund; and

         (b) all amounts in each Participant's Employee Account and Profit
Sharing Account shall be invested and reinvested as elected by Participants from
among the Investment Funds made available by the Investment Committee from time
to time, one of which shall be the Common Stock Fund. Investment Funds may be
added or deleted from time to time by the Investment Committee and may include
open-ended investment companies registered under the Investment Company Act of
1940, as amended, which are managed by the Company or an Affiliated Employer.

         SECTION 11.3 ELECTION OF INVESTMENT FUNDS.

         (a) Choice of Investment Funds. Each Participant shall be permitted to
elect the Investment Fund or Funds in which the amounts in his Employee Account
and Profit Sharing Account shall be invested. Subject to Section 11.3(c), on
each Business Day a Participant shall be permitted to reallocate the amounts in
his Employee Account and Profit Sharing Account between and among the Investment
Funds. Such reallocation will be effected through the Automated Response System
in accordance with the procedures

                                       38
<PAGE>   46
of such system. If a Participant elects to participate in the Plan, but fails to
elect the Investment Fund or Funds in which the amounts in his Employee Account
and Profit Sharing Account are to be invested, the amounts in his Employee
Account and Profit Sharing Account shall be invested in a default Investment
Fund specified by the Investment Committee. All elections with respect to the
investment of Before-Tax Contributions and After-Tax Contributions shall be made
in such minimum percentages of each Investment Fund as the Plan Administration
shall from time to time determine.

         (b) Frequency of Investment Allocations. On any Business Day, a
Participant may change his investment elections with respect to the allocation
of future Before-Tax Contributions, After-Tax Contributions, and Profit Sharing
Contributions. All elections shall be made by utilizing the Automated Response
System in accordance with the procedures of such system.

         (c) Use and Limitations. The Benefits Administration Committee shall
adopt such rules and procedures as it deems advisable with respect to all
matters relating to the election and use of the Investment Funds. The Plan
Administrator shall advise, or make provisions to advise, the Trustee of all
elections made by Participants pursuant to this Section 11.3. The Plan
Administrator shall have the right without prior notice to any Participant, to
suspend for a limited period of time daily transfers between and among
Investment Funds or to delay effecting transfers between and among Investment
Funds for one or more days if the Plan Administrator determines that such action
is necessary or advisable (i) in light of unusual market conditions, (ii) in
response to technical or mechanical problems with the Automated Response System
or the Plan's third-party record keeper, or (iii) in connection with any
suspension of normal trading activity on the New York Stock Exchange.

         SECTION 11.4 ALLOCATION AND INVESTMENT OF CONTRIBUTIONS.

         (a) Allocation of Matching Contributions. Matching Contributions
contributed to the Trust Fund for each Plan Year shall be allocated to the
Matching Contribution Account of each Participant for whom a Matching
Contribution is made and shall be invested in the Common Stock Fund as soon as
practicable after the date such amounts are contributed to the Trust Fund.

         (b) Allocation of Profit Sharing Contributions. Profit Sharing
Contributions to the Trust Fund for each Plan Year shall be allocated to the
Profit Sharing Contribution Account of each Participant for whom a Profit
Sharing Contribution is made and shall be invested in the Investment Fund or
Funds selected by the Participant in accordance with the provisions of Section
11.3(b) as soon as practicable after the date such amounts are contributed to
the Trust Fund.

         (c) Before-Tax Contributions and After-Tax Contributions. Before-Tax
Contributions and After-Tax made by a Participant for a Plan Year shall be
allocated to the Employee Account of such Participant and shall be invested in
the Investment Fund

                                       39
<PAGE>   47
or Funds selected by the Participant in accordance with the provisions of
Section 11.3(b) as soon as practicable after the date such amounts are
contributed to the Trust Fund.

         SECTION 11.5 VALUATION OF ACCOUNTS. As of each Valuation Date, the
Trustee shall determine the value of the Trust Fund and each Investment Fund,
and the Plan Administrator shall cause the value of the Accounts of each
Participant to be determined based upon such valuation. The valuation
methodology used by the Trustee for purposes of valuing the Trust Fund shall be
reasonable in light of prevailing commercial practices for defined contribution
plans that utilize daily valuations and daily transfers, and shall take into
account all contributions, withdrawals, distributions, charges, income, gains
and losses to the Trust Fund from the prior Valuation Date.

         SECTION 11.6 PURCHASE AND SALES OF COMMON STOCK. Whenever the Trustee
is authorized or required to sell shares of Common Stock held in the Common
Stock Fund in response to a change in the investment allocation of a
Participants Account, the Trustee may, in its absolute discretion, purchase for
the benefit of the Common Stock Fund or other portion of the Trust Fund the
shares to be sold at their fair market value (as determined by the Trustee on a
uniform basis consistently applied) on the applicable date.

         SECTION 11.7 NON-REVERSION. Except as provided in Section 11.8, all
contributions when made to the Trust Fund and all property of the Trust Fund,
including income from investments and all other sources, shall be retained for
the exclusive benefit of Participants or their Beneficiaries and shall be used
to pay benefits provided hereunder or to pay expenses of administration of the
Plan and the Trust Fund to the extent not paid by PaineWebber.

         SECTION 11.8 RETURN OF CERTAIN COMPANY CONTRIBUTIONS. Notwithstanding
any other provisions of the Plan to the contrary, in the case of any Before-Tax
Contribution, After-Tax Contribution, or Company Contribution which is made by
an Employer as a result of a mistake of fact or which is conditioned upon the
deductibility thereof under Section 1023(n) of the PR Code, such contribution,
to the extent made by a mistake of fact or to the extent that the deduction for
such contribution is disallowed, shall be returned to PaineWebber or the
Participant, as the case may be; provided, however, that contributions are
returned within one year after it is mistakenly paid or one year after such
deduction is disallowed, as the case may be. For these purposes, all Before-Tax
Contributions and Company Contributions are expressly declared to be conditioned
upon their deductibility under Section 1023(n) of the Code.

         SECTION 11.9 VOTING OF COMMON STOCK. A Participant shall be entitled to
direct the exercise of voting rights or other rights with respect to the number
of whole and fractional shares of Common Stock which corresponds to the
Participant's Account Balance which is invested in the Common Stock Fund.
PaineWebber shall provide to each Participant materials pertaining to the
exercise of such rights containing all the materials distributed to shareholders
of PWG. A Participant shall have the opportunity to

                                       40
<PAGE>   48
exercise any such rights within the same time period as shareholders of PWG and
if the Participant declines to exercise his voting or other rights with respect
to such Common Stock, such Common Stock shall not be voted by the Trustee. Any
shares of Common Stock held by the Trustee which as of the record date are not
allocated to the Employee Account or Company Account of any Participant shall
not be voted by the Trustee.

                                   ARTICLE XII

                            AMENDMENT OR TERMINATION

         SECTION 12.1 RIGHT TO AMEND OR TERMINATE. The Company, with respect to
each Employer, and each Employer, with respect to its Employees, maintains the
right to suspend, terminate, or completely discontinue contributions under the
Plan. In addition, the Plan may be amended or modified from time to time by the
Company; provided, however, that no such action shall adversely affect the
accrued benefit of any Participant. Notwithstanding the foregoing, any
modification or amendment of the Plan may be made prospectively or
retroactively, including retroactively if necessary or appropriate to qualify or
maintain the Plan as a plan meeting the requirements of the PR Code and ERISA,
as now in effect or hereafter amended, or any other provisions of law, as now in
effect or hereafter amended or adopted, and any regulation issued thereunder.
Any amendment to the Plan may be made by the Board or the Compensation Committee
to the Board. Notwithstanding the foregoing, any amendment to the Plan which (i)
is necessary or advisable to effect changes approved by the Compensation
Committee of the Board, (ii) makes changes required by applicable law, (iii)
adopts technical or clarifying amendments, or (iv) does not in any significant
respect increase benefits or cost to the Company may be made by any of the
following Company officers: the Chairman and Chief Executive Officer, the
President, the Chief Financial Officer, the General Counsel and the Director of
Human Resources.

         SECTION 12.2 MERGERS, CONSOLIDATIONS AND TRANSFERS. The Plan shall not
be automatically terminated by the Company's acquisition by, or merger into, any
other company, but the Plan shall be continued after such merger, provided the
successor company agrees to continue the Plan. All rights to amend, modify,
suspend, or terminate the Plan shall be transferred to the successor company,
effective as of the date of the merger. The merger or consolidation with, or
transfer of assets and liabilities to, any other qualified retirement plan shall
be permitted only if each Participant would receive a benefit immediately after
such merger, consolidation, or transfer of assets and liabilities (determined as
if the Plan had then terminated) which is equal to or greater than the benefit
he would have received immediately before any such transaction (determined as if
the Plan had then terminated); provided, however, that this sentence shall not
be construed as requiring the full vesting of all Accounts in connection with
any event described in this Section 12.2.

                                       41
<PAGE>   49
         SECTION 12.3 VESTING AND DISTRIBUTION UPON PLAN TERMINATION.

         (a) Vesting. In the event that (i) the Plan shall be terminated, (ii)
the Puerto Rico Treasury Department or the Board determines that a partial
termination of the Plan has occurred, or (iii) any Employer completely
discontinues contributions to the Plan, then (i) the accrued benefit of all
Participants, in the case of a Plan termination, or (ii) the accrued benefits of
those Participants affected by the partial termination or complete
discontinuance of contributions, in the case of a partial termination or
complete discontinuance of contributions, shall be fully vested and
nonforfeitable. In the case of a complete termination of the Plan, any
unallocated assets of the Trust Fund then held by the Trustee shall be
allocated, after providing for any unpaid expenses, among the appropriate
Company Accounts and Employee Accounts of Participants. Upon a complete
termination of the Plan, the Accounts of all Participants shall be distributed
in a lump sum in accordance with the distribution provisions of Article VIII.

         (b) Distribution. Such Participants shall receive a lump sum
distribution of the balances in the Participant's Accounts following the
allocation described in Section 12.3(a) as soon as practicable after Plan
termination provided that the Employer does not establish or maintain a
successor plan. For purposes of this Section 12.3(b), a successor plan is any
defined contribution plan maintained by the Employer, provided, however, that if
at all times during the twenty-four month period beginning twelve months before
the Plan termination, fewer than two percent of the Employees who were eligible
to participate in the Plan as of the date of its termination are eligible to
participate under the other defined contribution plan, such plan is not a
successor plan. A plan is a successor plan only if it exists at any time during
the period beginning on the date of plan termination and ending twelve months
after distribution of all assets from the terminated plan.

         SECTION 12.4 DISTRIBUTIONS UPON SALE OR DISPOSITION OF SUBSTANTIALLY
ALL OF THE COMPANY'S ASSETS OR OF A SUBSIDIARY.

         (a) Distribution Permitted. In the event that the Company (i) sells or
disposes of substantially all of the assets used by the Company in the trade or
business of the Company to an unrelated corporation or (ii) sells or disposes of
its interest in a subsidiary to an unrelated entity or individual, Participants
may receive a distribution of their Vested Account Balances as soon as
practicable after such sale or disposition, as long as the following provisions
apply:

         (i)      The Company continues to maintain the Plan after the sale or
                  disposition and the purchaser does not maintain or adopt the
                  Plan. The purchaser shall be considered to maintain the Plan
                  if the purchaser adopts the Plan or otherwise becomes an
                  employer whose employees accrue benefits under the Plan. The
                  purchaser shall also be considered to maintain the Plan if the
                  Plan is merged

                                       42
<PAGE>   50
                  or consolidated with, or any assets or liabilities are
                  transferred from, the Plan to a plan maintained by the
                  purchaser. A purchaser shall not be considered to maintain the
                  Plan by virtue of any accepting elective transfers or rollover
                  contributions from the Plan to a plan maintained by the
                  Purchaser.

         (ii)     The Participant seeking a distribution pursuant to this
                  Section 12.4 continues employment as an employee of the
                  purchaser.

         (iii)    Before-Tax Contributions shall not be distributed under this
                  Section 12.4 except in connection with a sale or disposition
                  that results in the Participant's transfer to the purchaser. A
                  distribution shall not be considered to have been made in
                  connection with a sale or disposition unless such distribution
                  was made by the end of the second calendar year after the
                  calendar year in which the disposition occurred.

         (b) For purposes of this Section 12.4, the sale of "substantially all"
the assets used in a trade or business means the sale of at least eighty-five
percent of the assets. The term "unrelated" entity or individual means one that
is not required to be aggregated with the Company under Section 414(b), (c),
(m), or (o) of the US Code.

         SECTION 12.5 WITHDRAWAL OF AN EMPLOYER. Upon any Employer's withdrawal
from the Plan, the Benefits Administration Committee may direct, in accordance
with ERISA and the PR Code, that any or all of the Accounts of the affected
Participants (who are Employees of such Employer) may continue to be maintained
by the Plan, or, after payment of or provision of expenses and charges and
appropriate adjustment of the Accounts of all such Participants as described in
Section 10.6, the Benefits Administration Committee may direct, subject to ERISA
and the PR Code, that the balances of such Accounts be transferred, subject to
Section 12.2, to a successor defined contribution plan that is qualified under
Section 1165(a) of PR Code.

                                  ARTICLE XIII

                                GENERAL PROVISION

         SECTION 13.1 NO GUARANTEE OF EMPLOYMENT. The Plan shall not be deemed
to constitute a contract between PaineWebber and any person or to be a
consideration for, or an inducement for, the employment of any person by
PaineWebber. Nothing contained in the Plan shall be deemed to give any person
the right to be retained in the service of any Employer or to interfere with the
right of PaineWebber to discharge or to terminate the service of any Employee at
any time without regard to the effect such discharge or termination may have on
any rights under the Plan.

                                       43
<PAGE>   51
         SECTION 13.2 PAYMENTS TO MINORS AND INCOMPETENTS. If a Participant or
Beneficiary entitled to receive any benefits hereunder is a minor or is deemed
by the Plan Administrator or is adjudged to be legally incapable of giving valid
receipt and discharge for such benefits, the benefits will be paid to such
persons as the Plan Administrator shall designate or to the duly appointed
guardian. Such payments shall, to the extent made, be deemed a complete
discharge of any liability for such payment under the Plan.

         SECTION 13.3 NONALIENATION OF BENEFITS. To the extent permitted by law,
no benefit payable under the Plan will be subject in any manner to anticipation,
assignment, garnishment or pledge, and any attempt to anticipate, assign,
garnish or pledge the same will be void and no such benefits will be in any
manner liable for or subject to the debts, liabilities, engagements or torts of
any Participant. Notwithstanding the foregoing, the creation, assignment or
recognition of a right to any benefit payable with respect to a Participant (i)
pursuant to a Qualified Domestic Relations Order or (ii) in a manner consistent
with United States Treas. Reg. Section 1.401(a)-13(b)(2) related to federal tax
levies shall not be treated as an assignment or alienation prohibited in this
Section 13.3.

         SECTION 13.4 EVIDENCE OF SURVIVOR. If the Plan Administrator, or the
Trustee with the assistance of the Plan Administrator, cannot make payment of
any amount to a Participant or Beneficiary within two years after such amount
becomes payable because the identity or whereabouts of such Participant or
Beneficiary cannot be ascertained notwithstanding the mailing of a notice to
such Participant or Beneficiary by certified mail to his last known address, the
Plan Administrator, at the end of such two-year period, may direct that all
unpaid amounts which would have been payable to such Participant or Beneficiary
be forfeited and treated as a forfeiture under Section 7.5. In determining
whether such two-year period has elapsed, the Plan Administrator may establish
rules to be applied on a uniform and nondiscriminatory basis concerning how such
periods shall be counted. Notwithstanding the foregoing, the forfeited benefits
of any Participant or Beneficiary shall be reinstated and payment of such
benefits will commence upon the filing at any time of a claim for such benefits
by such Participant or Beneficiary.

         SECTION 13.5 TITLES AND HEADINGS. The titles to Articles and headings
of Sections in the Plan are for convenience of reference only and, in case of
any conflict, the text of the Plan, rather than such titles and headings, shall
control.

         SECTION 13.6 GOVERNING LAW. To the extent not preempted by ERISA, the
provisions of the Plan will be construed according to the laws of the
Commonwealth of Puerto Rico applicable to agreements to be wholly performed
therein and without regard to the choice of law provisions thereof.

                                       44

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