<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
December 31, 1993 0-8709
U. S. TRUST CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-2927955
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
114 West 47th Street, New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(212) 852-1000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, Par Value $1 Per Share
(Title of Class)
Rights to Purchase Series A Participating Cumulative Preferred Shares
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date
within 60 days prior to the date of filing. (See definition of
affiliate in Rule 405, 17 CFR 230.405.)
$473,506,000 as of February 28, 1994
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
9,376,347 Common Shares, Par Value $1 Per Share, as of February 28,
1994.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the following documents are incorporated by reference:
(1) Annual report to shareholders for fiscal year ended December
31, 1993 (Part I, Part II); (2) Definitive proxy statement for
annual meeting of shareholders to be held on April 26, 1994 (Part
III).
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<PAGE>
PART I
------
Item 1. Business
- -----------------
U.S. Trust Corporation was incorporated in New York in December
1977 and became a bank holding company under the Federal Bank Holding
Company Act of 1956, as amended, on June 2, 1978.
The Corporation and its subsidiaries ("the Corporation") had total
assets of approximately $3.2 billion, total deposits of approximately
$2.5 billion and shareholders' equity of approximately $229 million at
December 31, 1993. At year-end, the Corporation had 2,473 full-time
employees.
The Corporation provides a full array of services to individuals,
institutions and funds, including asset management, private banking,
fiduciary and securities services.
For a description of the Corporation's principal areas of business,
see pages 26 through 29 of the 1993 Annual Report to Shareholders filed
herewith as Exhibit 13, which description is incorporated by reference
herein.
Competition
-----------
The trust and agency business is highly competitive. Many
commercial banks, with larger capitalizations and deposits, and several
smaller specialized banks throughout the country provide similar
fiduciary services. The Corporation also competes with investment
counselling firms and with investment bankers and brokers which offer
advisory services and, to some extent, with mutual funds.
In its private banking, corporate trust and securities services
activities, the Corporation operates in an intensely competitive
environment, both as to service and price, with other banks principally
in the New York metropolitan area, California, Florida, Texas and the
pacific northwest.
Banking and Trust Subsidiaries
- ------------------------------
United States Trust Company of New York ("the Trust Company"), the
Corporation's lead bank, was created by Special Act of the New York
Legislature in 1853. The Trust Company is a member bank of the Federal
Reserve System, an insured bank of the Federal Deposit Insurance
Corporation and a member of the New York Clearing House Association.
The Trust Company had total assets of approximately $2.9 billion,
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Banking and Trust Subsidiaries (Cont'd.)
- ------------------------------
total deposits of approximately $2.3 billion and shareholder's equity of
approximately $189 million at December 31, 1993. Dividends have been
paid by the Trust Company in every year since its organization in 1853.
At year-end, the Trust Company had 1,829 full-time employees.
The Corporation's other banking subsidiaries are U.S. Trust Company
of California, N.A. ("California"), U.S. Trust Company of Florida
Savings Bank ("Florida") and U.S. Trust Company of Texas, N.A.
("Texas"). Each of these subsidiaries have full banking and trust
powers within their respective states and provide essentially comparable
services to those offered by the Trust Company.
U.S. Trust Company of New Jersey ("New Jersey") is a full-service
trust company. New Jersey consists of the investment advisory
activities formerly conducted by Delafield, Harvey, Tabell, Inc.
("Delafield"), an investment advisory company that was acquired as of
March 31, 1992. In addition to its trust activities, commencing in
1993, New Jersey also provides private banking services.
On December 1, 1992, the Corporation acquired Campbell,
Cowperthwait & Co., Inc. ("Campbell"), a New York City-based investment
advisory company. On July 7, 1993, the Corporation acquired Capital
Trust Company ("Capital Trust"), an Oregon-based trust and investment
management firm. As of January 1, 1994, Capital Trust changed its name
to U.S. Trust Company of the Pacific Northwest and its consulting
practice was contributed to a separate subsidiary, CTC Consulting, Inc.
Both acquisitions were accounted for as poolings-of-interests. For an
additional discussion of these acquisitions, see pages 32 to 33 of the
1993 Annual Report to Shareholders and Note 2 of Notes to Consolidated
Financial Statements on page 40 of such Annual Report filed herewith as
Exhibit 13, which discussion is incorporated by reference herein.
Government Monetary Policies
- ----------------------------
Monetary authorities have a significant impact on the operating
results of the Corporation and other financial service institutions.
The decisions of the Board of Governors of the Federal Reserve System
("the Board of Governors") affect the supply of money and member bank
reserves by means of open market operations in U. S. Government
securities or by changes in the discount rate or reserve requirements.
The Board of Governors' actions have an important influence on the
growth of bank loans and investments and the level of interest charged
for loans and paid on deposits. Because of changing conditions in the
money markets, as a result of actions by the Board of Governors and
other regulatory authorities, interest rates, credit availability,
deposit levels and bond and stock prices may change materially due to
circumstances beyond the control of the Corporation.
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Supervision and Regulation of the Corporation and Affiliates
- ------------------------------------------------------------
Bank Holding Company Act of 1956
--------------------------------
The Corporation is a bank holding company within the meaning of the
Federal Bank Holding Company Act of 1956 (the "Act") and is so
registered with the Board of Governors. As such, the Corporation is
required to file with the Board of Governors annual reports and other
information and is subject to examination regarding its business
operations and those of its subsidiaries. Further, a bank holding
company and its subsidiaries are prohibited from engaging in certain
tie-in arrangements in connection with the extension of credit or
provision of any property or service.
The Act requires every bank holding company to obtain the prior
approval of the Board of Governors before acquiring substantially all
the assets of any bank or before acquiring direct or indirect ownership
or control of more than 5% of the voting shares of any bank which is not
already majority-owned. The Act prohibits the acquisition by a bank
holding company of shares of a bank located outside the state in which
the operations of its banking subsidiaries are principally conducted,
unless such an acquisition is specifically authorized by a statute of
the state in which the bank to be acquired is located. The Act, also
prohibits a bank holding company, with certain exceptions, from
acquiring more than 5% of the voting shares of any company which is not
a bank and from engaging in any business other than banking or managing
or controlling banks or furnishing services to or performing services
for its subsidiary banks. One of the exceptions to this prohibition is
engaging in, or acquiring shares of a company which engages in,
activities which the Board of Governors has determined to be so closely
related to banking or managing or controlling banks as to be a proper
incident thereto. Under current regulations, bank holding companies and
their subsidiaries are permitted to engage in such banking and banking-
related businesses as equipment leasing, computer service bureau
operations, acting as investment or financial adviser, performing
fiduciary, agency and custodial services, certain types of real estate
financing and providing management consulting advice to non-affiliated
banks.
In approving acquisitions by bank holding companies of banks and
companies engaged in banking-related activities, the Board of Governors
considers a number of factors, including the expected benefits to the
public such as greater convenience, increased competition or gains in
efficiency, as weighed against the risks or possible adverse effects
such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices. The
Board of Governors is also empowered to differentiate between activities
commenced de novo and activities commenced through acquisition of a
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Supervision and Regulation of the Corporation and Affiliates
(Cont'd.)
- ------------------------------------------------------------
going concern. The Board of Governors may order a bank holding company
to terminate any activity or its ownership or control of a nonbank
subsidiary if the Board of Governors finds that such activity or
ownership or control constitutes a serious risk to the financial safety,
soundness or stability of a subsidiary bank and is inconsistent with
sound banking principles or statutory purposes.
Other Federal and State Banking Regulation
------------------------------------------
The Superintendent of Banks of the State of New York has the
discretion to examine the affairs of the Corporation for the purpose of
determining the financial condition of the Trust Company. The Trust
Company and its operations are subject to federal and New York State
laws applicable to commercial banks and trust companies and to
regulation and examination by both federal and New York banking
authorities. Government regulations affecting the Trust Company and its
operations include minimum capital requirements, the requirement to
maintain reserves against deposits, restrictions on the nature and
amount of loans which may be made by the Trust Company and restrictions
relating to investments and other activities.
New York banks are barred from acting as a fiduciary in a number of
states, and in a number of other states where they may and do act as a
fiduciary, their activities are limited by state law and regulations.
The Corporation through its ownership of Florida is a savings bank
holding company. Accordingly, the Corporation and Florida are subject
to regulation and examination by the Office of Thrift Supervision.
California and Texas are subject to regulation and examination by the
Office of the Comptroller of the Currency. New Jersey is subject to
regulation and examination by the Banking Department of the State of New
Jersey. U.S. Trust Company of the Pacific Northwest is subject to
regulation and examination by the Division of Finance and Corporate
Securities of the State of Oregon.
The Federal Reserve Act and the Federal Deposit Insurance Act
impose certain restrictions on loans by the bank subsidiaries to the
Corporation and each other. In addition, the Corporation and its
subsidiaries are subject to restrictions imposed by the Banking Act of
1933 with respect to engaging in certain aspects of the securities
business.
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Statistical Information
- -----------------------
The following items set forth certain statistical information
concerning the Corporation. The page numbers indicated below correspond
to page numbers in the 1993 Annual Report to Shareholders filed herewith
as Exhibit 13. The applicable statistical data presented on those
pages, under the captions specifically cited, are incorporated herein by
reference.
I. Distribution of Assets, Liabilities and Shareholders'
Equity; Interest Rates and Interest Differential
-----------------------------------------------------
A. Information with respect to the distribution of assets,
liabilities and shareholders' equity is included on pages 60 and 61
under the caption "Three-Year Net Interest Income and Average Balances."
B. An analysis of net interest income is shown on pages 60 and 61
under the caption "Three-Year Net Interest Income and Average Balances."
The amounts of the taxable equivalent adjustments are as follows:
(In Thousands) 1993 1992 1991
- -------------- ------- ------- -------
Investment Securities $5,750 $8,105 $10,011
====== ====== =======
Loans $ 60 $ 132 $ 217
====== ====== =======
Interest on non-accrual and restructured loans has been included in this
analysis only to the extent collected.
C. An analysis of rate and volume variances is shown on page 59
under the caption "Analysis of Change in Net Interest Income."
II. Investment Portfolio
--------------------
Information with respect to the composition of the investment
securities portfolio is shown on page 62 under the caption "Securities
(Carrying Amount at Year End)." The maturity distribution of the year-
end 1993 portfolio is shown on page 62 under the caption "Maturity
Schedule of Securities Based on Amortized Cost at December 31, 1993."
III. Loan Portfolio
--------------
A. Information with respect to loan categories is included on
page 43 under the caption "Loans."
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III. Loan Portfolio (Cont'd.)
--------------
B. Information on maturities and sensitivity to changes in
interest rates is shown on page 62 under the captions "Maturity Schedule
of Loans at December 31, 1993" and "Interest Sensitivity of Loans at
December 31, 1993."
C. Information on risk elements is included on page 43 under the
caption "Loans".
IV. Summary of Credit Loss Experience
---------------------------------
Information with respect to credit loss experience and a discussion
of the factors considered in determining the amount of the allowance for
credit losses are shown on page 64 under the caption "Summary of Credit
Loss Experience."
V. Deposits
--------
A. Information with respect to average deposit balances is shown
on page 63 under the caption "Analysis of Average Daily Deposits."
B. Information on time certificates of deposit is shown on page
63 under the caption "Maturity Distribution of Interest Bearing Deposits
in Amounts of $100,000 or more at December 31, 1993."
C. Information on savings deposits is shown on page 63 under the
caption "Maturity Distribution of Time Deposits in Amounts of $100,000
or more at December 31, 1993."
VI. Return on Equity and Assets
---------------------------
Information with respect to return on equity and assets is shown on
page 25 under the caption "Selected Financial Data."
VII. Short-Term Borrowings
---------------------
Information with respect to short-term borrowings is shown on page
44 under the caption "Federal Funds Purchased, Securities Sold Under
Agreements to Repurchase and Other Borrowings."
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Item 2. Properties
- ------- ----------
The Trust Company rents approximately 1,179,000 square feet of
office space in New York City, of which approximately 432,000 square
feet are sublet to various sub-tenants. The Trust Company and certain
subsidiaries occupy approximately 60% (378,000 square feet) of a 25-
story bank and office building at 114 West 47th Street (the Trust
Company's statutory principal office) under a lease expiring in 2014.
Certain of the Trust Company's departments occupy approximately 335,000
square feet of space at 770 Broadway under a lease expiring in 2005.
The Trust Company owns a 5-story building at 9-11 West 54th Street and
leases adjoining property for the operation of a branch office. The
Trust Company also operates branch offices in leased premises at 100
Park Avenue and 111 Broadway.
Certain subsidiaries of the Corporation occupy leased office space
in New York City; Costa Mesa, California; Los Angeles, California;
Stamford, Connecticut; Washington, D.C.; Boca Raton, Florida; Naples,
Florida; Palm Beach, Florida; Boston, Massachusetts; Princeton, New
Jersey; Portland, Oregon, and Dallas, Texas.
Item 3. Legal Proceedings
- ------- -----------------
Various actions and claims are pending or are threatened against
the Trust Company or the Corporation in which liability has been denied.
Included among these is the following case:
In July 1990, an action captioned "Official Committee of Unsecured
Creditors of Fulfillment Associates, Inc. v. Louis Freedman et al. v.
United States Trust Company of New York" was brought in the United
States Bankruptcy Court for the Eastern District of New York. The
complaint was filed by the Creditors Committee of Fulfillment
Associates, Inc. (the "Debtor") against shareholders of the Debtor who
sold their shares in a leveraged buyout financed by the Trust Company.
The complaint seeks damages in excess of $500,000 and alleges a
fraudulent transfer in the granting of liens to the Trust Company on the
assets of the Debtor, abuse of fiduciary duty by the shareholders and
breach of employment agreements entered into by shareholders with the
Debtor. The shareholders have filed a third-party complaint against the
Trust Company seeking indemnification or contribution for all amounts
for which the shareholders may be held liable to the Creditors
Committee. The Trust Company is vigorously defending this matter. Its
motion to dismiss the third-party complaint is pending before the
Bankruptcy Court.
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Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
None
Item 10. Executive Officers of the Registrant
- -------- ------------------------------------
Name (Age) Business Experience
---------- -------------------
H. Marshall Schwarz (57) Chairman of the Board and Chief Executive
Officer (since February 1990) of the
Corporation and of the Trust Company.
President (from prior to March 1989 to
February 1990) of the Corporation and of
the Trust Company.
Jeffrey S. Maurer (46) President (since February 1990) of the
Corporation and of the Trust Company.
Executive Vice President (from prior to
March 1989 to February 1990) of the
Corporation and of the Trust Company.
Donald M. Roberts (58) Vice Chairman (since February 1990) and
Treasurer (from prior to March 1989) of
the Corporation and of the Trust Company.
Executive Vice President (from prior to
March 1989 to February 1990) of the
Corporation and of the Trust Company.
Frederick B. Taylor (52) Vice Chairman and Chief Investment
Officer (since February 1990) of the
Corporation and of the Trust Company.
Executive Vice President of the
Corporation and Executive Vice President
and Chairman, Investment Policy of the
Trust Company (from prior to March 1989
to February 1990).
Frederick S. Wonham (62) Vice Chairman (since February 1990) of
the Corporation and of the Trust Company.
Executive Vice President (from prior to
March 1989 to February 1990) of the
Corporation and of the Trust Company.
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PART II
-------
Item 5. Market for the Registrant's Common Stock and Related
- ------- Stockholder Matters
----------------------------------------------------
The information required under this item is incorporated herein by
reference from page 63 of the 1993 Annual Report to Shareholders filed
herewith as Exhibit 13.
Item 6. Selected Financial Data
- ------- -----------------------
The information required under this item is incorporated herein by
reference from page 25 of the 1993 Annual Report to Shareholders filed
herewith as Exhibit 13.
Item 7. Management's Discussion and Analysis of Financial
- ------- Condition and Results of Operations
-------------------------------------------------
The information required under this item is incorporated herein by
reference from pages 26 through 34 of the 1993 Annual Report to
Shareholders filed herewith as Exhibit 13. In addition, the following
information is added, under the indicated heading.
Income Taxes
- ------------
The Corporation had deferred tax assets of $42.7 million at
December 31, 1993. The Corporation has sufficient Federal income tax
carryback potential to realize the entire Federal income tax portion of
its deferred tax assets. The state and local income tax portion of the
Corporation's deferred tax assets is theoretically realizable based upon
the taxable income that is expected to be generated in the current year
for state and local purposes from the Corporation's ongoing operations.
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The information required under this item is incorporated herein by
reference from pages 35 through 57 of the 1993 Annual Report to
Shareholders filed herewith as Exhibit 13.
-11-
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Item 9. Changes in and Disagreements with Accountants on
- ------- Accounting and Financial Disclosure
------------------------------------------------
None
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
Item 11. Executive Compensation
- -------- ----------------------
Since the close of its fiscal year ended December 31, 1993, the
Corporation has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A for the annual meeting of shareholders to be
held on April 26, 1994 which involves the election of directors.
Accordingly, Part III (Items 10 and 11, other than that portion of Item
10 relating to executive officers, which is included on page 10 hereto)
of this Report is omitted in accordance with General Instruction G(3) to
Form 10-K. In accordance with such General Instruction, the information
required under these items is incorporated herein by reference from
pages 12 through 24 of such definitive proxy statement filed herewith as
Exhibit 99, except that, in accordance with paragraph (a)(9) of Item 402
of Regulation S-K, the information required by paragraph (k)
(Compensation Committee Report on Executive Compensation) (pages 13
through 15 of such definitive proxy statement) and paragraph (l)
(Performance Graph) (page 21 of such definitive proxy statement) of Item
402 is not incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
- -------- Management
---------------------------------------------------
The information required under this item is incorporated herein by
reference from pages 3 through 11 of the definitive proxy statement for
the annual meeting of shareholders to be held on April 26, 1994 filed
herewith as Exhibit 99.
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Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
The information required under this item is incorporated herein by
reference from page 24 of the definitive proxy statement for the annual
meeting of shareholders to be held on April 26, 1994 filed herewith as
Exhibit 99.
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
----------------------------------------------------
(a) (1) Exhibits
--------
Reference is made to the attached Index of Exhibits included
herein on page 14 for a list of the exhibits filed as part of this
Report.
(a) (2) Financial Statements and Schedules
----------------------------------
Reference is made to the attached Index to Financial Statements
and Schedules included herein on page 24 for a list of the financial
statements and schedules filed as part of this Report.
(b) Reports on Form 8-K
-------------------
None.
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<PAGE>
Index of Exhibits
-----------------
Exhibit No. Item
- ----------- -----------------------------------------------------------
3.1 Certificate of Incorporation of the Corporation, as amended
through May 4, 1993, filed as Exhibit 3(i) to the
Corporation's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993*.
3.2 By-Laws of the Corporation, as amended through October 28,
1986, filed as Exhibit (3) to the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31,
1987.*
4 Note: The exhibits filed herewith do not include the
instruments with respect to long-term debt of the
registrant and its subsidiaries, inasmuch as the total
amount of debt authorized under any such instrument does
not exceed 10% of the total assets of the registrant and
its subsidiaries on a consolidated basis. The registrant
agrees, pursuant to Item 601(b)(4)(iii) of Regulation S-K,
that it will furnish a copy of any such instrument to the
Securities and Exchange Commission upon request.
4.1 Specimen certificate representing the Corporation's Common
Shares, filed as Exhibit 6.3(a) to the Corporation's
Registration Statement on Form S-14 (Registration
No. 2-60433).*
4.2 Form of Rights Agreement, dated as of January 26, 1988,
between the Corporation and Morgan Shareholder Services
Trust Company, as Rights Agent, filed on January 28, 1988
as Exhibit 1 to the Corporation's Registration Statement on
Form 8-A registering Rights to Purchase the Corporation's
Series A Participating Cumulative Preferred Shares.*
4.3 Form of Amendment No. 1, dated as of December 12, 1989, to
the Rights Agreement, between the Corporation and First
Chicago Trust Company of New York (formerly Morgan
Shareholder Services Trust Company), as Rights Agent, filed
as Exhibit 4.4 to the Corporation's Current Report on Form
8-K dated December 12, 1989.*
- -----------------------------
* Incorporated by reference.
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Index of Exhibits
-----------------
(Continued)
Exhibit No. Item
- ----------- -----------------------------------------------------------
4.4 Specimen certificate representing Rights to Purchase the
Corporation's Series A Participating Cumulative Preferred
Shares, filed on January 28, 1988 as Exhibit B to Exhibit 1
to the Corporation's Registration Statement on Form 8-A
registering such Rights.*
10.1 Trust Company's Lease, dated June 20, 1980, with New York
Equities, Inc. covering space at 770 Broadway, New York,
New York (the "770 Lease"), filed as Exhibit (10)(b) to the
1990 10-K.*
10.2 Amendments to the 770 Lease between the Trust Company and
New York Equities, Inc. dated, respectively, as of April
20, 1981 and as of July 1, 1981; an amendment to the 770
Lease, between the Trust Company and Georgetown 770 Realty
Company, as successor to New York Equities, Inc., dated as
of May 31, 1984; and amendments to the 770 Lease between
the Trust Company and New York Equities Company, as
successor to New York Equities, Inc., dated, respectively,
as of May 15, 1986 and as of December 8, 1988, filed as
Exhibit (10)(c) to the Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1989 (the "1989
10-K").*
10.3 Amendment to the 770 Lease between the Trust Company and
New York Equities Company dated as of June 1, 1990, filed
as Exhibit (10)(d) to the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991 (the
"1991 10-K").*
10.4 Lease, dated as of September 10, 1987, between 46-47
Associates, as Lessor, and the Trust Company, as Lessee,
covering space at 114 West 47th Street, New York, New York;
letters modifying the terms of such Lease dated,
respectively, September 10, 1987 and October 2, 1989;
Subordination Agreement dated as of September 10, 1987
between the Trust Company and 1133 Building Corp.
subordinating to such Lease a ground lease with respect to
the property subject to such Lease; Right of First Refusal
dated as of September 10, 1987 between the Trust Company
- -----------------------------
* Incorporated by reference.
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Index of Exhibits
-----------------
(Continued)
Exhibit No. Item
- ----------- -----------------------------------------------------------
10.4 and the Lessor respecting the construction of an annex (at
(Cont'd.) 130 West 47th Street, New York, New York) adjacent to the
property subject to such Lease and which annex is to be
subject to such Lease; and Agreement dated as of September
10, 1987 among the Trust Company, the Lessor and 1155
Office Building Corp. under which the Trust Company and the
Lessor may exercise an option to purchase property (at 132
West 47th Street, New York, New York) contiguous to the
property subject to such Lease, filed as Exhibit (10)(k) to
the 1989 10-K.*
10.5 Lease modification agreement, dated December 7, 1987,
between 46-47 Associates, as Lessor, and the Trust Company,
as Lessee; Modification of Annex Agreement, dated December
7, 1987, between 46-47 Associates and the Trust Company;
Modification of Right of First Refusal Agreement, dated
December 7, 1987, between 1133 Building Corp. and the Trust
Company York, New York.
10.6 Confirmation and Clarification Agreement, dated March 10,
1992, between 46-47 Associates, as Lessor, and the Trust
Company, as Lessee, amending the lease agreement dated
September 10, 1987.
10.7 Clarification of Lease Modification Agreement, dated March
24, 1992, between 46-47 Associates, as Lessor, and the
Trust Company, as Lessee; Clarification of Right of First
Refusal Agreement, dated March 24, 1992, between 1133
Building Corp. and the Trust Company; Termination of Annex
Agreement, dated March 24, 1992, between 46-47 Associates
and the Trust Company; Agreement, dated March 24, 1992,
between 46-47 Associates and the Trust Company; Grant of
Easement and Zoning Lot and Development Agreement, dated
March 24, 1992, between 46-47 Associates and 1133 Building
Corp., and Indenture, dated March 24, 1992, between 46-47
Associates and David Puchall.
10.8 Second Lease Modification Agreement, dated May 10, 1993,
between 46-47 Associates, as Lessor, and the Trust Company,
as Lessee, amending the lease agreement dated September 10,
1987.
- -----------------------------
* Incorporated by reference.
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Index of Exhibits
-----------------
(Continued)
Exhibit No. Item
- ----------- -----------------------------------------------------------
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
---------------------------------------------
10.9 1981 Incentive Stock Option Plan of the Trust Company and
Affiliated Companies, as amended through January 1, 1983.
10.10 Amendment dated July 27, 1987 to the 1981 Incentive Stock
Option Plan of the Trust Company and affiliated companies,
filed as Exhibit (10)(m) to the 1990 10-K.*
10.11 Amendment dated January 26, 1988 to the 1981 Incentive
Stock Option Plan of the Trust Company and affiliated
companies, filed as Exhibit (10)(n) to the 1990 10-K.*
10.12 1986 Stock Option Plan of the Trust Company and Affiliated
Companies, as amended through October 24, 1989, filed as
Exhibit (10)(s) to the 1989 10-K.*
10.13 Annual Incentive Plan of U.S. Trust Corporation, as
amended, restated and renamed effective as of January 1,
1994.
10.14 1990 Annual Incentive Plan of the Trust Company and
Affiliated Companies, as amended and restated effective as
of January 1, 1994.
10.15 Long-Term Performance Plan of U.S. Trust Corporation, as
amended, restated and renamed effective as of January 1,
1994.
10.16 1988 Long-Term Performance Plan of U.S. Trust Corporation,
as amended, restated and renamed effective as of January 1,
1994.
10.17 1989 Stock Compensation Plan of U.S. Trust Corporation, as
amended, restated and renamed effective as of January 1,
1994, included in Exhibit 99 of this Form 10-K as
Appendix A.
10.18 Benefit Equalization Plan of U.S. Trust Corporation, as
amended, restated and renamed effective as of January 1,
1994.
- -----------------------------
* Incorporated by reference.
-17-
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<PAGE>
Index of Exhibits
-----------------
(Continued)
Exhibit No. Item
- ----------- -----------------------------------------------------------
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS (Cont'd.)
---------------------------------------------
10.19 1990 Change in Control and Severance Policy for Top Tier
Officers of the Trust Company and Affiliated Companies,
as amended and restated effective as of January 1, 1994.
10.20 Agreements re supplemental retirement benefits for Messrs.
Schwarz, Maurer, Roberts, Taylor and Wonham, as amended
and restated as of January 25, 1994.
10.21 Executive Deferred Compensation Plan of U.S. Trust
Corporation, as adopted effective as of January 1, 1994.
10.22 The Corporation's Stock Option Plan for Non-Employee
Directors filed as Exhibit (10)(u) to the 1989 10-K.*
10.23 Board Members' Deferred Compensation Plan of U.S. Trust
Corporation, as amended, restated and renamed effective
as of January 1, 1994, included in Exhibit 99 of this
Form 10-K as Appendix B.
10.24 Board Members' Retirement Plan of U.S. Trust Corporation,
as amended, restated and renamed effective as of January 1,
1994.
10.25 Stock Plan for Non-Officer Directors of U.S. Trust
Corporation effective as of February 15, 1992, filed as
Exhibit A to Exhibit 28 to the 1991 10-K.*
11 Statement re Computation of Per Share Earnings.
13 1993 Annual Report to Shareholders.
22 List of Subsidiaries.
23 Consent of Independent Accountants.
99 Definitive Proxy Statement.
- -----------------------------
* Incorporated by reference.
-18-
<PAGE>
<PAGE>
This Report has been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission, and the financial
statements incorporated by reference herein have been prepared in
accordance with such rules and regulations and with generally accepted
accounting principles, by officers and employees of the Corporation and
its affiliates. This has been done under the general supervision of
Richard E. Brinkmann, Senior Vice President and Comptroller, who has
executed this Report on the Corporation's behalf. It has been reviewed
by other operating and staff personnel of the Corporation and such
affiliates and by counsel. The consolidated financial statements
incorporated by reference herein have been audited by Coopers & Lybrand,
independent certified public accountants, as indicated in their report
incorporated by reference herein.
This Report contains much detailed information, of which the
various signatories cannot and do not have independent personal
knowledge. The signatories believe, however, that the preparation and
review processes summarized above are such as ordinarily to afford
reasonable assurance of compliance with applicable requirements.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
U. S. TRUST CORPORATION
(Registrant)
By RICHARD E. BRINKMANN
------------------------
(Signature)
Richard E. Brinkmann
Senior Vice President
and Comptroller
Dated: March 22, 1994
-19-
<PAGE>
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
H. MARSHALL SCHWARZ Chairman of the Board March 22, 1994
- ------------------- and Director (Principal
H. Marshall Schwarz Executive Officer)
DONALD M. ROBERTS Vice Chairman of the Board, March 22, 1994
- ----------------- Treasurer, and Director
Donald M. Roberts (Principal Financial
Officer)
RICHARD E. BRINKMANN Senior Vice President March 22, 1994
- -------------------- and Comptroller (Principal
Richard E. Brinkmann Accounting Officer)
EDWIN D. ETHERINGTON Director March 22, 1994
- --------------------
Edwin D. Etherington
Director March , 1994
- ----------------
Samuel C. Butler
FREDERIC C. HAMILTON Director March 22, 1994
- --------------------
Frederic C. Hamilton
-20-
<PAGE>
<PAGE>
Signature Title Date
--------- ----- ----
PAUL W. DOUGLAS Director March 22, 1994
- ---------------
Paul W. Douglas
DANIEL P. DAVISON Director March 22, 1994
- -----------------
Daniel P. Davison
CARROLL L. WAINWRIGHT, JR. Director March 22, 1994
- --------------------------
Carroll L. Wainwright, Jr.
ORSON D. MUNN Director March 22, 1994
- -------------
Orson D. Munn
PHILIPPE DE MONTEBELLO Director March 22, 1994
- ----------------------
Philippe de Montebello
RICHARD F. TUCKER Director March 22, 1994
- -----------------
Richard F. Tucker
FREDERICK S. WONHAM Vice Chairman of the Board March 22, 1994
- ------------------- and Director
Frederick S. Wonham
-21-
<PAGE>
<PAGE>
Signature Title Date
--------- ----- ----
PHILIP L. SMITH Director March 22, 1994
- ---------------
Philip L. Smith
JEFFREY S. MAURER President and Director March 22, 1994
- -----------------
Jeffrey S. Maurer
JOHN H. STOOKEY Director March 22, 1994
- ---------------
John H. Stookey
FREDERICK B. TAYLOR Vice Chairman of the Board March 22, 1994
- ------------------- and Director
Frederick B. Taylor
ANTONIA M. GRUMBACH Director March 22, 1994
- -------------------
Antonia M. Grumbach
Director March , 1994
- ----------------
Robert N. Wilson
PETER O. CRISP Director March 22, 1994
- ----------------
Peter O. Crisp
-22-
<PAGE>
<PAGE>
Signature Title Date
--------- ----- ----
PETER L. MALKIN Director March 22, 1994
- ----------------
Peter L. Malkin
Director March , 1994
- ----------------
Eleanor Baum
RUTH A. WOODEN Director March 22, 1994
- ----------------
Ruth A. Wooden
-23-
<PAGE>
<PAGE>
U. S. TRUST CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
----
Data incorporated by reference from the attached 1993 Annual
Report to Shareholders of U. S. Trust Corporation:
Consolidated Statements of Condition
December 31, 1993 and 1992 ............................... 36*
Consolidated Statements of Income for the Years Ended
December 31, 1993, 1992, and 1991 ........................ 35*
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1993, 1992, and 1991 .... 37*
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1992 and 1991 ......................... 38*
Notes to Consolidated Financial Statements ............... 39-57*
Report of Independent Accountants ......................... 58*
* Page numbers refer to the corresponding page numbers in the
Financial Section of the Annual Report to Shareholders.
All schedules are omitted since the required information is
not present in amounts sufficient to require submission of
the schedule.
-24-
<PAGE>
EXHIBIT 10.5
LEASE MODIFICATION AGREEMENT
AGREEMENT, dated as of December 7, 1987, between 46-47
ASSOCIATES, of New York partnership, having an office at 1133 Avenue of
the Americas, New York, New York 10036 (hereinafter referred to as
"Landlord") and UNITED STATES TRUST COMPANY OF NEW YORK, a New York
banking corporation, having offices at 45 Wall Street, New York, New
York (hereinafter referred to as "Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into a certain lease
(the "Lease") dated as of September 10, 1987 from Landlord to Tenant, a
memorandum of which was recorded in Reel 1290, page 1448, in the office
of the City Register of the County of New York, covering the premises
(the "Premises") more particularly described in the Lease.
WHEREAS, Landlord and Tenant have agreed to modify the
Lease in the manner hereinafter set forth.
NOW THEREFORE, in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt of which
is hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. There is hereby deleted from Parcel B of the Land
(as defined in the Lease) described in Exhibit B of the Lease and there
is hereby added to Parcel A of the Land described in Exhibit B of the
Lease, effective as of the date hereof, all that certain lot, piece or
parcel of land, with any improvements thereon, situate, lying and being
in the Borough of Manhattan, City, County and State of New York, as
bounded and described in the description attached hereto as Exhibit A.
2. Except as modified herein, all of the terms,
covenants and conditions of the Lease are and shall remain in full force
and effect and are hereby ratified and confirmed.
3. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
-1-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed
this Agreement as of the day and year first above written.
46-47 ASSOCIATES
(Landlord)
BY: D. Durst
Partner
UNITED STATES TRUST COMPANY
OF NEW YORK
(Tenant)
BY: Frederick S. Wonham
EXECUTIVE VICE-PRESIDENT
-2-
<PAGE>
<PAGE>
EXHIBIT A
---------
DESCRIPTION
-----------
ALL that certain lot, piece or parcel of land, situate, lying
and being in the Borough of Manhattan, City, County and State of New
York, bounded and described as follows:
BEGINNING at a point in the center line of block distant 350'-
0" west of the westerly line of Avenue of the Americas and 100'-5" north
of the northerly line of West 46th Street:
1) Running thence northerly, parallel with the westerly line
of Avenue of the Americas, 14'-1 1/4";
2) Thence easterly, parallel with the northerly line of West
46th Street, 25'-0";
3) Thence southerly, parallel with the westerly line of
Avenue of the Americas, 14'-1 1/4", to a point in the
center line of block;
4) Thence westerly, along the center line of block, parallel
with the northerly line of West 46th Street, 25'-0", to
the point or place of BEGINNING.
Said premises being part of Lot 46 in Section 4, Block 999.
-3-
<PAGE>
<PAGE>
MODIFICATION OF ANNEX AGREEMENT
AGREEMENT, dated as of December 7, 1987, between 46-47
ASSOCIATES, a New York partnership, having an office at 1133 Avenue of
the Americas, New York, New York 10036 (hereinafter referred to as
"Landlord") and UNITED STATES TRUST COMPANY OF NEW YORK, a New York
banking corporation having an office at 45 Wall Street, New York, New
York (hereinafter referred to as "Tenant").
W I T N E S S E T H :
WHEREAS, 46-47 Associates, as Landlord, entered into a
certain lease (the "Lease") with United States Trust Company of New
York, as Tenant, for certain space in the building to be known as 114
West 47th Street, New York, New York (the "Building").
WHEREAS, Landlord and Tenant entered into a certain
agreement (the "Annex Agreement") with respect to the possible
demolition of the existing apartment building (the "Existing Building")
which is adjacent to the Building on the site known as 130 West 47th
Street, New York, New York and more particularly described in Exhibit A
attached hereto and made a part hereof (the "Land") and the possible
construction on the Land of an annex to the Building (the "Annex") on
the terms and conditions set forth in the Annex Agreement.
WHEREAS, Landlord by deed dated December 7, 1987,
conveyed that portion of the Land which is described in Exhibit B
attached hereto (the "Premises") on which the Building is to be erected
to 1133 Building Corp. and has caused the Premises to be leased by 1133
Building Corp. to Landlord pursuant to a certain Lease Modification
Agreement dated December 7, 1987 which modified the Ground Lease dated
as of December 29, 1986, between 1133 Building Corp., as landlord and
46-47 Associates, as tenant.
WHEREAS, the parties hereto wish to amend the Annex
Agreement to reflect that the Premises has been deleted from the Land.
NOW THEREFORE, in consideration of the sum of One Dollar
($1.00) and other good and valuable consideration, the receipt of which
is hereby acknowledged, Landlord and Tenant hereby agree to modify the
Annex Agreement as follows:
-4-
<PAGE>
<PAGE>
1. There is hereby deleted from the Land, effective as
of the date hereof, all that certain lot, piece or parcel of land, with
the improvements thereon, if any, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, as bounded and
described in the description attached hereto as Exhibit B.
2. Except as herein modified, all of the terms,
covenants and conditions of the Annex Agreement are and shall remain in
full force and effect and are hereby ratified and confirmed.
3. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
IN WITNESS WHEREOF, Landlord and Tenant have executed
this Agreement as of the day and year first above written.
46-47 ASSOCIATES
(Landlord)
BY: D. Durst
Partner
UNITED STATES TRUST COMPANY
OF NEW YORK
(Tenant)
BY: Frederick S. Wonham
EXECUTIVE VICE-PRESIDENT
-5-
<PAGE>
<PAGE>
EXHIBIT A
---------
DESCRIPTION
-----------
ALL that certain lot, piece or parcel of land, situate, lying and being
in the Borough of Manhattan, City, County and State of New York, bounded
and described as follows:
BEGINNING at a point on the southerly side of 47th Street, distant 437
feet 6 inches easterly from the corner formed by the intersection of the
southerly side of 47th Street with the easterly side of Seventh Avenue;
running
thence easterly along the said southerly side of 47th Street, 37 feet 6
inches;
thence southerly parallel with the easterly side of Seventh Avenue, 100
feet 5 inches to the centre line of the block;
thence westerly along the said centre line block, 37 feet 6 inches;
thence northerly parallel with the easterly side of Seventh Avenue, 100
feet 5 inches to the point or place of BEGINNING.
Said premises being located in Lot 46, Section 4, Block 999, and being
known as 128-130 West 47th Street, New York, New York.
-6-
<PAGE>
<PAGE>
EXHIBIT B
---------
DESCRIPTION
-----------
ALL that certain lot, piece or parcel of land, situate,
lying and being in the Borough of Manhattan, City, County and State of
New York, bounded and described as follows:
BEGINNING at a point in the center line of block distant
350'-0" west of the westerly line of Avenue of the Americas and 100'-5"
north of the northerly line of West 46th Street:
1) Running thence northerly, parallel with the westerly
line of Avenue of the Americas, 14'-1 1/4";
2) Thence easterly, parallel with the northerly line of
West 46th Street, 25'-0";
3) Thence southerly, parallel with the westerly line of
Avenue of the Americas, 14'-1 1/4", to a point in
the center line of block;
4) Thence westerly, along the center line of block,
parallel with the northerly line of West 46th
Street, 25'-0", to the point or place of BEGINNING.
Said Additional Premises being part of Lot 46 in Section
4, Block 999.
-7-
<PAGE>
<PAGE>
MODIFICATION OF RIGHT OF FIRST REFUSAL AGREEMENT
AGREEMENT, made as of the 7th day of December, 1987,
between 1133 BUILDING CORP., a New York corporation, having offices at
1133 Avenue of the Americas, New York, New York 10036 ("Owner") and
UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation,
having offices at 45 Wall Street, New York, New York ("Tenant").
WHEREAS, Owner owns the land described in Exhibit A
attached hereto (the "Land").
WHEREAS, Owner has leased the land to 46-47 Associates
("Landlord") under that certain lease (the "Ground Lease") dated as of
December 29, 1986, a memorandum of which was recorded in Reel 1183, page
393, in the Office of the City Register of the County of New York.
WHEREAS, Tenant is the tenant under that certain lease
(the "Lease"), dated as of September 10, 1987 from Landlord to Tenant, a
memorandum of which was recorded in Reel 1290, page 1448 in the Office
of the City Register of the County of New York, covering the Land and
the new building to be constructed thereon by Landlord (the "Building").
WHEREAS, Owner and Tenant entered into a certain
agreement (the "Right of First Refusal Agreement") dated as of September
10, 1987, pursuant to which Owner gave Tenant a "right of first refusal"
with respect to the Land and Owner's reversionary interest in the
Building.
WHEREAS, Landlord by deed dated December 7, 1987,
conveyed that portion of the Land which is described in Exhibit B
attached hereto (the "Additional Land") to Owner and the Additional Land
has been leased by Owner to Landlord pursuant to a certain Lease
Modification Agreement dated December 7, 1987, which modified the Ground
Lease, and which was recorded in Reel 1338, page 2166 in the Office of
the City Register of the County of New York.
WHEREAS, Owner wishes the Right of First Refusal
Agreement to apply to the Additional Land and Owner and Tenant have
agreed to modify the Right of First Refusal Agreement in the manner
hereinafter set forth.
NOW THEREFORE, in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt of which
is hereby acknowledged, Owner and Tenant hereby agree as follows:
-8-
<PAGE>
<PAGE>
1. There is hereby added to the Land which is subject
to the Right of First Refusal Agreement effective as of the date hereof,
all that certain lot, piece or parcel of land, with any improvements
thereon, situate, lying and being in the Borough of Manhattan, City,
County and State of New York, as bounded and described in the
description attached hereto as Exhibit B (the "Additional Land") and the
parties agree that the Additional Land is hereby added as part of the
Land described in Exhibit A of the Right of First Refusal Agreement for
all purposes.
2. Except as herein modified, all of the terms,
covenants and conditions of the Right of First Refusal Agreement shall
remain in full force and effect and are hereby ratified and confirmed.
3. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
IN WITNESS WHEREOF, Owner and Tenant have executed this
Agreement as of the day and year first above written.
1133 BUILDING CORP.
(Landlord)
BY: David Durst
Vice President
UNITED STATES TRUST COMPANY
OF NEW YORK
(Tenant)
BY: Frederick S. Wonham
EXECUTIVE VICE-PRESIDENT
-9-
<PAGE>
<PAGE>
EXHIBIT A
---------
LAND DESCRIPTION
----------------
Parcel A
ALL that certain plot, piece or parcel of land, situate, lying and being
in the Borough of Manhattan, City of New York, County of New York, State
of New York, bounded and described as follows:
BEGINNING at a point on the southerly side of West 47th Street distant
193 feet 9 inches westerly from the corner formed by the intersection of
the southerly side of West 47th Street and the westerly side of Avenue
of the Americas;
THENCE running westerly along the southerly side of West 47th Street,
131 feet 3 inches to a point distant 475 feet easterly from the easterly
side of 7th Avenue;
THENCE running southerly parallel with the easterly side of 7th Avenue
and part of the way through a party wall, 100 feet 5 inches to the
center line of the block;
THENCE running westerly along the center line of the block, 25 feet to a
point;
THENCE running southerly parallel with the westerly side of Avenue of
the Americas, 100 feet 5 inches to the northerly side of West 46th
Street;
THENCE running easterly along the northerly side of West 46th Street,
125 feet to a point distant 225 feet westerly from the westerly side of
the Avenue of the Americas;
THENCE running northerly and parallel with the Avenue of the Americas,
100 feet 5 inches to the center line of the block;
THENCE easterly along said center line of the block, 31 feet 3 inches to
a point in a line drawn parallel with the Avenue of the Americas and
distant 193 feet 9 inches westerly therefrom;
THENCE northerly parallel with the Avenue of the Americas, 100 feet 5
inches to the southerly side of West 47th Street, at the point or place
of Beginning.
-10-
<PAGE>
<PAGE>
EXHIBIT A
---------
page 2
Said premises all being located in Section 4, Block 999 and being known
as:
114-116 West 47th Street Lot 41
118 West 47th Street Lot 42
120-122 West 47th Street Lot 43
124-126 West 47th Street Lot 45
121-127 West 46th Street Lot 19
117-119 West 46th Street Lot 22
-11-
<PAGE>
<PAGE>
EXHIBIT B
---------
DESCRIPTION OF ADDITIONAL LAND
------------------------------
ALL that certain lot, piece or parcel of land, situate,
lying and being in the Borough of Manhattan, City, County and State of
New York, bounded and described as follows:
BEGINNING at a point in the center line of block distant
350'-0" west of the westerly line of Avenue of the Americas and 100'-5"
north of the northerly line of West 46th Street:
1) Running thence northerly, parallel with the westerly
line of Avenue of the Americas, 14'-1 1/4";
2) Thence easterly, parallel with the northerly line of
West 46th Street, 25'-0";
3) Thence southerly, parallel with the westerly line of
Avenue of the Americas, 14'-1 1/4", to a point in
the center line of block;
4) Thence westerly, along the center line of block,
parallel with the northerly line of West 46th
Street, 25'-0", to the point or place of BEGINNING.
Said Additional Land being part of Lot 46 in Section 4,
Block 999.
-12-
<PAGE>
EXHIBIT 10.6
CONFIRMATION AND CLARIFICATION AGREEMENT
This Confirmation and Clarification Agreement (the
"Agreement"), dated as of March 10, 1992 between 46-47 ASSOCIATES, a New
York partnership, having offices at 1133 Avenue of the Americas, New
York, New York 10036 (the "Landlord") and UNITED STATES TRUST COMPANY OF
NEW YORK, a New York banking corporation, having offices at 114 West
47th Street, New York, New York (the "Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into that certain
lease (the "Lease") dated as of September 10, 1987, a memorandum of
which was recorded in Reel 1290, page 1448, in the office of the City
Register of the County of New York (the "Register's Office"), covering
the premises (the "Premises") more particularly described in the Lease;
WHEREAS, Landlord and Tenant entered into that certain
lease modification agreement (the "Modification Agreement") dated as of
December 7, 1987, modifying Exhibit B of the Lease, which Modification
Agreement was recorded in Reel 1374, page 1722, in the Register's
Office; and
WHEREAS, Landlord and Tenant have agreed to confirm and
clarify the occurrence of certain events and circumstances contemplated
by the parties under the Lease in the manner hereinafter set forth.
NOW THEREFORE, in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt of which
is hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Lease and the
Modification Agreement.
2. Article 1 of the Lease is hereby clarified by
deleting therefrom all of the language beginning with the words "TO HAVE
AND TO HOLD unto Tenant" appearing on page 2 of the Lease, through and
including the words "sooner pursuant to any of the terms of this Lease
or Pursuant to law;" appearing on the bottom of Page 3 of the Lease, and
by substituting the following therefor:
-1-
<PAGE>
<PAGE>
TO HAVE AND TO HOLD unto Tenant, its successors and
permitted assigns, for the initial term of approximately twenty five
(25) years (the "Initial Term") commencing on November 14, 1989 (the
"Commencement Date") and expiring on November 30, 2014 (the "Expiration
Date") unless the term shall terminate sooner pursuant to any of the
terms of this Lease or pursuant to law;
3. Article 2 of the Lease is hereby clarified by
deleting therefrom all of Sections 2.02 and 2.03. Tenant confirms that
Landlord has fully paid to Tenant, or to Tenant's designees, all of the
Initial Tenant's Work Allowance and the Additional Tenant's Work
Allowance provided for under the Lease except for any applicable Tenant
Work Allowance payable under Section 25.03 of the Lease.
4. Section 3.01. A of the Lease is hereby clarified by
deleting therefrom the lat full paragraph thereof appearing on Page 9 of
the Lease and substituting the following therefor:
"The parties hereto acknowledge that (a) Schedule A sets
forth the rentable (or net usable for the Mechanical Space) area of (or
within) each floor within the Demised Premises and within the Building
and (b) pursuant to Section 4.01.A.4 of the Lease, (i) Tenant's Share
with respect to Taxes is presently 63.9557% and (ii) Tenant's Share with
respect to Expenses is presently 65.6036%.
5. Section 3.01. B of the Lease is hereby clarified by
deleting such section in its entirety therefrom and substituting the
following therefor:
"B. The first lease year of the Term of this Lease is
the period from November 14, 1989 up to and including November 30, 1990.
Each subsequent lease year shall consist of the twelve calendar month
period thereafter (i.e., each December 1 to November 30) or part thereof
during the final lease year of the term of this Lease or any extension
thereof."
6. Section 4.01.A.4 of the Lease is clarified by
deleting therefrom the last sentence thereof and substituting the
following therefor:
"The rentable square foot area of any additional floors
added to the Demised Premises and or of any building additions added to
the Building shall be computed by the same method as currently set forth
on Schedule A attached hereto."
-2-
<PAGE>
<PAGE>
7. Section 21.01 of the Lease is hereby clarified by
adding the following to the last paragraph of Section 21.01 appearing on
Page 90 of the Lease:
"To the extent any of the terms and provisions of the
Modification Agreement or this Agreement are inconsistent with, or
contradict, the terms and provisions of the Net Lease, set forth as
Exhibit F to the Lease, the terms and provisions of the Modification
Agreement and this Agreement shall control and the Net Lease shall be
deemed to be hereby modified to conform to the provisions thereof and
any references in the Net Lease to the Space Lease shall be deemed
references to the Space Lease as hereby or hereafter amended."
8. Section 22.01. A is hereby clarified by adding the
following language to the end of Section 22.01. A.
"Anything to the contrary in this foregoing Section
22.01. A notwithstanding, Landlord and Tenant hereby agree that the
Commencement Date of the First Renewal Term shall be December 1, 2014
and the Expiration Date thereof shall be November 30, 2024 and that
Tenant may not give the First Election Notice earlier than November 30,
2010 nor later than November 30, 2012."
9. Section 22.01 B is hereby clarified by adding the
following language to the end of Section 22.01 B.
"Anything to the contrary in this foregoing Section
22.01. B notwithstanding, Landlord and Tenant hereby agree that the
commencement date of the Second Renewal Term shall be December 1, 2024
and the Expiration Date thereof shall be November 30, 2034 and that
Tenant may not give the Second Election Notice earlier than November 30,
2020 nor later than November 30, 2022."
10. Article 23 of the Lease is clarified solely to
provide that the Cancellation Date shall be November 30, 2004.
11. The Lease is further clarified by deleting therefrom
Schedule A attached thereto and substituting therefor the Schedule A
attached hereto.
-3-
<PAGE>
<PAGE>
12. At the request of either party hereto, Landlord and
Tenant shall promptly execute, acknowledge and deliver a memorandum with
respect to this Agreement sufficient for recordation. Such memorandum
shall not in any circumstances be deemed to change or otherwise affect
any of the obligations or provisions of the Lease or this Agreement.
Except as clarified and confirmed herein, all of the
terms, covenants and conditions of the Lease are and shall remain in
full force and effect and are hereby ratified and confirmed and this
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective legal representatives, successors
and assigns.
IN WITNESS WHEREOF, Landlord and Tenant have executed
this Agreement as of the day and year first above written.
46-47 ASSOCIATES (Landlord)
BY: D. Durst
Name: Douglas Durst
Title: Partner
UNITED STATES TRUST COMPANY
OF NEW YORK (Tenant)
BY: F.S. Wonham
Name: Frederick S. Wonham
Title: VICE CHAIRMAN
-4-
<PAGE>
<PAGE>
SCHEDULE A
----------
RENTABLE SQUARE FEET OF
THE DEMISED PREMISES
AND OF THE BUILDING
-----------------------
Rental Floor Designation Rentable Area
- ------------------------ -------------
Cellar No. 2 (Sub-Basement) 18890*
Cellar No. 1 (Basement) 25703
1st 15017
2nd 27536
3rd 28213
4th 28050
5th 28050
6th 24909
7th 24823
8th 23722
9th 23685
10th 23685
11th 23685
12th 23685
13th 23685
14th 23685
15th 23312
16th (Mechanical Space) 2402 (Usable)
17th 20899
18th 21090
19th 21138
20th 21138
21st 21185
22nd 20313
23rd 20313
24th 16561
25th 16561
26th 15022
Roof 244 (Usable)
* United States Trust Company of New York presently occupies 7242
square ft. of rentable area of Cellar No. 2.
-5-
<PAGE>
<PAGE>
SCHEDULE A
----------
Page 2
The following is the method of determining rentable area
for purposes of this Lease.
1. Determine the gross usable area.
2. Make the necessary deductions to determine the net
usable area.
3. Determine rentable are by dividing the net usable
area by the area adjustment factor (.756).
4. The gross usable area of the floor shall be the
entire area within the exterior walls. Dimensions shall be taken to the
front of the heating enclosure or where there is no heating enclosure to
the inside surface of the exterior wall.
5. The following areas shall be deducted from the gross
usable area on each floor, to determine the net usable area, public
passenger and freight elevators, public fire stairs, elevator lobby,
public toilets, the main telephone and electric closets, janitors
closets, pipe shafts necessary for the building's operations, H.V.A.C.
shafts necessary for the building's H.V.A.C. operation. Columns and
their enclosure shall not be deducted from usable space.
6. All tenant installations of every kind including
private toilets, supplementary H.V.A.C. equipment rooms and/or shafts,
private stairs, elevators, escalators, auxiliary telephone and electric
closets, pipe shafts, and exhaust shafts serving tenant's equipment,
equipment rooms of every description containing Tenant's equipment,
kitchens, storage rooms, shall be included in net usable area.
7. The net usable are for each floor shall be divided
by .756 to determine the rentable area.
8. Note that (a) to fix Tenant's Share for purposes of
determining Tenant's liability for Taxes under Article 4, the Sub-
Basement, Basement and Mechanical Space is to be excluded from both the
numerator and denominator in making the computation of Tenant's Share
under said Article 4 and (b) to fix Tenant's Share for purposes of
determining Tenant's liability for Expenses under Article 4, the Sub-
Basement and Mechanical Space is to be excluded from both the numerator
and denominator in making the computation of Tenant's Share under said
Article 4.
-6-
<PAGE>
<PAGE>
SCHEDULE A-1
------------
Additional Office Space Pursuant to Article 37
----------------------------------------------
Rental Floor Designation Rentable Area
- ------------------------ -------------
17th 77
18th 77
19th 77
20th 77
21st 77
22nd 77
23rd 77
24th 77
25th 73
26th 146
-7-
<PAGE>
EXHIBIT 10.7
CLARIFICATION OF LEASE MODIFICATION AGREEMENT
CLARIFICATION OF LEASE MODIFICATION AGREEMENT (the
"Agreement"), dated as of March 24, 1992, between 46-47 ASSOCIATES, a
New York partnership, having an office at 1133 Avenue of the Americas,
New York, New York 10036 ("Landlord") and UNITED STATES TRUST COMPANY OF
NEW YORK, a New York banking corporation, having offices at 114 West
47th Street, New York, New York 10036 ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into a certain lease
dated as of September 10, 1987 from Landlord to Tenant (the "Lease"), a
memorandum of which (the "Lease Memorandum") was recorded in Reel 1290,
page 1488, in the Office of the Register of the City of New York for New
York County (the "Register's Office"), demising space in the building
known as 114 West 47th Street and located on the real property (the
"Real Property") more particularly described in the Lease.
WHEREAS, Landlord and Tenant subsequently entered into a
certain lease modification agreement dated as of December 7, 1987 (the
"Lease Modification Agreement"), a memorandum of which was recorded in
Reel 1374, page 1722, in the Register's Office, pursuant to which the
land bounded and described in the description attached hereto as
Exhibit A (the "Additional Land") was added to, and made a part of, the
Real Property;
WHEREAS, Landlord and Tenant wish to acknowledge their
mutual understanding and agreement that the land which is described in
Exhibit B attached hereto (the "Excluded Land"), although adjacent to
both the Real Property and the Additional Land, does not constitute a
part of, nor is it, in any way included within, the Real Property or the
Additional Land and that the Excluded Land is not, therefore, subject
to, or encumbered by, either the Lease, the Lease Memorandum or the
Lease Modification Agreement.
NOW, THEREFORE, in consideration of the sum of Ten
Dollars ($10.00) and other good and valuable consideration, the receipt
of which is hereby acknowledged, Landlord and Tenant hereby mutually
acknowledge their understanding and agreement as follows:
-1-
<PAGE>
<PAGE>
1. The Excluded Land does not constitute a portion of,
nor is it included within, any of the parcels of land comprising, either
the Real Property or the Additional Land and is not, therefore, subject
to, or encumbered by, the Lease, the Lease Memorandum or the Lease
Modification Agreement.
2. Except as specifically set forth in this Agreement,
all of the terms, covenants and conditions of the Lease, the Lease
Memorandum and the Lease Modification Agreement are and shall remain in
full force and effect and are hereby ratified and confirmed.
3. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
IN WITNESS WHEREOF, Landlord and Tenant have executed
this Agreement as of the day and year first above written.
46-47 ASSOCIATES
(Landlord)
By: D. Durst
------------------------
UNITED STATES TRUST COMPANY
OF NEW YORK
(Tenant)
By: F.S. Wonham
------------------------
-2-
<PAGE>
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF ADDITIONAL LAND
------------------------------
ALL that certain lot, piece or parcel of land, situate,
lying and being in the Borough of Manhattan, City, County and State of
New York, bounded and described as follows:
BEGINNING at a point in the center line of block distant
350'-0" west of the westerly line of Avenue of the Americas and 100'-5"
north of the northerly line of West 46th Street:
1) Running thence northerly, parallel with the westerly
line of Avenue of the Americas, 14'- 1 1/4";
2) Thence easterly, parallel with the northerly line of
West 46th Street, 25'-0";
3) Thence southerly, parallel with the westerly line of
Avenue of the Americas, 14'-1 1/4", to a point in
the center line of block;
4) Thence westerly, along the center line of block,
parallel with the northerly line of West 46th
Street, 25'-0", to the point or place of BEGINNING.
Said premises being part of Lot 46 in Section 4, Block
999, and being the same parcel of land conveyed by Landlord to 1133
Building Corp. by deed dated December 7, 1987 and recorded December 24,
1987 in Reel 1338, page 2163.
-3-
<PAGE>
<PAGE>
EXHIBIT B
---------
DESCRIPTION OF EXCLUDED LAND
----------------------------
ALL that certain plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the County,
City and State of New York, more particularly bounded and described as
follows:
BEGINNING at a point on the southerly side of 47th Street distant 437
feet 6 inches easterly from the corner formed by the intersection of the
southerly side of 47th Street with the easterly side of 7th Avenue;
THENCE southerly and parallel with the easterly side of 7th Avenue 100
feet 5 inches to the centerline of the block;
THENCE easterly along said centerline of the block and parallel with the
southerly side of West 47th Street, 12 feet 6 inches;
THENCE northerly and parallel with the easterly side of 7th Avenue 14
feet 1-1/4 inches;
THENCE easterly again parallel with the southerly side of West 47th
Street, 25 feet;
THENCE northerly and again parallel with the easterly side of 7th Avenue
86 feet 3-3/8 inches (actual), 86et 3-3/4 inches (deed) to the southerly
side of West 47th Street;
RUNNING THENCE westerly along the southerly side of West 47th Street, 37
feet 6 inches to the point or place of BEGINNING.
-4-
<PAGE>
<PAGE>
CLARIFICATION OF RIGHT OF FIRST REFUSAL AGREEMENT
CLARIFICATION OF RIGHT OF FIRST REFUSAL AGREEMENT (the
"Agreement"), made as of the 24th day of March, 1992, between 1133
BUILDING CORP., a New York corporation, having offices at 1133 Avenue of
the Americas, New York, New York 10036 ("Owner") and UNITED STATES TRUST
COMPANY OF NEW YORK, a New York banking corporation, having offices at
114 West 47th Street, New York, New York 10036 ("Tenant").
W I T N E S S E T H :
WHEREAS, Owner owns the land described in Exhibit A
attached hereto (the "Land");
WHEREAS, Owner has leased the Land to 46-47 Associates
("Landlord") under that certain lease dated as of December 29, 1986 (the
"Ground Lease"), a memorandum of which was recorded on January 30, 1987,
in Reel 1183, page 393, in the Office of the Register of the City of New
York for New York County (the "Register's Office");
WHEREAS, Tenant is the tenant under that certain lease,
dated as of September 10, 1987 from Landlord to Tenant (the "Lease"), a
memorandum of which was recorded in Reel 1290, page 1488 in the
Register's Office, demising space in the new building now known as 114
West 47th Street and located on the Land (the "Building");
WHEREAS, Owner and Tenant also entered into a certain
right of first refusal agreement dated as of September 10, 1987 (the
"Right of First Refusal Agreement") which was recorded in Reel 1290,
page 1501, in the Register's Office, pursuant to which Owner gave Tenant
a "right of first refusal" with respect to the Land and Owner's
reversionary interest in the Building;
WHEREAS, Landlord, by deed dated December 7, 1987,
conveyed that certain parcel of real property described in Exhibit B
attached hereto (the "Additional Land") to Owner and which Additional
Land was then leased by Owner to Landlord pursuant to a certain lease
modification agreement dated December 7, 1987 modifying the Ground Lease
(the "Ground Lease Modification Agreement") which was recorded on
December 24, 1987 in Reel 1338, page 2166 in the Register's Office, so
that the Additional Land now constitutes a portion of the Land;
WHEREAS, Owner and Tenant subsequently entered into a
certain modification of right of first refusal agreement dated as of
December 7, 1987 (the "Modification of Right of First Refusal
Agreement") which was recorded on March 8, 1988 in Reel 1374, page 1733,
in the Register's Office, pursuant to which the Additional Land was made
-5-
<PAGE>
<PAGE>
subject to the Right of First Refusal Agreement; and
WHEREAS, Owner and Tenant wish to acknowledge their
mutual understanding and agreement that the land which is described in
Exhibit C attached hereto (the "Excluded Land") does not constitute a
part of, nor is included within, the Land or the Additional Land and is
therefore not subject to, or encumbered by, either the Right of First
Refusal Agreement or the Modification of Right of First Refusal
Agreement.
NOW, THEREFORE, in consideration of the sum of Ten
Dollars ($10.00) and other good and valuable consideration, the receipt
of which is hereby acknowledged, Owner and Tenant hereby mutually
acknowledge their understanding and agreement as follows:
1. The Excluded Land does not constitute a portion of,
nor is it included within, any of the parcels of land constituting, the
Land or the Additional Land and is not, therefore, subject to, or
encumbered by, the Right of First Refusal Agreement or the Modification
of Right of First Refusal Agreement.
2. Except as specifically set forth in this Agreement,
all of the terms, covenants and conditions of the Right of First Refusal
Agreement and the Modification of Right of First Refusal Agreement shall
remain in full force and effect and are hereby ratified and confirmed.
3. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
IN WITNESS WHEREOF, Owner and Tenant have executed this
Agreement as of the day and year first above written.
1133 BUILDING CORP.
(Owner)
By: D. Durst
------------------------
Name:
Title:
-6-
<PAGE>
<PAGE>
UNITED STATES TRUST COMPANY
OF NEW YORK
(Tenant)
By: F.S. Wonham
------------------------
Name:
Title:
-7-
<PAGE>
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF LAND
-------------------
Parcel A
- --------
ALL that certain plot, piece or parcel of land, situate, lying and being
in the Borough of Manhattan, City of New York, County of New York, State
of New York, bounded and described as follows:
BEGINNING at a point on the southerly side of West 47th Street distant
193 feet 9 inches westerly from the corner formed by the intersection of
the southerly side of West 47th Street and the westerly side of Avenue
of the Americas;
THENCE running westerly along the southerly side of West 47th Street,
131 feet 3 inches to a point distant 475 feet easterly from the easterly
side of 7th Avenue;
THENCE running southerly parallel with the easterly side of 7th Avenue
and part of the way through a party wall, 100 feet 5 inches to the
center line of the block;
THENCE running westerly along the center line of the block, 25 feet to a
point;
THENCE running southerly parallel with the westerly side of Avenue of
the Americas, 100 feet 5 inches to the northerly side of West 46th
Street;
THENCE running easterly along the northerly side of West 46th Street,
125 feet to a point distant 225 feet westerly from the westerly side of
the Avenue of the Americas;
THENCE running northerly and parallel with the Avenue of the Americas,
100 feet 5 inches to the center line of the block;
THENCE easterly along said center line of the block, 31 feet 3 inches to
a point in a line drawn parallel with the Avenue of the Americas and
distant 193 feet 9 inches westerly therefrom;
-8-
<PAGE>
<PAGE>
THENCE northerly parallel with the Avenue of the Americas, 100 feet 5
inches to the southerly side of West 47th Street, at the point or place
of Beginning.
Said premises all being located in Section 4, Block 999 and being known
as:
114-116 West 47th Street Lot 41
118 West 47th Street Lot 42
120-122 West 47th Street Lot 43
124-126 West 47th Street Lot 45
121-127 West 46th Street Lot 19
117-119 West 46th Street Lot 22
-9-
<PAGE>
<PAGE>
EXHIBIT B
---------
DESCRIPTION OF ADDITIONAL LAND
------------------------------
ALL that certain lot, piece or parcel of land, situate,
lying and being in the Borough of Manhattan, City, County and State of
New York, bounded and described as follows:
BEGINNING at a point in the center line of block distant
350'-0" west of the westerly line of Avenue of the Americas and 100'-5"
north of the northerly line of West 46th Street:
1) Running thence northerly, parallel with the westerly
line of Avenue of the Americas, 14'- 1 1/4";
2) Thence easterly, parallel with the northerly line of
West 46th Street, 25'-0";
3) Thence southerly, parallel with the westerly line of
Avenue of the Americas, 14'-1 1/4", to a point in
the center line of block;
4) Thence westerly, along the center line of block,
parallel with the northerly line of West 46th
Street, 25'-0", to the point or place of BEGINNING.
Said Additional Land being part of Lot 46 in Section 4,
Block 999 and being the same parcel of land conveyed by Landlord to 1133
Building Corp. by deed dated December 7, 1987 and recorded December 24,
1987 in Reel 1338, page 2163.
-10-
<PAGE>
<PAGE>
EXHIBIT C
---------
DESCRIPTION OF EXCLUDED LAND
----------------------------
ALL that certain plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the County,
City and State of New York, more particularly bounded and described as
follows:
BEGINNING at a point on the southerly side of 47th Street distant 437
feet 6 inches easterly from the corner formed by the intersection of the
southerly side of 47th Street with the easterly side of 7th Avenue;
THENCE southerly and parallel with the easterly side of 7th Avenue 100
feet 5 inches to the center line of the block;
THENCE easterly along said centerline of the block and parallel with the
southerly side of West 47th Street, 12 feet 6 inches;
THENCE northerly and parallel with the easterly side of 7th Avenue 14
feet 1-1/4 inches;
THENCE easterly again parallel with the southerly side of West 47th
Street, 25 feet;
THENCE northerly and again parallel with the easterly side of 7th
Avenue, 86 feet 3-3/8 inches (actual), 86 feet 3-3/4 inches (deed) to
the southerly side of West 47th Street;
RUNNING THENCE westerly along the southerly side of West 47th Street, 37
feet 6 inches to the point or place of BEGINNING.
-11-
<PAGE>
<PAGE>
TERMINATION OF ANNEX AGREEMENT
AGREEMENT, dated as of March 24, 1992, between 46-47
Associates, a New York partnership, with offices at 1133 Avenue of the
Americas, New York, New York 10036 ("Landlord") and United States Trust
Company of New York, a New York banking corporation, having offices at
114 West 47th Street, New York, New York 10036 ("Tenant")
WHEREAS, Landlord and Tenant are landlord and tenant
under that certain lease of premises dated as of September 10, 1987, a
memorandum of which was recorded in Reel 1290, page 1488, in the office
of the City Register of the County of New York (the "Register's
Office"), covering the premises more particularly described in the
lease, and which lease was modified by (a) that certain lease
modification agreement (the "Modification Agreement") dated as of
December 7, 1987 and recorded in Reel 1374, page 1722, in the Register's
Office and (b) that certain Confirmation and Clarification Agreement
(the "Clarification Agreement") dated as of March 10, 1992 (the lease,
as modified by the Modification Agreement and clarified by the
Clarification Agreement is hereinafter referred to as the "Lease");
WHEREAS, Landlord and Tenant entered into that certain
letter agreement dated September 10, 1987 and recorded in Reel 1290,
page 1513, in the Register's Office, which letter agreement was modified
by that certain Modification of Annex Agreement (the "Annex
Modification") dated as of December 7, 1987 and recorded in Reel 1374,
page 1727, in the Register's Office (the letter agreement, as modified
by the Annex Modification, is hereinafter referred to as the "Annex
Agreement");
WHEREAS, pursuant to the Annex Agreement, Landlord
granted to Tenant, and Tenant accepted, certain rights to acquire
certain leasehold estates and interests in certain real property,
located in Section 4, Block 999, part of Lot 46 and known as 128-130
West 47th Street, New York, New York, and more particularly described in
the Annex Agreement, and the improvements to be constructed thereon (the
"Annex Property"), and to add the Annex Property to the premises already
demised under the Lease, pursuant to, and in compliance with, the terms
and provisions of the Annex Agreement and the Lease;
WHEREAS, the effectiveness of Tenant's rights to acquire
the subject leasehold estates and interests remains conditional upon the
future occurrence of certain events (the "Required Events") specified in
the Annex Agreement; and
-12-
<PAGE>
<PAGE>
WHEREAS, each of Landlord and Tenant wishes to terminate
and cancel the Annex Agreement and to wholly (a) surrender their
respective rights created thereby and (b) release each other from their
respective obligations thereunder.
NOW, THEREFORE, in consideration of the sum of Ten
Dollars ($10.00) and other good and valuable consideration, the receipt
and sufficiency of which is hereby mutually acknowledged, Landlord and
Tenant hereby agree as follows:
1. Tenant hereby surrenders to Landlord, effective as
of the above date (hereinafter, the "Cancellation Date"), (a) the Annex
Agreement, (b) any and all rights of Tenant created thereunder (the
"Rights") and (c) any and all present and future estates and interests
in and to the Annex Property created thereby (the "Estates and
Interests"), so that (i) the Rights are rendered null, void and of no
further force or effect, (ii) the Estates and Interests are hereby
wholly extinguished, and (iii) the Annex Agreement, and any term
thereof, shall expire as of the Cancellation Date with the same force
and effect as if the Annex Agreement had expired pursuant to its terms.
2. Tenant hereby covenants that (a) nothing has been
done or suffered by Tenant whereby the Annex Agreement, the Rights or
the Estates and Interests have been encumbered in any way whatsoever,
(b) Tenant has not taken any action which could limit its right to
cancel and terminate the Annex Agreement and had good right to surrender
the Annex Agreement and (c) no one, other than Tenant, has acquired,
through or under Tenant, any right, title or interest in, or to, the
Annex Agreement, the Rights or the Estates and Interests.
3. Landlord hereby accepts said surrender, and in
consideration thereof and of the acceptance thereof by Landlord, Tenant
and Landlord do hereby mutually release each other, and their respective
successors and assigns, of and from all claims, demands, actions, and
causes of action of every kind and nature whatsoever arising out of the
Annex Agreement.
4. Simultaneously herewith, Landlord and Tenant shall
execute, acknowledge and deliver all filings and affidavits (including,
but not limited to, an appropriately completed New York State Real
Property Transfer Gains Tax Affidavit and an appropriately completed New
York City Real Property Transfer Tax Return) required for the
recordation of this Agreement in the Register's Office. In the event
any of the taxes provided for under Article 31-B-New York State Real
Property Transfer Gains Tax, Article 31-New York State Real Estate
Transfer Tax and/or New York City Real Property Transfer Tax are imposed
-13-
<PAGE>
<PAGE>
upon the termination of the Annex Agreement or the recordation of this
instrument, Landlord agrees to be fully liable for, and shall pay, any
such taxes, subject to any statutory rights of contest or other rights
provided for under such tax statutes.
5. The representations, warranties and covenants
contained in this Agreement shall survive and inure to the benefit and
be binding upon Landlord and Tenant and their respective successors and
assigns.
6. All prior agreements and understandings between the
parties hereto, but solely with respect to the Annex Agreement, are
merged herein. This Agreement shall not be modified or terminated
orally.
7. Anything in any of the foregoing to the contrary
notwithstanding, Landlord and Tenant each hereby acknowledge and agree
that this Agreement does not, and shall not, modify, amend, supplement
or, in any way, affect the Lease and each of Landlord and Tenant hereby
(a) ratifies and confirms each and every term, provision, covenant and
condition in the Lease and (b) agrees that the Lease remains in full
force and effect and that each of Landlord and Tenant remains fully
bound thereby and obligated thereunder.
IN WITNESS WHEREOF, this Agreement has been duly executed
by the parties hereto as of the date first above written.
46-47 ASSOCIATES,
Landlord
By: D. Durst
UNITED STATES TRUST COMPANY
OF NEW YORK,
Tenant
By: F.S. Wonham
-14-
<PAGE>
<PAGE>
AGREEMENT dated as of March 24, 1992 among 46-47
Associates ("Associates"), a New York partnership, having an office at
1133 Avenue of the Americas, New York, New York, 1133 Building Corp.
("1133"), a New York corporation, having an office at 1133 Avenue of the
Americas, New York, New York and United States Trust Company of New
York, a New York banking corporation, having offices at 114 W. 47th
Street, New York, New York ("Trust").
Reference is made to that certain (a) Grant of Easement
and Zoning Lot and Development Agreement ("ZLDA") by and among
Associates and 1133, (b) Indenture (the "Indenture") by and among
Associates, 1133 and David Puchall, an individual having an office at
132 W. 47th Street, New York, New York, both dated of even date herewith
and copies of which are attached hereto, and (c) lease ("Lease") between
Associates, as landlord, and Trust, as tenant, demising office space at
the building (the "Building") commonly known as 114 W. 47th Street, New
York, New York.
Pursuant to the ZLDA, Owner, as defined therein, has
granted an easement for light and air to Lessee, also as defined
therein, over its property located at 130 W. 47th Street, New York, New
York (the "Property") and which is adjacent to the Building) for the
benefit of the Building and has further agreed to be bound by certain
restrictions and limitations on the use and enjoyment of the Property,
all of which are binding upon Owner and Owner's successors and assigns.
Pursuant to the Indenture, Associates is conveying the
Property, which is the subject of, and is encumbered by, the ZLDA, to
David Puchall, who is taking the Property as encumbered by the ZLDA and
by certain additional restrictions on the use and enjoyment of the
Property contained in the Indenture.
Pursuant to the Lease, Trust occupies a significant
amount of office space in the Building giving it an interest in the use,
appearance and potential development of the Property and the maintenance
of the aforementioned easement by Puchall, his successors and assigns
(collectively, "Puchall").
1133 is owned and controlled by entities affiliated with
Associates and therefore has a common interest in executing this
Agreement.
Accordingly, the parties hereby agree as follows:
1. At any time during the term of the Lease and
provided Trust is not then in material default under the Lease beyond
-15-
<PAGE>
<PAGE>
the expiration of any applicable notice and grace periods, Trust may
give notice (the "Notice") to Associates in accordance with the notice
provisions of the Lease which Notice shall set forth in reasonable
detail the manner(s) in which Trust believes that Puchall is in material
default of his obligations under the ZLDA and/or the Indenture.
2. Unless Associates notifies Trust of its disagreement
with Trust's notification within five (5) days after its receipt
thereof, Associates (or 1133) shall promptly thereafter, at its own cost
and expense, proceed with due diligence and continuity, to enforce its
rights against Puchall under the ZLDA and/or the Indenture, as
applicable. If Associates shall fail to so proceed, Trust, upon notice
to Associates, and Associates' continued failure to do so for an
additional period of five (5) days after receipt of such notice, may
proceed, in the name of Associates and at Associates' cost and expense,
to enforce such rights. Associates agrees to cooperate with Trust with
respect to any proceeding so commenced by Trust.
3(a) If Associates disagrees with Trust's contention
under the Notice, it shall give written notice of such dispute
specifying the reasons therefor to Trust within said five (5) day period
and thereafter, such dispute shall be resolved by arbitration in
accordance with the provisions of Article 30 of the Lease.
3(b) Anything to the contrary in the foregoing Section
3(a) notwithstanding, if the parties shall resort to arbitration, as
provided for hereinabove, Trust may, at any time before (but only after
receipt of the notice from Associates provided for in Section 3(a)
above) or during the course of the arbitration process, but prior to the
rendering of decision by the arbitrator(s), exercise the rights provided
for in Section 2 hereof, but at Trust's sole cost and expense, and
Associates will cooperate with Trust, also as provided in Section 2
hereof. Trust's exercise of such rights will not however cause a
termination of the arbitration process and the decision by the
arbitrator(s), with respect to the initial dispute as provided for in
Section 3(a) above, shall take into account the actions taken by Trust
and any monetary award granted by such arbitrator(s) to either party
shall reflect the result of such exercise, including the repayment by
Associates to Trust of monies expended by Trust in enforcing the
aforementioned rights under the ZLDA or the Indenture, as applicable,
unless the arbitrators shall provide to the contrary.
4. Any and all rights of Trust hereunder shall
terminate and be null and void upon the termination of the Lease.
5. The parties hereto agree that the terms and
-16-
<PAGE>
<PAGE>
provisions of this Agreement shall, upon request of Trust, be
incorporated into a formal modification of the Lease to be entered into
by the parties on a date subsequent hereto, a memorandum of which shall
be recorded in the office of the Register of the City of New York for
New York County.
6. This Agreement may not be recorded unless and until
all the parties hereto have previously agreed in writing to such
recording.
7. Subject to the provisions of Section 4 hereof, the
terms and provisions of this Agreement shall be binding upon, and inure
to the benefit of, Associates, 1133 and Trust, and their respective
successors and assigns.
IN WITNESS WHEREOF, Associates, Trust and 1133 have
executed this Agreement as of the day first above written.
46-47 ASSOCIATES
By: D. Durst
---------------------------
a partner
UNITED STATES TRUST COMPANY OF
NEW YORK
By: F.S. Wonham
---------------------------
1133 BUILDING CORP.
By: D. Durst
---------------------------
-17-
<PAGE>
<PAGE>
GRANT OF EASEMENT
AND
ZONING LOT AND DEVELOPMENT AGREEMENT
WHEREAS 46-47 ASSOCIATES ("Owner"), a New York partnership,
having an address c/o The Durst Organization, Inc., 1133 Avenue of the
Americas, New York, New York 10036 is the owner of certain land, with
the buildings and improvements thereon, known as 130 West 47th Street,
New York, New York, more particularly described in Schedule A annexed
hereto (said land being herein called the "Owner's Land"; said buildings
and improvements, together with any replacements thereof, being herein
called the "Owner's Building"; and said land and buildings and
improvements being herein called the "Owner's Property");
WHEREAS 46-47 ASSOCIATES is also (a) the lessee ("Lessee")
under that certain ground lease, dated as of December 29, 1986, as
amended (a memorandum of which was recorded in reel 1183, page 393, in
the office of the Register of the City of New York for New York County)
with 1133 BUILDING CORP. as lessor (the "Lessor") of the land and (b)
the owner of the land and the owner of the buildings and improvements
thereon, known as 114 West 47th Street, New York, New York, more
particularly described in Schedule B annexed hereto (said land being
herein called the "Development Land"; said buildings and improvements,
with any further replacements thereof or additions thereto, being herein
called the "Development Building"). The Development Land and the
Development Building are herein collectively called the "Development
Property". Owner's Land and the Development Land are herein sometimes
collectively referred to as the "Parcels" and each individually as a
"Parcel".
WHEREAS Owner, with others, executed and delivered a
Declaration of Zoning Lot Restrictions (the "Declaration"), as defined
in Section 12-10 of the Zoning Resolution, dated of even date and
recorded on April 20, 1987 in the office of the Register of the City of
New York, New York County in Reel 1218, Page 1437, combining the Owner's
Land and the Development Land (and other adjoining properties) into a
single zoning lot (the "Combined Zoning Lot")
WHEREAS the Development Building contains more floor area
("Floor Area "), as that term is defined in the present Zoning
Resolution of the City of New York, as the same may be amended from time
to time (the "Zoning Resolution"), than is now available for use under
the "floor area ratio" limitation contained in the present Zoning
Resolution for the Development Land as an independent "zoning lot",
Lessee previously utilized the procedure available under the Zoning
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Resolution for combining the Development Land and the Owner's Land into
a single "zoning lot" for the purpose of determining compliance by the
Development Building with such limitation;
WHEREAS such procedure made available to Lessee for such
purpose all or a portion of (i) the currently unused Floor Area ("Unused
Floor Area") and (ii) the currently unused development rights ("Unused
Development Rights") available to the Owner's Property under the Zoning
Resolution (such Unused Floor Area and Unused Development Rights being
collectively called the "Excess Zoning Rights") and Owner made such
Excess Zoning Rights available for development of the Development
Property; and
NOW, THEREFORE, Owner, Lessee and Lessor agree as follows:
ARTICLE I
[Intentionally Omitted]
ARTICLE II
GRANT OF EASEMENT AND DEVELOPMENT RIGHTS
Section 2.1. Owner hereby grants a perpetual easement for
light and air over the Owner's Property for the benefit of the
Development Property (the "Easement") and for this purpose Owner hereby
covenants and agrees that no structure or improvement on Owner' Land
(including any addition to or extension of Owner's Building) shall,
except as expressly provided for herein, hereafter be erected upon
Owner's Land and no equipment shall be installed on the roof of Owner's
Building to an elevation (above the Datum Level used by the
Topographical Bureau, Borough of Manhattan, which is 2.75 feet above the
United States Coast and Geodetic Survey Datum, mean sea level, Sandy
Hook, New Jersey) exceeding the elevation of the level of the roof of
Owner's Building as it now exists (the "Height"). Upon Lessee's
request, the parties shall supplement this Agreement with a statement of
the Height, as per an accurate survey, in recordable form. The
foregoing shall not be deemed to prohibit or restrict the replacement or
continued maintenance on or above the roof of Owner's Building of any
existing parapet, bulkhead, elevator shaft, water tower, antenna (or
similar device), chimney, pipe, ladder, fire escape or other item of
building mechanical equipment in its present location on the roof of
Owner's Building to a height not to exceed the currently existing height
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thereof, provided, however, that each such replacement shall be designed
and constructed wholly within the present location of the item being
replaced so as not to interfere with the Easement or diminish the Excess
Zoning Rights. Owner's right to replace Owner's Building after
demolition or casualty shall be as set forth in Section 4.2 below.
Section 2.2. Owner hereby transfers and conveys to Lessee all
the Excess Zoning Rights and consents to Lessee's incorporation of the
Unused Floor Area into the Development Building and Lessee's utilization
of the Excess Zoning Rights to develop the Development Land. Owner
shall retain all rights in and to the existing Floor Area of the Owner's
Building, and Lessee shall have no rights thereto. Owner covenants and
agrees that no building or other improvements shall be constructed or
allowed to exist on either the Owner's Land or the Owner's Building, and
no reconstruction, repair, alteration or rebuilding of the Owner's
Building shall be made or suffered to exist, which will result in the
improvements on Owner's Land having (a) a total Floor Area on the ground
floor ("the Footprint Area") in excess of the present Floor Area of the
Footprint Area, or (b) a total Floor Area in excess of the present Floor
Area of Owner's Building. Lessee shall have the right to use all Unused
Floor Area and Excess Zoning Rights at any time available to the
Combined Zoning Lot, subject to the foregoing reservation by Owner.
ARTICLE III
CONSTRUCTION ON THE COMBINED ZONING LOT
Section 3.1. Owner and Lessee each acknowledge that the
location and design of any building or other structure now or
hereafter constructed or located on the Parcels may adversely affect
the right of the other to maintain the then existing improvements on its
Parcel. Neither Owner nor Lessee shall construct (or file an
application with any governmental authority to construct) or permit to
exist on its Parcel a building or other structure which would adversely
affect the right of the other party to maintain the Floor Area contained
in the then existing building that is located on its Parcel or the right
of Lessee to use any then available Excess Zoning Rights. Accordingly,
the party hereafter seeking to construct on the Combined Zoning Lot any
improvements that require approval from the Department of Buildings of
the City of New York (the "Building Department") shall submit to the
Building Department a copy of this Agreement and any plans or
applications affecting the Combined Zoning Lot hereafter filed with or
submitted to the Building Department.
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Section 3.2. Subject to Section 3.3, construction plans and
specifications and any applications to the Building Department for any
building on either Parcel shall be separate and independent from those
for any building on the other Parcel, and shall be so filed with the
Building Department as to obtain separate "new building" and
"alteration" treatment and numbers. Neither Owner nor (after the final
certificate of occupancy is issued for the Development Building) Lessee
shall make any application to the Building Department or any other
government authority for any construction, alteration, reconstruction or
other similar work in any building or other structure on its Parcel
which (a) involves or could result in any increase in the Floor Area of
any such building or structure beyond that permitted under the terms of
this Agreement, or (b) could in any way restrict the rights of either
Owner or Lessee to maintain the then existing improvements on its
Parcel, unless notice of the application and of the date on which it is
intended to be made and a copy of the application, together with the
architectural drawings proposed to be filed in connection with the
application, shall have been given to the other party at least fifteen
(15) days before the application is made. Neither Owner nor Lessee
shall make any application to the Building Department or any other
government authority for the demolition of any structure on its Parcel
unless notice of the application and of the date on which it is intended
to be made and a copy of the application shall have been given to the
other party a least thirty (30) days before the application is made.
The delivery of notices, documents, and drawings between Owner or Lessee
pursuant to this Section 3.2 shall be made solely for informational
purposes to assist the recipient of such materials in determining the
compliance of the other party with this Agreement and the consent of the
other party shall not be required except as may be provided for in any
ancillary documents between Owner and Lessee affecting the Owner's
Property. No construction or alterations shall be undertaken by either
Owner or Lessee on the Combined Zoning Lot which requires Building
Department approval, unless the owner of the Parcel benefiting from it
shall have procured liability insurance coverage from responsible
insurance carriers, in an amount not less than $5,000,000, against the
risk of physical damage to the other Parcel and the improvements thereon
resulting from such construction or alterations; provided, however, that
if such insurance shall not be available at commercially reasonable
rates, then such owner shall be required to procure as much of such
insurance as can be procured at a commercially reasonable cost.
Section 3.3. Each party shall give the other five (5) days'
notice prior to applying for any Approvals (as such term is defined in
Section 3.4) relating to the Combined Zoning Lot. With respect to all
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Approvals applied for or obtained by either party, such party shall
reasonably cooperate with the other party to the end that (i) delays in
and extra costs in connection with Lessee's development of the Combined
Zoning Lot are reasonably minimized, (ii) there is no material adverse
effect on such other party and, in particular, such development by
Lessee is affected as little as possible, (iii) the architects,
engineers, and expediters of both parties shall cooperate and shall
coordinate their presentations of plans, specifications, applications
for Approvals, etc., and (iv) each party shall be allowed to do the work
provided for or allowed or contemplated hereunder. Upon the request of
either party, the other party's applications for Approvals shall be in
the joint names of Owner and Lessee and shall include such items
relating to the development of the Combined Zoning Lot as the requesting
party shall specify; provided, however, that the cost of any such joint
application shall be borne entirely by the requesting party unless it
includes an application inserted by the requested party, in which event
such cost shall be divided equitably between Owner and Lessee.
Section 3.4. Owner shall apply to any governmental authority
for all licenses, permits, approvals, certificates, rulings, amendments,
or alteration permits (collectively, the "Approvals") for the Owner's
Building (i) that are prerequisites for obtaining an amended Certificate
of Occupancy for the Owner's Building or (ii) that Lessee may reasonably
deem necessary or desirable in connection with the utilization of the
Unused Zoning Rights and any other rights to which Lessee may be
entitled under this Agreement. Owner's applications for the Approvals
described in clause (ii) of the first sentence of this Section 3.4 shall
be at the sole cost and expense of Lessee. If Owner shall fail to file
and prosecute any of such application for Approvals when requested by
Lessee, Lessee may do so in Owner's name or otherwise and Owner hereby
appoints Lessee as its attorney-in-fact, coupled with an interest, to
sign, file, and prosecute any such applications. Owner agrees, at
Lessee's sole cost and expense (including reasonable attorneys' and
architects' fees), to cooperate with Lessee by giving all necessary
consents in connection with the filing and prosecution of applications
for the Approvals and all other governmental permits needed by Lessee
and to execute such documents and applications (including, without
limitation, Statement "A", and Occupied Housing Accommodations
Statement, and an Altered Building Application to the extent same are
consistent with this Agreement), and to furnish such information within
the possession of Owner, as may be reasonably requested by Lessee.
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Section 3.5. Anything to the contrary in this Article III
notwithstanding, in the event Owner wishes to effect any alterations to,
or new construction upon, the Owner's Building which contemplate (a)
material changes to any of the exterior facades thereof or (b)
demolition of and/or replacement in whole of the Owner's Building or any
material components thereof (whether or not such alterations or new
construction shall fall within the parameters of Section 3.2(a) and (b)
hereof), Owner shall first obtain Lessee's written consent thereto,
which shall not be unreasonably withheld or delayed in each instance,
and Owner shall submit, for review by Lessee, all notices, documents and
drawings, provided for in Section 3.2 hereof, in the same manner as
provided for in such Section 3.2 and within the time frames provided for
therein in connection with applications for the demolition of any
structure on Owner's Parcel. If Lessee shall refuse its consent to such
alteration or new construction, Lessee shall furnish Owner with a
reasonably detailed explanation for such refusal (the "objection
notice") and Owner shall have the right to revise and resubmit to Lessee
for its approval those items objected to by Lessee in its objection
notice. Anything to the contrary in the foregoing portion of this
Section 3.5 notwithstanding, Owner shall have no obligation to obtain
Lessee's consent to any replacement or restoration of Owner's Building
referenced in clause (b) so long as such replacement or restoration of
Owner's Building shall be, in appearance, structure and construction,
reasonably comparable to the appearance, structure and construction, in
existence as of the date of the agreement, of (i) the Owner's Building
or (ii) the Portland Hotel, located at 132 West 47th Street, New York,
New York. Owner shall, however, furnish Lessee with all notices,
documents and drawings provided for herinabove in connection with the
contemplated replacement or restoration for notice and informational
purposes only and shall otherwise continue to be subject to all of the
obligations provided for in this Article III.
ARTICLE IV
RECONSTRUCTION
Section 4.1. In the event of any destruction or demolition of
all or substantially all of either the Owner's Building or the
Development Building, the following provisions of this Article IV shall
apply.
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Section 4.2. If all or substantially all of the Owner's
Building shall be destroyed or demolished, then, notwithstanding any
other provision of this Agreement (except the restrictions in Article
II), the Floor Area which may thereafter exist on the Owner's Land may
not exceed the Floor Area of the Owner's Building as it existed as of
the date of this Agreement.
Section 4.3. If all or any portion of the Development Building
shall be destroyed or demolished, or if the Lessee desires to erect
additions to or replacement structures for portions of the Combined
Zoning Lot which are not physically located on Owner's Land, Lessee
shall be entitled to utilize for such purposes all or any portion of
the then unutilized Floor Area which would be permissible on and
available for the Combined Zoning Lot under applicable codes and laws
then in effect. Anything to the contrary in the foregoing portion of
this Section 4.3 notwithstanding and as already provided for in Section
2.2 hereof, Owner shall continue to retain all rights in and to the
existing Floor Area of the Owner's Building and Lessee shall have no
rights thereto. In addition, nothing in this Section 4.3 shall be
deemed or be construed to grant Lessee any right or interest in, or with
respect to, the rights and interests of Messrs. David Puchall and Daniel
Paul in and to the Reserved Unused Floor Area and the Reserved Unused
Development Rights, both as provided for, and as defined in, that
certain Zoning Lot and Development Agreement by and among Lessee and
Messrs. Puchall and Paul, dated as of December 30, 1986 and recorded in
Reel 1204, page 1601 in the office of the Register of the City of New
York for New York County.
Section 4.4. Each party shall upon request furnish to the
other any and all consents and other instruments which may be required
to accomplish the allocations of Floor Area provided in Sections 4.2 and
4.3. This Article IV is subject to the Zoning Resolution and other laws
in effect at the time of construction of any replacement building and if
the full amount of Floor Area under the provisions of this Article IV
cannot be built because of such restrictions, then neither party shall
have any rights against the other party for such reasons.
ARTICLE V
REAL ESTATE TAXES
Section 5.1. The separate interests of the parties hereto
require that tax assessments and tax liens concerning their respective
Parcels shall continue to be separate from and independent of those
concerning the other Parcels affected hereby. The parties anticipate
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that tax assessments and tax liens for the Development Property shall be
determined on a basis which incorporates in the tax lot of the
Development Property the Excess Zoning Rights transferred to the
Development Property, and the parties shall execute such documents and
prosecute such applications as shall be reasonable so as to accomplish
such treatment.
ARTICLE VI
REPRESENTATIONS AND COVENANTS
Section 6.1. Owner shall cooperate with Lessee so that Lessee
may fully utilize the zoning rights allocated to Lessee under this
Agreement, including without limitation: the obtaining of all
applications for building permits, temporary and permanent certificates
of occupancy and other governmental approvals for Lessee's Building; the
furnishing of whatever additional documents may be required of Owner or
anyone claiming under Owner in order to create, or pursuant to Article
IX hereof to add additional parcels to, the Combined Zoning Lot as
contemplated under this Agreement; and compliance with the requirements
of the City of New York as they pertain to Owner's Parcel.
Section 6.2. Owner shall not voluntarily appear in opposition
to Lessee in any action brought, sought, or defended by Lessee before
the Planning Commission of the City of New York, the Board of Estimate,
the Board of Standards and Appeals, the Building Department or any other
governmental agency, board, department or authority, arising out of or
in connection with any proceedings (including without limitation
proceedings pending before the Landmarks Preservation Commission and
applications for a building permit) relating to the construction or
maintenance of Lessee's Building or the utilization of the Excess Zoning
Rights as herein contemplated.
Section 6.3. Owner covenants and agrees that with respect to
Owner's Parcel there will not be a new (or increase in any existing)
non-conforming use or non-compliance for any zoning lot containing the
Owner's Land and the Owner's Building. Owner covenants and agrees that
there will be no change in the existing use of the Owner's Building and
no amendment or application to amend (except an amendment showing that
the Owner's Land is part of the Combined Zoning Lot) the certificate of
occupancy for the Owner's Building until Lessee has (i) initially
obtained a permanent certificate of occupancy for the Lessee's Building
(but no later than January 1, 1994) or (ii) specifically consented in
writing to such amendment or application.
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ARTICLE VII
RETAINED OWNERSHIP
Section 7.1. This Agreement and the Declaration are intended
solely to create the Combined Zoning Lot, to regulate the rights and
obligations of the parties hereto, and to impose the easements and
restrictions upon the Owner's Land and the Development Land specifically
set forth herein and, except as set forth herein each party hereto
retains full ownership and control over its Parcel.
ARTICLE VIII
NATURE OF AGREEMENT
Section 8.1. The parties hereto acknowledge and agree that in
the event of any breach or threatened breach of this Agreement by any
party, the non-defaulting party shall have the right to any remedy
available at law or equity (including but not limited to injunctive
relief) but neither party shall have the right to terminate this
Agreement or the Declaration without the written consent of the other
party. If any party incurs any legal fees or expenses arising from any
other party's default in the performance of its obligation under this
Agreement, such fees and expenses shall be payable to that party upon
rendition of a bill or statement therefor to the other party, together
with interest at a rate equal to two percent (2%) above the then Prime
Rate.
Section 8.2. Notwithstanding anything to the contrary
contained herein, each party hereto shall look only to the other party's
then estate in the Owner's Property (or the proceeds thereof) or the
Development Property (or the proceeds thereof), as the case may be, for
the satisfaction of its remedies for the collection of a judgment (or
other judicial process) requiring the payment of money by the other
party in the event of any default by the other party hereunder, and no
other property or assets of the other party or its principals, disclosed
or undisclosed, shall be subject to levy, execution or other enforcement
procedure for the satisfaction of the first party's remedies hereunder.
Owner and Lessee do, however, reserve the right to the remedies of
specific performance and injunction. No owner of Owner's Parcel or of
Lessee's Parcel shall be liable for any breaches of this Agreement
accruing after it conveys such owner's interest.
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ARTICLE IX
ADDITIONAL PARCELS AND SUBDIVISION
Section 9.1. Whenever requested by Lessee, and at Lessee's
sole cost and expense, Owner shall execute, acknowledge and deliver one
or more amendments to the Declaration and this Agreement, and shall
execute, acknowledge and deliver such other instruments as may be
required, for the purposes of enlarging or expanding the Combined Zoning
Lot covered by the Declaration to include one or more additional parcels
(including without limitation Lot 17 in Section 4, Block 999 of the tax
map of the City, County, and State of New York) designated by Lessee.
By the execution of this Agreement, Owner gives its consent to any and
all enlargements or expansions of the Combined Zoning Lot. The rights
and obligations of Owner regarding any past or future enlarged or
expanded Combined Zoning Lot shall be as if such additional parcel or
parcels were part of Lessee's Parcel and in no event shall Owner gain
any development and other zoning rights by reason of any past or future
addition of such additional parcel or parcels. Lessee shall have
discretion as to the allocation and restriction of the use of the Floor
Area and Development Rights of Lessee's Parcel and each such additional
parcel among Lessee's Parcel and each such additional parcel among
Lessee's Parcel and such additional parcels. Lessee shall furnish Owner
with such documents as Owner may reasonably require in order to be
assured that the enlargement or expansion of the Combined Zoning Lot is
consistent with Owner's obligations under this Section. Owner shall not
be required to execute any document or take any other step pursuant to
this Section 9.1 if Owner's rights would be materially diminished
thereby; provided, however, that no change or increase in size,
configuration, or Floor Area of the Development Building by reason of
the enlargement or expansion of the Combined Zoning Lot shall be deemed
to diminish Owner's rights.
Section 9.2. Owner and its successors and assigns and all
other "parties in interest" (as such term is defined in the Zoning
Resolution) who have executed this Agreement or have waived rights to
execute this Agreement hereby consent and agree that any subsequent
agreement or declaration which either enlarges or diminishes the
Combined Zoning Lot may be executed by Lessee without the further
joining, waiver, consent or other act of Owner or such "parties in
interest" and their successors and assigns shall execute and deliver all
necessary consents and further documents to carry out the purpose of
this Agreement. Owner hereby agrees, upon request of Lessee, to
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execute, acknowledge and deliver to Lessee such instruments as may
reasonably be required by Lessee to effect any enlargement or expansion
of the Combined Zoning Lot, provided that such instruments do not
require the demolition or alteration of any building or improvements
then on Owner's Land. If an interest attaches to Owner's Land
subsequent to the date hereof which would otherwise confer upon the
holder of such interest the status of a "party in interest", then the
holder of such interest shall not be considered a "party in interest"
and any modification, amendment or termination of this Agreement or the
Declaration entered into for the purposes of enlarging, expanding or
subdividing the Combined Zoning Lot or for the purpose of modifying or
terminating the provisions of this Agreement or the Declaration as they
affect the Combined Zoning Lot or any enlarged, expanded or diminished
Combined Zoning Lot may be executed without the joinder, waiver or other
act of the holder of such interest and such party, if it is determined
to be a "party in interest", shall be deemed to have waived its rights
pursuant to Section 12-10 of the Zoning Resolution (or any successor
provision) to execute such document. Such party further covenants to
promptly execute, acknowledge and deliver such other and further
documents as may be reasonably required, from time to time, to effect
the provision of this Section. Owner shall not be required to execute
any document or take any other step pursuant to this Section 9.2 if
Owner's rights would be diminished materially thereby; provided,
however, that no change or increase in the size, configuration, or Floor
Area of Lessee's Building by reason of the enlargement or expansion of
the Combined Zoning Lot shall be deemed to diminish Owner's rights.
Section 9.3. Lessee shall have the right to subdivide the
Combined Zoning Lot (but not Owner's Property) to the extent permitted
by the Zoning Resolution and other applicable law, provided by the
subdivision shall be subject to this Agreement and shall not in any way
diminish the rights of Owner. Lessee shall not apply for any such
subdivision without first, at least thirty (30) days prior to the
application, furnishing Owner with: (i) a copy of the application, and
(ii) the opinion of an architect, licensed in New York State and
familiar with New York City zoning requirements, addressed to Owner,
stating the zoning consequences of the subdivision and concluding that
the subdivision will not diminish Owner's rights under this Agreement.
To the extent that Lessee is entitled, under this Section, to subdivide
the Combined Zoning Lot, Owner shall cooperate with Lessee, provided
that Owner incurs neither expense nor liability thereby.
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Section 9.4. Owner shall have the right to subdivide Owner's
Parcel to the extent permitted by the Zoning Resolution and other
applicable law, provided that the subdivision shall be subject to this
Agreement and shall not in any way diminish the rights of Lessee. Owner
shall not apply for any such subdivision without first, at least thirty
(30) days prior to the application, furnishing Lessee with: (i) a copy
of the application, and (ii) the opinion of an architect, licensed in
New York State and familiar with New York City zoning requirements,
addressed to Lessee, stating the zoning consequences of the subdivision
and concluding that the subdivision will not diminish Lessee's rights
under this Agreement. To the extent that Owner is entitled, under this
Section, to subdivide Owner's Parcel, Lessee shall cooperate with Owner,
provided that Lessee incurs neither expense nor liability thereby.
ARTICLE X
ESTOPPEL CERTIFICATES
Section 10.1. Lessee shall furnish from time to time, upon
twenty (20) days' notice from Owner, a written statement, setting forth:
(i) whether this Agreement is in full force and effect; (ii) the extent
to which this Agreement has been modified by instruments not of record;
(iii) the extent to which Lessee has served any written notice of
default under this Agreement, which default remains uncured; and (iv)
that the statement may be relied upon by any designee specified by Owner
in its request.
Section 10.2. Owner shall furnish from time to time, upon
twenty (20) days' notice from Lessee, a written statement setting forth:
(i) whether this Agreement is in full force and effect; (ii) the extent
to which this Agreement has been modified by instruments not of record;
(iii) the extent to which Owner has served any written notice of default
under this Agreement, which default remains uncured; and (iv) that the
statement may be relied upon by any designee specified by Lessee in its
request.
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ARTICLE XI
MISCELLANEOUS
Section 11.1. This Agreement cannot be changed or terminated
orally but only by written instrument signed by the party against whom
enforcement thereof is sought.
Section 11.2. All of the grants, interests, covenants,
agreement and conditions contained in this Agreement: (a) shall be
construed as and deemed for all purposes to be covenants and
restrictions running with the lands, buildings and improvements
affected; (b) shall, subject to the preceding provisions of this
Agreement, inure to the benefit of and be binding upon each party to
this Agreement and its successors and assigns, including, without
limitation, Lessor as the owner of (i) the Development Land and (ii) a
reversionary interest in the Development Building; and (c) shall, to the
extent rights hereunder are assigned to the holder of any mortgages
encumbering any of the Parcels or any interest therein, be enforceable
by any such assignee after default under any such mortgage.
Section 11.3. The Article headings are inserted for
convenience only and shall not affect the construction of this
Agreement.
Section 11.4. All notices, consents, approvals, and other
communications pursuant to this Agreement shall be in writing and given
by registered or certified mail, postage prepaid, return receipt
requested, addressed to each party at its address hereinabove given or
at such other address as either party may from time to time designate by
notice to the other pursuant to this section. A copy of any notice
delivered to Lessee hereunder shall be delivered to White & Case, 1155
Avenue of the Americas, New York, New York 10036, Attention: Robert M.
Safron, Esq. or any other attorneys designated by Lessee by notice to
Owner pursuant to this Section. A copy of any notice delivered to Owner
hereunder shall be delivered to Kaufman & Serota, P.C., 225 Broadway,
Suite 1902, New York, New York 10007, Attention: Irving Serota, Esq. or
any other attorneys designated by Owner by notice to Lessee pursuant to
this Section.
Whenever requested by Owner on fifteen (15) days' notice,
Lessee shall also furnish copies of any of said notices to any and all
fee and leasehold mortgagees of Owner's Property, as designated by
Owner; whenever requested by Lessee on (15) days' notice, Owner shall
furnish copies of any said notices to any and all fee and leasehold
mortgagees of Lessee's Property, as designated by Lessee.
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Section 11.5. Except as permitted in Sections 9.3 and 9.4
hereof, neither Owner nor Lessee may subdivide its Parcel.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the 24th day of March, 1992.
OWNER: 46-47 ASSOCIATES
By: D. Durst
A Partner
LESSEE: 46-47 ASSOCIATES
By: D. Durst
A Partner
LESSOR: 1133 BUILDING CORP.
By: D. Durst
Vice President
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SCHEDULE A
----------
LAND
----
ALL that certain plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the County,
City and State of New York, more particularly bounded and described as
follows:
BEGINNING at a point on the southerly side of West 47th Street distant
437 feet 6 inches easterly from the corner formed by the intersection of
the southerly side of West 47th Street with the easterly side of 7th
Avenue;
THENCE southerly and parallel with the easterly side of 7th Avenue 100
feet 5 inches to the centerline of the block;
THENCE easterly along said centerline of the block and parallel with the
southerly side of West 47th Street, 12 feet 6 inches;
THENCE northerly and parallel with the easterly side of 7th Avenue 14
feet 1-1/4 inches;
THENCE easterly again parallel with the southerly side of West 47th
Street, 25 feet;
THENCE northerly and again parallel with the easterly side of 7th
Avenue, 86 feet 3-3/8 inches (actual), 86 feet 3-3/4 inches (deed) to
the southerly side of West 47th Street;
RUNNING THENCE westerly along the southerly side of West 47th Street, 37
feet 6 inches to the point or place of BEGINNING.
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SCHEDULE B
----------
ALL that certain plot, piece or parcel of land, situate, lying and being
in the Borough of Manhattan, County of New York, City and State of New
York, bounded and described as follows:
BEGINNING at a point on the southerly side of West 47th Street distant
193 feet 9 inches westerly as measured along said southerly side of West
47th Street from the corner formed by the intersection of said southerly
side of West 47th Street with the westerly side of Avenue of Americas;
and running
THENCE Westerly along and southerly side of West 47th Street, 131 feet 3
inches to a point distant 475 feet from the intersection of the
southerly side of West 47th Street with the easterly side of 7th Avenue;
THENCE Southerly at right angles to the southerly side of West 47th
Street, 86 feet 3-3/4 inches.
THENCE Westerly at right angles to the last preceding course, 25 feet;
THENCE Southerly at right angles to the last preceding course, 114 feet
6-1/4 inches to the northerly side of West 46 Street at a point thereon
distant 450 from the intersection of the northerly side of West 46th
Street with the easterly side of 7th Avenue;
THENCE Easterly along the northerly side of West 46th Street, 125 feet;
THENCE Northerly at right angles to the northerly side of West 46th
Street, 100 feet 5 inches;
THENCE Easterly at right angles to the last preceding course, 31 feet 3
inches;
THENCE Northerly at right angles to the last preceding course and at
right angles to southerly side of West 47th Street, 100 feet 5 inches to
the southerly side of West 47th Street, the point or place of Beginning.
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<PAGE>
THIS INDENTURE made the 24th day of March, nineteen
hundred and ninety-two
BETWEEN 46-47 Associates, a New York partnership, having offices c/o The
Durst Organization, Inc., 1133 Avenue of the Americas, New York, New
York 10036, Grantor,
and David Puchall, an individual having an address at 132 West 47th
Street, New York, New York, Grantee,
WITNESSETH, that Grantor, in consideration of Ten ($10.00) dollars,
lawful money of the United States, paid by Grantee does hereby grant and
release unto Grantee, the heirs or successors and assigns of Grantee
forever,
ALL that certain plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the County,
City and State of New York, more particularly bounded and described as
follows:
BEGINNING at a point on the southerly side of West 47th Street distant
437 feet 6 inches easterly from the corner formed by the intersection of
the southerly side of West 47th Street with the easterly side of 7th
Avenue;
THENCE southerly and parallel with the easterly side of 7th Avenue 100
feet 5 inches to the centerline of the block;
THENCE easterly along said centerline of the block and parallel with the
southerly side of West 47th Street, 12 feet 6 inches;
THENCE northerly and parallel with the easterly side of 7th Avenue 14
feet 1-1/4 inches;
THENCE easterly again parallel with the southerly side of West 47th
Street, 25 feet;
THENCE northerly and again parallel with the easterly side of 7th
Avenue, 86 feet 3-3/8 inches (actual), 86 feet 3-3/4 inches (deed) to
the southerly side of West 47th Street;
RUNNING THENCE westerly along the southerly side of West 47th Street, 37
feet 6 inches to the point or place of BEGINNING.
TOGETHER with all right, title and interest, if any, of Grantor in and
to any streets and roads abutting the above described premises to the
center line thereof,
TOGETHER with the appurtenances and all the estate and rights of Grantor
in and to said premises,
TO HAVE AND TO HOLD the premises herein granted unto Grantee, the heirs
or successors and assigns of Grantee forever (said premises and any
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building now or hereafter erected on all or any part thereof being
herein the "Premises").
AND Grantor, in compliance with Section 13 of the Lien
Law, covenants that Grantor will receive the consideration for this
conveyance and will hold the right to receive such consideration as a
trust fund to be applied first for the purpose of paying the cost of the
improvement and will apply the same first to the payment of the cost of
the improvement before using any part of the total of the same for any
other purpose.
This deed is made and accepted and the Premises conveyed
hereunder on the following express conditions;
Grantor is the owner of (a) a leasehold interest in
certain land located at 114 W. 47th Street lying and being in the City,
County and State of New York and being Section 4, Block 999, Lot 19 (the
"Land") and (b) a fee interest in the improvements thereon (the
"Improvements") and 1133 Building Corp. ("1133"), a New York
corporation, is the owner of a fee estate in the Land and a reversionary
interest in the Improvements;
Grantor, Grantee and 1133 agree that the architectural
character and aesthetic appeal of the Improvements contribute
significantly to the cityscape and the economic vitality of the
surrounding environs and whereas Grantor, Grantee and 1133 desire to
maintain the character, appeal, legal compliance and economic viability
of the Improvements and, in order to effect the intent of the parties
hereto, to protect against the unattractive or undesirable use or
operation of the Premises, Grantor, Grantee and 1133 agree that the
following restrictions shall apply to the Premises conveyed hereby:
1. During the period to and including November 30,
2014, the Premises shall be used ONLY:
(i) as a "transient hotel" as defined in the Zoning
Resolution of the City of New York (the "Zoning
Resolution") (but in no event shall the premises be
used as (A) an "apartment hotel" as defined in the
Zoning Resolution or (B) a hotel where all or a
portion thereof is rented to clients of any public
or charitable agency, except, and solely to the
extent, that those uses described in (A) and (B)
above and which are otherwise prohibited by the
terms hereof, shall be mandated by applicable law);
or
(ii) as a commercial office building which shall be
operated and maintained in a manner as nearly as
possible similar to the manner in which the
Improvements are then being operated and
maintained.
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<PAGE>
During said period no retail use (other than as a newsstand and/or
"coffee shop" of the types customarily located in and associated with
transient hotels located in New York City and subject to the provisions
of paragraph 2 hereinbelow) shall be conducted in the street level of
the Premises, without the prior written approval of the Grantor. The
provision of this paragraph 1 shall expire and terminate automatically
on November 30, 2014.
2. So long as (a) Grantee, (b) any affiliate of
Grantee, or (c) any entity in which Grantee or an affiliate of Grantee
holds an interest, owns any interest in the real property known as 132
West 47th Street, New York, New York (Block 999, Section 4, Lot 48) and
said property is used as a transient hotel, the Premises shall be used
ONLY as a transient hotel in conjunction with said property and the sole
means of ingress to and egress from (except for any emergency exits
required by law) the Premises shall be through said property, provided,
however, that in the event of an arm's length sale, conveyance or other
transfer of said property to a person unrelated to, or unaffiliated
with, any of the persons listed in (a), (b) or (c) of this paragraph 2,
then Grantee may restore ingress to and egress from the Premises by
arranging for access through the Premises with no obligation to continue
such access through the property at 132 West 47th Street.
3. Grantee shall not use (or permit to be used) the
Premises or any portion thereof for any illicit or unlawful purposes,
including, but not limited to:
(i) the sale, lease, display or exhibition of magazines,
posters, books, films, photographs, drawings,
paintings or other printed, pictorial or
representational matter primarily concerned with
sexual matters and customarily sold in "adult"
bookstores or stores chiefly trafficking in
pornographic materials;
(ii) the manufacture, sale, use, distribution or display
of (i) any drugs or narcotics or other such
"controlled substances", as such term is commonly
and reasonably understood and (ii) any paraphernalia
commonly associated with the use thereof;
(iii) the operation of a massage parlor, peep show or
house of prostitution or any similar related
activity which may include prostitution (i.e., the
performance of any sexual or sexually related
actions for payment);
(iv) for any of the purposes provided for (a) in Use
Groups 1, 2, 3 and 4, as set forth in Sections 22-
11, 22-12, 22-13 and 22-14 of the Zoning Resolution
or (b) under the heading "Public Service Establish-
ments", subsection D of Use Group 6, as set forth in
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Section 32-15 of the Zoning Resolution or (c) under
Use Groups 7, 8, 9, 10, 11, and 12, as set forth in
Sections 32-16, 32-17, 32-18, 32-19, 32-20 and 32-
21, respectively, of the Zoning Resolution, the
foregoing notwithstanding, Grantee may use the
Premises for a "transient hotel", as defined in the
Zoning Resolution, but under no circumstances, may
Grantee use the Premises as an "apartment hotel", as
defined in the Zoning Resolution, except as
expressly provided for in Paragraph 1 (i)
hereinabove;
(v) for the rendition of medical, dental, psychological,
psychiatric, social, counseling and other diagnostic
or therapeutic services including, but not limited
to, drug or alcohol dependency rehabilitative
services;
(vi) for the conduct or maintenance of any gambling or
gaming activity, whether or not permitted by law
(except for the sale of New York State sponsored or
sanctioned lottery or "lotto" tickets);
(vii) a check cashing operation or the conduct of a
school, public auctions, employment agencies,
wholesale or discount shops for sale of merchandise
or a fast food restaurant; and
(viii) for purposes of manufacturing or printing or any
industrial use of any character or nature.
4. Grantee shall not erect any signs or place any
illuminations or advertisements on the exterior of the Premises or
install any thereof within the Premises which are visible from the
street abutting the Premises, except as may be approved in advance by
Grantor in Grantor's sole and absolute discretion.
5. Grantee shall not use, operate or alter the Premises
in any manner which will affect the certificate of occupancy of the
Improvements.
6. Grantee shall not undertake any construction or
alteration of the Premises which would necessitate an amendment to the
certificate of occupancy of the Premises without Grantor's prior written
consent.
7. Grantee shall maintain the Premises in a quality
manner so as to prevent its deterioration. This maintenance obligation
shall require replacement, repair and reconstruction according to the
then prevailing standards for the maintenance and operation of
properties comparable to the Portland Hotel located at 132 West 47th
Street in New York City.
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<PAGE>
8. All of the foregoing restrictions and covenants
shall be deemed covenants running with the land, shall bind Grantee and
Grantee's successors and assigns and shall be for the benefit of, and be
enforceable by, Grantor and Grantor's successors and assigns, and by
1133 (and its successors and assigns), but only upon and after the
reversion back to 1133 (or its successors or assigns) of its
reversionary interest in the Improvements.
9. In the event that Grantee, or Grantee's heirs,
successors and assigns, shall, at any time subsequent to the date
hereof, fail to materially comply with any of the foregoing restrictions
within thirty (30) days after the date Grantor gives notice thereof to
Grantee (herein a "breach"), Grantor shall be immediately entitled to
all of Grantor's remedies at law and equity, including, but not limited
to, money damages, the right to halt or enjoin any violation of any of
the foregoing provisions by temporary restraining order and/or temporary
and/or permanent injunction and the right to specific performance to
restore the Premises to its prior condition in conformance with the
above restrictions, in any court of competent jurisdiction. In
addition, if such breach shall occur within seven (7) years from the
date hereof, title to the Premises, at Grantor's option, shall revert
to, and vest in, Grantor. Grantor's exercise of one remedy or relief
hereunder shall not have the effect of waiving or limiting any other
remedy or relief, subject, however, to the above mentioned seven (7)
year period, and the failure to exercise or delay in exercising any
remedy shall not have the effect of waiving or limiting the use of any
other remedy or relief or the use of such other remedy or relief at any
other time.
10. In the event a material breach occurs and Grantor
exercises its option to have title to the Premises revert back to
Grantor as set forth hereunder, Grantor shall reimburse Grantee for the
unamortized actual so-called "hard costs" incurred by Grantee for the
installation or renovation of new staircases and elevators in the
Premises (the "Renovation Work"), provided, however, (a) Grantor shall
have given its approval, not to be unreasonably withheld or delayed, to
the plans and specifications and the "hard cost" estimates for the
actual construction of the Renovation Work prior to Grantee's
commencement thereof, (b) such hard costs which are actually incurred by
Grantee are amortized on a straight line basis over a twenty year period
from the date of substantial completion of the Renovation Work and (c)
Grantee gives Grantor, within six (6) months of the date of substantial
completion of the Renovation Work, receipted invoices for such hard
costs and a certificate of Grantee's architect certifying that the hard
costs were actually incurred for the Renovation Work. In addition to
the foregoing, Grantor shall reimburse Grantee for the unamortized
actual costs to Grantee arising from the relocation of tenants or
occupants occupying units in the Premises as of the date hereof, which
units are subject to any municipal, state or Federal rent control or
rent stabilization law, to units or other residences outside the
Premises (the "relocation costs"). The relocation costs, which shall be
evidenced to Grantor's reasonable satisfaction, shall be amortized over
a ten [10] year period on a straight line basis from the date the tenant
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being relocated shall have vacated the unit in the Premises. In no
event, however, will the amount of relocation costs to be reimbursed by
Grantor exceed $10,000 per apartment unit so vacated.
11. This Indenture is subject to all the terms and
provisions of that certain Grant of Easement and Zoning Lot and
Development Agreement by and among Grantor and 1133 Building Corp.,
dated of even date and to be recorded prior to this Indenture.
IN WITNESS WHEREOF, Grantor and Grantee have duly
executed this deed as of the day and year first above written.
IN PRESENCE OF:
46-47 ASSOCIATES
By: Douglas Durst
-------------------
,a general partner
David Puchall
____________________
DAVID PUCHALL
AGREED TO AS TO THE
PROVISIONS AFFECTING IT:
1133 BUILDING CORP.
By: Douglas Durst
---------------
Vice President
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EXHIBIT 10.8
SECOND LEASE MODIFICATION AGREEMENT
This Second Lease Modification Agreement (the
"Agreement"), dated as of May 10, 1993, between 46-47 ASSOCIATES, a New
York partnership, having offices at 1133 Avenue of the Americas, New
York, New York 10036 (the "Landlord") and UNITED STATES TRUST COMPANY OF
NEW YORK, a New York banking corporation, having offices at 114 West
47th Street, New York, New York (the "Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into that certain
lease (such lease as thereafter modified being herein called the
"Lease") dated as of September 10, 1987, a memorandum of which was
recorded in Reel 1290, page 1448, in the office of the City Register of
the County of New York (the "Register's Office"), covering the premises
(the "Premises") more particularly described in the Lease;
WHEREAS, Landlord and Tenant entered into that certain
lease modification agreement (the "Modification Agreement") dated as of
December 7, 1987, modifying Exhibit B of the Lease, which Modification
Agreement was recorded in Reel 1374, page 1722, in the Register's
Office;
WHEREAS, Landlord and Tenant wish to confirm and clarify
the occurrence of certain events and circumstances contemplated by the
parties under the Lease and to make certain additional modifications to
the Lease in the manner hereinafter set forth.
NOW THEREFORE, in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt of which
is hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Lease.
2. Article 1 of the Lease is hereby modified by
deleting therefrom all of the language beginning with the words "TO HAVE
AND TO HOLD unto Tenant" appearing on Page 2 of the Lease, through and
including the words "sooner pursuant to any of the terms of this Lease
or pursuant to law;" appearing on the bottom of Page 3 of the Lease, and
by substituting the following therefor:
TO HAVE AND TO HOLD unto Tenant, its successors and
permitted assigns, for the initial term of approximately twenty five
(25) years (the "Initial Term") commencing on November 14, 1989 (the
"Commencement Date") and expiring on November 30, 2014 (the "Expiration
Date") unless the term shall terminate sooner pursuant to any of the
terms of this Lease or pursuant to law;
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3. Article 2 of the Lease is hereby modified by
deleting therefrom all of Sections 2.02 and 2.03. Tenant confirms that
Landlord has fully paid to Tenant, or to Tenant's designees, all of the
Initial Tenant's Work Allowance and the Additional Tenant's Work
Allowance provided for under the Lease.
4. Section 3.01. A of the Lease is hereby modified by
deleting therefrom the last full paragraph thereof appearing on Page 9
of the Lease and substituting the following therefor:
"The parties hereto acknowledge that (a) Schedule A sets
forth the rentable (or net useable for the Mechanical Space) area of (or
within) each floor within the Demised Premises and within the Building
and (b) pursuant to Section 4.01.A.4 of the Lease, (i) Tenant's Share
with respect to Taxes is presently 63.9557% and (ii) Tenant's Share with
respect to Expenses is presently 65.6036%.
5. Section 3.01. B of the Lease is hereby modified by
deleting such section in its entirety therefrom and substituting the
following therefor:
"B. The first lease year of the Term of this Lease is
the period from November 14, 1989 up to and including November 30, 1990.
Each subsequent lease year shall consist of the twelve calendar month
period thereafter (i.e., each December 1 to November 30) or part thereof
during the final lease year of the term of this Lease or any extension
thereof."
6. Section 3.01. C of the Lease is hereby deleted in
its entirety therefrom and the following paragraph substituted therefor:
C. Tenant also covenants and agrees to pay to Landlord,
in addition to all other Fixed Rent and additional rent payable
hereunder, during and after the sixth (6th) lease year, for a total of
ten (10) lease years, additional Fixed Rent in the amount of Seventy-One
Thousand Five Hundred Dollars ($71,500) per lease year, which shall be
in consideration for Landlord's granting to Tenant certain options to
lease additional floors as set forth hereinbelow and said additional
Fixed Rent shall be payable by Tenant to Landlord whether or not Tenant
actually exercises any of the option rights granted hereunder.
7. Section 4.01.A.4 of the Lease is hereby modified by
deleting therefrom the last sentence thereof and substituting the
following therefor:
"The rentable square foot area of any additional floors
added to the Demised Premises and or of any building additions added to
the Building shall be computed by the same method as currently set forth
on Schedule A attached hereto."
8. Section 21.01 of the Lease is hereby modified by
adding the following to the last paragraph of Section 21.01 appearing on
Page 90 of the Lease:
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"To the extent any of the terms and provisions of the
Modification Agreement or this Agreement are inconsistent with, or
contradict, the terms and provisions of the Net Lease, set forth as
Exhibit F to the Lease, the terms and provisions of the Modification
Agreement and this Agreement shall control and the Net Lease shall be
deemed to be hereby modified to conform to the provisions thereof and
any references in the Net Lease to the Space Lease shall be deemed
references to the Space Lease as hereby or hereafter amended."
9. Section 22.01. A is hereby modified by adding the
following language to the end of Section 22.01. A.
"Anything to the contrary in this foregoing Section
22.01. A notwithstanding, Landlord and Tenant hereby agree that the
Commencement Date of the First Renewal Term shall be December 1, 2014
and the Expiration Date thereof shall be November 30, 2024 and that
Tenant may not give the First Election Notice earlier than November 30,
2010 nor later than November 30, 2012."
10. Section 22.01. B is hereby modified by adding the
following language to the end of Section 22.01 B.
"Anything to the contrary in this foregoing Section
22.01. B notwithstanding, Landlord and Tenant hereby agree that the
commencement date of the Second Renewal Term shall be December 1, 2024
and the Expiration Date thereof shall be November 30, 2034 and that
Tenant may not give the Second Election Notice earlier than November 30,
2020 nor later than November 30, 2022."
11. Article 23 of the Lease is modified solely to
provide that the Cancellation Date shall be November 30, 2004.
12. The Lease is further modified by deleting therefrom
Article 25 in its entirely and substituting therefor in its entirety the
following:
"ARTICLE 25
OPTION SPACE
25.01. Provided (a) this Lease is in full force and effect
and (b) with respect to floors 23, 24, 25 and 26, provided Tenant has
not given Landlord the cancellation notice provided for in Article 23
hereof; and subject to the provisions of paragraphs I through K below:
A. Tenant shall have two (2) separate and independent
options to lease the entire seventeenth (17th) rental floor. Tenant may
exercise the first option (the "First Option") only by furnishing
Landlord written notice to such effect no later than January 1, 1994
(the "Outside 17th Floor Notice Date"). In the event of such timely
exercise and Tenant's compliance with the provisions hereof, Landlord
shall deliver possession of the subject floor to Tenant on or about
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December 1, 1996 (the "Outside 17th Floor Delivery Date"). Landlord
shall, however, make good faith, reasonable efforts (which efforts shall
not require the payment of monies or the institution of any legal
proceedings), to reach agreement with one of the current tenants of the
17th floor, the law firm of Carter Ledyard & Milburn, or its successors
and assigns, to extend to October 31, 1995 the required outside date by
which such tenant must exercise its right to renew its lease which shall
then enable Tenant to exercise the First Option for the entire
seventeenth (17th) rental floor by furnishing the aforementioned written
notice to Landlord no later than September 30, 1995 with possession
thereof to be delivered to Tenant on or about the Outside 17th Floor
Delivery Date. Landlord shall promptly notify Tenant if and when it is
successful in extending such tenant's required outside date which notice
shall advise Tenant that the Outside 17th Floor Notice Date shall be
extended to September 30, 1995. Upon the exercise of the First Option,
the second option (the "Second Option") for the seventeenth (17th)
rental floor (provided for in the following sentence) shall be deemed by
the parties hereto to be of no further force or effect. In the event,
however, Tenant shall fail to exercise the First Option, Tenant may
exercise the Second Option for the seventeenth (17th) rental floor,
subject to the provisions hereinabove, except that for the Second Option
the Outside 17th Floor Notice Date shall be October 31, 2005 and the
Outside 17th Floor Delivery Date for the Second Option shall be on or
about December 1, 2006.
B. Tenant shall have one (1) option to lease the entire
eighteenth (18th) rental floor. Tenant may exercise the subject option
only by furnishing Landlord written notice to such effect no later than
February 28, 2000. In the event of such timely exercise and Tenant's
compliance with the provisions hereof, Landlord shall deliver possession
of the eighteenth (18th) rental floor on or about February 1, 2002.
C. Subject to the provisions contained hereinbelow,
Tenant shall have one (1) option to lease the entire nineteenth (19th)
rental floor. Tenant may exercise the subject option only by furnishing
Landlord written notice to such effect no later than September 30, 2000.
In the event of such timely exercise and Tenant's compliance with the
provisions hereof, Landlord shall deliver possession of the nineteenth
(19th) rental floor on or about July 1, 2002. Landlord shall, however,
make good faith, reasonable efforts (which efforts shall not require the
payment of monies or the institution of any legal proceedings), to reach
agreement with one of the current tenants of the 19th floor, the law
firm of Pollack & Kaminsky, its successors and assigns, to extend the
current expiration date of its lease to June 30, 2002 and to extend to
January 1, 2001 the required outside date by which such tenant must
exercise its right to renew its lease which shall then enable Tenant to
exercise the subject option for the entire nineteenth (19th) rental
floor by furnishing the aforementioned written notice to Landlord no
later than November 30, 2000 with possession thereof to be delivered to
Tenant on or about July 1, 2002. Landlord shall promptly notify Tenant
if and when it is successful in extending the said tenant's required
outside date.
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D. Tenant shall have one (1) option to lease either, or
both of, the entire twentieth (20th) and twenty- first (21st) rental
floors. Tenant may exercise the subject option only by furnishing
Landlord written notice to such effect (designating the floor or floors
Tenant wishes to lease) no later than November 30, 2000. In the event
of such timely exercise and Tenant's compliance with the provisions
hereof, Landlord shall deliver possession of the floor(s) designated in
Tenant's notice to Tenant on or about July 1, 2002.
E. Tenant shall have one (1) option to lease the entire
twenty second (22nd) rental floor. Tenant may exercise the subject
option only by furnishing Landlord written notice to such effect no
later than October 31, 2005. In the event of such timely exercise and
Tenant's compliance with the provisions hereof, Landlord shall deliver
possession of the twenty second (22nd) floor to Tenant on or about
December 1, 2006.
F. Tenant shall have one (1) option to lease either, or
both of, the entire twenty-third (23rd) and twenty-fourth (24th) rental
floors. Subject to the provisions of the following Paragraph G, Tenant
may exercise the subject option only by furnishing Landlord written
notice to such effect (designating the floor or floors Tenant wishes to
lease) no later than April 30, 2004. In the event of such timely
exercise and Tenant's compliance with the provisions hereof, Landlord
shall deliver possession of the rental floor(s) designated in Tenant's
notice to Tenant on or about June 1, 2005. (See Paragraph G following).
G. Anything to the contrary in the foregoing Paragraph
F notwithstanding, in the event one of the tenants currently occupying a
portion of the twenty fourth (24th) rental floor, North American Taisei
Corporation ("Taisei") shall have renewed its lease, pursuant to the
renewal rights provided for therein, Tenant's option to lease the 24th
rental floor may only be exercised by Tenant furnishing Landlord written
notice to such effect no later than October 31, 2003. Landlord shall
promptly notify Tenant if and when Taisei so renews its lease. In the
event of such timely exercise and Tenant's compliance with the
provisions hereof, Landlord shall deliver possession of the 24th rental
floor to Tenant on or about July 1, 2005.
H. Tenant shall have one (1) option to lease either, or
both of, the entire twenty-fifth (25th) and twenty-sixth (26th) rental
floor(s). Tenant may exercise the subject option only by furnishing
Landlord written notice to such effect (designating the floor or floors
Tenant wishes to lease) no later than April 30, 2004. In the event of
such timely exercise and Tenant's compliance with the provisions hereof,
Landlord shall deliver possession of the floor(s) designated in Tenant's
notice at any time, together or separately, up to, but not later than,
July 1, 2005.
I. Anything in Article 8 of this Lease to the contrary
notwithstanding, in the event that United States Trust Company of New
York, the named Tenant, and/or any Tenant Entity or Required Subtenant
are in actual occupancy (i.e. exclusive of any subtenants) of less than
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two-thirds (2/3) of the then Demised Premises, as constituted at the
time that (i) Tenant shall have exercised any of the options provided
for in Paragraphs C, D, E, F, G and H or (ii) any of the foregoing
option rental floors have been delivered to Tenant, then, in such event,
Tenant shall have no right whatsoever to sublease all or any portion of
any of the floor or floors added to the Demised Premises through its
exercise of the applicable option (except to a Tenant Entity or Required
Subtenant) for a term commencing prior to eighteen (18) months after
delivery of possession of the said floor or floors added to the Demised
Premises pursuant to the exercise of the applicable option.
J. All Fixed Rent with respect to each of the subject
floors provided for in Paragraphs C, D, E, F, G and H shall commence six
(6) months after each such floor has been delivered to Tenant, but
additional rent and electricity charges with respect to each of the
applicable floors shall commence and be payable on the date of delivery
of possession of each of the applicable floors.
K. From and after the execution and delivery of this
Lease, Landlord will give written notice to Tenant when Landlord enters
into a lease with another tenant for any space in the Building, which
notice shall describe in reasonable detail the location and area of the
space rented, the expiration date of the lease, and whether the tenant
has any option(s) to extend the term thereof (in which case Landlord
shall describe said option(s) and the expiration date(s) of any lease
extension thereunder). Tenant acknowledges that Landlord shall be
deemed to have provided Tenant with the information required in the
immediately preceding sentence, prior to the date of this Agreement.
L. If Landlord fails promptly to give any of the
notices required to be given by Landlord under paragraphs A, C and/or G
above, then (at Tenant's option) Tenant's time to give notice of
election for the particular space involved shall be one day later for
each day of such delayed notice by Landlord.
M. The option floors described hereinabove are
collectively referred to hereinafter as the "Option Space".
25.02. In the event that Tenant exercises any of such
options for the Option Space:
A. The Fixed Rent with respect to such Option Space
shall be fixed in accordance with Article 3 of the Lease at the rental
rates then and thereafter in effect for the Office Space then under
lease hereunder to Tenant, based upon the number of rentable square feet
of such Option Space computed pursuant to Schedule A, and Exhibit E,
including any future adjustments of the Fixed Rent during each lease
year of the Term of the Lease, all as provided in Sections 3.01(A)(b),
(c) and (d), and to the extent applicable, Article 22 of the Lease.
B. The following illustrates, by way of example only,
the intentions of the parties hereto as to the computation of the
aforementioned adjustment in the Fixed Rent:
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<PAGE>
Assuming (a) that Tenant exercises its option to lease
the seventeenth (17th) floor under Section 25.01(A) and (b) delivery of
the 17th floor occurs on December 1, 1996 (i.e., the eighth (8th) lease
year) the Fixed Rent will be increased (as of the date Landlord delivers
to Tenant possession of said floor) by the product of (x) the number of
rentable square feet of the seventeenth (17th) floor computed pursuant
to Schedule A, as amended, multiplied by (y) the sum of (aa) $29.25 and
(bb) $1.75 (which amount represents the total increases for the seven
lease years immediately following the first lease year). The Fixed Rent
as computed above shall thereafter be further increased in accordance
with subsections 3.01(A)(b), (c), (d) and (e).
Assuming (a) that Tenant exercises its option to lease
the twenty third (23rd) and twenty fourth (24th) rental floors under
Section 25.01 F and (b) delivery of the twenty third (23rd) and twenty
fourth (24th) rental floors occurs on June 1, 2005, i.e., the sixteenth
(16th) lease year, the Fixed Rent will be increased (as of the date
Landlord delivers to Tenant possession of said floors) by the product of
(x) the number of rentable square feet of the twenty third (23rd) and
twenty fourth (24th) rental floors computed pursuant to Schedule A
multiplied by (y) the sum of (aa) $29.25, (bb) $2.25, representing the
total increases per lease year pursuant to subsection 3.01 A(b) and (cc)
$1.80, representing the total increases for the eleventh (11th) through
sixteenth (16th) lease years pursuant to subsection 3.01 A(c). The
Fixed Rent as computed above shall thereafter be further increased in
accordance with subsections 3.01 A(c),(d) and (e).
C. Tenant's Share (as defined in Article 4) shall be
from time to time increased based upon the number of rentable square
feet of said Option Space (as computed in accordance with Schedule A)
from time to time made part of the Demised Premises.
25.03. In the event Tenant duly and properly exercises any
option under this Article, the parties shall immediately be bound
thereby without the execution of an amendment to this Lease; however, at
the request of either party, the parties shall promptly execute and
deliver a written amendment to this Lease reflecting the addition of any
such Option Space as part of the Demised Premises for the remainder of
the term of this Lease, the increase of the Fixed Rent and of the
Tenant's Share in accordance with Article 3 and this Article. Except as
otherwise provided in this Article 25, the Option Space is leased and
added to the Demised Premises pursuant to all of the terms, covenants
and conditions of this Lease. Tenant will accept the Option Space and
the facilities thereto and improvements therein in their then "AS IS"
condition on the date of delivery thereof to Tenant and Tenant shall
have the right upon reasonable advance notice to Landlord (and subject
to the availability thereof for inspection) to inspect the Option Space
prior to taking possession thereof. Except for any damage by fire or
other casualty or condemnation, Landlord shall not be required to
perform any work or to give Tenant any work allowance with respect to
any such Option Space. Landlord will use reasonable efforts to make any
such Option Space available to Tenant within the time periods stated
above including diligent pursuit of any needed dispossess proceeding.
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However, in the event Landlord fails or is unable to deliver all or any
portion of such Option Space to Tenant on the proposed delivery date
thereof, as a result of the holding over of the prior tenant, Landlord
shall not be subject to any liability whatsoever for such failure or
inability to deliver possession and the exercise of said option shall
remain effective, but the Fixed Rent and additional rent shall not
commence with respect to such portion of such Option Space until the
date on which possession of the same is actually made available to
Tenant or such later date as provided in Section 25.01J or as may be
provided elsewhere in this Article. Nothing herein shall operate to
extend the Expiration Date for any of the Demised Premises (including
but not limited to the Option Space) beyond the date otherwise fixed for
the expiration of the term(s) of this Lease.
25.04. Anything to the contrary in the foregoing Sections
25.01, 25.02 and 25.03 notwithstanding, in the event Landlord shall find
itself able to deliver possession to Tenant of any of the rental floors
("available floor(s)") listed above to Tenant at least thirty (30) days
prior to the last day on which Tenant may give notice of the exercise of
its option to lease said available floor(s), Landlord shall give notice
to Tenant to such effect and Tenant will have thirty (30) days from the
giving of such notice to exercise its option to lease said available
floor(s), all on the terms and provisions contained in this Article 25,
except that possession of such available floor(s) shall be delivered to
Tenant as soon as such floor(s) are vacant and available for delivery to
Tenant. In the event Tenant shall not elect to exercise the option
provided in this Section 25.04 with respect to any such available
floor(s), Tenant shall have no right or interest with respect thereto
thereafter except the aforementioned options to lease, as expressly set
forth in Sections 25.01 A through H hereof. In addition, Landlord shall
have no obligation to give Tenant notice as to any available floor(s)
unless (a) such rental floor is an entire floor and not a partial floor
and (b) in Landlord's reasonable judgment, timely delivery of possession
of such available floor(s) shall be reasonably feasible.
25.05. Nothing contained in this Article shall be construed
to prevent Landlord from entering into one or more leases of all or any
component of the Option Space, provided that any such lease is expressly
contingent upon the exercise of Tenant's option rights under this
Article.
25.06. With respect to the date set forth in each of
Sections 25.01 A through H as the last date on which Landlord may
deliver possession of a rental floor to Tenant, if, after Tenant shall
have given a notice exercising an option with respect to such floor, any
such floor will become available for delivery to Tenant prior to the
outside date for delivery set forth in each Section as a result of the
vacancy of such floor by the then tenant thereof, Landlord shall have
the right to accelerate such date of delivery by giving Tenant notice
(the "acceleration notice") of (a) such acceleration and (b) the
projected accelerated delivery date (the "accelerated date") which
accelerated date shall not be prior to that date which is ninety (90)
days from the giving of the acceleration notice. All other provisions
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<PAGE>
of this Article 25 will otherwise be fully applicable with respect to
any rental floors delivered on an accelerated date.
25.07. It is understood and agreed that, except with
respect to the 17th and 18th rental floors which must be delivered by
Landlord to Tenant on or before the respective outside delivery dates
set forth in Sections 25.01A and B (but subject to the provisions of
Section 25.03), (a) the delivery of any specific option floors
constituting a component of the Option Space by the specific outside
dates set forth in Sections 25.01C, D, E, F, G and H is based on the
expiration dates in the current leases for each of those respective
floors, (b) Landlord shall use its best efforts (which shall not
necessitate legal proceedings or the expenditure of any funds) to
deliver each of those floors by those specific dates (subject to the
provisions of Section 25.03) and, thereafter by diligent dispossess
proceedings, and (c) if any of the current leases for any of those
floors (other than Floors 17 and 18) should be terminated prior to their
present expiration dates because of the then tenant's default
thereunder, then (unless Tenant exercises its rights under Section 25.04
to take earlier possession of any such floor) Landlord shall have the
right to re-let any such floor (hereinafter referred to as a "vacant
floor") to a tenant, other than Tenant, for a lease term agreeable to
such tenant provided, however, that Landlord must either (i) obtain
Tenant's approval of a different notice and delivery date for the vacant
floor under Section 25.01 or (ii) make arrangements to deliver one of
the other floors in the Building, in lieu of the vacant floor, to Tenant
on or about the date set forth for the delivery of the vacant floor or
floors under the applicable paragraph of Section 25.01 in the event
Tenant exercises its option to lease the vacant floor or floors under
such paragraph."
13. The Lease is further modified by deleting therefrom
Schedule A attached thereto and substituting therefor the Schedule A
attached hereto.
14. At the request of either party hereto, Landlord and
Tenant shall promptly execute, acknowledge and deliver a memorandum with
respect to this Agreement sufficient for recordation. Such memorandum
shall not in any circumstances be deemed to change or otherwise affect
any of the obligations or provisions of the Lease or this Agreement.
15. Except as modified herein, all of the terms,
covenants and conditions of the Lease are and shall remain in full force
and effect and are hereby ratified and confirmed and this Agreement
shall be binding upon and shall inure to the benefit of the parties
hereto and their respective legal representatives, successors and
assigns.
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed
this Agreement as of the day and year first above written.
46-47 Associates (Landlord)
By: D. Durst
------------------------
Name:
Title:
United States Trust Company
of New York (Tenant)
By: F. S. Wonham
------------------------
Name: F.S. Wonham
Title: Vice Chairman
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<PAGE>
<PAGE>
SCHEDULE A
----------
RENTABLE SQUARE FEET OF
THE DEMISED PREMISES
AND OF THE BUILDING
-----------------------
Rental Floor Designation Rentable Area
- ------------------------ -------------
Cellar No. 2 (Sub-Basement) 18890
Cellar No. 1 (Basement) 25703
1st 15017
2nd 27536
3rd 28213
4th 28050
5th 28050
6th 24909
7th 24823
8th 23722
9th 23685
10th 23685
11th 23685
12th 23685
14th 23685
15th 23312
16th (Mechanical Space) 2402(Useable)
17th 20899
18th 21090
19th 21138
20th 21138
21st 21185
22nd 20313
23rd 20313
24th 16561
25th 16561
26th 15022
Roof 244(Useable)
- ----------------------
* United States Trust Company of New York presently occupies 7242
square ft. of rentable area of Cellar No. 2.
The following is the method of determining rentable area
for purposes of this Lease.
1. Determine the gross useable area.
2. Make the necessary deductions to determine the net
useable area.
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<PAGE>
3. Determine rentable area by dividing the net useable
area by the area adjustment factor (.756).
4. The gross useable area of the floor shall be the
entire area within the exterior walls. Dimensions shall be taken to the
front of the heating enclosure or where there is no heating enclosure to
the inside surface of the exterior wall.
5. The following areas shall be deducted from the gross
useable area on each floor, to determine the net useable area, public
passenger and freight elevators, public fire stairs, elevator lobby,
public toilets, the main telephone and electric closets, janitors
closets, pipe shafts necessary for the building's operations, H.V.A.C.
shafts necessary for the building's H.V.A.C. operation. Columns and
their enclosure shall not be deducted from useable space.
6. All tenant installations of every kind including
private toilets, supplementary H.V.A.C. equipment rooms and/or shafts,
private stairs, elevators, escalators, auxiliary telephone and electric
closets, pipe shafts, and exhaust shafts serving tenant's equipment,
equipment rooms of every description containing Tenant's equipment,
kitchens, storage rooms, shall be included in net useable area.
7. The net useable area for each floor shall be divided
by .756 to determine the rentable area.
8. Note that (a) to fix Tenant's Share for purposes of
determining Tenant's liability for Taxes under Article 4, the Sub-
Basement, Basement and Mechanical Space is to be excluded from both the
numerator and denominator in making the computation of Tenant's Share
under said Article 4 and (b) to fix Tenant's Share for purposes of
determining Tenant's liability for Expenses under Article 4, the Sub-
Basement and Mechanical Space is to be excluded from both the numerator
and denominator in making the computation of Tenant's Share under said
Article 4.
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<PAGE>
SCHEDULE A-1
Additional Office Space Pursuant to Article 37
Rental Floor Designation Rentable Area
- ------------------------ -------------
17th 77
18th 77
19th 77
20th 77
21st 77
22nd 77
23rd 77
24th 77
25th 73
26th 146
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<PAGE>
EXHIBIT 10.9
UNITED STATES TRUST COMPANY OF NEW YORK
AND AFFILIATED COMPANIES
1981 STOCK OPTION PLAN
AS AMENDED
EFFECTIVE JANUARY 1, 1983
1. Purpose. The purpose of this Plan is to provide a means whereby
U.S. Trust Corporation (the "Corporation") may, through the grant of
nonqualified stock options to Key Employees, as defined below, attract
and retain person of ability as employees and motivate such employees to
exert their best efforts on behalf of the Corporation and any
Subsidiary. As used herein the term "Subsidiary" shall mean any
corporation which at the time an option is granted under this Plan
qualifies as a subsidiary of the Corporation under the definition of
"subsidiary corporation" contained in Section 425(f) of the Internal
Revenue Code of 1954, as amended from time to time (the "Code"), or any
similar provision hereafter enacted except that such term shall not
include any corporation which is classified as a foreign corporation
pursuant to Section 7701 of the Code. The term "Key Employees" means
those employees (including officers and directors who are also
employees) of the Corporation or of any Subsidiary, who, in the judgment
of the Committee referred to in paragraph 3, below, are considered
especially important to the future of the Corporation. No options
granted under this Plan shall be deemed to constitute incentive stock
options within the meaning of Section 422A of the Code or any similar
provision hereafter enacted.
2. Shares Subject to the Plan. Options may be granted by the
Corporation from time to time to Key Employees to purchase an aggregate
of 240,000 shares of Common Stock ($5 par value) of the Corporation
("Stock"), less the aggregate number of shares of Stock which have been
reserved for, or delivered upon exercise of, options granted under the
Corporation's 1981 Incentive Stock Option Plan, and such amount of
shares shall be reserved for options granted under the Plan (subject to
adjustment as provided in Section 5(h)). The shares issued upon
exercise of options granted under the Plan may be authorized and
unissued shares or shares held by the Corporation in its treasury. If
any option granted under the Plan shall terminate, expire or, with the
consent of the optionee, be cancelled as to any shares, new options may
thereafter be granted covering such shares.
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<PAGE>
3. Administration of the Plan. The Plan shall be administered by the
Compensation and Benefits Committee (the "Committee") of the Board of
Trustees of United States Trust Company of New York, consisting of not
less than three members appointed by such Board of Trustees and serving
at its leisure. Each member of the Committee shall be both a member of
the Board of Directors of the Corporation (the "Board") who is both (i)
not eligible to receive any option under the Plan and (ii) a
"disinterested person" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 or successor rule or regulation.
The Committee may interpret the Plan, prescribe, amend and rescind
any rules and regulations necessary or appropriate for the
administration of the Plan, or to assure that the options granted
thereunder will not qualify as incentive stock options, and make such
other determinations and take such other action as it deems necessary or
advisable, except as otherwise expressly reserved to the Board in the
Plan. Without limiting the generality of the foregoing sentence, the
Committee may, in its discretion, (i) treat all or any portion of any
period during which an optionee is on military or on an approved leave
of absence from the Corporation or a Subsidiary as a period of
employment of such optionee by the Corporation or such Subsidiary, as
the case may be, for purposes of accrual of his rights under his
options, and (ii) in the event of an optionee's termination of
employment due to death, disability or retirement, accelerate, in whole
or in part any schedule which may have been incorporated in an option
agreement for the exercise of one of more options. Any interpretation,
determination or other action made or taken by the Committee shall be
final, binding and conclusive.
4. Grant of Options. Subject to the provisions of the Plan, the
Committee shall determine and designate from time to time those Key
Employees to whom options are to be granted and the number of shares of
Stock to be optioned to each employee; provided, however,that no option
shall be granted after the expiration of ten years from the effective
date of the Plan specified in Section 9, below. No director of the
Corporation who is not also an employee of the Corporation or of a
Subsidiary shall be entitled to receive any option under the Plan.
5. Terms and Conditions of Options. Each option granted under the
Plan shall be evidenced by an agreement, in a form approved by the
Committee. Such agreement shall be subject to the following express
terms and conditions and to such other terms and conditions as the
Committee may deem appropriate:
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<PAGE>
(a) Option Period. Each option agreement shall specify the period
for which the option thereunder is granted (which in no event
shall exceed ten years from the date of grant) and shall
provide that the option shall expire at the end of such
period. The Committee may extend such period (but not beyond
ten years from the date of grant).
(b) Option Price. The option price per share shall be determined
by the Committee at the time any option is granted, and shall
be not less than the fair market value (but in no event less
than the par value) of Stock on the date the option is
granted, as determined by the Committee.
(c) Exercise of Option. Except as otherwise permitted in
accordance with Section 3 hereof, no part of any option may be
exercised until the optionee shall have remained in the employ
of the Corporation or of a Subsidiary for such period, which
shall be no less than one year, after the date on which the
option is granted as the Committee may specify in the option
agreement, and the option agreement may provide for
exercisability in installments.
(d) Payment of Purchase Price upon Exercise. Each option shall
provide that the purchase price of the shares as to which an
option shall be exercised shall be paid to the Corporation at
the time of exercise either in cash or in such other
consideration as the Committee deems appropriate, including,
but not limited to, Stock already owned by the optionee having
a total fair market value, as determined by the
Committee, equal to the purchase price, or a combination of
cash and Stock having a total fair market value, as so
determined, equal to the purchase price.
(e) Exercise in the Event of Death or Termination of Employment.
(1) If an optionee shall die (i) while an employee of the
Corporation or a Subsidiary or (ii) within three months after
termination of his employment with the Corporation or a
Subsidiary because of his disability, his options may be
exercised, to the extent that the optionee shall have been
entitled to do so on the date of his death or such termination
of employment, by the person or persons to whom the optionee's
rights under the option pass by will or applicable law, or if
no such person has such right, by his executors or
administrators, at any time, or from time to time, but not
later than the expiration date specified in paragraph (a) of
this Section 5 or two years after the optionee's death,
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<PAGE>
whichever date is earlier. (2) If an optionee's employment by
the Corporation or a Subsidiary shall terminate because of his
disability and such optionee has not died within the following
three months, he may exercise his options, to the extent that
he shall have been entitled to do so at the date of the
termination of his employment, at any time, or from time to
time, but not later than the expiration date specified in
paragraph (a) of this Section 5 or twelve months after
termination of employment, whichever date is earlier. (3) If
an optionee's employment shall terminate for any reason other
than death or disability as aforesaid, all right to exercise
his option shall terminate at the expiration date specified in
paragraph (a) of this Section 5 or three months after
termination of employment, whichever date is earlier;
provided, however, (i) that the Committee may, in its
discretion, grant new options or modify outstanding options to
permit their exercise upon an optionee's termination of
employment due to retirement until the earlier of the
expiration date specified in paragraph (a) of this Section 5
or twelve months after termination of employment and (ii) that
in the event of any dissolution or liquidation of the
Corporation, any merger or consolidation into or with any
other corporation in which the Corporation is not the
surviving corporation and in which control (within the meaning
of Section 368(c) of the Code with "50 percent" being
substituted for "80 percent") of the Corporation shall change,
or any acquisition of outstanding securities of the
Corporation resulting in such a change of control, or in the
event of the optionee's retirement with the consent of the
Corporation, the optionee shall have the right, immediately
prior to or concurrently with the occurrence of such an event,
to exercise his options to the full extent not theretofore
exercised.
(f) Transferability of Options. No option granted under the Plan
shall be transferable other than by will or by the laws of
descent and distribution. During the lifetime of the optionee
an option shall be exercisable only by him.
(g) Investment Representation. Each option agreement may provide
that, upon demand by the Committee for such a representation,
the optionee (or any person acting under Section 5(e)) shall
deliver to the Committee, at the time of any exercise of an
option or portion thereof, a written representation that the
shares to be acquired upon such exercise are to be acquired
for investment and not for resale or with a view to the
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<PAGE>
distribution thereof. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon
exercise of an option and prior to the expiration of the
option period shall be a condition precedent to the right of
the optionee or such other person to purchase any shares.
(h) Adjustments in Event of Change in Stock. In the event of any
change in the Stock of the Corporation by reason of any stock
dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, or
rights offering to purchase Stock at a price substantially
below fair market value, or of any similar change affecting
the Stock, the number and kind of shares which thereafter may
be optioned and sold under the Plan and the number of kind of
shares subject to option in outstanding option agreements and
the purchase price per share thereof shall be appropriately
adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution
or enlargement of the rights granted to, or available for,
participants in the Plan.
(i) Optionees to Have no Rights as Stockholders. No optionee
shall have any rights as a stockholder with respect to any
shares subject to his option prior to the date of issuance to
him of such shares.
(j) Plan and Option Not to Confer Rights With Respect to
Continuance of Employment. The Plan and any option granted
under the Plan shall not confer upon any optionee any right
with respect to continuance of employment by the Corporation
or any Subsidiary, nor shall they interfere in any way with
the right of the Corporation or any Subsidiary by which an
optionee is employed to terminate his employment at any time.
(k) Other Option Provisions. The form of option authorized by the
Plan may contain such other provisions as the Committee may,
from time to time, determine. Without limiting the foregoing
sentence, the Committee may require a Key Employee to agree,
as a condition of receiving an option under the Plan, that
part or all of any options previously granted to such Key
Employee under any prior plan of the Corporation be
terminated.
6. Compliance with Government Laws and Regulations. The Plan, the
grant and exercise of options thereunder, and the obligation of the
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Corporation to sell and deliver shares under such options, shall be
subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be
required. No options may be exercised if such exercise, or the receipt
of shares of Stock pursuant thereto, would be contrary to applicable
law. The Corporation shall not be required to issue or deliver any
certificates for shares of Stock prior to (i) the listing of such shares
on any stock exchange on which the Stock may then be listed and (ii) the
completion of any registration or qualification of such shares under any
federal or state law, or any ruling or regulation of any government body
which the Corporation shall, in its sole discretion, determine to be
necessary or advisable.
7. Disposition of Shares. The Committee shall have the right to
provide, in the option agreement, that the Stock acquired by an exercise
of an option granted under the Plan shall not be transferable, other
than by will or by the laws of descent and distribution, within a period
ending no later than two years after the date such option was granted
nor within one year after the transfer of Stock pursuant to such
exercise, and each certificate representing shares of Stock acquired by
the exercise of an option containing such a provision shall bear a
legend to that effect; provided, however,that the Committee may, in its
discretion, at any time permit all or any part of such Stock to be
transferred prior to the expiration of such period, in which case any
contrary provisions of the option agreement shall be disregarded.
8. Amendment, Discontinuance or Merger of the Plan. The Board may at
any time amend, discontinue or terminate the Plan, and the Committee may
adopt such amendments which do not significantly increase the
Corporation's costs of the Plan and which the Committee, on the advice
of counsel, determines to be necessary or appropriate to assure the
continued status of options granted hereunder as nonqualified options;
provided, however, that, subject to the provisions of Section 5(h) no
action of the Board or of the Committee may (i) increase the number of
shares reserved for options pursuant to Section 2, (ii) permit the
granting of any option at an option price less than that determined in
accordance with Section 5(b), or (iii) permit the extension or granting
of options which expire beyond the ten year period provided for in
Sections 4 and 5(a). Without limiting the foregoing, the Board may
merge the Plan with the Corporation's 1981 Incentive Stock Option Plan
if it determines, upon the advice of counsel, that such merger will not
cause options granted under this Plan to qualify as incentive stock
options. Without the written consent of an optionee, no amendment,
discontinuance, merger or termination of the Plan shall alter or impair
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<PAGE>
any option previously granted to him under the Plan.
9. Effective Date of the Plan. The effective date of the Plan shall
be October 27, 1981, subject to approval by stockholders of the
Corporation holding not less than a majority of the shares present and
voting at its 1982 Annual Meeting. Notwithstanding the foregoing, if
the Plan shall have been approved by the Board prior to such Annual
Meeting, options may be granted by the Committee as provided herein
subject to such subsequent stockholder approval.
10. Name. The Plan shall be known as the "United States Trust Company
of New York and Affiliated Companies 1981 Stock Option Plan."
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EXHIBIT 10.13
ANNUAL INCENTIVE PLAN
OF
U.S. TRUST CORPORATION
As Amended, Restated and Renamed
effective as of January 1, 1994
1. Purpose
The purpose of the Annual Incentive Plan of U.S. Trust
Corporation is to encourage greater focus on performance
among the key decision makers of U.S. Trust Corporation and
its affiliated companies by relating a significant portion
of their total compensation to the achievement of annual
financial and strategic objectives.
The Plan, as hereinafter set forth, represents a
continuation of the Annual Incentive Plan of United States
Trust Company of New York and Affiliated Companies, as
amended, restated and renamed effective as of January 1,
1994 to reflect (a) the adoption of the Plan by U.S. Trust
Corporation as its own Plan and the Corporation's assumption
of, and becoming solely responsible for, all liabilities and
obligations of United States Trust Company of New York under
the Plan, and (b) changes in certain other provisions of the
Plan.
2. Definitions
The following definitions are applicable to the Plan:
"Affiliated Companies" means United States Trust
Company of New York, and each other direct or indirect
subsidiary of the Corporation.
"Award" means a payment earned in accordance with
the provisions of the Plan.
"Beneficiary" means the person or persons
designated in accordance with Section 13 to receive the
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<PAGE>
amount, if any, payable under the Plan upon the death
of a Participant.
"Board of Directors" means the Board of Directors
of U.S. Trust Corporation.
"Committee" means the Compensation and Benefits
Committee of the Board of Directors.
"Corporation" means U.S. Trust Corporation.
"Management" means the senior officers of the
Corporation or any of its Affiliated Companies who are
responsible for determining business and strategic
policies.
"Maximum Amount Available for Awards" means, with
respect to any fiscal year ending after December 31,
1985, the total amount available for Awards for all
Participants in such fiscal year provided the applic-
able Performance Goals set with respect to the fiscal
year have been fully achieved.
"Participant" means an employee of the Corporation
or any of its Affiliated Companies who is selected to
participate in the Plan.
"Performance Goals" means the annual performance
objectives of the Corporation or individual Participant
established for the purpose of determining whether, and
to what extent, Awards will be made for a fiscal year.
"Plan" means the Annual Incentive Plan of U.S.
Trust Corporation.
3. Administration
The Plan shall be administered by the Committee. In no
event shall a member of the Committee be eligible for an
Award under the Plan.
A majority of the Committee shall constitute a quorum,
and the acts of a majority of the members present or acts
approved in writing by a majority of the members without a
meeting, shall be the acts of the Committee. In addition to
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the responsibilities and powers assigned to the Committee
elsewhere in the Plan, the Committee shall have the
authority to:
(i) Select the Participants;
(ii) Establish the Performance Goals;
(iii) Determine the Maximum Amount for Awards for
all Participants, the allocation of such Maximum Amount
Available for Awards among individual Participants or
categories of Participants and actual Awards for each
Participant; and
(iv) Establish from time to time regulations for
the administration of the Plan, interpret the Plan, and
make all determinations considered necessary or
advisable for the administration of the Plan.
All decisions, actions or interpretations of the
Committee shall be final, conclusive and binding upon all
parties.
4. Participation
Participants in the Plan shall be selected for each
fiscal year from those employees of the Corporation or any
of its Affiliated Companies whose efforts contribute
materially to the annual success of the Corporation. No
employee shall at any time have the right to be selected as
a Participant in the Plan for any fiscal year, to be
entitled automatically to an Award, nor, having been
selected as a Participant for one fiscal year, to be a
Participant in any other fiscal year.
5. Awards
Awards will be earned on the basis of performance
measured against preestablished Performance Goals which
relate to corporate performance, individual performance or a
combination of corporate and individual performance.
Corporate goals will be based upon an annual growth in
the earnings per share of the Corporation or on such other
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corporate objectives as the Committee shall determine annu-
ally. The Committee shall have the authority to adjust
Performance Goals, or performance measurement standards, for
any fiscal year as it deems equitable in recognition of (i)
extraordinary or nonrecurring events experienced by the
Corporation during the fiscal year, or by any other
corporation whose performance is relevant to the
determination of the amount of any award hereunder, (ii)
changes in applicable accounting rules or principles or
changes in the Corporation's or in any other such
corporation's methods of accounting during the fiscal year,
or (iii) the occurrence of a reorganization,
recapitalization, stock split, stock dividend, combination
of shares, merger, consolidation, rights offering, or any
other change in the capital structure of the Corporation, or
of any other such corporation. In the event that the
Corporation's annual return or rate of return on
shareholders' equity or other measurement of corporate
performance for any year is less than a minimum to be set
for each year by the Committee, no award based on corporate
performance will be made for that year.
Individual goals will be set and performance measured
annually by the Committee based upon recommendations of
Management.
The Committee shall determine the Maximum Amount Avail-
able for Awards as a percentage or percentages of the aggre-
gate base salary earned for the year while a Participant of
all Participants, either individually or by categories of
Participants, provided that the Committee may, in its sole
discretion, also apply such percentage or percentages to
other current or deferred compensation and determine the
year for which such deferred compensation shall be counted.
The Committee shall determine whether the Performance
Goals to be used in determining the Maximum Amount Available
for Awards and the actual Awards for Participants, individu-
ally or by categories of Participants, will be based on
corporate performance, individual performance or a combina-
tion of corporate and individual performance.
The Committee may allocate, in the Committee's discre-
tion, the portion, if any, of the Maximum Amount Available
for Awards which is to be based on individual performance to
categories of Participants, and may determine the actual
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Award, if any, to be based on individual performance for
each Participant in a category by apportioning, in the Com-
mittee's discretion, all or part of any such allocated
amount among any one or more of such Participants. The
Committee may also allocate, in the Committee's discretion,
a portion of the Maximum Amount Available for Awards to be
utilized for special additional Awards without regard to
categories of Participants.
No Award shall be considered as compensation under any
employee benefit plan of the Corporation or any of its
Affiliated Companies, except as specifically provided in any
such plan or as otherwise determined by the Board of
Directors.
6. Payment of Awards
The amount payable to a Participant with respect to an
Award earned under the Plan shall be (i) for the fiscal year
ending December 31, 1980 the amount of the Award, and (ii)
for any fiscal year ending after December 31, 1980, the
amount of the Award reduced by the amount of any Profit-
Sharing Amount contributed to or for the benefit of the
Participant under the Employees' Profit-Sharing Plan of
United States Trust Company of New York and Affiliated
Companies with respect to the base salary of such Partici-
pant taken into account in determining the Maximum Amount
Available for Awards under the Plan for that fiscal year.
The amount payable with respect to an award earned under the
Plan shall be paid by the Corporation in cash as soon as
practicable after the end of the fiscal year unless the
Participant has filed an irrevocable written election with
the Committee to defer the payment of all or a portion of
such amount to a period commencing in such future year as is
specified in the election, provided that no more than three
(3) such periods may be specified. Such election must be
filed with the Committee no later than the last day of the
fourth month prior to the end of the period for which the
Award is earned, unless the Committee specifies an earlier
filing date. Effective with respect to Awards earned under
the Plan for each fiscal year ending after December 31,
1984, no Participant shall be permitted to defer the payment
of all or any portion of the amount of an Award earned under
the Plan, except to the extent the Committee may permit such
a deferral by such Participants as the Committee may desig-
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nate in accordance with such standards as the Committee in
its sole discretion may adopt, and except to the extent such
a deferral may be permitted to the Employees' Profit-Sharing
Plan of United States Trust Company of New York and Affili-
ated Companies pursuant to the terms of such Profit-Sharing
Plan and consistent with the limitations set forth therein
and in Sections 401(k)(3) and 415 of the Internal Revenue
Code of 1954.
The Committee shall cause a separate account to be
maintained in the name of each Participant who has deferred
all or a portion of the amount payable with respect to an
Award under this Plan. Each such account shall be credited
with an additional amount equal to the amount the account
would have earned had it been credited with interest from
the last day of the fiscal year with respect to which the
Award was made until the last business day preceding the
date as of which payment is made, compounded annually, at
the Corporation's rate of return on shareholders' equity for
each fiscal year that payment is deferred, including years
during which such deferred payments are made, as determined
by the Committee. The Committee may, in its sole discre-
tion, credit interest or amounts payable prior to the date
on which the Corporation's rate of return on shareholders'
equity becomes ascertainable at the rate applicable to
deferred amounts for the year immediately preceding the year
of payment. Notwithstanding the foregoing provisions of
this paragraph of Section 6, effective with respect to
Awards earned under the Plan for each fiscal year beginning
after December 31, 1984, the Committee, in its sole discre-
tion, may provide an alternative method of determining the
additional amount to be credited to each separate account
maintained for deferred amounts under the Plan; provided,
however, that no amount credited to an account pursuant to
such alternative method shall exceed the amount that would
have been credited if such determination had been based on
the Corporation's rate of return on shareholders' equity
("R.O.E.") calculated in the manner provided in the
foregoing provisions of this paragraph of Section 6 of the
Plan. Any such alternative method may provide for use of
either a stated interest rate or a fixed or floating
interest rate determined by reference to an external
standard selected by the Committee and may be modified by
the Committee at any time, with prospective effect but with
respect to all prior and all future deferrals; provided,
however, that no such modification may be implemented
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without advance notice to Participants affected by the
modification.
Payment of the balance credited to the account of a
Participant shall be made in cash in a series of approxi-
mately equal quarterly installments over a period of ten
(10) years, commencing in the year specified by the Partici-
pant in his or her deferral election, unless the Committee
in its sole discretion determines that payment shall be made
over a shorter period or commence on an earlier date, or
both. If a Participant dies prior to the payment of the
balance credited to his or her account, payment of such
balance shall be made to the Participant's Beneficiary in a
series of approximately equal quarterly installments over a
period of five (5) years, unless the Committee in its sole
discretion determines that payment shall be made over a
shorter period.
Notwithstanding any other provision of the Plan to the
contrary, in the event of a Change in Control of the Corpo-
ration (as hereinafter defined), unless the Board of
Directors otherwise directs by resolution adopted prior to
the Change in Control, or not later than 45 days after the
Change in Control (if the percentage of the Corporation's
common shares acquired or directors appointed under
paragraph (i) or (iii) of the definition of Change in
Control set forth below shall be at least 20% but less than
25%, the entire unpaid balance of each Participant's and
Beneficiary's account shall become payable in full to such
Participant or Beneficiary. The amounts so payable shall be
paid in single cash lump sums, reduced by any taxes withheld
pursuant to Section 12, as soon as practicable following the
Change in Control. Any resolution of the Board of Directors
adopted in accordance with the provisions of this paragraph
directing that this paragraph not become effective may be
rescinded or countermanded at any time with or without
retroactive effect.
For purposes of this Section, "Change in Control" means
that:
(i) 20% or more of the common shares of the
Corporation has been acquired by any person (as defined
by Section 3(a)(9) of the Securities Exchange Act of
1934) other than directly from the Corporation;
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(ii) there has been a merger or equivalent combina-
tion after which 49% or more of the voting shares of
the surviving corporation is held by persons other than
former shareholders of the Corporation; or
(iii) 20% or more of the directors elected by
shareholders to the Board of Directors of the
Corporation are persons who were not nominated in the
most recent proxy statement of the Corporation.
Participants shall have no right, title, or interest
whatsoever in or to any investments which the Corporation
may make to aid in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant
to its provisions, shall create or be construed to create a
trust of any kind, or a fiduciary relationship between the
Corporation or any of its Affiliated Companies and any
Participant, Beneficiary or any other person. A Participant
shall have the status of a general unsecured creditor of the
Corporation with respect to his or her right to receive any
payment under the Plan. All payments to be made hereunder
shall be paid from the general funds of the Corporation and
no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of
such amounts except as expressly set forth in the Plan.
Notwithstanding any other provision to the contrary
contained in this Section 6, the following provisions shall
apply in the case of each Participant whose account balance
becomes payable on or after January 1, 1993:
(i) As of January 1, 1993, the balance of the
account of each such Participant (determined as of
December 31, 1992 after the additional amounts provided
for in the second paragraph of this Section 6 have been
credited for the fiscal year 1992) shall be increased
by an amount equal to 50 percent of such balance;
provided, however, that the Participant's account
balance shall not be so increased if, for any period
beginning on or after January 1, 1993, any amount is
required to be credited to the Participant's account
pursuant to the second paragraph of this Section 6 at a
rate higher than the rate specified in (ii) below.
(ii) With respect to all periods beginning on and
after January 1, 1993, there shall be credited to the
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account of each such Participant, in lieu of the
amounts otherwise provided for in the second paragraph
of this Section 6, an additional amount equal to the
amount the account would have earned if it had been
credited with interest, compounded annually, at a rate
equal to 50% of the Corporation's R.O.E. for each
fiscal year or part thereof included in such periods;
provided, however, that for any such period, the
foregoing rate shall not be less than the lower of
(A) 5% per annum or (B) the Corporation's R.O.E. for
the applicable fiscal year, nor shall the foregoing
rate exceed 15% per annum.
7. Conditions and Forfeitures
The payment of all Awards under the Plan, or of any
part thereof, shall be contingent upon a Participant's com-
pliance with each of the following conditions:
(i) The Participant shall not, directly or
indirectly, except as required in the course of his or
her employment by the Corporation or any of its
Affiliated Companies, furnish, divulge, or use at any
time any information of a proprietary nature owned by
the Corporation or any of its Affiliated Companies
which is in the nature of confidential information or
trade secrets.
(ii) The Participant's employment by the
Corporation or any of its Affiliated Companies shall
not have terminated for any reason other than death,
disability or retirement; provided, however, that the
Committee, in its sole discretion, may determine that
this condition shall not be applicable with respect to
the Participant or any class of Participants of which
the Participant is a member.
If in the judgment of the Committee, reasonably exer-
cised, a Participant shall have failed at any time to comply
with any of the foregoing conditions, the obligation of the
Corporation to make payment to such Participant or his or
her Beneficiary shall terminate forthwith and any unpaid
Awards shall be forfeited, except to the extent that the
Participant would otherwise have received payment with
respect to all or part of an Award but for his or her prior
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election to defer the payment thereof.
8. Partial Awards
An employee who is a Participant for less than a full
year, whether by reason of commencement or termination of
employment or otherwise, shall receive such portion of an
Award, if any, for that year as the Committee shall deter-
mine.
9. Reorganization or Discontinuance
A. The obligations of the Corporation under the Plan
shall be binding upon any successor corporation or organiza-
tion resulting from the merger, consolidation or other reor-
ganization of the Corporation, or upon any successor cor-
poration or organization succeeding to substantially all of
the assets and business of the Corporation. The Corporation
agrees that it will make appropriate provision for the
preservation of Participants' rights under the Plan in any
agreement or plan which it may enter into or adopt to effect
any such merger, consolidation, reorganization or transfer
of assets.
B. If the business conducted by the Corporation shall
be discontinued, any unpaid installments under the Plan
shall become payable in a lump sum to the person or persons
then entitled thereto.
10. Non-Alienation of Benefits and General Creditor Status
A Participant's rights to payments under the Plan shall
not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment,
or garnishment by creditors of the Participant or his or her
Beneficiary.
Participants shall have no right, title, or interest
whatsoever in or to any investments which the Corporation
may make to aid it in meeting its obligations under the
Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship
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between the Corporation and any Participant, Beneficiary, or
any other person. To the extent that any person acquires a
right to receive payments from the Corporation under the
Plan, such right shall be no greater than the right of a
general unsecured creditor of the Corporation. The Plan
shall constitute a mere promise by the Corporation to make
payments in the future of the benefits provided for herein.
It is intended that the arrangements reflected in this Plan
be treated as unfunded for tax purposes, as well as for
purposes of Title I of ERISA. All payments to be made
hereunder shall be paid from the general funds of the
Corporation and no special or separate fund shall be
established and no segregation of assets shall be made to
assure payment of such amounts except as expressly set forth
in the Plan. In its sole discretion, the Corporation may
authorize the creation of trusts or other arrangements to
meet the obligations created under the Plan to deliver
common shares of the Corporation or pay cash; provided,
however, that unless the Committee otherwise determines with
the consent of the affected Participant, the existence of
such trusts or other arrangements shall be consistent with
the "unfunded" status of the Plan.
11. No Claim or Right Under the Plan
No employee or other person shall have any claim or
right to be granted an Award under the Plan. Neither the
Plan nor any action taken thereunder shall be construed as
giving any employee any right to be retained in the employ
of the Corporation or any of its Affiliated Companies.
12. Taxes
The Corporation shall deduct from all amounts otherwise
payable under the Plan all federal, state, local and other
taxes required by law to be withheld with respect to such
amounts.
13. Designation and Change of Beneficiary
Each Participant shall file with the Committee a writ-
ten designation of one or more persons as the Beneficiary
who shall be entitled to receive the amount, if any, payable
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under the Plan upon his or her death. A Participant may,
from time to time, revoke or change his or her Beneficiary
designation without the consent of any previously designated
Beneficiary by filing a new designation with the Committee.
The last such designation received by the Committee shall be
controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless
received by the Committee prior to the Participant's death,
and in no event shall it be effective as of a date prior to
such receipt. If at the date of a Participant's death,
there is no designation of a Beneficiary in effect for the
Participant pursuant to the provisions of this Section 13,
or if no Beneficiary designated by the Participant in
accordance with the provisions hereof survives to receive
any amount payable under the Plan by reason of the
Participant's death, the Participant's estate shall be
treated as the Participant's Beneficiary for purposes of the
Plan.
14. Payments to Persons Other Than Participant
If the Committee shall find that any person to
whom any amount is payable under the Plan is unable to care
for his or her affairs because of illness, accident or legal
incapacity, then, if the Committee so directs, any payment
due to such person may be paid to such person's spouse,
child or other relative, an institution maintaining or
having custody of such person, or any other person deemed by
the Committee to be a proper recipient on behalf of such
person, unless a prior claim for payment of such amount has
been made by a duly appointed legal representative of such
person. Any such payment shall be a complete discharge of
the liability of the Corporation therefor.
15. No Liability of Committee Members
No member of the Committee shall be personally liable
by reason of any contract or other instrument executed by
such member or on his or her behalf in his or her capacity
as a member of the Committee nor for any mistake of judgment
made in good faith, and the Corporation shall indemnify and
hold harmless each member of the Committee and each
employee, officer, director or trustee of the Corporation or
any of its Affiliated Companies to whom any duty or power
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relating to the administration or interpretation of the Plan
may be allocated or delegated, against any cost or expense
(including counsel fees) or liability (including any sum
paid in settlement of a claim with the approval of the Board
of Directors) arising out of any act or omission to act in
connection with the Plan unless arising out of such person's
own fraud or bad faith.
16. Amendment or Termination
The Board of Directors may, with prospective or
retroactive effect, amend, suspend or terminate the Plan or
any portion thereof at any time, provided, however, that (i)
no amendment may be made by the Board of Directors which
will materially increase the cost of the Plan to the
Corporation and (ii) no amendment, suspension or termination
of the Plan shall deprive any Participant of any rights to
Awards previously made under the Plan without his or her
written consent. Subject to earlier termination pursuant to
the provisions of this Section, and unless the shareholders
of the Corporation shall have approved an extension of the
Plan beyond such date, no further Awards shall be made with
respect to any fiscal year of the Corporation ending after
December 31, 1989.
17. Governing Law
The Provisions of the Plan shall be governed by and
construed in accordance with the laws of the State of
New York.
18. Effective Date
The Plan, as initially adopted and approved by
shareholders of the Corporation at its 1980 annual meeting
of shareholders, became effective as of January 1, 1980 at
its 1983 annual meeting of shareholders.
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EXHIBIT 10.14
1990 Annual Incentive Plan of
United States Trust Company of New York
and
Affiliated Companies
as Amended and Restated
Effective as of January 1, 1994
1. Purpose
The purpose of the 1990 Annual Incentive Plan of United
States Trust Company of New York and Affiliated Companies is to
encourage greater focus on performance among the key decision
makers of United States Trust Company of New York and its affili-
ated companies by relating a significant portion of their total
compensation to the achievement of annual financial and strategic
objectives.
2. Definitions
As used herein, the following terms shall have the
following meanings:
"Award" shall mean a payment to be earned in accordance
with the provisions of the Plan.
"Beneficiary" shall mean the person or person desig-
nated in accordance with Section 13 to receive the amount, if
any, payable under the Plan upon the death of a Participant.
"Board of Trustees" shall mean the Board of Trustees of
United States Trust Company of New York.
"Committee" shall mean the Compensation and Benefits
Committee of the Board of Trustees.
"Corporation" shall mean U.S. Trust Corporation.
"Executive Deferred Compensation Plan" shall mean the
Executive Deferred Compensation Plan of U.S. Trust Corporation.
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"Management" shall mean the senior officers of United
States Trust Company of New York who are responsible for deter-
mining business and strategic policies.
"Maximum Amount Available for Awards" shall mean, with
respect to any fiscal year, the total amount available for Awards
for all Participants in such fiscal year based upon the extent to
which applicable Performance Goals set with respect to the fiscal
year have been achieved.
"Participant" shall mean an employee of the Trust
Company who is selected to participate in the Plan.
"Performance Goals" shall mean the annual performance
objectives of the Corporation or individual Participant estab-
lished for the purpose of determining whether, and to what
extent, Awards will be earned for a fiscal year.
"Plan" shall mean the 1990 Annual Incentive Plan of
United States Trust Company of New York and Affiliated Companies.
"ESOP Contribution" shall mean the ESOP Contribution as
defined under the 401(k) Plan.
"401(k) Plan" shall mean the 401(k) Plan and ESOP of
United States Trust Company of New York and Affiliated Companies.
"Trust Company" shall mean United States Trust Company
of New York and its affiliated companies.
3. Administration
The Plan shall be administered by the Committee. In no
event shall a member of the Committee be eligible for an Award
under the Plan.
A majority of the members of the Committee shall con-
stitute a quorum. The Committee may act at a meeting, including
a telephone meeting, by action of a majority of the members pres-
ent, or without a meeting by unanimous written consent. In addi-
tion to the responsibilities and powers assigned to the Committee
elsewhere in the Plan, the Committee shall have the authority to:
(i) Select the Participants;
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(ii) Establish the Performance Goals;
(iii) Determine the Maximum Amount Available for Awards
for all Participants, the allocation of such
Maximum Amount Available for Awards among indi-
vidual Participants or categories of Participants
and actual Awards for each Participant; and
(iv) Establish from time to time regulations for the
administration of the Plan, interpret the Plan,
and make all determinations considered necessary
or advisable for the administration of the Plan.
All decisions, actions or interpretations of the
Committee under the Plan shall be final, conclusive and binding
upon all parties.
4. Participation
Participants in the Plan shall be selected for each
fiscal year from those employees of the Trust Company whose
efforts contribute materially to the annual success of the Trust
Company. No employee shall at any time have the right to be
selected as a Participant in the Plan for any fiscal year, to be
entitled automatically to an Award, nor, having been selected as
a Participant for one fiscal year, to be a Participant in any
other fiscal year.
5. Awards
Awards will be earned on the basis of performance
measured against preestablished Performance Goals which relate to
corporate performance, individual performance or a combination of
corporate and individual performance.
Corporate goals will be based upon an annual growth in
the earnings per share of the Corporation and/or upon such other
corporate objectives as the Committee shall determine annually.
The Committee shall have the authority to adjust Performance
Goals, or performance measurement standards, for any fiscal year
as it deems equitable in recognition of (i) extraordinary or
nonrecurring events experienced by the Corporation during the
fiscal year, or by any other corporation whose performance is
relevant to the determination of the amount of any Award
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hereunder, (ii) changes in applicable accounting rules or
principles or changes in the Corporation's or in any other such
corporation's methods of accounting during the fiscal year, (iii)
the occurrence of a reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger,
consolidation, rights offering, or any other change in the
capital structure of the Corporation, or of any other such
corporation, or (iv) such other events, changes, occurrences,
conditions or circumstances as it shall determine warrant such
adjustment.
Individual goals will be set and performance measured
annually by the Committee based upon recommendations of Manage-
ment.
The Committee shall determine the Maximum Amount Avail-
able for Awards as a percentage or percentages of the aggregate
base salary earned for the year while a Participant of all
Participants, either individually or by categories of
Participants, provided that the Committee may, in its sole
discretion, also apply such percentage or percentages to other
current or deferred compensation and determine the year for which
such deferred compensation shall be counted.
The Committee shall determine whether the Performance
Goals to be used in determining the Maximum Amount Available for
Awards and the actual Awards for Participants, individually or by
categories of Participants, will be based on corporate perfor-
mance, individual performance or a combination of corporate and
individual performance.
The Committee may allocate, in the Committee's discre-
tion, the portion, if any, of the Maximum Amount Available for
Awards which is to be based on individual performance to cate-
gories of Participants, and may determine the actual Award, if
any, to be based on individual performance for each Participant
in a category by apportioning, in the Committee's discretion, all
or part of any such allocated amount among any one or more of
such Participants. The Committee may also allocate, in the
Committee's discretion, a portion of the Maximum Amount Available
for Awards to be utilized for special additional Awards without
regard to categories of Participants.
No Award shall be considered as compensation under any
employee benefit plan of the Trust Company, except as specifi-
cally provided in any such plan or as otherwise determined by the
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Board of Trustees.
6. Payment of Awards
The amount payable to a Participant with respect to an
Award earned under the Plan for any fiscal year beginning on or
after January 1, 1992, shall be the amount of the Award so
earned, reduced by the sum of (a) the amount of any ESOP
Contribution to be made on behalf of the Participant under the
401(k) Plan for the "Plan Year" (as defined in the 401(k) Plan)
corresponding to such fiscal year, and (b) the amount taken into
account in determining the number of Benefit Equalization Units
to be credited to the Participant's account under the 1989 Stock
Compensation Plan of U.S. Trust Corporation, in either case with
respect to the base salary of such Participant taken into account
in determining the Maximum Amount Available for Awards under the
Plan for that fiscal year.
The amount payable with respect to an Award earned
under the Plan for any fiscal year beginning on or after
January 1, 1992, as determined under the preceding paragraph,
shall be paid by the Trust Company in cash as soon as practicable
after the end of such fiscal year, except to the extent that the
Participant (a) has elected, under the applicable provisions of
the 401(k) Plan, to have any portion of such Award reduced, and
to have an amount equal to such portion of the Award contributed
to the 401(k) Plan on the Participant's behalf and/or (b) has
elected, under the applicable provisions of the Executive
Deferred Compensation Plan, to defer any portion of such Award.
With respect to the portion of any Award that is
subject to a Participant's election under the 401(k) Plan, the
Trust Company shall contribute an amount equal to such portion of
the Award to the 401(k) Plan on behalf of the Participant; and
thereupon, the Trust Company's obligation with respect to payment
of such portion of the Award shall be fully discharged. However,
no such contribution shall be made to the extent it would cause
any limitation applicable under the 401(k) Plan to be exceeded.
With respect to the portion of any Award that is
subject to a Participant's election under the Executive Deferred
Compensation Plan, the Trust Company's obligation under this Plan
with respect to payment of such portion of the Award shall be
fully discharged upon the crediting of such portion of the Award
to the Participant's account under the Executive Deferred
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Compensation Plan in accordance with the applicable provisions of
such Plan.
Participants shall have no right, title, or interest
whatsoever in or to any investments which the Trust Company may
make to aid in meeting its obligations under the Plan. Nothing
contained in the Plan, and no action taken pursuant to its pro-
visions, shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Trust Company and
any Participant, Beneficiary, or any other person. To the extent
that any person acquires a right to receive payments from the
Trust Company under the Plan, such right shall be no greater than
the right of a general unsecured creditor of the Trust Company.
All payments to be made hereunder shall be paid from the general
funds of the Trust Company and no special or separate fund shall
be established and no segregation of assets shall be made to
assure payment of such amounts except as expressly set forth in
the Plan.
Unless paid by the United States Trust Company of
New York, all liabilities in respect of Participants who are
employees of affiliates of such company shall be discharged by
the respective employing affiliates.
7. Partial Awards
An employee who is a Participant for less than a full
year, whether by reason of commencement or termination of employ-
ment or otherwise, shall receive such portion of an Award, if
any, for that year as the Committee shall determine.
8. Change in Control or Other Discontinuance
Notwithstanding anything in the Plan to the contrary,
upon the occurrence of a Change in Control of the Corporation (as
hereinafter defined), unless the Board of Trustees otherwise
directs by resolution adopted prior to the Change in Control, or
not later than 45 days after the Change in Control if the per-
centage of the Corporation's common shares acquired or directors
elected under clause (1) or (3) of the definition of Change in
Control set forth below shall be at least 20% but less than 25%,
the provisions of this Section 8 shall apply. All corporate and
individual Performance Goals with respect to the fiscal year in
which the Change in Control occurs shall be deemed to have been
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attained to the full and maximum extent. Unless another formula
shall have been designated by the Committee prior to the Change
in Control, each Participant shall be allocated a portion of the
Maximum Amount Available for Awards (which shall be the amount of
awards payable with respect to the fiscal year of the Change in
Control) equal to the Maximum Amount Available for Awards multi-
plied by a fraction, the numerator of which is the portion of the
anticipated annual compensation of the Participant which was
taken into account by the Committee in determining the Maximum
Amount Available for Awards, and the denominator of which is the
sum of all such amounts. As soon as practicable following the
Change in Control, all Awards which are deemed to have been
earned to the full and maximum extent upon the occurrence of the
Change in Control shall be payable in full in single cash lump
sums, reduced by any taxes withheld pursuant to Section 12 and by
the amount of any ESOP Contributions to be made on behalf of
Participants under the 401(k) Plan for the year of the Change in
Control. No Awards payable in accordance with this Section shall
be forfeitable on account of a Participant's termination of
employment upon or following the Change in Control. Any resolu-
tion of the Board of Trustees adopted in accordance with the
provisions of this Section directing that this Section not become
effective may be rescinded or countermanded at any time with or
without retroactive effect.
For purposes of this Section "Change in Control" shall
mean that:
(i) 20% or more of the common shares of the
Corporation has been acquired by any person (as
defined by Section 3(a)(9) of the Securities
Exchange Act of 1934) other than directly from the
Corporation;
(ii) there has been a merger or equivalent combination
after which 49% or more of the voting shares of
the surviving corporation is held by persons other
than former shareholders of the Corporation; or
(iii) 20% or more of the directors elected by share-
holders to the Board of Directors of the
Corporation are persons who were not nominated in
the most recent proxy statement of the
Corporation.
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9. Successor Corporation
The obligations of the Trust Company under the Plan
shall be binding upon any successor corporation or organization
resulting from the merger, consolidation or other reorganization
of the Trust Company, or upon any successor corporation or
organization succeeding to substantially all of the assets and
business of the Trust Company. The Trust Company agrees that it
will make appropriate provision for the preservation of
Participants' rights under the Plan in any agreement or plan
which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
10. Non-Alienation of Benefits
A Participant shall not assign, sell, encumber,
transfer or otherwise dispose of any rights or interests under
the Plan and any attempted disposition shall be null and void.
11. No Claim or Right Under the Plan
No employee or other person shall have any claim or
right to be granted an Award under the Plan. Neither the Plan
nor any action taken thereunder shall be construed as giving any
employee any right to be retained in the employ of the Trust
Company.
12. Taxes
The Trust Company shall deduct from all amounts other-
wise payable under the Plan all federal, state, local and other
taxes required by law to be withheld with respect to such
amounts.
13. Designation and Change of Beneficiary
Each Participant shall file with the Committee a
written designation of one or more persons as the Beneficiary who
shall be entitled to receive the amount, if any, payable under
the Plan upon his or her death. A Participant may, from time to
time, revoke or change his or her Beneficiary designation without
the consent of any previously designated Beneficiary by filing a
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new designation with the Committee. The last such designation
received by the Committee shall be controlling; provided, how-
ever, that no designation, or change or revocation thereof, shall
be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of
a date prior to such receipt. If at the date of a Participant's
death, there is no designation of a Beneficiary in effect for the
Participant pursuant to the provisions of this Section 13, or if
no Beneficiary designated by the Participant in accordance with
the provisions hereof survives to receive any amount payable
under the Plan by reason of the Participant's death, the
Participant's estate shall be treated as the Participant's
Beneficiary for purposes of the Plan.
14. Payments to Persons Other Than Participant
If the Committee shall find that any person to whom any
amount is payable under the Plan is unable to care for his or her
affairs because of illness, accident or legal incapacity, then,
if the Committee so directs, any payment due to such person may
be paid to such person's spouse, child or other relative, an
institution maintaining or having custody of such person, or any
other person deemed by the Committee to be a proper recipient on
behalf of such person, unless a prior claim for payment of such
amount has been made by a duly appointed legal representative of
such person. Any such payment shall be a complete discharge of
the liability of the Trust Company therefor.
15. No Liability of Committee Members
No member of the Committee shall be personally liable
by reason of any contract or other instrument executed by such
member or on his or her behalf in his or her capacity as a member
of the Committee nor for any mistake of judgment made in good
faith, and the Trust Company shall indemnify and hold harmless
each member of the Committee, and each employee, officer, direc-
tor or trustee of the Trust Company to whom any duty or power
relating to the administration or interpretation of the Plan may
be allocated or delegated, against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement
of a claim with the approval of the Board of Trustees) arising
out of any act or omission to act in connection with the Plan
unless arising out of such person's own fraud or bad faith.
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16. Amendment or Termination
The Board of Trustees may, with prospective or retro-
active effect, amend, suspend or terminate the Plan or any
portion thereof at any time, provided, however, that no amend-
ment, suspension or termination of the Plan shall deprive any
Participant of any rights to Awards previously made under the
Plan without his or her written consent. Any amendment that the
Board of Trustees would be permitted to make pursuant to the
preceding sentence may also be made by the Committee where appro-
priate to facilitate the administration of the Plan or to comply
with applicable law or any applicable rules and regulations of
government authorities, provided that the cost of the Plan to the
Trust Company is not materially increased thereby. Subject to
earlier termination pursuant to the provisions of this Section,
and unless the Board of Trustees shall have approved an extension
of the Plan beyond such date, no further Awards shall be made
with respect to any fiscal year of the Trust Company ending after
December 31, 1999.
17. Governing Law
The Plan shall be governed by and construed in
accordance with the laws of the State of New York.
18. Effective Date
The Plan shall be effective as of January 1, 1990.
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EXHIBIT 10.15
Long-Term Performance Plan of
U.S. Trust Corporation
As Amended, Restated and Renamed
Effective as of January 1, 1994
1. Purpose
The purpose of the Long-Term Performance Plan of U.S. Trust
Corporation is to promote the long-term success of U.S. Trust
Corporation and its affiliated companies by (i) encouraging
greater focus by senior level officers on its long-term objec-
tives, and (ii) providing senior level officers with the opportu-
nity to obtain an interest in U.S. Trust Corporation parallel to
that of the Corporation's shareholders through increased stock
ownership.
The Plan as hereinafter set forth, represents a continuation
of the Long-Term Performance Plan of United States Company of New
York and Affiliated Companies, as amended, restated and renamed
effective as of January 1, 1994 to reflect (a) the adoption of
the Plan by U.S. Trust Corporation as its own Plan and the Corpo-
ration's assumption of, and becoming solely responsible for, all
liabilities and obligations of United States Trust Company of New
York under the Plan, and (b) changes in certain other provisions
of the Plan.
The amendments described in clause (a) of the preceding
paragraph, and the amendments to Section 7G, as reflected in this
Restatement, are subject to approval by shareholders of the
Corporation at it annual meeting scheduled to be held on April 26,
1994.
2. Definitions
The following definitions are applicable to the Plan:
"Affiliated Companies" shall mean United States Trust
Company of New York and each other direct or indirect sub-
sidiary of the Corporation.
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"Award" means the dollar value of that part of a Parti-
cipant's compensation which is taken into account with re-
spect to a Performance Cycle and the corresponding number of
Performance Share Units which is allocated to such Partici-
pant in accordance with the provisions of the Plan.
"Beneficiary" means the person or persons designated by
a Participant in accordance with Section 14 to receive any
amount, or any common shares of the Corporation, payable
under the Plan upon the Participant's death.
"Board of Directors" means the Board of Directors of
the Corporation.
"Committee" means the Compensation and Benefits Commit-
tee of the Board of Directors.
"Corporation" means U.S. Trust Corporation.
"Participant" means an employee of the Corporation or
any of its Affiliated Companies who is selected to partici-
pate in the Plan in the manner described in Section 4.
"Performance Cycle" means the period of time over and
within which performance is measured for the purpose of
determining whether an Award has been earned.
"Performance Goals" means the performance objectives of
the Corporation during a Performance Cycle for the purpose
of determining whether, and to what extent, Awards will be
earned for a Performance Cycle.
"Performance Share Unit" and "Phantom Share Unit" mean
a unit of measurement equivalent to one common share of the
Corporation, with none of the attendant rights of a holder
of such share, including, without limitation, the right to
vote such share and the right to receive dividends thereon,
except to the extent otherwise specifically provided herein.
"Plan" means the Long-Term Performance Plan of U.S.
Trust Corporation.
3. Administration
The Plan shall be administered by the Committee. In no
event shall a member of the Committee be eligible for an Award
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under the Plan.
A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present, or acts approved
in writing by a majority of the Committee without a meeting,
shall be the acts of the Committee. In addition to the responsi-
bilities and powers assigned to the Committee elsewhere in the
Plan, the Committee shall have the authority to:
(i) Determine the duration of each Performance Cycle;
(ii) Establish the Performance Goals for each Perfor-
mance Cycle;
(iii) Select the Participants;
(iv) Determine the maximum percentage of compensation
with respect to which an Award may be made to each Partici-
pant, and the actual Award earned by each Participant; and
(v) Establish from time to time regulations for the
administration of the Plan, interpret the Plan, and make all
determinations considered necessary or advisable for the ad-
ministration of the Plan.
All decisions, actions or interpretations of the Committee
shall be final, conclusive and binding upon all parties.
4. Participation
Participants in the Plan shall be limited to those senior
officers of the Corporation and its Affiliated Companies (i)
whose decisions determine the long-term business and strategic
policies of the Corporation and its Affiliated Companies or whose
services may be expected to contribute substantially to the
attainment of Performance Goals, based on such criteria as the
Committee shall from time to time establish and (ii) who have
received written notification from the Committee, or from a per-
son designated by the Committee, that they have been selected to
participate in the Plan. No employee shall at any time have the
right to be selected as a Participant for a Performance Cycle, to
be entitled automatically to an Award, nor, having been selected
as a Participant for one Performance Cycle, to be a Participant
in any other Performance Cycle.
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5. Maximum Number of Shares of Common Stock Available For
Awards
Notwithstanding any other provision of the Plan, no more
than 253,125 common shares of the Corporation shall be
distributed to Participants during the term of the Plan. This
limitation shall be computed as if full payment with respect to
all Awards were made in the manner described in Section 7 hereof
immediately upon the conclusion of each Performance Cycle and
shall be adjusted appropriately, as determined by the Committee
in its sole discretion, for (i) stock dividends, stock splits or
combinations and any recapitalization, merger or consolidation of
the Corporation which may occur during the term of the Plan, (ii)
any increase in the number of shares payable under Section 7 with
respect to deferred awards due to dividends reinvested in Phantom
Share Units or accumulated interest required to be paid in common
shares, and (iii) any shares previously taken into account for
purposes of this limitation which thereafter became forfeited due
to the operation of Section 8. The shares distributed under the
Plan may be authorized and unissued shares, shares held in the
treasury of the Corporation, or shares purchased on the open
market by the Corporation (at such time or times and in such
manner as it may determine). The Corporation shall be under no
obligation to acquire its common shares for distribution to Par-
ticipants before payment in common shares is due.
6. Awards
Awards will be earned on the basis of corporate performance
measured against preestablished Performance Goals which will be
determined by the Committee for each Performance Cycle. The
Committee shall have the authority to adjust Performance Goals,
or performance measurement standards for any Performance Cycle as
it deems equitable in recognition of (i) extraordinary or non-
recurring events experienced by the Corporation during the
Performance Cycle, or by any other corporation whose performance
is relevant to the determination of the amount of any Award
thereunder, (ii) changes in applicable accounting rules or prin-
ciples or changes in the Corporation's or in any other such
corporation's methods of accounting during the Performance Cycle,
or (iii) the occurrence of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger, con-
solidation, rights offering, or any other change in the capital
structure of the Corporation, or of any other such corporation.
The Committee shall determine the Award allocated to each
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Participant as a percentage of his or her annual rate of base
salary at the commencement of, or average annual base salary
during the Performance Cycle, either individually or by catego-
ries of Participants, provided that the Committee may, in its
sole discretion, also apply such percentage to other current or
deferred compensation and determine the Performance Cycle for
which such deferred compensation shall be counted. In the case
of a Participant whose participation commenced after the begin-
ning of a Performance Cycle, the Committee shall determine the
Award as a percentage of his or her annual base salary or average
annual base salary on such date or during such other period as
the Committee shall determine prior to the date such participa-
tion commenced.
The Award for each Participant or class of Participants
shall then be converted into and expressed in Performance Share
Units by dividing the dollar value of the Award by the average
market value (the mean between the high and low prices during
each day as quoted on the NASDAQ national market system, or, if
the Corporation's common shares are not quoted on such system, on
such other securities market or securities exchange on which such
shares are traded as the Committee shall determine) of one common
share of the Corporation during the month preceding the month in
which the Performance Cycle begins or, in the case of an officer
who becomes a Participant in a Performance Cycle after it has
begun, during the calendar month selected by the Committee on or
prior to the date such participation commenced.
In determining the number of Performance Share Units which
constitute the Awards hereunder, the Committee shall make appro-
priate adjustments for stock dividends, stock splits or combina-
tions and any recapitalization, merger or consolidation or other
capital changes of the Corporation.
The Committee shall also determine the percentage of each
Participant's Award which is to be based on absolute and relative
growth in earnings per share or rate of return on shareholder's
equity of the Corporation, or other measurement of corporate
performance, either individually or by categories of Partici-
pants.
No Award shall be considered as compensation under any
employee benefit plan of the Corporation or any of its Affiliated
Companies, except as specifically provided in any such plan or as
otherwise determined by the Board of Directors.
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7. Payment of Awards
A. Amount of Payment. The amount payable to a Participant
with respect to an Award earned under the Plan shall be equal to
(i) the number of Performance Share Units to which he shall have
become entitled by reason of the level of attainment of Perfor-
mance Goals, multiplied by (ii) the average market value (deter-
mined as provided in Section 6 above) of one common share of the
Corporation during the month in which the Performance Cycle ends.
B. Time of Payment; Deferral Elections. Any amount pay-
able on account of an Award earned under the Plan shall be paid
by the Corporation at such time, in such manner, and subject to
such conditions, including forfeiture conditions (in addition to
the conditions specified in Section 8), as determined by the
Committee; provided, however, that a Participant may file a writ-
ten election with the Committee to defer the payment of any
amount payable on account of an award to a period commencing at
such future date, following the time for payment otherwise deter-
mined by the Committee, as specified in the election. Such elec-
tion must be filed with the Committee no later than the last day
of the month which is two-thirds of the way through the Perfor-
mance Cycle during which the Award is earned, unless the Commit-
tee specifies an earlier filing date.
C. Payment of Non-deferred Awards. The portion of an
amount payable on account of an Award which is not deferred,
either by election of the Participant or by the Committee, shall
be paid one-half in cash and one-half in common shares of the
Corporation as soon as practicable after the end of the
Performance Cycle. The number of shares to be distributed shall
be determined by dividing (i) one-half of the amount so payable
which is not deferred by (ii) the average market value
(determined as above provided) of one common share of the
Corporation during the month in which the Performance Cycle ends.
D. Separate Accounts. At the conclusion of each Perfor-
mance Cycle, the Committee shall cause a separate account
("Account") to be maintained in the name of each Participant with
respect to whom all or a portion of an Award earned under the
Plan has been deferred, either by election of the Participant or
by the Committee.
E. Election of Form of Investment. Not later than sixty
(60) days prior to the end of each Performance Cycle, a Partici-
pant may file a written election with the Committee of the per-
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centage of the deferred portion of any Award which is to be cred-
ited with interest, and of the percentage of such Award which is
to be credited with Phantom Share Units, which latter percentage
shall be at least fifty percent (50%). In the event a Partici-
pant fails to file an election within the time prescribed, one
hundred percent (100%) of the deferred portion of such Partici-
pant's Award shall be credited with Phantom Share Units.
F. Interest Portion. The amount of interest credited with
respect to the portion of an Award credited to the Participant's
account which is deferred and credited with interest (the "Inter-
est Portion") shall be equal to the amount such portion would
have earned had it been credited with interest from the last day
of the Performance Cycle with respect to which the Award was made
until the last business day preceding the date as of which pay-
ment is made, compounded annually, at the Corporation's rate of
return on shareholders' equity ("R.O.E.") for each fiscal year
that payment is deferred. The Committee may, in its sole dis-
cretion, credit interest on amounts payable prior to the date on
which the Corporation's rate of return on shareholders' equity
becomes ascertainable at the rate applicable to deferred amounts
during the year immediately preceding the year of payment. Not-
withstanding the foregoing provisions of this Section 7F, effec-
tive with respect to Awards earned for each Performance Cycle
beginning after December 31, 1982, the Committee, in its sole
discretion, may provide an alternative method of determining the
additional amount to be credited to the Interest Portion of each
separate Account maintained for deferred amounts under the Plan;
provided, however, that no amount credited to an Account pursuant
to such alternative method shall exceed the amount that would
have been credited if such determination had been based on the
Corporation's rate of return on shareholders' equity calculated
in the manner provided in the foregoing provisions of this Sec-
tion 7F of the Plan. Any such alternative method may provide for
use of either a stated interest rate or a fixed or floating
interest rate determined by reference to an external standard
selected by such Committee, and may be modified by the Committee
at any time, with prospective effect but with respect to all
prior and all future deferrals; provided, however, that no such
modification may be implemented without advance notice to
Participants affected by the modification.
Notwithstanding any other provision to the contrary
contained in this Section 7F, the following provisions shall
apply in the case of each Participant whose Account had not yet
become payable as of January 1, 1993 and whose Account, at
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December 31, 1992, included an R.O.E. Balance (as defined below):
(i) As of January 1, 1993, the Participant's R.O.E.
Balance (determined as of December 31, 1992 after the addi-
tional amounts provided for in this Section 7F have been
credited for the fiscal year 1992) shall be increased by an
amount equal to 50 percent of such balance; provided, how-
ever, that the Participant's R.O.E. Balance shall not be so
increased if, for any period beginning on or after
January 1, 1993, any amount is required to be credited to
the Participant's R.O.E. Balance pursuant to this Section 7F
at a rate higher than the rate specified in (ii) below.
(ii) With respect to all periods beginning on and after
January 1, 1993, there shall be credited to each such Parti-
cipant's R.O.E. Balance, in lieu of the amounts otherwise
provided for in this Section 7F, an additional amount equal
to the amount of the Participant's R.O.E. Balance would have
earned if it had been credited with interest, compounded
annually, at a rate equal to 50% of the Corporation's R.O.E.
for each fiscal year or part thereof included in such
periods; provided, however, that for any such period, the
foregoing rate shall not be less than the lower of (A) 5%
per annum or (B) the Corporation's R.O.E. for the applicable
fiscal year, nor shall the foregoing rate exceed 15% per
annum.
(iii) For purposes of this Section 7, a Participant's
R.O.E. Balance should mean, as of any date, that part of the
Interest Portion of the Participant's Account that consists
of deferred Awards earned for Performance Cycles ended on or
prior to December 31, 1984, together with all interest
credited thereon to such date in accordance with the provi-
sions of this Section 7F.
G. Credits to Interest Portion after January 1, 1994.
Notwithstanding any provision to the contrary in Section 7F, in
the case of any Participant whose Account had not yet become
payable as of January 1, 1994, such Participant's R.O.E. Balance
shall continue to be credited with interest for all periods
ending after December 31, 1993 in accordance with the applicable
provisions of Section 7F; but, with respect to any periods ending
after December 31, 1993, the provisions of Section 7F shall not
apply with respect to the Participant's Non-R.O.E. Balance (as
defined below) and the Participant's Non-R.O.E. Balance shall be
credited with Earnings (as defined below) for all such periods in
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accordance with the following provisions:
(i) For purposes of this Section 7, a Participant's
Non-R.O.E. Balance shall mean, as of any date, that part of
the Interest Portion of the Participant's Account that con-
sists of deferred Awards earned for Performance Cycles ended
on or after December 31, 1985, together with all interest
credited thereon to such date in accordance with the appli-
cable provisions of Section 7F or this Section 7G.
(ii) As of the last day of each calendar month, each
part of a Participant's Non-R.O.E. Balance for which a sepa-
rate Earnings Crediting Option (as hereinafter defined) is
in effect pursuant to the Participant's election under this
Section 7G shall be credited with an amount determined by
multiplying such part of the balance by a percentage corre-
sponding to the Applicable Rate of Return (as hereinafter
defined) for such month under such Earnings Crediting
Option. The amount so credited (which may be positive or
negative depending on whether the Applicable Rate of Return
for the month is positive or negative) is referred to herein
as "Earnings".
(iii) For purposes of this Section 7G, the term
"Earnings Crediting Option" shall mean, initially, (a) the
Prime Rate, and (b) any investment fund maintained under the
401(k) Plan and ESOP of United States Trust Company of New
York and Affiliated Companies (the "401(k) Plan") other than
the ESOP Fund or the U.S.T. Corp. Stock Fund; and the term
"Prime Rate" shall mean, with respect to any calendar month,
the prime rate as quoted by United States Trust Company of
New York on the last business day of such month. Any
investment fund described in clause (b) of the preceding
sentence is referred herein as a "401(k) Plan Fund".
Notwithstanding the foregoing, the Committee may
at any time, in its sole discretion, determine (x) that the
Prime Rate or any 401(k) Plan Fund shall cease to constitute
an Earnings Crediting Option for purposes of this Section
7G, (y) that any investment fund that is added to the 401(k)
Plan at any time after January 1, 1994 shall not constitute
and earnings Crediting Option for purposes of the Plan, or
(z) that any other hypothetical investment fund or index or
referenced rate of return shall constitute an Earnings
Crediting Option for purposes of the Plan. Participants
shall be notified in writing, at least 45 days in advance,
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of any such change in the Plan's Earnings Crediting Options.
(iv) The "Applicable Rate of Return" for any month,
under any Earnings Crediting Option, shall mean (a) in the
case of an Earnings Crediting Option that is a 401(k) Plan
Fund, the percentage by which the value of such Fund, as
determined by the 401(k) Plan's Trustee of the Valuation
Date (as defined in the 401(k) Plan for such month, exceeds,
or is less than, the value of such Fund, as determined by
the 401(k) Plan's Trustee as of the Valuation Date for the
immediately preceding month; and (b) in the case of any
other Earnings Crediting Option, the rate of return
applicable for such month, as determined by the Committee in
its sole discretion.
(v) A Participant may make elections with respect to
the Earnings Crediting Options that are to apply with
respect to his or her Non-R.O.E. Balance, in accordance with
the following rules:
(a) a Participant may elect to have any part or
all of his or her Non-R.O.E. Balance credited with Earnings
under any Earnings Crediting Option available under the Plan
at the time of his or her election.
(b) each Participant shall make an initial elec-
tion as to the Earnings Crediting Options that are to apply
with respect to his or her Non-R.O.E. Balance by no later
than November 19, 1993. Such election shall be made in
writing on a form which is provided by the Committee for
such purpose and which the Participant files with the
Committee. In such election form, the Participant shall
specify, by percentages (which must be even multiples of 5%)
the respective parts of such balance that are to be credited
with Earnings under each of the Earnings Crediting Options
designated by the Participant in such form.
(c) The Earnings Crediting Options selected in
the initial election made by the Participant under clause
(b) above shall remain in effect until the Participant
changes his or her election in accordance with clause (d)
below.
(d) A Participant may change the Earnings
Crediting Options that are to apply with respect to his or
her Non-R.O.E. Balance by making a new election hereunder.
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Such new election shall be made in writing, on a form which
is provided by the Committee for this purpose and which the
Participant files with the Committee. In such form, the
Participant shall specify, in the same manner as described
in clause (b) above, the respective parts of such balance
that are to be credited with Earnings under each of the
Earnings Crediting Options designated by the Participant in
such form. The Participant's new election shall become
effective as of the first day of the calendar month fol-
lowing the date on which such election is filed with the
Committee, provided that it is so filed at least 15 days
prior to such first day. The Earnings Crediting Options
selected by the Participant in such new election shall
remain in effect until the Participant again changes his
election with respect to his or her Non-R.O.E. Balance in
accordance with this clause (d).
(vi) A Participant's Non-R.O.E. Balance shall continue
to be credited with Earnings in accordance with the
provisions of this Section 7G until all payments required to
be made with respect to the Interest Portion under Section
7L have been made. For this purpose, any payments made
under Section 7L with respect to the Participant's Non-
R.O.E. Balance will be deemed to have been made pro rata
from the respective parts of such balance that are subject
to separate Earnings Crediting Options.
H. Phantom Share Unit Portion. With respect to the
portion of an Award credited to the Participant's Account which
is deferred and credited with Phantom Share Units (the "PSU
Portion"), the number of Phantom Share Units ("PSU's") so cred-
ited shall be equal to the result of dividing (i) the PSU Portion
by (ii) the average market value (determined as above provided)
of one common share of the Corporation during the month in which
the Performance Cycle ended.
I. Dividend Equivalents. As of each date on which the
Corporation pays a dividend on its common shares, the PSU Portion
of each Participant's Account shall be credited with additional
PSU's the number of which shall be determined by (i) multiplying
the number of PSU's standing to the Participant's credit in the
PSU Portion of the Participant's Account at the time such
dividend was declared by the per share dollar amount of the
dividend so paid, and then (ii) dividing the resulting amount by
the average market value (determined as above provided) of one
common share of the Corporation on the payment date for such
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dividend.
J. Payment of Deferred Awards. Payment with respect to
amounts credited to the Account of a Participant shall be made in
a series of annual installments over a period of ten (10) years.
Except as otherwise provided by the Committee, each installment
shall be withdrawn proportionately from the Interest Portion and
from the PSU Portion of a Participant's account based on the
percentage of the Participant's account which he or she elected
to be credited with interest and with PSU's. Payments shall
commence on the date specified by the Participant in his or her
deferral election or on the date determined initially by the
Committee, whichever is applicable, unless the Committee in its
sole discretion determines that payment shall be made over a
shorter period or in more frequent installments, or commence on
an earlier date, or any or all of the above. If a Participant
dies prior to the date on which payment with respect to all
amounts credited to his or her Account shall have been completed,
payment with respect to such amounts shall be made to the Parti-
cipant's Beneficiary in a series of annual installments over a
period of five (5) years, unless the Committee in its sole
discretion determines that payment shall be made over a shorter
period or in more frequent installments, or both. To the extent
practicable, each installment payable hereunder shall approximate
that part of the amount then credited to the Participant's or
Beneficiary's Account which, if multiplied by the number of
installments remaining to be paid, would be equal to the entire
amount then credited to the Participant's Account.
K. Composition of Payment. Payment with respect to the
Interest Portion of a Participant's Account shall be made in
cash. Payment with respect to the PSU Portion of a Participant's
Account shall be made in common shares of the Corporation. One
common share of the Corporation shall be distributed to the
Participant for each whole PSU for which payment is being made.
Fractional PSU's shall be paid in cash.
L. Payments After January 1, 1994. Notwithstanding any
other provision herein to the contrary, on and after January 1,
1994 the provisions of Sections 7J and 7K shall apply only in the
case of payments to be made with respect to Participants whose
employment with the Corporation and its Affiliated Companies
terminated prior to such date; and in the case of each other
Participant, payment with respect to the Participant's Account
shall be made in accordance with the following provisions:
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(i) The balances of the Interest Portion and the PSU
Portion of a Participant's Account shall become payable upon
the Participant's termination of employment with the
Corporation and its Affiliated Companies for any reason.
For this purpose, a Participant who ceases active employment
by reason of disability but who becomes entitled to receive
benefit payments under the long-term disability plan
maintained by the Corporation or any of its Affiliated
Companies shall be treated as continuing to be employed with
the Corporation and its Affiliated Companies during all
periods for which he or she continues to receive benefit
payments under such plan.
(ii) Payment with respect to the Interest Portion and
the PSU Portion of a Participant's Account shall be made in
the form of a series of 10 annual installments. The first
such installment payment shall be made on the last business
day of February of the calendar year following the year in
which the Participant's employment with the Corporation and
its Affiliated Companies terminates, and the remaining
installment payments shall be made on the last business day
of February of each succeeding year.
(iii) Each installment payment to be made with respect
to the Interest Portion of a Participant's Account shall be
made in cash, in an amount determined by dividing (a) the
aggregate amount of the Participant's R.O.E. Balance and
Non-R.O.E. Balance determined as of the last day of the
calendar year preceding the year in which such payment is to
be made, by (b) the number of installment payments remaining
to be made. Each such installment payment shall be deemed
to have been made pro rata from the Participant's R.O.E.
Balance and his or her Non-R.O.E. Balance. The last such
installment payment shall include interest or Earnings
credited to the Participant's R.O.E. Balance and his or her
Non-R.O.E. Balance for the month preceding the month in
which such payment is made.
(iv) Each installment payment to be made with respect
to the PSU Portion of a Participant's Account shall be made
partly in common shares of the Corporation, and partly in
cash. The number of shares to be included in each such
installment payment shall be equal to the number of whole
PSU's included in the quotient resulting from dividing (a)
the total number of PSU's included in the balance of the PSU
Portion of the Participant's Account as of the last day of
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the calendar year preceding the year in which such payment
is to be made, by (b) the number of installment payments
remaining to be made; and the amount of cash to be included
in each such installment payment shall be determined by
multiplying (c) the fractional part of a PSU included in the
aforementioned quotient by (d) the average market value
(determined as above provided) of one common share of the
Corporation on the business day immediately preceding the
date on which such installment payment is to be made. The
last such installment payment shall include a number of
common shares of the Corporation equal to the whole number
of any additional PSU's that are credited to the PSU Portion
of the Participant's Account under Section 7I during the
month preceding the month in which such payment is made,
together with cash (in an amount determined in the same
manner as described in clause (d) of the preceding sentence)
for any fractional part of a PSU that is so credited.
(v) If a Participant should die before receiving all
payments required to be made hereunder with respect to the
Participant's Account, any payments remaining to be made at
the date of the Participant's death shall be made to the
Participant's Beneficiary in the same form, at the same
times and in the same amounts, as such payments would have
been made to the Participant (a) if he or she had not died
and (b) if the Participant died while still employed, if the
Participant's employment had otherwise terminated on the
date of his or her death.
(vi) Notwithstanding any other provision in this
Section 7L to the contrary, payment with respect to any part
or all of the Participant's Account balances may be made to
the Participant or, if the Participant has died, to the
Participant's Beneficiary, on any date earlier than the date
on which such payment is to be made pursuant to such other
provisions of this Section 7L if (a) the Participant, or his
or her Beneficiary, requests such early payment and (b) the
Committee, in its sole discretion, determines that such
early payment is necessary to help the Participant, or his
or her Beneficiary, meet an "unforeseeable emergency" within
the meaning of Section 1.457-2(h)(4) of the federal Income
Tax Regulations. The amount that may be so paid may not
exceed the amount necessary to meet such emergency.
M. Adjustment of PSU's. In the event of any change in the
Corporation's common shares by reason of any stock dividend,
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recapitalization, reorganization, merger, consolidation, split-
up, combination or exchange of shares, or any rights offering to
purchase such shares at a price substantially below fair market
value, or any similar change affecting the Corporation's common
shares, the number and kind of shares represented by Phantom
Share Units credited to the Accounts of Participants hereunder
shall be appropriately adjusted consistent with such change in
such manner as the Committee, in its sole discretion, may deem
equitable to prevent substantial dilution or enlargement of the
rights granted to, or available for, the Participants hereunder.
The Committee shall give notice to each Participant of any
adjustment made pursuant to this Section 7M and, upon such
notice, such adjustment shall be effective and binding for all
purposes of the Plan.
8. Conditions and Forfeitures
The payment of all Awards under the Plan, or of any part
thereof, shall be contingent upon a Participant's compliance with
the following condition: the Participant shall not, directly or
indirectly, except as required in the course of his or her
employment by the Corporation or any of its Affiliated Companies,
furnish, divulge, or use at any time any information of a
proprietary nature owned by the Corporation or any of its
Affiliated Companies which is in the nature of confidential
information or trade secrets.
If in the judgment of the Committee, reasonably exercised, a
Participant shall have failed at any time to comply with the
foregoing condition, the obligation of the Corporation to make
payment to such Participant or his or her Beneficiary shall ter-
minate forthwith and any unpaid Awards shall be forfeited, except
to the extent that the Participant would otherwise have received
payment with respect to all or part of an Award but for his or
her prior election to defer the payment thereof.
9. Partial Awards
An officer who is a Participant for less than a full Perfor-
mance Cycle, whether by reason of commencement or termination of
employment or otherwise, shall receive such portion of an Award,
if any, for that Performance Cycle as the Committee shall deter-
mine.
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10. Change in Control or Other Discontinuance
A. Upon the occurrence of a Change in Control of the Corpo-
ration (as hereinafter defined), unless the Board of Directors
otherwise directs by resolution adopted prior to the Change in
Control, or not later than 45 days after the Change in Control if
the percentage of the Corporation's common shares acquired or
directors elected under clause (1) or (3) of the definition of
Change in Control set forth below shall be at least 20% but less
than 25%, all incomplete Performance Cycles in effect on the date
the Change in Control occurs shall end on such date and the
Committee, shall, (i) determine the extent to which Performance
Goals with respect to each such Performance Cycle have been met
based upon such audited or unaudited financial information then
available as it deems relevant, (ii) cause to be paid to each
Participant partial or full Awards with respect to Performance
Goals for each such Performance Cycle, based upon the Committee's
determination of the degree of attainment of Performance Goals,
and (iii) cause all previously deferred Awards to be settled in
full. Any resolution of the Board of Directors adopted in
accordance with the provisions of this Section directing that
this Section 10A not become effective may be rescinded or
countermanded at any time with or without retroactive effect.
All payments of Awards in accordance with the foregoing and all
settlements of previously deferred Awards shall be payable in the
manner prescribed in Section 7 as soon as practicable following
the Change in Control.
Notwithstanding the last sentence of the preceding para-
graph, all settlements of previously deferred Awards to be made
after January 1, 1992 pursuant to this Section 10A shall be made
in the form of single cash lump sum payments. The amount so
payable with respect to each Participant's previously deferred
Awards shall be equal to the sum of (a) the aggregate amount of
the balances of Interest Portion of the Participant's Account,
plus (b) an amount determined by multiplying the aggregate number
of Phantom Share Units then included in the balance of the PSU
Portion of the Participant's Account by the Determined Value of
one common share of the Corporation. For purposes of the
foregoing, the term "Determined Value" shall have the meaning
assigned to such term in Section 1.2 of the 1989 Stock
Compensation Plan of U.S. Trust Corporation. All amounts so
payable to Participants, reduced by any taxes withheld pursuant
to Section 13, shall be paid to such Participants as soon as
practicable following the Change in Control.
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For purposes of this Section "Change in Control" means that:
(1) 20% or more of the common shares of the
Corporation has been acquired by any person (as defined by
Section 3(a)(9) of the Securities Exchange Act of 1934) other than
directly from the Corporation; or that
(2) there has been a merger or equivalent combination
after which 49% or more of the voting shares of the sur-
viving corporation is held by persons other than former
shareholders of the Corporation; or that
(3) 20% or more of the directors elected by
shareholders to the Board of Directors of the Corporation
are persons who were not nominated in the most recent proxy
statement of the Corporation.
B. The obligations of the Corporation under the Plan shall
be binding upon any successor corporation or organization
resulting from the merger, consolidation or other reorganization
of the Corporation, or upon any successor corporation or organi-
zation succeeding to substantially all of the assets and business
of the Corporation. The Corporation agrees that it will make
appropriate provision for the preservation of Participants'
rights under the Plan in any agreement or plan which it may enter
into or adopt to effect any such merger, consolidation, reorgani-
zation or transfer of assets.
11. Non-Alienation of Benefits and General Creditor Status
A Participant's rights to payments under the Plan shall not
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Participant or his or her
Beneficiary.
Participants shall have no right, title, or interest
whatsoever in or to any investments which the Corporation may
make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to
its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Corporation and
any Participant, Beneficiary, or any other person. To the extent
that any person acquires a right to receive payments from the
Corporation under the Plan, such right shall be no greater than
the right of the general unsecured creditor of the Corporation.
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The Plan shall constitute a mere promise by the Corporation to
make payments in the future of the benefits provided for herein.
It is intended that the arrangements reflected in this Plan be
treated as unfunded for tax purposes, as well as for purposes of
Title I of ERISA. All payments to be made hereunder shall be
paid from the general funds of the Corporation and no special or
separate fund shall be established and no segregation of assets
shall be made to assure payment of such amounts except as
expressly set forth in the Plan. In its sole discretion, the
Corporation may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to
deliver common shares of the Corporation or pay cash; provided,
however, that unless the Committee otherwise determines with the
consent of the affected Participant, the existence of such trusts
or other arrangements shall be consistent with the "unfunded"
status of the Plan.
12. No Claim or Right Under the Plan
No employee or other person shall have any claim or right to
be granted an Award under the Plan. Neither the Plan nor any
action taken thereunder shall be construed as giving any employee
any right to be retained in the employ of the Corporation or any
of its Affiliated Companies.
13. Taxes
The Corporation shall deduct from all payments otherwise
required to be made under the Plan all federal, state, local and
other taxes required by law to be withheld with respect to such
payments.
14. Designation and Change of Beneficiary
Each Participant shall file with the Committee a written
designation of one or more persons as the Beneficiary who shall
be entitled to receive any amount, or any Common Shares of the
Corporation, payable under the Plan upon his or her death. A
Participant may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any previously
designated Beneficiary by filing a new designation with the
Committee. The last such designation received by the Committee
shall be controlling; provided, however, that no designation or
change or revocation thereof shall be effective unless received
by the Committee prior to the Participant's death, and in no
event shall it be effective as of a date prior to such receipt.
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If at the date of a Participant's death, there is no designation
of a Beneficiary in effect for the Participant pursuant to the
provisions of this Section 14, or if no Beneficiary designated by
the Participant in accordance with the provisions hereof survives
to receive any amount, or common shares of the Corporation, that
becomes payable under the Plan by reason of the Participant's
death, the Participant's estate shall be treated as the
Participant's Beneficiary for purposes of the Plan.
15. Payments to Persons Other Than Participant
If the Committee shall find that any Participant or
Beneficiary to whom any amount, or any common shares of the
Corporation, is payable under the Plan is unable to care for his
or her affairs because of illness, accident or legal incapacity,
then, if the Committee so directs, such amount, or such shares,
may be paid to such Participant's or Beneficiary's spouse,
child, or other relative, an institution maintaining or having
custody of such person, or any other person deemed by the
Committee to be a proper recipient on behalf of such Participant
or Beneficiary, unless a prior claim therefor has been made by a
duly appointed legal representative of the Participant or
Beneficiary. Any such payment shall be a complete discharge of
the liability of the Corporation therefor.
16. No Liability of Committee Members
No member of the Committee shall be personally liable by
reason of any contract or other instrument executed by such mem-
ber or on his or her behalf in his or her capacity as a member of
the Committee nor for any mistake of judgment made in good faith,
and the Corporation shall indemnify and hold harmless each member
of the Committee, and each employee, officer or director of the
Corporation or any of its Affiliated Companies to whom any duty
or power relating to the administration or interpretation of the
Plan may be allocated or delegated, against any cost or expense
(including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Board of
Directors) arising out of any act or omission to act in connec-
tion with the Plan unless arising out of such person's own fraud
or bad faith.
17. Amendment or Termination
The Board of Directors may, with prospective or retroactive
effect, amend, suspend or terminate the Plan or any portion
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thereof at any time; provided, however, that (i) no amendment
that would materially increase the cost of the Plan to the
Corporation may be made by the Board of Directors without the
approval of shareholders of the Corporation, (ii) no amendment,
suspension or termination of the Plan shall deprive any
Participant of any rights to Awards previously made under the
Plan without his or her written consent. Subject to earlier
termination pursuant to the provisions of this Section, and
unless the shareholders of the Corporation shall have approved an
extension of the Plan beyond such date, no further Awards shall
be made under the Plan with respect to that part of any
Performance Cycle which ends after December 31, 1989.
18. Governing Law
The Plan shall be governed by and construed in accordance
with the laws of the State of New York.
19. Effective Date
The Plan, as initially adopted and approved by shareholders
of the Corporation at its 1980 annual meeting of shareholders,
became effective as of January 1, 1980.
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EXHIBIT 10.16
1988 Long-Term Performance Plan of
U.S. Trust Corporation
As Amended, Restated and Renamed
Effective as of January 1, 1994
1. Purpose
The purpose of the 1988 Long-Term Performance Plan of U.S.
Trust Corporation is to promote the long-term success of U.S.
Trust Corporation and its affiliated companies by (i) encouraging
greater focus by senior level officers on its long-term objec-
tives, and (ii) providing senior level officers with the oppor-
tunity to obtain an interest in U.S. Trust Corporation parallel
to that of the Corporation's shareholders through increased stock
ownership.
The Plan, as hereinafter set forth, represents a continua-
tion of the 1988 Long-Term Performance Plan of United States
Trust Company of New York and Affiliated Companies, as amended,
restated and renamed effective as of January 1, 1994 to reflect
(a) the adoption of the Plan by U.S. Trust Corporation as its own
Plan and the Corporation's assumption of, and becoming solely
responsible for, all liabilities and obligations of United States
Trust Company of New York under the Plan, and (b) changes in
certain other provisions of the Plan.
The amendments described in clause (a) of the preceding
paragraph, and the amendments to Section 7F, as reflected in this
Restatement, are subject to approval by shareholders of the
Corporation at its annual meeting scheduled to be held on
April 26, 1994.
2. Definitions
The following definitions are applicable to the Plan:
"Affiliated Companies" shall mean United States Trust
Company of New York and each other direct or indirect sub-
sidiary of the Corporation.
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"Award" means the dollar value of that part of a Parti-
cipant's compensation which is taken into account with
respect to a Performance Cycle and the corresponding number
of Performance Share Units which is allocated to such
Participant in accordance with the provisions of the Plan.
"Beneficiary" means the person or persons designated by
a Participant in accordance with Section 14 to receive any
amount, or any common shares of the Corporation, payable
under the Plan upon the Participant's death.
"Board of Directors" means the Board of Directors of
the Corporation.
"Committee" means the Compensation and Benefits
Committee of the Board of Directors.
"Corporation" means U.S. Trust Corporation.
"Participant" means an employee of the Corporation or
any of its Affiliated Companies who is selected to partici-
pate in the Plan in the manner described in Section 4.
"Performance Cycle" means the period of time over and
within which performance is measured for the purpose of
determining whether an Award has been earned.
"Performance Goals" means the performance objectives of
the Corporation during a Performance Cycle for the purpose
of determining whether, and to what extent, Awards will be
earned for a Performance Cycle.
"Performance Share Unit" and "Phantom Share Unit" mean
a unit of measurement equivalent to one common share of the
Corporation with none of the attendant rights of a holder of
such share, including, without limitation, the right to vote
such share and the right to receive dividends thereon,
except to the extent otherwise specifically provided herein.
"Plan" means the 1988 Long-Term Performance Plan of
U.S. Trust Corporation.
3. Administration
The Plan shall be administered by the Committee. In no
event shall a member of the Committee be eligible for an Award
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under the Plan.
A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present, or acts approved
in writing by a majority of the Committee without a meeting,
shall be the acts of the Committee. In addition to the responsi-
bilities and powers assigned to the Committee elsewhere in the
Plan, the Committee shall have the authority to:
(i) Determine the duration of each Performance Cycle;
(ii) Establish the Performance Goals for each
Performance Cycle;
(iii) Select the Participants;
(iv) Determine the maximum percentage of compensation
with respect to which an Award may be made to each Partici-
pant, and the actual Award earned by each Participant; and
(v) Establish from time to time regulations for the
administration of the Plan, interpret the Plan, and make all
determinations considered necessary or advisable for the
administration of the Plan.
All decisions, actions or interpretations of the Committee
shall be final, conclusive and binding upon all parties.
4. Participation
Participants in the Plan shall be limited to those senior
officers of the Corporation and its Affiliated Companies (i)
whose decisions determine the long-term business and strategic
policies of the Corporation and its Affiliated Companies or whose
services may be expected to contribute substantially to the
attainment of Performance Goals, based on such criteria as the
Committee shall from time to time establish and (ii) who have
received written notification from the Committee, or from a per-
son designated by the Committee, that they have been selected to
participate in the Plan. No employee shall at any time have the
right to be selected as a Participant for a Performance Cycle, to
be entitled automatically to an Award, nor, having been selected
as a Participant for one Performance Cycle, to be a Participant
in any other Performance Cycle.
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5. Maximum Number of Shares of Common Stock Available for
Awards
Notwithstanding any other provision of the Plan, no more
than 150,000 common shares of the Corporation shall be dis-
tributed to Participants during the term of the Plan. This
limitation shall be computed as if full payment with respect to
all Awards were made in the manner described in Section 7 hereof
immediately upon the conclusion of each Performance Cycle and
shall be adjusted appropriately, as determined by the Committee
in its sole discretion, for (i) stock dividends, stock splits or
combinations and any recapitalization, merger or consolidation of
the Corporation which may occur during the term of the Plan, (ii)
any increase in the number of shares payable under Section 7 with
respect to deferred awards due to dividends reinvested in Phantom
Share Units or accumulated interest required to be paid in common
shares, and (iii) any shares previously taken into account for
purposes of this limitation which thereafter became forfeited due
to the operation of Section 8. The shares distributed under the
Plan may be authorized and unissued shares, shares held in the
treasury of the Corporation, or shares purchased on the open
market by the Corporation (at such time or times and in such
manner as it may determine). The Corporation shall be under no
obligation to acquire its common shares for distribution to
Participants before payment in common shares is due.
6. Awards
Awards will be earned on the basis of corporate performance
measured against preestablished Performance Goals which will be
determined by the Committee for each Performance Cycle. The
Committee shall have the authority to adjust Performance Goals or
performance measurement standards for any Performance Cycle as it
deems equitable in recognition of (i) extraordinary or non-
recurring events experienced by the Corporation during the
Performance Cycle, or by any other corporation whose performance
is relevant to the determination of the amount of any Award
thereunder, (ii) changes in applicable accounting rules or prin-
ciples or changes in the Corporation's or in any other such
corporation's methods of accounting during the Performance Cycle,
or (iii) the occurrence of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger, con-
solidation, rights offering, or any other change in the capital
structure of the Corporation, or of any other such corporation.
The Committee shall determine the Award allocated to each
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Participant as a percentage of his or her annual rate of base
salary at the commencement of, or average annual base salary
during the Performance Cycle, either individually or by cate-
gories of Participants, provided that the Committee may, in its
sole discretion, also apply such percentage to other current or
deferred compensation and determine the Performance Cycle for
which such deferred compensation shall be counted. In the case
of a Participant whose participation commenced after the begin-
ning of a Performance Cycle, the Committee shall determine the
Award as a percentage of his or her annual base salary or average
annual base salary on such date or during such other period as
the Committee shall determine prior to the date such participa-
tion commenced.
The Award for each Participant or class of Participants
shall then be converted into and expressed in Performance Share
Units by dividing the dollar value of the Award by the average
market value (the mean between the high and low prices during
each day as quoted on the NASDAQ national market system, or, if
the Corporation's common shares are not quoted on such system, on
such other securities market or securities exchange on which such
shares are traded as the Committee shall determine) of one common
share of the Corporation during the month preceding the month in
which the Performance Cycle begins or, in the case of an officer
who becomes a Participant in a Performance Cycle after it has
begun, during the calendar month selected by the Committee on or
prior to the date such participation commenced.
In determining the number of Performance Share Units which
constitute the Awards hereunder, the Committee shall make appro-
priate adjustments for stock dividends, stock splits or combina-
tions and any recapitalization, merger or consolidation or other
capital changes of the Corporation.
The Committee shall also determine the percentage of each
Participant's Award which is to be based on absolute and relative
growth in earnings per share or rate of return on shareholder's
equity of the Corporation, or other measurement of corporate per-
formance, either individually or by categories of Participants.
No Award shall be considered as compensation under any
employee benefit plan of the Corporation or any of its Affiliated
Companies, except as specifically provided in any such plan or as
otherwise determined by the Board of Directors.
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7. Payment of Awards
A. Amount of Payment. The amount payable to a Participant
with respect to an Award earned under the Plan shall be equal to
(i) the number of Performance Share Units to which he shall have
become entitled by reason of the level of attainment of
Performance Goals, multiplied by (ii) the average market value
(determined as provided in Section 6 above) of one common share
of the Corporation during the month in which the Performance
Cycle ends.
B. Time of Payment; Deferral Elections. Any amount
payable on account of an Award earned under the Plan shall be
paid by the Corporation at such time, in such manner, and subject
to such conditions, including forfeiture conditions (in addition
to the conditions specified in Section 8), as determined by the
Committee; provided, however, that a Participant may file a writ-
ten election with the Committee to defer the payment of any
amount payable on account of an award to a period commencing at
such future date, following the time for payment otherwise deter-
mined by the Committee, as specified in the election. Such elec-
tion must be filed with the Committee no later than the last day
of the month which is two-thirds of the way through the
Performance Cycle during which the Award is earned, unless the
Committee specifies an earlier filing date.
C. Payment of Non-deferred Awards. The portion of an
amount payable on account of an Award which is not deferred,
either by election of the Participant or by the Committee, shall
be paid as soon as practicable after the end of the Performance
Cycle in cash and in common shares of the Corporation as the
Committee shall determine in its sole discretion, provided,
however, that not more than one-half of the value of the payment
shall consist of common shares of the Corporation. The number of
shares to be distributed shall be determined by dividing (i) the
portion of the amount payable in such shares by (ii) the average
market value (determined as above provided) of one common share
of the Corporation during the month in which the Performance
Cycle ends.
D. Separate Accounts. At the conclusion of each
Performance Cycle, the Committee shall cause a separate account
("Account") to be maintained in the name of each Participant with
respect to whom all or a portion of an Award earned under the
Plan has been deferred, either by election of the Participant or
by the Committee.
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E. Election of Form of Investment. Not later than sixty
(60) days prior to the end of each Performance Cycle, a
Participant may file a written election with the Committee of the
percentage of the deferred portion of any Award which is to be
credited with interest, and of the percentage of such Award which
is to be credited with Phantom Share Units, which latter percent-
age shall be at least fifty percent (50%). In the event a
Participant fails to file an election within the time prescribed,
one hundred percent (100%) of the deferred portion of such
Participant's Award shall be credited with Phantom Share Units.
F. Interest Portion. The amount of interest credited with
respect to the portion of an Award credited to the Participant's
account which is deferred and credited with interest (the
"Interest Portion") shall be equal to the amount such portion
would have earned had it been credited with interest from the
last day of the Performance Cycle with respect to which the Award
was made until the last business day preceding the date as of
which payment is made, compounded annually, at the rate of inter-
est determined by the Committee in accordance with the provisions
of this Section 7F. The Committee, in its sole discretion, shall
select the method of determining the additional amount to be
credited to the Interest Portion of each separate account main-
tained for deferred amounts under the Plan; provided, however,
that no amount credited to an account pursuant to such method
shall exceed the amount that would have been credited if such
determination had been based on the Corporation's rate of return
on shareholders' equity ("R.O.E.") calculated in the manner pro-
vided in the foregoing provisions of this Section 7F of the Plan.
The method selected by the Committee may provide for use of
either a stated interest rate or a fixed or floating interest
rate determined by reference to an external standard selected by
such Committee.
In the case of any Participant whose employment with the
Corporation and its Affiliated Companies terminated prior to
January 1, 1994, interest shall continue to be credited to the
Interest Portion of such Participant's Account in accordance with
the provisions of the preceding paragraph for all periods ending
after December 31, 1993, until payment with respect to the
Interest Portion of such Participant's Account has been made in
full. In the case of each other Participant, the provisions of
the preceding paragraph shall not apply with respect to any
periods ending after December 31, 1993; and the Interest Portion
of such Participant's Account shall be credited with Earnings (as
defined below) for all such periods, in accordance with the
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following provisions:
(i) As of the last day of each calendar month, each
part of the balance of the Interest Portion of a
Participant's Account for which a separate Earnings
Crediting Option (as hereinafter defined) is in effect pur-
suant to the Participant's election under this Section 7F
shall be credited with an amount determined by multiplying
such part of the balance by a percentage corresponding to
the Applicable Rate of Return (as hereinafter defined) for
such month under such Earnings Crediting Option. The amount
so credited (which may be positive or negative depending on
whether the Applicable Rate of Return for the month is posi-
tive or negative) is referred to herein as "Earnings".
(ii) For purposes of this Section 7F, the term
"Earnings Crediting Option" shall mean, initially, (a) the
Prime Rate, and (b) any investment fund maintained under the
401(k) Plan and ESOP of United States Trust Company of New
York and Affiliated Companies (the "401(K) Plan") other than
the ESOP Stock Fund or the U.S.T. Corp. Stock Fund; and the
term "Prime Rate" shall mean, with respect to any calendar
month, the prime rate as quoted by United States Trust
Company of New York on the last business day of such month.
Any investment fund described in clause (b) of the preceding
sentence is referred to herein as a "401(k) Plan Fund".
Notwithstanding the foregoing, the Committee may at any
time, in its sole discretion, determine (x) that the Prime
Rate or any 401(k) Plan Fund shall cease to constitute an
Earnings Crediting Option for purposes of this Section 7F,
(y) that any investment fund that is added to the 401(k)
Plan at any time after January 1, 1994 shall not constitute
an Earnings Crediting Option for purposes of the Plan, or
(z) that any other hypothetical investment fund or index or
referenced rate of return shall constitute an Earnings
Crediting Option for purposes of the Plan. Participants
shall be notified in writing, at least 45 days in advance,
of any such change in the Plan's Earnings Crediting Options.
(iii) The "Applicable Rate of Return" for any month,
under any Earnings Crediting Option, shall mean (a) in the
case of an Earnings Crediting Option that is a 401(k) Plan
Fund, the percentage by which the value of such Fund, as
determined by the 401(k) Plan's Trustee as of the Valuation
Date (as defined in the 401(k) Plan) for such month,
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exceeds, or is less than, the value of such Fund, as deter-
mined by the 401(k) Plan's Trustee as of the Valuation Date
for the immediately preceding month; and (b) in the case of
any other Earnings Crediting Option, the rate of return
applicable for such month, as determined by the Committee in
its sole discretion.
(iv) A Participant may make elections with respect to
the Earnings Crediting Options that are to apply with
respect to the Interest Portion of his or her Account, in
accordance with the following rules:
(a) a Participant may elect to have any part or
all of the balance of the Interest Portion credited
with Earnings under any Earnings Crediting Option
available under the Plan at the time of his or her
election.
(b) each Participant shall make an initial
election as to the Earnings Crediting Options that
are to apply with respect to the Interest Portion by
no later than November 19, 1993. Such election
shall be made in writing, on a form which is pro-
vided by the Committee for such purpose and which
the Participant files with the Committee. In such
election form, the Participant shall specify, by
percentages (which must be even multiples of 5%) the
respective parts of the balance of the Interest
Portion that are to be credited with Earnings under
each of the Earnings Crediting Options designated by
the Participant in such form.
(c) The Earnings Crediting Options selected in
the initial election made by the Participant under
clause (b) above shall remain in effect until the
Participant changes his or her election in accor-
dance with clause (d) below.
(d) A Participant may change the Earnings
Crediting Options that are to apply with respect to
the Interest Portion by making a new election here-
under. Such new election shall be made in writing,
on a form which is provided by the Committee for
this purpose and which the Participant files with
the Committee. In such form, the Participant shall
specify, in the same manner as described in clause
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(b) above, the respective parts of the balance of
the Interest Portion that are to be credited with
Earnings under each of the Earnings Crediting
Options designated by the Participant in such form.
The Participant's new election shall become effec-
tive as of the first day of the calendar month fol-
lowing the date on which such election is filed with
the Committee, provided that it is so filed at least
15 days prior to such first day. The Earnings
Crediting Options selected by the Participant in
such new election shall remain in effect until the
Participant again changes his election with respect
to the Interest Portion of his or her Account in
accordance with this clause (d).
(v) The Interest Portion of a Participant's Account
shall continue to be credited with Earnings in accordance
with the provisions of this Section 7F until all payments
required to be made with respect to the Interest Portion
under Section 7K have been made. For this purpose, any
payments made under Section 7K with respect to the Interest
Portion of the Participant's Account will be deemed to have
been made pro rata from the respective parts of the balance
of the Interest Portion that are subject to separate
Earnings Crediting Options.
G. Phantom Share Unit Portion. With respect to the
portion of an Award credited to the Participant's Account which
is deferred and credited with Phantom Share Units (the "PSU
Portion"), the number of Phantom Share Units ("PSU's") so cred-
ited shall be equal to the result of dividing (i) the PSU Portion
by (ii) the average market value (determined as above provided)
of one common share of the Corporation during the month in which
the Performance Cycle ended.
H. Dividend Equivalents. As of each date on which the
Corporation pays a dividend on its common shares, the PSU Portion
of each Participant's Account shall be credited with additional
PSU's the number of which shall be determined by (i) multiplying
the number of PSU's standing to the Participant's credit in the
PSU Portion of the Participant's Account at the time such divi-
dend was declared, by the per share dollar amount of the dividend
so paid, and then (ii) dividing the resulting amount by the aver-
age market value (determined as above provided) of one common
share of the Corporation on the payment date for such dividend.
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I. Payment of Deferred Awards. Payment with respect to
amounts credited to the Account of a Participant shall be made in
a series of annual installments over a period of ten (10) years.
Except as otherwise provided by the Committee, each installment
shall be withdrawn proportionately from the Interest Portion and
from the PSU Portion of a Participant's Account based on the
percentage of the Participant's Account which he or she elected
to be credited with interest and with PSU's. Payments shall
commence on the date specified by the Participant in his or her
deferral election or on the date determined initially by the
Committee, whichever is applicable, unless the Committee in its
sole discretion determines that payment shall be made over a
shorter period or in more frequent installments, or commence on
an earlier date, or any or all of the above. If a Participant
dies prior to the date on which payment with respect to all
amounts credited to his or her Account shall have been completed,
payment with respect to such amounts shall be made to the
Participant's Beneficiary in a series of annual installments over
a period of five (5) years, unless the Committee in its sole
discretion determines that payment shall be made over a shorter
period or in more frequent installments, or both. To the extent
practicable, each installment payable hereunder shall approximate
that part of the amount then credited to the Participant's or
Beneficiary's Account which, if multiplied by the number of
installments remaining to be paid, would be equal to the entire
amount then credited to the Participant's Account.
J. Composition of Payment. Payment with respect to the
Interest Portion of a Participant's Account shall be made in
cash. Payment with respect to the PSU Portion of a Participant's
Account shall be made in common shares of the Corporation. One
common share of the Corporation shall be distributed to the
Participant for each whole PSU for which payment is being made.
Fractional PSU's shall be paid in cash.
K. Payments After January 1, 1994. Notwithstanding any
other provision herein to the contrary, on and after January 1,
1994 the provisions of Sections 7I and 7J shall apply only in the
case of payments to be made with respect to Participants whose
employment with the Corporation and its Affiliated Companies
terminated prior to such date; and in the case of each other
Participant, payment with respect to the Participant's Account
shall be made in accordance with the following provisions:
(i) The balances of the Interest Portion and the PSU
Portion of a Participant's Account shall become payable upon
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the Participant's termination of employment with the
Corporation and its Affiliated Companies for any reason.
For this purpose, a Participant who ceases active employment
by reason of disability but who becomes entitled to receive
benefit payments under the long-term disability plan main-
tained by the Corporation or any of its Affiliated Companies
shall be treated as continuing to be employed with the
Corporation and its Affiliated Companies during all periods
for which he or she continues to receive benefit payments
under such plan.
(ii) Payment with respect to the Interest Portion and
the PSU Portion of a Participant's Account shall be made in
the form of a series of 10 annual installments. The first
such installment payment shall be made on the last business
day of February of the calendar year following the year in
which the Participant's employment with the Corporation and
its Affiliated Companies terminates, and the remaining
installment payments shall be made on the last business day
of February of each succeeding year.
(iii) Each installment payment to be made with respect
to the Interest Portion of a Participant's Account shall be
made in cash, in an amount determined by dividing (a) the
balance of the Interest Portion determined as of the last
day of the calendar year preceding the year in which such
payment is to be made, by (b) the number of installment
payments remaining to be made. The last such installment
payment shall include Earnings credited to the Interest
Portion for the month preceding the month in which such
payment is made.
(iv) Each installment payment to be made with respect
to the PSU Portion of a Participant's Account shall be made
partly in common shares of the Corporation, and partly in
cash. The number of shares to be included in each such
installment payment shall be equal to the number of whole
PSU's included in the quotient resulting from dividing
(a) the total number of PSU's included in the balance of the
PSU Portion of the Participant's Account as of the last day
of the calendar year preceding the year in which such pay-
ment is to be made, by (b) the number of installment pay-
ments remaining to be made; and the amount of cash to be
included in each such installment payment shall be deter-
mined by multiplying (c) the fractional part of a PSU
included in the aforementioned quotient by (d) the average
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market value (determined as above provided) of one common
share of the Corporation on the business day immediately
preceding the date on which such installment payment is to
be made. The last such installment payment shall include a
number of common shares of the Corporation equal to the
whole number of any additional PSU's that are credited to
the PSU Portion of the Participant's Account under Section
7H during the month preceding the month in which such pay-
ment is made, together with cash (in an amount determined in
the same manner as described in clause (d) of the preceding
sentence) for any fractional part of a PSU that is so
credited.
(v) If a Participant should die before receiving all
payments required to be made hereunder with respect to the
Participant's Account, any payments remaining to be made at
the date of the Participant's death shall be made to the
Participant's Beneficiary in the same form, at the same
times and in the same amounts, as such payments would have
been made to the Participant (a) if he or she had not died,
and (b) if the Participant died while still employed, if the
Participant's employment had otherwise terminated on the
date of his or her death.
(vi) Notwithstanding any other provision in this
Section 7K to the contrary, payment with respect to any part
or all of the Participant's Account balances may be made to
the Participant or, if the Participant has died, to the
Participant's Beneficiary, on any date earlier than the date
on which such payment is to be made pursuant to such other
provisions of this Section 7K if (a) the Participant, or his
or her Beneficiary, requests such early payment and (b) the
Committee, in its sole discretion, determines that such
early payment is necessary to help the Participant, or his
or her Beneficiary, meet an "unforeseeable emergency" within
the meaning of Section 1.457-2(h)(4) of the federal Income
Tax Regulations. The amount that may be so paid may not
exceed the amount necessary to meet such emergency.
L. Adjustment of PSU's. In the event of any change in the
Corporation's common shares by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation, split-
up, combination or exchange of shares, or any rights offering to
purchase such shares at a price substantially below fair market
value, or any similar change affecting the Corporation's common
shares, the number and kind of shares represented by Phantom
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Share Units credited to the Accounts of Participants hereunder
shall be appropriately adjusted consistent with such change in
such manner as the Committee, in its sole discretion, may deem
equitable to prevent substantial dilution or enlargement of the
rights granted to, or available for, the Participants hereunder.
The Committee shall give notice to each Participant of any
adjustment made pursuant to this Section 7L and, upon such
notice, such adjustment shall be effective and binding for all
purposes of the Plan.
8. Conditions and Forfeitures
The payment of all Awards under the Plan, or of any part
thereof, shall be contingent upon a Participant's compliance with
the following condition: the Participant shall not, directly or
indirectly, except as required in the course of his or her
employment by the Corporation or any of its Affiliated Companies,
furnish, divulge, or use at any time any information of a propri-
etary nature owned by the Corporation or any of its Affiliated
Companies which is in the nature of confidential information or
trade secrets.
If in the judgment of the Committee, reasonably exercised, a
Participant shall have failed at any time to comply with the
foregoing condition, the obligation of the Corporation to make
payment to such Participant or his or her Beneficiary shall
terminate forthwith and any unpaid Awards shall be forfeited,
except to the extent that the Participant would otherwise have
received payment with respect to all or part of an Award but for
his or her prior election to defer the payment thereof.
9. Partial Awards
An officer who is a Participant for less than a full
Performance Cycle, whether by reason of commencement or termin-
ation of employment or otherwise, shall receive such portion of
an Award, if any, for that Performance Cycle as the Committee
shall determine.
10. Change in Control or Other Discontinuance
A. Upon the occurrence of a Change in Control of the
Corporation (as hereinafter defined), unless the Board of
Directors otherwise directs by resolution adopted prior to the
Change in Control, or not later than 45 days after the Change in
Control if the percentage of the Corporation's common shares
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acquired or directors elected under clause (1) or (3) of the
definition of Change in Control set forth below shall be at least
20% but less than 25%, all incomplete Performance Cycles in
effect on the date the Change in Control occurs shall end on such
date, and the Committee shall, (i) determine the extent to which
Performance Goals with respect to each such Performance Cycle
have been met based upon such audited or unaudited financial
information then available as it deems relevant, (ii) cause to be
paid to each Participant partial or full Awards with respect to
Performance Goals for each such Performance Cycle, based upon the
Committee's determination of the degree of attainment of
Performance Goals, and (iii) cause all previously deferred Awards
to be settled in full. Any resolution of the Board of Directors
adopted in accordance with the provisions of this Section 10A
directing that this Section not become effective may be rescinded
or countermanded at any time with or without retroactive effect.
All payments of Awards in accordance with the foregoing and all
settlement of previously deferred Awards shall be payable in the
manner prescribed in Section 7 as soon as practicable following
the Change in Control.
Notwithstanding the last sentence of the preceding para-
graph, all settlements of previously deferred Awards to be made
after January 1, 1992 pursuant to this Section 10A shall be made
in the form of single cash lump sum payments. The amount so
payable with respect to each Participant's previously deferred
Awards shall be equal to the sum of (a) the aggregate amount of
the balance of the Interest Portion of the Participant's Account,
plus (b) an amount determined by multiplying the aggregate number
of Phantom Share Units then included in the balance of the PSU
Portion of the Participant's Account, by the Determined Value of
one common share of the Corporation. For purposes of the
foregoing, the term "Determined Value" shall have the meaning
assigned to such term in Section 1.2 of the 1989 Stock
Compensation Plan of U.S. Trust Corporation. All amounts so
payable to Participants, reduced by any taxes withheld pursuant
to Section 13, shall be paid to such Participants as soon as
practicable following the Change in Control.
For purposes of this Section "Change in Control" means that:
(1) 20% or more of the common shares of the
Corporation has been acquired by any person (as defined by
Section 3(a)(9) of the Securities Exchange Act of 1934)
other than directly from the Corporation; or that
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(2) there has been a merger or equivalent combination
after which 49% or more of the voting shares of the sur-
viving corporation is held by persons other than former
shareholders of the Corporation; or that
(3) 20% or more of the directors elected by share-
holders to the Board of Directors of the Corporation are
persons who were not nominated in the most recent proxy
statement of the Corporation.
B. The obligations of the Corporation under the Plan shall
be binding upon any successor corporation or organization
resulting from the merger, consolidation or other reorganization
of the Corporation, or upon any successor corporation or
organization succeeding to substantially all of the assets and
business of the Corporation. The Corporation agrees that it will
make appropriate provision for the preservation of Participants'
rights under the Plan in any agreement or plan which it may enter
into or adopt to effect any such merger, consolidation, reorgani-
zation or transfer of assets.
11. Non-Alienation of Benefits and General Creditor Status
A Participant's rights to payments under the Plan shall not
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or gar-
nishment by creditors of the Participant or his or her
Beneficiary.
Participants shall have no right, title, or interest
whatsoever in or to any investments which the Corporation may
make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to
its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Corporation and
any Participant, Beneficiary, or any other person. To the extent
that any person acquires a right to receive payments from the
Corporation under the Plan, such right shall be no greater than
the right of a general unsecured creditor of the Corporation.
The Plan shall constitute a mere promise by the Corporation to
make payments in the future of the benefits provided for herein.
It is intended that the arrangements reflected in this Plan be
treated as unfunded for tax purposes, as well as for purposes of
Title I of ERISA. All payments to be made hereunder shall be
paid from the general funds of the Corporation and no special or
separate fund shall be established and no segregation of assets
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shall be made to assure payment of such amounts except as
expressly set forth in the Plan. In its sole discretion, the
Corporation may authorize the creation of trusts or other arrange-
ments to meet the obligations created under the Plan to deliver
common shares of the Corporation or pay cash; provided, however,
that, unless the Committee otherwise determines with the consent
of the affected Participant, the existence of such trusts or
other arrangements shall be consistent with the "unfunded" status
of the Plan.
12. No Claim or Right Under the Plan
No employee or other person shall have any claim or right to
be granted an Award under the Plan. Neither the Plan nor any
action taken thereunder shall be construed as giving any employee
any right to be retained in the employ of the Corporation or any
of its Affiliated Companies.
13. Taxes
The Corporation shall deduct from all payments otherwise
required to be made under the Plan all federal, state, local and
other taxes required by law to be withheld with respect to such
payments.
14. Designation and Change of Beneficiary
Each Participant shall file with the Committee a written
designation of one or more persons as the Beneficiary who shall
be entitled to receive any amount, or any common shares of the
Corporation, payable under the Plan upon his or her death. A
Participant may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any previously
designated Beneficiary by filing a new designation with the
Committee. The last such designation received by the Committee
shall be controlling; provided, however, that no designation or
change or revocation thereof shall be effective unless received
by the Committee prior to the Participant's death, and in no
event shall it effective as of a date prior to such receipt. If
at the date of a Participant's death, there is no designation of
a Beneficiary in effect for the Participant pursuant to the pro-
visions of this Section 14, or if no Beneficiary designated by
the Participant in accordance with the provisions hereof survives
to receive any amount, or common shares of the Corporation, that
becomes payable under the Plan by reason of the Participant's
death, the Participant's estate shall be treated as the
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Participant's Beneficiary for purposes of the Plan.
15. Payments to Persons Other Than Participant
If the Committee shall find that any Participant or
Beneficiary to whom any amount, or any common shares of the
Corporation, is payable under the Plan is unable to care for his
or her affairs because of illness, accident or legal incapacity,
then, if the Committee so directs, such amount, or such shares,
may be paid to such Participant's or Beneficiary's spouse, child,
or other relative, an institution maintaining or having custody
of such person, or any other person deemed by the Committee to be
a proper recipient on behalf of such Participant or Beneficiary,
unless a prior claim therefor has been made by a duly appointed
legal representative of the Participant or Beneficiary. Any
payment made under this Section 15 shall be a complete discharge
of the liability of the Corporation therefor.
16. No Liability of Committee Members
No member of the Committee shall be personally liable by
reason of any contract or other instrument executed by such mem-
ber or on his or her behalf in his or her capacity as a member of
the Committee nor for any mistake of judgment made in good faith,
and the Corporation shall indemnify and hold harmless each member
of the Committee, and each employee, officer, director or trustee
of the Corporation or any of its Affiliated Companies to whom any
duty or power relating to the administration or interpretation of
the Plan may be allocated or delegated, against any cost or
expense (including counsel fees) or liability (including any sum
paid in settlement of a claim with the approval of the Board of
Directors) arising out of any act or omission to act in connec-
tion with the Plan unless arising out of such person's own fraud
or bad faith.
17. Amendment or Termination
The Board of Directors may, with prospective or retroactive
effect, amend, suspend or terminate the Plan or any portion
thereof at any time; provided, however, that (i) no amendment
that would materially increase the cost of the Plan to the
Corporation may be made by the Board of Directors without the
approval of the shareholders of the Corporation and (ii) no
amendment, suspension or termination of the Plan shall deprive
any Participant of any rights to Awards previously made under the
Plan without his or her written consent. Subject to earlier
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termination pursuant to the provisions of this Section, and
unless the shareholders of the Corporation shall have approved an
extension of the Plan beyond such date, no further Awards shall
be made under the Plan with respect to that part of any
Performance Cycle which ends after December 31, 1997.
18. Governing Law
The Plan shall be governed by and construed in accordance
with the laws of the State of New York.
19. Effective Date
The Plan, as initially adopted and approved by the holders
of a majority of the common shares of the Corporation entitled to
vote at the annual meeting of the Corporation's shareholders in
1987, is effective as of January 1, 1988.
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EXHIBIT 10.18
BENEFIT EQUALIZATION PLAN
OF
U.S. TRUST CORPORATION
As Amended, Restated and Renamed
effective as of January 1, 1994
1. Purpose.
The purpose of this Plan is to provide members of the
Employees' Retirement Plan of United States Trust Company of New
York and Affiliated Companies, and their surviving spouses, with
benefits that would have been payable to them under such plan but
for the limitations placed on benefits payable under such plan by
Section 415 of the Code.
The Plan, as hereinafter set forth, represents a
continuation of the Benefit Equalization Plan of United States
Trust Company of New York and Affiliated Companies, as amended,
restated and renamed effective as of January 1, 1994 to reflect
(a) the adoption of the Plan by U.S. Trust Corporation as its own
Plan and the Corporation's assumption of, and becoming solely
responsible for, all liabilities and obligations of United States
Trust Company of New York under the Plan, and (b) changes in
certain other provisions of the Plan.
2. Definitions.
When used herein, the following terms shall have the
following meanings:
"Affiliated Companies" means United States Trust
Company of New York and each other direct or indirect subsidiary
of the Corporation
"Benefit Limitation" means the Maximum Pension
Limitations set forth in Paragraph G of Article VII of the
Retirement Plan.
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"Board of Directors" means the Board of Directors of
the U.S. Trust Corporation.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Committee" means the Compensation and Benefits
Committee of the Board of Directors.
"Corporation" means U.S. Trust Corporation.
"Earliest Payment Date" means (i) the date as of which
payment of an Eligible Employee's Pension under the Retirement
Plan commences, or (ii) if earlier, the earliest date as of which
the Eligible Employee could elect, under the Retirement Plan, to
have payment of his or her Pension commence.
"Eligible Employee" means any Employee who becomes
entitled to receive a Pension pursuant to Article V or Article VI
of the Retirement Plan, the amount of which is less than the
amount of the Pension he or she would be entitled to receive if
the Employee's Pension were calculated without regard to the
Benefit Limitation.
"Eligible Spouse" means the surviving spouse of a
deceased Employee who, upon such Employee's death, becomes
entitled to receive a Spouse's Preretirement Survivorship Pension
pursuant to Paragraph F of Article VIII of the Retirement Plan,
the amount of which is less than the amount of the Spouse's
Preretirement Survivorship Pension he or she would be entitled to
receive if the Pension that the deceased Employee would have been
entitled to receive had he or she not died were calculated with-
out regard to the Benefit Limitation. Notwithstanding the fore-
going, the surviving spouse of a deceased Employee shall not be
treated as an Eligible Spouse for purposes of this Plan if the
deceased Employee had received an Excess Pension Benefit
hereunder prior to his or her death.
"Employee" means any person employed, or formerly
employed, by the Corporation or any of its Affiliated Companies
that participates in the Retirement Plan.
"Plan" means the Benefit Equalization Plan of U.S.
Trust Corporation as set forth herein and as amended and restated
from time to time.
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"Retirement Plan" means the Employees' Retirement Plan
of United States Trust Company of New York and Affiliated
Companies, as amended and restated from time to time.
"Termination of Employment" means the termination of an
Employee's employment with the Corporation and all of its
Affiliated Companies.
Each other capitalized term used herein, not otherwise
defined, shall have the meaning given to such term under the
Retirement Plan.
3. Excess Pension Benefit.
Upon an Eligible Employee's Termination of Employment
for any reason other than death, the Eligible Employee shall be
entitled to receive an Excess Pension Benefit under this Plan.
The Excess Pension Benefit shall be a lump-sum payment
in the amount that is of Equivalent Actuarial Value (determined
as of the first day of the month following the date of the
Eligible Employee's Termination of Employment) to the excess of
(i) the Pension that would be payable to the Eligible Employee
under the Retirement Plan in the form of a single life annuity if
payment thereof were to commence on the Eligible Employee's
Earliest Payment Date, calculated without regard to the Benefit
Limitation, and (ii) the Pension that would be payable to the
Eligible Employee under the Retirement Plan in the form of a
single life annuity if payment thereof were to commence on the
Eligible Employee's Earliest Payment Date, calculated by taking
into account the Benefit Limitation.
The Excess Pension Benefit shall be paid to the
Eligible Employee as soon as practicable after the date of his or
her Termination of Employment, but in any event, by no later than
six months after such date.
4. Excess Survivorship Pension Benefit.
Upon the death of an Employee, the Employee's Eligible
Spouse shall be entitled to receive an Excess Survivorship
Pension Benefit under this Plan.
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The Excess Survivorship Pension Benefit shall be a
lump-sum payment in the amount that is of Equivalent Actuarial
Value (determined as of the first day of the month following the
date of the Employee's death) to the excess of (i) the Spouse's
Preretirement Survivorship Pension that would be payable to the
Eligible Spouse under the Retirement Plan, if calculated without
regard to the Benefit Limitation, and (ii) the Spouse's Pre-
retirement Survivorship Pension actually payable to the Eligible
Spouse under the Retirement Plan.
The Excess Survivorship Pension Benefit shall be paid
to the Eligible Spouse as soon as practicable after the date of
the Employee's death, but, in any event, by no later than six
months after such date.
5. Source of Payment.
All payments to be made hereunder shall be paid from
the general funds of the Corporation, and no special or separate
fund shall be established or other segregation of assets made to
assure such payments. Nothing contained in the Plan, and no
action taken pursuant to the provisions of the Plan, shall create
or be construed to create a trust of any kind, or a fiduciary
relationship between the Corporation, the Committee and any
Employee or other person. To the extent that any person acquires
a right to receive payments from the Corporation under the Plan,
such person shall have the status of a general unsecured creditor
of the Corporation with respect to his or her right to receive
any payment under the Plan.
Notwithstanding the foregoing, the Corporation may
establish a bookkeeping reserve to reflect its obligations here-
under, or may establish a "grantor" trust, within the meaning of
Sections 671 through 679 of the Code, to assist it in making the
payments provided for hereunder; provided, however, that any
bookkeeping reserve, and the assets of any trust, so established
shall not be deemed to constitute assets of this Plan, and the
assets of any trust so established shall at all times prior to
payment to Eligible Employees and Eligible Spouses remain a part
of the general assets of the Corporation and subject to the
claims of the Corporation's general creditors.
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6. Administration of the Plan.
The Plan shall be administered by the Committee, which
shall have full power and authority to interpret and construe the
Plan, to make all determinations considered necessary or advis-
able for the administration of the Plan and the calculation of
the amount of benefits payable thereunder, and to review claims
for benefits under the Plan. The Committee's interpretations and
constructions of the Plan and its decisions or actions thereunder
shall be binding and conclusive on all persons for all purposes.
No member of the Committee shall be personally liable
by reason of any contract or other instrument executed by such
member or on his or her behalf in his or her capacity as a member
of the committee nor for any mistake of judgment made in good
faith, and the Corporation shall indemnify and hold harmless each
member of the Committee and each other employee, officer, or
director or trustee of the Corporation or any of its Affiliated
Companies to whom any duty or power relating to the admini-
stration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees)
or liability (including any sum paid in settlement of a claim
with the approval of the Board of Directors) arising out of any
act or omission to act in connection with the Plan unless arising
out of such person's own fraud or bad faith.
7. Amendment and Termination.
The Plan may be amended, suspended or terminated, with
prospective or retroactive effect, in whole or in part, by the
Board of Directors without the consent of any Employee or any
other person. The Committee may adopt any amendment that may be
necessary or appropriate to facilitate the administration,
management and interpretation of the Plan or to conform the Plan
thereto, provided any such amendment does not have a material
effect on the currently estimated cost to the Corporation of
maintaining the Plan. No such amendment, suspension or term-
ination shall retroactively impair or otherwise adversely affect
the rights of any Employee or other person to benefits under the
Plan that have arisen prior to the date of such action as
determined by the Committee in its sole discretion.
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8. General Provisions.
The following additional provisions shall be applicable
with respect to the Plan.
(a) The Plan shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns, and
Eligible Employees, Eligible Spouses, and their estates. The
Plan shall also be binding upon any successor corporation or
organization succeeding to substantially all of the assets and
business of the Corporation, but nothing in the Plan shall pre-
clude the Corporation from merging or consolidating into or with,
or transferring all or substantially all of its assets to, an-
other corporation that assumes the Plan and all obligations of
the Corporation hereunder. The Corporation agrees that it will
make appropriate provision for the preservation of Employees'
rights under the Plan in any agreement or plan that it may enter
into to effect any merger, consolidation, reorganization or
transfer of assets. Upon such a merger, consolidation, reorg-
anization, or transfer of assets and assumption, the term
"Corporation" shall refer to such other corporation and the Plan
shall continue in full force and effect.
(b) Neither the Plan nor any action taken hereunder
shall be construed as giving to any Employee the right to be
retained in the employ of the Corporation or any of its
Affiliated Companies or as affecting the right of the Corporation
or any of its Affiliated Companies to dismiss any Employee.
(c) The Corporation shall withhold from all benefits
otherwise payable under the Plan all Federal, state, local or
other taxes required pursuant to law to be withheld with respect
to such payments.
(d) Any person's rights to payments under the Plan
shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of such person.
(e) If the Committee shall find that any person to
whom any amount is payable under the Plan is unable to care for
his or her affairs because of illness, accident or legal
incapacity, then, if the Committee so directs, any payment due to
such person may be paid to such person's spouse, child or other
relative, an institution maintaining or having custody of such
person, or any other person deemed by the Committee to be a
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proper recipient on behalf of such person, unless a prior claim
for payment of such amount has been made by a duly appointed
legal representative of such person. Any such payment shall be a
complete discharge of the liability of the Corporation therefor.
(f) The Plan shall constitute a mere promise by the
Corporation to make payments in the future of the benefits
provided for herein. The Plan is intended to constitute an
unfunded "excess benefit plan", as defined in Section 3(36) of
the Employee Retirement Income Security Act of 1974 ("ERISA").
(g) The Plan shall be governed by the laws of the State
of New York from time to time in effect.
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EXHIBIT 10.19
1990 CHANGE IN CONTROL AND SEVERANCE POLICY
FOR TOP TIER OFFICERS OF UNITED STATES TRUST COMPANY
OF NEW YORK AND AFFILIATED COMPANIES
as amended and restated
effective as of January 1, 1994
1. Purpose
The purpose of this Plan is to provide for payments to
(and other benefits for) certain officers of United States Trust
Company of New York and designated affiliates thereof whose ser-
vice is terminated under certain circumstances following changes
in the ownership or management of U.S. Trust Corporation, and to
provide for regular severance payments to certain of such offi-
cers whose service is otherwise terminated.
2. Definitions
The following definitions are applicable to the Plan:
"Act" means the Employee Retirement Income Security Act
of 1974, as now in effect or as hereafter amended.
"Affiliate" means any affiliate of the Trust Company
that has been designated by the Committee specifically for
purposes of participation in the Plan.
"AIP" means the Annual Incentive Plan of U.S. Trust
Corporation, the 1990 Annual Incentive Plan of United States
Trust Company of New York and Affiliated Companies, and any
successor plan of either of the foregoing.
"Base Salary" means, with respect to any Participant,
his base salary as in effect at the time his service is
terminated; provided, however, that if a Participant termi-
nates his service following a reduction in the Participant's
base salary, then, for purposes of Section 5, his "Base
Salary" shall mean his base salary as in effect immediately
prior to any such reduction.
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"Board of Directors" means the Board of Directors of
the Corporation.
"Board of Trustees" means the Board of Trustees of the
United States Trust Company of New York.
"Change in Control" has the meaning set forth in Sec-
tion 5(f).
"Change in Control Benefit" means any payment or other
benefit that a Participant may be entitled to receive under
any Change in Control Plan upon a change in control (as
defined in such Plan) or upon the Participant's involuntary
termination (as defined in such Plan) following such change
in control.
"Change in Control Plan" means any plan (including the
Plan), program, policy, or agreement or resolution of the
Board of Trustees or Board of Directors under which a Change
in Control Benefit may be provided to a Participant. All
Change in Control Plans shall be listed in Schedule C
hereto, which shall be amended as necessary, from time to
time, by the Committee.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Committee" means the Compensation and Benefits
Committee of the Board of Trustees.
"Corporation" means U.S. Trust Corporation.
"Former Management Committee Member" means any of the
individuals listed in Schedule B hereto.
"401(k) Plan" means the 401(k) Plan and ESOP of United
States Trust Company of New York and Affiliated Companies.
"Involuntary Termination" has the meaning set forth in
Section 5(e).
"1987 Policy" means the 1987 Change in Control Policy
of United States Trust Company of New York and Affiliated
Companies, as set forth in and adopted by resolutions of the
Board of Directors at its meeting on December 8, 1987, and
as in effect immediately prior to the effective date of the
Plan. The 1987 Policy is reproduced in Schedule D hereto.
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"Participant" has the meaning set forth in Section 4.
"Payment" means any and all payments to which a Par-
ticipant is or may become entitled in accordance with the
provisions of the Plan.
"Plan" means the 1990 Change in Control and Severance
Policy for Top Tier Officers of United States Trust Company
of New York and Affiliated Companies.
"Profit-Sharing Plan" means the Employees' Profit-
Sharing Plan of United States Trust Company of New York and
Affiliated Companies, as in effect on December 31, 1991 and
any prior date.
"Retirement Plan" means the Employees' Retirement Plan
of United States Trust Company of New York and Affiliated
Companies.
"Stock Plan" means the 1989 Stock Compensation Plan of
U.S. Trust Corporation.
"Trust Company" means United States Trust Company of
New York.
3. Administration
The Plan shall be administered by the Committee. All
decisions, actions or interpretations of the Committee under the
Plan shall be final, conclusive and binding upon all parties.
After a Change in Control, all powers of the Committee under this
Plan shall be exercised solely by the Committee as it was consti-
tuted immediately prior to such Change in Control.
4. Participation
(a) A "Participant" shall mean any officer of the
Trust Company or an Affiliate who is included in the list of
persons designated for participation in the Plan set forth in
Schedule A hereto, as the same may be amended from time to time
by the Committee, in its sole discretion.
(b) Notwithstanding any other provisions of the Plan,
no Participant who is otherwise eligible to receive a Payment
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under the Plan who is employed by the Trust Company or an Affili-
ate under the terms of a written employment contract shall be
entitled to receive such Payment, except to the extent otherwise
provided in such contract.
5. Change in Control
(a) Special Severance Payment. A Participant who
experiences an Involuntary Termination within two years following
a Change in Control shall be entitled to receive a Payment in an
amount equal to
(i) the sum of:
(A) two times his annual Base Salary,
(B) two times the average of the highest three
awards he earned under the AIP for the five years prior
to the year during which the Change in Control occurs,
and
(C) in the case of a Participant who is a Former
Management Committee Member not entitled to a Payment
under Section 6, the amount of the Payment to which he
would otherwise be entitled under Section 6 if he were
a Senior Vice President,
(ii) reduced by the aggregate amount he is actually paid
under all other severance or separation plans, policies and
arrangements.
For purposes of computing amounts described in clause (i)(B)
above, AIP awards earned for years preceding the year in which a
Change in Control occurs shall be deemed to have equalled the
amount of such awards before reduction on account of (x) any
Profit-Sharing Amounts (as defined under the AIP as in effect on
or prior to December 31, 1991) contributed to or for the benefit
of the Participant under the Profit-Sharing Plan, (y) any ESOP
Contributions made on behalf of the Participant under the 401(k)
Plan, or (z) any amount taken into account in determining the
number of Benefit Equalization Units (as defined under the Stock
Plan) to be credited to the Participant's account under the Stock
Plan. Except as otherwise provided in Section 7(a), no Partici-
pant's Payment under the Plan shall be less than the amount he
would have received under the 1987 Policy.
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(b) Other Benefits. Any Payment payable to a Partici-
pant under this Section 5 shall be paid in addition to any pay-
ments or benefits the Participant receives under Section 6 and
under any other applicable plans, programs or agreements.
(c) Medical/Life Insurance Continuation Coverage. A
Participant who, without regard to the limitation set forth in
Section 4(b), is entitled a Payment under this Section 5 shall
also be entitled to the continuation (on the same terms and con-
ditions) of any medical and life insurance coverage to which the
Participant was entitled immediately prior to his Involuntary
Termination for a period of two years following his Involuntary
Termination.
Notwithstanding the above, to the extent that a
Participant becomes covered under the medical or life insurance
arrangements of an employer other than the Trust Company or an
Affiliate, the Trust Company shall no longer be obligated to
provide comparable benefits hereunder.
(d) Method of Payment. Any Payment payable to a
Participant under this Section 5 shall be paid in a lump sum cash
payment as soon as practicable after the Involuntary Termination
of such Participant, but, in any event, by no later than six
months after the date of such Participant's Involuntary
Termination.
(e) Involuntary Termination. For purposes of this
Section 5, an "Involuntary Termination" shall mean the termina-
tion of a Participant's employment with the Trust Company or an
Affiliate
(i) by the Trust Company or Affiliate, or
(ii) by such Participant following any
(A) reduction in his Base Salary,
(B) change, without his consent, in the location
of his place of employment to an borough other than
Manhattan or, if such place of employment is not in
Manhattan, to a city other than the city in which his
place of employment is located,
(C) material diminishment of his responsibilities
with respect to the business of the Trust Company or
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Affiliate, or
(D) other material adverse change in the condi-
tions of his employment with the Trust Company or
Affiliate.
An Involuntary Termination pursuant to clause (ii)
above shall be deemed to occur within two years of a Change in
Control if the event described in subclause (A), (B), (C) or (D)
that gives rise to such termination occurs within two years of a
Change in Control and such termination occurs within six months
after such event.
Notwithstanding any other provision herein, no payment
shall be made to a Participant pursuant to this Section 5 upon
the Participant's termination of employment unless such termina-
tion of employment constitutes an "Involuntary Termination", as
defined in this Section 5(e).
(f) Change in Control. For purposes of this Sec-
tion 5, a "Change in Control" shall be deemed to have occurred
whenever
(i) 20% or more of the common shares of the Corporation
has been acquired by any person (as defined by Section
3(a)(9) of the Securities Exchange Act of 1934) other than
directly from the Corporation,
(ii) there has been a merger or equivalent combination
after which 49% or more of the voting shares of the sur-
viving corporation is held by persons other than former
shareholders of the Corporation, or
(iii) 20% or more of the directors elected by share-
holders to the Board of Directors are persons who were not
nominated in the most recent proxy statement of the Corpora-
tion.
6. Regular Severance
(a) Regular Severance Payment. Any Participant who is
a Senior Vice President of the Trust Company whose employment is
terminated by the Trust Company because of job discontinuance or
inadequate job performance shall be entitled to a Payment in an
amount equal to 26 times his weekly Base Salary.
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A Participant who is entitled to a Payment under this
Section 6 shall also be offered the services of a professional
outplacement counseling firm, such services to be paid for by the
Trust Company. The duration, extent and cost of such services
will be determined by the Trust Company in its sole discretion.
Notwithstanding the foregoing, a Participant whose
employment is terminated by the Trust Company because of dishon-
esty or other malfeasance shall not be entitled to any Payment or
other benefit under this Section 6.
(b) Method of Payment. Any Payment payable under this
Section 6 with respect to a Participant's termination of employ-
ment shall be paid in a lump-sum cash payment as soon as prac-
ticable following such Participant's termination of employment.
7. Payment Limitations
Notwithstanding any other provision of the Plan to the
contrary, the amount of the Payments that a Participant may
otherwise be entitled to receive hereunder shall be subject to
the following limitations:
(a) Limit on Section 5(a)(i)(A) and (B) Amounts. In
the case of any Participant whose employment with the Trust
Company or an Affiliate is terminated after he has attained age
63, the amounts that otherwise would be taken into account under
Section 5(a)(i)(A) and (B) in determining the Payment to which
the Participant is entitled under Section 5 shall be that per-
centage of such amounts determined by dividing (x) the number of
calendar months in the period that begins on the first day of the
month in which the Participant's employment is terminated and
that ends on the last day of the month in which the Participant
will attain age 65, by (y) 24.
(b) Limit on Section 5(a)(i)(C) and Section 6 Amounts.
In the case of any Participant whose employment with the Trust
Company is terminated at any time within six months prior to the
date on which the Participant will attain age 65, the amount that
otherwise would be taken into account under Section 5(a)(i)(C) in
determining the Payment to which the Participant is entitled
under Section 5, or that otherwise would be taken into account in
determining the Payment to which the Participant is entitled
under Section 6, shall be that percentage of such amount deter-
mined by dividing (x) the number of calendar months in the period
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that begins on the first day of the month in which the Par-
ticipant's employment is terminated and that ends on the last day
of the month in which the Participant will attain age 65, by
(y) 6.
(c) Excess Parachute Payment Cutback. Whenever any
Participant becomes entitled to receive a Change in Control
Benefit under any Change in Control Plan, the Trust Company's
independent auditors, as designated by the Board of Trustees
prior to the change in corporate management or control giving
rise to such entitlement, shall determine whether any amount of
the aggregate Change in Control Benefits that such Participant
has received, or is entitled to receive, under the Change in
Control Plans will constitute an "excess parachute payment" (as
defined under Section 280G of the Code, or any successor provi-
sion) and, if so, whether the Participant would receive a greater
after-tax benefit if such aggregate Change in Control Benefits
were reduced. In the event a greater after-tax benefit would
result, such reduction, as computed by such auditors, will be
made, provided that the Participant may choose which Change in
Control Benefits shall be reduced.
8. Payment of Legal Fees
The Trust Company shall promptly pay, or reimburse each
Participant for, all reasonable legal fees and expenses incurred
by him in seeking to obtain, or enforce or defend his right to
receive, any Change in Control Benefit provided under any Change
in Control Plan.
9. Amendment
Prior to a Change in Control, the Board of Trustees may
amend or terminate this Plan, in whole or in part, at any time.
Except as hereinafter provided, the Plan, and any Schedules
attached to the Plan, shall not be amended or terminated
following a Change in Control. The Board of Trustees may,
however, at any time before a Change in Control, or within 45
days following a Change in Control where the percentage of the
Corporation's shares acquired or directors appointed under clause
(i) or (iii), respectively, of Section 5(f) is at least 20% but
less than 25%, direct by resolution that no Payments shall be
made and no benefits provided pursuant to Section 5, which reso-
lution may be rescinded or countermanded at any time with or
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without retroactive effect.
10. Unsecured Creditor Status
Participants shall have no right, title or interest in
or to any investments that the Trust Company may make to assist
it in meeting its obligations under the Plan. To the extent that
any Participant acquires a right to receive a Payment under the
Plan, such right shall be no greater than the right of an
unsecured creditor of the Trust Company. All payments to be made
under the Plan shall be paid from the general assets of the Trust
Company and no special or separate fund shall be established and
no segregation of assets shall be made to assure payment of such
amounts, except that the Trust Company may establish and fund a
"grantor trust" (as defined in Sections 671, et seq., of the
Code) to provide for any payments under the Plan.
Neither the Plan nor any action taken hereunder shall
be construed as giving any Participant any right to be retained
in the employ of the Trust Company or any affiliate thereof.
11. Nonalienation of Payment
A Participant shall not assign, sell, encumber, trans-
fer, pledge or otherwise dispose of any rights or interests under
the Plan and any attempted disposition shall be null and void,
except pursuant to a will or the laws of descent and distribu-
tion.
12. Taxes
The Trust Company shall deduct from any Payment other-
wise required to be made under the Plan all Federal, state, local
and other taxes required by law to be withheld with respect to
such Payment.
13. Payments to Persons Other Than Participants
If the Committee shall find that any Participant to
whom a Payment is payable under the Plan is unable to care for
his affairs because of illness, accident or legal incapacity,
then any Payment due to such Participant may, if the Committee so
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directs the Trust Company, be paid to his spouse, child or other
relative, an institution maintaining or having custody of such
person, or any person deemed by the Committee to be a proper
recipient on behalf of such Participant, unless a prior claim
therefor has been made by a duly appointed legal representative.
In the event that any Participant to whom any Payment is payable
under the Plan dies before he receives his Payment, such Payment
shall be paid to his estate.
Any payment made under this Section 13 shall be a com-
plete discharge of the liability of the Trust Company therefor.
14. No Liability of Committee Members
No member of the Committee shall be personally liable
by reason of any contract or other instrument executed by such
member or on his behalf in his capacity as a member of the
Committee nor for any mistake of judgment made in good faith, and
the Trust Company shall indemnify and hold harmless each member
of the Committee, and each employee, officer or director of the
Trust Company to whom any duty or power relating to the adminis-
tration or interpretation of the Plan may be allocated or dele-
gated, against any cost or expense (including counsel fees) or
liability (including any amount paid in settlement of a claim
with the approval of the Board of Trustees) arising out of any
act or omission in connection with the Plan unless arising out of
such person's own fraud or bad faith.
15. Superseding Effect
Except to the extent otherwise provided herein, the
Plan supersedes the 1987 Policy. In addition, Section 8 super-
sedes the resolution adopted by the Board of Trustees at its
meeting on January 26, 1988, regarding the payment of legal fees
and expenses.
16. Governing Law
The provisions of the Plan shall be governed by and
construed in accordance with the applicable provisions of the Act
and the laws of the State of New York.
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17. Successors
The Plan shall inure to the benefit of the Participants
and shall be binding upon the Trust Company, the Corporation, and
any assignee or successor corporation or organization resulting
from the merger, consolidation or other reorganization thereof or
succeeding to substantially all of the assets and business
thereof. The Trust Company and the Corporation agree that they
will make appropriate provision for the preservation of the Par-
ticipants' rights under the Plan in any agreement or plan that
they may enter into or adopt to effect any such merger, consoli-
dation, reorganization or transfer of assets.
18. Severability
If any provision of the Plan is determined to be
invalid or unenforceable, the remaining provisions of the Plan
shall not for that reason alone also be determined to be invalid
or unenforceable.
19. Gender
Whenever used in the Plan, the masculine gender
includes the feminine.
20. Effective Date
The Plan shall be effective as of July 24, 1990.
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SCHEDULE A
H. Marshall Schwarz
Joel Abramowitz
Trowbridge Callaway III
John M. Deignan
Edmond T. Drewsen
Laird I. Grant
John C. Hover, II
Jeffrey S. Maurer
Kenneth J. McAlley
Paul K. Napoli
Donald M. Roberts
C. William Steelman
Frederick B. Taylor
Kenneth G. Walsh
Frederick S. Wonham
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SCHEDULE B
H. Marshall Schwarz
Joel Abramowitz
Jeffrey S. Maurer
Donald M. Roberts
Frederick B. Taylor
Frederick S. Wonham
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SCHEDULE C
Employees' Retirement Plan of United States Trust Company of New
York and Affiliated Companies
1989 Stock Compensation Plan of U.S. Trust Corporation
United States Trust Company of New York and Affiliated Companies
1986 Stock Option Plan
1988 Long-Term Performance Plan of U.S. Trust Corporation
Long-Term Performance Plan of U.S. Trust Corporation
1990 Annual Incentive Plan of United States Trust Company of
New York and Affiliated Companies
Annual Incentive Plan of U.S. Trust Corporation
1990 Change in Control and Severance Policy for Top Tier Officers
of United States Trust Company of New York and Affiliated
Companies
Supplemental Pension Agreements between United States Trust
Company of New York and Messrs. Abramowitz, Maurer, Roberts,
Schwarz, Taylor and Wonham.
Executive Deferred Compensation Plan of U.S. Trust Corporation
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SCHEDULE D
1987 Change in Control Policy
Set forth below are the terms of the 1987 Change in
Control Policy of United States Trust Company of New York and
Affiliated Companies:
In the event of an "involuntary termination" within two
years following a "change in control" of a senior officer
who is a member of the Management Committee of United States
Trust Company of New York or such entity as may succeed to
substantially the same rights and responsibilities of such
committee (the "Management Committee") on the date of such
"change in control", such senior officer shall be paid in a
lump sum, promptly following such termination, the sum of
(a) an amount equal to such senior officer's then current
annual base salary, plus (b) an amount equal to the average
of the highest three of the prior five years' awards payable
to such senior officer pursuant to the Annual Incentive Plan
of United States Trust Company of New York and Affiliated
Companies (the "Annual Plan"), such amounts to be in addi-
tion to any other coverages, payments and distributions to
which such senior officer is entitled, except as may be
specifically provided in a written agreement entered into by
United States Trust Company of New York (the "Trust
Company") and such senior officer.
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EXHIBIT 10.20
[letterhead of U.S. Trust Corporation]
January 25, 1994
Mr. H. Marshall Schwarz
1120 Park Avenue
Apartment 6A
New York, NY 10128
Dear Marshall:
The purpose of this letter is to amend and restate the letter
agreement between you and United States Trust Company of New York
(the "Trust Company") dated May 26, 1992 (the "Prior Agreement"),
which sets forth the terms and conditions under which you were to
be provided a supplemental retirement benefit (the "Supplemental
Pension") to reflect U.S. Trust Corporation's (the "Corpor-
ation's") assumption of, and becoming solely responsible for, all
liabilities and obligations of the Trust Company with respect to
the Supplemental Pension and changes in certain other provisions
of the Prior Agreement.
Upon your acknowledgment of and agreement to this Amendment and
Restatement as provided on the last page hereof, this letter
agreement (the "Agreement") shall supersede and replace, in its
entirety, the prior agreement, and the Supplemental Pension shall
be provided on the terms and conditions set forth below. All
capitalized terms not otherwise defined herein shall have the
same meaning as is given to them in the Employees' Retirement
Plan of United States Trust Company of New York and Affiliated
Companies (the "Retirement Plan").
(1) The Supplemental Pension shall be equal to the
Pension that you would have been entitled to receive under the
Retirement Plan upon retirement on your Normal Retirement Date
calculated as if:
(A) you had been a Member of the Retirement Plan for
an uninterrupted period beginning on February 6, 1967 (the
"Starting Date"), and ending on December 1, 2001 (your "Normal
Retirement Date");
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<PAGE>
(B) your Credited Service in fact equalled the maximum
number of units of Credited Service that could be credited for
such uninterrupted period under the Retirement plan as now in
effect or, if greater, as in effect on the date of your
termination ("Maximum Units of Service");
(C) the provisions of Sections 401 (a)(17) and 415 of
the Internal Revenue Code of 1986, as amended (the "Code"), and
the Maximum Pension Limitations of Paragraph G of Article VII (or
any successor provision) of the Retirement Plan were
inapplicable; and
(D) you had elected, with the consent of your spouse
to the extent required by the terms of the Retirement Plan or
applicable law, the normal form of Pension payable to a retired
Member only during his lifetime pursuant to Option 4 of Paragraph
D of Article VIII (or any successor provision) of the Retirement
Plan; such amount to be reduced (but not below zero) by the sum
of the annual amounts that you are in fact entitled to receive on
your retirement on your Normal Retirement Date (i) from the
Retirement Plan, (ii) from the Benefit Equalization Plan of U.S.
Trust Corporation or any similar pension or executive benefit
plan of the Corporation or any of its affiliated companies (all
such plans are hereinafter collectively referred to as the
"Benefit Equalization Plan") to the extent that any such amount
is attributable to the Retirement Plan, and (iii) from any
qualified defined benefit plan in which you participated during
any previous employment (the "Prior Plans"). For purposes of
determining the amount of the reduction required under the
preceding sentence, if any amount described in clause (i), (ii)
or (iii) thereof, is not in fact payable in the same form as
specified in Option 4 of Paragraph D of Article VIII (or any
successor provision) of the Retirement Plan, such amount shall be
converted into an amount that is of Equivalent Actuarial Value
(as defined in the Retirement Plan) to such amount if such amount
were payable in the form specified in Option 4.
(2) Notwithstanding the method of calculation
described above, you may elect, with the consent of the
Compensation and Benefit Committee of the Board of Directors (the
"Committee"), to have such amount paid on an actuarially
equivalent basis under any of the optional forms of Pension then
available under Paragraph D of Article VIII (or any successor
provision) of the Retirement Plan, using the same factors as are
prescribed under the Retirement Plan for determining actuarial
equivalence. Any such election must be made at least two years
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<PAGE>
prior to your Normal Retirement Date.
(3) Except as provided in Paragraph 5 below, the
Supplemental Pension shall not be payable to you prior to your
Normal Retirement Date or, if later, the effective date of your
termination of employment with the Corporation or any of its
affiliated companies.
(4) Notwithstanding any other provision of the
Agreement, no Supplemental Pension shall be payable hereunder
except as provided in Paragraphs 5 and 6 below if prior to your
Normal Retirement Date your employment with the Corporation or
any of its affiliated companies is terminated for any reason
other than disability.
(5) In the event of your death prior to the
commencement of the Supplemental Pension, while you are employed
by the Corporation or any of its affiliated companies and a
Member of the Retirement Plan, there shall be paid to your
surviving spouse (if any) an amount equal to (A) the Spouse's
Preretirement Survivorship Pension which would have been paid to
your surviving spouse, based on your Maximum Units of Service, if
you (i) had satisfied the Retirement Plan's requirements for
payment of a Spouse's Preretirement Survivorship Pension, (ii)
had been a Member of the Retirement Plan for an uninterrupted
period beginning on the Starting Date and ending on the date of
your death or, if your date of death is on or after the date of a
"change in control," ending on the date which would have been
your Normal Retirement Date if you had not died and had remained
in the employ of the Corporation or any of its affiliated
companies until your Normal Retirement Date, and (iii) had not
waived such coverage, reduced (but not below zero) by (B) the sum
of any amounts actually payable to your surviving spouse under
(i) the Retirement Plan, (ii) the Benefit Equalization Plan and
(iii) the Prior Plans, or, if greater, by (C) the sum of any
amounts which would have been payable under the plans referred to
in clause (B) if you had not waived any preretirement survivor
benefit under such plans and, with regard to the Prior Plans, you
had elected a 50 percent joint and survivor annuity. The amount
so payable to your surviving spouse under this Paragraph 5 shall
be paid to her in the same form as the Spouse's Preretirement
Survivorship Pension is payable to her under the Retirement Plan,
with payments commencing at the earliest date as of which she
could elect under the Retirement Plan to receive the Spouse's
Preretirement Survivorship Pension, whether or not she makes any
such election. If any amount payable to your surviving spouse
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<PAGE>
under any plan referred to in clause (B) hereof is to be paid in
a form, or if payment of such amount is to commence at a date,
other than the form or commencement date applicable to the
payments to be made to your surviving spouse under this Paragraph
5, the reduction required under clause (B) or clause (C) hereof
with respect to the amount so payable shall be determined by
converting such amount to an amount that is of Equivalent
Actuarial Value to the amount that would be payable to your
surviving spouse under such plan if payment thereof were to be
made in the same form, and were to commence as of the same date,
as the form and commencement date specified herein for the
payments that are to be made to your surviving spouse pursuant to
this Paragraph 5.
(6) In the event of your "involuntary termination"
following a "change in control", the Supplemental Pension benefit
provided for you hereunder shall be paid to you in a single cash
lump sum, within 30 days after the date of your "involuntary
termination". The amount so payable to you shall be equal to the
single lump sum amount that is of Equivalent Actuarial Value to
the Supplemental Pension that would have been payable to you at
your Normal Retirement Date under Paragraph (1) above if you had
remained in the employ of the Corporation or any of its
affiliated companies through your Normal Retirement Date at an
annual rate of Compensation equal to the annual rate of your
Compensation in effect immediately prior to your "involuntary
termination" or, if your "involuntary termination" occurs
following a reduction of your salary under Paragraph (7)(ii)
below, the annual rate of your Compensation in effect immediately
prior to such reduction of your salary. For this purpose, the
single lump sum amount that is of Equivalent Actuarial Value to
your Supplemental Pension shall be determined using the
conversion factors that were in effect under the Retirement Plan
on July 24, 1990. Notwithstanding the foregoing, the amount so
payable to you under this Paragraph (6) shall be subject to
reduction as required under the "excess Parachute payment
cutback" provisions of Section 7(c) of the 1990 Change in Control
and Severance Policy for Top Tier Officers of United States Trust
Company of New York and Affiliated Companies.
(7) The term "involuntary termination" as used in the
Agreement means the termination of your employment with the
Corporation or any of its affiliated companies (i) by the
Corporation or any of its affiliated companies or (ii) by you
after any reduction in your salary, any change in location of
your place of employment to a location outside the Borough of
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<PAGE>
Manhattan without your consent, a material decrease in your
responsibilities with respect to the business of the Corporation
or any of its affiliated companies, or any other material adverse
change in the conditions of your employment by the Corporation or
any of its affiliated companies.
(8) The term "change in control" as used in the
Agreement means that:
(A) 20% or more of the common shares of the
Corporation has been acquired by any person (as defined by
Section 3 (a)(9) of the Securities Exchange Act of 1934) other
than directly from the Corporation;
(B) there has been a merger or equivalent combination
after which 49% or more of the voting shares of the surviving
corporation is held by persons other than former shareholders of
the Corporation; or
(C) 20% or more of the directors elected by
shareholders to the Board of Directors of the Corporation are
persons who were not nominated in the most recent proxy statement
of the Corporation.
(9) Notwithstanding any other provision of the
Agreement, no amounts shall become payable pursuant to Paragraph
6 above to the extent that the Board of Directors otherwise
directs by resolution adopted prior to the change in control, or
not later than 45 days after the change in control (if the
percentage of common shares acquired or directors appointed under
(A) or (C) of the definition of change in control shall be at
least 20% but less than 25%). Any resolution of the Board of
Directors adopted in accordance with the provisions of this
Paragraph directing that such amounts not become payable may be
rescinded or countermanded at any time with or without
retroactive effect. Notwithstanding the foregoing, any resolution
of the Board of Directors directing that amounts otherwise
payable under Paragraph 6 above shall not become payable, and any
resolution of the Board of Directors rescinding or countermanding
any such resolution, shall be given effect for purposes of this
Agreement only if, at the time the Board of Directors adopts such
resolution or rescinding resolution, it also adopts, or has
previously adopted, a similar resolution with respect to the
Change in Control Benefits payable to participants under each
other Change in Control Plan maintained by the Corporation or any
of its affiliated companies. For this purpose, the terms "Change
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<PAGE>
in Control Benefits" and "Change in Control Plans" shall have the
same meaning as assigned to such terms under the 1990 Change in
Control and Severance Policy for Top Tier Officers of United
States Trust Company of New York and Affiliated Companies.
(10) In the event of a change in control, all powers
of the Committee under the Agreement shall thereafter be
exercised solely by the Committee as it was constituted
immediately prior to the change in control.
(11) The determination of the amount of the
Supplemental Pension payable and of the amount of all benefit
offsets described herein shall be made by the Committee in its
sole discretion and any determination or interpretation of the
Committee shall be final, binding and conclusive on all persons.
You shall furnish, or take whatever steps are necessary to permit
you to furnish, the Committee with all information that is
reasonably requested by it to enable it to make such
determination. Except as otherwise provided in Paragraph 6, if,
notwithstanding any election that you might have made, payment of
any benefit offsets described in Paragraph 1 could not have
commenced on the date payment of your Supplemental Pension under
Paragraph 1 is to commence, such benefit offsets shall be taken
into account on the earliest date on which payment of such
benefit offsets could have commenced.
(12) All Supplemental Pension payments shall be paid
in cash from the general funds of the Corporation, and no special
or separate fund shall be established, and no segregation of
assets shall be made, to assure payment of such Supplemental
Pension. You shall have the status of a general unsecured
creditor of the Corporation with respect to your right to receive
any payment under the Agreement. The Agreement shall constitute
a mere promise by the Corporation to make payments in the future
of the benefits provided for herein. It is intended that the
arrangements reflected in this Agreement be treated as unfunded
for tax purposes, as well as for purposes of Title I of ERISA.
Nothing in the Agreement shall preclude the Corporation from
establishing and funding a "rabbi trust" to provide for the
payment of benefits under the Agreement.
(13) No Supplemental Pension payable under the
Agreement shall be deemed salary or other compensation to you for
the purpose of computing benefits to which you may be entitled
under the Retirement Plan, the Employees' Profit-Sharing Plan or
any other plan or arrangement maintained by the Corporation or
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<PAGE>
any of its affiliated companies for the benefit of its employees.
(14) The Agreement shall be binding upon and inure to
the benefit of the Corporation and its successors and assigns and
you, your designees and your estate. Your rights to payments
under the Agreement shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
incumbrance, attachment, or garnishment by your creditors or
those of your Beneficiary.
(15) The Agreement is not an employment agreement and
nothing contained herein shall give you any right or claim to be
retained in the employ of the Corporation or any of its
affiliated companies, or shall obligate the Corporation or any of
its affiliated companies to continue your employment.
(16) The Corporation may withhold from any Supple-
mental Pension or other Payments otherwise required to be made
under the Agreement all Federal, State, City or other taxes as
shall be required pursuant to any law or governmental regulation
or ruling.
(17) The Agreement supersedes and replaces all prior
agreements between you and the Corporation and any of its
affiliated companies with respect to the subject matter hereof.
I have been authorized to executive the Agreement on behalf of
the Corporation. Please acknowledge your agreement to be bound
by the terms and conditions of the Agreement by signing the
enclosed copy of the Agreement and returning it to me.
__________________________________
Philip L. Smith, Chairman
Compensation and Benefits Committee
Acknowledged and Agreed to the
________ day of _____________ 1994
____________________________________
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<PAGE>
[letterhead of U.S. Trust Corporation]
January 25, 1994
Mr. Jeffrey S. Maurer
10 Clover Drive
Great Neck, NY 11021
Dear Jeff:
The purpose of this letter is to amend and restate the letter
agreement between you and United States Trust Company of New York
(the "Trust Company") dated May 26, 1992 (the "Prior Agreement"),
which sets forth the terms and conditions under which you were to
be provided a supplemental retirement benefit (the "Supplemental
Pension") to reflect U.S. Trust Corporation's (the "Corpor-
ation's") assumption of, and becoming solely responsible for, all
liabilities and obligations of the Trust Company with respect to
the Supplemental Pension and changes in certain other provisions
of the Prior Agreement.
Upon your acknowledgment of and agreement to this Amendment and
Restatement as provided on the last page hereof, this letter
agreement (the "Agreement") shall supersede and replace, in its
entirety, the prior agreement, and the Supplemental Pension shall
be provided on the terms and conditions set forth below. All
capitalized terms not otherwise defined herein shall have the
same meaning as is given to them in the Employees' Retirement
Plan of United States Trust Company of New York and Affiliated
Companies (the "Retirement Plan").
(1) The Supplemental Pension shall be equal to the
Pension that you would have been entitled to receive under the
Retirement Plan upon retirement on your Normal Retirement Date
calculated as if:
(A) you had been a Member of the Retirement Plan for
an uninterrupted period beginning on June 8, 1970 (the "Starting
Date"), and ending on August 1, 2012 (your "Normal Retirement
Date");
(B) your Credited Service in fact equalled the maximum
number of units of Credited Service that could be credited for
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<PAGE>
such uninterrupted period under the Retirement plan as now in
effect or, if greater, as in effect on the date of your
termination ("Maximum Units of Service");
(C) the provisions of Sections 401 (a)(17) and 415 of
the Internal Revenue Code of 1986, as amended (the "Code"), and
the Maximum Pension Limitations of Paragraph G of Article VII (or
any successor provision) of the Retirement Plan were
inapplicable; and
(D) you had elected, with the consent of your spouse
to the extent required by the terms of the Retirement Plan or
applicable law, the normal form of Pension payable to a retired
Member only during his lifetime pursuant to Option 4 of Paragraph
D of Article VIII (or any successor provision) of the Retirement
Plan; such amount to be reduced (but not below zero) by the sum
of the annual amounts that you are in fact entitled to receive on
your retirement on your Normal Retirement Date (i) from the
Retirement Plan, (ii) from the Benefit Equalization Plan of U.S.
Trust Corporation or any similar pension or executive benefit
plan of the Corporation or any of its affiliated companies (all
such plans are hereinafter collectively referred to as the
"Benefit Equalization Plan") to the extent that any such amount
is attributable to the Retirement Plan, and (iii) from any
qualified defined benefit plan in which you participated during
any previous employment (the "Prior Plans"). For purposes of
determining the amount of the reduction required under the
preceding sentence, if any amount described in clause (i), (ii)
or (iii) thereof, is not in fact payable in the same form as
specified in Option 4 of Paragraph D of Article VIII (or any
successor provision) of the Retirement Plan, such amount shall be
converted into an amount that is of Equivalent Actuarial Value
(as defined in the Retirement Plan) to such amount if such amount
were payable in the form specified in Option 4.
(2) Notwithstanding the method of calculation
described above, you may elect, with the consent of the
Compensation and Benefit Committee of the Board of Directors (the
"Committee"), to have such amount paid on an actuarially
equivalent basis under any of the optional forms of Pension then
available under Paragraph D of Article VIII (or any successor
provision) of the Retirement Plan, using the same factors as are
prescribed under the Retirement Plan for determining actuarial
equivalence. Any such election must be made at least two years
prior to your Normal Retirement Date.
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<PAGE>
(3) Except as provided in Paragraph 5 below, the
Supplemental Pension shall not be payable to you prior to your
Normal Retirement Date or, if later, the effective date of your
termination of employment with the Corporation or any of its
affiliated companies.
(4) Notwithstanding any other provision of the
Agreement, no Supplemental Pension shall be payable hereunder
except as provided in Paragraphs 5 and 6 below if prior to your
Normal Retirement Date your employment with the Corporation or
any of its affiliated companies is terminated for any reason
other than disability.
(5) In the event of your death prior to the
commencement of the Supplemental Pension, while you are employed
by the Corporation or any of its affiliated companies and a
Member of the Retirement Plan, there shall be paid to your
surviving spouse (if any) an amount equal to (A) the Spouse's
Preretirement Survivorship Pension which would have been paid to
your surviving spouse, based on your Maximum Units of Service, if
you (i) had satisfied the Retirement Plan's requirements for
payment of a Spouse's Preretirement Survivorship Pension, (ii)
had been a Member of the Retirement Plan for an uninterrupted
period beginning on the Starting Date and ending on the date of
your death or, if your date of death is on or after the date of a
"change in control," ending on the date which would have been
your Normal Retirement Date if you had not died and had remained
in the employ of the Corporation or any of its affiliated
companies until your Normal Retirement Date, and (iii) had not
waived such coverage, reduced (but not below zero) by (B) the sum
of any amounts actually payable to your surviving spouse under
(i) the Retirement Plan, (ii) the Benefit Equalization Plan and
(iii) the Prior Plans, or, if greater, by (C) the sum of any
amounts which would have been payable under the plans referred to
in clause (B) if you had not waived any preretirement survivor
benefit under such plans and, with regard to the Prior Plans, you
had elected a 50 percent joint and survivor annuity. The amount
so payable to your surviving spouse under this Paragraph 5 shall
be paid to her in the same form as the Spouse's Preretirement
Survivorship Pension is payable to her under the Retirement Plan,
with payments commencing at the earliest date as of which she
could elect under the Retirement Plan to receive the Spouse's
Preretirement Survivorship Pension, whether or not she makes any
such election. If any amount payable to your surviving spouse
under any plan referred to in clause (B) hereof is to be paid in
a form, or if payment of such amount is to commence at a date,
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other than the form or commencement date applicable to the
payments to be made to your surviving spouse under this Paragraph
5, the reduction required under clause (B) or clause (C) hereof
with respect to the amount so payable shall be determined by
converting such amount to an amount that is of Equivalent
Actuarial Value to the amount that would be payable to your
surviving spouse under such plan if payment thereof were to be
made in the same form, and were to commence as of the same date,
as the form and commencement date specified herein for the
payments that are to be made to your surviving spouse pursuant to
this Paragraph 5.
(6) In the event of your "involuntary termination"
following a "change in control", the Supplemental Pension benefit
provided for you hereunder shall be paid to you in a single cash
lump sum, within 30 days after the date of your "involuntary
termination". The amount so payable to you shall be equal to the
single lump sum amount that is of Equivalent Actuarial Value to
the Supplemental Pension that would have been payable to you at
your Normal Retirement Date under Paragraph (1) above if you had
remained in the employ of the Corporation or any of its
affiliated companies through your Normal Retirement Date at an
annual rate of Compensation equal to the annual rate of your
Compensation in effect immediately prior to your "involuntary
termination" or, if your "involuntary termination" occurs
following a reduction of your salary under Paragraph (7)(ii)
below, the annual rate of your Compensation in effect immediately
prior to such reduction of your salary. For this purpose, the
single lump sum amount that is of Equivalent Actuarial Value to
your Supplemental Pension shall be determined using the
conversion factors that were in effect under the Retirement Plan
on July 24, 1990. Notwithstanding the foregoing, the amount so
payable to you under this Paragraph (6) shall be subject to
reduction as required under the "excess Parachute payment
cutback" provisions of Section 7(c) of the 1990 Change in Control
and Severance Policy for Top Tier Officers of United States Trust
Company of New York and Affiliated Companies.
(7) The term "involuntary termination" as used in the
Agreement means the termination of your employment with the
Corporation or any of its affiliated companies (i) by the
Corporation or any of its affiliated companies or (ii) by you
after any reduction in your salary, any change in location of
your place of employment to a location outside the Borough of
Manhattan without your consent, a material decrease in your
responsibilities with respect to the business of the Corporation
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<PAGE>
or any of its affiliated companies, or any other material adverse
change in the conditions of your employment by the Corporation or
any of its affiliated companies.
(8) The term "change in control" as used in the
Agreement means that:
(A) 20% or more of the common shares of the
Corporation has been acquired by any person (as defined by
Section 3 (a)(9) of the Securities Exchange Act of 1934) other
than directly from the Corporation;
(B) there has been a merger or equivalent combination
after which 49% or more of the voting shares of the surviving
corporation is held by persons other than former shareholders of
the Corporation; or
(C) 20% or more of the directors elected by
shareholders to the Board of Directors of the Corporation are
persons who were not nominated in the most recent proxy statement
of the Corporation.
(9) Notwithstanding any other provision of the
Agreement, no amounts shall become payable pursuant to Paragraph
6 above to the extent that the Board of Directors otherwise
directs by resolution adopted prior to the change in control, or
not later than 45 days after the change in control (if the
percentage of common shares acquired or directors appointed under
(A) or (C) of the definition of change in control shall be at
least 20% but less than 25%). Any resolution of the Board of
Directors adopted in accordance with the provisions of this
Paragraph directing that such amounts not become payable may be
rescinded or countermanded at any time with or without
retroactive effect. Notwithstanding the foregoing, any resolution
of the Board of Directors directing that amounts otherwise
payable under Paragraph 6 above shall not become payable, and any
resolution of the Board of Directors rescinding or countermanding
any such resolution, shall be given effect for purposes of this
Agreement only if, at the time the Board of Directors adopts such
resolution or rescinding resolution, it also adopts, or has
previously adopted, a similar resolution with respect to the
Change in Control Benefits payable to participants under each
other Change in Control Plan maintained by the Corporation or any
of its affiliated companies. For this purpose, the terms "Change
in Control Benefits" and "Change in Control Plans" shall have the
same meaning as assigned to such terms under the 1990 Change in
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Control and Severance Policy for Top Tier Officers of United
States Trust Company of New York and Affiliated Companies.
(10) In the event of a change in control, all powers
of the Committee under the Agreement shall thereafter be
exercised solely by the Committee as it was constituted
immediately prior to the change in control.
(11) The determination of the amount of the
Supplemental Pension payable and of the amount of all benefit
offsets described herein shall be made by the Committee in its
sole discretion and any determination or interpretation of the
Committee shall be final, binding and conclusive on all persons.
You shall furnish, or take whatever steps are necessary to permit
you to furnish, the Committee with all information that is
reasonably requested by it to enable it to make such
determination. Except as otherwise provided in Paragraph 6, if,
notwithstanding any election that you might have made, payment of
any benefit offsets described in Paragraph 1 could not have
commenced on the date payment of your Supplemental Pension under
Paragraph 1 is to commence, such benefit offsets shall be taken
into account on the earliest date on which payment of such
benefit offsets could have commenced.
(12) All Supplemental Pension payments shall be paid
in cash from the general funds of the Corporation, and no special
or separate fund shall be established, and no segregation of
assets shall be made, to assure payment of such Supplemental
Pension. You shall have the status of a general unsecured
creditor of the Corporation with respect to your right to receive
any payment under the Agreement. The Agreement shall constitute
a mere promise by the Corporation to make payments in the future
of the benefits provided for herein. It is intended that the
arrangements reflected in this Agreement be treated as unfunded
for tax purposes, as well as for purposes of Title I of ERISA.
Nothing in the Agreement shall preclude the Corporation from
establishing and funding a "rabbi trust" to provide for the
payment of benefits under the Agreement.
(13) No Supplemental Pension payable under the
Agreement shall be deemed salary or other compensation to you for
the purpose of computing benefits to which you may be entitled
under the Retirement Plan, the Employees' Profit-Sharing Plan or
any other plan or arrangement maintained by the Corporation or
any of its affiliated companies for the benefit of its employees.
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<PAGE>
(14) The Agreement shall be binding upon and inure to
the benefit of the Corporation and its successors and assigns and
you, your designees and your estate. Your rights to payments
under the Agreement shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
incumbrance, attachment, or garnishment by your creditors or
those of your Beneficiary.
(15) The Agreement is not an employment agreement and
nothing contained herein shall give you any right or claim to be
retained in the employ of the Corporation or any of its
affiliated companies, or shall obligate the Corporation or any of
its affiliated companies to continue your employment.
(16) The Corporation may withhold from any Supple-
mental Pension or other Payments otherwise required to be made
under the Agreement all Federal, State, City or other taxes as
shall be required pursuant to any law or governmental regulation
or ruling.
(17) The Agreement supersedes and replaces all prior
agreements between you and the Corporation and any of its
affiliated companies with respect to the subject matter hereof.
I have been authorized to executive the Agreement on behalf of
the Corporation. Please acknowledge your agreement to be bound
by the terms and conditions of the Agreement by signing the
enclosed copy of the Agreement and returning it to me.
__________________________________
Philip L. Smith, Chairman
Compensation and Benefits Committee
Acknowledged and Agreed to the
________ day of _____________ 1994
____________________________________
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[letterhead of U.S. Trust Corporation]
January 25, 1994
Mr. Donald M. Roberts
#10 Gracie Square
New York, NY 10028
Dear Don:
The purpose of this letter is to amend and restate the letter
agreement between you and United States Trust Company of New York
(the "Trust Company") dated May 26, 1992 (the "Prior Agreement"),
which sets forth the terms and conditions under which you were to
be provided a supplemental retirement benefit (the "Supplemental
Pension") to reflect U.S. Trust Corporation's (the "Corpor-
ation's") assumption of, and becoming solely responsible for, all
liabilities and obligations of the Trust Company with respect to
the Supplemental Pension and changes in certain other provisions
of the Prior Agreement.
Upon your acknowledgment of and agreement to this Amendment and
Restatement as provided on the last page hereof, this letter
agreement (the "Agreement") shall supersede and replace, in its
entirety, the prior agreement, and the Supplemental Pension shall
be provided on the terms and conditions set forth below. All
capitalized terms not otherwise defined herein shall have the
same meaning as is given to them in the Employees' Retirement
Plan of United States Trust Company of New York and Affiliated
Companies (the "Retirement Plan").
(1) The Supplemental Pension shall be equal to the
Pension that you would have been entitled to receive under the
Retirement Plan upon retirement on your Normal Retirement Date
calculated as if:
(A) you had been a Member of the Retirement Plan for
an uninterrupted period beginning on September 1, 1975 (the
"Starting Date"), and ending on September 1, 2000 (your "Normal
Retirement Date");
(B) your Credited Service in fact equalled 25 units;
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<PAGE>
(C) the provisions of Sections 401 (a)(17) and 415 of
the Internal Revenue Code of 1986, as amended (the "Code"), and
the Maximum Pension Limitations of Paragraph G of Article VII (or
any successor provision) of the Retirement Plan were
inapplicable; and
(D) you had elected, with the consent of your spouse
to the extent required by the terms of the Retirement Plan or
applicable law, the normal form of Pension payable to a retired
Member only during his lifetime pursuant to Option 4 of Paragraph
D of Article VIII (or any successor provision) of the Retirement
Plan; such amount to be reduced (but not below zero) by the sum
of the annual amounts that you are in fact entitled to receive on
your retirement on your Normal Retirement Date (i) from the
Retirement Plan, (ii) from the Benefit Equalization Plan of U.S.
Trust Corporation or any similar pension or executive benefit
plan of the Corporation or any of its affiliated companies (all
such plans are hereinafter collectively referred to as the
"Benefit Equalization Plan") to the extent that any such amount
is attributable to the Retirement Plan, and (iii) from any
qualified defined benefit plan in which you participated during
any previous employment (the "Prior Plans"). For purposes of
determining the amount of the reduction required under the
preceding sentence, if any amount described in clause (i), (ii)
or (iii) thereof, is not in fact payable in the same form as
specified in Option 4 of Paragraph D of Article VIII (or any
successor provision) of the Retirement Plan, such amount shall be
converted into an amount that is of Equivalent Actuarial Value
(as defined in the Retirement Plan) to such amount if such amount
were payable in the form specified in Option 4.
(2) Notwithstanding the method of calculation
described above, you may elect, with the consent of the
Compensation and Benefit Committee of the Board of Directors (the
"Committee"), to have such amount paid on an actuarially
equivalent basis under any of the optional forms of Pension then
available under Paragraph D of Article VIII (or any successor
provision) of the Retirement Plan, using the same factors as are
prescribed under the Retirement Plan for determining actuarial
equivalence. Any such election must be made at least two years
prior to your Normal Retirement Date.
(3) Except as provided in Paragraph 5 below, the
Supplemental Pension shall not be payable to you prior to your
Normal Retirement Date or, if later, the effective date of your
termination of employment with the Corporation or any of its
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affiliated companies.
(4) Notwithstanding any other provision of the
Agreement, no Supplemental Pension shall be payable hereunder
except as provided in Paragraphs 5 and 6 below if prior to your
Normal Retirement Date your employment with the Corporation or
any of its affiliated companies is terminated for any reason
other than disability.
(5) In the event of your death prior to the
commencement of the Supplemental Pension, while you are employed
by the Corporation or any of its affiliated companies and a
Member of the Retirement Plan, there shall be paid to your
surviving spouse (if any) an amount equal to (A) the Spouse's
Preretirement Survivorship Pension which would have been paid to
your surviving spouse, based on 25 Units of Credited Service, if
you (i) had satisfied the Retirement Plan's requirements for
payment of a Spouse's Preretirement Survivorship Pension, (ii)
had been a Member of the Retirement Plan for an uninterrupted
period beginning on the Starting Date and ending on the date of
your death or, if your date of death is on or after the date of a
"change in control," ending on the date which would have been
your Normal Retirement Date if you had not died and had remained
in the employ of the Corporation or any of its affiliated
companies until your Normal Retirement Date, and (iii) had not
waived such coverage, reduced (but not below zero) by (B) the sum
of any amounts actually payable to your surviving spouse under
(i) the Retirement Plan, (ii) the Benefit Equalization Plan and
(iii) the Prior Plans, or, if greater, by (C) the sum of any
amounts which would have been payable under the plans referred to
in clause (B) if you had not waived any preretirement survivor
benefit under such plans and, with regard to the Prior Plans, you
had elected a 50 percent joint and survivor annuity. The amount
so payable to your surviving spouse under this Paragraph 5 shall
be paid to her in the same form as the Spouse's Preretirement
Survivorship Pension is payable to her under the Retirement Plan,
with payments commencing at the earliest date as of which she
could elect under the Retirement Plan to receive the Spouse's
Preretirement Survivorship Pension, whether or not she makes any
such election. If any amount payable to your surviving spouse
under any plan referred to in clause (B) hereof is to be paid in
a form, or if payment of such amount is to commence at a date,
other than the form or commencement date applicable to the
payments to be made to your surviving spouse under this Paragraph
5, the reduction required under clause (B) or clause (C) hereof
with respect to the amount so payable shall be determined by
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<PAGE>
converting such amount to an amount that is of Equivalent
Actuarial Value to the amount that would be payable to your
surviving spouse under such plan if payment thereof were to be
made in the same form, and were to commence as of the same date,
as the form and commencement date specified herein for the
payments that are to be made to your surviving spouse pursuant to
this Paragraph 5.
(6) In the event of your "involuntary termination"
following a "change in control", the Supplemental Pension benefit
provided for you hereunder shall be paid to you in a single cash
lump sum, within 30 days after the date of your "involuntary
termination". The amount so payable to you shall be equal to the
single lump sum amount that is of Equivalent Actuarial Value to
the Supplemental Pension that would have been payable to you at
your Normal Retirement Date under Paragraph (1) above if you had
remained in the employ of the Corporation or any of its
affiliated companies through your Normal Retirement Date at an
annual rate of Compensation equal to the annual rate of your
Compensation in effect immediately prior to your "involuntary
termination" or, if your "involuntary termination" occurs
following a reduction of your salary under Paragraph (7)(ii)
below, the annual rate of your Compensation in effect immediately
prior to such reduction of your salary. For this purpose, the
single lump sum amount that is of Equivalent Actuarial Value to
your Supplemental Pension shall be determined using the
conversion factors that were in effect under the Retirement Plan
on July 24, 1990. Notwithstanding the foregoing, the amount so
payable to you under this Paragraph (6) shall be subject to
reduction as required under the "excess Parachute payment
cutback" provisions of Section 7(c) of the 1990 Change in Control
and Severance Policy for Top Tier Officers of United States Trust
Company of New York and Affiliated Companies.
(7) The term "involuntary termination" as used in the
Agreement means the termination of your employment with the
Corporation or any of its affiliated companies (i) by the
Corporation or any of its affiliated companies or (ii) by you
after any reduction in your salary, any change in location of
your place of employment to a location outside the Borough of
Manhattan without your consent, a material decrease in your
responsibilities with respect to the business of the Corporation
or any of its affiliated companies, or any other material adverse
change in the conditions of your employment by the Corporation or
any of its affiliated companies.
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(8) The term "change in control" as used in the
Agreement means that:
(A) 20% or more of the common shares of the
Corporation has been acquired by any person (as defined by
Section 3 (a)(9) of the Securities Exchange Act of 1934) other
than directly from the Corporation;
(B) there has been a merger or equivalent combination
after which 49% or more of the voting shares of the surviving
corporation is held by persons other than former shareholders of
the Corporation; or
(C) 20% or more of the directors elected by
shareholders to the Board of Directors of the Corporation are
persons who were not nominated in the most recent proxy statement
of the Corporation.
(9) Notwithstanding any other provision of the
Agreement, no amounts shall become payable pursuant to Paragraph
6 above to the extent that the Board of Directors otherwise
directs by resolution adopted prior to the change in control, or
not later than 45 days after the change in control (if the
percentage of common shares acquired or directors appointed under
(A) or (C) of the definition of change in control shall be at
least 20% but less than 25%). Any resolution of the Board of
Directors adopted in accordance with the provisions of this
Paragraph directing that such amounts not become payable may be
rescinded or countermanded at any time with or without
retroactive effect. Notwithstanding the foregoing, any resolution
of the Board of Directors directing that amounts otherwise
payable under Paragraph 6 above shall not become payable, and any
resolution of the Board of Directors rescinding or countermanding
any such resolution, shall be given effect for purposes of this
Agreement only if, at the time the Board of Directors adopts such
resolution or rescinding resolution, it also adopts, or has
previously adopted, a similar resolution with respect to the
Change in Control Benefits payable to participants under each
other Change in Control Plan maintained by the Corporation or any
of its affiliated companies. For this purpose, the terms "Change
in Control Benefits" and "Change in Control Plans" shall have the
same meaning as assigned to such terms under the 1990 Change in
Control and Severance Policy for Top Tier Officers of United
States Trust Company of New York and Affiliated Companies.
(10) In the event of a change in control, all powers
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of the Committee under the Agreement shall thereafter be
exercised solely by the Committee as it was constituted
immediately prior to the change in control.
(11) The determination of the amount of the
Supplemental Pension payable and of the amount of all benefit
offsets described herein shall be made by the Committee in its
sole discretion and any determination or interpretation of the
Committee shall be final, binding and conclusive on all persons.
You shall furnish, or take whatever steps are necessary to permit
you to furnish, the Committee with all information that is
reasonably requested by it to enable it to make such
determination. Except as otherwise provided in Paragraph 6, if,
notwithstanding any election that you might have made, payment of
any benefit offsets described in Paragraph 1 could not have
commenced on the date payment of your Supplemental Pension under
Paragraph 1 is to commence, such benefit offsets shall be taken
into account on the earliest date on which payment of such
benefit offsets could have commenced.
(12) All Supplemental Pension payments shall be paid
in cash from the general funds of the Corporation, and no special
or separate fund shall be established, and no segregation of
assets shall be made, to assure payment of such Supplemental
Pension. You shall have the status of a general unsecured
creditor of the Corporation with respect to your right to receive
any payment under the Agreement. The Agreement shall constitute
a mere promise by the Corporation to make payments in the future
of the benefits provided for herein. It is intended that the
arrangements reflected in this Agreement be treated as unfunded
for tax purposes, as well as for purposes of Title I of ERISA.
Nothing in the Agreement shall preclude the Corporation from
establishing and funding a "rabbi trust" to provide for the
payment of benefits under the Agreement.
(13) No Supplemental Pension payable under the
Agreement shall be deemed salary or other compensation to you for
the purpose of computing benefits to which you may be entitled
under the Retirement Plan, the Employees' Profit-Sharing Plan or
any other plan or arrangement maintained by the Corporation or
any of its affiliated companies for the benefit of its employees.
(14) The Agreement shall be binding upon and inure to
the benefit of the Corporation and its successors and assigns and
you, your designees and your estate. Your rights to payments
under the Agreement shall not be subject in any manner to
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<PAGE>
anticipation, alienation, sale, transfer, assignment, pledge,
incumbrance, attachment, or garnishment by your creditors or
those of your Beneficiary.
(15) The Agreement is not an employment agreement and
nothing contained herein shall give you any right or claim to be
retained in the employ of the Corporation or any of its
affiliated companies, or shall obligate the Corporation or any of
its affiliated companies to continue your employment.
(16) The Corporation may withhold from any Supple-
mental Pension or other Payments otherwise required to be made
under the Agreement all Federal, State, City or other taxes as
shall be required pursuant to any law or governmental regulation
or ruling.
(17) The Agreement supersedes and replaces all prior
agreements between you and the Corporation and any of its
affiliated companies with respect to the subject matter hereof.
I have been authorized to executive the Agreement on behalf of
the Corporation. Please acknowledge your agreement to be bound
by the terms and conditions of the Agreement by signing the
enclosed copy of the Agreement and returning it to me.
__________________________________
Philip L. Smith, Chairman
Compensation and Benefits Committee
Acknowledged and Agreed to the
________ day of _____________ 1994
____________________________________
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<PAGE>
[letterhead of U.S. Trust Corporation]
January 25, 1994
Mr. Frederick B. Taylor
One Westerleigh Court
Purchase, NY 10577
Dear Fred:
The purpose of this letter is to amend and restate the letter
agreement between you and United States Trust Company of New York
(the "Trust Company") dated May 26, 1992 (the "Prior Agreement"),
which sets forth the terms and conditions under which you were to
be provided a supplemental retirement benefit (the "Supplemental
Pension") to reflect U.S. Trust Corporation's (the "Corpor-
ation's") assumption of, and becoming solely responsible for, all
liabilities and obligations of the Trust Company with respect to
the Supplemental Pension and changes in certain other provisions
of the Prior Agreement.
Upon your acknowledgment of and agreement to this Amendment and
Restatement as provided on the last page hereof, this letter
agreement (the "Agreement") shall supersede and replace, in its
entirety, the prior agreement, and the Supplemental Pension shall
be provided on the terms and conditions set forth below. All
capitalized terms not otherwise defined herein shall have the
same meaning as is given to them in the Employees' Retirement
Plan of United States Trust Company of New York and Affiliated
Companies (the "Retirement Plan").
(1) The Supplemental Pension shall be equal to the
Pension that you would have been entitled to receive under the
Retirement Plan upon retirement on your Normal Retirement Date
calculated as if:
(A) you had been a Member of the Retirement Plan for
an uninterrupted period beginning on June 27, 1966 (the "Starting
Date"), and ending on September 1, 2006 (your "Normal Retirement
Date");
(B) your Credited Service in fact equalled the maximum
number of units of Credited Service that could be credited for
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<PAGE>
such uninterrupted period under the Retirement plan as now in
effect or, if greater, as in effect on the date of your
termination ("Maximum Units of Service");
(C) the provisions of Sections 401 (a)(17) and 415 of
the Internal Revenue Code of 1986, as amended (the "Code"), and
the Maximum Pension Limitations of Paragraph G of Article VII (or
any successor provision) of the Retirement Plan were
inapplicable; and
(D) you had elected, with the consent of your spouse
to the extent required by the terms of the Retirement Plan or
applicable law, the normal form of Pension payable to a retired
Member only during his lifetime pursuant to Option 4 of Paragraph
D of Article VIII (or any successor provision) of the Retirement
Plan; such amount to be reduced (but not below zero) by the sum
of the annual amounts that you are in fact entitled to receive on
your retirement on your Normal Retirement Date (i) from the
Retirement Plan, (ii) from the Benefit Equalization Plan of U.S.
Trust Corporation or any similar pension or executive benefit
plan of the Corporation or any of its affiliated companies (all
such plans are hereinafter collectively referred to as the
"Benefit Equalization Plan") to the extent that any such amount
is attributable to the Retirement Plan, and (iii) from any
qualified defined benefit plan in which you participated during
any previous employment (the "Prior Plans"). For purposes of
determining the amount of the reduction required under the
preceding sentence, if any amount described in clause (i), (ii)
or (iii) thereof, is not in fact payable in the same form as
specified in Option 4 of Paragraph D of Article VIII (or any
successor provision) of the Retirement Plan, such amount shall be
converted into an amount that is of Equivalent Actuarial Value
(as defined in the Retirement Plan) to such amount if such amount
were payable in the form specified in Option 4.
(2) Notwithstanding the method of calculation
described above, you may elect, with the consent of the
Compensation and Benefit Committee of the Board of Directors (the
"Committee"), to have such amount paid on an actuarially
equivalent basis under any of the optional forms of Pension then
available under Paragraph D of Article VIII (or any successor
provision) of the Retirement Plan, using the same factors as are
prescribed under the Retirement Plan for determining actuarial
equivalence. Any such election must be made at least two years
prior to your Normal Retirement Date.
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(3) Except as provided in Paragraph 5 below, the
Supplemental Pension shall not be payable to you prior to your
Normal Retirement Date or, if later, the effective date of your
termination of employment with the Corporation or any of its
affiliated companies.
(4) Notwithstanding any other provision of the
Agreement, no Supplemental Pension shall be payable hereunder
except as provided in Paragraphs 5 and 6 below if prior to your
Normal Retirement Date your employment with the Corporation or
any of its affiliated companies is terminated for any reason
other than disability.
(5) In the event of your death prior to the
commencement of the Supplemental Pension, while you are employed
by the Corporation or any of its affiliated companies and a
Member of the Retirement Plan, there shall be paid to your
surviving spouse (if any) an amount equal to (A) the Spouse's
Preretirement Survivorship Pension which would have been paid to
your surviving spouse, based on your Maximum Units of Service, if
you (i) had satisfied the Retirement Plan's requirements for
payment of a Spouse's Preretirement Survivorship Pension, (ii)
had been a Member of the Retirement Plan for an uninterrupted
period beginning on the Starting Date and ending on the date of
your death or, if your date of death is on or after the date of a
"change in control," ending on the date which would have been
your Normal Retirement Date if you had not died and had remained
in the employ of the Corporation or any of its affiliated
companies until your Normal Retirement Date, and (iii) had not
waived such coverage, reduced (but not below zero) by (B) the sum
of any amounts actually payable to your surviving spouse under
(i) the Retirement Plan, (ii) the Benefit Equalization Plan and
(iii) the Prior Plans, or, if greater, by (C) the sum of any
amounts which would have been payable under the plans referred to
in clause (B) if you had not waived any preretirement survivor
benefit under such plans and, with regard to the Prior Plans, you
had elected a 50 percent joint and survivor annuity. The amount
so payable to your surviving spouse under this Paragraph 5 shall
be paid to her in the same form as the Spouse's Preretirement
Survivorship Pension is payable to her under the Retirement Plan,
with payments commencing at the earliest date as of which she
could elect under the Retirement Plan to receive the Spouse's
Preretirement Survivorship Pension, whether or not she makes any
such election. If any amount payable to your surviving spouse
under any plan referred to in clause (B) hereof is to be paid in
a form, or if payment of such amount is to commence at a date,
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other than the form or commencement date applicable to the
payments to be made to your surviving spouse under this Paragraph
5, the reduction required under clause (B) or clause (C) hereof
with respect to the amount so payable shall be determined by
converting such amount to an amount that is of Equivalent
Actuarial Value to the amount that would be payable to your
surviving spouse under such plan if payment thereof were to be
made in the same form, and were to commence as of the same date,
as the form and commencement date specified herein for the
payments that are to be made to your surviving spouse pursuant to
this Paragraph 5.
(6) In the event of your "involuntary termination"
following a "change in control", the Supplemental Pension benefit
provided for you hereunder shall be paid to you in a single cash
lump sum, within 30 days after the date of your "involuntary
termination". The amount so payable to you shall be equal to the
single lump sum amount that is of Equivalent Actuarial Value to
the Supplemental Pension that would have been payable to you at
your Normal Retirement Date under Paragraph (1) above if you had
remained in the employ of the Corporation or any of its
affiliated companies through your Normal Retirement Date at an
annual rate of Compensation equal to the annual rate of your
Compensation in effect immediately prior to your "involuntary
termination" or, if your "involuntary termination" occurs
following a reduction of your salary under Paragraph (7)(ii)
below, the annual rate of your Compensation in effect immediately
prior to such reduction of your salary. For this purpose, the
single lump sum amount that is of Equivalent Actuarial Value to
your Supplemental Pension shall be determined using the
conversion factors that were in effect under the Retirement Plan
on July 24, 1990. Notwithstanding the foregoing, the amount so
payable to you under this Paragraph (6) shall be subject to
reduction as required under the "excess Parachute payment
cutback" provisions of Section 7(c) of the 1990 Change in Control
and Severance Policy for Top Tier Officers of United States Trust
Company of New York and Affiliated Companies.
(7) The term "involuntary termination" as used in the
Agreement means the termination of your employment with the
Corporation or any of its affiliated companies (i) by the
Corporation or any of its affiliated companies or (ii) by you
after any reduction in your salary, any change in location of
your place of employment to a location outside the Borough of
Manhattan without your consent, a material decrease in your
responsibilities with respect to the business of the Corporation
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<PAGE>
or any of its affiliated companies, or any other material adverse
change in the conditions of your employment by the Corporation or
any of its affiliated companies.
(8) The term "change in control" as used in the
Agreement means that:
(A) 20% or more of the common shares of the
Corporation has been acquired by any person (as defined by
Section 3 (a)(9) of the Securities Exchange Act of 1934) other
than directly from the Corporation;
(B) there has been a merger or equivalent combination
after which 49% or more of the voting shares of the surviving
corporation is held by persons other than former shareholders of
the Corporation; or
(C) 20% or more of the directors elected by
shareholders to the Board of Directors of the Corporation are
persons who were not nominated in the most recent proxy statement
of the Corporation.
(9) Notwithstanding any other provision of the
Agreement, no amounts shall become payable pursuant to Paragraph
6 above to the extent that the Board of Directors otherwise
directs by resolution adopted prior to the change in control, or
not later than 45 days after the change in control (if the
percentage of common shares acquired or directors appointed under
(A) or (C) of the definition of change in control shall be at
least 20% but less than 25%). Any resolution of the Board of
Directors adopted in accordance with the provisions of this
Paragraph directing that such amounts not become payable may be
rescinded or countermanded at any time with or without
retroactive effect. Notwithstanding the foregoing, any resolution
of the Board of Directors directing that amounts otherwise
payable under Paragraph 6 above shall not become payable, and any
resolution of the Board of Directors rescinding or countermanding
any such resolution, shall be given effect for purposes of this
Agreement only if, at the time the Board of Directors adopts such
resolution or rescinding resolution, it also adopts, or has
previously adopted, a similar resolution with respect to the
Change in Control Benefits payable to participants under each
other Change in Control Plan maintained by the Corporation or any
of its affiliated companies. For this purpose, the terms "Change
in Control Benefits" and "Change in Control Plans" shall have the
same meaning as assigned to such terms under the 1990 Change in
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Control and Severance Policy for Top Tier Officers of United
States Trust Company of New York and Affiliated Companies.
(10) In the event of a change in control, all powers
of the Committee under the Agreement shall thereafter be
exercised solely by the Committee as it was constituted
immediately prior to the change in control.
(11) The determination of the amount of the
Supplemental Pension payable and of the amount of all benefit
offsets described herein shall be made by the Committee in its
sole discretion and any determination or interpretation of the
Committee shall be final, binding and conclusive on all persons.
You shall furnish, or take whatever steps are necessary to permit
you to furnish, the Committee with all information that is
reasonably requested by it to enable it to make such
determination. Except as otherwise provided in Paragraph 6, if,
notwithstanding any election that you might have made, payment of
any benefit offsets described in Paragraph 1 could not have
commenced on the date payment of your Supplemental Pension under
Paragraph 1 is to commence, such benefit offsets shall be taken
into account on the earliest date on which payment of such
benefit offsets could have commenced.
(12) All Supplemental Pension payments shall be paid
in cash from the general funds of the Corporation, and no special
or separate fund shall be established, and no segregation of
assets shall be made, to assure payment of such Supplemental
Pension. You shall have the status of a general unsecured
creditor of the Corporation with respect to your right to receive
any payment under the Agreement. The Agreement shall constitute
a mere promise by the Corporation to make payments in the future
of the benefits provided for herein. It is intended that the
arrangements reflected in this Agreement be treated as unfunded
for tax purposes, as well as for purposes of Title I of ERISA.
Nothing in the Agreement shall preclude the Corporation from
establishing and funding a "rabbi trust" to provide for the
payment of benefits under the Agreement.
(13) No Supplemental Pension payable under the
Agreement shall be deemed salary or other compensation to you for
the purpose of computing benefits to which you may be entitled
under the Retirement Plan, the Employees' Profit-Sharing Plan or
any other plan or arrangement maintained by the Corporation or
any of its affiliated companies for the benefit of its employees.
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(14) The Agreement shall be binding upon and inure to
the benefit of the Corporation and its successors and assigns and
you, your designees and your estate. Your rights to payments
under the Agreement shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
incumbrance, attachment, or garnishment by your creditors or
those of your Beneficiary.
(15) The Agreement is not an employment agreement and
nothing contained herein shall give you any right or claim to be
retained in the employ of the Corporation or any of its
affiliated companies, or shall obligate the Corporation or any of
its affiliated companies to continue your employment.
(16) The Corporation may withhold from any Supple-
mental Pension or other Payments otherwise required to be made
under the Agreement all Federal, State, City or other taxes as
shall be required pursuant to any law or governmental regulation
or ruling.
(17) The Agreement supersedes and replaces all prior
agreements between you and the Corporation and any of its
affiliated companies with respect to the subject matter hereof.
I have been authorized to executive the Agreement on behalf of
the Corporation. Please acknowledge your agreement to be bound
by the terms and conditions of the Agreement by signing the
enclosed copy of the Agreement and returning it to me.
__________________________________
Philip L. Smith, Chairman
Compensation and Benefits Committee
Acknowledged and Agreed to the
________ day of _____________ 1994
____________________________________
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[letterhead of U.S. Trust Corporation]
January 25, 1994
Mr. Frederick S. Wonham
238 June Road
Stamford, Connecticut 06903
Dear Fred:
The purpose of this letter is to amend and restate the letter
agreement between you and United States Trust Company of New York
(the "Trust Company") dated May 26, 1992 (the "Prior Agreement"),
which sets forth the terms and conditions under which you were to
be provided a supplemental retirement benefit (the "Supplemental
Pension") to reflect U.S. Trust Corporation's (the "Corpor-
ation's") assumption of, and becoming solely responsible for, all
liabilities and obligations of the Trust Company with respect to
the Supplemental Pension and changes in certain other provisions
of the Prior Agreement.
Upon your acknowledgment of and agreement to this Amendment and
Restatement as provided on the last page hereof, this letter
agreement (the "Agreement") shall supersede and replace, in its
entirety, the prior agreement, and the Supplemental Pension shall
be provided on the terms and conditions set forth below. All
capitalized terms not otherwise defined herein shall have the
same meaning as is given to them in the Employees' Retirement
Plan of United States Trust Company of New York and Affiliated
Companies (the "Retirement Plan").
(1) The Supplemental Pension shall be equal to the
Pension that you would have been entitled to receive under the
Retirement Plan upon retirement on your Normal Retirement Date
calculated as if:
(A) you had been a Member of the Retirement Plan for
an uninterrupted period beginning on May 1, 1971 (the "Starting
Date"), and ending on May 1, 1996 (your "Normal Retirement
Date");
(B) your Credited Service in fact equalled 25 units;
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(C) the provisions of Sections 401 (a)(17) and 415 of
the Internal Revenue Code of 1986, as amended (the "Code"), and
the Maximum Pension Limitations of Paragraph G of Article VII (or
any successor provision) of the Retirement Plan were
inapplicable; and
(D) you had elected, with the consent of your spouse
to the extent required by the terms of the Retirement Plan or
applicable law, the normal form of Pension payable to a retired
Member only during his lifetime pursuant to Option 4 of Paragraph
D of Article VIII (or any successor provision) of the Retirement
Plan; such amount to be reduced (but not below zero) by the sum
of the annual amounts that you are in fact entitled to receive on
your retirement on your Normal Retirement Date (i) from the
Retirement Plan, (ii) from the Benefit Equalization Plan of U.S.
Trust Corporation or any similar pension or executive benefit
plan of the Corporation or any of its affiliated companies (all
such plans are hereinafter collectively referred to as the
"Benefit Equalization Plan") to the extent that any such amount
is attributable to the Retirement Plan, and (iii) from any
qualified defined benefit plan in which you participated during
any previous employment (the "Prior Plans"). For purposes of
determining the amount of the reduction required under the
preceding sentence, if any amount described in clause (i), (ii)
or (iii) thereof, is not in fact payable in the same form as
specified in Option 4 of Paragraph D of Article VIII (or any
successor provision) of the Retirement Plan, such amount shall be
converted into an amount that is of Equivalent Actuarial Value
(as defined in the Retirement Plan) to such amount if such amount
were payable in the form specified in Option 4.
(2) Notwithstanding the method of calculation
described above, you may elect, with the consent of the
Compensation and Benefit Committee of the Board of Directors (the
"Committee"), to have such amount paid on an actuarially
equivalent basis under any of the optional forms of Pension then
available under Paragraph D of Article VIII (or any successor
provision) of the Retirement Plan, using the same factors as are
prescribed under the Retirement Plan for determining actuarial
equivalence. Any such election must be made at least two years
prior to your Normal Retirement Date.
(3) Except as provided in Paragraph 5 below, the
Supplemental Pension shall not be payable to you prior to your
Normal Retirement Date or, if later, the effective date of your
termination of employment with the Corporation or any of its
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affiliated companies.
(4) Notwithstanding any other provision of the
Agreement, no Supplemental Pension shall be payable hereunder
except as provided in Paragraphs 5 and 6 below if prior to your
Normal Retirement Date your employment with the Corporation or
any of its affiliated companies is terminated for any reason
other than disability.
(5) In the event of your death prior to the
commencement of the Supplemental Pension, while you are employed
by the Corporation or any of its affiliated companies and a
Member of the Retirement Plan, there shall be paid to your
surviving spouse (if any) an amount equal to (A) the Spouse's
Preretirement Survivorship Pension which would have been paid to
your surviving spouse, based on 25 Units of Credited Service, if
you (i) had satisfied the Retirement Plan's requirements for
payment of a Spouse's Preretirement Survivorship Pension, (ii)
had been a Member of the Retirement Plan for an uninterrupted
period beginning on the Starting Date and ending on the date of
your death or, if your date of death is on or after the date of a
"change in control," ending on the date which would have been
your Normal Retirement Date if you had not died and had remained
in the employ of the Corporation or any of its affiliated
companies until your Normal Retirement Date, and (iii) had not
waived such coverage, reduced (but not below zero) by (B) the sum
of any amounts actually payable to your surviving spouse under
(i) the Retirement Plan, (ii) the Benefit Equalization Plan and
(iii) the Prior Plans, or, if greater, by (C) the sum of any
amounts which would have been payable under the plans referred to
in clause (B) if you had not waived any preretirement survivor
benefit under such plans and, with regard to the Prior Plans, you
had elected a 50 percent joint and survivor annuity. The amount
so payable to your surviving spouse under this Paragraph 5 shall
be paid to her in the same form as the Spouse's Preretirement
Survivorship Pension is payable to her under the Retirement Plan,
with payments commencing at the earliest date as of which she
could elect under the Retirement Plan to receive the Spouse's
Preretirement Survivorship Pension, whether or not she makes any
such election. If any amount payable to your surviving spouse
under any plan referred to in clause (B) hereof is to be paid in
a form, or if payment of such amount is to commence at a date,
other than the form or commencement date applicable to the
payments to be made to your surviving spouse under this Paragraph
5, the reduction required under clause (B) or clause (C) hereof
with respect to the amount so payable shall be determined by
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converting such amount to an amount that is of Equivalent
Actuarial Value to the amount that would be payable to your
surviving spouse under such plan if payment thereof were to be
made in the same form, and were to commence as of the same date,
as the form and commencement date specified herein for the
payments that are to be made to your surviving spouse pursuant to
this Paragraph 5.
(6) In the event of your "involuntary termination"
following a "change in control", the Supplemental Pension benefit
provided for you hereunder shall be paid to you in a single cash
lump sum, within 30 days after the date of your "involuntary
termination". The amount so payable to you shall be equal to the
single lump sum amount that is of Equivalent Actuarial Value to
the Supplemental Pension that would have been payable to you at
your Normal Retirement Date under Paragraph (1) above if you had
remained in the employ of the Corporation or any of its
affiliated companies through your Normal Retirement Date at an
annual rate of Compensation equal to the annual rate of your
Compensation in effect immediately prior to your "involuntary
termination" or, if your "involuntary termination" occurs
following a reduction of your salary under Paragraph (7)(ii)
below, the annual rate of your Compensation in effect immediately
prior to such reduction of your salary. For this purpose, the
single lump sum amount that is of Equivalent Actuarial Value to
your Supplemental Pension shall be determined using the
conversion factors that were in effect under the Retirement Plan
on July 24, 1990. Notwithstanding the foregoing, the amount so
payable to you under this Paragraph (6) shall be subject to
reduction as required under the "excess Parachute payment
cutback" provisions of Section 7(c) of the 1990 Change in Control
and Severance Policy for Top Tier Officers of United States Trust
Company of New York and Affiliated Companies.
(7) The term "involuntary termination" as used in the
Agreement means the termination of your employment with the
Corporation or any of its affiliated companies (i) by the
Corporation or any of its affiliated companies or (ii) by you
after any reduction in your salary, any change in location of
your place of employment to a location outside the Borough of
Manhattan without your consent, a material decrease in your
responsibilities with respect to the business of the Corporation
or any of its affiliated companies, or any other material adverse
change in the conditions of your employment by the Corporation or
any of its affiliated companies.
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(8) The term "change in control" as used in the
Agreement means that:
(A) 20% or more of the common shares of the
Corporation has been acquired by any person (as defined by
Section 3 (a)(9) of the Securities Exchange Act of 1934) other
than directly from the Corporation;
(B) there has been a merger or equivalent combination
after which 49% or more of the voting shares of the surviving
corporation is held by persons other than former shareholders of
the Corporation; or
(C) 20% or more of the directors elected by
shareholders to the Board of Directors of the Corporation are
persons who were not nominated in the most recent proxy statement
of the Corporation.
(9) Notwithstanding any other provision of the
Agreement, no amounts shall become payable pursuant to Paragraph
6 above to the extent that the Board of Directors otherwise
directs by resolution adopted prior to the change in control, or
not later than 45 days after the change in control (if the
percentage of common shares acquired or directors appointed under
(A) or (C) of the definition of change in control shall be at
least 20% but less than 25%). Any resolution of the Board of
Directors adopted in accordance with the provisions of this
Paragraph directing that such amounts not become payable may be
rescinded or countermanded at any time with or without
retroactive effect. Notwithstanding the foregoing, any resolution
of the Board of Directors directing that amounts otherwise
payable under Paragraph 6 above shall not become payable, and any
resolution of the Board of Directors rescinding or countermanding
any such resolution, shall be given effect for purposes of this
Agreement only if, at the time the Board of Directors adopts such
resolution or rescinding resolution, it also adopts, or has
previously adopted, a similar resolution with respect to the
Change in Control Benefits payable to participants under each
other Change in Control Plan maintained by the Corporation or any
of its affiliated companies. For this purpose, the terms "Change
in Control Benefits" and "Change in Control Plans" shall have the
same meaning as assigned to such terms under the 1990 Change in
Control and Severance Policy for Top Tier Officers of United
States Trust Company of New York and Affiliated Companies.
(10) In the event of a change in control, all powers
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of the Committee under the Agreement shall thereafter be
exercised solely by the Committee as it was constituted
immediately prior to the change in control.
(11) The determination of the amount of the
Supplemental Pension payable and of the amount of all benefit
offsets described herein shall be made by the Committee in its
sole discretion and any determination or interpretation of the
Committee shall be final, binding and conclusive on all persons.
You shall furnish, or take whatever steps are necessary to permit
you to furnish, the Committee with all information that is
reasonably requested by it to enable it to make such
determination. Except as otherwise provided in Paragraph 6, if,
notwithstanding any election that you might have made, payment of
any benefit offsets described in Paragraph 1 could not have
commenced on the date payment of your Supplemental Pension under
Paragraph 1 is to commence, such benefit offsets shall be taken
into account on the earliest date on which payment of such
benefit offsets could have commenced.
(12) All Supplemental Pension payments shall be paid
in cash from the general funds of the Corporation, and no special
or separate fund shall be established, and no segregation of
assets shall be made, to assure payment of such Supplemental
Pension. You shall have the status of a general unsecured
creditor of the Corporation with respect to your right to receive
any payment under the Agreement. The Agreement shall constitute
a mere promise by the Corporation to make payments in the future
of the benefits provided for herein. It is intended that the
arrangements reflected in this Agreement be treated as unfunded
for tax purposes, as well as for purposes of Title I of ERISA.
Nothing in the Agreement shall preclude the Corporation from
establishing and funding a "rabbi trust" to provide for the
payment of benefits under the Agreement.
(13) No Supplemental Pension payable under the
Agreement shall be deemed salary or other compensation to you for
the purpose of computing benefits to which you may be entitled
under the Retirement Plan, the Employees' Profit-Sharing Plan or
any other plan or arrangement maintained by the Corporation or
any of its affiliated companies for the benefit of its employees.
(14) The Agreement shall be binding upon and inure to
the benefit of the Corporation and its successors and assigns and
you, your designees and your estate. Your rights to payments
under the Agreement shall not be subject in any manner to
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anticipation, alienation, sale, transfer, assignment, pledge,
incumbrance, attachment, or garnishment by your creditors or
those of your Beneficiary.
(15) The Agreement is not an employment agreement and
nothing contained herein shall give you any right or claim to be
retained in the employ of the Corporation or any of its
affiliated companies, or shall obligate the Corporation or any of
its affiliated companies to continue your employment.
(16) The Corporation may withhold from any Supple-
mental Pension or other Payments otherwise required to be made
under the Agreement all Federal, State, City or other taxes as
shall be required pursuant to any law or governmental regulation
or ruling.
(17) The Agreement supersedes and replaces all prior
agreements between you and the Corporation and any of its
affiliated companies with respect to the subject matter hereof.
I have been authorized to executive the Agreement on behalf of
the Corporation. Please acknowledge your agreement to be bound
by the terms and conditions of the Agreement by signing the
enclosed copy of the Agreement and returning it to me.
__________________________________
Philip L. Smith, Chairman
Compensation and Benefits Committee
Acknowledged and Agreed to the
________ day of _____________ 1994
____________________________________
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EXHIBIT 10.21
EXECUTIVE DEFERRED COMPENSATION PLAN
OF
U.S. TRUST CORPORATION
As Adopted effective as of
January 1, 1994
1. Purpose
The purpose of the Plan is to provide Eligible
Officers of
U.S. Trust Corporation and its Affiliated
Companies with an opportunity
to defer payment of certain portions of their compensation, at their
election, in accordance
with the provisions herein set forth.
The Plan is intended to constitute an unfunded plan
of
deferred compensation for "a select group of management or
highly
compensated employees" within the meaning of Sections
201(2), 301(a)(3)
and 401(a)(1) of the Employee Retirement
Income Security Act of 1974, as
amended ("ERISA").
2. Definitions
As used herein, the following terms shall have the
following
meanings:
"Account" or "Accounts" shall mean the Lump Sum
Payment
Account established for a Participant pursuant to
Section 4, the
Installment Payment Account established for a
Participant under Section
4, or both such Accounts, as the
context may require.
"Affiliated Companies" shall mean United States
Trust Company
of New York, and each other direct or indirect
subsidiary of the
Corporation.
"Beneficiary" shall mean the person or persons
designated by a
Participant in accordance with Section 7 to receive any amount payable
under the Plan by reason of his or
her death.
"Board of Directors" shall mean the Board of
Directors of the
Corporation.
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"Change in Control" shall mean that any of the
following has
occurred:
(i) 20% or more of the common shares of the
Corporation has
been acquired by any person (as
defined by Section
3(a)(9) of the Securities
Exchange Act of 1934) other
than directly from
the Corporation;
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting
shares of the surviving
corporation is held by
persons other than former
shareholders of the
Corporation; or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors are persons
who were not nominated
by management in the
most recent proxy statement of the
Corporation;
provided, however, that notwithstanding anything in the Plan
to the
contrary no Change in Control shall be deemed to have
occurred, and no
right to receive any amount that becomes payable upon a Change in
Control as provided in Section 6 shall
exist, to the extent that the
Board of Directors so directs by
resolution adopted prior to the Change
in Control, or not
later than 45 days after the Change in Control if the
percentage of the Corporation's common shares acquired or directors
elected under clauses (i) or (iii) of the foregoing definition
of Change
in Control shall be at least 20% but less than 25%.
Any resolution of
the Board of Directors adopted in accordance
with the provisions of this
definition directing that a Change
in Control shall be deemed not to
have occurred for purposes
of this Plan may be rescinded or
countermanded at any time
with or without retroactive effect.
"Committee" shall mean the Compensation and Benefits
Committee
of the Board of Directors.
"Corporation" shall mean U.S. Trust Corporation.
"Eligible Compensation" shall mean, with respect to
any
Eligible Officer for any Plan Year, (i) any Award that
becomes payable
to the Eligible Officer during such year under the 1990 Annual Incentive
Plan of United States Trust Company
of New York and Affiliated
Companies, as reduced by the sum of
(A) the amount of any ESOP
Contribution to be made on behalf
of the Eligible Officer under the
401(k) Plan with respect to
such Award, (B) the amount that is taken
into account with
respect to such Award in determining the number of any
Benefit
Equalization Units to be credited to the Eligible Officer's
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account under the 1989 Stock Compensation Plan of U.S. Trust
Corporation, and (C) any amount that is contributed to the
401(k) Plan
on the Eligible Officer's behalf with respect to
such Award pursuant to
the Eligible Officer's election under
the applicable provisions of the
401(k) Plan; (ii) any commissions (including any "trail" commissions and
any commission
"overrides") that are payable to the Eligible Officer
during
such year (but, in the case of any amount payable during such
year with respect to commissions that were earned prior to the
start of
such year, only to the extent of such of those commissions as were
earned after the date on which the Eligible
Officer filed his or her
deferral election for such year under
Section 3), exclusive of (A) the
amount of any such
commissions that are included in the Eligible
Officer's base
compensation for any Plan Year pursuant to the Eligible
Officer's election; (B) the amount by which any such commissions are
reduced with respect to any ESOP Contribution made
on behalf of the
Eligible Officer under the 401(k) Plan, and
(C) the amount by which any
such commissions are reduced with
respect to any Benefit Equalization
Units credited to the
Eligible Officer's account under the 1989 Stock
Compensation
Plan of U.S. Trust Corporation; and (iii) any bonus or
incentive payments payable to the Eligible Officer pursuant to any
employment agreement between the Eligible Officer and the
Corporation or
any of its Affiliated Companies, to the extent
earned during such year,
regardless of the year in which such
bonus or incentive payments are
payable.
"Eligible Officer" shall mean any officer of the
Corporation
or any of its Affiliated Companies at or above the
rank of Vice
President, who, for the Plan Year immediately
preceding the Plan Year in
which such officer first makes a
deferral election under Section 3, had
total compensation in
excess of $150,000. For this purpose an officer's
"total compensation" for any Plan Year shall mean the sum of (i) the
aggregate amount reported as the officer's compensation from
the
Corporation and its Affiliated Companies in Form W-2 filed
with respect
to the officer for such year, for Federal income
tax purposes; (ii) the
aggregate amount of all 401(k)
Contributions and ESOP Contributions made
on behalf of the
officer for such year under the 401(k) Plan; and (iii)
the
aggregate amount of all salary reduction contributions made on
behalf of the officer for such year under the Employees' Flexible
Spending Plan of United States Trust Company of
New York and Affiliated
Companies. For any Plan Year beginning on or after January 1, 1995, the
$150,000 amount referred
to in the second preceding sentence shall be
adjusted to the
extent necessary for such amount to equal the amount of
the
limitation on annual compensation in effect for such year
under
section 401(a)(17) of the Internal Revenue Code of 1986.
"401(k) Plan" shall mean the 401(k) Plan and ESOP of
United
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States Trust Company of New York and Affiliated
Companies.
"Participant" shall mean any Eligible Officer who
has made an
election under Section 3 hereof to defer any portion of his or her
Eligible Compensation for any Plan Year.
"Plan" shall mean the Executive Deferred
Compensation Plan of
U.S. Trust Corporation, as set forth
herein and as amended from time to
time.
"Plan Year" shall mean the calendar year.
"Retirement" shall mean a Participant's termination
of
employment with the Corporation and its Affiliated
Companies for any
reason other than death if, as of the date
of the Participant's
termination of employment, (i) the
Participant has attained age 65 or
(ii) the sum of Participant's age and the number of his or her "Years of
Service", as
defined in the 401(k) Plan, is at least equal to 80. In
addition, in the case of any Participant who becomes entitled
to receive
benefit payments under the long-term disability
plan maintained by the
Corporation or any of its Affiliated
Companies and who continues to
receive payments under such
plan throughout the entire period ending on
the date on which
the Participant first meets the age, or the age and
service,
requirements set forth in clause (i) or (ii) above, such
Participant shall be treated, for purposes of the Plan, as
having
terminated employment with the Corporation and its
Affiliated Companies
as a result of Retirement, on the first
day of the month following the
date on which the Participant
first meets such requirements. In
applying clause (ii) above
for this purpose, the Participant's "Years of
Service" shall
include the number of calendar years (or part thereof)
during
which the Participant has received benefits payments under
such
long-term disability plan.
3. Deferral Elections
With respect to each Plan Year beginning on or after
January
1, 1994, an Eligible Officer may elect to have payment
of any part or
all of his or her Eligible Compensation for
such year deferred, and to
have payment of such portion made
under the terms of this Plan. Any
such election shall be made
in accordance with the following rules:
(a) A deferral election shall be made in writing,
on a form
provided by the Committee for such purpose.
(b) In the election form, the Eligible Officer (i) shall
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specify, by amount or percentage (which must be an
even multiple of 5%),
the portion of his or her Eligible
Compensation the Eligible Officer
wishes to defer (the amounts
so deferred are hereinafter referred to as
the Eligible
Officer's "Deferred Amounts"), and (ii) shall specify, by
percentage (which must be an even multiple of 5%), the portions
of the
Eligible Officer's Deferred Amounts that he or she
wishes to have
allocated, respectively, to the Lump Sum
Payment Account and to the
Installment Payment Account
established for the Eligible Officer
pursuant to Section 4.
(c) An Eligible Officer's election to defer
Eligible
Compensation for any Plan Year shall be filed with
the Committee (i) by
no later than November 19, 1993, in the
case of an election to defer
Eligible Compensation for the
Plan Year beginning on January 1, 1994; or
(ii) in the case of
an election to defer Eligible Compensation for any
Plan Year
beginning on or after January 1, 1995, by no later than
November 15 of the preceding Plan Year (September 30 of the
preceding
Plan Year, in the case of Eligible Compensation
described in clause (ii)
of the definition of such term contained in Section 2), or by such other
date as the Committee
may determine in its discretion subject, however,
to the
limitation in paragraph (e)(iii) below.
(d) Any deferral election made by an Eligible
Officer with
respect to his or her Eligible Compensation for a
Plan Year, and any
election made by an Eligible Officer as to
the allocation of the
Eligible Officer's Deferred Amounts for
such year to his or her
Accounts, shall be irrevocable.
(e) Notwithstanding any other provision herein to
the
contrary, a deferral election otherwise permitted to be
made hereunder
shall be subject to the following requirements:
(i) no amount may be deferred pursuant to an
Eligible
Officer's election unless such amount equals or
exceeds
$1,000;
(ii) no portion of an Eligible Officer's Eligible
Compensation
may be deferred hereunder to the extent that
any tax is required to
be withheld from such portion pursuant to applicable federal, state
or local law; and
(iii) no portion of an Eligible Officer's Eligible
Compensation
may be deferred hereunder to the extent that
such portion has been
earned prior to the date on which
the Eligible Officer's election
to defer such portion has
been filed with the Committee.
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4. Accounts
For each Participant, there shall be established and
maintained on the books and records of the Corporation, for
bookkeeping
purposes only, a Lump Sum Payment Account, and an
Installment Payment
Account, to reflect the Participant's
interest under the Plan.
Each such Account shall be credited with amounts
equal to that
portion of the Participant's Deferred Amounts
for each Plan Year that
the Participant has elected under
Section 3 to have allocated to such
Account. Such amounts
shall be so credited to the Participant's
Accounts as of the
first day of the calendar month following the month
in which
the amounts in question would have been paid to the Participant
had the Participant not elected under Section 3 to have
payment of such
amounts deferred under this Plan.
A Participant's Accounts shall be adjusted to
reflect all
Earnings (as defined in paragraph (a) of Section 5) to be credited to
such Accounts pursuant to Section 5,
and all payments made with respect
to the Participant's
Account balances pursuant to Section 6.
A Participant's interest in each of his or her
Accounts shall
be fully vested and nonforfeitable at all
times.
5. Crediting of Earnings
Until payment with respect to a Participant's
Accounts has
been made in full, the Participant's Accounts
shall be credited with
Earnings in accordance with the
following provisions:
(a) As of the last day of each calendar month, each
part of
the balance of each of a Participant's Accounts for
which a separate
Earnings Crediting Option (as hereinafter
defined) is in effect pursuant
to the Participant's election
hereunder shall be credited with an amount
determined by multiplying such part of the balance of the Participant's
Account
by a percentage corresponding to the Applicable Rate of Return
(as hereinafter defined) for such month under such Earnings
Crediting
Option. The amount so credited (which may be positive or negative
depending on whether the Applicable Rate of
Return for the month is
positive or negative) is referred to
herein as "Earnings".
(b) For purposes of this Section 5, the term
"Earnings
Crediting Option" shall mean, initially, any investment fund maintained
under the 401(k) Plan other than the ESOP
Stock Fund or the U.S.T. Corp.
Stock Fund. Any such investment fund is referred to herein as a "401(k)
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Plan Fund".
Notwithstanding the foregoing, the Committee may at
any time,
in its sole discretion, determine (i) that any
401(k) Plan Fund shall
cease to constitute an Earnings
Crediting Option for purposes of this
Plan, (ii) that any
investment fund that is added to the 401(k) Plan at
any time
after January 1, 1994 shall not constitute an Earnings
Crediting Option for purposes of this Plan, or (iii) that any
other
hypothetical investment fund or index or referenced rate
of return shall
constitute an Earnings Crediting Option for
purposes of this Plan.
Participants shall be notified in
writing, at least 45 days in advance,
of any such change in
the Plan's Earnings Crediting Options.
(c) The "Applicable Rate of Return" for any month,
under any
Earnings Crediting Option, shall mean (i) in the
case of an Earnings
Crediting Option that is a 401(k) Plan
Fund, the percentage by which the
value of such Fund, as
determined by the 401(k) Plan's Trustee as of the
Valuation
Date (as defined in the 401(k) Plan) for such month,
exceeds,
or is less than, the value of such Fund, as determined by the
401(k) Plan's Trustee as of the Valuation Date for the immediately
preceding month; and (ii) in the case of any other
Earnings Crediting
Option, the rate of return applicable for such month, as determined by
the Committee in its sole
discretion.
(d) A Participant may make elections with respect
to the
Earnings Crediting Options that are to apply with
respect to his or her
Accounts, in accordance with the
following rules:
(i) a Participant may elect to have any part or all
of the
balance of any Account credited with Earnings
under any Earnings
Crediting Option available under the
Plan at the time of his or her
election.
(ii) each Participant shall make an initial election
as to the
Earnings Crediting Options that are to apply
with respect to an Account
at the time the Participant
first elects under Section 3 to have any
portion of the
Participant's Deferred Amounts for any Plan Year
allocated to that Account. Such election shall be made in
the election
form in which the Participant makes his or
her election under Section 3
to have such portion of the
Participant's Deferred Amounts for such Plan
Year allocated to that Account. In such election form, the
Participant
shall specify, by percentages (which must be
even multiples of 5%) the
respective parts of the balance
of such Account that are to be credited
with Earnings
under each of the Earnings Crediting Options designated
by
the Participant in such form.
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(iii) The Earnings Crediting Options selected in the
initial
election made by the Participant with respect to
an Account under clause
(ii) above shall remain in effect
for that Account (and shall apply to
all additional
amounts allocated to such Account pursuant to any
deferral elections made by the Participant under Section 3
with respect
to any subsequent Plan Years) until the
Participant changes his or her
election with respect to
that Account in accordance with clause (iv)
below.
(iv) A Participant may change the Earnings Crediting
Options
that are to apply with respect to an Account by
making a new election
hereunder with respect to that
Account. Such new election shall be made
in writing, on
a form which is provided by the Committee for this
purpose and which the Participant files with the Committee.
In such
form, the Participant shall specify, in the same
manner as described in
clause (ii) above, the respective
parts of the balance of such Account
that are to be credited with Earnings under each of the Earnings
Crediting
Options designated by the Participant in such form. The
Participant's new election shall become effective as of
the first day of
the calendar month following the date on
which such election is filed
with the Committee, provided
that it is so filed at least 15 days prior
to such first
day. The Earnings Crediting Options selected by the
Participant in such new election shall remain in effect
with respect to
the Participant's Account until the
Participant again changes his or her
election with
respect to that Account in accordance with this clause
(iv).
(e) If payment with respect to a Participant's
Installment
Payment Account is to be made in form of annual
installments pursuant to
Section 6(c)(ii), such Account shall
continue to be credited with
Earnings in accordance with the
provisions of this Section 5 until all
payments required to be
made with respect to such Account have been
made. For this
purpose, any such payments will be deemed to have been
made
pro rata from the respective portions of the balance of such
Account that are subject to separate Earnings Crediting
Options.
6. Payment of Account Balances
Payment with respect to a Participant's Account
balances shall
be made in accordance with the following
provisions:
(a) A Participant's Account balances shall become
payable
upon the earliest to occur of the following events
(hereinafter referred
to as "Payment Events"): (i) the
Participant's death, (ii) the
Participant's Retirement,
(iii) the Participant's termination of
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employment with the
Corporation and its Affiliated Companies for any
reason other
than death or Retirement, and (iv) the occurrence of a
Change
in Control.
(b) Payment with respect to a Participant's Lump
Sum Payment
Account shall be made in the form of a single lump
sum cash payment.
Such payment shall be made to the Participant or, if the Participant's
Accounts become payable by
reason of his or her death, to the
Participant's Beneficiary.
Payment shall be made as soon as practicable
after the
occurrence of any Payment Event; provided, however, that if
payment with respect to the Participant's Installment Payment
Account is
required to be made in the form of annual installments pursuant to
Section 7(c)(ii), payment with respect to
the Participant's Lump Sum
Payment Account shall be made on
the same date as the date on which the
first such annual
installment payment is required to be made under
Section 7(c)(ii). The amount so payable shall be equal to the balance
of the Participant's Lump Sum Payment Account determined as of
the last
day of the month preceding the month in which payment
is made.
(c) Payment with respect to a Participant's
Installment
Payment Account shall be made in accordance with
the following rules:
(i) except as provided in clause (ii) below, payment shall be
made to the Participant or, in the event of
the Participant's
death, to his or her Beneficiary, in
the same form, at the same
time, and in an amount determined in the same manner, as payment
with respect to the
Participant's Lump Sum Payment Account is to be
made, as
provided in paragraph (b) above.
(ii) if the Participant's Account balances become
payable as a
result of the Participant's Retirement, or
as a result of the
Participant's death while he or she is
still employed with the
Corporation or any of its
Affiliated Companies but after the
Participant has met
the age, or the age and service, requirements
for
eligibility for Retirement stated in the definition of
such
term contained in Section 2, payment with respect to
the
Participant's Installment Payment Account shall be
made to the
Participant or, in the event of the Participant's death, to his or
her Beneficiary, in the form of a
series of 10 annual
installments. The first such
installment payment shall be made on
the last business
day of February of the Plan Year following the
year in
which the Participant's Retirement or death occurs, and
the
remaining installment payments shall be made on the
last business
day of February of each succeeding Plan
Year. The amount of each
such installment payment shall
be determined by dividing (A) the
balance of the Participant's Installment Payment Account determined
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<PAGE>
as of the
last day of the Plan Year preceding the year in which
such payment is to be made, by (B) the number of installment
payments remaining to be made. The last such
installment payment
shall include Earnings credited to
the Installment Payment Account
for the month preceding
the month in which such payment is
made.
(iii) if payment with respect to a Participant's
Installment
Payment Account is to be made in the form of
annual installments
pursuant to clause (ii) above and the
Participant should die before
receiving all installment
payments required to be made to the
Participant, any
installment payments remaining to be made at the
date of the Participant's death shall be made to the
Participant's Beneficiary in the same form, at the same times,
and
in the same amounts, as such payments would have been
made to the
Participant (A) if he or she had not died,
and (B) if the
Participant died before receiving any such
installment payments, if
the Participant's employment had
terminated as a result of
Retirement on the date of his
or her death.
(iv) if a Participant's Installment Payment Account
balance
has become payable in the form of annual installments pursuant to
clause (ii) above and a Change in
Control should occur before all
installment payments
required to be made with respect to the
Participant have
been made, the balance of such Account shall
become
immediately due and payable upon the occurrence of such
Change in Control. Payment with respect to such balance
shall
be made to the Participant or, if the Participant
has died, to his
or her Beneficiary, in the form of a
single lump sum cash payment.
Payment shall be made as
soon as practicable after the occurrence
of such Change
in Control. The amount so payable shall be equal to
the
balance of the Participant's Installment Payment Account
determined as of the last day of the month preceding the
month in
which payment is made.
(d) Notwithstanding any other provision in this
Section 6 to
the contrary, payment with respect to any part or
all of the
Participant's Account balances may be made to the
Participant or, if
applicable, the Participant's Beneficiary,
on any date earlier than the
date on which such payment is to
be made pursuant to such other
provisions of this Section 6 if
(i) the Participant, or his or her
Beneficiary, requests such
early payment and (ii) the Committee, in its
sole discretion,
determines that such early payment is necessary to help
the
Participant, or his or her Beneficiary, meet an "unforeseeable
emergency" within the meaning of Section 1.457-2(h)(4) of the
federal
income tax regulations. The amount that may be so
paid may not exceed
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<PAGE>
the amount necessary to meet such
emergency.
(e) There shall be deducted from the amount of any
payment
otherwise required to be made under the Plan all
Federal, state and
local taxes required by law to be withheld
with respect to such payment.
7. Designation and Change of Beneficiary
Each Participant shall file with the Committee a
written
designation of one or more persons as the Beneficiary
who shall be
entitled to receive any amount payable under the
Plan by reason of his
or her death. A Participant may,
from time to time, revoke or change
his or her Beneficiary
designation without the consent of any previously
designated
Beneficiary by filing a new designation with the Committee.
The last such designation received by the Committee shall be
controlling; provided, however, that no designation, or change
or
revocation thereof, shall be effective unless received by
the Committee
prior to the Participant's death, and in no
event shall it be effective
as of a date prior to such
receipt. If at the date of a Participant's
death, there is no
designation of a Beneficiary in effect for the
Participant
pursuant to the provisions of this Section 7, or if no
Beneficiary designated by the Participant in accordance with
the
provisions hereof survives to receive any amount payable
under the Plan
by reason of the Participant's death, the
Participant's estate shall be
treated as the Participant's
Beneficiary for purposes of the Plan.
8. Payments to Persons Other Than Participants
If the Committee shall find that any Participant or
Beneficiary to whom any amount is payable under the Plan is
unable to
care for his or her affairs because of illness,
accident or legal
incapacity, then, if the Committee so
directs, such amount may be paid
to such Participant's or
Beneficiary's spouse, child or other relative,
an institution
maintaining or having custody of such person, or any
person
deemed by the Committee to be a proper recipient on behalf of
such Participant, unless a prior claim therefor has been made
by a duly
appointed legal representative of the Participant or
Beneficiary.
Any payment made under this Section 8 shall be a
complete
discharge of the liability of the Corporation with
respect to such
payment.
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<PAGE>
9. Rights of Participants
A Participant's rights and interests under the Plan
shall be
subject to the following provisions:
(a) A Participant shall have the status of a
general
unsecured creditor of the Corporation with respect to
his or her right
to receive any payment under the Plan. The
Plan shall constitute a mere
promise by the Corporation to make payments in the future of the
benefits provided for
herein. It is intended that the arrangements
reflected in
this Plan be treated as unfunded for tax purposes, as well
as
for purposes of Title I of ERISA.
(b) The Corporation may, but shall not be required
to,
purchase a life insurance policy or policies, to assist it
in funding
any of its payment obligations under the Plan. If
any policy is so
purchased, it shall, at all times, remain
subject to the claims of the
Corporation's creditors. No
Participant or Beneficiary shall have any
interest in, or
rights with respect to, such policy.
(c) A Participant's rights to payments under the
Plan shall
not be subject in any manner to anticipation,
alienation, sale,
transfer, assignment, pledge, encumbrance,
attachment, or garnishment by
creditors of the Participant or
his or her Beneficiary.
(d) Neither the Plan nor any action taken hereunder
shall be
construed as giving any Participant any right to be
retained in the
employment of the Corporation or any of its
Affiliated Companies.
10. Administration
The Plan shall be administered by the Committee.
All
decisions, actions or interpretations of the Committee
under the Plan
shall be final, conclusive and binding upon all
parties.
No member of the Committee shall be personally
liable by
reason of any contract or other instrument executed
by such member or on
his or her behalf in his or her capacity
as a member of the Committee
nor for any mistake of judgment
made in good faith, and the Corporation
shall indemnify and
hold harmless each member of the Committee, and each
employee,
officer, director or trustee of the Corporation or any of its
Affiliated Companies to whom any duty or power relating to the
administration or interpretation of the Plan may be delegated,
against
any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with
the approval of the Board of
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<PAGE>
Directors) arising out of any act
or omission to act in connection with
the Plan unless arising
out of such person's own fraud or bad faith.
11. Amendment or Termination
The Board of Directors may, with prospective or
retroactive
effect, amend, suspend or terminate the Plan or
any portion thereof at
any time; provided, however, that no
amendment of the Plan shall deprive
any Participant of any
rights to receive payment of any amounts due him
or her under
the terms of the Plan as in effect prior to such amendment
without his or her written consent.
Any amendment that the Board of Directors would be
permitted
to make pursuant to the preceding paragraph may also
be made by the
Committee where appropriate to facilitate the
administration of the Plan
or to comply with applicable law or
any applicable rules and regulations
of governing authorities
provided that the cost of the Plan to the
Corporation is not
materially increased by such amendment.
Notwithstanding any other provision in this Plan to
the
contrary, the Committee may terminate any Participant's
participation in
the Plan, and direct that an immediate payment be made with respect to
the balances of the Participant's
Accounts, if the Committee, in its
sole discretion, determines
that such termination of participation and
payment are necessary in order to preserve the Plan's status as a plan
of
deferred compensation for "a select group of management or
highly
compensated employees" within the meaning of the
applicable provisions
of ERISA.
12. Successor Corporation
The obligations of the Corporation under the Plan
shall be
binding upon any successor corporation or organization resulting from
the merger, consolidation or other
reorganization of the Corporation, or
upon any successor corporation or organization succeeding to
substantially all of
the assets and business of the Corporation. The
Corporation
agrees that it will make appropriate provision for the
preservation of Participants' rights under the Plan in any agreement
or
plan which it may enter into or adopt to effect any such
merger,
consolidation, reorganization or transfer of assets.
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<PAGE>
13. Governing Law
The provisions of the Plan shall be governed by and
construed
in accordance with the laws of the State of
New York.
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<PAGE>
EXHIBIT 10.24
BOARD MEMBERS' RETIREMENT PLAN
OF
U. S. TRUST CORPORATION
As amended, restated and renamed effective as of
January 1, 1994
ARTICLE I
Purpose
1.1 The purpose of the Plan is to assist in attracting
and retaining individuals of superior talent, ability and achie-
vement, to serve as Board Members by establishing, as of July 24,
1984, a means of providing a retirement income for Board Members.
1.2 The Plan, as hereinafter set forth, represents a
continuation of the Trustees and Directors Retirement Plan of
United States Trust Corporation of New York and Affiliated
Companies, as amended, restated and renamed effective as of
January 1, 1994 to reflect (a) U.S. Trust Corporation's assump-
tion of, and becoming solely responsible for, all liabilities and
obligations of United States Trust Company of New York under the
Plan, and (b) changes in certain other provisions of the Plan.
ARTICLE II
Definitions
When used herein, the following terms shall have the
following meanings:
2.1 "Affiliated Companies" means United States Trust
Company of New York and each other direct or indirect subsidiary
of the Corporation.
2.2 "Annual Retainer" means the sum of (i) cash
retainer fees paid for service to the Board without regard to the
number of meetings attended and (ii) the Fair Market Value on the
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date of grant of the Corporation's common shares issued to each
Board Member pursuant to the terms of the U.S. Trust
Corporation Stock Plan for Non-Employee Directors.
2.3 "Beneficiary" means the person or persons desig-
nated in accordance with Article VI of the Plan to receive the
amount, if any, payable upon the death of an Eligible Board
Member.
2.4 "Board" means (i) the Board of Directors, (ii) the
Board of Trustees, or (iii) the board of directors of any
Affiliated Company, the members of which board have been desig-
nated by the Board of Directors as being eligible for participa-
tion in this Plan.
2.5 "Board Member" means any individual who is a
member of any Board.
2.6 "Board of Directors" means the Board of Directors
of U.S. Trust Corporation.
2.7 "Board of Trustees" means the Board of Trustees of
United States Trust Company of New York.
2.8 "Committee" means the Executive Committee of the
Board of Directors.
2.9 "Corporation" means U.S. Trust Corporation.
2.10 "Eligible Board Member" means a Board Member who
retires from active service as such after the date of original
adoption and approval of the Plan by the Board of Trustees and
the Board of Directors and meets both of the following condi-
tions: (i) retirement takes place on reaching age 72 or after
completing fifteen years of such service and (ii) at no time
after the date of such adoption and approval has he or she been
an officer or an employee of the Corporation or any of its
Affiliated Companies.
2.11 "Fair Market Value" means, with respect to common
shares on any valuation date, the Average Market Value of one
common share of the Corporation on the valuation date or, if such
valuation date is not a business day, on the business day next
preceding such valuation date. For this purpose, the "Average
Market Value" of one common share of the Corporation on any
business day shall mean the mean between the per-share high and
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<PAGE>
low prices for the Corporation's common shares during such day,
as quoted on the NASDAQ National Market System, or, if the
Corporation's common shares are not traded on such system, on
such other securities market or securities exchange on which such
shares are traded as the Committee shall determine.
2.12 "Plan" means the Board Members' Retirement Plan of
U.S. Trust Corporation as set forth herein and as amended and
restated from time to time.
2.13 "Retirement Benefit" means the benefit described
in Article III of the Plan.
ARTICLE III
Retirement Benefits
3.1 An Eligible Board Member upon retirement from
active service as a Board Member shall receive an annual Retire-
ment Benefit equal to the amount of the Annual Retainer payable
to such Board Member during the last full year of such active
service, which shall be payable for the period set forth in
Article IV.
3.2 The Retirement Benefit shall be payable in four
quarterly installments on the first business day of the month
following the end of each calendar quarter, with the first and
last such payment adjusted where appropriate to reflect the
number of full months for which such benefit has been earned.
ARTICLE IV
Duration of Retirement Benefits
4.1 If an Eligible Board Member retires at age 72
having served as such for a minimum of 10 years, the Retirement
Benefit shall be payable for life.
4.2 If an Eligible Board Member retires at age 72
having served as such for less than 10 years, the Retirement
Benefit shall be payable for a period equal to the number of
whole years and whole months of such service or for life, which-
ever is shorter.
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4.3 If an Eligible Board Member retires prior to
reaching age 72 having served a minimum of 15 years, the Retire-
ment Benefit shall be payable for a period equal to the number of
whole years and whole months of such service or for life, which-
ever is shorter.
ARTICLE V
Source of Payment
5.1 All payments of Retirement Benefits hereunder
shall be paid from the general funds of the Corporation, and no
special or separate fund shall be established or other segre-
gation of assets made to assure such payments; provided, however,
that the Corporation may establish a bookkeeping reserve to meet
its obligations hereunder. Nothing contained in the Plan, and no
action taken pursuant to the provisions of the Plan, shall create
or be construed to create a trust of any kind, or a fiduciary
relationship between the Corporation or the Committee, and any
Board Member or other person. An Eligible Board Member shall
have the status of a general unsecured creditor of the Corpora-
tion with respect to his or her right to receive any payment
under the Plan.
ARTICLE VI
Designation of Beneficiaries
6.1 Each Board Member who participates in the Plan
shall file with the Committee a written designation of one or
more persons as the Beneficiary who shall be entitled to receive
the amount, if any, payable under the Plan upon his or her death.
A Board Member may, from time to time, revoke or change his or
her Beneficiary designation without the consent of any previously
designated Beneficiary by filing a new designation with the
Committee. The last such designation received by the Committee
shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received
by the Committee prior to the Board Member's death, and in no
event shall it be effective as of the date prior to such receipt.
6.2 If no such Beneficiary designation is in effect at
the time of a Board Member's death, or if no designated Benefic-
iary survives the Board Member, or if such designation conflicts
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<PAGE>
with law, the Board Member's estate shall be deemed to have been
designated as his or her Beneficiary and shall receive the
payment of the amount, if any, payable under the Plan upon his or
her death. If the Committee is in doubt as to the right of any
person to receive such amount, the Committee may retain such
amount, without liability for any interest thereon, until the
rights thereto are determined, or the Committee may pay such
amount into any court of appropriate jurisdiction and such
payment shall be a complete discharge of the liability of the
Corporation therefor.
ARTICLE VII
Administration of the Plan
7.1 The Plan shall be administered by the Committee
which shall have full power and authority to interpret and
construe the Plan, to make all determinations considered neces-
sary or advisable for the administration of the Plan and the
calculation of the amount of benefits payable thereunder, and to
review claims for benefits under the Plan. The Committee's
interpretations and constructions of the Plan and its decisions
or actions thereunder shall be binding and conclusive on all
persons for all purposes.
7.2 No member of the Committee shall be personally
liable by reason of any contract or other instrument executed by
such member or on his or her behalf in his or her capacity as a
member of the Committee nor for any mistake of judgment made in
good faith, and the Corporation shall indemnify and hold harm-
less, each member of the Committee and each other employee,
officer, director or trustee of the Corporation or any of its
Affiliated Companies to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees)
or liability (including any sum paid in settlement of a claim
with the approval of the Board of Directors) arising out of any
act or omission to act in connection with the Plan unless arising
out of such person's own fraud or bad faith.
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<PAGE>
ARTICLE VIII
Amendment and Termination
8.1 The Plan may be amended, suspended or terminated,
with prospective or retroactive effect, in whole or in part, by
the Board of Directors without the consent of any Board Member or
Beneficiary. The Committee may adopt any amendment which may be
necessary or appropriate to facilitate the administration,
management and interpretation of the Plan or to conform the Plan
thereto, provided any such amendment does not have a material
effect on the currently estimated cost to the Corporation of
maintaining the Plan. No such amendment, suspension or termina-
tion shall retroactively impair or otherwise adversely affect the
rights of any Eligible Board Member to benefits under the Plan
which have arisen prior to the date of such action, as determined
by the Committee in its sole discretion.
ARTICLE IX
General Provisions
9.1 The Plan shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns and the
Eligible Board Member, his or her successors, assigns, designees
and estate. The Plan shall also be binding upon any successor
corporation or organization succeeding to substantially all of
the assets and business of the Corporation, but nothing in the
Plan shall preclude the Corporation from merging or consolidating
into or with, or transferring all or substantially all of the
assets to, another corporation which assumes the Plan and all
obligations of the Corporation hereunder. The Corporation agrees
to make appropriate provision for the preservation of Eligible
Board Members' rights under the Plan in any agreement or plan
which it may enter into to effect any merger, consolidation,
reorganization or transfer of assets. Upon such a merger,
consolidation, reorganization, or transfer of assets and assump-
tion, the term "Corporation" shall refer to such other corpora-
tion and the Plan shall continue in full force and effect.
9.2 Neither the Plan nor any action taken hereunder
shall be construed as giving to any person the right to be
proposed or elected as a director or trustee of the Corporation
or any of its Affiliated Companies.
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9.3 The Corporation shall withhold from all amounts
payable under the Plan all federal, state, local or other taxes
required pursuant to law to be withheld with respect to such
amounts.
9.4 An Eligible Board Member's rights to payments
under the Plan shall not be subject in any manner to anticipa-
tion, alienation, sale, transfer, assignment, pledge, encum-
brance, attachment, or garnishment by creditors of the Eligible
Board Member or his or her Beneficiary.
9.5 If the Committee shall find that any person to
whom any amount is payable under the Plan is unable to care for
his or her affairs because of illness, accident or legal incapac-
ity, then, if the Committee so directs, such amount may be paid
to such person's spouse, child, or other relative, an institution
maintaining or having custody of such person, or any other person
deemed by the Committee to be a proper recipient on behalf of
such person, unless a prior claim therefor has been made by a
duly appointed legal representative of such person. Any payment
shall be a complete discharge of the liability of the Corporation
with respect to such payment.
9.6 All elections, designations, requests, notices,
instructions, and other communications from an Eligible Board
Member, Beneficiary or other person to the Committee required or
permitted under the Plan shall be in such form as is prescribed
from time to time by the Committee, shall be mailed by first
class mail or delivered to such location as shall be specified by
the Committee and shall be deemed to have been given and deliv-
ered only upon actual receipt thereof at such location.
9.7 The captions preceding the sections and articles
hereof have been inserted solely as a matter of convenience and
shall not in any manner define or limit the scope or intent of
any provisions of the Plan.
9.8 The Plan shall constitute a mere promise by the
Corporation to make payments in the future of the benefits
provided for herein. It is intended that the arrangements
reflected in this Plan be treated as unfunded for tax purposes.
9.9 The Plan shall be governed by the laws of the
State of New York from time to time in effect.
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<TABLE>
EXHIBIT 11
U. S. TRUST CORPORATION
COMPUTATION OF NET INCOME PER SHARE
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
PRIMARY NET INCOME PER SHARE:
Net Income ...................................................... $42,267,000 $28,751,000 $31,383,000
Plus Dividend Equivalent on Deferred Long-Term Performance
Plan Awards (After-Tax) ....................................... 213,000 - -
----------- ----------- -----------
Adjusted Net Income ............................................. $42,480,000 $28,751,000 $31,383,000
=========== =========== ===========
Weighted average number of common shares outstanding ............ 9,344,026 9,192,644 9,131,419
Add average shares issuable under stock option and
variable stock award plans .................................... 624,007 505,343 335,267
----------- ----------- -----------
Total Common and Common Equivalent Shares .................. 9,968,033 9,697,987 9,466,686
=========== =========== ===========
Primary Net Income Per Share .................................... $4.26 $2.96 $3.32
FULLY DILUTED NET INCOME PER SHARE:
Net Income ...................................................... $42,267,000 $28,751,000 $31,383,000
Plus Dividend Equivalent on Deferred Long-Term Performance
Plan Awards (After-Tax) ....................................... 213,000 - -
----------- ----------- -----------
Adjusted Net Income ............................................. $42,480,000 $28,751,000 $31,383,000
=========== =========== ===========
Weighted average number of common shares outstanding ............ 9,344,026 9,192,644 9,131,419
Add maximum dilutive impact of average shares issuable
under stock option and variable stock award plans* ............ 650,565 575,855 461,580
----------- ----------- -----------
Total Dilutive Shares ...................................... 9,994,591 9,768,499 9,592,999
=========== =========== ===========
Fully Diluted Net Income Per Share .............................. $4.25 $2.94 $3.27
* Assumes issuance of the maximum number of shares calculated as follows:
Stock option plans - computed using the period-end market price of the Corporation's common stock, if
it is higher than the average market price used in calculating primary net income per share.
Variable stock award plans - computed assuming the issuance of performance stock awards that have
been accrued but not yet awarded.
</TABLE>
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EXHIBIT 13
U.S. TRUST CORPORATION
1993 ANNUAL REPORT TO SHAREHOLDERS
(Financial Section Only)
Page numbers in this Exhibit 13 do not correspond to the comparable pages
in the Corporation's Annual Report to Shareholders due to differences in
page layout. The following is a cross-reference listing of the pages in
this Exhibit 13 and the appropriate pages in the 1993 Annual Report to
Shareholders.
Annual Report Exhibit 13
Item Page Number Page Number
- ---- ------------- -----------
Selected Financial Data 25 2
Financial Review -
Overview 26 3
Highlights 26 3
Fees and Other Income 26 4
Net Interest Income (Taxable Equivalent
Basis) 28 7
Operating Expenses 29 9
Income Taxes 29 10
Asset Quality 30 10
Asset/Liability Management 31 13
Liquidity and Capital Resources 31 14
Acquisitions and Subsidiaries 32 16
Fair Value of Financial Instruments 33 17
Adoption of New Accounting Standards 34 18
Accounting Standards Not Yet Adopted 34 19
Consolidated Statement of Income 35 20
Consolidated Statement of Condition 36 21
Consolidated Statement of Changes in
Stockholders' Equity 37 22
Consolidated Statement of Cash Flows 38 23
Notes to the Consolidated Financial Statements -
1. Accounting Policies 39 24
2. Acquisitions 40 27
3. Cash and Due from Banks 40 27
4. Securities 41 28
5. Loans 43 30
6. Allowance for Credit Losses 44 31
7. Premises and Equipment 44 31
8. Federal Funds Purchased, Securities Sold
Under Agreements to Repurchase and
Other Borrowings 44 32
9. Income Taxes 45 32
10. Long Term Debt 47 35
11. Stockholders' Equity 47 36
12. Contingencies 47 36
13. Financial Instruments with Off-
Balance-Sheet Risk 48 37
14. Rental Commitments on Premises
and Equipment 49 39
15. Retirement Plan 50 40
16. Incentive Compensation Plans 51 41
17. Health Care and Life Insurance Benefits 52 42
18. Fair Value of Financial Instruments 53 44
19. Parent Company Only 55 47
20. Quarterly Consolidated Statement of
Income (Unaudited) 57 49
Report of Independent Accountants 58 50
Analysis of Change in Net Interest Income 59 51
Three-Year Net Interest Income and Average
Balances 60 52
Statistical Summary -
Securities (Carrying Amount at Year End) 62 55
Maturity Schedule of Securities 62 55
Maturity Schedule of Loans 62 55
Interest Sensitivity of Loans 62 55
Analysis of Average Daily Deposits 63 56
Maturity Distribution of Interest Bearing
Deposits in Amounts of $100,000 or more 63 56
Market Price of the Corporation's Common
Shares and Related Security Holder Matters 63 56
Summary of Credit Loss Experience 64 57
-1-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
- ------------------------
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Years Ended December 31,
(Dollars in Millions, ------------------------------------------------------
Except Per Share Amounts)* 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiduciary and Other Fees..................................... $264.1 $235.8 $204.9 $184.2 $177.8
Net Interest Income.......................................... 116.2 108.9 96.1 89.4 83.3
Provision for Credit Losses.................................. (4.0) (6.0) (6.0) (8.4) (1.6)
Other Income................................................. 11.9 9.7 8.7 13.0 16.6
------ ------ ------ ------ ------
Total Operating Income Net of Interest Expense
and Provision for Credit Losses............................ 388.2 348.4 303.7 278.2 276.1
Total Operating Expenses..................................... 315.5 289.5 254.9 259.7 232.9
------ ------ ------ ------ ------
Income From Operations Before Income Tax Expense
and Cumulative Effect of Accounting Changes................ 72.7 58.9 48.8 18.5 43.2
Income Tax Expense........................................... 30.4 22.4 17.4 6.8 12.5
------ ------ ------ ------ ------
Income From Operations Before Cumulative Effect
of Accounting Changes...................................... 42.3 36.5 31.4 11.7 30.7
Cumulative Effect of Changes in Accounting for
Postretirement Benefits and Income Taxes................... - (7.8) - - -
------ ------ ------ ------ ------
Net Income................................................... $ 42.3 $ 28.8 $ 31.4 $ 11.7 $ 30.7
====== ====== ====== ====== ======
- -----------------------------------------------------------------------------------------------------------------------
Net Income Per Share:
Primary:
Income From Operations Before Cumulative Effect
of Accounting Changes.................................. $ 4.26 $ 3.76 $ 3.32 $ 1.24 $ 3.08
Cumulative Effect of Changes in Accounting for
Postretirement Benefits and Income Taxes............... - (0.80) - - -
------ ------ ------ ------ ------
Net Income............................................... $ 4.26 $ 2.96 $ 3.32 $ 1.24 $ 3.08
====== ====== ====== ====== ======
Fully Diluted:
Income From Operations Before Cumulative Effect
of Accounting Changes.................................. $ 4.25 $ 3.74 $ 3.27 $ 1.23 $ 3.07
Cumulative Effect of Changes in Accounting for
Postretirement Benefits and Income Taxes............... - (0.80) - - -
------ ------ ------ ------ ------
Net Income............................................... $ 4.25 $ 2.94 $ 3.27 $ 1.23 $ 3.07
====== ====== ====== ====== ======
Cash Dividends Declared Per Share............................ $ 1.88 $ 1.72 $ 1.60 $ 1.60 $ 1.52
Dividends Per Share as a Percentage of:
Fully Diluted Income From Operations Before Cumulative
Effect of Accounting Changes Per Share................... 44.24% 45.99% 48.93% 130.08% 49.51%
Fully Diluted Net Income Per Share......................... 44.24 58.50 48.93 130.08 49.51
- -----------------------------------------------------------------------------------------------------------------------
At December 31:
Total Assets............................................... $3,186 $2,951 $2,917 $2,778 $2,526
Total Deposits............................................. 2,487 2,355 2,108 2,040 1,987
Long Term Debt............................................. 65 65 69 71 75
Stockholders' Equity....................................... 229 197 182 166 177
- -----------------------------------------------------------------------------------------------------------------------
As a Percentage of Average Stockholders' Equity:
Income From Operations Before Cumulative Effect
of Accounting Changes.................................... 20.47% 18.64% 18.05% 6.75% 17.29%
Net Income................................................. 20.47 15.28 18.05 6.75 17.29
As a Percentage of Average Total Assets:
Income From Operations Before Cumulative Effect
of Accounting Changes.................................... 1.11 1.05 1.09 0.46 1.26
Net Income................................................. 1.11 0.83 1.09 0.46 1.26
As a Percentage of Risk-Adjusted Period End Total Assets:
Tier 1 Capital............................................. 14.08 13.71 10.81 9.90 9.99
Total Capital.............................................. 15.47 15.16 12.03 11.22 11.26
As a Percentage of Risk-Adjusted Average Total Assets:
Tier 1 Capital............................................. 13.52 13.50 13.58 11.94 11.93
Total Capital.............................................. 14.85 14.94 15.12 13.52 13.45
Leverage..................................................... 5.60 5.78 6.68 6.72 7.60
Average Stockholders' Equity as a Percentage of
Average Total Assets....................................... 5.43 5.43 6.04 6.77 7.27
- -----------------------------------------------------------------------------------------------------------------------
* Columns may not tally due to roundings.
</TABLE>
-2-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
- ----------------
FINANCIAL REVIEW
- ------------------------------------------------------------------------
Overview
The Financial Review should be read in conjunction with the Consolidated
Financial Statements. The financial information presented in the
Financial Review has been prepared on a basis consistent with the
policies set forth in the Consolidated Financial Statements. U.S. Trust
Corporation ("the Corporation or Parent") is a financial services
company concentrating on fee-based businesses that provide asset
management, private banking, fiduciary and securities services to
affluent individuals and institutions.
The Corporation has adopted, as of December 31, 1993, Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," ("FAS 115") resulting in
stockholders' equity being increased by $8.7 million. For further
discussion of FAS 115, see the "Adoption of New Accounting Standards"
section of the Financial Review and "Notes to the Consolidated Financial
Statements No. 4." The Corporation also adopted, as of December 31,
1993, Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits," ("FAS 112") which did not have
a significant impact on the results of operations or financial condition
of the Corporation. For further discussion of FAS 112, see the
"Adoption of New Accounting Standards" section of the Financial Review.
In 1992, the Corporation adopted, retroactive to January 1, 1992,
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," ("FAS 106")
and Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," ("FAS 109"). As a result of adopting these two
accounting standards, a one-time, non-cash net after tax charge of
$7.8 million was incurred. The following discussion of the
Corporation's earnings excludes the impact of this one-time net charge.
For further discussion of FAS 106 and FAS 109, see "Notes to the
Consolidated Financial Statements Nos. 9 and 17."
- ------------------------------------------------------------------------
Highlights
o The Corporation earned a record $42.3 million from operations in
1993, an increase of 15.7% over 1992's results. Fully diluted
income per share from operations was a record $4.25 compared to
$3.74 in 1992.
o The return on average stockholders' equity was 20.47% compared to
18.64% for 1992.
o Assets under management increased 21.8% to $32.2 billion. Total
assets under administration, including assets under management,
increased 11.8% to $393.2 billion.
o The Corporation's Tier 1 Capital ratio, based on period end risk-
-3-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
adjusted assets was 14.08% at December 31, 1993, compared to 13.71%
at December 31, 1992.
o The Corporation repurchased 157,500 shares of common stock during
1993, making a total of 2,941,787 shares of common stock that have
been repurchased under its 3.7 million common stock repurchase
program, and acquired a trust and investment management firm
through the issuance of 75,831 shares of common stock.
- ------------------------------------------------------------------------
Fees and Other Income
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
% Change
--------------------
(In Thousands) 1993 1992 1991 93-92 92-91
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Asset Management $152,362 $131,188 $113,031 16.1% 16.1 %
Services to Institutions and Funds:
Funds Services 71,472 66,195 55,936 8.0 18.3
Institutional Services 40,241 38,441 35,981 4.7 6.8
-------- -------- --------
Total Fiduciary Fees 264,075 235,824 204,948 12.0 15.1
Securities Gains, Net 3,025 2,801 1,558 8.0 79.8
Other 8,863 6,939 7,165 27.7 (3.2)
-------- -------- --------
Total Fees and Other Income $275,963 $245,564 $213,671 12.4 14.9
======== ======== ======== ==== ====
Total Fees and Other Income as a Percent of
Taxable Equivalent Operating Income, Net of
Interest Expense and Provision for Credit Losses 70.0% 68.8% 68.1%
======== ======== ========
</TABLE>
Fiduciary Fees are the largest component of revenue and are derived from
the Corporation's two areas of business. The Corporation's reliance on
fee-based services reflects its strategy to be positioned as a financial
services company specializing in asset management, private banking,
fiduciary and securities services. Fee-based services provide a
relatively stable core source of revenues that are less subject to
change in periods of interest rate volatility as compared to net
interest income. The credit loss experience from fee-based activities
has been and continues to be negligible.
Fiduciary Fees are based typically on the market value or par value
-4-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
of assets under management and administration, the volume of securities
transactions, income collection transactions and other services
rendered. Most Asset Management fees are determined on an incremental
scale so that as the value of a client's portfolio grows in size, the
Corporation receives a smaller percentage of the increasing value as fee
income. Therefore, market value or other incremental changes in a
portfolio's size do not necessarily have a proportionate impact on the
level of Fiduciary Fees.
In addition to Fiduciary Fees, certain of the Corporation's
fiduciary businesses provide a substantial and relatively stable source
of predominantly non-interest bearing deposits that are available for
investment. The revenue derived from investing these deposits is
reported as interest income.
The following table provides details of assets under management and
administration for the last six years. Unless otherwise noted, asset
values are measured at their estimated fair value.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
Compound
Growth
Rate
(In Billions) 1993 1992 1991 1990 1989 1988 88-93
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets Under Management $ 32.2 $ 26.5 $ 21.9 $ 18.1 $ 18.0 $ 15.3 16.01%
Custody and Other Non-Managed Assets:
Personal 7.0 5.8 5.6 4.5 4.5 4.0 11.94
Institutional Services 98.5 93.1 83.0 83.2 68.2 58.1 11.12
Funds Services* 128.5 114.4 103.8 78.0 66.6 60.0 16.46
Corporate and Municipal Trusteeships
and Agency Relationships (Par Value) 127.0 112.0 102.0 94.0 90.0 81.0 9.42
------ ------ ------ ------ ------ ------
Total Assets Under Management and
Administration $393.2 $351.8 $316.3 $277.8 $247.3 $218.4 12.48
====== ====== ====== ====== ====== ====== =====
* Includes UIT and Bond Immobilization assets measured at their par value which is the basis upon which fees
are determined.
</TABLE>
Asset Management Fiduciary Fees are derived mainly from investment
management and related services to individuals and institutions. These
services include investment portfolio management, estate and tax
-5-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
planning and personal custody. Asset Management Fiduciary Fees are
based primarily on the market value of its accounts. The increase in
Asset Management Fiduciary Fees are related to higher market values, new
business and acquisitions. Assets under management as of December 31,
1993 increased by 21.8% from the December 31, 1992 level.
Asset Management Fiduciary Fees in 1993 include revenues from
Capital Trust Company ("Capital Trust"), a trust and investment
management firm acquired in July 1993, and a full year of revenues from
Campbell, Cowperthwait & Co., Inc. ("Campbell"), an investment advisory
company acquired in December 1992. Asset Management Fiduciary Fees in
1992 include revenues from Delafield, Harvey, Tabell ("Delafield"), an
investment advisory company acquired in April 1992. Fiduciary fees from
these acquisitions amounted to less than 5% and 3% of Total Asset
Management Fiduciary Fees in 1993 and 1992, respectively. These
acquisitions accounted for 5.6% and 4.0% of assets under management as
of December 31, 1993 and 1992, respectively. See the "Acquisitions and
Subsidiaries" section of the Financial Review and "Notes to the
Consolidated Financial Statements No. 2" for additional discussion.
Funds Services provides custody administration, fund accounting and
administration and transfer agent activities for open and closed-end
mutual funds and custodian, recordkeeping, income collection and
disbursement, and transfer agent services for taxable and tax-exempt
unit investment trusts.
Funds Services assets under administration increased by 12.3% in
1993 and 10.2% in 1992. This increase in assets is primarily
attributable to expanded business with mutual funds, both open and
closed-end. The par value of bonds held in custody for unit investment
trusts has declined over the past few years since many municipalities
have taken advantage of the prevailing low interest rate environment and
redeemed their higher yielding bonds that were held in various unit
investment trusts. While these redemptions have resulted in a reduction
in fee income earned from unit investment trusts, the redemption
activity has also temporarily increased the volume of non-interest
bearing deposits derived from these accounts that was available for
investment.
Institutional Services is comprised of Corporate Trust and Agency
("Corporate Trust") and Institutional Asset Services ("IAS") activities.
Corporate Trust activities include the indenture trustee business for
corporate and municipal debt issues, as well as the non-traditional
processing business. Corporate Trust Fiduciary Fees are affected by the
volume of new debt issuances and redemptions at, or in advance of,
maturity of existing issues. The volume of corporate and municipal
trusteeships and agency relationships (measured by the par value of the
outstanding debt) increased 13.4% in 1993 and 9.8% in 1992.
IAS includes master trust and custody services, securities lending
and global custody services to corporate employee benefit funds, public
funds, financial institutions and endowments and foundations. IAS
Fiduciary Fees are influenced by the market value of its accounts and
transactional activity. IAS assets administered in custody accounts
-6-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
increased 5.8% in 1993 and 12.2% in 1992.
- ------------------------------------------------------------------------
Net Interest Income (Taxable Equivalent Basis)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
(In Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income $169,600 $173,211 $191,354
Taxable Equivalent Adjustment 5,810 8,237 10,228
-------- -------- --------
Total Interest Income 175,410 181,448 201,582
Interest Expense 53,358 64,323 95,256
-------- -------- --------
Net Interest Income $122,052 $117,125 $106,326
======== ======== ========
Percentage Increase From Prior Period 4.2% 10.2% 4.8%
======== ======== ========
</TABLE>
The Corporation's net interest income is a function of the income earned
on interest earning assets, less the cost of interest bearing
liabilities, adjusted to a taxable equivalent basis. The Corporation's
net interest income is impacted by the amount of non-interest bearing
and nterest bearing liabilities derived from its fiduciary activities.
These activities provide in excess of 62% of the Corporation's average
total deposits in 1993, representing 80.8% of its non-interest bearing
deposits and 36.8% of its interest bearing deposits. The funds derived
from the fiduciary activities and from other funding sources are
invested in interest earning assets. Such assets principally consist of
loans to private banking customers, securities and short-term interest
earning financial instruments. The components that comprise net
interest income are shown on page 60, "Three-Year Net Interest Income
and Average Balances."
The major influences on the Corporation's net interest income over
the past three years are:
o An increase in the average volume of net non-interest bearing funds
primarily attributable to the Funds Services business.
o A $939 million increase in the average volume of interest earning
assets from 1990 to 1993.
o A widening of the interest rate spread between the average rate
earned on interest earning assets and the average rate paid on
-7-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
interest bearing sources of funds to 254 basis points in 1993 from
231 basis points in 1991.
o A reduction in the average yield on short-term and variable rate
investments and loans.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
Average Volumes (In Millions) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Earning Assets $3,086 $2,834 $2,447
Interest Bearing Liabilities 1,699 1,674 1,606
------ ------ ------
Net Interest Earning Assets $1,387 $1,160 $ 841
====== ====== ======
Percentage Increase from Prior Period 19.6% 38.0% 12.5%
Non-Interest Bearing Deposits $1,761 $1,508 $1,021
====== ====== ======
Percentage Increase from Prior Period 16.8% 47.7% 11.2%
====== ====== ======
Average Rates (Taxable Equivalent Basis)
- ----------------------------------------
Interest Earning Assets 5.68% 6.40% 8.24%
Cost of Funding Interest Earning Assets 1.73 2.27 3.89
---- ---- ----
Net Yield on Interest Earning Assets 3.95% 4.13% 4.35%
==== ==== ====
</TABLE>
The net yield on interest earning assets is dependent upon the
Corporation's volume of average net non-interest bearing funds ("Free
Funds"), the maturity structure of its interest earning assets and
interest bearing liabilities and the general interest rate environment.
If the average volume of Free Funds is stable, the net yield will
generally be higher in a rising interest rate environment. Conversely,
in a declining interest rate environment, the net yield will be lower.
The Corporation's business philosophy is to enter into private
banking lending relationships with high income professionals and other
affluent individuals and families who either already have other business
relationships with the Corporation, or who might ultimately develop
other relationships. In addition, the Corporation acquires high quality
U.S. Government and Federal Agency securities or mortgage-backed
obligations that are collateralized by Federal Agency securities. These
-8-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
securities produce an acceptable return without subjecting the
Corporation to credit risk exposure. As of December 31, 1993, all of
the Corporation's securities were investment grade or better, with more
than 90% rated AAA.
Temporary inflows of deposits, mainly related to the Funds and
Institutional Services activities, are invested in high quality liquid
short-term financial instruments that ensure the Corporation an adequate
rate of return, while maintaining liquidity and credit quality to
satisfy the eventual outflow of the deposits.
During 1993, average interest earning assets increased mainly by
$148 million of private banking loans and $160 million of short-term
financial instruments. The higher volume of average interest earning
assets was funded primarily by increases in average net non-interest
bearing funds, derived principally from the Funds Services business.
The increase in average interest earning assets in 1992 was
primarily in private banking loans ($168 million) and high quality
securities ($365 million). The volume of average short-term financial
instruments was reduced during this period ($178 million) and replaced
by U.S. Government obligations having an average maturity of less than
one year. The higher volume of average interest earning assets was
funded mainly by increases in average net non-interest bearing funds,
principally related to the Funds Services business.
- ------------------------------------------------------------------------
Operating Expenses
The following table provides details of operating expenses other than
interest expense and provision for credit losses for the last three
years.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
(In Thousands) 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries $120,770 $104,506 $ 93,354
Employee Benefits and Incentive Compensation 68,383 60,426 47,877
Net Occupancy 40,035 37,420 36,939
Equipment 18,536 18,591 19,507
Other 67,796 68,589 57,260
-------- -------- --------
Total $315,520 $289,532 $254,937
======== ======== ========
Percentage Increase (Decrease) From Prior Period 9.0% 13.6% (1.8)%
======== ======== ========
Total Operating Expenses as a Percent of Taxable Equivalent Operating
Income, Net of Interest Expense and Provision for Credit Losses 80.1% 81.2% 81.2 %
======== ======== ========
</TABLE>
-9-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Salaries in 1993 increased 15.6% from 1992 and increased 11.9% in 1992
from 1991. The increases were due mainly to staff additions in the
Asset Management and Funds Services businesses. The number of full-time
equivalent employees increased 12.1% to 2,574 at December 31, 1993,
compared to 2,296 at December 31, 1992. During 1992, the number of
full-time equivalent employees increased 8.6% to 2,296 from 2,114.
Excluding the impact of the acquisitions of Delafield, Campbell and
Capital Trust, salaries increased by 13.3% in 1993 and 9.9% in 1992.
Employee benefits and incentive compensation increased 14.7% in
1993 from 1992 and increased 26.2% in 1992 compared with 1991. These
changes were due primarily to incentive award plans, which are
determined based upon the Corporation's financial performance as
measured by its return on stockholders' equity, and to other employee
benefits whose expense level is a function of staffing levels.
Occupancy charges increased 7.0% in 1993 compared with 1992 and
1.3% in 1992 from 1991. The 1993 and 1992 expense levels reflect the
impact of the Asset Management acquisitions.
Equipment costs decreased 0.3% in 1993 and 4.7% in 1992 due to
reductions in the rates being charged on leased computer equipment.
Other expenses in 1993 decreased 1.2% compared to 1992, while
increasing 19.8% in 1992 compared to 1991. The 1993 decline is a
result, in part, of lower costs related to real estate acquired in debt
restructurings principally associated with the residual corporate loan
portfolio.
Much of the success of the Corporation's fiduciary businesses is
due to its state-of-the-art computer systems. Such systems are costly
to develop and maintain. Expenditures for systems development,
including capitalized costs for purchased computer software from outside
contractors, amounted to 4.71%, 4.03% and 4.44%, respectively, of
taxable equivalent operating income net of interest expense and
provision for credit losses in 1993, 1992 and 1991, respectively.
- ------------------------------------------------------------------------
Income Taxes
The effective tax rates on income before income taxes and cumulative
effect of accounting changes for 1993, 1992 and 1991 were 41.8%, 38.0%
and 35.7%, respectively. The increase in the 1993 effective tax rate is
due to the decline in tax-exempt income as a result of maturities and
redemptions of state and municipal bonds and the impact of the increase
in the federal corporate income tax rate that was retroactive to January
1, 1993. See "Notes to the Consolidated Financial Statements No. 9" for
an analysis of the effective tax rate.
- ------------------------------------------------------------------------
Asset Quality
The Corporation's asset quality is excellent. Its asset mix is
predominantly liquid and low-risk, while its exposure to credit risk
from lending activities is well controlled.
-10-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
<TABLE>
<CAPTION>
Years Ended December 31,
Average Balances --------------------------------------------------------
(Percentage) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and Due From Banks 8.5% 8.3% 8.7%
Short-Term Financial Instruments 14.7 11.5 20.0
Marketable Securities 37.2 42.5 38.5
----- ----- -----
Total Cash, Short-Term Financial Instruments
and Marketable Securities 60.4 62.3 67.2
Loans, Net of Allowance for Credit Losses 28.5 26.8 25.4
Other Assets 11.1 10.9 7.4
----- ----- -----
Total Assets 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
In excess of 60% of average total assets consist of cash and due from
banks, short-term financial instruments and readily marketable
securities. The securities portfolio is concentrated in investments in
U.S. Government and Federal Agencies securities and collateralized
mortgage obligations. At December 31, 1993, the estimated fair value of
the securities portfolio exceeded the Corporation's amortized cost basis
by $16.8 million. See "Notes to the Consolidated Financial Statements
No. 4" for additional details concerning securities.
The loan portfolio is the second largest category of average total
assets, compared to most other banking institutions where the loan
portfolio is the largest component of interest earning assets. The
Corporation's loan portfolio is comprised primarily of loans to private
banking customers. Average loans increased 16.4%, or approximately
$154.6 million in 1993 to $1,095.7 million, from $941.1 million in 1992.
Average private banking loans, which comprise approximately 90% of total
loans outstanding, grew by $148.4 million, or 17.7% from 1992. In
excess of 60% of average private banking loans are secured by
residential mortgages. Average loans increased by 27.3% in 1992, with
average private banking loans increasing by 25.1%.
The provision for credit losses was $4.0 million in 1993 and $6.0
million in 1992 and 1991. The provision for credit losses reflects the
addition to the allowance for credit losses that management deems
appropriate to maintain the allowance at a level adequate when related
to the risk of loss inherent in the credit portfolio. In assessing
adequacy, management relies on its ongoing review of specific credits,
on past experience, present credit portfolio composition and general
economic and financial considerations. See "Summary of Credit Loss
Experience" on page 64 for a more detailed discussion of the allowance
-11-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
for credit losses.
The following table presents significant credit loss relationships
for the past three years:
<TABLE>
<CAPTION>
(In Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $11,676 $ 8,661 $ 8,599
------- ------- -------
Charge-offs (4,100) (3,566) (6,285)
Recoveries 1,817 581 322
------- ------- -------
Net charge-offs (2,283) (2,985) (5,963)
Provision charged to income 4,000 6,000 6,025
------- ------- -------
Balance, December 31 $13,393 $11,676 $ 8,661
======= ======= =======
Ratios:
Allowance to Average Loans 1.22% 1.24% 1.17%
Net Charge-Offs to Average Loans 0.21 0.32 0.81
Allowance to Loans at Year-End 0.96 0.93 0.74
Net Charge-Offs to Loans at Year-End 0.16 0.24 0.51
Allowance to Nonperforming Loans 223.03 135.75 44.42
</TABLE>
The reduction in the 1993 provision for credit losses compared to the
1992 provision for credit losses reflects the credit quality of the
Corporation's loan portfolio. Non-accrual and restructured loans
represent 0.43% of total loans at December 31, 1993, versus 0.68% and
1.68% of total loans at December 31, 1992 and 1991, respectively.
Private banking loans that are secured by residential mortgages amounted
to 50.0% of total loans at December 31, 1993, compared to 48.6% and
38.6% at December 31, 1992 and 1991, respectively.
At December 31, 1993, the ratio of the allowance for credit losses
to average loans was 1.22%. This ratio reflects the quality of the
Corporation's loan portfolio. All new lending has been concentrated
with private banking customers, mainly in residential real estate
mortgage loans. The Corporation exited the corporate lending business
in 1987 and the residual corporate loan portfolio has been reduced since
that time to its current insignificant level. See "Summary of Credit
Loss Experience" on page 64 for details on loan charge-offs and
recoveries.
At December 31, 1993, the loan portfolio included loans to
individuals involved in the financial services industry of approximately
$329 million. The Corporation's credit loss experience with these loans
has been excellent. Net charge-offs from loans to individuals involved
-12-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
in the financial services industry amounted to $237,000 in 1993,
$707,000 in 1992 and $807,000 in 1991. Such net charge-offs as a
percentage of average total loans amounted to 2 basis points, 8 basis
points and 11 basis points in 1993, 1992 and 1991, respectively.
The following table presents the composition of nonperforming
assets for the private banking business and all other lending
businesses, which includes the corporate loan business that the
Corporation exited in 1987.
<TABLE>
<CAPTION>
December 31,
---------------------
(In Thousands) 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Non-accrual and restructured loans:
Private banking non-accrual loans $ 4,929 $ 7,498
All other non-accrual and restructured loans 1,076 1,103
------- -------
6,005 8,601
------- -------
Real estate acquired in debt restructurings:
Private banking 3,101 3,291
All other 8,441 10,386
------- -------
11,542 13,677
------- -------
Total nonperforming assets $17,547 $22,278
======= =======
</TABLE>
The decrease in nonperforming assets reflects a reduction in private
banking non-accrual loans, primarily through charge-offs, and a
reduction in real estate acquired in debt restructurings through the
sale of certain properties and the receipt of cash that was applied
against the carrying amount of the applicable property. The ratio of
total nonperforming assets to the sum of total average loans and real
estate acquired in debt restructurings was 1.58% at December 31, 1993
and 2.33% at December 31, 1992.
- ------------------------------------------------------------------------
Asset/Liability Management
Asset/Liability management plays an integral part in implementing the
Corporation's strategic goals and objectives. Asset/Liability
management involves the approximate matching of interest sensitive
assets and liabilities within appropriate time periods. The Corporation
attempts to maintain a reasonable balance of rate sensitive assets and
liabilities in order to produce a relatively stable net interest margin
-13-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
over time. This is achieved through both direct matching of assets and
liabilities with similar maturity structures and employing interest rate
swaps and forward rate agreements. At December 31, 1993, the
Corporation had $103 million notional principal amount of interest rate
swaps outstanding and $150 million of notional principal amount of
forward rate agreements outstanding. See "Notes to the Consolidated
Financial Statements No. 13" for additional details.
The seasonality of the Funds Services and Institutional Services
businesses results normally in significant increases in total deposits
at the beginning of each calendar quarter, with July 1 and January 1 of
each year being the highest volume dates, as trust accounts collect
scheduled interest and principal payments on their investments. These
large inflows of deposits remain temporarily with the Corporation.
While the management of these deposits is an important element of the
Corporation's asset/liability management, the trust accounts incur
overdraft loans at period-end in anticipation of receiving these
deposits at the beginning of the following month and tend to distort the
quarter-end statements of condition of the Corporation. For this
reason, average balances represent a far more meaningful measure of the
Corporation's asset/liability position.
The Corporation purchases securities with the positive intent to
hold such securities until their maturity. The Corporation also
believes, subject to unforeseeable events, that it has the ability to
hold such securities until their maturity. The Corporation does,
however, from time to time sell certain securities when it is determined
that such transactions are the most appropriate method for achieving the
Corporation's asset/liability management objectives and are typically
made to compensate for an increase in private banking fixed rate
residential mortgage loans. The Corporation adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," ("FAS 115") as of December
31, 1993. Upon adopting FAS 115, the Corporation classified
approximately 90% of its securities as "available for sale" in order to
maintain the requisite flexibility needed to continue to manage its
asset/liability structure.
Under FAS 115 unrealized gains and losses attributable to
securities available for sale are recorded as a separate component of
stockholders' equity. Since the Corporation's capital base will be
directly impacted by short-term changes in interest rates, it is likely
that in future periods the volume of securities transactions will
increase. See the "Adoption of New Accounting Standards" section of the
Financial Review and "Notes to the Consolidated Financial Statements No.
4" for further discussion of the impact of adopting FAS 115.
- ------------------------------------------------------------------------
Liquidity and Capital Resources
Liquidity management involves the Corporation's ability to raise or gain
access to funds to satisfy the requirements of its customers and the
-14-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
funding of its own interest earning financial instruments and other
assets. Liquidity management is a dynamic concept, the implementation
of which is put into action as the composition of the Corporation's
asset and liability mix changes.
The Corporation maintains a high degree of liquidity. Average core
deposits, consisting primarily of demand, trust and money market
deposits from private banking and fiduciary clients, amounted to 79.0%
of total gross sources of funds in 1993. Certain trust relationships,
especially from the Funds Services area, provide the Corporation with a
predictable long-term source of funds. The predictability of these
deposits allows the Corporation to acquire long-term interest earning
assets. These sources of funds also allow the Corporation to minimize
its reliance upon commercial paper borrowings, Federal funds purchased
and the issuance of large denomination certificates of deposit.
See the composition of assets and liabilities in the "Three-Year
Net Interest Income and Average Balances" on page 60, maturity schedules
of securities, loans and deposits on pages 62 and 63 and interest
sensitivity of loans on page 62 for additional information concerning
the Corporation's liquidity positioning.
The Parent requires access to funds sufficient to pay dividends to
common shareholders, interest and principal to debt holders and for
other corporate purposes, such as loans and capital investments in
affiliates and purchases of treasury stock. The primary source of funds
for the parent is dividends from United States Trust Company of New York
("the Trust Company"). See "Notes to the Consolidated Financial
Statements No. 11" for a discussion of restrictions on the Corporation's
banking affiliates' ability to pay dividends to the Parent. At December
31, 1993, the Corporation's subsidiary banks had the ability, without
seeking regulatory authority, to pay dividends totaling $47.4 million to
the Parent. During 1993, the Parent injected $17.9 million of capital
into the Trust Company and its other non-banking subsidiaries to support
business expansion.
Additional sources of liquidity include a $25.0 million revolving,
unsecured credit arrangement with a major financial institution and,
subject to certain regulatory restrictions, the Parent may borrow on a
collateralized basis from its affiliate banks. At December 31, 1993,
the Parent had no borrowings outstanding under its revolving credit
arrangement.
The Corporation's capital ratios remain strong. The ratio of Tier
1 Capital to period-end risk-adjusted assets amounted to 14.08% at
December 31, 1993. The Leverage ratio (defined by the Federal Reserve
Board as Tier 1 Capital divided by quarterly average total assets
reduced by disallowed intangibles) amounted to 5.60%. The Trust Company
has also maintained its strong capital position. At December 31, 1993,
the Trust Company's Tier 1 Risk Adjusted capital ratio was 13.08%. Its
Leverage ratio (as defined by the Federal Reserve Board) was 5.04%. As
of December 31, 1993, the banking regulatory authorities had not
determined the capital treatment of unrealized gains or losses resulting
-15-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
from the adoption of FAS 115. Accordingly, for the purpose of
calculating the various capital ratios, Tier 1 capital, risk-adjusted
assets and average assets exclude the impact of the Corporation's
adoption of FAS 115.
The Corporation has maintained its strong capital position while
conducting a stock repurchase program which commenced in 1987. Between
1987 and 1992, the Corporation's Board of Directors approved common
stock repurchases totalling 3.7 million shares. Through December 31,
1993, 2,941,787 shares of common stock have been repurchased at an
aggregate cost of $116.3 million (average cost of $39.54 per share),
leaving 758,213 common shares remaining to be repurchased. The
Corporation continues to believe that its level of capital is high for
the risks inherent in its business. Internally generated capital (net
income reduced by dividends declared) increased by $67.4 million for the
five year period 1989 - 1993, representing a 6.42% compound annual
growth rate.
The Corporation believes that its most important asset is its
employees. A significant element for achieving success in the
Corporation's businesses relates to making stock ownership in the
Corporation an integral part of employee compensation. This is
accomplished through the ESOP, purchases of shares of stock through the
401(k) plan and grants of stock options, restricted stock and other
stock-based incentive compensation plans to selected officers of the
Corporation. Non-employee directors of the Corporation also participate
in stock option and stock compensation programs. Employees, officers
and Directors of the Corporation own approximately 23% of the
Corporation's outstanding shares of stock.
The Corporation has a targeted dividend payout ratio of 40 - 50% of
earnings both to control the growth of its capital and to return value
to its shareholders. The 1993 dividend payout ratio, as a percentage of
fully diluted net income per share, was 44.24%. At its January 25, 1994
meeting, the Corporation's Board of Directors increased the quarterly
dividend on the Corporation's common stock to $.50 per share, an
increase of three cents. This represents an annual dividend of $2.00
per common share.
- ------------------------------------------------------------------------
Acquisitions and Subsidiaries
The Corporation's business strategy calls for expansion of its asset
management customer base in key areas of wealth concentration through
the acquisition of investment advisory firms, the de novo establishment
of subsidiaries and the establishment of branch offices of existing
subsidiaries. A summary of these activities follows.
o In June 1993, U.S. Trust Company of Connecticut ("UST Connecticut")
was opened for business as a limited purpose trust company. At
December 31, 1993, UST Connecticut had approximately $362 million
of assets under management.
-16-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
o In July 1993, the Corporation acquired Capital Trust Company
("Capital Trust"), a Portland, Oregon-based trust and investment
management firm, for 75,831 shares of its common stock valued at
$4 million. The acquisition was accounted for as a pooling-of-
interests. At December 31, 1993, Capital Trust had approximately
$1.4 billion of assets under management and approximately
$672 million of assets under supervision. As of January 1, 1994,
Capital Trust changed its name to U.S. Trust of the Pacific
Northwest and its consulting practice was contributed to a separate
subsidiary, CTC Consulting, Inc.
o In November 1993, U.S. Trust Company of California, N.A., opened a
new full-service branch office in Costa Mesa, California, to serve
the growing affluent region of Orange County.
o Effective March 31, 1992, the Corporation purchased Delafield,
Harvey, Tabell, Inc. ("Delafield"), a Princeton, New Jersey-based
investment advisory and broker/dealer company, for 206,307 shares
of its common stock valued at $9 million. The acquisition was
accounted for as a purchase. In late 1992, U.S. Trust Company of
New Jersey was granted authority to operate as a full-service trust
company and the investment advisory business of Delafield was
contributed to it. At December 31, 1993, U.S. Trust Company of New
Jersey had approximately $613 million of assets under management.
o On December 1, 1992, the Corporation acquired Campbell,
Cowperthwait & Co., Inc. ("Campbell"), a New York City-based
investment advisory company, for 106,541 shares of its common stock
valued at $5 million. The acquisition was accounted for as a
pooling-of-interests. At December 31, 1993, Campbell had
approximately $452 million of assets under management.
o In 1991, the Corporation converted U.S. Trust Company of Florida,
N.A., located in Palm Beach, into a state-chartered savings bank
that has the ability to establish branch locations in selected high
net worth areas in Florida. In 1992, a branch office was opened in
Naples, Florida.
- ------------------------------------------------------------------------
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," ("FAS 107") requires disclosure of
the estimated fair values of the Corporation's financial instruments.
The FAS 107 disclosures and commentary concerning the usefulness of
these disclosures is set forth in "Notes to the Consolidated Financial
Statements No. 18." A discussion of the Corporation's most significant
financial instruments under FAS 107 follows.
The estimated fair value of the Corporation's loan portfolio
-17-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
exceeded its carrying amount ("the fair value spread") by approximately
$19 million at December 31, 1993 and by approximately $11 million at
December 31, 1992. The increase in the fair value spread primarily
reflects the higher value of the Corporation's fixed rate residential
real estate mortgage portfolio ("fixed rate mortgages"). At December
31, 1993, fixed rate mortgages outstanding amounted to $439 million,
compared to $327 million outstanding at December 31, 1992. The
estimated fair value of these loans was derived using a discounted cash
flow model that took into consideration current loan prepayment rates.
At December 31, 1993, the Corporation's 15-year fixed rate mortgage
portfolio, the dominant fixed rate mortgage product, yielded 57 basis
points more than the interest rate offered to qualified borrowers at
year end. At December 31, 1992, the spread between the yield on the 15-
year fixed rate mortgage portfolio and the interest rate offered to
qualified borrowers was 34 basis points.
The estimated fair value of the Corporation's securities portfolio
exceeded its amortized cost by approximately $17 million at December 31,
1993 and approximately $26 million at December 31, 1992. This decrease
in the excess of fair value over amortized cost reflects the
Corporation's decision to sell approximately $351 million of fixed rate
securities while realizing a $3.0 million gain during 1993 and an
overall reduction in the weighted average maturity of the Corporation's
portfolio of securities.
The fair value spread for the Corporation's long term debt at
December 31, 1993 was approximately $5 million, compared to
approximately $4 million at December 31, 1992. The increase in the fair
value spread of long term debt reflects an approximate 100 basis point
decrease in interest rates between the two periods.
The estimated fair value of interest rate swaps improved from an
approximate loss of $6.6 million at December 31, 1992 to an approximate
loss of $4.0 million at December 31, 1993. The Corporation is a net
fixed rate payor under its interest rate swap agreements. The reduction
in the loss on interest rate swaps reflects the maturity and
amortization of $15.5 million notional principal amount of high fixed
rate interest rate swaps and their replacement with a $25 million
notional principal amount interest rate swap with a significantly lower
fixed interest obligation.
- ------------------------------------------------------------------------
Adoption of New Accounting Standards
Accounting for Postemployment Benefits
The Corporation has adopted, as of December 31, 1993, Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," ("FAS 112"). FAS 112 requires employers to
accrue currently the cost of benefits, including salary continuation and
severance benefits, provided to former or inactive employees after
employment but before retirement. The adoption of FAS 112 did not have
a significant impact on the results of operations or financial condition
-18-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
of the Corporation.
Accounting for Debt and Equity Securities
The Corporation has adopted, as of December 31, 1993, Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," ("FAS 115"). FAS 115
requires that investments in debt securities be classified in one of
three categories, each having a different financial accounting method.
The three categories, with their related accounting method, are:
securities held to maturity (carried at amortized cost; unrealized gains
and losses are not recorded); trading securities (carried at estimated
fair value; unrealized gains and losses included in the determination of
net income); and securities available for sale (carried at estimated
fair value; unrealized gains and losses recorded, net of deferred income
taxes, in a separate component of stockholders' equity).
As of December 31, 1993, $837 million of the Corporation's
investment securities portfolio was classified as available for sale;
the remaining $87 million of the investment securities portfolio was
classified as held to maturity. Investment securities classified as
available for sale are carried at their estimated fair value, which
exceeded their amortized cost by $16.5 million. Stockholders' equity
has been increased by $8.7 million (net of $7.8 million of deferred
income taxes).
- ------------------------------------------------------------------------
Accounting Standards Not Yet Adopted
Accounting for Impairment of a Loan
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan," ("FAS 114") was issued in May 1993
and is effective for years beginning after December 15, 1994, with
earlier application encouraged. FAS 114 addresses the accounting by
creditors for impairment of a loan by specifying how allowances for
credit losses related to certain loans should be determined. FAS 114
also addresses the accounting by creditors for all loans that are
restructured in a troubled debt restructuring involving a modification
of terms, including troubled debt restructurings involving a receipt of
assets in partial satisfaction of a loan.
FAS 114 requires that the amount of loan impairment be measured
based on the present value of expected future cash flows discounted at
the loan's effective interest rate or, as a practical expedient, at the
loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. Based upon the initial review of this
standard and the present creditworthiness of the loan portfolio, the
Corporation does not believe that the adoption of FAS 114 will have a
significant impact on the results of operations or financial condition
of the Corporation.
-19-
<PAGE>
<PAGE>
<TABLE>
U.S. TRUST CORPORATION
Consolidated Statement of Income
For the Years Ended December 31,
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In Thousands, Except Per Share Amounts) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans............................................................................ $ 77,204 $ 70,088 $ 69,927
Securities:
Taxable........................................................................ 67,868 77,669 70,401
Exempt from Federal Income Taxes............................................... 7,267 10,842 15,167
Federal Funds Sold and Securities Purchased Under Agreements to Resell........... 12,213 8,338 19,099
Deposits with Banks.............................................................. 5,048 6,274 16,760
-------- -------- --------
Total Interest Income............................................................ 169,600 173,211 191,354
-------- -------- --------
INTEREST EXPENSE
Deposits......................................................................... 37,478 42,450 68,639
Federal Funds Purchased, Securities Sold Under Agreements to Repurchase
and Other Borrowings........................................................... 10,509 16,356 20,887
Long Term Debt................................................................... 5,371 5,517 5,730
-------- -------- --------
Total Interest Expense........................................................... 53,358 64,323 95,256
-------- -------- --------
NET INTEREST INCOME.............................................................. 116,242 108,888 96,098
Provision for Credit Losses...................................................... 4,000 6,000 6,025
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES............................ 112,242 102,888 90,073
-------- -------- --------
FEES AND OTHER INCOME
Fiduciary and Other Fees......................................................... 264,075 235,824 204,948
Securities Gains, Net............................................................ 3,025 2,801 1,558
Other............................................................................ 8,863 6,939 7,165
-------- -------- --------
Total Fees and Other Income...................................................... 275,963 245,564 213,671
-------- -------- --------
Total Operating Income Net of Interest Expense and Provision for Credit Losse.... 388,205 348,452 303,744
-------- -------- --------
OPERATING EXPENSES
Salaries......................................................................... 120,770 104,506 93,354
Employee Benefits and Incentive Compensation..................................... 68,383 60,426 47,877
-------- -------- --------
Total Salaries and Benefits...................................................... 189,153 164,932 141,231
Net Occupancy.................................................................... 40,035 37,420 36,939
Equipment........................................................................ 18,536 18,591 19,507
Other............................................................................ 67,796 68,589 57,260
-------- -------- --------
Total Operating Expenses......................................................... 315,520 289,532 254,937
-------- -------- --------
Income From Operations Before Income Tax Expense and Cumulative Effect
of Accounting Changes.......................................................... 72,685 58,920 48,807
Income Tax Expense............................................................... 30,418 22,389 17,424
-------- -------- --------
Income From Operations Before Cumulative Effect of Accounting Changes............ 42,267 36,531 31,383
Cumulative Effect of Changes in Accounting for Postretirement Benefits and
Income Taxes (Notes 9 and 17).................................................. - (7,780) -
-------- -------- --------
Net Income....................................................................... $ 42,267 $ 28,751 $ 31,383
======== ======== ========
Primary Net Income Per Share:
Income From Operations Before Cumulative Effect of Accounting Changes.......... $ 4.26 $ 3.76 $ 3.32
Cumulative Effect of Changes in Accounting for Postretirement Benefits
and Income Taxes............................................................. - (0.80) -
-------- -------- --------
Net Income..................................................................... $ 4.26 $ 2.96 $ 3.32
======== ======== ========
Fully Diluted Net Income Per Share:
Income From Operations Before Cumulative Effect of Accounting Changes.......... $ 4.25 $ 3.74 $ 3.27
Cumulative Effect of Changes in Accounting for Postretirement Benefits
and Income Taxes.............................................................. - (0.80) -
-------- -------- --------
Net Income..................................................................... $ 4.25 $ 2.94 $ 3.27
======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
-20-
<PAGE>
<PAGE>
<TABLE>
U.S. TRUST CORPORATION
Consolidated Statement of Condition
December 31,
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and Due from Banks..................................................................... $ 179,117 $ 219,709
Interest Bearing Deposits with Banks........................................................ 61,476 61,860
Securities:
Available for Sale, at Estimated Fair Value............................................... 836,532 -
Held to Maturity (Estimated Fair Value $87,069 in 1993)................................... 86,748 -
Investment (Estimated Fair Value $1,222,349 in 1992)...................................... - 1,196,068
Federal Funds Sold and Securities Purchased Under Agreements to Resell...................... 237,000 -
Loans....................................................................................... 1,398,723 1,260,461
Less: Allowance for Credit Losses.......................................................... 13,393 11,676
---------- ----------
Net Loans................................................................................... 1,385,330 1,248,785
Premises and Equipment...................................................................... 109,767 102,080
Other Assets................................................................................ 290,382 122,958
---------- ----------
Total Assets................................................................................ $3,186,352 $2,951,460
========== ==========
LIABILITIES
Deposits:
Non-Interest Bearing...................................................................... $1,241,085 $1,220,677
Interest Bearing.......................................................................... 1,245,529 1,134,474
---------- ----------
Total Deposits.............................................................................. 2,486,614 2,355,151
Federal Funds Purchased, Securities Sold Under Agreements to Repurchase
and Other Borrowings...................................................................... 258,072 225,295
Accounts Payable and Accrued Liabilities.................................................... 147,979 108,779
Long Term Debt.............................................................................. 65,100 65,082
---------- ----------
Total Liabilities........................................................................... 2,957,765 2,754,307
---------- ----------
Commitments and Contingencies
STOCKHOLDERS' EQUITY 1993 1992
---- ----
Common Stock
Par Value................. $1.00 $5.00
Authorized Shares......... 40,000,000 20,000,000
Issued Shares............. 11,436,293 11,301,213 .......................... 11,436 56,506
Capital Surplus.............................................................................. 67,898 23,280
Retained Earnings............................................................................ 242,112 216,839
Treasury Stock, at Cost (2,076,868 Shares in 1993 and 2,028,891 Shares in 1992).............. (82,857) (78,443)
Loan to ESOP................................................................................. (18,697) (21,029)
Unrealized Gain, Net of Taxes, on Securities Available for Sale.............................. 8,695 -
---------- ----------
Total Stockholders' Equity................................................................... 228,587 197,153
---------- ----------
Total Liabilities and Stockholders' Equity................................................... $3,186,352 $2,951,460
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
-21-
<PAGE>
<PAGE>
<TABLE>
U.S. TRUST CORPORATION
Consolidated Statement of Changes in Stockholders' Equity
For the Years Ended December 31,
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands, Except Per Share Amounts) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance, Beginning of Year........................................................ $ 56,506 $ 55,864 $ 55,600
Issuance of Shares Under Employee Benefit Plans (135,080,
128,497 and 52,800 Shares)...................................................... 467 642 264
Change in Par Value of Common Stock............................................... (45,537) - -
-------- -------- --------
Balance, End of Year.............................................................. $ 11,436 $ 56,506 $ 55,864
======== ======== ========
CAPITAL SURPLUS
Balance, Beginning of Year........................................................ $ 23,280 $ 23,385 $ 22,639
Employee Benefit Plans............................................................ 4,011 2,282 746
Acquisitions...................................................................... (4,930) (2,387) -
Change in Par Value of Common Stock............................................... 45,537 - -
-------- -------- --------
Balance, End of Year.............................................................. $ 67,898 $ 23,280 $ 23,385
======== ======== ========
RETAINED EARNINGS
Balance, Beginning of Year........................................................ $216,839 $203,441 $186,150
Net Income........................................................................ 42,267 28,751 31,383
Cash Dividends Declared ($1.88, $1.72 and $1.60 Per Share)........................ (17,677) (15,860) (14,598)
Tax Benefit on Dividends Paid to ESOP............................................. 683 507 506
-------- -------- --------
Balance, End of Year.............................................................. $242,112 $216,839 $203,441
======== ======== ========
TREASURY STOCK
Balance, Beginning of Year........................................................ $(78,443) $(77,452) $(73,496)
Purchases (157,500, 292,000 and 96,000 Shares).................................... (8,485) (13,277) (3,862)
Issuance (Tender) of Shares Under Employee Benefit Plans, Net (33,692,
27,780 and (639) Shares)...................................................... 1,175 821 (94)
Issuance of Shares for Acquisitions (75,831 and 312,848 Shares)................. 2,896 11,465 -
-------- -------- --------
Balance, End of Year............................................................ $(82,857) $(78,443) $(77,452)
======== ======== ========
LOAN TO ESOP
Balance, Beginning of Year........................................................ $(21,029) $(23,181) $(25,167)
Principal Payment by ESOP......................................................... 2,332 2,152 1,986
-------- -------- --------
Balance, End of Year.............................................................. $(18,697) $(21,029) $(23,181)
======== ======== ========
UNREALIZED GAIN, NET OF TAXES, ON SECURITIES AVAILABLE FOR SALE
Balance, Beginning of Year........................................................ $ - $ - $ -
Adoption of FAS 115 - Net Unrealized Gain, Net of Taxes, on Securities
Available for Sale,............................................................. 8,695 - -
-------- -------- --------
Balance, End of Year.............................................................. $ 8,695 $ - $ -
======== ======== ========
Total Stockholders' Equity........................................................ $228,587 $197,153 $182,057
======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
-22-
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<PAGE>
<TABLE>
U.S. TRUST CORPORATION
Consolidated Statement of Cash Flows
For the Years Ended December 31,
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income................................................................... $ 42,267 $ 28,751 $ 31,383
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
Activities:
Provision for Credit Losses.................................................. 4,000 6,000 6,025
Depreciation and Amortization of Premises and Equipment and Other Assets..... 14,896 13,326 11,167
Deferred Income Taxes........................................................ 1,820 889 (1,348)
Net Amortization of Premium on Securities.................................... 10,768 9,752 2,091
Net Change in Accrued Interest, Commissions and Other Receivables............ (28,886) 2,456 (3,384)
Net Change in Accounts Payable and Other Liabilities......................... 39,405 6,019 15,354
Cumulative Effect of Adopting FAS 106 (Before Taxes)......................... - 22,968 -
Cumulative Effect of Adopting FAS 109........................................ - (4,609) -
Other, Net................................................................... (2,738) (84) (8,163)
--------- --------- ---------
Net Cash Provided by Operating Activities.................................... 81,532 85,468 53,125
--------- --------- ---------
Cash Flows From Investing Activities:
Net Change in Interest Bearing Deposits with Banks........................... 384 33,480 65,232
Investment Securities:
Proceeds from Sales........................................................ 202,080 169,968 53,587
Proceeds from Maturities, Calls and Mandatory Redemptions.................. 781,561 607,660 458,981
Purchases.................................................................. (854,446) (961,837) (629,617)
Net Change in Federal Funds Sold and Securities Purchased
Under Agreements to Resell................................................. (237,000) 304,525 (65,586)
Net Change in Loans.......................................................... (138,262) (96,816) (103,481)
Expenditures for Premises and Equipment, Net of Retirements.................. (19,405) (7,595) (7,334)
Principal Payment by ESOP.................................................... 2,332 2,152 1,986
Other, Net................................................................... 3,067 (17,147) (5,357)
--------- --------- ---------
Net Cash Provided (Used) by Investing Activities............................. (259,689) 34,390 (231,589)
--------- --------- ---------
Cash Flows From Financing Activities:
Net Change in Non-Interest Bearing Deposits.................................. 20,408 183,928 67,655
Net Change in Money Market and Other Savings Deposits........................ 115,971 58,284 37,102
Net Change in Time Deposits.................................................. (4,916) 5,066 (36,747)
Net Change in Federal Funds Purchased, Securities Sold Under
Agreements to Repurchase and Other Borrowings.............................. 32,777 (248,486) 46,243
Repurchases/Repayment of Long Term Debt...................................... (5,282) (3,822) (2,031)
Issuance of Common Stock..................................................... 4,297 3,119 684
Purchases of Treasury Stock.................................................. (8,485) (13,277) (3,862)
Dividends Paid............................................................... (17,205) (15,570) (14,618)
--------- --------- ---------
Net Cash Provided (Used) by Financing Activities............................. 137,565 (30,758) 94,426
--------- --------- ---------
Net Change in Cash and Cash Equivalents...................................... (40,592) 89,100 (84,038)
Cash and Cash Equivalents at January 1....................................... 219,709 130,609 214,647
--------- --------- ---------
Cash and Cash Equivalents at December 31..................................... $ 179,117 $ 219,709 $ 130,609
========= ========= =========
Income Taxes Paid............................................................ $ 29,678 $ 23,670 $ 16,546
Interest Expense Paid........................................................ 53,536 65,436 99,850
The accompanying notes are an integral part of these financial statements.
</TABLE>
-23-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
- ----------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------
1. Accounting Policies
U.S. Trust Corporation ("the Corporation") provides banking and
fiduciary services in the United States through its principal
subsidiary, United States Trust Company of New York ("the Trust
Company") and its other subsidiaries. The accounting and reporting
policies of the Corporation and its subsidiaries conform with generally
accepted accounting principles and general practice within the banking
industry.
The following is a summary of the significant policies:
(a) Basis of Presentation - The consolidated financial statements
include the accounts of the Corporation and its majority owned
subsidiaries. All material intercompany accounts and transactions have
been eliminated in consolidation.
(b) Trust Assets - Property (other than cash deposits) held by the
Trust Company or the Corporation's other subsidiaries in a fiduciary or
agency capacity for customers are not assets of the Corporation and are
not included in the consolidated statement of condition.
(c) Securities - Effective December 31, 1993, the Corporation adopted
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," ("FAS 115"). FAS
115 requires that an enterprise classify its investments in debt and
readily marketable equity securities as either securities held to
maturity (carrying amount equals amortized cost), securities available
for sale (carrying amount equals estimated fair value; unrealized gains
and losses recorded in a separate component of stockholders' equity) or
trading securities (carrying amount equals estimated fair value;
unrealized gains and losses included in the determination of net
income.).
The Corporation has evaluated all of its investments in debt and
equity securities and has classified them as either held to maturity or
available for sale. Premiums and discounts on these securities are
amortized or accreted in accordance with the policy set forth in "Notes
to the Consolidated Financial Statements No. 1(d)." Realized gains and
losses from sales of securities held to maturity and securities
available for sale are determined on a specific identification cost
basis.
Prior to the adoption of FAS 115, the Corporation had classified
its investments in debt and equity securities as investment securities,
that were carried at amortized cost. Premiums and discounts on
investment securities were amortized or accreted in accordance with the
policy set forth in "Notes to the Consolidated Financial Statements
No.1(d)." Realized gains and losses from sales of investment securities
were determined on a specific identification cost basis.
See "Notes to the Consolidated Financial Statements No. 4" for
additional discussion.
-24-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
(d) Interest Bearing Financial Instruments - Interest income/expense is
accrued on interest bearing financial instruments based upon the
contractual terms of the instrument. Premiums and discounts are
amortized or accreted, respectively, on a basis that approximates the
effective yield method.
(e) Nonperforming Assets - Nonperforming assets consist of non-accrual
financial instruments, restructured assets and real estate acquired in
debt restructurings. Interest accruals are discontinued when principal
or interest is contractually past due ninety days or more. In addition,
interest accruals may be discontinued when principal or interest is
contractually past due less than ninety days if in the opinion of
management the amount due is not likely to be paid in accordance with
the terms of the contractual agreement, even though the financial
instruments are currently performing. Any accrued but unpaid interest
previously recorded on a non-accrual financial instrument is reversed
against interest income. Subsequent cash receipts of interest on non-
accrual financial instruments are applied either to the outstanding
principal balance or recorded as interest income, depending on
management's assessment of the ultimate collectibility of principal.
Non-accrual financial instruments are generally returned to accrual
status only when all delinquent principal and interest payments are
brought current and the collectibility of future principal and interest
on a timely basis is reasonably assured.
If a financial instrument is restructured as a result of the
deterioration of a borrower's financial condition, interest will accrue
at the renegotiated or effective rate, as appropriate.
Real estate acquired in debt restructurings ("ORE") is recorded in
other assets at the lower of the carrying amount of the loan or the
ORE's estimated fair value less estimated costs to sell. After the
acquisition date of the ORE, operating expenses and revenue, additional
writedowns, as appropriate, and gains and losses on the ultimate
disposition of ORE are reported in other expenses.
(f) Allowance for Credit Losses - The allowance for credit losses is
established through charges to income based on management's evaluation
of the adequacy of the allowance in meeting present and possible future
losses in the existing credit portfolio, which includes loans,
commitments to extend credit and standby letters of credit. The
adequacy of the allowance is continually reviewed by management, taking
into consideration current economic conditions, past loss experience and
the risks inherent in the credit portfolio.
(g) Premises and Equipment - Premises and equipment, including
leasehold improvements, are stated at cost less accumulated amortization
and depreciation. Amortization and depreciation expenses are computed
on a straight-line method over the lesser of the term of the lease or
the estimated useful lives of the assets. Maintenance and repairs
-25-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
expenses are charged to operating expenses as incurred.
(h) Postretirement Plans - The Corporation has a trusteed,
noncontributory, qualified defined benefit retirement plan that provides
retirement benefits to substantially all employees. The retirement plan
benefit formula is based upon years of service, average compensation
over the final years of service and the social security covered
compensation. The Corporation's funding policy is consistent with the
funding requirements of Federal laws and regulations. Retirement plan
assets are managed by the Trust Company and consist primarily of listed
stocks and commingled debt and international and domestic equity pension
trust funds. The Corporation also maintains an unfunded, non-trusteed,
noncontributory, non-qualified retirement plan for participants whose
retirement benefit payments under the qualified plan are expected to
exceed the limits imposed by Federal tax law.
Effective January 1, 1992, the Corporation adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." See "Notes to the
Consolidated Financial Statements No. 17" for additional discussion.
(i) Income Taxes - The Corporation files a consolidated Federal income
tax return. Applicable taxes of the individual companies are determined
as if they filed a separate return and every subsidiary is charged or
credited for its amount of computed tax.
Deferred income taxes are provided for items that are recognized
for income tax purposes in years other than those in which they are
recognized for financial reporting purposes.
Effective January 1, 1992, the Corporation adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
See "Notes to the Consolidated Financial Statements No. 9" for
additional discussion.
(j) Net Income Per Share - Primary net income per share is computed by
dividing net income by the total weighted average common and common
equivalent shares outstanding. Common equivalent shares include the
dilutive effect of outstanding stock options and the assumed issuance of
deferred stock awards earned from incentive plans. Total common and
common equivalent shares outstanding amounted to 9,968,033 in 1993,
9,697,987 in 1992 and 9,466,686 in 1991.
Fully diluted net income per share is computed under the assumption
that all contingent increases in common stock have occurred to the
extent that they have a dilutive effect on net income per share. Total
common shares outstanding on a fully diluted basis amounted to 9,994,591
in 1993, 9,768,499 in 1992 and 9,592,999 in 1991.
(k) Cash and Cash Equivalents - For purposes of the Consolidated
Statement of Cash Flows, the Corporation considers the Consolidated
-26-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Statement of Condition caption "Cash and Due from Banks" as cash and
cash equivalents. For purposes of the U.S. Trust Corporation (Parent
Company Only) (See "Notes to the Consolidated Financial Statements No.
19") Statement of Cash Flows, the Corporation considers the Statement of
Condition caption "Total Due From Banks" as cash and cash equivalents.
- ------------------------------------------------------------------------
2. Acquisitions
On July 7, 1993, the Corporation exchanged 75,831 shares of its common
stock, valued at approximately $4.0 million, for 100% of the shares of
Capital Trust Company ("Capital Trust"), a Portland, Oregon-based trust
and investment management and consulting company. On December 1, 1992,
the Corporation exchanged 106,541 shares of its common stock, valued at
approximately $5.0 million, for 100% of the shares of Campbell,
Cowperthwait & Co., Inc. ("Campbell"), a New York City-based investment
advisory company. These acquisitions were accounted for as poolings-of-
interests. Neither acquisition had a significant effect on the
Corporation's consolidated financial statements. Accordingly, the
results of operations for Capital Trust and Campbell have been recorded
as of their respective dates of acquisition and prior period financial
statements were not restated.
On March 31, 1992, the Corporation purchased 100% of the stock of
Delafield, Harvey, Tabell Inc., an investment advisory company located
in Princeton, New Jersey, for 206,307 shares of the Corporation's common
stock valued at $9.0 million. The acquisition was accounted for as a
purchase. Substantially all of the purchase price was allocated to the
value of investment management contracts that are being amortized on a
straight-line basis over their estimated 10 years life. The acquisition
did not have a material impact on the Corporation's 1992 operating
results.
- ------------------------------------------------------------------------
3. Cash and Due from Banks
The average non-interest earning balances held at the Federal Reserve
Bank for the years ended December 31, 1993 and 1992 were $73 million and
$58 million, respectively. These amounts represent reserve requirements
which must be maintained on deposits. There are no other restrictions
on cash and due from banks.
- ------------------------------------------------------------------------
4. Securities
The Corporation adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities,"
("FAS 115") as of December 31, 1993. Prior to adopting FAS 115, all of
the Corporation's investments in debt and equity securities had been
classified as investment securities that were recorded at their
amortized cost.
A comparison of the amortized cost, estimated fair value and gross
-27-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
unrealized gains and losses as of December 31, 1993 for securities
available for sale and securities held to maturity, and for investment
securities as of December 31, 1992 follows.
<TABLE>
<CAPTION>
Estimated Gross Gross
Amortized Fair Unrealized Unrealized
(In Thousands) Cost Value Gains Losses
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
December 31, 1993:
U.S. Government and Federal Agency obligations:
U.S. Treasury obligations $ 210,265 $ 212,312 $ 2,100 $ 53
Government National Mortgage Association obligations
(Ginnie Mae) (1) 153,239 162,379 9,401 261
U.S. Government Sponsored Agencies and Corporations (2) 189,755 190,467 784 72
---------- ---------- ------- ------
553,259 565,158 12,285 386
---------- ---------- ------- ------
States and Municipal obligations (3) 85,341 89,748 4,417 10
Collateralized mortgage obligations (4) 115,516 115,728 447 235
All other 65,907 65,898 - 9
---------- ---------- ------- ------
Total $ 820,023 $ 836,532 $17,149 $ 640
========== ========== ======= ======
Securities held to maturity:
December 31, 1993:
U.S. Government and Federal Agency obligations:
Government National Mortgage Association
obligations (Ginnie Mae) (1) $ 73,300 $ 73,591 $ 291 $ -
U.S. Government Sponsored Agencies and Corporations (2) 13,448 13,478 32 2
---------- ---------- ------- ------
$ 86,748 $ 87,069 $ 323 $ 2
========== ========== ======= ======
Investment securities:
December 31, 1992:
U.S. Government and Federal Agency obligations:
U.S. Treasury obligations $ 335,549 $ 345,157 $ 9,608 $ -
Government National Mortgage Association obligations
(Ginnie Mae) (1) 268,659 279,889 12,695 1,465
U.S. Government Sponsored Agencies and Corporations (2) 154,961 155,195 523 289
---------- ---------- ------- ------
759,169 780,241 22,826 1,754
---------- ---------- ------- ------
States and Municipal obligations (3) 131,453 137,325 5,891 19
Collateralized mortgage obligations (4) 285,184 284,531 723 1,376
All other 20,262 20,252 9 19
---------- ---------- ------- ------
Total $1,196,068 $1,222,349 $29,449 $3,168
========== ========== ======= ======
<FN>
(1) Backed by the full faith and credit of the U.S. Government.
(2) Securities available for sale are comprised of Federal National Mortgage Association (Fannie Mae), Federal Home Loan
Mortgage Corporation (Freddie Mac) and Small Business Administration (SBA) obligations. Securities held to maturity
are comprised of SBA obligations. Investment securities are comprised of Fannie Mae and Freddie Mac obligations.
(3) Comprised mainly of highly rated investment grade general obligation and revenue bonds.
(4) Collateralized by either Ginnie Mae, Fannie Mae or Freddie Mac obligations.
</TABLE>
-28-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
The amortized cost and estimated fair value of securities available for
sale and securities held to maturity at December 31, 1993, by the
earlier of contractual maturity or call date, follows.
<TABLE>
<CAPTION>
December 31, 1993,
-----------------------------------------------------------------
Securities Available for Sale Securities Held to Maturity
------------------------------ ---------------------------
Estimated Estimated
Amortized Fair Amortized Fair
(In Thousands) Cost Value Cost Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $250,079 $250,469 $ - $ -
Due after one year through two years 34,031 35,853 - -
Due after two years through five years 54,069 57,357 - -
Due after five years through ten years 4,515 4,961 - -
Due after ten years 15,043 15,542 - -
-------- -------- ------- -------
Sub-Total 357,737 364,182 - -
Collateralized mortgage obligations,
mortgage-backed securities and other
asset-backed securities (1)(2)(3) 458,510 468,574 86,748 87,069
-------- -------- ------- -------
Total $816,247 $832,756 $86,748 $87,069
======== ======== ======= =======
<FN>
(1) In excess of 98% and 84% of securities available for sale and securities held to maturity, respectively, are
collateralized mortgage obligations and mortgage-backed securities.
(2) At December 31, 1993, the Corporation's available for sale collateralized mortgage obligations, mortgage-backed
securities and other asset-backed securities had a weighted-average life of 2.6 years and the Corporation's held to
maturity mortgage-backed securities and other asset-backed securities had a weighted-average life of 7.8 years,
reflecting anticipated future prepayments based on a consensus of dealers in the market.
(3) Expected maturities for collateralized mortgage obligations, mortgage-backed securities and other asset-backed
securities may differ from contractual maturities because borrowers have the right to prepay obligations with or
without prepayment penalties.
(4) Excludes $3,776 of Federal Reserve Bank and Federal Home Loan Bank stock.
</TABLE>
The components of securities gains, net for the years ended December 31,
1993, 1992 and 1991 follows.
-29-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------
(In Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross realized gains from sales $3,347 $2,871 $1,624
Gross realized (losses) from sales (370) (206) (43)
Net gains (losses) on maturities, calls and mandatory redemptions 48 136 (23)
------ ------ ------
Securities gains, net $3,025 $2,801 $1,558
====== ====== ======
</TABLE>
In December 1993, the Corporation sold $351,460,000 of securities, which
created an account receivable from various brokers of $152,358,000. The
entire amount of this receivable was collected in January 1994.
At December 31, 1993 and 1992, securities in the amount of
$285,543,000 and $226,323,000, respectively, were pledged to secure
public deposits, as collateral for borrowings, to qualify for fiduciary
powers and for other purposes.
- ------------------------------------------------------------------------
5. Loans
The following is an analysis of the composition of the loan portfolio.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------
(In Thousands) 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Private banking:
Residential real estate mortgages $ 699,193 $ 612,142 $ 449,270 $ 353,663 $ 298,860
Other 416,922 319,233 300,859 308,071 339 028
---------- ---------- ---------- ---------- ----------
Total private banking loans 1,116,115 931,375 750,129 661,734 637,888
---------- ---------- ---------- ---------- ----------
Short-term trust credit facilities* 211,741 259,729 321,270 341,511 337,963
Loans to financial institutions for
purchasing and carrying securities 57,505 52,652 49,982 20,967 28,103
All other 13,362 16,705 42,264 35,952 74,826
---------- ---------- ---------- ---------- ----------
Total $1,398,723 $1,260,461 $1,163,645 $1,060,164 $1,078,780
========== ========== ========== ========== ==========
* The Trust Company provides short-term credit facilities to certain of its trust customers in anticipation of
receiving interest and dividends due from investments under administration and custody agreements. The Trust Company
has never experienced a credit loss as a result of these arrangements. Approximately 86% of the December 31, 1993
short-term trust credit facilities were repaid on the next business day.
</TABLE>
-30-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
The aggregate outstanding principal amounts of non-accrual and
restructured loans follow:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------
(In Thousands) 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Private banking non-accrual loans $4,929 $7,498 $ 9,194 $ 5,054 $ 1,356
All other non-accrual and restructured loans 1,076 1,103 10,304 11,058 28,532
------ ------ ------- ------- -------
Total $6,005 $8,601 $19,498 $16,112 $29,888
====== ====== ======= ======= =======
</TABLE>
The effect of these loans on interest income is presented below:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
(In Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income which would have been earned under original terms $689 $648 $1,748
Interest income recognized during year 264 276 473
---- ---- ------
Reduction in interest income $425 $372 $1,275
==== ==== ======
</TABLE>
An analysis of real estate acquired in debt restructurings follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
(In Thousands) 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Private banking $ 3,101 $ 3,291 $ 840 $ 240 $ 147
All other 8,441 10,386 8,375 9,108 7,192
------- ------- ------ ------ ------
Total $11,542 $13,677 $9,215 $9,348 $7,339
======= ======= ====== ====== ======
</TABLE>
-31-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
- ------------------------------------------------------------------------
6. Allowance for Credit Losses
An analysis of the allowance for credit losses follows:
<TABLE>
<CAPTION>
(In Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $11,676 $ 8,661 $ 8,599
------- ------- -------
Charge-offs (4,100) (3,566) (6,285)
Recoveries 1,817 581 322
------- ------- -------
Net charge-offs (2,283) (2,985) (5,963)
Provision charged to income 4,000 6,000 6,025
------- ------- -------
Balance, December 31 $13,393 $11,676 $ 8,661
======= ======= =======
</TABLE>
- ------------------------------------------------------------------------
7. Premises and Equipment
An analysis of premises and equipment follows:
<TABLE>
<CAPTION>
December 31,
--------------------
(In Thousands) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 1,000 $ 1,000
Building 12,140 12,127
Leasehold improvements 93,115 88,378
Furniture and equipment 62,776 52,280
-------- --------
169,031 153,785
Less accumulated amortization and depreciation 59,264 51,705
-------- --------
Total $109,767 $102,080
======== ========
Amortization and depreciation expense $ 11,952 $ 10,669
======== ========
</TABLE>
Amortization and depreciation expense amounted to $10,062,000 for 1991.
-32-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
- ------------------------------------------------------------------------
8. Federal Funds Purchased, Securities Sold Under
Agreements to Repurchase and Other Borrowings
An analysis of borrowings follows:
<TABLE>
<CAPTION>
(In Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal funds purchased:
Year-end balance $ 31,535 $ 70,945 $ 45,775
Daily average balance 151,005 253,446 147,888
Maximum end-of-month balance 470,325 812,810 257,870
Weighted average interest rate during year 3.12% 3.78% 5.62%
Weighted average interest rate at year-end 3.00 2.04 4.01
Securities sold under agreements to repurchase:
Year-end balance $189,679 $134,473 $387,657
Daily average balance 187,868 192,733 207,662
Maximum end-of-month balance 305,249 378,146 387,657
Weighted average interest rate during year 2.82% 3.26% 5.64%
Weighted average interest rate at year-end 2.86 2.91 3.69
Other borrowings:
Year-end balance $ 36,858 $ 19,877 $ 40,349
Daily average balance 17,326 20,327 16,171
Maximum end-of-month balance 37,716 101,138 40,349
Weighted average interest rate during year 2.88% 2.45% 5.40%
Weighted average interest rate at year-end 2.59 3.97 3.75
</TABLE>
Federal funds purchased and securities sold under agreements to
repurchase generally are overnight borrowing transactions.
- ------------------------------------------------------------------------
9. Income Taxes
The Corporation adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," ("FAS 109") retroactive to January
1, 1992. FAS 109 requires, among other things, that an asset and
liability approach be applied to accounting for income taxes and that
the recognition of deferred tax assets be evaluated using a "more likely
than not" realizability criterion. As a result of adopting FAS 109,
first quarter and full year 1992 net income was increased by $4.6
million ($.47 per share).
Since the Corporation did not restate its 1991 financial statements
for the effects of FAS 109, the following disclosures have been prepared
using two different accounting principles. The disclosures for 1993 and
1992 have been prepared under the provisions of FAS 109. Disclosures
for 1991 have been prepared under the guidelines set forth in Accounting
Principles Board Opinion No. 11, the predecessor of FAS 109.
-33-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
The components of the provision for income tax expense that are
attributable to income from operations are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
(In Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $16,280 $10,543 $ 9,684
State and local 12,318 10,957 9,088
------- ------- -------
Total current income taxes 28,598 21,500 18,772
------- ------- -------
Deferred:
Federal 2,180 2,205 (1,308)
State and local (360) (1,316) (40)
------- ------- -------
Total deferred income taxes 1,820 889 (1,348)
------- ------- -------
Total $30,418 $22,389 $17,424
======= ======= =======
</TABLE>
Deferred income tax provisions (benefits) that are attributable to
income from operations resulted from:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
(In Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alternative minimum tax $ 2,563 $ 3,718 $(1,356)
Depreciation expense 2,999 1,593 2,835
Other real estate 1,554 107 (2,170)
Deferred compensation (3,941) (3,012) (1,432)
Provision for credit losses (706) (1,367) 69
Trust and fiduciary activities (337) (499) (1,081)
Retirement plans 63 (236) 1,651
Federal tax rate change (403) - -
Other, net 28 585 136
------- ------- -------
Total $ 1,820 $ 889 $(1,348)
======= ======= =======
</TABLE>
-34-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
A reconciliation of the Federal statutory income tax rate with the
Corporation's effective income tax rate attributable to income from
operations follows:
<TABLE>
<CAPTION>
Years Ended December 31,
- ----------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1993 1993 1992 1992 1991 1991
- ---------------------------------------------------------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. Federal income tax rate $25,440 35.0 % $20,033 34.0 % $16,594 34.0 %
Increase (decrease) in effective rate
resulting from:
Tax-exempt interest income (2,466) (3.4) (3,562) (6.0) (4,846) (9.9)
State and local taxes, net of Federal
income tax benefit 7,773 10.7 6,363 10.8 5,972 12.2
Alternative minimum tax - - - - (1,356) (2.8)
Miscellaneous items (329) (0.5) (445) (0.8) 1,060 2.2
------- ---- ------- ---- ------- ----
$30,418 41.8 % $22,389 38.0 % $17,424 35.7 %
======= ==== ======= ==== ======= ====
</TABLE>
The components of income tax expense for the years ended December 31,
1993 and 1992 that are attributable to income from operations,
cumulative effect of changes in accounting principles and stockholders'
equity follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
(In Thousands) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income from operations $30,418 $ 22,389
Cumulative effect of changes in accounting principles:
Adoption of FAS 106 - (10,579)
Adoption of FAS 109 - (4,609)
Stockholders' equity:
Adoption of FAS 115 7,814 -
Tax benefit on dividends paid to the ESOP on unallocated shares (683) (507)
------- --------
Total $37,549 $ 6,694
======= ========
</TABLE>
-35-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
The components of the net deferred tax (asset) as of December 31, 1993
and 1992 follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
(In Thousands) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax (assets):
Deferred compensation $(14,880) $(10,751)
Trust and fiduciary activities (9,239) (8,750)
Retirement plans (6,332) (5,863)
Allowance for credit losses (6,186) (5,382)
Leasing transactions (3,400) (3,400)
Other real estate (1,232) (2,793)
Alternative minimum tax - (2,563)
Other (1,427) (1,642)
-------- --------
(42,696) (41,144)
-------- --------
Deferred tax liabilities:
Premises and equipment 18,012 14,757
Other 494 780
-------- --------
Net deferred tax (asset) $(24,190) $(25,607)
======== ========
</TABLE>
The income tax effect of securities gains, net was $1,433,000,
$1,304,000 and $725,000 in 1993, 1992 and 1991, respectively.
- ------------------------------------------------------------------------
10. Long Term Debt
Long term debt is comprised of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
(In Thousands) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
8 1/2% Capital Notes due 2001 $12,453 $14,103
8.35% Senior Unsecured ESOP Notes due 1999 18,697 21,029
8% Notes due 1996 29,950 29,950
Federal Home Loan Bank Borrowings 4,000 -
------- -------
Total $65,100 $65,082
======= =======
</TABLE>
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<PAGE>
<PAGE>
U.S. TRUST CORPORATION
The capital notes were issued by the Trust Company, and are subordinated
to deposits and certain other liabilities. The capital notes require
annual sinking fund payments of $1,650,000; and are redeemable in whole
or in part, at the option of the Trust Company, subject to the approval
of any bank supervisory authority having jurisdiction, at an initial
redemption price of 104.25% of the principal amount, decreasing to 100%
of the principal amount in 1996 and thereafter, together with accrued
interest.
The 8.35% Senior Unsecured ESOP Notes due 1999 ("ESOP Notes") are
obligations of the Corporation that require annual payments of principal
and interest. The Corporation loaned the proceeds from the ESOP Notes
to the trust established to administer the 401(k) Plan and ESOP of
United States Trust Company of New York and Affiliated Companies
("401(k) Plan") on the same terms. The 401(k) Plan used the proceeds to
purchase 690,498 shares of common stock from the Corporation's treasury
stock holdings for an Employee Stock Ownership Plan ("the ESOP"). The
ESOP Notes are collateralized by the unallocated shares of the
Corporation's common stock held by the ESOP. The ESOP Notes call for
principal repayments amounting to $2,526,000, $2,737,000, $2,966,000,
$3,213,000 and $3,482,000, payable annually on February 1, 1994, through
February 1, 1998. Based upon the anticipated February 1, 1994 loan
payment, 69,075 shares of common stock were allocated to ESOP
participants as of December 31, 1993, bringing the total number of
allocated shares to 345,124.
The 8% notes are unsecured and unsubordinated obligations of the
Corporation. They are not redeemable or callable by, or at the option
of, the Corporation at any time.
The Federal Home Loan Bank ("PHIL") borrowings represent four
separate drawings of $1 million each, with maturity dates between 1995
and 1999. The PHIL borrowings bear interest ranging between 5.56% and
6.43%. Each PHIL borrowing is collateralized by the pledge of
qualifying assets.
- ------------------------------------------------------------------------
11. Stockholders' Equity
At the Annual Meeting of Shareholders on April 27, 1993, the
shareholders approved an amendment to the Certificate of Incorporation
which reduced the par value of the Corporation's common stock from $5.00
per share to $1.00 per share. Effective as of that date $45,537,000 was
transferred from the Common Stock account to the Capital Surplus
account. In addition, the shareholders approved an increase in the
Corporation's authorized common shares to 40 million from 20 million.
Neither of these actions had any effect on the total amount of
Stockholders' Equity.
In April 1992, the Corporation's Board of Directors approved a 1.0
million common stock buyback program. This was in addition to the 2.7
million common stock buyback program that had been previously approved.
Through December 31, 1993, 2,941,787 shares of common stock have been
repurchased in the open market at an average cost of $39.54 per share.
Of the total common shares repurchased, 157,500 common shares were
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<PAGE>
<PAGE>
U.S. TRUST CORPORATION
purchased in 1993 at a total cost of $8.5 million.
The Corporation is authorized to issue up to 5.0 million, $1.00 par
value, preferred shares as of December 31, 1993. No preferred shares
have been issued.
The Corporation's banking subsidiaries are subject to limitations
on the amount of dividends they can pay to the Corporation without prior
approval of the bank regulatory authorities. Under this limitation, the
banking subsidiaries can declare, in aggregate, dividends in 1994
without approval of the regulatory authorities of approximately $27.4
million, plus an additional amount equal to the banking subsidiaries'
net income for 1994 as of the dividend declaration date. In addition,
in 1992 the Trust Company applied for, and was granted permission by the
Federal Reserve Bank of New York, authority to pay a special dividend to
the Corporation of up to $50.0 million. Under this special authority,
the Trust Company has paid dividends to the Corporation of $5.0 million
in 1993 and $25.0 million in 1992.
- ------------------------------------------------------------------------
12. Contingencies
There are various pending and threatened actions and claims against the
Corporation and its subsidiaries in which the Corporation has denied any
liability and which it will vigorously contest. Management, after
consultation with counsel as to the foregoing matters, is of the opinion
that the ultimate resolution of such matters is unlikely to have any
future material effect on the Corporation's financial position.
- ------------------------------------------------------------------------
13. Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business, the Corporation enters into various
transactions involving off-balance sheet financial instruments to meet
the needs of its customers and to reduce its own exposure to
fluctuations in interest rates. These transactions are subject to
varying degrees of market and credit risk. As compensation for the
risks assumed, these instruments generate interest or fee revenue or
expense. The controls used to monitor the credit and market risks of
off-balance sheet financial instruments are consistent with those
associated with the Corporation's on-balance sheet activities.
Credit-Related Financial Instruments
Credit-related financial instruments include firm commitments to extend
credit ("commitments"), standby letters of credit ("standbys") and
indemnifications in connection with securities lending activities
("securities lending"). The credit risk associated with these
instruments varies depending on the creditworthiness of the customer and
the value of the collateral held, if any. Collateral requirements vary
by type of instrument. The contractual amounts of these instruments
represent the amounts at risk should the contract be fully drawn upon
and the client default, with all collateral being worthless.
-38-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Commitments are legally binding agreements to lend to a customer
that generally have fixed expiration dates or other termination clauses,
may require payment of a fee and are not secured by collateral until
funds are advanced. The Corporation evaluates each customer's
creditworthiness on a case-by-case basis prior to approving a commitment
or advancing funds under a commitment and determining the related
collateral requirement. Collateral held includes marketable securities,
real estate mortgages or other assets. The majority of the
Corporation's commitments are related to mortgage lending to private
banking clients and backup lines or credit for various financial
institutions. The mortgage lending commitments are generally expected
to be utilized, while the backup lines of credit typically expire
unused. Commitments totaled $129.6 million and $153.1 million at
December 31, 1993 and 1992, respectively.
Standbys are conditional commitments issued by the Corporation to
guarantee the performance of a customer to a third party. Those
guaranties are issued to satisfy margin requirements incurred by
investment banking and broker/dealer companies for their activities
conducted on organized exchanges, to guarantee performance under lease
and other agreements by professional business corporations and for other
purposes. The credit risk involved in issuing standbys is essentially
the same as that involved in extending loans. Standbys outstanding at
December 31, 1993 and 1992 amounted to $113.5 million and $122.5
million, respectively. Collateral is obtained based on management's
credit assessment of the counterparty. At December 31, 1993, $92.7
million of the standbys outstanding were partially or fully secured by
collateral consisting of cash, marketable equity securities, marketable
debt securities (including corporate and U.S. Treasury debt securities)
and other assets, compared with $82.5 million at December 31, 1992.
Approximately 54% of the standbys outstanding at December 31, 1993
expire within one year compared with approximately 47% at December 31,
1992.
The Trust Company has established a program through which
participating trust customers may lend their securities to
counterparties. In certain cases, the Trust Company indemnifies the
trust customer for losses if the counterparty defaults and the
collateral received is insufficient to compensate for the loss of the
loaned securities. Collateral value is monitored daily and additional
collateral is obtained when appropriate. Securities lending obligations
subject to the Trust Company's indemnification amounted to $1,231.1
million at December 31, 1993 and $814.7 million at December 31, 1992.
Collateral, principally cash, held against these security lending
obligations totaled $1,253.2 million and $828.2 million, respectively,
at December 31, 1993 and 1992, respectively.
Derivative Financial Instruments
From time to time, the Corporation utilizes derivative financial
instruments, such as interest rate swap agreements ("swap agreements")
and forward rate agreements ("FRAs") to hedge its fixed rate loan
-39-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
portfolio as part of its overall asset and liability management process.
The market values associated with these instruments can vary depending
on movements in interest rates. The measurement of the market risks
associated with these instruments is meaningful only when all related
and offsetting transactions are identified. The notional or contractual
amounts of these instruments are indications of the volume of
transactions and do not necessarily represent amounts at risk. The
amounts at risk upon default are generally limited to the unrealized
market valuation gains of the instruments and will vary based on changes
in interest rates. The risk of default depends on the creditworthiness
of the counterparty to the instrument. The Corporation evaluates the
creditworthiness of its counterparties as part of its normal credit
review procedures.
At December 31, 1993 and 1992, the Corporation was a counterparty
to swap agreements with a total notional principal amount of $103
million and $94 million, respectively. Swap agreements involve the
exchange of fixed and floating rate interest payment obligations
computed on notional principal amounts. The Corporation enters into
swap agreements with counterparties as a principal. Outstanding swap
agreements had a weighted average maturity of approximately 19 months at
December 31, 1993 and 23 months at December 31, 1992.
FRAs involve the exchange of net interest differentials calculated
as the difference between a contractual interest rate and a market
interest rate determined on the contract's settlement date. At December
31, 1993, the Corporation was a party to FRAs with a total notional
principal amount of $150 million, compared with a total notional
principal amount of $175 million outstanding at December 31, 1992.
Outstanding FRAs had a weighted average maturity of approximately 90
days at both December 31, 1993 and 1992.
- ------------------------------------------------------------------------
14. Rental Commitments on Premises and Equipment
Substantially all of the Corporation's operations are conducted from
premises that are leased. The initial lease periods expire between 1994
and 2016. The lease for the Corporation's headquarters building expires
in 2014 and is renewable at the Corporation's option for two successive
terms of 10 years each at the then current market rate. In addition,
the Corporation leases data processing equipment under leases with
expiration dates ranging from two to seven years. Management expects
that in the normal course of business most leases will be renewed or
replaced by other leases.
Rent expense on operating leases for the years 1993, 1992 and 1991,
net of sublease rentals, was $35,799,000, $35,021,000 and $35,269,000,
respectively. Operating lease rent expense includes adjustments
amounting to $2,584,000 in 1993, $2,222,000 in 1992 and $3,598,000 in
1991 for increases in real estate taxes, labor costs and certain
operating expenses of the landlords, net of similar adjustments applied
on sublease rentals.
-40-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
The following is a schedule of future minimum rental and sublease
payments that have noncancelable lease terms in excess of one year as of
December 31, 1993:
<TABLE>
<CAPTION>
Minimum
Minimum Rentals Net
Minimum Sublease of Sublease
(In Thousands) Rentals Rentals Rentals
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year Ending December 31:
1994 $ 26,846 $200 $ 26,646
1995 27,581 183 27,398
1996 27,379 - 27,379
1997 25,980 - 25,980
1998 25,302 - 25,302
Later years 272,745 - 272,745
-------- ---- --------
Total minimum payments required $405,833 $383 $405,450
======== ==== ========
</TABLE>
The foregoing minimum rental amounts include, and are subject to
escalations based upon increases in certain operating expenses incurred
by the lessors.
- ------------------------------------------------------------------------
15. Retirement Plan
The following table details the components of pension expense (credit)
and the funded status of the Corporation's qualified and non-qualified
retirement plans and the major assumptions used to determine these
amounts.
-41-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
<TABLE>
<CAPTION>
Qualified Plan Non-Qualified Plan
---------------------------------- -----------------------------------
(In Thousands) 1993 1992 1991 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Components of pension expense (credit):
Service cost $ 5,072 $ 4,267 $ 3,520 $ 260 $ 157 $ 134
Interest cost 9,212 8,313 7,379 355 396 308
Actual return on plan assets (31,233) (15,892) (36,051) - - -
Net amortization and deferral 15,189 821 21,656 110 191 148
-------- -------- -------- ------- ------- -------
Net pension expense (credit) $ (1,760) $ (2,491) $ (3,496) $ 725 $ 744 $ 590
======== ======== ======== ======= ======= =======
Funded status of retirement plans:
Plan assets, at market value $194,141 $167,180 $155,241 $ - $ - $ -
Actuarial present value of benefit
obligations:
Accumulated benefit obligations:
Vested 99,757 78,468 66,265 2,684 1,749 1,185
Non-vested 7,519 6,559 5,816 209 205 159
-------- -------- -------- ------- ------- -------
Total 107,276 85,027 72,081 2,893 1,954 1,344
Provision for future salary increases 18,370 17,916 16,450 2,130 2,626 2,437
-------- -------- -------- ------- ------- -------
Projected benefit obligations 125,646 102,943 88,531 5,023 4,580 3,781
-------- -------- -------- ------- ------- -------
Excess of plan assets over projected
benefit obligations 68,495 64,237 66,710 (5,023) (4,580) (3,781)
Unrecognized cumulative net losses
(gains) (32,072) (27,366) (29,207) 1,283 1,459 1,342
Prior service cost not yet recognized
in periodic pension costs 1,786 1,976 1,252 245 270 280
Unrecognized net liability (asset)
at date of initial application (19,189) (21,588) (23,986) 414 466 517
-------- -------- -------- ------- ------- -------
Prepaid (accrued) pension cost $ 19,020 $ 17,259 $ 14,769 $(3,081) $(2,385) $(1,642)
======== ======== ======== ======= ======= =======
Major assumptions at year-end (1):
Discount rate 7.5% 8.5% 9.0% 7.5% 8.5% 9.0%
Rate of increase in compensation 4.5% 5.5% 6% 4.5% 5.5% 6%
Expected rate of return on plan assets 9% 9% 9% 9% 9% 9%
- -----------------------------------------------------------------------------------------------------------------------
(1) The pension expense (credit) is determined using the assumptions as of the beginning of the year. The funded
status is determined using the assumptions as of the end of the year.
</TABLE>
The Corporation uses the projected unit credit cost method to compute
the vested benefit obligation, where the vested benefit obligation is
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<PAGE>
<PAGE>
U.S. TRUST CORPORATION
the actuarial present value of the vested benefits to which the employee
is entitled based on the employee's expected date of separation or
retirement.
- ------------------------------------------------------------------------
16. Incentive Compensation Plans
The Corporation sponsors a 401(k) Plan and ESOP covering all employees
who satisfy a one year service requirement. The 401(k) Plan provides
that, depending upon the Corporation satisfying certain profitability
criteria and other factors, eligible employees receive annual awards
calculated as a percentage of such employees' compensation. Awards to
senior officers are calculated under the provisions of the Annual
Incentive Plan ("AIP"), while awards to non-senior officers and other
employees are governed by the terms of the Incentive Award Plan ("IAP").
Awards under either the AIP or IAP plan are comprised of an ESOP award,
which is mandatorily contributed to the 401(k) Plan, and of an elective
award, which may be taken in cash or, subject to certain limitations,
deferred and contributed to the 401(k) Plan. Total incentive awards
were $26.0 million, $23.8 million and $19.0 million in 1993, 1992 and
1991, respectively.
The Corporation's 1989 Stock Compensation Plan ("the 1989 Plan")
governs the granting of stock option, restricted common stock and Long-
Term Performance ("LTPP") awards to eligible employees. The 1989 Plan,
as amended in April 1992, authorizes the issuance of a maximum of 1.3
million common shares plus common shares previously authorized but not
utilized under certain predecessor stock compensation plans. At
December 31, 1993, the Corporation had 561,307 shares of common stock
available for issuance as restricted stock awards, incentive stock
options, non-qualified stock options and performance share units.
Under the 1989 Plan, the Corporation may award either incentive
stock options or non-qualified stock options. The options expire ten
years from the date of grant and their exercise price is not less than
the fair value of a common share on the date of grant.
In 1989, the shareholders of the Corporation approved the Stock
Option Plan for Non-Employee Directors of U.S. Trust Corporation ("the
Directors Plan"). The Directors Plan provides for the granting of non-
qualified options to non-employee directors, as defined in the Directors
Plan. The Directors Plan authorizes the issuance of a maximum of
125,000 shares of common stock. The options expire ten years from the
date of grant and their exercise price is not less than the fair value
of a common share on the date of grant.
The following is a combined summary of option transactions which
occurred under the 1989 Plan and the Directors Plan during 1993, 1992
and 1991.
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<PAGE>
<PAGE>
U.S. TRUST CORPORATION
<TABLE>
<CAPTION>
Shares
Under Option Price
Option Per Share
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1, 1991 1,239,920 $ 9.22 - 42.13
Granted 10,000 29.58 - 35.45
Exercised or cancelled (61,787) 9.22 - 42.13
--------- --------------
Balance, December 31, 1991 1,188,133 16.72 - 42.13
Granted 210,000 44.75 - 49.63
Exercised or cancelled (145,735) 16.72 - 44.75
--------- --------------
Balance, December 31, 1992 1,252,398 16.72 - 49.63
Granted 179,200 53.88
Exercised or cancelled (144,425) 16.72 - 53.88
--------- --------------
Balance, December 31, 1993 1,287,173 $19.00 - 53.88
========= ==============
</TABLE>
Options exercisable at December 31, 1993 and 1992 amounted to 750,121
shares and 668,293 shares, respectively.
Awards of restricted common stock to key executives are contingent
upon their continued employment, generally between two to seven years.
The fair value of the shares at the date of grant is recorded as
compensation expense over the restriction period. At December 31, 1993,
a total of 100,608 shares with an unamortized cost of $1,594,000 were
outstanding with restrictions. During 1993, 28,500 shares with an
aggregate fair value at their date of grant of approximately $1,536,000
were awarded. The expense recognized for the plan amounted to
$1,465,000 in 1993, $1,240,000 in 1992 and $1,259,000 in 1991.
LTPP awards are calculated as a percentage of such officers'
compensation to the extent that certain goals defined in the plan are
met. The Corporation provided for awards of $4,222,000, $3,691,000 and
$1,984,000 under the LTPP in the years 1993, 1992 and 1991. LTPP awards
are based upon three-year cycles. Awards are charged to expense over
the three-year cycle based upon earnings projections.
- ------------------------------------------------------------------------
17. Health Care and Life Insurance Benefits
The Corporation provides certain health care and life insurance benefits
for all employees, certain qualifying retired employees and their
dependents.
The Corporation adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," ("FAS 106") retroactive to January 1, 1992, using the
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<PAGE>
U.S. TRUST CORPORATION
immediate recognition method. FAS 106 requires that employers accrue,
during the years that the employee renders service, the expected cost of
providing health care and life insurance and other benefits to an
employee upon retirement. Under the immediate recognition transition
method, the accumulated postretirement benefit obligation of $23.0
million, net of deferred taxes of $10.6 million, was charged against
first quarter 1992 net income. In addition, employee benefits expense
was increased by $2.2 million ($1.4 million after taxes) reflecting the
ongoing impact of FAS 106. The increased expense was charged evenly to
each of the four quarters of 1992.
Effective January 1, 1993, the Corporation's postretirement health
care plans were amended to change the health care insurance cost-sharing
formula for retirees and their qualified dependents. Under the revised
cost-sharing formula, the Corporation will not absorb any insurance
premium cost increases after 1999. The impact of this amendment ($8.5
million reduction in the accumulated postretirement benefit obligation)
is being amortized over the estimated remaining service lives of the
affected employee group of 11 years, commencing in 1993.
The following tables detail the components of expense for the
Corporation's unfunded postretirement health care and life insurance
plans and the composition of the accumulated postretirement benefit
obligation.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------
1993 1992
------------------------------ ------------------------------
(In Thousands) Health Life Total Health Life Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Components of postretirement benefit expense:
Service cost $ 436 $109 $ 545 $ 915 $102 $1,017
Interest cost 1,099 465 1,564 1,704 331 2,035
Amortization of prior service cost (771) - (771) _ - -
Amortization of loss - 97 97 - - -
------ ---- ------ ------ ---- ------
Net postretirement benefit expense $ 764 $671 $1,435 $2,619 $433 $3,052
====== ==== ====== ====== ==== ======
December 31,
------------------------------------------------------------------
1993 1992
------------------------------ ------------------------------
(In Thousands) Health Life Total Health Life Total
- -----------------------------------------------------------------------------------------------------------------------
Composition of accumulated postretirement benefit
obligation:
Retirees (including covered dependents) $ 4,252 $ 4,234 $ 8,486 $ 5,390 $1,994 $ 7,384
Fully eligible active employees 3,209 926 4,135 2,381 713 3,094
Other active employees 8,237 2,039 10,276 5,455 1,635 7,090
------- ------- ------- ------- ------ -------
Total obligation 15,698 7,199 22,897 13,226 4,342 17,568
Unrecognized prior service cost amendment 7,713 - 7,713 8,484 - 8,484
Unrecognized net (loss) (1,659) (3,599) (5,258) (123) (725) (848)
------- ------- ------- ------- ------ -------
Accrued (liability) $21,752 $ 3,600 $25,352 $21,587 $3,617 $25,204
======= ======= ======= ======= ====== =======
(1) The postretirement benefit expense is determined using the assumptions as of the beginning of the year. The
accumulated postretirement benefit obligation is determined using the assumptions as of the end of the year.
</TABLE>
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<PAGE>
<PAGE>
U.S. TRUST CORPORATION
The assumed rate of future increases in per capita cost of health care
benefits (the health care cost trend rate) is 14% in 1994, decreasing
gradually to 6% in the year 2009. An increase in the health care cost
trend rate by 1% will increase the annual net postretirement benefit
expense by approximately $60,000 and the accumulated postretirement
benefit obligation by approximately $890,000.
A weighted average discount rate of 7.5% was used at December 31,
1993 to measure the accumulated postretirement benefit obligation.
- ------------------------------------------------------------------------
18 Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," ("FAS 107") requires the
disclosure of the estimated fair values of financial instruments.
Substantially all of the Corporation's assets, liabilities and off-
balance sheet products are considered financial instruments as defined
by FAS 107. Fair value is defined as the price at which a financial
instrument could be liquidated in an orderly manner over a reasonable
time period under present market conditions.
FAS 107 requires that the fair value of financial instruments be
estimated using various valuation methodologies. Quoted market prices,
when available, are used as the measure of fair value. Where quoted
market prices are not available, fair values have been estimated using
primarily discounted cash flow analyses and other valuation techniques.
These derived fair values are significantly affected by assumptions
used, principally the timing of future cash flows and the discount rate.
Because assumptions are inherently subjective, the estimated fair values
cannot be substantiated by comparison to third party evidence and may
not be indicative of the value that could be realized in a sale or
settlement of the financial instrument.
The relevance of this information is also severely constrained
because FAS 107 provides only a partial estimate of the fair value of
the Corporation. The FAS 107 disclosures do not provide an estimated
fair value of the various ongoing businesses in which the Corporation
operates. For example, FAS 107 specifically excludes the fair value of
certain fee generating businesses, the value of long-term trust
relationships and anticipated future business activities from its scope.
A discussion of the fair value estimation methodologies used for
material financial instruments follows.
Loans
The estimated fair value of the Corporation's performing fixed rate
loans (primarily residential real estate mortgages) was calculated by
discounting contractual cash flows adjusted for current prepayment
estimates. The discount rates were based on the interest rates charged
to current customers for comparable loans. The Corporation's performing
adjustable rate loans reprice frequently at current market rates.
Therefore, the fair value of these loans has been estimated to be
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<PAGE>
<PAGE>
U.S. TRUST CORPORATION
approximately equal to their carrying amount. Estimated fair value for
nonperforming loans was based upon a discounted estimated cash flow
method and, for residential real estate mortgage loans, current
appraisals. The discount rate used was commensurate with the risk
associated with the estimated cash flows. See "Notes to the
Consolidated Financial Statements No. 5" for additional discussion of
the Corporation's entire loan portfolio.
Securities
The estimated fair value of securities is based upon quoted bid market
prices, where available, or fair value quotes obtained from third party
pricing services. See "Notes to the Consolidated Financial Statements
No. 4" for additional discussion of securities.
Long Term Debt
The estimated fair value of long term debt was calculated using a
discounted cash flow method, where the estimated cash flows considered
contractual principal and interest payments, as well as required sinking
fund payments. The discount rate used consisted of two components.
First, the credit risk spread was determined for each debt issue i.e.,
the spread that the Corporation paid over the comparable risk-free rate
at the date of issuance. The credit risk spread was added to the
current risk-free market interest rate for the comparable remaining
maturity. See "Notes to the Consolidated Financial Statements No. 10"
for additional discussion of long term debt.
A comparison of the fair value and carrying amounts of the Corporation's
significant on-balance sheet financial instruments follows.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1993 1992
-------------------- --------------------
Carrying Fair Carrying Fair
(In Millions) Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans $1,385* $1,404 $1,249* $1,260
Securities:
Available for sale 820** 837 - -
Held to maturity 87 87 - -
Investment - - 1,196 1,222
Long term debt 65 70 65 69
* Net of allowance for credit losses.
** Represents the amortized cost of securities available for sale, which is different from the estimated fair
value basis of accounting at which they are reported in the Consolidated Statement of Condition.
</TABLE>
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<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Interest Rate Swap Agreements
The Corporation is a net fixed rate payor under its interest rate swap
agreements ("swap agreements") and at December 31, 1993 and 1992 had a
net payable of $468,000 and $537,000, respectively. Swap agreements are
used as a hedge of the Corporation's funding of various fixed rate
interest earning assets. The estimated fair value of swap agreements
are obtained from dealer quotes. These values represent the estimated
amount that the Corporation would have to pay to terminate the swap
agreements, taking into account current interest rates and, when
appropriate, the current creditworthiness of the counterparties. See
"Notes to the Consolidated Financial Statements No. 13" for additional
discussion of swap agreements.
Forward Rate Agreements
Forward rate agreements ("FRAs") are used as a hedge of the
Corporation's short-term interest earning assets. The estimated fair
value of FRAs are obtained from dealer quotes. The fair value of FRAs
at December 31, 1993 and 1992 was nominal. See "Notes to the
Consolidated Financial Statements No. 13" for additional discussion of
FRAs.
A comparison of the fair value and notional amounts of the Corporation's
significant off-balance sheet financial instruments follows.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1993 1992
-------------------- --------------------
Notional Fair Notional Fair
(In Millions) Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate swap agreements $103 $(4.0) $ 94 $(6.6)
Forward rate agreements 150 0.1 175 0.1
</TABLE>
Other Financial Instruments
The Corporation's other financial instruments are generally short-term
in nature and contain very little credit risk. These instruments
consist of cash and due from banks, interest bearing deposits with
banks, Federal funds sold, securities purchased under agreements to
resell, accrued interest receivable and accounts receivable, demand
deposit liabilities, time deposit liabilities, Federal fund purchased,
securities sold under agreements to repurchase, other borrowings and
accrued interest payable and accounts payable. Consequently, carrying
amounts of these assets and liabilities approximate estimated fair
value.
-48-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
- ------------------------------------------------------------------------
19. Parent Company Only
Condensed statements of income, condition and cash flows for U.S. Trust
Corporation (Parent Company Only) follow:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
STATEMENT OF INCOME ---------------------------------
(In Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Equity in Net Income (Loss) of Subsidiaries:
Bank $41,746 $34,046 * $30,916
Non-Bank 1,862 (1,358)* (78)
Interest Income 2,658 3,228 3,673
Other Income 1 - 1
------- ------- -------
Total Income 46,267 35,916 34,512
------- ------- -------
Expenses:
Interest Expense 4,131 4,182 4,406
Other Expenses 586 2,240 785
------- ------- -------
Total Expenses 4,717 6,422 5,191
------- ------- -------
Income Before Income Tax Expense (Benefit) 41,550 29,494 29,321
Income Tax Expense (Benefit) (717) 743 (2,062)
------- ------- -------
Net Income $42,267 $28,751 $31,383
======= ======= =======
* Equity in Net Income (Loss) of Subsidiaries includes the impact of adopting FAS 106 and FAS 109.
</TABLE>
-49-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
December 31,
STATEMENT OF CONDITION ----------------------
(In Thousands) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Due from Subsidiary $ 219 $ 444
Due from Other Banks 14 212
-------- --------
Total Due from Banks 233 656
-------- --------
Securities Purchased from Subsidiary Under Agreements to Resell - 19,289
Investment in Subsidiaries at Equity in Net Assets:
Bank 229,239 207,645
Non-Bank 34,165 18,810
-------- --------
Total Investment in Subsidiaries 263,404 226,455
-------- --------
Loan to Non-Bank Subsidiary - 700
Securities:
Available for Sale, at Estimated Fair Value 24,078 -
Investment (Estimated Fair Value $11,899 in 1992) - 11,136
Other Assets 5,590 7,169
-------- --------
Total Assets $293,305 $265,405
======== ========
LIABILITIES
Short-Term Borrowings $ - $ 5,000
Due to Subsidiary 1,500 -
Other Liabilities 14,571 12,273
Long Term Debt 48,647 50,979
-------- --------
Total Liabilities 64,718 68,252
-------- --------
TOTAL STOCKHOLDERS' EQUITY 228,587 197,153
-------- --------
Total Liabilities and Stockholders' Equity $293,305 $265,405
======== ========
</TABLE>
-50-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
STATEMENT OF CASH FLOWS ---------------------------------
(In Thousands) 1993 1992* 1991*
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 42,267 $ 28,751 $ 31,383
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Equity in Net (Income) of Subsidiaries (43,608) (32,688) (30,838)
Dividends Received from Subsidiaries 30,000 43,836 28,476
Deferred Income Taxes (7,612) 4,572 -
Net Change in Accruals, Receivables and Other Assets 4,307 622 (403)
Net Change in Accruals, Payables and Other Liabilities 6,399 1,193 (1,117)
Other, Net 683 508 506
-------- -------- --------
Net Cash Provided by Operating Activities 32,436 46,794 28,007
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Subsidiaries (17,028) (11,900) (9,756)
Net Change in Securities Purchased Under Agreements to Resell 19,289 (19,289) -
Investment Securities:
Proceeds from Sales - 3,778 -
Proceeds from Maturities, Calls and Mandatory Redemptions 2,234 1,927 -
Purchases (14,517) - (3,188)
Net Change in Loans to Subsidiaries 700 (700) 2,250
Principal Payment by ESOP 2,332 2,152 1,986
-------- -------- --------
Net Cash (Used) by Investing Activities (6,990) (24,032) (306)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Change in Loans from Subsidiaries 1,500 - -
Net Change in Short-Term Borrowings (5,000) 5,000 (8,124)
Repayment of Long Term Debt (2,332) (2,152) (1,986)
Issuance of Common Stock Under Employee Benefit Plans 5,653 3,745 916
Purchases of Treasury Stock (8,485) (13,277) (3,862)
Dividends Paid (17,205) (15,570) (14,618)
-------- -------- --------
Net Cash (Used) by Financing Activities (25,869) (22,254) (27,674)
-------- -------- --------
Net Change in Cash and Cash Equivalents (423) 508 27
Cash and Cash Equivalents at January 1 656 148 121
-------- -------- --------
Cash and Cash Equivalents at December 31 $ 233 $ 656 $ 148
======== ======== ========
Income Taxes Paid (Refund) Received $ 5,285 $ (592) $ 1,607
Interest Expense Paid 4,258 4,392 4,601
* Certain amounts have been reclassified to conform with the 1993 presentation.
</TABLE>
-51-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
20. Quarterly Consolidated Statement of Income (Unaudited)
1993 1992
------------------------------- -------------------------------------
(In Thousands, Except Fourth Third Second First Fourth Third Second First
Per Share Amounts) Quarter Quarter Quarter Quarter Quarter Quarter* Quarter* Quarter*
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Interest Income $ 27,683 $31,588 $27,284 $29,687 $27,887 $29,638 $23,935 $27,428
Provision for Credit Losses 500 1,000 1,250 1,250 1,500 1,500 1,500 1,500
-------- ------- ------- ------- ------- ------- ------- -------
Net Interest Income After Provision for
Credit Losses 27,183 30,588 26,034 28,437 26,387 28,138 22,435 25,928
Total Fees and Other Income 75,714 68,683 67,353 64,213 63,475 61,735 61,586 58,768
-------- ------- ------- ------- ------- ------- ------- -------
Total Operating Income Net of Interest
Expense and Provision for Credit Losses 102,897 99,271 93,387 92,650 89,862 89,873 84,021 84,696
Total Operating Expenses 87,711 78,328 76,534 72,947 77,248 72,212 71,131 68,941
-------- ------- ------- ------- ------- ------- ------- -------
Income From Operations Before Income
Tax Expense and Cumulative Effect
of Accounting Changes 15,186 20,943 16,853 19,703 12,614 17,661 12,890 15,755
Income Tax Expense 6,038 9,027 7,078 8,275 4,793 6,711 4,898 5,987
-------- ------- ------- ------- ------- ------- ------- -------
Income From Operations Before Cumulative
Effect of Accounting Changes 9,148 11,916 9,775 11,428 7,821 10,950 7,992 9,768
Cumulative Effect of Changes in
Accounting for Postretirement Benefits
and Income Taxes - - - - - - - (7,780)
-------- ------- ------- ------- ------- ------- ------- -------
Net Income $ 9,148 $11,916 $ 9,775 $11,428 $ 7,821 $10,950 $ 7,992 $ 1,988
======== ======= ======= ======= ======= ======= ======= =======
Primary Net Income Per Share:
Income From Operations Before Cumulative
Effect of Accounting Changes $ .92 $ 1.20 $ .99 $ 1.16 $ .81 $ 1.13 $ .82 $ 1.02
Cumulative Effect of Changes in
Accounting for Postretirement Benefits
and Income Taxes - - - - - - - (.81)
-------- ------- ------- ------- ------- ------- ------- -------
Net Income $ .92 $ 1.20 $ .99 $ 1.16 $ .81 $ 1.13 $ .82 $ .21
======== ======= ======= ======= ======= ======= ======= =======
Fully Diluted Net Income Per Share:
Income From Operations Before Cumulative
Effect of Accounting Changes $ .92 $ 1.20 $ .99 $ 1.15 $ .80 $ 1.12 $ .81 $ 1.02
Cumulative Effect of Changes in
Accounting for Postretirement Benefits
and Income Taxes - - - - - - - (.81)
-------- ------- ------- ------- ------- ------- ------- -------
Net Income $ .92 $ 1.20 $ .99 $ 1.15 $ .80 $ 1.12 $ .81 $ .21
======== ======= ======= ======= ======= ======= ======= =======
* First, second and third quarter 1992 statements of income have been restated to reflect the Corporation's adoption of
FAS 106 and FAS 109. See Notes 9 and 17 for additional details.
</TABLE>
-52-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Report of Independent Accountants
To the Board of Directors and Stockholders of U.S. Trust Corporation:
We have audited the accompanying consolidated statements of condition of
U.S. Trust Corporation and Subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1993. These financial statements are the
responsibility of the Corporation's management. Our responsibility is
to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
U.S. Trust Corporation and Subsidiaries at December 31, 1993 and 1992,
and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
As discussed in Notes 9 and 17 to the consolidated financial
statements, U.S. Trust Corporation and Subsidiaries has adopted
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," and Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
retroactive to January 1, 1992.
New York, New York
January 19, 1994
-53-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Analysis of Change in Net Interest Income
For the Years Ended December 31,
The following table, on a taxable equivalent basis, is an analysis of
the year-to-year changes in the categories of interest income and
interest expense resulting from changes in volume and rate.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1993 Compared to 1992 1992 Compared to 1991
Increase (Decrease) Due to Change in: Increase (Decrease) Due to Change in:
------------------------------------- -------------------------------------
Average Average Average Average
(In Thousands) Balance Rate Total Balance Rate Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Bearing Deposits with
Banks............................. $ (137) $ (1,089) $ (1,226) $(5,015) $ (5,471) $(10,486)
Loans (1)(2)........................ 11,112 (4,068) 7,044 18,361 (18,285) 76
Federal Funds Sold and Securities
Purchased Under Agreements to
Resell............................ 5,662 (1,787) 3,875 (4,173) (6.588) (10,761)
Securities (3):
U.S. Government Obligations....... (7,451) (1,601) (9,052) 14,892 (6,289) 8,603
Federal Agency Obligations........ 16,368 (8,490) 7,878 7,099 (8,452) (1,353)
State and Municipal Obligations... (5,056) (421) (5,477) (5,250) (1,308) (6,558)
Collateralized Mortgage
Obligations..................... (4,890) (4,219) (9,109) 8,530 (7,739) 791
Other Securities.................. 339 (310) 29 636 (1,082) (446)
------- -------- -------- ------- -------- --------
Total Securities.................... (690) (15,041) (15,731) 25,907 (24,870) 1,037
------- -------- -------- ------- -------- --------
Total Interest Earning Assets....... 15,947 (21,985) (6,038) 35,080 (55,870) (20,134)
------- -------- -------- ------- -------- --------
Interest Bearing Sources of Funds:
Interest Bearing Deposits........... 5,090 (10,062) (4,972) (1,417) (24,772) (26,189)
Federal Funds Purchased, Securities
Sold Under Agreements to
Repurchase and Other Borrowings... (3,500) (2,347) (5,847) 5,326 (9,857) (4,531)
Long Term Debt...................... (84) (62) (146) (203) (10) (213)
------- -------- -------- ------- -------- --------
Total Sources on Which Interest
is Paid........................... 1,506 (12,471) (10,965) 3,706 (34,639) (30,933)
------- -------- -------- ------- -------- --------
Change in Net Interest Income....... $14,441 $ (9,514) $ 4,927 $31,374 $(20,575) $ 10,799
======= ======== ======== ======= ======== ========
<FN>
Changes that are not due solely to volume or rate have been allocated ratably to their respective categories.
(1) The average principal balances of non-accrual and reduced rate loans are included in the above figures.
(2) Loans include the Loan to ESOP, which had an average balance of $18,902,000 in 1993, $21,211,000 in 1992 and
$23,350,000 in 1991.
(3) Includes securities classified at December 31, 1993 as available for sale and held to maturity at amortized cost and
securities classified as investment securities in 1992 and 1991. The average balance and average rate for
securities available for sale has been calculated using their amortized cost.
</TABLE>
-54-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Three-Year Net Interest Income and Average Balances
For the Years Ended December 31,
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1993
--------------------------------------------------
Average Average
(Dollars in Thousands) Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest Bearing Deposits with Banks............................. $ 154,376 $ 5,048 3.27
---------- --------
Securities (1):
U.S. Government Obligations.................................... 394,717 23,057 5.84
Federal Agency Obligations..................................... 668,951 38,412 5.74
State and Municipal Obligations (2)............................ 107,463 11,703 10.89
Collateralized Mortgage Obligations (3)........................ 200,714 6,196 3.09
Other Securities............................................... 41,571 1,517 3.65
---------- --------
Total Securities................................................. 1,413,416 80,885 5.72
---------- --------
Loans (2)(4)(5).................................................. 1,114,575 77,264 6.93
---------- --------
Federal Funds Sold and Securities Purchased Under
Agreements to Resell........................................... 403,846 12,213 3.02
---------- --------
Total Interest Earning Assets.................................... 3,086,213 175,410 5.68
---------- --------
Allowance for Credit Losses...................................... (13,601)
Cash and Due From Banks.......................................... 324,802
Other Assets..................................................... 423,888
----------
Total Assets..................................................... $3,821,302
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest Bearing Deposits........................................ $1,277,467 37,478 2.93
Federal Funds Purchased, Securities Sold Under Agreements to
Repurchase and Other Borrowings................................ 356,199 10,509 2.95
Long Term Debt................................................... 65,619 5,371 8.19
---------- --------
Total Sources on Which Interest is Paid.......................... 1,699,285 53,358 3.14
---------- --------
Total Non-Interest Bearing Deposits.............................. 1,760,892
Other Liabilities................................................ 135,749
Stockholders' Equity (5)......................................... 225,376
----------
Total Liabilities and Stockholders' Equity....................... $3,821,302
==========
Net Interest Income.............................................. $122,052
========
Net Yield on Interest Earning Assets............................. 3.95
- -----------------------------------------------------------------------------------------------------------------------
<FN>
(1) Includes securities classified at December 31, 1993 as available for sale and held to maturity at amortized cost and
securities classified as investment securities in 1992 and 1991. The average balance and average rate for
securities available for sale has been calculated using their amortized cost.
(2) Yields on state and municipal obligations are stated on a taxable equivalent basis, employing the Federal statutory
income tax rate adjusted for the effect of state and local taxes, resulting in effective tax rate of approximately
47% for 1993, 1992 and 1991.
(3) Primarily comprised of variable rate collateralized mortgage obligations.
(4) The average principal balances of non-accrual and reduced rate loans are included in the above figures.
(5) Loans include the Loan to ESOP, which had an average balance of $18,902,000 in 1993, $21,211,000 in 1992 and
$23,350,000 in 1991.
</TABLE>
-55-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1992
---------------------------------------------------
Average Average
(Dollars in Thousands) Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest Bearing Deposits with Banks............................. $ 157,903 $ 6,274 3.97%
---------- --------
Securities (1):
U.S. Government Obligations.................................... 521,049 32,109 6.16
Federal Agency Obligations..................................... 435,502 30,534 7.01
State and Municipal Obligations (2)............................ 153,795 17,180 11.17
Collateralized Mortgage Obligations (3)........................ 329,014 15,305 4.65
Other Securities............................................... 33,858 1,488 4.40
---------- --------
Total Securities................................................. 1,473,218 96,616 6.56
---------- --------
Loans (2)(4)(5).................................................. 962,301 70,220 7.30
---------- --------
Federal Funds Sold and Securities Purchased Under
Agreements to Resell........................................... 240,520 8,338 3.47
---------- --------
Total Interest Earning Assets.................................... 2,833,942 181,448 6.40
---------- --------
Allowance for Credit Losses...................................... (10,446)
Cash and Due From Banks.......................................... 286,450
Other Assets..................................................... 378,032
----------
Total Assets..................................................... $3,487,978
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest Bearing Deposits........................................ $1,140,696 42,450 3.72
Federal Funds Purchased, Securities Sold Under Agreements to
Repurchase and Other Borrowings................................ 466,506 16,356 3.51
Long Term Debt................................................... 66,647 5,517 8.28
---------- --------
Total Sources on Which Interest is Paid.......................... 1,673,849 64,323 3.84
---------- --------
Total Non-Interest Bearing Deposits.............................. 1,507,622
Other Liabilities................................................ 97,126
Stockholders' Equity (5)......................................... 209,381
----------
Total Liabilities and Stockholders' Equity....................... $3,487,978
==========
Net Interest Income.............................................. $117,125
========
Net Yield on Interest Earning Assets............................. 4.13
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
-56-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1991
---------------------------------------------------
Average Average
(Dollars in Thousands) Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest Bearing Deposits with Banks............................. $ 251,072 $ 16,760 6.68%
---------- --------
Securities (1):
U.S. Government Obligations.................................... 318,970 23,506 7.37
Federal Agency Obligations..................................... 356,198 31,887 8.95
State and Municipal Obligations (2)............................ 200,229 23,738 11.86
Collateralized Mortgage Obligations (3)........................ 207,229 14,514 7.00
Other Securities............................................... 25,478 1,934 7.59
---------- --------
Total Securities................................................. 1,108,104 95,579 8.63
---------- --------
Loans (2)(4)(5).................................................. 762,666 70,144 9.20
---------- --------
Federal Funds Sold and Securities Purchased Under
Agreements to Resell........................................... 324,944 19,099 5.88
---------- --------
Total Interest Earning Assets.................................... 2,446,786 201,582 8.24
---------- --------
Allowance for Credit Losses...................................... (9,064)
Cash and Due From Banks.......................................... 248,241
Other Assets..................................................... 213,712
----------
Total Assets..................................................... $2,899,675
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest Bearing Deposits........................................ $1,165,239 68,639 5.89
Federal Funds Purchased, Securities Sold Under Agreements to
Repurchase and Other Borrowings................................ 371,721 20,887 5.62
Long Term Debt................................................... 69,098 5,730 8.29
---------- --------
Total Sources on Which Interest is Paid.......................... 1,606,058 95,256 5.93
---------- --------
Total Non-Interest Bearing Deposits.............................. 1,020,599
Other Liabilities................................................ 75,842
Stockholders' Equity (5)......................................... 197,176
----------
Total Liabilities and Stockholders' Equity....................... $2,899,675
==========
Net Interest Income.............................................. $106,326
========
Net Yield on Interest Earning Assets............................. 4.35
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
-57-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Statistical Summary
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
(In Millions) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Securities (Carrying Amount at Year End) (1):
U.S. Government Obligations................................................... $212 $ 336 $ 257
Federal Agency Obligations.................................................... 439 424 346
State and Municipal Obligations............................................... 90 131 181
Collateralized Mortgage Obligations........................................... 116 285 187
Other Securities.............................................................. 66 20 42
---- ------ ------
Total....................................................................... $923 $1,196 $1,013
==== ====== ======
(1) 1993 amounts include securities available for sale, that are carried at their estimated fair value, and securities
held to maturity, that are carried at their amortized cost. 1992 and 1991 amounts consist of investment securities,
that are carried at their amortized cost.
</TABLE>
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Within 1 Year 1 - 5 Years 5 - 10 Years Over 10 Years
--------------- --------------- --------------- ---------------
Weighted Weighted Weighted Weighted
Average Average Average Average
(Dollars in Millions) Amount Yield(2) Amount Yield(2) Amount Yield(2) Amount Yield(2) Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maturity Schedule of Securities Based
on Amortized Cost at December 31, 1993:(3)
U.S. Government Obligations.... $176 3.51% $ 34 8.02% $ - -% $ - -% $210
Federal Agency Obligations..... - - 226 6.30 121 5.48 83 4.06 430
State and Municipal Obligations 17 13.64 49 10.68 4 11.66 15 7.49 85
Collateralized Mortgage
Obligations.................. 4 2.81 70 3.47 - - 42 10.72 116
Other Securities............... 58 3.17 4 2.89 - - - - 62
---- ---- ---- ---- ----
Total........................ $255 $383 $125 $140 $903
==== ==== ==== ==== ====
(2) Yields have been computed by dividing annualized interest income, on a taxable equivalent basis, by the amortized
cost of the respective securities.
(3) Includes securities available for sale and securities held to maturity; Excludes Federal Reserve Bank and Federal
Home Loan Bank stock of $3.8 million; Excludes unrealized gains of $16.5 million related to securities available for
sale.
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In Thousands) Within 1 Year 1-5 Years Over 5 Years Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maturity Schedule of Loans at December 31, 1993:
Private banking:
Residential real estate mortgages (4)......... $242,701 $ 99,664 $356,828 $ 699,193
Other......................................... 406,854 5,862 4,206 416,922
-------- -------- -------- ----------
Total private banking loans..................... 649,555 105,526 361,034 1,116,115
-------- -------- -------- ----------
Short-term trust credit facilities.............. 211,741 - - 211,741
Loans to financial institutions for purchasing
and carrying securities....................... 57,505 - - 57,505
All other....................................... 9,184 3,690 488 13,362
-------- -------- -------- ----------
Total......................................... $927,985 $109,216 $361,522 $1,398,723
======== ======== ======== ==========
Interest Sensitivity of Loans at December 31, 1993:
Loans with predetermined interest rates......... $ 67,015 $271,518 $ 338,533
Loans with floating or adjustable interest rates 42,201 90,004 132,205
-------- -------- ----------
Total......................................... $109,216 $361,522 $ 470,738
======== ======== ==========
(4) Maturities are based upon the contractual terms of the loans.
</TABLE>
-58-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Statistical Summary
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1993 1992 1991
---------------- ---------------- ----------------
(Dollars in Millions) Amount Rate Amount Rate Amount Rate
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Analysis of Average Daily Deposits:
Non-Interest Bearing Deposits............... $1,761 $1,508 $1,021
Certificates of Deposit of $100,000 or more. 26 3.04% 33 4.01% 35 6.61%
Money Market and Other Savings Deposits..... 1,251 2.93 1,107 3.71 1,130 5.87
------ ------ ------
Total Deposits............................ $3,038 $2,648 $2,186
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Certificates Other
(In Millions) of Deposit Deposits
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maturity Distribution of Interest Bearing Deposits in
Amounts of $100,000 or more at December 31, 1993:
Time remaining until maturity:
Three months or less............................................................ $18 $1,007
Three through six months........................................................ 3 -
Six through twelve months....................................................... 1 -
Over twelve months.............................................................. 6 -
--- ------
Total......................................................................... $28 $1,007
=== ======
</TABLE>
- ------------------------------------------------------------------------
Market Price of the Corporation's Common Shares
and Related Security Holder Matters
The common shares of the Corporation are traded in the over-the-counter
market. Market prices (based on NASDAQ national market prices as
reported in The Wall Street Journal) and dividends declared per share
for the past two years are shown below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For Each Quarter
1993 High............................................................ $58 1/2 $59 $54 1/2 $54 1/2
Low............................................................. 49 1/4 50 1/4 51 1/4 52
Cash Dividends Declared......................................... 0.47 0.47 0.47 0.47
1992 High............................................................ $45 1/4 $49 1/4 $50 1/2 $49 1/4
Low............................................................. 42 3/4 42 3/4 46 45 1/2
Cash Dividends Declared......................................... 0.43 0.43 0.43 0.43
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
As of January 1, 1994, there were approximately 2,120 record holders of
the Corporation's common shares.
-59-
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Summary of Credit Loss Experience
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In Thousands) 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Analysis of Allowance for Credit Losses:
Balance, January 1..................................... $ 11,676 $ 8,661 $ 8,599 $ 7,300 $ 11,344
---------- -------- -------- -------- --------
Charge-Offs:
Private banking...................................... (3,762) (2,856) (5,776) (1,743) (593)
Residual corporate loans............................. (338) (710) (509) (5,878) (5,292)
Other................................................ - - - - (17)
---------- -------- -------- -------- --------
Total charge-offs...................................... (4,100) (3,566) (6,285) (7,621) (5,902)
---------- -------- -------- -------- --------
Recoveries:
Private banking...................................... 612 465 133 226 274
Residual corporate loans............................. 1,205 116 189 318 -
---------- -------- -------- -------- --------
Total recoveries....................................... 1,817 581 322 544 274
---------- -------- -------- -------- --------
Net charge-offs........................................ (2,283) (2,985) (5,963) (7,077) (5,628)
---------- -------- -------- -------- --------
Provision charged to income............................ 4,000 6,000 6,025 8,376 1,584
---------- -------- -------- -------- --------
Balance, December 31................................... $ 13,393 $ 11,676 $ 8,661 $ 8,599 $ 7,300
========== ======== ======== ======== ========
Loan Statistics (Dollars in Thousands):
Average total loans.................................... $1,095,673 $941,090 $739,316 $710,715 $680,305
Allowance for credit losses, end of year,
as a percent of average total loans.................. 1.22% 1.24% 1.17% 1.21% 1.07%
Net loans charged off as a percent of
average total loans.................................. 0.21 0.32 0.81 1.00 0.83
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation maintains the allowance for credit losses at a level
deemed to be adequate. The level of the allowance is based on
management's judgment as to the current condition of the credit
portfolio, which includes loans, commitments to extend credit and
standby letters of credit, determined by a continuous surveillance
process. In addition, management looks to past experience, current loan
composition and volume and general economic conditions.
Senior management determines, at least quarterly, which credits are
to be charged off partially or in full. This is based on a review of
all underperforming credits highlighted in the surveillance process.
Loan officers are expected to be the first to identify potential credit
problems. In addition, experienced credit review professionals provide
independent internal oversight of these credits. Credit reviews by the
Federal Reserve and New York State Bank Examiners, as well as our
certified public accounting firm, as part of the regular bank
examination and audit processes, are also considered in the credit
surveillance process.
Since substantially all of the Corporation's loan portfolio relates
to private banking accounts, the Corporation does not attempt to
allocate the allowance among specific credit categories.
-60-
<PAGE>
EXHIBIT 22
U. S. Trust Corporation
List of Subsidiaries
State or Other Jurisdiction Percent
of Incorporation Owned
--------------------------- -------
United States Trust Company
of New York New York 100.0%
United States Trust Company
International Corporation United States 100.0
United States Trust Company of
New York (Grand Cayman) Ltd. Cayman Islands 100.0
UST Overseas Corporation Delaware 100.0
Foreign & Colonial Asset
Management London, England 50.0
U.S. Trust Company of California, N.A. California 100.0
Summit Management Company, Inc. California 100.0
UST Fiduciary Services Ltd. Delaware 100.0
U.S. Trust Company of Connecticut Connecticut 100.0
U.S. Trust Company of Florida
Savings Bank Florida 100.0
U.S. Trust Company of New Jersey New Jersey 100.0
UST Securities Corporation New Jersey 100.0
U.S. Trust Company Limited New York 100.0
U.S. Trust Company of Wyoming Wyoming 100.0
U.S.T. L.P.O. Corp. Delaware 100.0
U.S. Trust Company of Texas,
N. A. Texas 100.0
Denker & Goodwin, Incorporated Texas 100.0
U.S. Trust Financial Services,
Inc. Florida 100.0
Campbell, Cowperthwait & Company Delaware 100.0
CTMC Holding Company Oregon 100.0
CTC Consulting, Inc. Oregon 100.0
U.S. Trust Company of the Pacific
Northwest Oregon 100.0
Mutual Funds Service Company Delaware 100.0
Technologies Holding Corporation Delaware 100.0
FTI Partner Corporation New York 100.0
Financial Technologies
International L.P. Delaware 50.0
-1-
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in (i) the
Registration Statements on Form S-8 of U. S. Trust Corporation (File
No. 2-78763, File No. 33-16162, File No. 33-29738 and File No. 33-51463)
pertaining to the United States Trust Company of New York and Affiliated
Companies 1981 Incentive Stock Option Plan, 1986 Stock Option Plan and
1989 Stock Compensation Plan, (ii) the Registration Statements on Form
S-8 of U. S. Trust Corporation (File No. 33-00028, File No. 33-5433 and
File No. 33-22453) pertaining to the Employees' Profit-Sharing Plan of
United States Trust Company of New York and Affiliated Companies, (iii)
the Registration Statement on Form S-8 of U. S. Trust Corporation (File
No. 33-34140) pertaining to the U. S. Trust Corporation Stock Option
Plan for Non-Employee Directors, (iv) the Registration Statement on
Form S-3 of U. S. Trust Corporation (File No.33-44058) pertaining to an
offering by certain selling shareholders of up to 206,307 Common Shares,
par value $1 per share, of U. S. Trust Corporation, (v) the Registration
Statement on Form S-3 of U. S. Trust Corporation (File No. 33-49163)
pertaining to an offering by certain selling shareholders of up to
111,109 Common Shares, par value $1 per share, of U. S. Trust
Corporation and (vi) the Registration Statement on Form S-3 of U.S.
Trust Corporation (File No. 33-49627) pertaining to an offering by
certain selling shareholders of up to 89,000 Common Shares, par value $1
per share, of U.S. Trust Corporation of our report dated January 19,
1994 on our audits of the consolidated financial statements of U. S.
Trust Corporation and Subsidiaries as of December 31, 1993 and 1992 and
for the years ended December 31, 1993, 1992, and 1991, which report is
included in Exhibit 13 of this Annual Report on Form 10-K.
Coopers & Lybrand
New York, New York
March 22, 1994
-1-
<PAGE>
EXHIBIT 99
U.S. Trust Corporation
Proxy
Statement
General Information
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of U.S. Trust Corporation (the "Corporation")
to be used at the Annual Meeting of Shareholders (the "Meeting") of the
Corporation and at any adjournment thereof. The Meeting will be held on April
26, 1994, at the time and place and for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. Shares represented by
properly executed proxies, if such proxies are received in time for the Meeting
and are not revoked, will be voted at the Meeting in accordance with the
instructions thereon, or if no instructions are given, such shares will be
voted as follows: for the election of directors, for the ratification of the
appointment of the Corporation's independent auditors, for the assumption by
the Corporation of certain employee benefit plans, for the amendments to the
1989 Stock Compensation Plan, for the amendments to the Predecessor
Performance Plans, for the approval of the amended Board Members' Deferred
Compensation Plan, and in the discretion of the proxies on any other matters to
come before the Meeting. A proxy may be revoked by a shareholder at any time
prior to the time the shares are actually voted. Proxies may be revoked either
by written notice to the Corporation, by submission of a subsequent proxy or by
voting in person at the Meeting.
The approximate date on which this proxy statement and the accompanying form of
proxy are being sent to shareholders is March 11, 1994. This proxy statement
is accompanied by the Corporation's 1993 Annual Report to Shareholders.
The Board of Directors has fixed the close of business on March 8, 1994 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Meeting. On the record date, there were 9,373,930 Common Shares of
the Corporation outstanding and entitled to be voted at the Meeting.
Principal Shareholders
The following table contains information concerning (i) those persons known to
management of the Corporation to be the beneficial owners of more than 5% of
the Corporation's outstanding Common Shares, and (ii) the beneficial ownership
-1-
<PAGE>
<PAGE>
of the Corporation's outstanding Common Shares by United States Trust Company
of New York (a wholly-owned subsidiary of the Corporation) and its affiliates
as of the close of business on February 28, 1994:
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Shares Employees' 401(k) Plan and 1,304,606 shares (in a 13.89
(par value ESOP of United States Trust fiduciary capacity)(1)
$1 per share) Company of New York and
Affiliated Companies
114 West 47th Street
New York, New York 10036
GeoCapital Corporation 637,450 shares 6.79
767 Fifth Avenue (with sole dispositive
New York, New York 10153 power)(2)
United States Trust Company 307,722 shares (in 3.28
of New York and Affiliated fiduciary and agency
Companies capacities)(3)
114 West 47th Street
New York, New York 10036
- ------------------------------------------------------------------------------------------------------
<FN>
(1) These shares consist of 959,232 shares allocated to the individual accounts of participants in
the Employees' 401(k) Plan and ESOP (the "Plan"), who have voting and dispositive power over such
shares, and 345,374 shares which have not been allocated to participant accounts, as to which shares
United States Trust Company of New York (the "Trust Company"), as Trustee of the Plan, may be deemed
to have voting and dispositive power.
(2) Information herein with respect to GeoCapital Corporation ("GCC") has been obtained from GCC's
filings with the Securities and Exchange Commission pursuant to Section 13(g) of the Securities
Exchange Act of 1934 by GCC, a registered investment advisor, and Barry K. Fingerhut and Irwin Lieber,
by reason of their ownership interest in GCC. Such filing further discloses that the shares were
acquired in the ordinary course of business and were not acquired for the purpose of and do not have
the effect of changing or influencing the control of the Corporation and were not acquired in
connection with or as a participant in any transaction having such purpose or effect.
(3) The Trust Company and its affiliates, including the Corporation (together "U.S. Trust"), have
sole voting power as to 16,171 of such shares, shared voting power as to 42,002 of such shares, sole
dispositive power as to 164,742 of such shares and shared dispositive power as to 142,980 of such
shares. The 345,374 shares held in the Plan which have not been allocated to participant accounts as
described in footnote 1, and as to which U.S. Trust may have sole voting and dispositive power, are
not included. As a matter of policy, U.S. Trust votes shares held in an agency capacity only as
directed by its customers, and where it holds shares as a co-fiduciary, votes such shares as directed
by the other co-fiduciaries. Shares held by U.S. Trust as sole fiduciary are not voted unless
specific voting instructions are given by a donor or beneficiary pursuant to the governing trust
instrument.
</TABLE>
Other than as set forth above, management of the Corporation is aware of no
person who, on the record date, was the beneficial owner of more than 5% of the
Corporation's outstanding Common Shares. The total number of the Corporation's
Common Shares beneficially owned by all directors and executive officers of the
-2-
<PAGE>
<PAGE>
Corporation as a group amounted to 836,374 shares (approximately 7.97% of the
Corporation's outstanding Common Shares) as of February 28, 1994.
Votes Required
Each of the Corporation's Common Shares is entitled to one vote upon each
matter to come before the Meeting. The election of directors is by a plurality
of the votes cast. Ratification of the appointment of the Corporation's
independent auditors requires the affirmative vote of a majority of the votes
cast. The assumption by the Corporation of certain employee benefit plans of
the Trust Company, the amendments to the 1989 Stock Compensation Plan and
Predecessor Performance Plans and the approval of the amended Board Members'
Deferred Compensation Plan each require the affirmative vote of a majority of
the outstanding shares (abstentions will thus be the equivalent of negative
votes on these proposals.)
I ELECTION OF DIRECTORS
Nine directors of the Corporation are to be elected at the Meeting, seven to
serve until the annual meeting of shareholders in 1997, one to serve until the
annual meeting of shareholders in 1996, one to serve until the annual meeting
of shareholders in 1995, and, in each case, to serve until their successors
have been elected and qualified.
The Corporation anticipates that the nominees named herein will be available
for election, but if any nominee should be unable to serve, shares represented
by proxies will be voted for an additional nominee to be designated by the
Board of Directors unless the Board reduces the number of directors. All of
the nominees are now directors of the Corporation and, with the exception of
Dr. Baum and Ms. Wooden, previously were elected by the shareholders. All
directors of the Corporation are trustees of the Trust Company and serve
parallel terms on both Boards.
The following table contains information as to the nominees for election as
directors of the Corporation and as to directors who will continue in office,
including name, age, principal occupation, selected biographical information,
all other positions and offices, if any, held by each of them with the
Corporation and the Trust Company, and, under the heading "Number of Shares
Owned," the number of Common Shares of the Corporation beneficially owned by
each of them as of February 28, 1994 (in each case, other than Mr. Munn, such
number represented less than 1% of the Corporation's outstanding Common
Shares). The table also shows the year since which each nominee and each
continuing director has been continuously a director of the Corporation or, in
the case of directors who have been directors of the Corporation continuously
since the acquisition by the Corporation of the outstanding Capital Stock of
the Trust Company, a trustee of the Trust Company:
- -------------------
* Includes shares subject to stock options exercisable within 60 days of
February 28, 1994, and shares attributable to deferred awards under the
1989 Stock Compensation Plan and Predecessor Performance Plans.
-3-
<PAGE>
<PAGE>
Nominees
<TABLE>
<CAPTION>
First Number of
Principal Occupation and Became Shares
Name (Age) Business Experience Director Owned(1)(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Term Expires in 1997
Peter O. Crisp (61) General Partner of 1992 700
Venrock Associates
(venture capital
limited partnership)
Mr. Crisp has been general partner of Venrock Associates since 1969. He is also a
director of Apple Computer, Inc., American Superconductor Corporation, Evans &
Sutherland Computer Corp., Long Island Lighting Company, Inc., Thermedics Inc.,
Thermo Electron Corp., Thermo Power Corporation and ThermoTrex Corp. Mr. Crisp
serves as a member of the Board of Managers of Memorial Sloan-Kettering Cancer
Center, Memorial Hospital for Cancer and Allied Diseases and Sloan-Kettering Institute
for Cancer Research. He is a trustee of North Shore University Hospital and of the
Teagle Foundation.
Daniel P. Davison (69) Retired Chairman of the 1979 48,095(3)
Board of the Corporation
and the Trust Company
Mr. Davison was chairman of the board of Christie, Manson & Woods International, Inc.
from February 1990 to January 1, 1994. He served as president of the Corporation and
the Trust Company from the spring of 1979 until June 1, 1986, as chief executive officer
from January 1, 1981 through January 1990 and as chairman of the board from February
1, 1982 until his retirement in February 1990. Prior to joining U.S. Trust, he was
associated with Morgan Guaranty Trust Company for 23 years, serving as corporate
secretary, general manager of its London office and, in his final position, as executive vice
president in charge of the National Bank Division. Mr. Davison is also a director of The
Atlantic Companies, Burlington Northern, Inc., Christies International, plc and Prime
Property Inc. He is a trustee and treasurer of the Winston Churchill Foundation of the
United States, Ltd. and of the Florence Gould Foundation. Mr. Davison is also vice
chairman of The Nature Conservancy and trustee of The Cooper Union for the
Advancement of Science and Art.
Antonia M. Grumbach (50) Partner in Patterson, 1991 1,300
Belknap, Webb & Tyler
(law firm)
Ms. Grumbach joined the law firm of Patterson, Belknap, Webb & Tyler in 1971 and
became a partner of the firm in 1979. She is currently serving as managing partner of the
firm. She is vice chairman of the board of trustees of Teachers College, Columbia
University, and a trustee of Milton Academy, the Sister Fund and the William T. Grant
Foundation. Ms. Grumbach also serves as a director of The Henfield Foundation and
served as an initial member of the Board of Advisors of the New York University
program on philanthropy and the law.
</TABLE>
-4-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
First Number of
Principal Occupation and Became Shares
Name (Age) Business Experience Director Owned(1)(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frederic C. Hamilton (66) Chairman of the Board, 1972 30,825
President and Chief
Executive Officer of
Hamilton Oil Company, Inc.
(international petroleum
company)
Mr. Hamilton serves as chairman of the board, president and chief executive officer of
Hamilton Oil Company, Inc., chairman of the board of BHP Petroleum, and chairman of
the board of Tejas Gas Corporation. He is also a director of the American Petroleum
Institute and a member of the National Petroleum Council. Mr. Hamilton is chairman of
the Denver Art Museum Foundation and a trustee of the Denver Art Museum, the Boys'
Club Foundation and the Boy Scouts of America Denver Area Council.
Peter L. Malkin (60) Chairman of Wien, Malkin & 1992 1,200
Bettex (law firm)
Mr. Malkin joined the predecessor law firm of Wien, Malkin & Bettex in 1958 and became
a partner in the firm in 1962. He is also chairman of W & M Properties, Inc. and is a
general partner in the ownership of several New York City buildings, including the
Empire State Building, the Graybar Building, the Lincoln Building, 1185 Avenue of the
Americas, and One Penn Plaza. Mr. Malkin is founding chairman of the Grand Central
Partnership and of the 34th Street Partnership, a director of the New York City Chamber
of Commerce & Industry, a member of the New York City Partnership, a member of the
Board of Overseers of Harvard College and a director and member of the Executive
Committee of Lincoln Center for the Performing Arts.
Jeffrey S. Maurer (46) President of the Corporation 1989 20,277(3)(4)(5)
and the Trust Company
Mr. Maurer joined the Trust Company in 1970 and was made manager of the Asset
Management and Private Banking Group in 1988. He was elected senior vice president in
November 1980, executive vice president in May 1986 and president effective
February 1990. Mr. Maurer is a trustee of Alfred University, a director and treasurer of
The Children's Health Fund, a director of The Hebrew Home for the Aged, a member of
the Advisory Board of The Salvation Army of Greater New York and chairman of the
Commerce and Industry Division of the Greater New York Israel Bond Campaign.
</TABLE>
-5-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
First Number of
Principal Occupation and Became Shares
Name (Age) Business Experience Director Owned(1)(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard F. Tucker (67) Retired Vice Chairman of the 1983 3,325
Board of Mobil Corporation
(petroleum and chemicals)
Mr. Tucker joined Mobil Corporation in 1961 and retired as vice chairman in May 1991.
He was a director of Mobil from 1971, and president and chief operating officer of Mobil
Oil Corporation from 1986 until his retirement. Mr. Tucker is also a director of The
Perkin-Elmer Corporation. He is trustee emeritus of Cornell University and a life member
of the Board of Overseers of Cornell Medical College. He is also a trustee of the Aldrich
Museum of Contemporary Art, The Teagle Foundation and the Norwalk Hospital.
Mr. Tucker is a member of the National Academy of Engineering, The Council on
Foreign Relations, Inc. and the Woods Hole Oceanographic Institution.
Term Expires in 1996
Eleanor Baum (54) Dean of Engineering at The 1994 300
Cooper Union for the
Advancement of Science &
Art
Dr. Baum became dean of engineering at Cooper Union in 1987. Prior to that, she was
dean of Pratt Institute in Brooklyn and worked as an engineer at Sperry Rand Corp. and
General Instrument Corp. Dr. Baum is also a director of Allegheny Power Systems. She is
on the board of trustees of the Accreditation Board for Engineering & Technology, is a
commissioner of the Engineering Workforce Commission and is executive director of the
Cooper Union Research Foundation.
Term Expires in 1995
Ruth A. Wooden (47) President & Chief Executive 1994 200
Officer of The Advertising
Council, Inc. (not-for-profit
public service advertising)
Ms. Wooden became president and chief executive officer of The Advertising Council in
August 1987. Prior to that, she was with NW Ayer, Inc. for eleven years. Ms. Wooden
serves as a trustee of The Edna McConnell Clark Foundation and of St. Luke's Roosevelt
Hospital Center. She is vice chair of CARE, USA, director of the National Elementary
School Center and an advisor to the Columbia Health Sciences Advisory Council and the
Columbia University School of Public Health Advisory Council.
</TABLE>
-6-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
First Number of
Principal Occupation and Became Shares
Name (Age) Business Experience Director Owned(1)(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Directors Continuing In Office
Term Expires in 1996
Philippe de Montebello (57) Director of the Metropolitan 1983 800
Museum of Art
Mr. de Montebello has been associated with the Metropolitan Museum of Art since 1963,
serving as associate curator for European paintings from 1963 to 1969, vice director for
curatorial and educational affairs from 1974 to 1977 and as director since 1978. In the
interim of his duties at the Metropolitan, Mr. de Montebello served as director of the
Museum of Fine Arts in Houston from 1969 to 1974. He is a member of the Advisory
Board of the Skowhegan School of Painting and Sculpture and the Columbia University
Advisory Council-Departments of Art History and Archaeology. Mr. de Montebello is a
trustee of the New York University Institute of Fine Arts and the American Federation of
Arts.
Edwin D. Etherington (69) President Emeritus of 1969* 8,150
Wesleyan University
Mr. Etherington was president and chief executive officer of the American Stock
Exchange from 1962 to 1966 and president of Wesleyan University from 1966 to 1970.
Earlier, after practicing law in Washington D.C. and New York City, he was vice president
of the New York Stock Exchange and, subsequently, a general partner of Pershing & Co.
Mr. Etherington was president (1971) and chairman (1972) of the National Center for
Voluntary Action and for two years was chairman of the National Advertising Review
Board. He is a director of Automatic Data Processing, Inc. and a trustee of The
Schumann Foundation. He also serves as honorary chairman of the Lymes' Youth Service
Bureau.
Donald M. Roberts (58) Vice Chairman of the Board 1986 31,917(3)(4)(5)
and Treasurer of the
Corporation and the Trust
Company
Mr. Roberts was elected treasurer in January 1989 and vice chairman effective February 1,
1990. He is head of the Trust Company's Institutional Services Group. Prior to joining
U.S. Trust in 1979, he was associated with Citibank for 22 years serving as senior vice
president from 1974 to 1979. Mr. Roberts is also a director of York International
Corporation, Burlington Resources, Inc. and the New York Road Runners Club, Inc. He
is president of the Board of Trustees of St.Bernard's School, a trustee of the YWCA of
New York City and a member of The Bridge Fund Advisory Board.
- -------------------
* Mr. Etherington resigned as a director of the Corporation and trustee of the Trust
Company for health reasons on March 1, 1986. He was re-elected to both Boards on
September 27, 1988.
</TABLE>
-7-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
First Number of
Principal Occupation and Became Shares
Name (Age) Business Experience Director Owned(1)(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John Hoyt Stookey (64) Chairman of Quantum 1989 800
Chemical Corporation
(petrochemicals and
propane)
Mr. Stookey served as president of Quantum Chemical from 1975 to 1993 when Quantum
was acquired by Hanson Industries, Inc. He continues as chairman of the board of
Quantum, a position he has held since 1986. As Chairman of Quantum, Mr. Stookey
served from 1989 to 1993 as an executive officer of Petrolane Incorporated, Petrolane
Finance Corp. and QJV Corp., affiliates of Quantum, which companies were reorganized
on July 15, 1993 under the U.S. Bankruptcy Code. Prior to joining Quantum, Mr. Stookey
was president of Wallace Clark Incorporated from 1969 to 1975 and served as the U.S.
Representative to both private and public banks in Mexico. He is also a director of
AMAX Inc. and Chesapeake Corporation. Mr. Stookey is the founder and president of
The Berkshire Choral Institute, trustee of the Glimmerglass Opera and trustee emeritus
of the Boston Symphony Orchestra. He is a member of the New York Academy of
Science.
Robert N. Wilson (53) Vice Chairman of the Board 1991 950
of Johnson & Johnson
(health care products)
Mr. Wilson joined Johnson & Johnson in 1964. He was appointed to the Executive
Committee in 1983 and was elected to the board of directors in 1986. Mr. Wilson has
been vice chairman of the board of directors of Johnson & Johnson since 1989. He is a
member of the Board of Directors of the Pharmaceutical Manufacturers Association, of
the Alliance for Aging Research and The Georgetown College Foundation, Inc. He also
serves as a trustee of the Museum of American Folk Art and is a member of the Trilateral
Commission.
Frederick S. Wonham (62) Vice Chairman of the Board 1986 30,404(3)(4)(5)
of the Corporation and the
Trust Company
Mr. Wonham joined the Trust Company in 1979 as a senior vice president, and was head
of the Personal Asset Management Division until 1982, when he was elected executive vice
president and appointed manager of the Planning, Administration and Computer Services
Group. He was elected vice chairman effective February 1990 and is head of the Funds
Services Group. Between 1974 and 1978, Mr. Wonham was associated with White Weld
and Co., Incorporated serving as president and chief operating officer from 1975 through
1978. Earlier, he was associated with G.H. Walker & Co., Incorporated for 19 years,
serving as president and chief executive officer from 1971 to 1974. Mr. Wonham is a
trustee of the Provident Loan Society.
Term Expires in 1995
Samuel C. Butler (64) Partner in Cravath, Swaine & 1972 7,562(6)
Moore (law firm)
Mr. Butler joined the law firm of Cravath, Swaine & Moore in 1956 and was elected a
partner of the firm in 1960. He is also a director of Ashland Oil, Inc., Millipore
Corporation and GEICO Corporation. Mr. Butler is a trustee of the New York Public
Library and of the Culver Educational Foundation.
</TABLE>
-8-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
First Number of
Principal Occupation and Became Shares
Name (Age) Business Experience Director Owned(1)(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul W. Douglas (67) Retired Chairman of the 1978 1,837
Board of The Pittston
Company (coal mining,
transportation and security
services)
Mr. Douglas retired as chairman of the board and chief executive officer of The Pittston
Company in September 1991. Prior to joining Pittston in January 1984, he had been
associated with Freeport-McMoRan Inc. following the merger of Freeport Minerals
Company and McMoRan Oil and Gas Company in April 1981. Formerly, he was director
of the internal finance section of the ECA Mission to France. Mr. Douglas is also a
director of Holmes Protection Group, Inc., MacMillan Bloedel Limited of Vancouver,
B.C., New York Life Insurance Company, Phelps Dodge Corporation and Philip Morris
Companies, Inc. He is a member of The Council on Foreign Relations, Inc. and a trustee
of The International Center for the Disabled and of St. Luke's-Roosevelt Hospital.
Orson D. Munn (69) Chairman and Director of 1982 160,200(7)
Munn, Bernhard &
Associates, Inc. (investment
advisory firm)
Mr. Munn was senior vice president and chief investment officer of Madison Fund, Inc.
from May 1981 through February 1983 and was president of Orson Munn, Inc. from
February 1983 until the organization of Munn, Bernhard & Associates, Inc. in
November 1990. Previously, he was president of Piedmont Advisory Corporation and,
upon its merger in 1980 with Lexington Management Corporation, performed the duties
of vice chairman and chief investment officer. Earlier, Mr. Munn was associated with
Wood Walker & Co. for 20 years, serving as chief executive officer of the company from
1972 to 1974. Mr. Munn is a trustee of the Waterfowl Research Foundation and is a
former member of the Financial Advisory Committee of the Garden Club of America, a
former trustee of the Village of Southampton and a former director of numerous
charities.
H. Marshall Schwarz (57) Chairman of the Board and 1977 29,625(4)(5)
Chief Executive Officer of
the Corporation and the
Trust Company
Mr. Schwarz joined the Trust Company in 1967 after a seven-year association with
Morgan Stanley & Co. In 1972, he was elected a senior vice president and head of the
Banking Division. He was elected executive vice president and chief operating officer of
the Trust Company's Bank Group in 1977 and chief operating officer of the Asset
Management Group in 1979. Mr Schwarz served as president of the Corporation and the
Trust Company from June 1986 through January 1990 and became chairman and chief
executive officer effective February 1, 1990. He is also a director of Atlantic Mutual
Companies and Bowne & Co., Inc. Mr. Schwarz is chairman of the board of the American
Red Cross in Greater New York and a director of the United Way of New York City. He
is a trustee of Teachers College-Columbia University, Milton Academy, the Camille and
Henry Dreyfus Foundation, Inc. and The Boys' Club of New York.
</TABLE>
-9-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
First Number of
Principal Occupation and Became Shares
Name (Age) Business Experience Director Owned(1)(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Philip L. Smith (60) Chairman of the Board and 1987 800
Director of the Golden Cat
Corporation (manufacturer
of cat litter and related
products)
Mr. Smith has been chairman of the board and director of the Golden Cat Corporation
since November 1990. He was chairman of the board, president and chief executive
officer of The Pillsbury Company from August 1988 through January 1989. Formerly, he
had been associated with General Foods Corporation for over 20 years, serving in his final
position as chairman of General Foods and director of Philip Morris Companies, Inc.
Mr. Smith is also a director of Whirlpool Corporation and Ecolab Corporation.
Frederick B. Taylor (52) Vice Chairman of the Board 1989 28,457(3)(4)(5)(8)
and Chief Investment Officer
of the Corporation and the
Trust Company
Mr. Taylor joined the Trust Company in 1966. In 1980, he was elected a senior vice
president and, in 1986, he was elected an executive vice president of the Corporation and
chairman, Investment Policy of the Trust Company. Mr. Taylor was elected vice chairman
and chief investment officer effective February 1990. He is a member of the New York
Society of Security Analysts and the Association for Investment Management and
Research. Mr. Taylor serves on the board of counselors of White Plains Hospital and on
the senior advisory board of the New York Chapter of the Arthritis Foundation.
Carroll L. Wainwright, Jr. (68) Consulting Partner in 1981 3,600(3)
Milbank, Tweed, Hadley &
McCloy (law firm)
Mr. Wainwright joined the law firm of Milbank, Tweed, Hadley & McCloy in 1952. After
serving as assistant counsel to the Governor of New York from 1959 through 1960, he
returned to the firm, becoming a partner in 1963, a senior partner in 1986 and consulting
partner in 1991. Mr. Wainwright is a trustee of the American Museum of Natural History,
trustee and vice chairman of The Cooper Union for the Advancement of Science and Art
and trustee and former president of The Boys' Club of New York. He is also an adjunct
professor at Washington and Lee University Law School, a trustee of the Edward John
Noble Foundation, and member of the Distribution Committee of The New York
Community Trust.
- -------------------
<FN>
(1) Share ownership involves sole voting and dispositive power unless otherwise indicated.
(2) Does not include shares subject to non-employee director stock options exercisable within
60 days of February 28, 1994 as follows: Messrs. Crisp and Malkin each 1,650 shares, Mr. Munn
2,000 shares, Mr. Wilson 4,650 shares and 5,000 shares by each of the other non-employee directors
(as defined in the plan) other than Dr. Baum, Mr. Etherington and Ms. Wooden. See "Directors'
Compensation."
(3) Includes 3,155 shares owned by Mr. Roberts' daughter, 2,250 shares owned by Mr. Wonham's
children, 300 shares owned by Mr. Wainwright's wife, 10,254 shares owned by Mr. Davison's wife,
2,500 shares owned by Mr. Maurer's wife, 621 shares held in trust by Mr. Maurer's wife for their
children and 3,989 shares owned by Mr. Taylor's wife, with respect to which the director in each
case disclaims beneficial ownership.
</TABLE>
-10-
<PAGE>
<PAGE>
[FN]
(4) Does not include shares subject to employee stock options exercisable
within 60 days of February 28, 1994 as follows: Mr. Schwarz 57,500 shares,
Mr. Maurer 35,000 shares, Mr. Taylor 27,500 shares, Mr. Roberts 25,900 shares
and Mr. Wonham 18,500 shares.
(5) Does not include shares attributable to deferred awards under the 1989
Stock Compensation Plan and Predecessor Performance Plans as follows:
Mr. Schwarz 71,661 shares, Mr. Maurer 23,117 shares, Mr. Roberts 52,470 shares,
Mr. Taylor 6,451 shares and Mr. Wonham 38,501 shares. See "Compensation of
Executive Officers."
(6) Includes 1,250 shares held in a trust of which Mr. Butler is trustee and
5,703 shares held in a trust in which he has a beneficial interest.
(7) Represents approximately 1.71% of the Corporation's outstanding Common
Shares as of February 28, 1994. Includes 2,700 shares held in a trust of which
Mr. Munn is trustee and 149,700 shares held by Munn, Bernhard & Associates,
Inc. for clients of the firm (over which the firm has both voting and
dispositive power), with respect to which Mr. Munn disclaims beneficial
ownership.
(8) Includes 270 shares held in a trust of which Mr. Taylor is sole trustee
and in which he has a beneficial interest.
Reports of Beneficial Ownership
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and
rules of the Securities and Exchange Commission (the "Commission") thereunder
require the Corporation's directors and officers to file with the Commission
reports of their beneficial ownership and changes in beneficial ownership of
the Corporation's Common Shares. Personnel of the Corporation generally
prepare these reports for the directors and officers on the basis of
information furnished by them to such personnel. Based on such information
and written representations by the directors and officers that certain reports
were not required, the Corporation believes that all reports required by
Section 16(a) of the Exchange Act and the rules of the Commission thereunder
to be filed by its directors and officers during 1993 were timely filed.
Directors' and Trustees' Committees;
Board and Committee Meetings
The Board of Directors of the Corporation and the Board of Trustees of the
Trust Company (the "Board of Trustees") each has, among others, a standing
Executive Committee, a standing Audit Committee (in the case of the Trust
Company, known as the Examining & Audit Committee) and a standing Compensation
and Benefits Committee. The Executive Committees of the Board of Directors
and of the Board of Trustees are composed of Mr. Schwarz (the Committee
Chairman) and six other Board members, all of whom are appointed annually.
The Executive Committees have the power to act for their respective Boards
when such Boards are not in session and each Executive Committee also serves
as a nominating committee. The Executive Committees will consider nominees
for director and trustee recommended by shareholders who submit the names of
recommended nominees and supporting reasons for such recommendations in writing
to the Secretary of the Corporation or the Trust Company. In addition to
Mr. Schwarz, the members of both Executive Committees are currently Messrs.
Butler, Davison, Douglas, Etherington, Maurer and Wainwright.
The Audit Committee of the Board of Directors of the Corporation and the
Examining and Audit Committee of the Board of Trustees (together, "the Audit
Committee") provide the Boards with an independent review of the Corporation's
and the Trust Company's accounting policies, the adequacy of financial controls
and the reliability of financial information reported to the public. The Audit
Committee also conducts examinations of the affairs of the Corporation and the
-11-
<PAGE>
<PAGE>
Trust Company as required by law or as directed by the Boards, supervises the
activities of the internal Auditor and reviews the services provided by the
independent auditors. (See "Ratification of Appointment of Independent
Auditors" for the names of the members of the Audit Committee, who are
appointed annually.)
The Compensation and Benefits Committees of the Board of Directors and the
Board of Trustees (together, the "Compensation Committee") determine
compensation and benefits for officer-trustees, review salary and benefits
changes for other senior officers and review employee benefit plans under the
Employee Retirement Income Security Act of 1974 and other employee benefit
plans. (See "Compensation Committee Interlocks and Insider Participation"
below for the names of the members of the Compensation Committee, who are
appointed annually.)
During 1993, the Executive Committees of the Board of Directors and Board of
Trustees met two times, the Compensation Committee met three times and the
Audit Committee met seven times.
Both the Board of Trustees and the Board of Directors held ten meetings in
1993. Other than Mr. Hamilton, no member of the Board of the Corporation or
of the Trust Company attended in 1993 fewer than 75% of the aggregate of (1)
the total number of meetings of the Boards held during the period for which he
or she has been a director or trustee and (2) the total number of meetings
held by all committees on which he or she served.
Directors' Compensation
Each director of the Corporation who is not also an officer of the Corporation
or of the Trust Company receives a retainer fee of $15,000 per year and an
attendance fee of $1,000 for each meeting attended of the Board of Directors of
the Corporation, of the Board of Trustees, of the Executive Committee of each
Board and of the committees of the Board of Trustees other than those mentioned
below. If the Boards or the Executive Committees of the Corporation and the
Trust Company meet on the same day, only one fee is paid to a director-trustee
for attendance at both meetings. Under the Stock Plan for Non-Officer
Directors, each director of the Corporation who is not also an officer of the
Corporation or of the Trust Company receives 100 Common Shares of U.S. Trust
Corporation each February as an additional part of his or her annual retainer
fee.
The Chairman of the Audit Committee receives an annual retainer of $12,500 and
each member of such Committee receives an annual retainer of $10,000. The
Chairman of the Compensation Committee receives an annual retainer of $10,000
and each member of such Committee receives an annual retainer of $7,000. All
directors and trustees are reimbursed for travel and other out-of-pocket
expenses incurred by them in attending board or committee meetings.
Directors who are not also officers of the Corporation or of the Trust Company
may defer cash compensation (including meeting attendance fees) for services
rendered as directors of the Corporation or trustees of the Trust Company or
as members of any Board committee. Interest equivalents are credited to an
unfunded directors' deferred compensation account on the last business day of
each calendar quarter at the prime rate of the Trust Company then in effect.
(See "Approval of Amended Board Deferred Plan" below for a description of the
amended and restated Deferred Compensation Plan for Board Members of United
States Trust Company of New York and Affiliated Companies under which,
effective January 1, 1994, eligible directors would have the same investment
options for the crediting of earnings on their deferred compensation as would
be available under certain executive compensation plans as proposed to be
amended.)
Directors who are not officers of the Corporation or of the Trust Company who
retire from the Board at age 72 with 10 or more years of Board service are
paid an annual retirement benefit for life equal to the annual retainer as a
Board member received in his or her last full year of Board membership.
Directors with less than 10 years of service who retire at age 72 and
-12-
<PAGE>
<PAGE>
directors with 15 or more years of service who retire prior to age 72 are paid
the same annual benefit for the lesser of the number of years he or she served
on the Board or for life.
Under the Stock Option Plan for Non-Employee Directors of U.S. Trust
Corporation (the "Directors Plan"), a maximum of 125,000 Common Shares of the
Corporation are reserved for grants of options to members of the Board of
Directors who are not full-time employees of the Corporation, the Trust Company
or any of their affiliated companies, who have not been such full-time
employees for the previous two years and who have never been members of the
Board of Directors while being employed full-time by the Corporation, the Trust
Company or any of their affiliated companies (the "Non-Employee Directors").
Each person who either was a Non-Employee Director at the time of the adoption
of the Directors Plan in April 1989 or who subsequently became a Non-Employee
Director has been granted an option to purchase 5,000 Common Shares. Each
person who hereafter becomes a Non-Employee Director will be granted an option,
effective on the date of becoming a Non-Employee Director, to purchase 5,000
Common Shares, subject to reduction in the event of an insufficiency of
available shares under the Directors Plan.
Options granted under the Directors Plan are granted for a period of ten years.
The exercise price per share is the fair market value, as defined in the
Directors Plan, of a Common Share on the date of grant. Each option becomes
exercisable in three equal, cumulative installments on each of the first three
anniversary dates of the date the option was granted. Except in the event of
a "change in control" of the Corporation, as defined in the Directors Plan,
full payment of the exercise price for shares subject to an option must be made
in cash at the time of exercise.
In the event of a change in control of the Corporation, all options under the
Directors Plan will be accelerated and become fully exercisable, and optionees
will be permitted to pay the exercise price in cash, or in Common Shares of
the Corporation valued at their then fair market value, or a combination of
cash and Common Shares. In addition, all options that were granted at least
six months prior to the date of such change in control will be cancelled in
return for a cash payment equal to the excess of the aggregate Determined Value
(as defined in the Directors Plan) of the Common Shares subject to the option
over the aggregate option exercise price of such Common Shares. The Board of
Directors may direct that any of the foregoing change in control provisions
not become effective by adopting a resolution to such effect prior to the date
of a change in control (or not later than 45 days thereafter in certain
circumstances).
Compensation of Executive Officers
Compensation Committee Interlocks and Insider Participation
During 1993, the following non-employee directors served as members of the
Compensation Committee: Mr. Philip L. Smith (the Committee Chairman),
Mr. Samuel C. Butler, Mr. Peter O. Crisp, Ms. Antonia M. Grumbach,
Mr. Frederic C. Hamilton and Mr. Richard F. Tucker. The law firm of Cravath,
Swaine & Moore, of which Mr. Butler is a partner, and the law firm of
Patterson, Belknap, Webb & Tyler, of which Ms. Grumbach is a partner,
performed legal services for the Corporation or the Trust Company in 1993.
Mr. Butler and Ms. Grumbach resigned as members of the Compensation Committee
in September 1993.
Report on Executive Compensation
The Compensation Committee is responsible for the administration of U.S.
Trust's executive compensation program, with oversight review by the Board of
Directors and Board of Trustees. The Compensation Committee determines salary,
bonus, stock options, restricted stock, performance share units and other
benefits for senior officers of U.S. Trust, in each case (other than the
Chief Executive Officer) upon the recommendation of the Chief Executive
Officer.
-13-
<PAGE>
<PAGE>
Compensation Strategy and Program. U.S. Trust is committed to attracting,
motivating and encouraging long-term employment of high-caliber,
service-oriented individuals. The Compensation Committee expects and seeks
excellence in performance and uses the compensation program as a means to
reward superior achievement. The Compensation Committee manages compensation
to support the long-term interests of U.S. Trust and its shareholders by
adhering to the following basic strategic principles:
Compensation at all levels will be competitive with comparable
organizations and will reward employees on the basis of their
performance and contribution to U.S. Trust.
U.S. Trust's benefits package will be competitive and designed to
encourage a career commitment to U.S. Trust.
Total incentive compensation paid will be based on overall corporate
performance; individual and unit performance will determine the
allocation of the total among selected participants.
As an employee moves up at U.S. Trust, a larger proportion of his or
her total compensation will be incentive compensation which will be
influenced in large part by the market value of U.S. Trust Common
Shares. Incentive compensation at the executive officer level may
exceed by several times the executive's base salary, while for the
great majority of employees, incentive compensation is unlikely to
exceed their base salary. One-half or more of each executive
officer's incentive compensation is likely to be earned based on the
value of U.S. Trust Common Shares.
U.S. Trust encourages employee ownership of U.S. Trust Common Shares
and has therefore established an ESOP and other stock-based incentive
compensation plans. The Compensation Committee believes that the
performance of U.S. Trust is best when employees think like owners.
Acceptance of U.S. Trust's ownership philosophy is a requirement for
advancement to senior management positions; senior management will be
expected over time to build and maintain significant ownership
positions in U.S. Trust Common Shares.
Salaries are administered to provide a level of base compensation that is
competitive with that available at other high caliber institutions. Annual
salary increases generally reflect improved individual performance, increased
responsibilities and changes in the competitive marketplace. These factors
involve subjective judgments made by the Compensation Committee and are not
weighted. For competitive comparisons, the Committee considers companies in
the peer group used for the performance graph below as well as other financial
organizations in the New York metropolitan area. This competitive information
is reviewed by the Compensation Committee after salaries have been
preliminarily determined merely to assure that salaries are not "out of line."
Annual incentive compensation is paid under the 1990 Annual Incentive Plan (the
"Annual Plan") based on the attainment of annual corporate and personal
performance objectives established at the beginning of each year. As to
corporate performance, the aggregate incentive compensation pool is determined
by the Compensation Committee on the basis of the Corporation's absolute
return on equity (ROE) and ROE ranking in relation to other banking
organizations included in the peer group referred to above. In 1993, U.S.
Trust placed in the top quartile in ROE ranking and exceeded its absolute ROE
target for the year. The Compensation Committee selected ROE as the
performance measure because the Committee believes that the effective use of
shareholder capital is the principal test of management performance, and that
a high ROE has a positive influence on the market value of the Corporation's
Common Shares. Individual awards are based on the Compensation Committee's
assessment of personal achievement of objectives by members of management,
such as attainment of long-term goals for their business units, client
satisfaction, new business development and results achieved in relation to
budget. Arithmetic criteria are not used in determining cash compensation.
-14-
<PAGE>
<PAGE>
Long-term incentive compensation at U.S. Trust is generally granted in three
forms: stock options, restricted stock and performance share units. The grants
are designed to align a significant portion of executive compensation with
shareholder interests. Stock awards to executive officers are generally in the
form of performance share units and stock options, which carry an exercise
price equal to the fair market value of the Common Shares at the time of grant.
The size of each executive officer's stock option award is not based on
arithmetic criteria but rather is based on the Compensation Committee's
assessment of the individual's potential long-term contribution to U.S. Trust's
results, taking into account the number of options and shares currently held by
that individual. Executive officers generally are strongly encouraged to hold
shares obtained through the exercise of stock options consistent with U.S.
Trust's commitment to substantial stock ownership by its executives.
Performance share units, which are phantom shares of U.S. Trust Corporation
stock, are granted annually under the 1989 Stock Compensation Plan and earned
over a three-year performance cycle from 0% to 100% based on achievement of
earnings and ROE goals (both in absolute terms and in relation to other banking
organizations). The value of awards to executives is based on the number of
performance share units earned and the value per share of U.S. Trust's Common
Shares during the last month of the performance cycle. Dividend equivalents
are paid and reinvested in additional performance share units during the
performance cycle. The number of performance share units initially granted is
based on a guideline percentage of salary, divided by the stock price at the
time of grant.
CEO Compensation for 1993. The salary paid in 1993 to H. Marshall Schwarz,
Chairman and Chief Executive Officer ("CEO"), was $517,308. Mr. Schwarz's
salary reflects the Compensation Committee's review of competitive and
internal compensation levels, as well as its belief that executive compensation
should be influenced by both short and long-term operating results and should
reflect both short and long-term incentives rather than salary alone.
Cash awards were paid under the Annual Plan to Mr. Schwarz and other executive
officers. Amounts reflect the fact that U.S. Trust exceeded its ROE goal and
placed in the top quartile in a ranking of the peer group of banking companies
on relative ROE in 1993. Subjective assessments by the Compensation Committee
of individual performance were considered in the determination of specific
individual awards.
The performance share earn out for the 1991-93 cycle was 100% of the initial
grant amount reflecting 100% achievement of goals for absolute EPS growth,
relative ROE and absolute ROE performance against peers.
In summary, the Compensation Committee believes it has a comprehensive and
competitive executive compensation program with an appropriate balance between
salary and short and long-term incentives and with an emphasis on stock-based
compensation.
Respectfully submitted,
Philip L. Smith, Chairman
Peter O. Crisp
Frederic C. Hamilton
Richard F. Tucker
-15-
<PAGE>
<PAGE>
The following table sets forth the compensation paid or accrued during 1993,
1992 and 1991 to the CEO and the four other most highly compensated executive
officers (during 1993) for services rendered in all capacities to the
Corporation and to the Trust Company and their affiliates.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Long-Term Compensation
Compensation --------------------------------
--------------------------------- Awards Payouts
Other -------------------- ---------
Annual Restricted Stock Long-Term All Other
Compen- Stock Option Incentive Compen-
Name and Principal Salary Bonus sation Awards Awards Payouts sation(1)
Position Year ($) ($) ($) ($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
H.M. Schwarz 1993 517,308 304,135 0 0 10,000 545,015 89,641
Chairman, CEO 1992 485,192 305,740 0 0 0 221,688 28,451
1991 464,846 297,109 0 0 0 112,921 30,374
J.S. Maurer 1993 381,538 205,923 0 0 6,000 370,669 61,175
President 1992 359,423 212,029 0 0 15,000 150,617 20,737
1991 344,885 209,307 0 0 0 76,222 22,332
F.B. Taylor 1993 351,539 187,423 0 0 5,000 307,670 48,860
Vice Chairman, 1992 329,423 183,529 0 0 12,000 126,057 18,527
Chief Investment 1991 314,904 181,106 0 0 0 73,203 20,112
Officer
D.M. Roberts 1993 327,769 153,612 0 0 5,000 302,785 455,892
Vice Chairman, 1992 316,923 159,154 0 0 0 126,057 44,726
Treasurer 1991 309,923 156,405 0 0 0 77,716 35,707
F.S. Wonham 1993 327,769 153,612 0 0 5,000 302,785 162,723
Vice Chairman 1992 316,923 159,154 0 0 0 126,057 25,462
1991 309,923 156,405 0 0 0 76,222 24,293
(1) See following table for identification and amounts of components.
</TABLE>
-16-
<PAGE>
<PAGE>
The following table lists for each of the named executives the payments that
comprise the "All Other Compensation" amounts found in the Summary
Compensation Table.
<TABLE>
All Other Compensation
<CAPTION>
Special
Adjustment
Employer Benefit Earnings on to Deferred
Contribution Equalization Deferred Award
to ESOP(1) Units(2) Awards(3) Balances(4) Total
Name Year ($) ($) ($) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H.M. Schwarz 1993 11,792 14,073 2,668 61,108 89,641
J.S. Maurer 1993 11,792 7,285 1,761 40,337 61,175
F.B. Taylor 1993 11,792 5,785 1,309 29,974 48,860
D.M. Roberts 1993 11,792 4,596 18,387 421,117 455,892
F.S. Wonham 1993 11,792 4,596 6,122 140,213 162,723
<FN>
(1) Represents the amount of the employer contribution made to the ESOP portion of the 401(k) Plan and ESOP on behalf
of each of the named executive officers for the year indicated.
(2) Represents the amount of the employer contribution, otherwise required under the ESOP portion of the 401(k) Plan
and ESOP, that could not be made to the Plan on behalf of the named executive officers for the years indicated due to
certain limitations imposed under the Internal Revenue Code of 1986 (the "Code Limitations"). Under the 1989 Stock
Compensation Plan (the "Stock Plan"), each executive officer was credited with "benefit equalization units" having an
aggregate market value (determined as of the last business day of the applicable year) equal to the dollar amount (shown
in the column above) that could not be contributed to the 401(k) Plan and ESOP on the officer's behalf for each of the
years indicated due to the Code Limitations. Under the terms of the Stock Plan, each such officer will receive, upon
termination of employment, one Common Share of the Corporation for each benefit equalization unit so credited and for
each additional benefit equalization unit that is credited to the officer's plan account in respect of dividend
equivalents on all previously credited benefit equalization units.
(3) Represents that portion of the interest accrued on certain previously deferred incentive plan cash awards which is
"above market" interest as defined in the rules of the Securities and Exchange Commission.
(4) Represents a special adjustment made as of January 1, 1993 to the deferred award balances of all active employees
who had been participants in two incentive award plans maintained in prior years. Prior to 1993, interest on deferred
awards was credited at a rate equal to the Corporation's ROE. In December 1992, as a result of the Corporation's ROE
reaching 19% (as compared with an ROE rate of only 11.1% in 1980 when these plans were established) and with even higher
ROE rates possible for future years, management concluded that the cost of continuing to credit interest at the full ROE
rate would be prohibitive. Accordingly, the plans were amended effective as of January 1, 1993 to reduce the interest
crediting rate to 50% of the Corporation's annual ROE, subject to a minimum rate of 5% (or the full ROE rate if less
than 5%) and a maximum rate of 15%. In order to lessen the effect of this reduction on participants, the plans were
also amended to provide for a one-time 50% increase in the balances of the deferred awards at December 31, 1992.
Management believes that the net effect of the reduction in crediting rate and the increase in account balances will be
to achieve substantial long-term savings in the costs associated with these plans.
</TABLE>
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<PAGE>
<PAGE>
Stock Options. The following table sets forth certain information concerning
options granted during 1993 to the executive officers named in the Summary
Compensation Table, including potential gains that these officers would realize
under two stock price growth-rate assumptions compounded annually. Under the
5% growth-rate assumption, the indicated values would be realized if the stock
price reached $87.76 per share at the end of the option term (10 years from
grant). Correspondingly, under the 10% growth-rate assumption, the indicated
values would be realized if the stock price reached $139.75 per share.
<TABLE>
Option Grants in 1993
<CAPTION>
Potential Realizable Value
at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Options Term(1)
--------------------------------------------------------- --------------------------
Number of Exercise
Securities % of Total Price per
Underlying Options Share
Options Granted to (Market
Granted(2) Employees Price at
(# of in Date of Expiration
Name Shares) Fiscal Year Grant)($) Date 5%($) 10%($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H.M. Schwarz 10,000 5.6% 53.88 01/26/03 338,800 858,700
J.S. Maurer 6,000 3.3% 53.88 01/26/03 203,280 515,220
F.B. Taylor 5,000 2.8% 53.88 01/26/03 169,400 429,350
D.M. Roberts 5,000 2.8% 53.88 01/26/03 169,400 429,350
F.S. Wonham 5,000 2.8% 53.88 01/26/03 169,400 429,350
<FN>
(1) Annual growth-rate assumptions are prescribed by rules of the Securities and Exchange Commission and do not reflect
actual or projected price appreciation of U.S. Trust Corporation Common Shares. The actual average annual price
appreciation of U.S. Trust Common Shares over the last ten years was 13.67%.
(2) Options become exercisable in four equal, cumulative installments in each of the first through fourth anniversary
dates of the date of grant (January 26, 1993).
</TABLE>
The following table discloses the aggregated stock option exercises for each of
the named executive officers in the last fiscal year. It also shows the number
of vested and unvested unexercised options and the value of vested and unvested
unexercised in-the-money options.
<TABLE>
Aggregated Option Exercises in 1993 and Year-End Option Values
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Year-End(#) Year-End($)(2)
Acquired on Value ------------------------- -------------------------
Name Exercise(#) Realized ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H.M. Schwarz -- -- 57,500/25,500 1,023,125/305,938
J.S. Maurer -- -- 35,000/28,000 643,438/307,188
F.B. Taylor 1,000 30,250 27,500/22,500 500,155/235,969
D.M. Roberts 1,500 48,915 25,900/13,500 522,060/167,344
F.S. Wonham -- -- 18,500/13,500 329,530/167,344
<FN>
(1) Aggregate market value on the date(s) of exercise less aggregate exercise price.
(2) Total value of unexercised options is based on the difference between aggregate market value of U.S. Trust
Corporation Common Shares at $52.50 per share, the closing price on December 31, 1993, and aggregate exercise price.
</TABLE>
-18-
<PAGE>
<PAGE>
Performance Share Units. The Stock Plan permits the Compensation Committee to
make grants of performance share units. In recognition of the longer-term
nature of many policy decisions, performance share units are earned over a
period of three years (a "Performance Cycle") to the extent that pre-
established performance goals for the Corporation are met. Such performance
goals are currently comprised of a formula based on compound growth in the
Corporation's earnings per share and the Corporation's return on equity, both
in absolute terms and in relation to other banks and bank holding companies
included in the peer group used for the performance graph below.
In granting awards of performance share units, the Compensation Committee first
allocates a dollar amount to each participant based on a percentage of the
participant's base salary at the commencement of the Performance Cycle (the
percentage used for the CEO is higher than those used for other executive
officers). Such dollar amount is then converted into performance share units
by dividing such amount by the Average Market Value of one Common Share during
the month preceding the month in which the Performance Cycle begins. ("Average
Market Value" is the daily mean between the high and low prices of a Common
Share as quoted on the NASDAQ National Market System.) Additional performance
share units are credited to a participant to reflect all dividends on the
Common Shares with record dates occurring during the Performance Cycle. The
amount payable to a participant at the end of a Performance Cycle is equal to
the number of performance share units earned in accordance with the attainment
of performance goals for that Performance Cycle, multiplied by the Average
Market Value of one Common Share during the month in which the Performance
Cycle ends. The Summary Compensation Table, under the column heading
"Long-Term Compensation--Payouts--Long-Term Incentive Payouts," shows the
dollar value of awards earned by the named executive officers for the three
Performance Cycles which ended at the end of 1991, 1992 and 1993.
Earned awards are paid as soon as practicable after the end of the Performance
Cycle unless a participant previously has elected in writing to defer the
receipt of all or part of an earned award. Awards which are not deferred are
paid in a combination of cash and Common Shares determined by the Compensation
Committee in its sole discretion, provided that not less than one-half of the
value of any non-deferred payment may consist of Common Shares. At the
election of the participant, deferred awards are either (i) converted into
"phantom share units," which will thereafter fluctuate in value according to
changes in the market value of the Common Shares, or (ii) credited with
interest compounded quarterly, at such rate as the Compensation Committee shall
select. (See "Approval of Amendments to the Stock Plan--Proposed Amendments--
Investment Options for Deferred Performance Awards" below for a description of
a proposed amendment to the Stock Plan under which, effective January 1, 1994,
participants may elect to have their deferred awards credited with earnings on
the basis of the performance of certain investment accounts, rather than
interest at the Trust Company's prime rate. See also "Executive Deferred
Compensation Plan" below.) The Stock Plan provides, however, that at least 50%
of the value of a participant's deferred awards must be converted into phantom
share units, and 100% of such value will be converted into phantom share units
if the participant shall have failed to file an election within the time
prescribed by the Stock Plan (not later than 60 days prior to the end of the
Performance Cycle).
The number of phantom share units into which deferred awards are converted is
equal to the dollar amount of the portion of the deferred award to be
converted, divided by the Average Market Value of one Common Share during the
month in which the Performance Cycle ends. Additional phantom share units are
issued in payment of dividend equivalents on phantom share units already
issued.
-19-
<PAGE>
<PAGE>
Payments with respect to deferred awards are made in ten annual installments
commencing on the last day of February of the year following the year in which
the participant retires or otherwise terminates employment. Such payments
will consist of Common Shares (to the extent the participant elected to defer
awards in the form of phantom share units) and cash (to the extent the
participant elected to defer awards in the form of investment accounts).
Long-Term Incentive Awards Granted In 1993
<TABLE>
<CAPTION>
Number of Performance Estimated Future Payouts of Performance Share Units
Performance Period Until -----------------------------------------------------
Name Share Units(#) Payout Threshold (#)(1) Target (#)(2) Maximum (#)(2)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H.M. Schwarz 6,136 3 years 1,023 6,136 6,136
J.S. Maurer 4,162 3 years 694 4,162 4,162
F.B. Taylor 3,477 3 years 561 3,477 3,477
D.M. Roberts 3,293 3 years 549 3,293 3,293
F.S. Wonham 3,293 3 years 549 3,293 3,293
<FN>
(1) Assumes minimum number of performance share units earned in each performance goal for 1993-95 performance cycle.
(2) Assumes all specified performance targets are reached.
</TABLE>
-20-
<PAGE>
<PAGE>
Performance Graph. The graph below compares the annual change in the
cumulative total return on U.S. Trust Common Shares with the annual change
in the cumulative total returns of the Standard & Poor's Composite--500 Stock
Index and a group of U.S. Trust peer companies. The peer companies are
banking organizations selected on the basis of their similarity to U.S. Trust
in having a high percentage of revenues from fees generated by personal trust
business and other fee-based services. The peer group consists of The Bank of
New York Company, Inc., Bankers Trust New York Corporation, Boatmen's
Bancshares, Inc., Comerica Incorporated, CoreStates Financial Corp, Fleet/
Norstar Financial Group, Mellon Bank Corporation, Mercantile Bancorporation
Inc., Mercantile Bankshares Corporation, J.P. Morgan & Co., Incorporated, NBD
Bancorp, Inc., Northern Trust Corporation, PNC Financial Corp, Society
Corporation, State Street Boston Corporation, Sun Trust Banks, Inc. and
Wilmington Trust Company.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Among U.S. Trust, S&P 500 and Bank Peer Group**
<CAPTION>
1988 1989 1990 1991 1992 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Trust 100.0 101.6 89.2 129.3 153.6 168.9
S&P 500 100.0 131.6 127.5 166.2 178.8 196.7
Peer Group 100.0 121.1 106.6 181.2 218.2 225.3
<FN>
* Assumes that the value of the investment in U.S. Trust Common Shares, the S&P 500 index and the peer group was $100
on December 31, 1988, and that all dividends were reinvested.
** The return of each member of the peer group has been weighted according to its respective stock market
capitalization.
</TABLE>
Retirement Benefits. Each of the executive officers named in the Summary
Compensation Table is a participant in The Employees' Retirement Plan of United
States Trust Company of New York and Affiliated Companies (the "Retirement
Plan"). The Retirement Plan is a defined benefit pension plan which is tax
qualified under Section 401(a) of the Internal Revenue Code. The Retirement
Plan provides for payment of a pension in an annual amount equal to a specified
percentage (based on the length of a participant's credited service up to a
maximum of 35 years) of the participant's average base salary for his highest
five consecutive years of base salary during the last ten plan years prior to
retirement or other termination of employment, reduced by a portion of the
participant's annual Social Security benefit. The table below shows the
estimated annual pension payable under the Retirement Plan's benefit formula
upon retirement at age 65 to persons in specified remuneration and years-of-
service classifications who have elected to receive their pensions under a
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<PAGE>
<PAGE>
straight life annuity option. The amounts shown do not reflect reductions
which would be made to offset Social Security benefits.
<TABLE>
<CAPTION>
Highest Consecutive Estimated Annual Pension for Representative
Five-Year Years of Credited Service
Average Base Salary 15 25 35 or More
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$300,000 $101,250 $150,000 $180,000
350,000 118,125 175,000 210,000
400,000 135,000 200,000 240,000
450,000 151,875 225,000 270,000
500,000 168,750 250,000 300,000
550,000 185,625 275,000 330,000
600,000 202,500 300,000 360,000
</TABLE>
The table below sets forth the number of years of credited service and the
average base salary, in each case as of the end of 1993, that would be taken
into account in determining the pension payable under the Retirement Plan's
benefit formula to each of the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Average
Years Base
Name of Service Salary
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
H.M. Schwarz 26.9 $457,000
J.S. Maurer 23 340,000
F.B. Taylor 27.6 315,000
D.M. Roberts 14 305,800
F.S. Wonham 14.5 303,200
</TABLE>
The amount of compensation taken into account in determining each executive
officer's pension under the Retirement Plan's formula, as shown in the third
column of the table above, represents the average of the rates of base salary
in effect for such officer as of the last day of each of the years 1989
through 1993. In the case of each such officer, the base salary amounts so
taken into account for the years 1991, 1992 and 1993 differ from the amounts
shown in the "Salary" column of the Summary Compensation Table for these years,
in that the latter amounts represent the base salary actually earned by the
officer during each such year, rather than the rate of base salary in effect
for the officer at the end of that year.
The pension amounts otherwise payable from the Retirement Plan are subject to
reduction to the extent necessary to comply with the applicable Code
Limitations. However, in the case of each executive officer named in the
Summary Compensation Table, any pension amount otherwise payable under the
Retirement Plan's benefit formula that cannot be paid to such officer from the
Retirement Plan because of the Code Limitations will be paid to the officer
under the Trust Company's Benefit Equalization Plan or under a supplemental
pension agreement the Trust Company has entered into with each such officer.
In addition, the supplemental pension agreements of Mr. Wonham and Mr. Roberts
provide, in effect, that if such officer retires on or after his normal
retirement date (age 65) with less than 25 years of credited service, he will
receive a supplemental pension from the Trust Company in such amount as may be
necessary for the total pension amount payable to him under the Retirement
Plan, the Benefit Equalization Plan, any retirement plan maintained by any
previous employer and under his supplemental pension agreement with the Trust
Company, to be at least equal to the pension amount that would have been
payable to him under the Retirement Plan (without regard to the Code
Limitations) if he had had 25 years of credited service at the time of his
retirement.
-22-
<PAGE>
<PAGE>
Change in Control Provisions. Various compensation and benefit plans under
which the executive officers named in the Summary Compensation Table are
covered contain provisions pursuant to which payment of the benefits provided
under the plan would be accelerated in the event of a "change in control" of
the Corporation (as defined in the Stock Plan), unless the Board of Trustees
otherwise determines prior to the date of the change in control (or not later
than 45 days thereafter in certain circumstances). As defined in the Stock
Plan, a "change in control" means that any of the following events has
occurred: (i) 20% or more of the Common Shares have been acquired by any person
(as defined by Section 3(a)(9) of the Securities Exchange Act of 1934) other
than directly from the Corporation; (ii) there has been a merger or equivalent
combination after which 49% or more of the voting stock of the surviving
corporation is held by persons other than former shareholders of the
Corporation; or (iii) 20% or more of the directors elected by shareholders to
the Board of Directors of the Corporation are persons who were not nominated
by management in the most recent proxy statement of the Corporation.
Specifically, upon such a change in control (a) the restrictions applicable to
all restricted stock previously awarded under the Stock Plan would lapse, and
a cash payment would be made for each share of restricted stock equal to the
Determined Value (as defined in the Stock Plan) of a Common Share of the
Corporation; (b) each stock option granted under the Stock Plan at least six
months prior to the change in control would be cancelled in return for a cash
payment equal to the excess of the Determined Value of the Common Shares
subject to the option over the aggregate purchase price of such Common Shares
under the terms of the option; (c) all other stock options outstanding under
the Stock Plan would become immediately and fully exercisable; (d) all
performance share units awarded under the Stock Plan for the performance cycle
in which the change in control occurs would be deemed to have been earned in
full, and a cash payment would be made for each such performance share unit in
an amount equal to the Determined Value of a Common Share of the Corporation;
(e) all previously deferred awards of performance share units under the Stock
Plan would become immediately payable in the form of a cash payment in an
amount equal to the sum of the Interest Portion (as defined in the Stock Plan)
of such awards and the Determined Value of the number of Common Shares of the
Corporation corresponding to the number of units included in the Phantom Share
Unit Portion (as defined in the Stock Plan) of such awards; (f) all benefit
equalization units granted under the Stock Plan would become immediately
payable in the form of a cash payment in an amount equal to the Determined
Value of the number of Common Shares of the Corporation corresponding to the
number of benefit equalization units credited to the participant; (g) all
awards under the Annual Plan for the year in which the change in control occurs
would be deemed to have been earned in full, and would be immediately payable
in the form of a cash payment; and (h) all previously-deferred awards under the
predecessor to the Annual Plan and under the Trust Company's Long-Term
Performance Plans would become immediately payable in the form of a cash
payment, and in the case of deferred awards under the Long-Term Performance
Plans, the cash payment would be equal to the sum of the Interest Portion
(as defined in the Long-Term Performance Plans) of such awards and the
Determined Value of the number of Common Shares of the Corporation
corresponding to the number of units included in the Phantom Share Unit Portion
(as defined in the Long-Term Performance Plans) of such awards.
The Retirement Plan provides that if that plan is terminated within four years
after the occurrence of a change in control, any surplus funding in the plan
would be applied (subject to the Code Limitations and other tax qualification
requirements applicable to the Plan) to provide pro rata increases in the
accrued pension benefits of all qualified participants in the Plan, including
the executive officers named in the Summary Compensation Table.
The supplemental pension agreements between the Trust Company and each of the
executive officers named in the Summary Compensation Table provide that in the
event of the involuntary termination of the officer's employment following a
change in control, the officer would receive from the Trust Company an
-23-
<PAGE>
<PAGE>
immediate lump sum cash payment equal to the actuarial present value of the
supplemental pension that would have been payable to the officer under the
agreement at his normal retirement date if he had remained employed with the
Trust Company until that date, at the same rate of annual compensation in
effect for the officer immediately prior to such termination of his employment.
In addition, under the 1990 Change in Control and Severance Policy (the "1990
Policy"), each of the executive officers named in the Summary Compensation
Table would be entitled to receive severance benefits in the event of the
officer's involuntary termination of employment within two years following a
change in control. In such event, each such officer would be entitled to
receive a cash payment in an amount equal to the sum of (a) two times the
officer's then current annual base salary, (b) the average of the highest three
of the previous five years' awards to such officer under the Annual Plan and
predecessor plan and (c) 26 times the officer's then current weekly base
salary.
Benefit Protection Trusts. The Board of Trustees has approved the
establishment of an Executives' Benefits Protection Trust and an Employees'
Benefits Protection Trust. In the event of a "change in control" of the
Corporation (as defined), the trust funds would be used to satisfy the
obligations of the Trust Company under the Benefit Equalization Plan, the
officers' supplemental retirement benefits agreements, the 1990 Policy, the
Annual Plan and its predecessor plan, and the Stock Plan and its predecessor
plans.
Directors, Trustees and Officers Liability Insurance
Pursuant to Section 726(d) of the New York Business Corporation Law and
Section 7024(d) of the New York Banking Law, the Corporation and the Trust
Company hereby report that on June 10, 1993, policies of directors and officers
liability insurance in the aggregate amount of $50,000,000 were obtained for a
one-year term with National Union Fire Insurance Company of Pittsburgh, Federal
Insurance Company and Aetna Casualty & Surety Company at a total cost of
$388,650 covering all directors, trustees and officers of the Corporation and
the Trust Company and affiliated companies serving at any time during the term
of the policies.
Transactions With Directors and Executive Officers
Some of the Corporation's directors are customers of the Trust Company and some
of the directors are officers of corporations or members of partnerships which
are customers of the Trust Company. As such customers, they have had
transactions in the ordinary course of business with the Trust Company,
including borrowings, all of which were on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than normal
risk of collectibility or present other unfavorable features. In the ordinary
course of business, the Trust Company uses the products or services of a number
of organizations with which directors of the Corporation are affiliated as
officers or partners. It is expected that the Trust Company and the
Corporation will in the future have transactions with organizations with which
directors of the Corporation are affiliated as officers or partners. The law
firm of Cravath, Swaine & Moore, of which Mr. Samuel C. Butler is a partner,
the law firm of Patterson, Belknap, Webb & Tyler, of which Ms. Antonia M.
Grumbach is a partner, and the law firm of Wien, Malkin & Bettex, of which
Mr. Peter L. Malkin is a partner, performed legal services for the Corporation
or the Trust Company in 1993.
II RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to shareholder approval, the Board of Directors of the Corporation and
the Board of Trustees of the Trust Company have appointed Coopers & Lybrand,
certified public accountants, as independent auditors for the year 1993.
-24-
<PAGE>
<PAGE>
Coopers & Lybrand have served as independent auditors for the Trust Company for
many years and have served as independent auditors for the Corporation since
its inception in 1977. In their capacity as independent auditors for the year
1993, Coopers & Lybrand performed the following services: audited the
consolidated financial statements of the Corporation and the statement of
condition of the Trust Company and of certain of the subsidiaries of the
Corporation and the Trust Company, the separate financial statements of the
Trust Company's employee benefit plans as required by the Employee Retirement
Income Security Act of 1974 and the separate monthly financial statements of
the Pooled Pension and Profit Sharing Trust Funds and Discretionary Trust Funds
administered by the Trust Company; conducted limited reviews of the quarterly
financial information that is reported to shareholders; and conducted special
internal accounting control reviews of assets held or managed by the Trust
Company for others.
The members of the Audit Committee are currently Messrs. Etherington (the
Committee Chairman), de Montebello, Douglas, Stookey and Wilson.
Representatives of Coopers & Lybrand will be present at the Meeting with the
opportunity to make a statement if they wish to do so. They also will be
available to respond to appropriate questions.
If the appointment of Coopers & Lybrand is not approved by the shareholders,
the appointment of independent auditors will be reconsidered by the Board of
Directors of the Corporation and the Board of Trustees of the Trust Company.
III ASSUMPTION BY THE CORPORATION OF CERTAIN BENEFIT PLANS OF THE TRUST
COMPANY
In October 1993, the Board of Directors of the Corporation and the Board of
Trustees of the Trust Company resolved that, effective January 1, 1994, the
Corporation would adopt as its own each of the following benefit plans of the
Trust Company, and would assume and become solely responsible for all
liabilities and obligations of the Trust Company under each of such plans,
including all liabilities with respect to the payment of benefits which had
accrued but remained unpaid under each such plan as at December 31, 1993:
<TABLE>
<CAPTION>
Accrued and unpaid
liabilities
(or deferred charges)
at
December 31, 1993
---------------------
<S> <C>
1989 Stock Compensation Plan of United States Trust Company
of New York and Affiliated Companies (the "Stock Plan") $(1,383,493.71)
1988 Long-Term Performance Plan (the "1988 Long-Term Plan")
and Long-Term Performance Plan (the "Long-Term Plan") of
United States Trust Company of New York and Affiliated Companies 15,065,587.66
Deferred Compensation Plan for Board Members of United States
Trust Company of New York and Affiliated Companies (the "Board
Deferred Plan") 1,468,916.37
Annual Incentive Plan of United States Trust Company of New York
and Affiliated Companies 8,223,666.95
Benefit Equalization Plan of United States Trust Company of New
York and Affiliated Companies 3,080,773.59
Supplemental Pension Agreements between United States Trust
Company of New York and certain of its officers and an employee 1,256,783.68
Trustees and Directors Retirement Plan of United States Trust
Company of New York and Affiliated Companies 1,157,467.59
--------------
Total $28,869,702.13
</TABLE>
-25-
<PAGE>
<PAGE>
The adoption of these plans, and assumption of the liabilities thereunder, by
the Corporation do not in any way affect the substantive terms of the plans,
including those relating to participant eligibility and the nature and value
of accrued or future benefits. The principal purpose of such adoption and
assumption is to recognize that a larger proportion of the participants in
these plans than was previously the case are employees of the Corporation and
its subsidiaries other than the Trust Company, so that the Corporation should
bear the financial responsibility for the plans. In addition, in most cases,
the performance of the Corporation and all of its subsidiaries is the measure
for the granting of awards. An effect of the assumption of the plans by the
Corporation will be an improvement in the net income and, therefore, regulatory
capital of the Trust Company on a stand-alone basis. There will be no effect
on the Corporation's consolidated financial statements.
Board approval of the assumption by the Corporation of the Stock Plan, the 1988
Long-Term Plan, the Long-Term Plan and the Board Deferred Plan was conditioned
upon obtaining shareholder approval because the benefits under these plans
include the award of Common Shares or can be valued by reference to the market
performance over time of the Common Shares. Shareholder approval will exempt
the receipt of such Common Shares or stock-based awards by directors and
certain officers of the Corporation from Section 16(b) of the Securities
Exchange Act of 1934.
The Board of Directors recommends that shareholders vote "FOR" the adoption by
the Corporation, effective January 1, 1994, of the 1989 Stock Compensation
Plan, the 1988 Long-Term Performance Plan, the Long-Term Performance Plan and
the Deferred Compensation Plan for Board Members, and the assumption by the
Corporation, effective as of such date, of all liabilities and obligations of
the Trust Company under such plans as at December 31, 1993. For further
information regarding each of these plans, see Proposals IV, V and VI below.
IV APPROVAL OF AMENDMENTS TO THE STOCK PLAN
The Stock Plan is a stock-based incentive compensation plan under which the
Corporation may grant stock options, restricted stock and other stock-based
awards to officers and key employees of the Corporation and its subsidiaries.
The Board of Directors believes that the Stock Plan is an important element of
the Corporation's executive compensation program because stock-based incentive
compensation ties employee compensation directly to stock value and thus
aligns the interests of the Corporation's employees with those of its
shareholders. Additionally, the Stock Plan gives the Corporation flexibility
to implement stock-based compensation strategies to attract and retain
individuals who are important to the Corporation's long-term success.
The Board of Directors has approved, effective January 1, 1994, subject to the
approval of the shareholders, certain amendments to the Stock Plan. Set forth
below are a description of these proposed amendments and a general summary of
the terms of the Stock Plan. Such description and summary are qualified in
their entirety by reference to the text of the proposed amended Stock Plan,
which is attached to this proxy statement as Appendix A.
Proposed Amendments
Investment Options for Deferred Performance Awards. Section 4 of the Stock
Plan provides for the grant of performance share units which are earned to the
extent that pre-established performance goals for the Corporation are met over
a designated period of time (a "Performance Cycle"). Earned awards are paid
as soon as practicable after the end of the Performance Cycle unless a
participant previously shall have elected in writing to defer the receipt of
all or part of an earned award. Currently, a participant may elect to have
his or her deferred awards either (i) converted into "phantom share units,"
which thereafter fluctuate in value according to changes in the market value
of the Common Shares, or (ii) allocated to an individual account (an "Interest
-26-
<PAGE>
<PAGE>
Account") which is credited with interest, compounded quarterly, at such rate
as the Compensation Committee shall select (such rate is currently the Trust
Company's prime rate).
Under the Stock Plan as proposed to be amended, participants whose employment
did not terminate prior to January 1, 1994, will be given the option to choose
from among a number of rates of return for purposes of determining the amounts
to be credited to their respective Interest Accounts. Initially, there will
be six rates of return available -- the Trust Company's prime rate and rates
of return which will match the rates of return on the following five
investment funds presently available for the investment of employees' accounts
under the Trust Company's 401(k) Plan and ESOP (the "401(k) Plan"):
<TABLE>
<CAPTION>
Fund Type of investment
---- ------------------
<S> <C> <C>
Common Stock Fund -- Common stocks and similar equity securities.
Fixed Income Fund -- Securities and other property, except common stocks and similar equity
securities, considered to offer dependable income yields.
Money Market Fund -- Primarily short-term instruments of high quality.
U.S. Government Short/Intermediate -- Short and intermediate term (3-year average) U.S. Treasury and
Term Fund federally-backed agency securities.
International Fund -- Equity securities of the major free world economies.
</TABLE>
The Trust Company's prime rate and each of the above-listed funds are defined
as the "Earnings Crediting Options." A plan participant will be able to
allocate any part or all of the balance in his or her Interest Account to each
of the Earnings Crediting Options and will be able to change such allocation
on a monthly basis.
As of the last day of each month, each part of the balance of a participant's
Interest Account for which a separate Earnings Crediting Option is in effect
shall be credited with an amount (which may be positive or negative)
determined by multiplying such part of the balance by a percentage
corresponding to the "Applicable Rate of Return" for such month under such
Earnings Crediting Option. The "Applicable Rate of Return" for any month
under any Earnings Crediting Option means (i) in the case of an Earnings
Crediting Option that is a 401(k) Plan fund, the percentage by which the
value of such fund, as determined by the 401(k) Plan's trustee as of the last
business day of such month, exceeds, or is less than, the value of such fund
as determined by the 401(k) Plan's trustee as of the last business day of
the immediately preceding month, and (ii) in the case of any other Earnings
Crediting Option, the rate of return applicable for such month as determined
by the Compensation Committee in its sole discretion.
The Compensation Committee may at any time, in its sole discretion, determine
(i) that the Trust Company's prime rate or any 401(k) Plan fund shall cease to
constitute an Earnings Crediting Option for purposes of the Stock Plan,
(ii) that any investment fund that is added to the 401(k) Plan at any time
after January 1, 1994, shall not constitute an Earnings Crediting Option for
purposes of the Stock Plan, or (iii) that any other hypothetical investment
fund or index or referenced rate of return shall constitute an Earnings
Crediting Option for purposes of the Stock Plan. Participants will be
notified in writing at least 45 days in advance of any such change in the
Earnings Crediting Options.
This proposed amendment to the Stock Plan is subject to shareholder approval,
as well as shareholder approval of Proposal III herein.
For information regarding the funding and protection of Earnings Crediting
Options, see "Funding and Protection of Plan Benefits" below.
-27-
<PAGE>
<PAGE>
Exercise of Stock Options after Retirement. Section 2.2(E) of the Stock Plan
currently provides that if an optionee's employment shall terminate for any
reason other than death or disability, all right to exercise his or her options
shall terminate on the expiration dates specified in such options or the date
three months after the date of termination of the optionee's employment,
whichever date is earlier, except that if such termination is by reason of
retirement, the Compensation Committee may in its sole discretion extend such
three-month period to the date twelve months after the date of termination.
It is proposed that this provision be amended to provide that if an optionee's
employment shall terminate by reason of retirement, all such optionee's stock
options will expire on the earlier of their specified expiration dates or the
date three months (in the case of incentive stock options) or fifteen months
(in the case of nonqualified options) after the date of termination of
employment, without action by the Compensation Committee. Under the Internal
Revenue Code of 1986 (the "Code"), incentive stock options must be exercised
no later than three months after termination of employment by reason of
retirement in order to be treated as incentive stock options for income tax
purposes. The change will allow retirees greater flexibility in the timing of
the exercise of nonqualified stock options granted to them during their active
service with U.S. Trust.
Stock Option Award Limitation. The Stock Plan presently contains no limit on
the total number of Common Shares with respect to which stock options may be
granted to any one person. It is proposed that Section 2.1 of the Stock Plan
be amended to provide that the total number of Common Shares with respect to
which options may be granted to any person during any calendar year shall not
exceed 250,000 Common Shares. The purpose of this amendment is to enable
options granted under the Stock Plan to be treated as "performance-based
compensation" for purposes of section 162(m) of the Code. As enacted in 1993,
section 162(m) limits to $1 million the amount that can be deducted by a
publicly-held corporation with respect to the annual compensation it pays to
its chief executive officer and to its four other highest paid executive
officers. However, under section 162(m), compensation that is performance-
based is not taken into account for purposes of the deduction limit. Under
proposed federal income tax regulations issued under section 162(m), one of
the requirements that must be met in order for options granted under the
Stock Plan to qualify for the performance-based exception to the deduction
limit is that the Stock Plan include a limit on the maximum number of options
that may be granted to any individual participant during a specified period.
Management believes that it is desirable for options granted under the Stock
Plan to qualify for the performance-based exception.
Summary Description of the Stock Plan
The following is a brief description of the existing Stock Plan with reference
where appropriate to the proposed amendments described in this proxy statement.
General. The Stock Plan provides for the award of Common Shares by means of
restricted stock, stock options and performance share units to senior officers
of the Corporation, the Trust Company and their subsidiaries. In addition,
the Stock Plan provides for the grant of benefit equalization units to certain
participants in the 401(k) Plan in order to provide such participants with the
full benefits to which they would have been entitled under the 401(k) Plan
benefit formula but for certain limitations imposed by the Code.
The Stock Plan currently authorizes the issuance of a maximum of 1,300,000
Common Shares plus the Common Shares previously authorized but not utilized
or reserved for issuance under various predecessor plans. As of February 28,
1994, there were an aggregate of 325,506 Common Shares available for future
awards under the Stock Plan. The Common Shares to be distributed under the
Stock Plan may be shares held in the Corporation's treasury, authorized but
previously unissued shares or shares purchased by the Corporation on the open
market.
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<PAGE>
<PAGE>
Officers of the Corporation, the Trust Company and their subsidiaries at or
above the rank of Vice President are eligible to be granted stock options and
other awards under the Stock Plan. In addition, benefit equalization units
are automatically credited to certain participants in the 401(k) Plan, as
described below under the caption "Benefit Equalization Units." The
Compensation Committee selects the officers who will be granted awards and
determines the nature, extent and timing of awards, performance goals and
performance measurement periods and any conditions to be attached to awards.
Currently, there are approximately 450 persons who are eligible to be granted
awards under the Stock Plan, including all five of the Named Executive
Officers.
Restricted Stock. A recipient of restricted Common Shares is prohibited from
selling, pledging or otherwise disposing of such shares within a period
determined by the Compensation Committee (typically three years for all
restricted stock awards). Restricted shares are held in the participant's name
in a book entry account. During the restricted period, the participant has all
of the rights of a shareholder of the Corporation with respect to his or her
restricted shares, including voting and dividend rights. Subject to
satisfaction of any tax withholding obligation and the participant's compliance
with such other conditions as may be imposed by the Compensation Committee,
certificates evidencing the shares are delivered to the participant free of
restrictions at the conclusion of the restricted period. In the event of the
termination of employment of a participant for any reason, all shares then
subject to restrictions are forfeited unless the Compensation Committee
otherwise determines.
Stock Options. The Stock Plan provides for the award of options to purchase
Common Shares. The maximum term of all options granted under the Stock Plan is
ten years from the date of grant, and the per share exercise price of any
option may not be less than the fair market value of a Common Share on the date
of grant of the option, as determined by the Compensation Committee. The
Compensation Committee may require that an option under the Stock Plan be
exercised in installments; each presently outstanding option under the Stock
Plan became or becomes exercisable in four substantially equal, cumulative
installments over a four-year period, subject to the discretion of the
Compensation Committee to accelerate an option in whole or in part upon an
optionee's termination of employment by reason of death, permanent disability
or retirement. Payment of the option exercise price may be made in cash or in
other consideration approved by the Compensation Committee, including Common
Shares valued at their fair market value at the time of exercise.
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The following table sets forth information with respect to options currently
outstanding under the Stock Plan. On February 28, 1994, the closing price of a
Common Share on the NASDAQ National Market System was $50.75.
<TABLE>
<CAPTION>
Number of shares
Optionee or group under option
----------------- ----------------
<S> <C>
H.M. Schwarz 40,000
Chairman and CEO
J.S. Maurer 46,000
President
F.B. Taylor 32,000
Vice Chairman and Chief Investment Officer
D.M. Roberts 20,000
Vice Chairman and Treasurer
F.S. Wonham 20,000
Vice Chairman
All executive officers as a group 158,000
(5 persons)
All other employees, including officers other than executive officers 637,731
</TABLE>
Options granted under the Stock Plan are either incentive stock options meeting
the requirements set forth in Section 422 of the Code ("ISOs") or options which
do not qualify as ISOs ("nonqualified options"). For federal income tax
purposes, assuming that the shares acquired by the holder of an ISO are not
disposed of within two years from the date the option was granted or one year
from the date the option was exercised, the Corporation receives no deduction
either upon the grant or the exercise of an ISO or upon a subsequent sale of
the shares by the optionee. The optionee realizes no income for regular
federal income tax purposes either at the time of the grant or the time of
exercise of the ISO. Instead, the optionee realizes income or loss only upon
his or her subsequent sale of the option shares, and the optionee's income, in
the amount of any excess of the sale price over the option exercise price,
will be taxed as long-term capital gain.
If, however, the shares are disposed of within either of the two- and one-year
periods mentioned above (a "disqualifying disposition"), the excess, if any,
of the fair market value of the shares on the date of exercise over the option
exercise price will be treated as ordinary income to the optionee in the year
of the disqualifying disposition. In addition, if a disqualifying disposition
is for more than the fair market value of the shares on the date of exercise,
the excess of the amount realized over the fair market value will be treated
as a short-term or long-term capital gain realized by the optionee, depending
upon the length of time the shares are held. If a disqualifying disposition is
for less than the fair market value of such shares on the date of exercise, the
amount treated as ordinary income realized by the optionee will be limited to
the excess of the amount realized over the option exercise price, and if the
disqualifying disposition is for less than the option exercise price, the
optionee will realize no ordinary income, but rather a short-term or long-term
capital loss, depending upon the length of time the shares are held, equal to
the difference between the option exercise price and the amount realized. The
Corporation may be entitled, in the year of a disqualifying disposition, to a
deduction equal to the amount that the optionee must treat as ordinary income.
The optionee of a nonqualified option does not realize any taxable income upon
the grant of the option. Upon exercise of a nonqualified option, the optionee
realizes ordinary income in an amount generally measured by the excess, if any,
of the fair market value of the shares on the date of exercise over the option
exercise price. The Corporation will be entitled to a deduction in the same
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amount as the ordinary income realized by the optionee. Upon the sale of such
shares, the optionee will realize short-term or long-term capital gain or loss,
depending upon the length of time the shares are held. Such gain or loss will
be measured by the difference between the sale price of the shares and the
market price of the shares on the date of exercise.
An option under the Stock Plan will not be exercisable unless the optionee has
remained in the employ of the Corporation, the Trust Company or a participating
subsidiary for such period after the date of grant of the option as may be
determined by the Compensation Committee. If the optionee's employment shall
terminate (except by reason of death or disability), the option will be
exercisable, to the extent the optionee was entitled to exercise the option on
the date of such termination, until the earlier of (i) three months after the
date of termination of employment and (ii) the expiration date specified in
the option. This three-month period is extended to twelve months if the
optionee's employment shall terminate by reason of disability, is extended to
two years after death if the optionee's employment shall terminate by reason of
death or if the optionee dies within one year of retiring as a result of a
disability, and may, in the Compensation Committee's sole discretion, be
extended to twelve months if the optionee ceases to be an employee by reason
of retirement. As described above under the caption "Proposed Amendments --
Exercise of Stock Options after Retirement," the shareholders are being asked
to approve an amendment to the Stock Plan which would change the option
exercise period, in the event of the optionee's termination of employment by
reason of retirement, to the earlier of the expiration date specified in the
option and the date three months (in the case of an ISO) or fifteen months (in
the case of a nonqualified option) after the date of termination of employment.
The Compensation Committee would not have the discretion to extend the option
exercise period.
Performance Share Units. See "Compensation of Executive Officers --
Performances Share Units" above for a general description of Performance Share
Units. As described above under the caption "Proposed Amendments--Investment
Options for Deferred Performance Awards," shareholders are being asked to
approve an amendment to the Stock Plan which would permit a participant to
elect one or more of a number of rates of return for the participant's Interest
Account, and to change such election on a monthly basis. Approximately 14
participants in the Stock Plan, including all five of the Named Executive
Officers, currently have deferred awards to their credit under the Stock Plan.
Benefit Equalization Units. Under the Stock Plan, awards of benefit
equalization units are credited to certain participants in the 401(k) Plan to
compensate them for reductions of the ESOP contributions made to the 401(k)
Plan on behalf of such participants, which reductions are imposed by the Code
as a condition for qualifying the ESOP portion of the 401(k) Plan for certain
tax benefits. All participants in the 401(k) Plan whose ESOP contributions
thereunder are reduced because of such Code limitations automatically receive
benefit equalization units under the Stock Plan.
The number of benefit equalization units credited to a participant is equal to
(a) the amount of the ESOP contribution for a 401(k) Plan year which would have
been made to the Plan on the participant's behalf under the formula set forth
in the 401(k) Plan in the absence of the Code limitations, less (b) the amount
of the ESOP contribution for such Plan year actually made on the participant's
behalf, taking into account the Code limitations, divided by (c) the Average
Market Value of a Common Share on the last business day of the relevant 401(k)
Plan year. In addition, benefit equalization units earn Common Share dividend
equivalents which are converted into additional benefit equalization units on
the basis of the Average Market Value of a Common Share on a dividend payment
date.
A participant's interest in benefit equalization units is fully vested at all
times and not subject to forfeiture. As soon as practicable after the
termination of a participant's employment, the participant will receive a
number of Common Shares equal to the whole number of benefit equalization units
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then credited to the participant's account (fractional units are settled in
cash). Apart from the right to dividend equivalents, benefit equalization
units do not entitle the holder to any of the rights of a holder of Common
Shares.
Change in Control Provisions. See "Compensation of Executive Officers --
Change in Control Provisions" above.
The Board of Directors recommends that shareholders vote "FOR" the proposed
amendments to the 1989 Stock Compensation Plan.
V APPROVAL OF AMENDMENTS TO THE PREDECESSOR PERFORMANCE PLANS
The provisions of the 1988 Long-Term Plan and the Long-Term Plan (collectively,
"the Predecessor Performance Plans") are substantially the same as the
performance share unit feature of the Stock Plan as described above, which
superseded the Predecessor Performance Plans, except that certain Interest
Accounts under the Long-Term Plan are credited with interest, compounded
annually, equal to one-half of the Corporation's rate of return on
shareholders' equity, rather than at the Trust Company's prime rate, compounded
quarterly. No Performance Cycles remain in progress under the Predecessor
Performance Plans; however, deferred awards remain outstanding in the form of
Interest Accounts and phantom share units for the benefit of 8 employees of
the Corporation and its subsidiaries, including all five of the Named
Executive Officers except Mr. Taylor.
The Board of Directors has approved, effective January 1, 1994, subject to
shareholder approval, amendments to the Predecessor Performance Plans which are
substantially the same as those described above for the Stock Plan, to give
participants the option to choose from among alternative Earnings Crediting
Options for purposes of determining the amounts to be credited to their
Interest Accounts. Initially, there will be six rates of return available --
the Trust Company's prime rate and the rates of return on the five investment
funds under the 401(k) Plan enumerated above under the caption "IV Approval of
Amendments to the Stock Plan -- Proposed Amendments -- Investment Options for
Deferred Performance Awards." However, the Earnings Crediting Options will not
be available for amounts in Interest Accounts under the Long-Term Plan which
are earning interest equal to one-half of the Corporation's rate of return on
shareholders' equity. The proposed amendments to the Predecessor Performance
Plans are also subject to shareholder approval of Proposal III herein.
For information regarding the funding and protection of Earnings Crediting
Options, see "Funding and Protection of Plan Benefits" below.
The Board of Directors recommends that shareholders vote "FOR" the proposed
amendments to the 1988 Long-Term Performance Plan and the Long-Term Performance
Plan.
VI APPROVAL OF AMENDED BOARD DEFERRED PLAN
The Board Deferred Plan permits "Eligible Board Members" (Board members who are
not also officers of the Corporation, the Trust Company and other subsidiaries
of the Corporation) to elect to defer their receipt of the cash compensation
payable to them as retainer fees and meeting attendance fees for their services
as Board members or members of any Board committees ("Eligible Compensation").
There are currently 17 Eligible Board Members, six of whom are currently
participating in the Board Deferred Plan. Compensation deferred under the
Board Deferred Plan is credited with interest, compounded quarterly, at a rate
determined from time to time by the committee of directors which administers
the Plan, who are chosen by the Board of Directors from among those directors
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who are ineligible to participate in the Plan. Such rate is currently the
Trust Company's prime rate.
The Board of Directors has approved, effective January 1, 1994, subject to the
approval of the shareholders, an amended and restated Board Deferred Plan under
which Eligible Board Members would have the same investment options for the
crediting of earnings on their deferred compensation as would be available for
earnings on deferred performance awards earned under the Stock Plan and the
Predecessor Performance Plans (as proposed to be amended as described above).
Thus, a participant in the Board Deferred Plan would be able to elect to
allocate his or her deferred compensation between phantom share units and an
Interest Account. The phantom share units under the Board Deferred Plan would
be identical to those under the Stock Plan and Predecessor Performance Plans;
for example, they would accrue Common Share dividend equivalents in the form of
additional phantom share units and would be settled by the issuance of Common
Shares on the basis of one Common Share for each phantom share unit.
Participants in the Board Deferred Plan would be able to choose from among the
same Earnings Crediting Options for their Interest Accounts as are available
for Interest Accounts under the Stock Plan and Predecessor Performance Plans
as proposed to be amended, i.e., the Trust Company's prime rate and the rates
of return on the five investment funds under the 401(k) Plan enumerated above
under the caption "IV Approval of Amendments to the Stock Plan -- Proposed
Amendments -- Investment Options for Deferred Performance Awards." A
participant's account balance under the Board Deferred Plan at January 1, 1994,
would be allocated between phantom share units and the Interest Account in any
proportion elected by the participant prior to December 31, 1993. Subsequent
compensation deferred under the Board Deferred Plan must be allocated in the
same manner as deferred performance awards under the Stock Plan and Predecessor
Performance Plans, i.e., at least 50% of the value of deferred amounts must be
converted into phantom share units.
The Board Deferred Plan was not previously submitted to shareholders for their
approval because the benefits thereunder were not payable in Common Shares or
valued by reference to the market performance over time of the Common Shares.
Shareholder approval of the amended Board Deferred Plan will exempt the receipt
by directors of phantom share units and Common Shares thereunder from Section
16(b) of the Securities Exchange Act of 1934.
The Board of Directors believes that the greater investment flexibility which
would be provided under the Board Deferred Plan as amended will aid the
Corporation in attracting and retaining non-employee board members of
exceptional ability. In addition, the stock-based features of the Board
Deferred Plan, as amended, will further align the interests of non-employee
board members with those of the Corporation's shareholders and is consistent
with the general trend toward offering stock or stock-based compensation to
non-employee directors.
Set forth below is a general summary of the terms of the Board Deferred Plan as
proposed to be amended. Such summary is qualified in its entirety by reference
to the text of the proposed amended Board Deferred Plan, which is attached to
this proxy statement as Appendix B.
Deferral Elections. With respect to each year beginning in 1994, an Eligible
Board Member may elect in writing to have payment of any part or all of his or
her Eligible Compensation for such year deferred under the terms of the Board
Deferred Plan. In the election form, the Eligible Board Member (i) specifies,
by a percentage in an even multiple of 5%, the portion of his or her Eligible
Compensation to be deferred ("Deferred Amounts"), and (ii) specifies, by
percentages in even multiples of 5%, the portion of the Deferred Amounts to be
converted into phantom share units and the portion to be allocated to his or
her Interest Account under the Board Deferred Plan. At least 50% of an
Eligible Board Member's Deferred Amounts for each year beginning in 1994 must
be converted into phantom share units. Any deferral election made by an
Eligible Board Member with respect to his or her Eligible Compensation, and
any election made as to the allocation of the Deferred Amounts between phantom
share units and the Interest Account, shall be irrevocable.
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Each participant in the Board Deferred Plan prior to 1994 was given the right
under the amended Plan to elect to have his or her account balance under the
Plan at December 31, 1993 (the participant's "Existing Balance") allocated
between phantom share units and the participant's Interest Account in such
percentages (in even multiples of 5%) as the participant specified in writing
prior to December 31, 1993.
A participant's interest in his or her phantom share units and Interest Account
shall be fully vested and nonforfeitable at all times.
Phantom Share Units. The number of phantom share units into which any Deferred
Amount is to be converted shall be determined by dividing the dollar value of
such Deferred Amount by the Average Market Value of one Common Share on the
conversion date or, if such conversion date is not a business day, on the
business day next preceding such conversion date. Phantom share units earn
Common Share dividend equivalents which are converted into additional phantom
share units on the basis of the Average Market Value of a Common Share on a
dividend payment date.
In the event of any change in the Common Shares by reason of any stock
dividend, recapitalization, merger, or any similar change affecting the Common
Shares, the number and kind of shares represented by phantom share units will
be appropriately adjusted consistent with such change in such manner as the
Plan Committee, in its sole discretion, may deem equitable to prevent
substantial dilution or enlargement of the rights granted to, or available for,
the participants under the Board Deferred Plan.
Crediting of Earnings. As of the last day of each month, each part of the
balance of a participant's Interest Account for which a separate Earnings
Crediting Option is in effect shall be credited with an amount (which may be
positive or negative) determined by multiplying such part of the balance by a
percentage corresponding to the "Applicable Rate of Return" for such month
under such Earnings Crediting Option. The "Applicable Rate of Return" for any
month under any Earnings Crediting Option shall mean (i) in the case of an
Earnings Crediting Option that is a 401(k) Plan fund, the percentage by which
the value of such fund, as determined by the 401(k) Plan's trustee as of the
last business day of such month, exceeds, or is less than, the value of such
fund as determined by the 401(k) Plan's trustee as of the last business day of
the immediately preceding month, and (ii) in the case of any other Earnings
Crediting Option, the rate of return applicable for such month, as determined
by the Plan Committee in its sole discretion.
The Plan Committee may at any time, in its sole discretion, determine (i) that
the Trust Company's prime rate or any 401(k) Plan fund shall cease to
constitute an Earnings Crediting Option for purposes of the Board Deferred
Plan, (ii) that any investment fund that is added to the 401(k) Plan at any
time after January 1, 1994, shall not constitute an Earnings Crediting Option
for purposes of the Plan, or (iii) that any other hypothetical investment fund
or index or referenced rate of return shall constitute an Earnings Crediting
Option for purposes of the Plan. Participants will be notified in writing at
least 45 days in advance of any such change in the Earnings Crediting Options.
Whenever a participant first elects to have his or her Deferred Amounts
allocated to an Interest Account, the participant shall specify, by percentages
in even multiples of 5%, the respective parts of the balance of his or her
Interest Account which are to be credited with earnings under each of the
Earnings Crediting Options designated by the participant. The Earnings
Crediting Options selected in such initial election will remain in effect (and
will apply to all additional amounts allocated to the Interest Account
pursuant to any deferral elections made by the participant with respect to any
subsequent years) until the participant changes his or her election.
A participant's account will continue to be credited with earnings until all
payments have been made which are required to be made with respect to the
Interest Account, as described below under "-- Payment of Account Balances."
For this purpose, any payments made with respect to a participant's Interest
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Account will be deemed to have been made pro rata from the respective parts of
the balance of the Interest Account that are subject to separate Earnings
Crediting Options.
Payment of Account Balances. Balances held for a participant's account under
the Board Deferred Plan will become payable upon the participant's ceasing to
be a member of any Board for any reason. Payment with respect to a
participant's account will be made in ten annual installments commencing on the
first business day of February of the year following the year in which the
participant ceases to be a member of any Board. Payments with respect to a
participant's Interest Account will be made in cash, and payments with respect
to a participant's phantom share units will consist of one Common Share for
each whole phantom share unit. Fractional phantom share units will be settled
in cash on the basis of the Average Market Value of a Common Share on the
business day immediately preceding the date on which such installment payment
is to be made.
Any installment payments remaining to be made to a participant at the date of
his or her death will be made to the participant's designated beneficiary in a
single payment of cash and Common Shares as soon as practicable after the date
of death. Payment with respect to any part or all of a participant's account
may be made to the participant or the participant's beneficiary in advance of
the above-mentioned ten-year installment schedule if the Plan Committee, in its
sole discretion, determines that such advance payment is necessary to help the
participant or the beneficiary meet an "unforeseeable emergency" within the
meaning of the federal Income Tax Regulations.
Rights of Participants. A participant in the Board Deferred Plan will have the
status of a general unsecured creditor of the Corporation with respect to his
or her right to receive any payment under the Plan. A participant's rights to
payments under the Board Deferred Plan are not subject to assignment in any
manner.
Administration. The Board Deferred Plan is administered by a Committee
composed of at least three Board members who are appointed by the Board of
Directors from among Board members who are not Eligible Board Members (i.e.,
three Board members who are officers of the Corporation or the Trust Company).
If at any time there are fewer than three such Board members, additional
members of the Committee shall be appointed from among those Board members who
have never participated in the Plan or, in the absence of any such Board
members, from among the senior officers of the Corporation or any of its
affiliated companies.
No member of the Committee shall be personally liable by reason of any contract
or other instrument executed by such member or on his or her behalf in his or
her capacity as a member of the Committee nor for any mistake of judgment made
in good faith. The Corporation shall indemnify and hold harmless each member
of the Committee against any cost or expense (including counsel fees) or
liability arising out of any act or omission to act in connection with the
Board Deferred Plan unless such cost, expense or liability arises out of such
member's own fraud or bad faith.
Amendment or Termination. The Board of Directors of the Corporation may, with
prospective or retroactive effect, amend, suspend or terminate the Board
Deferred Plan at any time, provided that no amendment of the Board Deferred
Plan shall deprive any participant of any rights to receive payment of any
amounts due him or her under the terms of the Plan as in effect prior to such
amendment without his or her written consent. Any amendment that the Board of
Directors would be permitted to make may also be made by the Plan Committee
where appropriate to facilitate the administration of the Board Deferred Plan
or to comply with applicable law or any applicable rules and regulations of
governing authorities, provided that the cost of the Plan to the Corporation
is not materially increased by such amendment.
For information regarding the funding and protection of Earnings Crediting
Options, see "Funding and Protection of Plan Benefits" below.
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The Board of Directors recommends that shareholders vote "FOR" the approval of
the proposed amended Board Members' Deferred Compensation Plan of U.S. Trust
Corporation.
Executive Deferred Compensation Plan
The Board of Directors has approved, effective January 1, 1994, an Executive
Deferred Compensation Plan (the "Executive Deferred Plan"). All officers of
the Corporation, the Trust Company and their subsidiaries at or above the rank
of Vice President whose total annual compensation (as defined in the Plan)
exceeds $150,000 are eligible to participate in the Executive Deferred Plan.
Currently, approximately 100 persons are eligible to participate in the
Executive Deferred Plan, including the five Named Executive Officers.
With respect to each year beginning in 1994, a participant in the Executive
Deferred Plan may elect to defer his or her receipt of all or any part (in
multiples of 5%) of his or her "Eligible Compensation" for such year.
Eligible Compensation for any year is defined as a certain portion of a
participant's award payable during such year under the Corporation's 1990
Annual Incentive Plan, certain commissions payable to the participant during
such year, and any bonus or incentive payment earned during such year by the
participant pursuant to any employment agreement between the participant and
the Corporation or any subsidiary. Participants in the Executive Deferred Plan
are able to choose rates of return for their deferred amounts from among any or
all of the same rates of return described above under the caption "IV Approval
of Amendments to the Stock Plan -- Proposed Amendments -- Investment Options
for Deferred Performance Awards."
Deferred amounts under the Executive Deferred Plan become payable upon a
participant's termination of employment, or upon a "change in control" of the
Corporation as defined above under the caption "Compensation of Executive
Officers -- Change in Control Provisions." Payment of deferred amounts
generally will be made in a single cash lump sum. However, if employment was
terminated by reason of retirement or death and the employee has so elected,
payment will be made in ten annual cash installments.
The Executive Deferred Plan is not being submitted to shareholders for their
approval because the benefits thereunder are not payable in Common Shares or
valued by reference to the market performance over time of the Common Shares.
Funding And Protection Of Plan Benefits
As discussed above under Proposals IV, V and VI, it is proposed that the Stock
Plan, the Predecessor Performance Plans and the Board Deferred Plan be amended
so as to give participants therein the option of choosing from among additional
rates of return for earnings on their deferred compensation held in Interest
Accounts, which rates would match the rates of return on certain of the
investment funds available for the investment of employees' accounts under the
401(k) Plan. However, amounts held in Interest Accounts, as well as amounts
under the Executive Deferred Plan, would not actually be invested by the
Corporation in the 401(k) Plan investment funds. All the above-mentioned Plans
(collectively, the "Deferred Benefit Plans") are intended to be unfunded plans
for tax purposes, and participants thereunder have the status of general
unsecured creditors of the Corporation with respect to their rights to receive
any benefits.
If Proposals III, IV, V and VI are approved by the shareholders, management
intends that the Corporation's obligations with respect to amounts in Interest
Accounts earning 401(k) Plan rates of return under the Deferred Benefit Plans
would be funded through a variable life insurance policy under which the
Corporation's premium payments (in amounts equal to all Interest Account
allocations earning 401(k) Plan rates of return) would be invested in funds
maintained under the policy which would generally correspond in their
investment objectives to the five 401(k) Plan investment funds used to
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determine rates of return for the Interest Accounts. Management estimates that
the Corporation's after-tax rate of return on the insurance policy will
approximate the after-tax cost to the Corporation of the Interest Account
portions of the Deferred Benefit Plans which earn 401(k) Plan rates of return.
The insurance policy would have the following additional features: (i) the
return on investment of premiums would not be currently taxable to the
Corporation; (ii) death benefit proceeds payable to the Corporation would not
be subject to federal or state income tax; and (iii) the policy would permit
surrender by the Corporation at any time for its then cash surrender value.
Participants in the Deferred Benefit Plans would have no ownership interest in
or rights with respect to the policy.
It is intended that a benefits protection trust would be established by the
Corporation to which would be contributed the above-mentioned life insurance
policy and other assets. Although contributions to such trust would be made
in the discretion of management, the trust itself, and contributions once made
thereto, would be irrevocable, except that the insurance policy and all other
assets held in the trust would remain subject to the claims of the
Corporation's creditors in the event of its insolvency or bankruptcy. In the
event of a "change in control" of the Corporation (as defined above under the
caption "Compensation of Executive Officers -- Change in Control Provisions"),
the insurance policy and other trust assets would be used to satisfy the
obligations of the Corporation under the Deferred Benefit Plans.
VII MISCELLANEOUS
Other Matters
The management of the Corporation does not know of any matters to be presented
at the Meeting other than those specifically set forth in the Notice of Annual
Meeting of Shareholders. If any other matters properly come before the Meeting
or any adjournment thereof, the persons named in the accompanying form of proxy
and acting thereunder will vote in accordance with their best judgment with
respect to such matters.
Shareholder Proposals
Shareholder proposals intended to be presented at the 1995 Annual Meeting of
Shareholders must be received by the Corporation for possible inclusion in the
proxy statement and form of proxy relating to the 1995 meeting by November 11,
1994.
Cost of Solicitation
The expense of soliciting proxies will be borne by the Corporation. In
addition to the use of the mails, proxies may be solicited by personal
interview, by telephone, by facsimile or by telegraph. It is anticipated that
banks, brokerage firms and other institutions, nominees and fiduciaries will
be requested to forward the soliciting material to beneficial owners and to
obtain authorizations for the execution of proxies; and, if they in turn so
request, the Corporation will reimburse such banks, brokerage firms and other
institutions, nominees and fiduciaries for their expenses in forwarding such
material. Officers and regular employees of the Corporation and the Trust
Company also may solicit proxies without additional remuneration therefor.
The Corporation has retained Morrow & Co., Inc., New York, New York, to aid in
the solicitation of proxies for an estimated fee of $5,500.
Dated: March 11, 1994
Carol A. Strickland
Secretary
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Appendix A
1989 Stock Compensation Plan
of U.S. Trust Corporation
As amended, restated and renamed
effective as of January 1, 1994
SECTION 1. INTRODUCTION
1.1 Purpose
The purpose of the 1989 Stock Compensation Plan of U.S. Trust
Corporation (the "Plan") is to advance and promote the interests of U.S.
Trust Corporation and its Affiliated Companies by encouraging and
enabling their senior level employees to acquire common shares of U.S.
Trust Corporation and by providing for monetary payments to such
employees based in part on the value of such shares. In addition, the
Plan will provide benefits to Members of the 401(k) Plan (as hereinafter
defined) whose allocations under the 401(k) Plan are reduced as a result
of the operation of the limitations imposed under sections 401(a)(17)
and 415 of the Internal Revenue Code of 1986, as amended. Accordingly,
the Plan is intended as a further means not only of attracting and
retaining outstanding management but also of promoting a close identity
of interest between management and U.S. Trust Corporation's
shareholders.
The Plan, as hereinafter set forth, represents a continuation
of the 1989 Stock Compensation Plan of United States Trust Company of
New York and Affiliated Companies, as amended, restated and renamed
effective as of January 1, 1994 to reflect (a) the adoption of the Plan
by U.S. Trust Corporation as its own Plan and the Corporation's
assumption of, and becoming solely responsible for, all liabilities and
obligations of United States Trust Company of New York under the Plan,
and (b) changes in certain other provisions of the Plan.
The amendments described in clause (a) of the preceding
paragraph, and the amendments to Sections 2.1(ii), 2.2(E)(4), and 4.7,
as reflected in this Restatement, are subject to approval by
shareholders of the Corporation at its annual meeting scheduled to be
held on April 26, 1994.
1.2 Definitions
As used herein, the following terms shall have the following
meanings:
"Affiliated Companies" shall mean United States Trust Company
of New York, and each other direct or indirect subsidiary of the
Corporation.
"Average Market Value" shall mean, with respect to one Common
Share as of any date or with respect to any period, the mean between the
per-share high and low prices for the Corporation's Common Shares on
such date, or on each day during such period, as quoted on the NASDAQ
National Market System, or, if the Corporation's Common Shares are not
traded on such system, on such other securities market or securities
exchange on which such shares are traded as the Committee shall
determine.
"Award" shall mean the grant of any Option, Performance Share
Unit, Restricted Common Share or Benefit Equalization Unit, or any
combination thereof, by the Committee to a Participant.
"Beneficiary" shall mean the person or persons designated by a
Participant in accordance with Section 6.9 to exercise any Option or to
receive any amount, or any Common Shares, payable under the Plan upon
the Participant's death.
"Benefit Equalization Unit," ""Performance Share Unit" and
"Phantom Share Unit" shall mean a unit of measurement equivalent to one
Common Share, with none of the attendant rights of a shareholder of such
share, including, without limitation, the right to vote such share and
the right to receive dividends thereon, except to the extent otherwise
specifically provided herein.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
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"Change in Control" shall mean that any of the following
events has occurred:
(i) 20% or more of the Common Shares has been acquired by any
person (as defined by Section 3(a)(9) of the Securities
Exchange Act of 1934) other than directly from the
Corporation;
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving
corporation is held by persons other than former
shareholders of the Corporation; or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors are persons who were not nominated
by management in the most recent proxy statement of the
Corporation;
provided, however, that notwithstanding anything in the Plan to the
contrary, no Change in Control shall be deemed to have occurred, and no
rights arising upon a Change in Control as provided in Sections
2.2(E)(6), 2.2(J), 3.7, 4.11 and 5.6 shall exist, to the extent that the
Board of Directors so directs by resolution adopted prior to the Change
in Control, or not later than 45 days after the Change in Control if the
percentage of Common Shares acquired or directors elected under clause
(i) or (iii) of the foregoing definition of Change in Control shall be
at least 20% but less than 25%. Any resolution of the Board of
Directors adopted in accordance with the provisions of this definition
directing that a Change in Control shall be deemed not to have occurred
for purposes of this Plan and that Sections 2.2(E)(6), 2.2(J), 3.7, 4.11
and 5.6, or any of such Sections shall not become effective, may be
rescinded or countermanded at any time with or without retroactive
effect.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Committee" shall mean the Compensation and Benefits Committee
of the Board of Directors.
"Common Shares" shall mean the common shares ($1.00 par value)
of the Corporation.
"Corporation" shall mean U.S. Trust Corporation.
"Determined Value" shall mean the higher of (i) the highest
bid price per Common Share during the twelve months immediately
preceding the date of a Change in Control, or (ii) the highest price per
Common Share actually paid in connection with any Change in Control
(including, without limitation, prices paid in any subsequent merger or
combination with any entity that acquires control of the Corporation).
"Dividend Payment Date" shall mean the date on which the
Corporation pays a dividend on its Common Shares.
"ESOP Contribution" shall mean, (i) for any Plan Year (as
defined in the 401(k) Plan) beginning on or after January 1, 1992, the
ESOP Contribution to be made on behalf of a Participant under the
provisions of the 401(k) Plan in effect for such Plan Year and (ii) for
any Plan Year (as defined in the 401(k) Plan) ending prior to January 1,
1992, the 50 percent portion of the Profit-Sharing Amount (as defined in
the 401(k) Plan in effect for such year) that was to be contributed to
or for the benefit of a Participant for such year and that was not
subject to the Participant's election to receive such amount in cash.
"401(k) Plan" shall mean (i) for any period beginning on or
after January 1, 1992, the 401(k) Plan and ESOP of United States Trust
Company of New York and Affiliated Companies and (ii) for any period
ending prior to January 1, 1992, the Employees' Profit-Sharing Plan of
United States Trust Company of New York and Affiliated Companies.
"Incentive Stock Option" shall mean an option to purchase
Common Shares that qualifies as an incentive stock option within the
meaning of section 422A of the Code.
"Key Employee" shall mean any officer of the Corporation or
any of its Affiliated Companies at or above the rank of Vice President.
"Member" shall mean any person included in the membership of
the 401(k) Plan.
"Nonqualified Stock Option" shall mean an option to purchase
Common Shares that does not qualify as an Incentive Stock Option.
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"Option" shall mean an Incentive Stock Option or a
Nonqualified Stock Option.
"Participant" shall mean any Key Employee who is selected to
participate in the Plan in the manner described in Section 1.4. Any
other employee of the Corporation or any of its Affiliated Companies who
is a Member of the 401(k) Plan shall also be treated as a "Participant"
for purposes of Section 5 of this Plan if, for any Plan Year (as defined
in the 401(k) Plan), the ESOP Contribution otherwise to be made on
behalf of such Participant, or to be allocated to the Participant's
account under the 401(k) Plan, for such Plan Year is reduced as a result
of the Statutory Limitations.
"Performance Cycle" shall mean the period of time, designated
by the Committee, during which performance is measured for the purpose
of determining whether an Award of Performance Share Units with respect
to such period has been earned.
"Performance Goals" shall mean, with respect to any
Performance Cycle, the performance objectives selected by the Committee
to apply for the purpose of determining whether, and to what extent,
Awards of Performance Share Units will be earned for such Performance
Cycle.
"Prior Plan" shall mean the 1989 Stock Compensation Plan of
United States Trust Company of New York and Affiliated Companies, as in
effect from time to time prior to January 1, 1994.
"Restricted Common Shares" shall mean Common Shares which are
subject to the Restrictions set forth in Section 3, and any new,
additional or different securities a Participant may become entitled to
receive with respect to such shares by virtue of a stock split or stock
dividend or any other change in corporate or capital structure of the
Corporation.
"Restricted Period" shall mean the period of time during which
Restricted Common Shares are subject to Restrictions as set forth in
Section 3.
"Restrictions" shall mean the restrictions on Restricted
Common Shares determined in accordance with Section 3.
"Statutory Limitations" shall mean, with respect to any Plan
Year (as defined in the 401(k) Plan), the limitations imposed under
sections 401(a)(17) and 415 of the Code with respect to the amount of
compensation that may be taken into account in calculating contributions
on behalf of any Member, and the amount of contributions that may be
allocated to a Member's account, under the 401(k) Plan for such year.
1.3 Administration
The Plan shall be administered by the Committee. In no event
shall a member of the Committee be eligible for an Award under the Plan.
A majority of the members of the Committee shall constitute a quorum.
The Committee may act at a meeting, including a telephone meeting, by
action of a majority of the members present, or without a meeting by
unanimous written consent. In addition to the responsibilities and
powers assigned to the Committee elsewhere in the Plan, the Committee
shall have the authority to:
(i) select the Participants;
(ii) grant Options, Restricted Common Shares, Performance
Share Units and Benefit Equalization Units to
Participants in such combination and in such amounts as
it shall determine, subject to the terms and conditions
of the Plan;
(iii) determine the nature of the Restrictions and the duration
of the Restricted Period applicable to each Award of
Restricted Common Shares in accordance with Section 3;
(iv) determine the duration of each Performance Cycle;
(v) establish the Performance Goals for each Performance
Cycle;
(vi) determine the maximum percentage of compensation with
respect to which an Award of Performance Share Units may
be made to each Participant, and the actual amount earned
by each Participant with respect to such Awards;
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(vii) determine whether an Option that is granted to a
Participant shall constitute a Nonqualified Stock Option
or an Incentive Stock Option, the number of Common Shares
to be covered by each such Option and the time or times
when and the manner in which each Option shall be
exercisable;
(viii) amend any Incentive Stock Option with the consent of the
Participant so as to make it a Nonqualified Stock Option;
(ix) determine the amount of each Participant's ESOP
Contribution for any Plan Year (as defined in the 401(k)
Plan) which could not be contributed on the Participant's
behalf, or allocated to the Participant's account under
the 401(k) Plan, because of the Statutory Limitations;
(x) treat all or any portion of any period during which a
Participant is on military leave or on an approved leave
of absence as a period of employment, for purposes of
accrual of his rights with respect to any Award; and
(xi) establish from time to time guidelines or regulations for
the administration of the Plan, interpret the Plan, cause
appropriate records to be established, and make all
determinations and take all other actions considered
necessary or advisable for the administration of the
Plan.
All decisions, actions or interpretations of the Committee
under the Plan shall be final, conclusive and binding upon all parties.
1.4 Participation
Except for purposes of Section 5, Participants in the Plan
shall be limited to those Key Employees who have received written
notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan; and
no employee shall at any time have the right to be selected as a
Participant. No Participant shall have the right, by virtue of having
been granted an Award, to be granted any additional Award at any future
date.
1.5 Maximum Number of Shares of Common Stock Available for Awards
Notwithstanding any other provision of the Plan, the number of
Common Shares that may be distributed to Participants during the term of
the Plan shall be limited to one million three hundred thousand
(1,300,000) Common Shares plus the Common Shares, if any, remaining
unused from the Common Shares previously approved by the shareholders
for awards and options under the 1981 Incentive Stock Option Plan, 1981
Stock Option Plan, 1986 Stock Option Plan, Restricted Stock Plan, Long-
Term Performance Plan and 1988 Long-Term Performance Plan. In the event
(i) any Option granted under the Plan shall terminate or expire or (ii)
Awards of Performance Share Units or Restricted Common Shares shall be
forfeited, the number of Common Shares no longer subject to such Option
or no longer payable under such Award, and the number of Restricted
Common Shares that are forfeited, shall thereupon be released and shall
thereafter be available for new Awards under the Plan. In the event of
a cancellation of an Option as provided in Paragraph J of Section 2.2,
the number of Common Shares as to which such Option was canceled shall
not again become available for use under the Plan. The number of Common
Shares represented by Benefit Equalization Units paid for in cash lump
sums pursuant to Section 5.6 shall not again become available for use
under the Plan. Furthermore, in determining the number of Common Shares
available for Awards under the Plan, only the number of Common Shares
paid in satisfaction of Awards of Performance Share Units in accordance
with Section 4.3, and Phantom Share Units in accordance with Section
4.9, shall be considered to have been used with respect to such Awards;
provided, however, that the number of Common Shares represented by
Performance Share Units and Phantom Share Units paid for in cash lump
sums pursuant to Section 4.11 shall not again become available for use
under the Plan. The limitation provided under this Section 1.5 shall be
subject to adjustment as provided in Section 6.1. The Common Shares
distributed under the Plan may be authorized and unissued shares, shares
held in the treasury of the Corporation, or shares purchased on the open
market by the Corporation (as such time or times and in such manner as
it may determine); provided, however, that Restricted Common Shares
shall be distributed from shares held in the treasury of the
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Corporation. The Corporation shall be under no obligation to acquire
Common Shares for distribution to Participants before payment in Common
Shares is due.
SECTION 2. STOCK OPTIONS
2.1 Awards of Options
Subject to the provisions of the Plan, the Committee shall
determine and designate from time to time those Participants to whom
Incentive Stock Options, or Nonqualified Stock Options, or both, are to
be granted and the number of Common Shares to be optioned to each
Participant; provided, however, that (i) the aggregate fair market value
(determined at the time the Option is granted) of the Common Shares with
respect to which Incentive Stock Options are exercisable for the first
time by any Participant during any calendar year (under all incentive
stock option plans of the Participant's employer corporation and its
parent and subsidiary corporations) shall not exceed$100,000; and (ii)
the total number of Common Shares with respect to which Options may be
granted to any Participant during any calendar year beginning on or
after January 1, 1994, shall not exceed 250,000 Common Shares.
2.2 Terms and Conditions of Options
Each Option granted under the Plan shall be evidenced by an
agreement, in a form approved by the Committee (the "Option Agreement").
The Option Agreement shall contain the following terms and conditions,
and such other terms and conditions as the Committee may deem
appropriate:
(A) Option Period. Each Option Agreement shall specify
the period for which the Option thereunder is granted (which
in no event shall exceed ten years from the date of grant) and
shall provide that the Option shall expire at the end of such
period. The Committee may extend such period; provided,
however, that in the case of any Option that the Committee
previously determined to constitute an Incentive Stock Option,
such extension shall not in any way disqualify the Option as
an Incentive Stock Option. In no case shall such period,
including any such extensions, exceed (i) ten years from the
date of grant, or (ii) in the case of Incentive Stock Options
granted to a Participant who, at the time the Incentive Stock
Option is granted, owns shares possessing more than 10 percent
of the total combined voting power of all classes of shares of
his or her employer corporation or of its parent or subsidiary
corporation (a "Ten Percent Shareholder"), five years from the
date of grant.
(B) Purchase Price. The purchase price per Common Share
shall be determined by the Committee at the time any Option
is granted, and shall be not less than (i) the fair market
value, or (ii) in the case of Incentive Stock Options granted
to a Ten Percent Shareholder, 110 percent of the fair market
value (but in no event less than the par value), of a Common
Share on the date the Option is granted, as determined by the
Committee.
(C) Exercise of Option. Except as otherwise provided
under the Plan, no part of any Option may be exercised until
the Participant shall have remained in the employ of the
Corporation or any of its Affiliated Companies for such period
after the date on which the Option is granted as the Committee
may specify in the Option Agreement, and the Option Agreement
may provide for exercisability in installments.
(D) Payment of Purchase Price upon Exercise. Each
Option Agreement shall provide that the purchase price of the
Common Shares as to which an Option shall be exercised shall
be paid to the Corporation at the time of exercise either in
cash or in such other consideration as the Committee deems
appropriate, including, but not limited to, Common Shares
already owned by the Participant having a total fair market
value, as determined by the Committee, equal to the purchase
price, or a combination of cash and Common Shares having a
total fair market value, as so determined, equal to the
purchase price. The Committee in its sole discretion may also
provide that the purchase price may be paid by delivering a
properly executed exercise notice in a form approved by the
Committee together with irrevocable instructions to a broker
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to promptly deliver to the Corporation the amount of the
applicable sale or loan proceeds to pay the purchase price.
(E) Exercise in the Event of Termination of Employment
or Change in Control. In the event a Participant's employment
with the Corporation and its Affiliated Companies should
terminate, or if a Change in Control should occur, Options
granted to the Participant may be exercised in accordance with
the following provisions:
(1) If a Participant's employment terminates as a
result of death, permanent disability or retirement, the
Committee may, in its sole discretion, accelerate in
whole or in part any or all Options which the Participant
was not then entitled to exercise and the Participant
(or, in the case of the Participant's death, the
Participant's Beneficiary) shall have the right to
exercise all Options so accelerated on the date of such
termination.
(2) If a Participant dies (i) while an employee or
(ii) within twelve months after termination of employment
because of permanent disability, the Participant's
Options may be exercised, to the extent that the
Participant was entitled to exercise such Options on the
date of his or her death or termination of employment, by
the Participant's Beneficiary at any time, or from time
to time, but not later than the expiration date specified
in paragraph (A) of this Section 2.2 or two years after
the Participant's death, whichever date is earlier.
(3) If a Participant's employment terminates as a
result of permanent disability, the Participant may
exercise his or her Options, to the extent that the
Participant was entitled to do so at the date of the
termination of his or her employment, at any time, or
from time to time, but not later than the expiration date
specified in paragraph (A) of this Section 2.2 or twelve
months after such termination of the Participant's
employment, whichever date is earlier.
(4) If a Participant's employment terminates as a
result of his or her retirement, the Participant may
exercise his or her Options to the extent the Participant
was entitled to do so at the date of the termination of
his or her employment, at any time, or from time to time,
but not later than the earlier of (x) the expiration date
specified in paragraph (A) of this Section 2.2, or (y)
three months (or, in the case of any Nonqualified Stock
Options, 15 months) after such termination of the
Participant's employment.
(5) If a Participant's employment terminates for
any reason other than death, permanent disability or
retirement as described in (2), (3) or (4) of this
paragraph (E), all right to exercise his or her Options
shall terminate at the expiration date specified in
paragraph (A) of this Section 2.2 or three months after
termination of employment, whichever date is earlier.
(6) Notwithstanding any other provision herein to
the contrary (but subject to the proviso contained in the
definition of "Change in Control" in Section 1.2), upon
the occurrence of a Change in Control, the right to
exercise all Options granted under the Plan which a
Participant would not otherwise have been entitled to
exercise at such time shall be accelerated, and the
Participant shall thereupon have the right to exercise
all such Options immediately.
(F) Transferability of Options. Any Option granted to a
Participant under the Plan shall be nontransferable and may be
exercised during the Participant's lifetime only by the
Participant.
(G) Investment Representation. Each Option Agreement
may provide that, upon demand by the Committee for such a
representation, the Participant (or, in the case of the
Participant's death, the Participant's Beneficiary) shall
deliver to the Committee, at the time of any exercise of an
Option or portion thereof, a written representation that the
shares to be acquired upon such exercise are to be acquired
for investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such
representation prior to the delivery of any Common Shares
issued upon exercise of an Option and prior to the expiration
of the option period shall be a condition precedent to the
right of the Participant (or the Participant's Beneficiary) to
purchase any Common Shares. In the event certificates are
delivered under the Plan for any Common Shares with respect to
which such an investment representation has been obtained, the
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Committee may cause a legend or legends to be placed on such
certificates to make appropriate reference to such
representation and to restrict transfer in the absence of
compliance with applicable federal or state securities laws.
(H) Participants To Have No Rights as Shareholders. A
Participant shall not have any rights as a shareholder with
respect to any Common Shares that are subject to any Option
granted to the Participant, prior to the date as of which such
shares are issued to the Participant pursuant to his or her
exercise of such Option.
(I) Other Option Provisions. Each Option Agreement
shall also contain the applicable terms and conditions set
forth in Sections 6.1 and 6.6 and may contain such other
provisions as the Committee may, from time to time, determine.
Without limiting the foregoing, the Committee may require a
Participant to agree, as a condition to receiving an Option
under the Plan, that part or all of any Options previously
granted to such Participant under the Plan (or any predecessor
plan) be terminated.
(J) Cancellation of Options upon a Change in Control.
Upon the occurrence of a Change in Control, all Options that
were granted under the Plan at least six months prior to the
date of such Change in Control shall be cancelled. In the
event of any such cancellation, the Corporation's obligation
in respect of each such Option shall be discharged by payment
to the Participant of a single cash lump sum (reduced by any
taxes withheld pursuant to Section 6.8) in an amount equal to
the excess, if any, of the Determined Value of the Common
Shares subject to the Option or portion thereof so cancelled
over the aggregate purchase price of such shares as set forth
in the applicable Option Agreement. All such amounts shall be
payable as soon as practicable following the Change in
Control.
(K) Sequential Exercise of Options Not Required.
Options granted under the Plan may be exercised in any order,
regardless of the date of grant or the existence of any other
outstanding Option.
SECTION 3. RESTRICTED COMMON SHARES
3.1 Awards of Restricted Common Shares
Restricted Common Shares awarded under this Plan shall be
subject to such Restrictions as may be imposed with respect to such
Shares by the Committee pursuant to Section 3.2. Any Restrictions so
imposed shall be binding on the Corporation and on the Participants and
their Beneficiaries.
3.2 Restrictions and Restricted Period
At the time each Award of Restricted Common Shares is granted,
the Committee shall establish a period within which Restricted Common
Shares awarded to the Participants may not be sold, assigned,
transferred, made subject to gift, or otherwise disposed of, mortgaged,
pledged or otherwise encumbered. The Committee may impose such other
Restrictions on any Restricted Common Shares as it may determine in its
discretion.
3.3 Rights as Shareholders
Except for the Restrictions described in Section 3.2, and
subject to the forfeiture provisions described in Section 3.5, each
Participant shall have, with respect to any Restricted Common Shares
awarded to the Participant, all rights of a holder of Common Shares
including the right to receive all dividends or other distributions made
or paid in respect of such shares and the right to vote such shares at
regular or special meetings of the shareholders of the Corporation.
3.4 Delivery of Shares
Restricted Common Shares awarded to a Participant under the
Plan shall be held in the Participant's name in a book entry account
maintained by the Corporation. At the conclusion of the Restricted
Period imposed with respect to any Restricted Common Shares awarded to a
Participant, or upon the prior approval of the Committee as provided in
Section 3.5, and subject to the satisfaction of the applicable tax
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withholding requirements provided in Section 6.8, certificates
representing such Restricted Common Shares will be delivered to the
Participant or, if the Participant has died, to the Participant's
Beneficiary, free of the restrictions imposed pursuant to Section 3.2.
3.5 Termination of Employment
In the event of the termination of employment of any
Participant, all Restricted Common Shares awarded to the Participant
under the Plan which are then still subject to Restrictions will be
forfeited by the Participant and become the property of the Corporation.
However, the Committee may, if the Committee in its sole discretion
determines that the circumstances warrant such action, approve the
delivery to the Participant of all or any part of the Restricted Common
Shares which would otherwise be forfeited pursuant to this Section, upon
such conditions as it shall determine.
3.6 Section 83(b) Elections
A Participant who files an election under section 83(b) of the
Code to include the fair market value of any Restricted Common Shares in
gross income while they are still subject to Restrictions shall promptly
furnish the Corporation with a copy of such election together with the
amount of any federal, state, local or other taxes required to be
withheld to enable the Corporation or any of its Affiliated Companies to
claim an income tax deduction with respect to such election.
3.7 Change in Control
Upon the occurrence of a Change in Control, all Restricted
Periods shall end, the Restrictions applicable to all previously granted
Awards of Restricted Common Shares shall lapse and in lieu of delivery
of such shares to the Participants free from such Restrictions as
provided in Section 3.4, the Corporation's obligation in respect of such
shares shall be discharged by payment to each of the applicable
Participants of a single cash lump sum. The amount of such cash lump
sum shall be determined by multiplying the number of Restricted Common
Shares held in the Participant's name by the Determined Value of one
Common Share. The single cash lump sum amount so determined, reduced by
any taxes withheld pursuant to Section 6.8, shall be paid to the
Participant as soon as practicable following the Change in Control.
SECTION 4. PERFORMANCE SHARE UNITS
4.1 Awards of Performance Share Units
Awards of Performance Share Units will be earned on the basis
of corporate performance measured against preestablished Performance
Goals which will be determined by the Committee for each Performance
Cycle. The Committee shall have the authority to adjust Performance
Goals, or performance measurement standards for any Performance Cycle as
it deems equitable in recognition of (i) extraordinary or nonrecurring
events experienced by the Corporation during the Performance Cycle, or
by any other corporation whose performance is relevant to the
determination of the amount of any Award thereunder, (ii) changes in
applicable accounting rules or principles or changes in the
Corporation's or in any other such corporation's methods of accounting
during the Performance Cycle, (iii) the occurrence of a reorganization,
recapitalization, stock split, stock dividend, combination of shares,
merger, consolidation, rights offering, or any other change in the
capital structure of the Corporation, or of any other such corporation,
or (iv) such other events, changes, occurrences, conditions or
circumstances as it determines warrant such adjustment.
The Committee shall determine the amount allocated to each
Participant as a percentage of his or her annual rate of base salary at
the commencement of, or average annual base salary during the
Performance Cycle, either individually or by categories of Participants,
provided that the Committee may, in its sole discretion, also apply such
percentage to other current or deferred compensation and determine the
Performance Cycle for which such deferred compensation shall be counted.
In the case of a Participant whose participation commenced after the
beginning of a Performance Cycle, the Committee shall determine the
amount allocated to such Participant as a percentage of his or her
annual base salary or average annual base salary on such date or during
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such other period as the Committee shall determine prior to the date
such participation commenced.
The amount allocated to each Participant or class of
Participants shall then be converted into and expressed in Performance
Share Units by dividing the dollar value of the amount so allocated by
the Average Market Value of one Common Share during the month preceding
the month in which the Performance Cycle begins or, in the case of an
officer who becomes a Participant in a Performance Cycle after it has
begun, during the calendar month selected by the Committee on or prior
to the date such participation commenced.
A Participant's Award shall be increased by additional
Performance Share Units to reflect all dividends on the Common Shares
with record date occurring during the Performance Cycle relating to that
Award. The amount of any such additional Performance Share Units shall
be determined by (i) multiplying the dividend per share paid on the
Common Shares by the number of Performance Share Units then comprising
such Participant's Award, and then (ii) dividing such amount by the
Average Market Value of one Common Share on the Dividend Payment Date
for such dividend.
The Committee shall also determine the percentage of each
Participant's Award which is to be based on absolute and relative growth
in earnings per share or rate of return on shareholder's equity of the
Corporation, or other measurement of corporate performance, either
individually or by categories of Participants.
4.2 Amount of Payment
The amount payable to a Participant with respect to an Award
of Performance Share Units earned under the Plan shall be equal to (i)
the number of Performance Share Units to which such Participant shall
have become entitled by reason of the level of attainment of Performance
Goals, multiplied by (ii) the Average Market Value of one Common Share
during the month in which the Performance Cycle ends.
4.3 Payment of Non-deferred Awards
The portion of an amount payable on account of an Award of
Performance Share Units which is not deferred pursuant to the
Participant's election under Section 4.4 shall be paid as soon as
practicable after the end of the Performance Cycle for which such Award
was earned. Payment shall be made in the form of a cash payment and/or
in Common Shares, in such proportions as the Committee shall determine
in its sole discretion; provided, however, that not more than one-half
of the value of the payment shall consist of Common Shares. The number
of Common Shares to be included in such payment shall be determined by
dividing (i) the portion of the amount that is to be paid in such shares
by (ii) the Average Market Value of one Common Share during the month in
which the Performance Cycle ends.
4.4 Deferral Elections
A Participant may elect to defer payment of any part or all of
an Award of Performance Share Units earned for any Performance Cycle.
Any such election shall be made in accordance with the following rules:
(a) A deferral election shall be made in writing, on a
form provided by the Committee for such purpose.
(b) In the election form, the Participant shall specify,
by percentage (which must be an even multiple of 5%), the
portion of his or her Award the Participant wishes to defer
hereunder (the portion of an Award deferred pursuant to the
Participant's election is hereinafter referred to as the
Participant's "Deferred Amount").
(c) A Participant's election to defer an Award, or any
part thereof, for any Performance Cycle shall be filed with
the Committee by no later than the last day of the month which
is two-thirds of the way through such Performance Cycle unless
the Committee specifies an earlier filing date.
(d) Any deferral election made by a Participant with
respect to an Award for any Performance Cycle shall be
irrevocable.
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4.5 Separate Accounts
For each Participant who elects to defer any part of any Award
of Performance Share Units, there shall be established on the books and
records of the Corporation, for bookkeeping purposes only, an account
("Account"), to reflect the Participant's interest in his or her
Deferred Amounts. The Account so established for each Participant shall
be maintained in accordance with the following provisions:
(a) The Account established for each Participant shall
consist of two sub-accounts referred to herein, respectively,
as the "Interest Portion" and the "PSU Portion".
(b) The Interest Portion and the PSU Portion of each
Participant's Account shall be credited, respectively, with
amounts equal to the portions of the Participant's Deferred
Amount for each Performance Cycle that the Participant has
elected under Section 4.6 to have allocated to such Portions.
Such amounts shall be so credited as of the first day of the
calendar month following the month in which the applicable
Performance Cycle ended.
(c) As of the date as of which any amount is credited to
the PSU Portion of a Participant's Account pursuant to
paragraph (b), such amount shall be converted into (and after
such conversion shall be reflected in such Portion as) a
number of Phantom Share Units ("PSU's"). The number of PSU's
into which any amount is to be so converted shall be
determined by dividing (i) the dollar value of such amount by
(ii) the Average Market Value of one Common Share during the
month in which the applicable Performance Cycle ended.
(d) The Interest Portion and the PSU Portion of a
Participant's Account shall also include, on January 1, 1994,
all interest, and all additional Phantom Share Units, credited
to such Portions for periods ended prior to January 1, 1994 in
accordance with the provisions of Sections 4.7 and 4.9 of the
Prior Plan.
(e) From time to time after December 31, 1993, the
Interest Portion and the PSU Portion of a Participant's
Account shall be adjusted to reflect all interest or Earnings
(as defined in Section 4.7), and all additional PSU's, to be
credited to such Portions pursuant to Sections 4.7 and 4.8,
and all payments made with respect to such Portions pursuant
to Section 4.9.
(f) A Participant's interest in his or her Account shall
be fully vested and nonforfeitable at all times.
4.6 Election as to Allocation between Interest Portion and PSU Portion
A Participant who elects to defer any part of an Award of
Performance Share Units for any Performance Cycle may make an election
under this Section 4.6 as to the allocation of the Participant's
Deferred Amount with respect to such Award between the Interest Portion,
and the PSU Portion, of the Participant's Account. Any such election
shall be made in accordance with the following rules:
(a) Such election shall be made in writing, on a form
provided by the Committee for such purpose.
(b) In the election form, the Participant shall specify,
by percentage (which must be an even multiple of 5%), the
portions of the Participant's Deferred Amount that he or she
wishes to have allocated, respectively, to the Interest
Portion and to the PSU Portion of the Participant's Account.
At least 50% of the Participant's Deferred Amount with respect
to an Award for any Performance Cycle must be allocated to the
PSU portion of the Participant's Account.
(c) A Participant's election as to the allocation of his
or her Deferred Amount with respect to the Participant's Award
for any Performance Cycle shall be filed with the Committee by
no later than 60 days prior to the close of such Performance
Cycle, or within such other period ending prior to the close
of such Performance Cycle as the Committee may require or
permit. Notwithstanding the foregoing, in the case of any
Participant who is an officer of the Corporation subject to
Section 16 of the Securities Exchange Act of 1934, an election
as to the allocation of the Participant's Deferred Amount with
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respect to an Award for any Performance Cycle ending on or
after December 31, 1994 shall be filed with the Committee at
least six months prior to the close of such Performance Cycle.
(d) If a Participant fails to file, within the time
provided in (c) above, an electio n as to the allocation of
his or her Deferred Amount with respect to an Award for any
Performance Cycle, the Participant shall be deemed to have
made an election hereunder to have the entire portion of such
Deferred Amount allocated to the PSU Portion of the
Participant's Account.
(e) Any election made, or deemed to have been made,
under this Section 4.6 as to the allocation of the
Participant's Deferred Amount with respect to an Award for any
Performance Cycle shall be irrevocable.
4.7 Credits to Interest Portion
In the case of any Participant whose employment with the
Corporation and its Affiliated Companies terminated prior to January 1,
1994, interest shall continue to be credited to the Interest Portion of
such Participant's Account in accordance with the provisions of Section
4.7 of the Prior Plan for all periods ending after December 31, 1993,
until payment with respect to the Interest Portion of such Participant's
Account has been made in full. In the case of each other Participant,
the Interest Portion of the Participant's Account shall be credited with
Earnings for periods ending after December 31, 1993, in accordance with
the following provisions:
(a) As of the last day of each calendar month, each part
of the balance of the Interest Portion of a Participant's
Account for which a separate Earnings Crediting Option (as
hereinafter defined) is in effect pursuant to the
Participant's election under this Section 4.7 shall be
credited with an amount determined by multiplying such part of
the balance by a percentage corresponding to the Applicable
Rate of Return (as hereinafter defined) for such month under
such Earnings Crediting Option. The amount so credited (which
may be positive or negative depending on whether the
Applicable Rate of Return for the month is positive or
negative) is referred to herein as "Earnings".
(b) For purposes of this Section 4.7, the term "Earnings
Crediting Option" shall mean, initially, (i) the Prime Rate,
and (ii) any investment fund maintained under the 401(k) Plan
other than the ESOP Stock Fund or the U.S.T. Corp. Stock
Fund; and the term "Prime Rate" shall mean, with respect to
any calendar month, the prime rate as quoted by United States
Trust Company of New York on the last business day of such
month. Any investment fund described in clause (ii) of the
preceding sentence is referred to herein as a "401(k) Plan
Fund".
Notwithstanding the foregoing, the Committee may at any
time, in its sole discretion, determine (x) that the Prime
Rate or any 401(k) Plan Fund shall cease to constitute an
Earnings Crediting Option for purposes of this Section 4.7,
(y) that any investment fund that is added to the 401(k) Plan
at any time after January 1, 1994 shall not constitute an
Earnings Crediting Option for purposes of the Plan, or (z)
that any other hypothetical investment fund or index or
referenced rate of return shall constitute an Earnings
Crediting Option for purposes of the Plan. Participants shall
be notified in writing, at least 45 days in advance, of any
such change in the Plan's Earnings Crediting Options.
(c) The "Applicable Rate of Return" for any month, under
any Earnings Crediting Option, shall mean (i) in the case of
an Earnings Crediting Option that is a 401(k) Plan Fund, the
percentage by which the value of such Fund, as determined by
the 401(k) Plan's Trustee as of the Valuation Date (as defined
in the 401(k) Plan) for such month, exceeds, or is less than,
the value of such Fund, as determined by the 401(k) Plan's
Trustee as of the Valuation Date for the immediately preceding
month; and (ii) in the case of any other Earnings Crediting
Option, the rate of return applicable for such month, as
determined by the Committee in its sole discretion.
(d) A Participant may make elections with respect to the
Earnings Crediting Options that are to apply with respect to
the Interest Portion of his or her Account, in accordance with
the following rules:
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(i) a Participant may elect to have any part or all
of the balance of the Interest Portion credited with
Earnings under any Earnings Crediting Option available
under the Plan at the time of his or her election.
(ii) each Participant shall make an initial election
as to the Earnings Crediting Options that are to apply
with respect to the Interest Portion at the time the
Participant first elects under Section 4.6 to have any
part of the Participant's Deferred Amount with respect to
an Award for any Performance Cycle ended on or after
December 31, 1993, allocated to the Interest Portion of
his or her Account. Such election shall be made in the
election form in which the Participant makes his or her
election under Section 4.6 to have such part of the
Participant's Deferred Amount with respect to the
Participant's Award for such Performance Cycle, allocated
to the Interest Portion. In such election form, the
Participant shall specify, by percentages (which must be
even multiples of 5%) the respective parts of the balance
of the Interest Portion of his or her Account that are to
be credited with Earnings under each of the Earnings
Crediting Options designated by the Participant in such
form. In the case of a Participant with a balance to his
credit in the Interest Portion of his Account as of
December 31, 1993 (the Participant's "Existing Balance"),
the Participant shall make the specification referred to
in the preceding sentence separately for (A) the
Participant's Existing Balance and (B) the portion of the
Participant's Deferred Amount to be allocated to the
Interest Portion with respect to the Award earned by the
Participant for the Performance Cycle ended on December
31, 1993.
(iii) The Earnings Crediting Options selected in the
initial election made by the Participant under clause
(ii) above shall remain in effect (and shall apply to all
Deferred Amounts allocated to the Interest Portion under
Section 4.6 with respect to Awards earned by the
Participant for any subsequent Performance Cycles) until
the Participant changes his or her election in accordance
with clause (iv) below.
(iv) A Participant may change the Earnings Crediting
Options that are to apply with respect to the Interest
Portion of his or her Account by making a new election
hereunder. Such new election shall be made in writing,
on a form which is provided by the Committee for this
purpose and which the Participant files with the
Committee. In such form, the Participant shall specify,
in the same manner as described in clause (ii) above, the
respective parts of the balance of the Interest Portion
that are to be credited with Earnings under each of the
Earnings Crediting Options designated by the Participant
in such form. The Participant's new election shall
become effective as of the first day of the calendar
month following the date on which such election is filed
with the Committee, provided that it is so filed at least
15 days prior to such first day. The Earnings Crediting
Options selected by the Participant in such new election
shall remain in effect until the Participant again
changes his election with respect to the Interest Portion
of his or her Account in accordance with this clause
(iv).
(e) The Interest Portion of a Participant's Account
shall continue to be credited with Earnings in accordance with
the provisions of this Section 4.7 until all payments required
to be made with respect to the Interest Portion under Section
4.9 have been made. For this purpose, any payments made under
Section 4.9 with respect to the Interest Portion of the
Participant's Account will be deemed to have been made pro
rata from the respective parts of the balance of the Interest
Portion that are subject to separate Earnings Crediting
Options.
4.8 Credits to PSU Portion
As of each Dividend Payment Date, the PSU Portion of each
Participant's Account shall be credited with additional PSU's the number
of which shall be determined by first (i) multiplying the number of
PSU's standing to the Participant's credit in the PSU Portion of the
Participant's Account on the date such dividend was declared by the per-
share dollar amount of the dividend so paid, and then (ii) dividing the
resulting amount by the Average Market Value of one Common Share on the
Dividend Payment Date.
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4.9 Payment of Deferred Awards
In the case of any Participant described in the first sentence
of Section 4.7, any amounts remaining to be paid with respect to such
Participant's Account as of January 1, 1994 shall be paid in accordance
with the provisions of Sections 4.10 and 4.11 of the Prior Plan. In the
case of each other Participant, payment with respect to the
Participant's Account shall be made in accordance with the following
provisions:
(a) The balances of the Interest Portion and the PSU
Portion of a Participant's Account shall become payable upon
the Participant's termination of employment with the
Corporation and its Affiliated Companies for any reason. For
this purpose, a Participant who ceases active employment by
reason of disability but who becomes entitled to receive
benefit payments under the long-term disability plan
maintained by the Corporation or any of its Affiliated
Companies shall be treated as continuing to be employed with
the Corporation and its Affiliated Companies during all
periods for which he or she continues to receive benefit
payments under such plan.
(b) Payment with respect to the Interest Portion and the
PSU Portion of a Participant's Account shall be made in the
form of a series of 10 annual installments. The first such
installment payment shall be made on the last business day of
February of the calendar year following the year in which the
Participant's employment with the Corporation and its
Affiliated Companies terminates, and the remaining installment
payments shall be made on the last business day of February of
each succeeding year.
(c) Each installment payment to be made with respect to
the Interest Portion of a Participant's Account shall be made
in cash, in an amount determined by dividing (i) the balance
of the Interest Portion determined as of the last day of the
calendar year preceding the year in which such payment is to
be made, by (ii) the number of installment payments remaining
to be made. The last such installment payment shall include
Earnings credited to the Interest Portion for the month
preceding the month in which such payment is made.
(d) Each installment payment to be made with respect to
the PSU Portion of a Participant's Account shall be made
partly in Common Shares, and partly in cash. The number of
shares to be included in each such installment payment shall
be equal to the number of whole PSU's included in the quotient
resulting from dividing (i) the total number of PSU's included
in the balance of the PSU Portion of the Participant's Account
as of the last day of the calendar year preceding the year in
which such payment is to be made, by (ii) the number of
installment payments remaining to be made; and the amount of
cash to be included in each such installment payment shall be
determined by multiplying (iii) the fractional part of a PSU
included in the aforementioned quotient by (iv) the Average
Market Value of one Common Share on the business day
immediately preceding the date on which such installment
payment is to be made. The last such installment payment
shall include a number of Common Shares equal to the whole
number of any additional PSU's that are credited to the PSU
Portion of the Participant's Account under Section 4.8 during
the month preceding the month in which such payment is made,
together with cash (in an amount determined in the same manner
as described in clause (iv) of the preceding sentence) for any
fractional part of a PSU that is so credited.
(e) If a Participant should die before receiving all
payments required to be made hereunder with respect to the
Participant's Account, any payments remaining to be made at
the date of the Participant's death shall be made to the
Participant's Beneficiary in the same form, at the same times
and in the same amounts, as such payments would have been made
to the Participant (i) if he or she had not died, and (ii) if
the Participant died while still employed, if the
Participant's employment had otherwise terminated on the date
of his or her death.
(f) Notwithstanding any other provision in this Section
4.9 to the contrary, payment with respect to any part or all
of the Participant's Account balances may be made to the
Participant or, if the Participant has died, to the
Participant's Beneficiary, on any date earlier than the date
on which such payment is to be made pursuant to such other
provisions of this Section 4.9 if (i) the Participant, or his
or her Beneficiary, requests such early payment and (ii) the
Committee, in its sole discretion, determines that such early
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payment is necessary to help the Participant, or his or her
Beneficiary, meet an "unforeseeable emergency" within the
meaning of Section 1.457-2(h)(4) of the federal Income Tax
Regulations. The amount that may be so paid may not exceed
the amount necessary to meet such emergency.
4.10 Partial Awards
A Key Employee who is a participant for less than a full
Performance Cycle, whether by reason of commencement or termination of
employment or otherwise, shall receive such portion of an Award of
Performance Share Units, if any, for that Performance Cycle as the
Committee shall determine in its sole discretion.
4.11 Change in Control
In the event of a Change in Control, the provisions of this
Section 4.11 shall apply notwithstanding any other provision herein to
the contrary (but subject to the proviso contained in the definition of
"Change in Control" in Section 1.2). Upon the occurrence of a Change in
Control, all incomplete Performance Cycles in effect on the date the
Change in Control occurs shall end on such date, and the Performance
Goals with respect to each such Performance Cycle shall be deemed to
have been attained to the full and maximum extent. The Committee shall
(i) cause to be paid to each Participant full Awards with respect to
Performance Goals for each such Performance Cycle, and (ii) cause all
previously deferred Awards to be settled in full. All Awards of
Performance Share Units which are deemed to have been earned to the full
and maximum extent upon the occurrence of a Change in Control shall be
payable in single cash lump sums, in amounts determined by multiplying
the number of Performance Share Units corresponding to such full Awards
by the Determined Value of one Common Share. All settlements of
previously deferred Awards shall be payable in single cash lump sums.
The amount so payable with respect to each Participant's previously
deferred Awards shall be equal to the sum of (a) the aggregate amount of
the balance of the Interest Portion of the Participant's Account, plus
(b) an amount determined by multiplying the aggregate number of Phantom
Share Units then included in the balance of the PSU Portion of the
Participant's Account by the Determined Value of one Common Share. All
amounts payable to Participants pursuant to this Section 4.11, reduced
by any taxes withheld pursuant to Section 6.8, shall be paid to such
Participants as soon as practicable following the Change in Control.
SECTION 5. BENEFIT EQUALIZATION UNITS
5.1 Awards of Benefit Equalization Units
For each Plan Year (as defined in the 401(k) Plan) for which
any portion of the ESOP Contribution that otherwise would have been made
to the 401(k) Plan on behalf of a Participant cannot be made, or cannot
be allocated (or cannot result in the allocation of ESOP Stock) to the
Participant's account under the 401(k) Plan, because of the Statutory
Limitations, an Award of Benefit Equalization Units shall be made to the
Participant under this Plan.
The number of Benefit Equalization Units to be so awarded for
any such year shall be determined by
(a) ascertaining the amount of the ESOP Contribution for
such year that would have been made on the Participant's
behalf and that would have been allocated (or that would have
resulted in the allocation of ESOP Stock) to the Participant's
account under the 401(k) Plan in the absence of the Statutory
Limitations;
(b) subtracting from the amount determined in clause
(a), the amount of the ESOP Contribution for such year that
was made on the Participant's behalf and that was allocated
(or that resulted in the allocation of ESOP Stock) to the
Participant's account under the 401(k) Plan; and
(c) dividing the amount determined under clause (b) by
the Average Market Value of one Common Share on the last
business day of such year.
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5.2 Vesting
All Benefit Equalization Units credited to a Participant under
the Plan shall be nonforfeitable at all times.
5.3 Separate Accounts
The Committee shall cause a separate account to be maintained
for each Participant who has been credited with Benefit Equalization
Units under the Plan. Each Participant's account shall be credited from
time to time with the number of Benefit Equalization Units determined by
the Committee.
5.4 Dividend Equivalents
As of each Dividend Payment Date, each Participant's account
shall be credited with additional Benefit Equalization Units the number
of which shall be determined by first (i) multiplying the number of
Benefit Equalization Units standing to the Participant's credit on the
date such dividend was declared by the per-share dollar amount of the
dividend so paid, and then (ii) dividing the resulting amount by the
Average Market Value of one Common Share on the Dividend Payment Date.
5.5 Payment of Benefit Equalization Units
Payment with respect to a Participant's Benefit Equalization
Units shall be made as soon as practicable after the termination of a
Participant's employment with the Corporation and its Affiliated
Companies, for any reason. Payment shall be made in the form of (a) a
number of Common Shares equal to the number of whole Benefit
Equalization Units included in the balance of the Participant's Account
as of the last day of the month preceding the month in which such
payment is made, and (b) a cash payment in an amount determined by
multiplying (i) the fractional part of the Benefit Equalization Unit
included in such balance as of such last day, by (ii) the Average Market
Value of one Common Share on the business day immediately preceding the
date on which such payment is made.
5.6 Change in Control
Notwithstanding any other provision herein to the contrary
(but subject to the proviso contained in the definition of "Change in
Control" in Section 1.2), payment with respect to a Participant's
Benefit Equalization Units shall be made in accordance with the
provisions of this Section 5.6 in the event of a Change in Control.
Upon the occurrence of a Change in Control, all Benefit Equalization
Units shall become payable to the applicable Participants in single cash
lump sums. The amount so payable to each Participant shall be
determined by multiplying the number of Benefit Equalization Units to
the Participant's credit by the Determined Value of one Common Share.
Amounts payable to Participants pursuant to this Section 5.6, reduced by
taxes withheld pursuant to Section 6.8, shall be paid to the
Participants as soon as practicable following the Change in Control.
SECTION 6. GENERAL PROVISIONS
6.1 Certain Adjustments to Plan Shares
In the event of any change in the Common Shares by reason of
any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, or any
rights offering to purchase Common Shares at a price substantially below
fair market value, or any similar change affecting the Common Shares,
the number and kind of shares available for Awards under the Plan, the
number and kind of shares represented by Performance Share Units,
Phantom Share Units or Benefit Equalization Units and the number and
kind of shares subject to Restrictions or subject to Options in
outstanding Option Agreements and the purchase price per share thereof
shall be appropriately adjusted consistent with such change in such
manner as the Committee, in its sole discretion, may deem equitable to
prevent substantial dilution or enlargement of the rights granted to, or
available for, the Participants hereunder. Any adjustment of an
Incentive Stock Option pursuant to this Section shall be made only to
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the extent not constituting a "modification" within the meaning of
Section 425(h)(3) of the Code, unless the holder of such Option shall
agree otherwise. The Committee shall give notice to each Participant of
any adjustment made pursuant to this Section and, upon such notice, such
adjustment shall be effective and binding for all purposes of the Plan.
6.2 Successor Corporation
The obligations of the Corporation under the Plan shall be
binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Corporation, or
upon any successor corporation or organization succeeding to
substantially all of the assets and business of the Corporation. The
Corporation agrees that it will make appropriate provision for the
preservation of Participants' rights under the Plan in any agreement or
plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
6.3 Non-Alienation of Benefits
A Participant's rights to payments under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors
of the Participant or his or her Beneficiary.
6.4 General Creditor Status
Participants shall have no right, title, or interest
whatsoever in or to any investments which the Corporation may make to
aid it in meeting its obligations under the Plan. Nothing contained in
the Plan, and no action taken pursuant to its provisions, shall create
or be construed to create a trust of any kind, or a fiduciary
relationship between the Corporation and any Participant, Beneficiary,
or any other person. To the extent that any person acquires a right to
receive payments from the Corporation under the Plan, such right shall
be no greater than the right of a general unsecured creditor of the
Corporation. The Plan shall constitute a mere promise by the
Corporation to make payments in the future of the benefits provided for
herein. It is intended that the arrangements reflected in this Plan be
treated as unfunded for tax purposes, as well as for purposes of Title I
of ERISA. All payments to be made hereunder shall be paid from the
general funds of the Corporation and no special or separate fund shall
be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan. In
its sole discretion, the Corporation may authorize the creation of
trusts or other arrangements to meet the obligations created under the
Plan to deliver Common Shares or pay cash; provided, however, that,
unless the Committee otherwise determines with the consent of the
affected Participant, the existence of such trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan.
6.5 No Right to Continued Employment Under the Plan
Neither the Plan nor any action taken thereunder shall be
construed as giving any employee any right to be retained in the employ
of the Corporation or any of its Affiliated Companies.
6.6 Awards Not Treated as Compensation Under Benefit Plans
No Award shall be considered as compensation under any
employee benefit plan of the Corporation or any of its Affiliated
Companies, except as specifically provided in any such plan or as
otherwise determined by the Board of Directors.
6.7 Listing and Qualification of Common Shares
The Corporation, in its discretion, may postpone the issuance,
delivery, distribution or release of Common Shares upon any exercise of
an Option or pursuant to an Award of Restricted Stock, Performance Share
Units or Benefit Equalization Units until completion of such stock
exchange listing or other qualification of such shares under any state
or federal law, rule or regulation as the Corporation may consider
appropriate, and may require any Participant or Beneficiary to make such
representations and furnish such information as it may consider
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appropriate in connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations.
6.8 Taxes
The Corporation or any of its Affiliated Companies may make
such provisions and take such steps as it may deem necessary or
appropriate for the withholding of all federal, state and local taxes
required by law to be withheld with respect to Awards granted pursuant
to the Plan including, but not limited to (i) deducting the amount so
required to be withheld from any other amount then or thereafter payable
to a Participant or Beneficiary, (ii) reducing the amount of any Award
of Performance Share Units otherwise required to be deferred pursuant to
a Participant's election under Section 4.4, by the amount so required to
be withheld with respect to such deferred amount, and/or (iii) requiring
a Participant or Beneficiary to pay to the Corporation or any of its
Affiliated Companies the amount so required to be withheld as a
condition of the issuance, delivery, distribution or release of any
Common Shares.
6.9 Designation and Change of Beneficiary
Each Participant shall file with the Committee a written
designation of one or more persons as the Beneficiary who shall be
entitled to exercise any Options or to receive any amount, or any Common
Shares, payable under the Plan upon his or her death. A Participant
may, from time to time, revoke or change his or her Beneficiary
designation without the consent of any previously designated Beneficiary
by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's
death, and in no event shall it be effective as of a date prior to such
receipt. If at the date of a Participant's death, there is no
designation of a Beneficiary in effect for the Participant pursuant to
the provisions of this Section 6.9, or if no Beneficiary designated by
the Participant in accordance with the provisions hereof survives to
exercise any Options that become exercisable, or to receive any amount
or Common Shares that becomes payable, under the Plan by reason of the
Participant's death, the Participant's estate shall be treated as the
Participant's Beneficiary for purposes of the Plan.
6.10 Payments to Persons Other Than Participant
If the Committee shall find that any Participant or
Beneficiary to whom any amount, or any Common Shares, is payable under
the Plan is unable to care for his or her affairs because of illness,
accident or legal incapacity, then if the Committee so directs, such
amount, or such Common Shares, may be paid to such Participant's or
Beneficiary's spouse, child or other relative, an institution
maintaining or having custody of such person, or any other person deemed
by the Committee to be a proper recipient on behalf of such Participant
or Beneficiary, unless a prior claim therefor has been made by a duly
appointed legal representative of the Participant or Beneficiary. Any
payment made under this Section 6.9 shall be a complete discharge of the
liability of the Corporation with respect to such payment.
6.11 No Liability of Committee Members
No member of the Committee shall be personally liable by
reason of any contract or other instrument executed by such member or on
his or her behalf in his or her capacity as a member of the Committee
nor for any mistake of judgment made in good faith, and the Corporation
shall indemnify and hold harmless each member of the Committee, and each
employee, officer, director or trustee of the Corporation or any of its
Affiliated Companies to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the
approval of the Board of Directors) arising out of any act or omission
to act in connection with the Plan unless arising out of such person's
own fraud or bad faith.
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6.12 Amendment or Termination
Except as to matters that in the opinion of the Corporation's
legal counsel require shareholder approval, any provision of the Plan
may be modified as to a Participant by an individual agreement approved
by the Board of Directors. The Board of Directors may, with prospective
or retroactive effect, amend, suspend or terminate the Plan or any
portion thereof at any time; provided, however, that (i) no amendment
that would materially increase the cost of the Plan to the Corporation
may be made by the Board of Directors without the approval of the
shareholders of the Corporation and (ii) no amendment, suspension or
termination of the Plan shall deprive any Participant of any rights to
Awards previously made under the Plan without his or her written
consent. Any amendment that the Board of Directors would be permitted
to make pursuant to the preceding sentence may also be made by the
Committee where appropriate to facilitate the administration of the Plan
or to comply with applicable law or any applicable rules and regulations
of government authorities. Subject to earlier termination pursuant to
the provisions of this Section, and unless the shareholders of the
Corporation shall have approved an extension of the Plan beyond such
date, no further Awards shall be made under the Plan after the
expiration of 10 years from the effective date of the Plan specified in
Section 6.14.
6.13 Governing Law
The Plan shall be governed by and construed in accordance with
the laws of the State of New York, without reference to the principles
of conflicts of law thereof.
6.14 Effective Date
The Plan, as initially adopted and approved by the holders of
a majority of the Common Shares outstanding and entitled to vote at the
annual meeting of the Corporation's shareholders in 1989, is effective
as of December 13, 1988.
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Appendix B
Board Members' Deferred Compensation Plan
of U.S. Trust Corporation
As amended, restated and renamed effective as of
January 1, 1994
1. Purpose
The purpose of the Plan is to provide Eligible Board Members of U.S.
Trust Corporation and its Affiliated Companies with an opportunity to
defer payment of certain portions of their compensation, at their
election, in accordance with the provisions hereof.
The Plan, as hereinafter set forth, represents a continuation of the
Deferred Compensation Plan for Board Members of United States Trust
Company of New York and Affiliated Companies, as amended, restated and
renamed effective as of January 1, 1994 to reflect (a) the adoption of
the Plan by U.S. Trust Corporation as its own Plan and the Corporation's
assumption of, and becoming solely responsible for, all liabilities and
obligations of United States Trust Company of New York under the Plan,
and (b) changes in certain other provisions of the Plan.
2. Definitions
As used herein, the following terms shall have the following
meanings:
"Account" shall mean the Account established for a Participant
pursuant to Section 5.
"Affiliated Companies" shall mean United States Trust Company of New
York, and each other direct or indirect subsidiary of the Corporation.
"Beneficiary" shall mean the person or persons designated by a
Participant in accordance with Section 10 to receive any amount, or any
common shares of the Corporation, payable under the Plan by reason of
his or her death. "Board" shall mean (i) the Board of Directors, (ii)
the Board of Trustees of United States Trust Company of New York, or
(iii) the Board of Directors of any other direct or indirect subsidiary
of the Corporation, the members of which board have been designated by
the Board of Directors as being eligible for participation in this Plan.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Business Day" shall mean any day on which common shares of the
Corporation are traded on the NASDAQ National Market System or, if
common shares of the Corporation are not traded on such system, on such
other securities market or securities exchange on which such shares are
traded as the Committee shall have designated under Section 6(b).
"Committee" shall mean the persons appointed by the Board of
Directors to administer the Plan in accordance with Section 13.
"Corporation" shall mean U.S. Trust Corporation.
"Eligible Board Member" shall mean any individual who is a member of
any Board and who is entitled to receive compensation for services
rendered in such capacity.
"Eligible Compensation" shall mean, with respect to any Eligible
Board Member for any Plan Year, all fees payable to such Board Member
during such year for attendance at meetings of any Board or committees
thereof, and all fees payable to such Board Member during such year by
way of retainer for service as a member or chairman of any Board or
committees thereof regardless of the number of meetings attended
("Retainer Fees"). Notwithstanding the foregoing, the term "Eligible
Compensation" shall not include (i) any compensation payable to an
Eligible Board Member in a form other than cash, or (ii) any Retainer
Fee payable to any Eligible Board Member in 1994 for services rendered
during the last calendar quarter of 1993. Clause (ii) of the preceding
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sentence shall not apply to any Retainer Fee so payable to any Eligible
Board Member who had elected to defer such fee pursuant to an election
made prior to October 1, 1993 under Section 4 of the Prior Plan.
"Participant" shall mean any Eligible Board Member who has made an
election under Section 3 (or under Section 4 of the Prior Plan) to defer
any portion of his or her Eligible Compensation for any Plan Year.
"Phantom Share Unit" or "PSU" shall mean a unit of measurement
equivalent to one common share of the Corporation, with none of the
attendant rights of a holder of such share, including, without
limitation, the right to vote such share and the right to receive
dividends thereon, except to the extent otherwise specifically provided
herein.
"Plan" shall mean the Board Members' Deferred Compensation Plan of
U.S. Trust Corporation, as set forth herein and as amended from time to
time.
"Plan Year" shall mean the calendar year.
"Prior Plan" shall mean the Deferred Compensation Plan for Board
Members of United States Trust Company of New York and Affiliated
Companies, as in effect from time to time prior to January 1, 1994.
3. Deferral Elections
With respect to each Plan Year beginning on or after January 1,
1994, an Eligible Board Member may elect to have payment of any part or
all of his or her Eligible Compensation for such year deferred, and to
have payment of such portion made under the terms of this Plan. Any
such election shall be made in accordance with the following rules:
(a) A deferral election shall be made in writing, on a form
provided by the Committee for such purpose.
(b) In the election form, the Eligible Board Member (i) shall
specify, by percentage (which must be an even multiple of 5%), the
portion of his or her Eligible Compensation the Eligible Board
Member wishes to defer hereunder (the amounts so deferred are
hereinafter referred to as the Eligible Board Member's "Deferred
Amounts"), and (ii) shall specify, by percentage (which must be an
even multiple of 5%), the portions of the Eligible Board Member's
Deferred Amounts that he or she wishes to have allocated,
respectively, to the PSU Portion and to the Interest Portion of the
Account established for the Eligible Board Member pursuant to
Section 5. At least 50% of the Eligible Board Member's Deferred
Amounts for each Plan Year must be allocated to the PSU Portion of
such Account.
(c) An Eligible Board Member's election to defer Eligible
Compensation for any Plan Year shall be filed with the Committee (i)
by no later than December 31, 1993, in the case of an election to
defer Eligible Compensation for the Plan Year beginning on January
1, 1994; or (ii) in the case of an election to defer Eligible
Compensation for any Plan Year beginning on or after January 1,
1995, by no later than June 30 of the preceding Plan Year.
(d) Notwithstanding the provisions of paragraph (b) above, a
newly elected Eligible Board Member may make an initial deferral
election hereunder with respect to Eligible Compensation for the
Plan Year in which he or she is first elected to serve as a member
of any Board and, if so elected after June 30 of such year, for the
next following Plan Year, by filing his or her election form with
the Committee by no later than 30 days after the date on which he or
she commences to serve as a member of such Board. Any deferral
election so made shall be effective only with respect to Eligible
Compensation earned for services performed after the date on which
the Eligible Board Member's initial deferral election has been filed
with the Committee.
(e) Any deferral election made by an Eligible Board Member
with respect to his or her Eligible Compensation for a Plan Year,
and any election made hereunder as to the allocation of the Deferred
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Amounts for such year to the PSU Portion and the Interest Portion of
his or her Account, shall be irrevocable.
4. Election as to Existing Balance
Each Participant who had elected to defer any compensation under the
terms of the Prior Plan shall have the right to elect to have the
balance to the Participant's credit under the Prior Plan at December 31,
1993 (the Participant's "Existing Balance") allocated to the PSU Portion
and to the Interest Portion of the Participant's Account in such
percentages (which must be even multiples of 5%) as specified by the
Participant in such election.
The Participant's election with respect to the allocation of his
Existing Balance shall be made in writing, on a form provided by the
Committee for such purpose, and shall be filed by the Participant with
the Committee by no later than December 31, 1993. If a Participant
fails to make such election by such date, the Participant shall be
deemed to have made an election hereunder to have his or her Existing
Balance allocated entirely to the Interest Portion of his or her
Account, and shall be deemed to have made an initial election under
Section 7(f)(ii) to have the entire balance of the Interest Portion
credited with the Earnings under the Earnings Crediting Option specified
in Section 7(d)(i), subject, however, to the Participant's right to
change such deemed initial election in accordance with Section 7(f)(iv).
5. Accounts
For each Participant, there shall be established on the books and
records of the Corporation, for bookkeeping purposes only, an Account,
to reflect the Participant's interest under the Plan. The Account so
established for each Participant shall be maintained in accordance with
the following provisions:
(a) The Account established for each Participant shall
consist of two sub-accounts referred to herein, respectively, as the
"PSU Portion" and the "Interest Portion".
(b) The PSU Portion and the Interest Portion of each
Participant's Account shall be credited, respectively, with amounts
equal to the portions of the Participant's Deferred Amounts for each
Plan Year that the Participant has elected under Section 3 to have
allocated to such Portions. Such amounts shall be so credited as of
the first day of the calendar month following the month in which the
amounts in question would have been paid to the Participant had the
Participant not elected under Section 3 to have payment of such
amounts deferred under this Plan.
(c) As of January 1, 1994, the PSU Portion and the Interest
Portion of a Participant's Account shall be credited, respectively,
with amounts equal to the portions of the Participant's Existing
Balance that are to be allocated to such Portions pursuant to the
Participant's election, or deemed election, under Section 4.
(d) The PSU Portion and the Interest Portion of a
Participant's Account shall be adjusted to reflect all additional
PSU's, interest and Earnings (as defined in paragraph (c) of Section
7) to be credited to such Portions pursuant to Section 7, and all
payments made with respect to such Portions pursuant to Section 9.
(e) A Participant's interest in his or her Account shall be
fully vested and nonforfeitable at all times.
6. Conversion to PSU's
Amounts credited to the PSU Portion of a Participant's Account
pursuant to paragraph (b) or (c) of Section 5 (and any interest credited
thereon pursuant to paragraph (b) of Section 7) shall be converted into
(and after such conversion shall be reflected in such Portion as) a
number of Phantom Share Units ("PSU's"). The conversion shall be made
in accordance with the following rules.
(a) Amounts so credited shall be converted as of the
following dates (the date for the conversion of each such amount is
hereinafter referred to as the "Conversion Date"):
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(i) In the case of any amount so credited with respect
to any part of a Participant's Existing Balance (and any
interest credited thereon under paragraph (b) of Section 7),
the Conversion Date shall be July 1, 1994.
(ii) In the case of any amount so credited with respect
to a Participant's Deferred Amounts for any Plan Year
beginning on or after January 1, 1995, the Conversion Date
shall be the same date as the date as of which such amount is
so credited.
(iii) In the case of any amount so credited with respect
to a Participant's Deferred Amounts for the Plan Year
beginning on January 1, 1994, the Conversion Date shall be the
later of (A) the date as of which such amount is so credited,
or (B) July 1, 1994.
(iv) Notwithstanding the provisions of clauses (ii) and
(iii), in the case of any amount so credited with respect to a
newly elected Eligible Board Member's Deferred Amounts for the
Plan Year in which he or she is first elected to serve as a
Member of any Board and, if so elected after June 30 of such
year, for the Next Following Plan Year, the Conversion Date
shall be the later of (A) the date as of which such amount is
so credited, or (B) the first day of the month following the
expiration of six months from the date on which the Eligible
Member's initial deferral election was filed with the
Committee pursuant to Section 3(d).
(b) The number of PSU's into which any amount credited to the
PSU Portion of a Participant's Account (and any interest credited
thereon under paragraph (b) of Section 7) is to be converted shall
be determined by dividing (i) the dollar value of such amount by
(ii) the Average Market Value of one common share of the Corporation
on the Conversion Date for such amount or, if such Conversion Date
is not a Business Day, on the Business Day next preceding such
Conversion Date. For this purpose, the "Average Market Value" of
one common share of the Corporation on any Business Day shall mean
the mean between the per-share high and low prices for the
Corporation's common shares during such day, as quoted on the NASDAQ
National Market System, or, if the Corporation's common shares are
not traded on such system, on such other securities market or
securities exchange on which such shares are traded as the Committee
shall determine.
7. Crediting of Earnings
Until payment with respect to a Participant's Account has been made
in full in accordance with Section 9, the PSU Portion of a Participant's
Account shall be credited with additional PSU's or interest, and the
Interest Portion of the Participant's Account shall be credited with
Earnings, in accordance with the following provisions:
(a) As of each date on which the Corporation pays a dividend
on its common shares ("Dividend Payment Date") the PSU Portion of
each Participant's Account shall be credited with additional PSU's
the number of which shall be determined by first (i) multiplying the
number of PSU's standing to the Participant's credit on the date
such dividend was declared by the per-share dollar amount of the
dividend so paid, and then (ii) dividing the resulting amount by the
Average Market Value (determined as provided in paragraph (b) of
Section 6) of one common share of the Corporation on the Dividend
Payment Date.
(b) If, as of the last day of any calendar month, any part of
the balance of the PSU Portion of a Participant's Account has not
yet been converted into PSU's in accordance with Section 6, such
part of the balance shall be credited, as of such last day, with
interest computed at the Prime Rate (as hereinafter defined).
(c) As of the last day of each calendar month, each part of
the balance of the Interest Portion of a Participant's Account for
which a separate Earnings Crediting Option (as hereinafter defined)
is in effect pursuant to the Participant's election shall be
credited with an amount determined by multiplying such part of the
balance by a percentage corresponding to the Applicable Rate of
Return (as hereinafter defined) for such month under such Earnings
Crediting Option. The amount so credited (which may be positive or
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negative depending on whether the Applicable Rate of Return for the
month is positive or negative) is referred to herein as "Earnings".
(d) For purposes of this Section 7, the term "Earnings
Crediting Option" shall mean, initially, (i) the Prime Rate, and
(ii) any investment fund maintained under the 401(k) Plan and ESOP
of United States Trust Company of New York and Affiliated Companies
(the "401(k) Plan") other than the ESOP Stock Fund or the U.S.T.
Corp. Stock Fund; and the term "Prime Rate" shall mean, with respect
to any calendar month, the prime rate as quoted by United States
Trust Company of New York on the last Business Day of such month.
Any investment fund described in clause (ii) of the preceding
sentence is referred to herein as a "401(k) Plan Fund".
Notwithstanding the foregoing, the Committee may at any time,
in its sole discretion, determine (x) that the Prime Rate or any
401(k) Plan Fund shall cease to constitute an Earnings Crediting
Option for purposes of the Plan, (y) that any investment fund that
is added to the 401(k) Plan at any time after January 1, 1994 shall
not constitute an Earnings Crediting Option for purposes of the
Plan, or (y) that any other hypothetical investment fund or index or
referenced rate of return shall constitute an Earnings Crediting
Option for purposes of the Plan. Participants shall be notified in
writing, at least 45 days in advance, of any such change in the
Plan's Earnings Crediting Options.
(e) The "Applicable Rate of Return" for any month, under any
Earnings Crediting Option, shall mean (i) in the case of an Earnings
Crediting Option that is a 401(k) Plan Fund, the percentage by which
the value of such Fund, as determined by the 401(k) Plan's Trustee
as of the Valuation Date (as defined in the 401(k) Plan) for such
month, exceeds, or is less than, the value of such Fund, as
determined by the 401(k) Plan's Trustee as of the Valuation Date for
the immediately preceding month; and (ii) in the case of any other
Earnings Crediting Option, the rate of return applicable for such
month, as determined by the Committee in its sole discretion.
(f) A Participant may make elections with respect to the
Earnings Crediting Options that are to apply with respect to the
Interest Portion of his or her Account, in accordance with the
following rules:
(i) a Participant may elect to have any part or all of
the balance of the Interest Portion credited with Earnings
under any Earnings Crediting Option available under the Plan
at the time of his or her election.
(ii) each Participant shall make an initial election as
to the Earnings Crediting Options that are to apply with
respect to the Interest Portion at the time the Participant
first elects under Section 3 or 4 to have any part of the
Participant's Deferred Amounts for any Plan Year, or any part
of the Participant's Existing Balance, allocated to the
Interest Portion of his or her Account. Such election shall
be made in the election form in which the Participant makes
his or her election under Section 3 or 4 to have such part of
the Participant's Deferred Amounts for such Plan Year, or such
part of the Participant's Existing Balance, allocated to the
Interest Portion. In such election form, the Participant
shall specify, by percentages (which must be even multiples of
5%) the respective parts of the balance of the Interest
Portion of his or her Account that are to be credited with
Earnings under each of the Earnings Crediting Options
designated by the Participant in such form.
(iii) The Earnings Crediting Options selected in the
initial election made by the Participant under clause (ii)
above shall remain in effect (and shall apply to all
additional amounts allocated to the Interest Portion pursuant
to any deferral elections made by the Participant under
Section 3 with respect to any subsequent Plan Years) until the
Participant changes his or her election in accordance with
clause (iv) below.
(iv) A Participant may change the Earnings Crediting
Options that are to apply with respect to the Interest Portion
of his or her Account by making a new election hereunder.
Such new election shall be made in writing, on a form which is
provided by the Committee for this purpose and which the
Participant files with the Committee. In such form, the
Participant shall specify, in the same manner as described in
clause (ii) above, the respective parts of the balance of the
Interest Portion that are to be credited with Earnings under
each of the Earnings Crediting Options designated by the
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Participant in such form. The Participant's new election
shall become effective as of the first day of the calendar
month following the date on which such election is filed with
the Committee, provided that it is so filed at least 15 days
prior to such first day. The Earnings Crediting Options
selected by the Participant in such new election shall remain
in effect until the Participant again changes his election
with respect to the Interest Portion of his or her Account in
accordance with this clause (iv).
(g) The Interest Portion of a Participant's Account shall
continue to be credited with Earnings in accordance with the
provisions of this Section 7 until all payments required to be made
with respect to the Interest Portion under Section 9 have been made.
For this purpose, any payments made under Section 9 with respect to
the Interest Portion of the Participant's Account will be deemed to
have been made pro rata from the respective parts of the balance of
the Interest Portion that are subject to separate Earnings Crediting
Options.
8. Adjustment of PSU's
In the event of any change in the Corporation's common shares by
reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, or any
rights offering to purchase such shares at a price substantially below
fair market value, or any similar change affecting the Corporation's
common shares, the number and kind of shares represented by Phantom
Share Units shall be appropriately adjusted consistent with such change
in such manner as the Committee, in its sole discretion, may deem
equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, the Participants hereunder. The Committee
shall give notice to each Participant of any adjustment made pursuant to
this Section 8 and, upon such notice, such adjustment shall be effective
and binding for all purposes of the Plan.
9. Payment of Account Balances
Payment with respect to a Participant's Account shall be made in
accordance with the following provisions:
(a) The balances of the PSU Portion and the Interest Portion
of a Participant's Account shall become payable upon the
Participant's ceasing to be a member of any Board, for any reason.
(b) Except as otherwise provided in paragraph (e) below,
payment with respect to the PSU Portion and the Interest Portion of
a Participant's Account shall be made in the form of a series of 10
annual installments. The first such installment payment shall be
made on the last Business Day of February of the Plan Year following
the year in which the Participant ceases to be a member of any
Board, and the remaining installment payments shall be made on the
last Business Day of February of each succeeding Plan Year.
(c) Each installment payment to be made with respect to the
Interest Portion of a Participant's Account shall be made in cash,
in an amount determined by dividing (i) the balance of the Interest
Portion determined as of the last day of the Plan Year preceding the
year in which such payment is to be made, by (ii) the number of
installment payments remaining to be made. The last such
installment payment shall include Earnings credited to the Interest
Portion for the month preceding the month in which such payment is
made.
(d) Each installment payment to be made with respect to the
PSU Portion of a Participant's Account shall be made partly in
common shares of the Corporation, and partly in cash. The number of
shares to be included in each such installment payment shall be
equal to the number of whole PSU's included in the quotient
resulting from dividing (i) the total number of PSU's included in
the balance of the PSU Portion of the Participant's Account as of
the last day of the Plan Year preceding the year in which such
payment is to be made, by (ii) the number of installment payments
remaining to be made; and the amount of cash to be included in each
such installment payment shall be determined by multiplying (iii)
the fractional part of a PSU included in the aforementioned quotient
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by (iv) the Average Market Value (determined as provided in
paragraph (b) of Section 6) of one common share of the Corporation
on the Business Day immediately preceding the date on which such
installment payment is to be made. The last such installment
payment shall include a number of common shares of the Corporation
equal to the whole number of any additional PSU's that are credited
to the PSU Portion of the Participant's Account under Section 7(a)
during the month preceding the month in which such payment is made,
together with cash (in an amount determined in the same manner as
described in clause (iv) of the preceding sentence) for any
fractional part of a PSU that is so credited.
(e) If a Participant should die before receiving all payments
required to be made hereunder with respect to the Participant's
Account, any payments remaining to be made at the date of the
Participant's death shall be made to the Participant's Beneficiary
as follows:
(i) Payment with resect to the Interest Portion of the
Participant's Account shall be made in the form of a single
lump-sum cash payment, in an amount equal to the balance of
the Interest Portion determined as of the last day of the
month preceding the month in which such payment is made.
(ii) Payment with respect to the PSU Portion of the
Participant's Account shall be made in the form of (a) a
number of common shares of the Corporation equal to the number
of whole PSU's included in the balance of the PSU Portion as
of the last day of the month preceding the month in which such
payment is made, and (b) a cash payment in an amount
determined by multiplying (x) the fractional part of a PSU
included in such balance as of such last day, by (y) the
Average Market Value (determined as provided in paragraph (b)
of Section 6) of one common share of the Corporation on the
Business Day immediately preceding the date on which such
payment is made.
(iii) The payments to be made hereunder to the
Participant's Beneficiary shall be made as soon as practicable
after the date of the Participant's death.
(f) Notwithstanding any other provision in this Section 9 to
the contrary, payment with respect to any part or all of the
Participant's Account balances may be made to the Participant on any
date earlier than the date on which such payment is to be made
pursuant to such other provisions of this Section 9 if (i) the
Participant requests such early payment and (ii) the Committee, in
its sole discretion, determines that such early payment is necessary
to help the Participant meet an "unforeseeable emergency" within the
meaning of Section 1.457-2(h)(4) of the federal Income Tax
Regulations. The amount that may be so paid may not exceed the
amount necessary to meet such emergency.
(g) There shall be deducted from the amount of any payment
otherwise required to be made under the Plan all Federal, state and
local taxes required by law to be withheld with respect to such
payment.
10. Designation and Change of Beneficiary
Each Participant shall file with the Committee a written designation
of one or more persons as the Beneficiary who shall be entitled to
receive any amount, or any common shares of the Corporation, payable
under the Plan by reason of his or her death. A Participant may, from
time to time, revoke or change his or her Beneficiary designation
without the consent of any previously designated Beneficiary by filing a
new designation with the Committee. The last such designation received
by the Committee shall be controlling; provided, however, that no
designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Participant's death, and in no
event shall it be effective as of a date prior to such receipt. If at
the date of a Participant's death, there is no designation of a
Beneficiary in effect for the Participant pursuant to the provisions of
this Section 10, or if no Beneficiary designated by the Participant in
accordance with the provisions hereof survives to receive any amount
payable under the Plan by reason of the Participant's death, the
Participant's estate shall be treated as the Participant's Beneficiary
for purposes of the Plan.
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11. Payments to Persons Other Than Participants
If the Committee shall find that any Participant or Beneficiary to
whom any amount, or any common shares of the Corporation, is payable
under the Plan is unable to care for his or her affairs because of
illness, accident or legal incapacity, then, if the Committee so
directs, such amount, or such common shares, may be paid to such
Participant's or Beneficiary's spouse, child or other relative, an
institution maintaining or having custody of such person, or any person
deemed by the Committee to be a proper recipient on behalf of such
Participant or Beneficiary, unless a prior claim therefor has been made
by a duly appointed legal representative of the Participant or
Beneficiary.
Any payment made under this Section 11 shall be a complete discharge
of the liability of the Corporation with respect to such payment.
12. Rights of Participants
A Participant's rights and interests under the Plan shall be subject
to the following provisions:
(a) A Participant shall have the status of a general
unsecured creditor of the Corporation with respect to his or her
right to receive any payment under the Plan. The Plan shall
constitute a mere promise by the Corporation to make payments in the
future of the benefits provided for herein. It is intended that the
arrangements reflected in this Plan be treated as unfunded for tax
purposes.
(b) The Corporation may, but shall not be required to,
purchase a life insurance policy or policies, to assist it in
funding any of its payment obligations under the Plan. If any
policy is so purchased, it shall, at all times, remain subject to
the claims of the Corporation's creditors. No Participant or
Beneficiary shall have any interest in, or rights with respect to,
such policy.
(c) A Participant's rights to payments under the Plan shall
not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Participant or his or her
Beneficiary.
13. Administration
The Plan shall be administered by a Committee composed of at least
three Board members who shall be appointed by the Board of Directors
from among Board members who are not Eligible Board Members. If at any
time there are less than three such Board members, additional members of
the Committee shall be appointed from among those Board members who have
never participated in the Plan or, in the absence of any such Board
members, from among any senior officers of the Corporation or any of its
Affiliated Companies.
All decisions, actions or interpretations of the Committee under the
Plan shall be final, conclusive and binding upon all parties.
No member of the Committee shall be personally liable by reason of
any contract or other instrument executed by such member or on his or
her behalf in his or her capacity as a member of the Committee nor for
any mistake of judgment made in good faith, and the Corporation shall
indemnify and hold harmless each member of the Committee, and each
employee, officer, director or trustee of the Corporation or any of its
Affiliated Companies to whom any duty or power relating to the
administration or interpretation of the Plan may be delegated, against
any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with the approval of the Board of
Directors) arising out of any act or omission to act in connection with
the Plan unless arising out of such person's own fraud or bad faith.
14. Amendment or Termination
The Board of Directors may, with prospective or retroactive effect,
amend, suspend or terminate the Plan or any portion thereof at any time;
provided, however, that no amendment of the Plan shall deprive any
Participant of any rights to receive payment of any amounts due him or
her under the terms of the Plan as in effect prior to such amendment
without his or her written consent.
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Any amendment that the Board of Directors would be permitted to make
pursuant to the preceding paragraph may also be made by the Committee
where appropriate to facilitate the administration of the Plan or to
comply with applicable law or any applicable rules and regulations of
governing authorities provided that the cost of the Plan to the
Corporation is not materially increased by such amendment.
15. Successor Corporation
The obligations of the Corporation under the Plan shall be binding
upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Corporation, or
upon any successor corporation or organization succeeding to
substantially all of the assets and business of the Corporation. The
Corporation agrees that it will make appropriate provision for the
preservation of Participants' rights under the Plan in any agreement or
plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
16. Governing Law
The provisions of the Plan shall be governed by and construed in
accordance with the laws of the State of New York.
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