<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 31, 1994
REGISTRATION NO. 33-52821
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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UST CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2436093
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
</TABLE>
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40 COURT STREET
BOSTON, MA 02108
(617) 726-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ERIC R. FISCHER, EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
UST CORP.
40 COURT STREET
BOSTON, MA 02108
(617) 726-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
PRELIMINARY PROSPECTUS DATED MAY 31, 1994 -- SUBJECT TO COMPLETION
500,000 SHARES
UST CORP.
COMMON STOCK
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All of the shares of common stock, par value $0.625 per share (the "Common
Stock"), of UST Corp., a Massachusetts corporation (the "Company"), offered
hereby (the "Shares") are to be sold by Kidder, Peabody Group Inc. (the "Selling
Stockholder"). See "Selling Stockholder." The Company will receive no part of
the proceeds from this offering.
The Shares will be sold based on market prices prevailing at the time of
sale on the NASDAQ National Market System. On May , 1994, the last reported
sale price per share of Common Stock on the NASDAQ National Market System was
$ . The Company has agreed to indemnify the Selling Stockholder against
certain liabilities arising out of this offering, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). See "Selling
Stockholder."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS SEE "RISK FACTORS."
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June , 1994
<PAGE> 3
AVAILABLE INFORMATION
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus. If given or made, such representations must not be relied upon
as having been authorized by the Company. This Prospectus shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
law of any such State.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the United
States Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information filed by the Company with the SEC can be
inspected and copied at public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, DC. 20549; 75 Park Place, 14th Floor, New York,
New York, 10007; and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material may also be obtained
at prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, DC. 20549. The Common Stock is quoted for trading on
the NASDAQ National Market System and reports, proxy statements and other
information concerning the Company may be inspected at the offices of NASDAQ,
1735 K Street, N.W., Washington, DC. 20006.
This prospectus constitutes part of a registration statement (the
"Registration Statement") filed by the Company with the SEC under the Securities
Act. This Prospectus omits certain of the information contained in the
Registration Statement and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Company and the securities offered hereby. Statements contained herein
concerning the provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
copy of the applicable document filed with the SEC.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, each of which was previously filed by the Company
with the SEC pursuant to Section 13 of the Exchange Act, are incorporated herein
by reference:
(1) Annual Report on Form 10-K for the fiscal year ended December 31,
1993, (the "Form
10-K"); (2) Quarterly Report on Form 10-Q/A for the quarter ended March
31, 1994, (the "Form
10-Q"); (3) Current Report on Form 8-K/A dated March 18, 1994, including
among other information the consolidated financial statements of the
Company for certain periods ended December 31, 1993, audited by Arthur
Andersen & Co., independent public accountants; and (4) the description
of the Company's capital stock contained in the Company's registration
statements filed under Section 12 of the Exchange Act, including any
amendment or report filed for the purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all securities
remaining unsold shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of the filing of such reports and documents. Any
statements contained in a document incorporated or deemed to be incorporated by
referenced herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part to this Prospectus.
The Company will provide without charge to each person to whom a Prospectus
is delivered, upon written or oral request of such person, a copy of any
documents incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the documents that this Prospectus incorporates). Requests for such copies
should be directed to UST Corp., Attention: Executive Vice President and General
Counsel, 40 Court Street, Boston, MA 02108.
2
<PAGE> 4
THE COMPANY
The Company, a bank holding company registered with the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board"), was organized as a
Massachusetts business corporation in 1967. The Company is also subject to
examination by, and is required to file reports with, the Commissioner of Banks
of the Commonwealth of Massachusetts (the "Massachusetts Commissioner"). The
Company's banking subsidiaries are USTrust and United States Trust Company
("USTC"), each headquartered in Boston and each a Massachusetts trust company,
and UST Bank/Connecticut ("UST/Conn") headquartered in Bridgeport, a Connecticut
trust company. All of the common stock of USTrust, USTC and UST/Conn is issued
to and owned by the Company. In addition, the Company owns, directly or
indirectly, all of the outstanding stock of three active non-banking
subsidiaries, all Massachusetts corporations: UST Leasing Corporation, UST Data
Services Corp. and UST Capital Corp.
Through its banking and non-banking subsidiaries, the Company provides a
broad range of financial services, principally to individuals and small-and
medium-sized companies in New England. In addition, an important component of
the Company's financial services is the provision of trust and money management
services to professionals, corporate executives, non-profit organizations, labor
unions, foundations, mutual funds and owners of closely-held businesses in the
New England region.
As of the close of business on December 31, 1993, the Company's total
assets were approximately $2 billion and USTrust, the lead bank, had over $1.9
billion or 93% of the Company's consolidated assets.
USTrust and UST/Conn are engaged in a general commercial banking business
and accept deposits which are insured by the Federal Deposit Insurance
Corporation ("FDIC"). USTC, which has full banking powers and accepts deposits
which are insured by the FDIC, focuses its activity on trust and money
management and other fee generating businesses. Two of the Company's banking
subsidiaries are located in Massachusetts and one is located in Connecticut.
RISK FACTORS
The Shares being offered hereby involve a high degree of risk and are
suitable only for persons who can afford to bear such risk.
RECENT OPERATING HISTORY
The Company reported a loss of $20.1 million, or $1.31 per share, for 1993,
resulting primarily from a loan loss provision of $42.7 million in the second
quarter and writedowns of certain nonperforming assets. In addition, the Company
incurred net losses in each of the two preceding recent fiscal years. See
"Selected Consolidated Financial Information."
BANK REGULATORY AGREEMENTS AND ORDERS
Since 1992 the Company and its banking subsidiaries in Massachusetts have
been operating under regulatory agreements and orders with the relevant Federal
authorities and the Massachusetts Commissioner. UST/Conn has been operating
under a regulatory agreement with the Banking Commissioner of the State of
Connecticut (the "Connecticut Commissioner") since 1991. In February, 1994, the
FDIC and the Massachusetts Commissioner terminated and lifted their regulatory
order with USTC. These agreements restrict the ability of the Company and its
banking subsidiaries to pay dividends and impose a number of other requirements
and restrictions. The Company and each of its banking subsidiaries is in
satisfactory compliance with the terms of these agreements, except with respect
to the issues related to Director Frances X. Messina discussed under "Potential
Regulatory Sanctions" below. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Capital and Dividends";
"Supervision and Regulation -- Bank Regulatory Agreements and Orders" and
"Description of Capital Securities."
3
<PAGE> 5
POTENTIAL REGULATORY SANCTIONS
See the discussion below of certain regulatory issues related to Director
Francis X. Messina in "Supervision and Regulation -- Potential Regulatory
Sanctions."
PROPOSED NEW STANDARDS ON SAFETY AND SOUNDNESS -- ASSET QUALITY AND MINIMUM
EARNINGS STANDARDS
Proposed regulations covering standards for safety and soundness at banks
and bank holding companies have been put forth by the Company's primary federal
banking regulators as required by Section 132 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"). Included in the proposal are
standards which would (i) in effect state that the Company's "classified assets"
(as determined by the Company's banking regulator in its most recent
examination) may not exceed its "total capital" (as defined in these
regulations) plus that portion of its allowance for loan losses not included in
total capital, and (ii) establish a minimum earnings amount. Failure to meet
these standards would require the filing of a compliance action plan with and
acceptable to the Company's supervisory agencies. If the proposed regulations
were to be adopted in their present form, the Company believes it would not have
been in compliance with the first standard at March 31, 1994, as its "classified
assets" (as determined by the Company) at that date were approximately $238
million, while the maximum amount permitted at that date under the proposed
regulations would have been $207 million. The federal banking regulators have
not publicly indicated at this time when passage of final regulations in this
area will occur or whether final regulations will be substantially similar to
those proposed.
At March 31, 1994, classified assets, defined as Substandard, Doubtful or
Loss, as determined by the Company in its internal risk rating profile, were
$238 million, which includes $89 million in nonperforming commercial and real
estate loans and other real estate owned and $149 million in accruing commercial
and real estate loans. In addition, at March 31, 1994, $39 million of commercial
and real estate loans were categorized as Special Mention in the Company's
internal risk rating profile. Under the Company's definition, Substandard assets
are characterized by the distinct possibility that some loss will be sustained
if the credit deficiencies are not corrected. The Substandard classification,
however, does not necessarily imply ultimate loss for each individual asset so
classified. Assets classified as Doubtful have all the weaknesses inherent in
Substandard assets with the added characteristic that the weaknesses make
collection of 100% of the assets questionable and improbable. Included in the
$89 million in nonperforming loans there were no loans classified as Loss and
approximately $12 million classified as Doubtful at March 31, 1994. Special
Mention assets, as defined by the Company, have potential weaknesses that
deserve management's close attention. If left uncorrected, these potential
weaknesses may result in deterioration of the repayment prospects for the
assets.
Management of the Company has identified the reduction of the aggregate
amount of non-performing and classified assets as a high priority. Management is
assessing its alternatives with a view to implementing the most effective means
of achieving such a reduction, which could include a further acceleration of the
Company's strategy to handle problem credits expeditiously (including the
possibility of bulk sales). Management believes that the steps that may be taken
to achieve this objective could have a material adverse effect on the Company's
results of operations over the short term, but does not anticipate a material
adverse effect on a long-term basis.
LOCAL ECONOMIC CONDITIONS; CREDIT RISK CONCENTRATION
The Company's primary loan market, the New England region, continues to
experience an uneven and slow recovery. Most of the loans outstanding are from
Eastern Massachusetts and a substantial portion of these loans are various types
of real estate loans; still others have real estate as additional collateral. At
year-end 1993, the Company's exposure to credit risk principally secured by real
estate collateral included $499 million of loans. Recent economic studies have
concluded that the region's economy will remain sluggish for at least for the
balance of this year. While there have been pockets of growth, they have been
rather anemic, and the forecast is for small increases in the overall job market
with some industries increasing modestly and others not at all. Real estate
prices and activity have both improved from extremely depressed levels. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
4
<PAGE> 6
INTEREST RATE RISK
The Company engages in certain interest rate management practices in order
to reduce the effect of interest rate volatility on the net interest margin and
to enhance income. Depending upon the Company's particular "GAP" position at a
given time, a particular movement in interest rates could have an adverse effect
on the Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Interest Rate Risk." The recent rapid rise in
interest rates is likely to have a positive impact on interest margins, but also
will cause securities holdings to depreciate in value. The resulting unrealized
loss on securities will be reported as a reduction in shareholders' equity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital and Dividends." This interest rate rise may adversely
affect the cash flow of borrowers on some real estate loans.
COMPETITIVE CONDITIONS
The Company's banking and non-banking subsidiaries face substantial
competition throughout Massachusetts and Connecticut. This competition is
provided by commercial banks, savings banks, credit unions, consumer finance
companies, insurance companies, "non-bank banks," money market mutual funds,
government agencies, investment management companies, investment advisors,
brokers and investment bankers. In addition, the Company anticipates increased
competition from out-of-state and foreign banks and bank holding companies as
those entities increase their usage of interstate banking powers granted during
the past few years. During the past several years, acquisitions of small-and
medium-sized banks and bank holding companies by the largest New England bank
holding companies and the closing by regulators of a number of banks and bank
holding companies in Eastern Massachusetts and Connecticut has resulted in fewer
but financially stronger competitors in the local markets served by the
Company's banking subsidiaries.
5
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
This discussion should be read in conjunction with financial statements,
notes and tables included in the Company's Form 10-K and the Form 10-Q. See
"Incorporation of Certain Documents by Reference."
The Company's primary loan market, the New England region, continues to
experience an uneven and slow recovery. Recent economic studies have concluded
that the region's economy will remain sluggish for at least the next year. This
climate has contributed to the decline in commercial and residential real estate
values, although there is recent evidence that these values are stabilizing.
Generally, real estate prices and activity have both improved from extremely
depressed levels. Specifically, in the Commonwealth of Massachusetts, home sales
and home construction are both rising due to the prevailing low mortgage rates.
The harsh economic environment over the last few years has adversely affected
both the net worth of certain borrowing customers of the Company's subsidiary
banks and the Company's collateral position with respect to certain loans.
Massachusetts has seen both an exodus and failure of a number of businesses and
unemployment continues to remain at a high level. While there have been pockets
of growth, they have been sluggish, and the forecasts is for small increases in
the overall job market with some industries increasing modestly and others not
at all.
The foregoing factors continued to influence the Company's financial
results for 1993, particularly in the areas of provision for loan losses and
expenses related to foreclosed asset and workout expense, and are likely to
continue to influence such results. Toward the end of the second quarter of
1993, a strategy was adopted which recognized that many troubled credit
situations will need to be handled in an expeditious manner (including the
possibility of bulk sales) in order to reduce the management and staff
involvement and, in some cases, carrying costs of these workouts. This would
allow the Company's resources to be redirected toward new business. However, it
would increase the up-front costs of the workouts. As a result, the reserve for
loan losses was increased by $19.8 million during the second quarter. At
December 31, 1993, it stood at $62.5 million, or 4.67%, of loans outstanding,
while at March 31, 1994 the reserve was $60.9 million or 4.73% of loans
outstanding. To achieve the higher reserve level, the Company recorded a $42.7
million provision for loan losses in the second quarter of 1993. Included in
that amount was a special provision of $30 million. This special provision was
management's estimate of the additional losses to be incurred from the strategic
change referred to above, the continued sluggish economic climate and losses
occurring during the remainder of 1993 on these and other credits as a result of
recent events or new facts. The provision for the year ended December 31, 1993
totaled $64.3 million. Net chargeoffs in 1993 were $51.8 million compared with
$41.9 million in 1992. The provision for the three months ended March 31, 1994
and 1993 was $5.5 million and $10.4 million, respectively, while net chargeoffs
during these periods were $7.1 million and $5.4 million, respectively. At
December 31, 1993 and March 31, 1994, the reserve for loan losses equaled 127%
and 125.2%, respectively, of nonaccrual loans.
The above-mentioned special provision for loan losses coupled with a $3.1
million increase in foreclosed asset and workout expenses when compared with
those of 1992 are the primary reasons the Company reported a $20.1 million loss,
or $1.31 per share, for 1993. Positive factors in 1993 included a $21 million
reduction in the costs to fund lending operations. The decreased cost outpaced
the decrease in the yield on assets. Further, nonperforming assets were reduced
from $175.8 million at December 31, 1992 to $110.8 at December 31, 1993, a
decrease of 37%. These factors were the principal reasons that net interest
revenue increased $4.6 million in 1993. Noninterest income, of $36.7 million,
declined by $5.6 million in 1993. Gains on sales of securities decreased $9.3
million. This was offset in part by a $3.3 million increase in asset management
fees. Asset management fees continued their positive trend due to new business
and appreciation of existing clients' asset portfolios. Noninterest expense, of
$97.5 million, remained essentially flat in 1993 compared with 1992. Increases
in foreclosed asset and workout expense amounted to $3.1 million. In 1992, the
Company added $3.8 million to a reserve for losses arising from securitized
loans. These losses resulted from an unexpectedly high delinquency and default
rate on securitized automobile loans, which, when recalculating the gain or loss
on the transactions during the Company's regular and systematic review
necessitated the charge to earnings. There was no comparable expense for 1993,
as there were no loans securitized. In 1993, the Company adopted
6
<PAGE> 8
Financial Accounting Standard No. 109 "Accounting for Income Taxes." This
Standard changed the accounting for deferred income tax to the "liability
method." This change, a one-time event, increased net income by $750 thousand in
January 1993, representing the cumulative effect of the adoption of the new
standard on the balance sheet.
The Company reported net income of $1.0 million, or $0.6 per share, in the
first quarter of 1994 as compared to net income of $1.3 million, or $.09 per
share for the same period in 1993. The results for 1993 include a one-time tax
benefit of $750 thousand as discussed above. The results for the first quarter
of 1994 reflect declines in net interest income and noninterest income from the
first quarter of 1993, which were more than offset by decreases in the loan loss
provision and foreclosed asset and workout expenses. The Company's net interest
income on a fully tax equivalent basis was $22.0 million in the first quarter of
1994 compared with $23.1 million for the same period in 1993. The Company's
interest rate spread and margin declined during this period due to a decline in
the volume of loans. A decline in the level of nonperforming assets, due
primarily to paydowns and chargeoffs, and a related decline in substandard loans
resulted in a loan loss provision of $5.4 million for the first quarter of 1994
compared with $10.4 million for the same period in 1993. Total noninterest
income decreased $4.6 million in the first quarter of 1994 compared with the
same period in 1993. This decrease resulted primarily from the decline in
securities gains of $3.5 million. Smaller declines also occurred in asset
management fees and lease residual income. Total noninterest expense for the
first quarter of 1994 decreased $1.2 million from the same period in 1993.
Foreclosed asset and workout expenses declined by $3.2 million, which was offset
by increases in personnel related costs of $.9 million, occupancy expenses of
$.3 million, consulting fees of $.5 million and appraisal expenses of $.3
million.
Management of the Company has identified the reduction of the aggregate
amount of non-performing and classified assets as a high priority. Management is
assessing its alternatives with a view to implementing the most effective means
of achieving such a reduction, which could include a further acceleration of the
Company's strategy to handle problem credits expeditiously (including the
possibility of bulk sales). The specific alternatives selected by management
could be affected by the adoption of proposed regulations covering standards for
safety and soundness at banks and bank holding companies, which, if adopted in
their present form, would in effect require the Company to reduce its current
level of "classified assets" (as defined in those regulations). At March 31,
1994 the Company's "classified assets" under the proposed regulations would have
been approximately $238 million, while the maximum amount permitted at that date
under the proposed regulations would have been $207 million. See "Risk
Factors -- Proposed New Standards on Safety and Soundness -- Asset Quality and
Minimum Earnings Standards." Management believes that the steps that may be
taken to achieve the objective of reducing such loans could have a material
adverse effect on the Company's results of operations over the short term, but
does not anticipate a material adverse effect on a long-term basis.
FINANCIAL CONDITION
Total assets, at $2.04 billion and $2.01 billion at December 31, 1993 and
March 31, 1994, respectively, have declined slightly since December 31, 1992 due
to weak loan demand in the Company's market area consistent with the sluggish
local economy and a reduction due to previously mentioned chargeoffs.
At December 31, 1993 and March 31, 1994, liquidity, which includes excess
cash, excess funds sold and unpledged securities, totaled approximately $310
million and $315 million, respectively. The Company's deposits have decreased in
the present low interest rate environment. Generally, high-yielding certificates
of deposit which matured were not renewed at the prevailing rates -- these
investors are utilizing mutual fund and other vehicles to obtain higher returns.
Short-term borrowings have been increased to maintain liquidity at prudent
levels.
INTEREST RATE RISK
Volatility in interest rates requires the Company to manage interest rate
risk. Interest rate risk arises from mismatches between the repricing or
maturity characteristics of assets and the liabilities which fund them.
Management monitors and adjusts the difference between interest-sensitive assets
and interest-sensitive liabilities ("GAP" position) within various time frames.
An institution with more assets repricing than liabilities within a given time
frame is considered asset sensitive ("positive GAP") and in time frames with
7
<PAGE> 9
more liabilities repricing than assets it is liability sensitive ("negative
GAP"). Over a positive GAP time frame an institution will generally benefit from
rising interest rates and over a negative GAP time frame will generally benefit
from falling rates. Within GAP limits established by the Board of Directors of
the Company, the Company seeks to balance the objective of insulating the net
interest margin from rate exposure with that of taking advantage of anticipated
changes in rates in order to enhance income.
The following table summarizes the Company's GAP position at March 31,
1994. Approximately seventy percent of the loans are included in the 0-30 day
category, as they reprice in response to changes in the interest rate
environment. Securities and demand deposits are divided among the categories in
accordance with their expected lives. They are evaluated in conjunction with the
Company's asset/liability management strategy and securities may be sold in
response to changes in interest rates, prepayment risk, loan growth and similar
factors. The Company, by policy, maintains a one-year cumulative GAP position
within a range of plus or minus 2.5 times total equity. At March 31, 1994, the
one-year cumulative GAP position was slightly positive at $20 million, or
approximately 1.0% of total assets, as the Company was positioning itself for a
rise in interest rates. The recent rapid rise in rates, therefore, is likely to
have a positive impact on interest margins.
Interest Sensitivity Periods
<TABLE>
<CAPTION> 0-30 DAYS 31-90 DAYS 91-365 DAYS OVER 1 YEAR TOTAL
--------- ---------- ----------- ----------- ------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Loans........................................ $ 893 $ 28 $ 88 $ 218 $1,227
Short-term investments....................... 52 52
Securities................................... 10 18 69 441 528
Other assets................................. 1 10 182 203
------- ------- -------- -------- ------
Total assets............................ 955 47 167 841 2,010
------- ------- -------- -------- ------
Interest-bearing deposits.................... 692 86 153 298 1,229
Borrowed funds............................... 212 6 8 226
Demand deposits.............................. 320 320
Other liabilities and stockholders' equity... 235 235
------- ------- -------- -------- ------
Total liabilities and equity............ $ 904 $ 86 $ 159 $ 861 $2,010
------- ------- ------- -------- ------
GAP for period............................... $ 51 $(39) $ 8 $ (20) $ 0
------- ------- -------- -------- ------
------- ------
Cumulative GAP............................... $ 12 $ 20 $ 0
------- -------- --------
------- -------- --------
As a percentage of total assets.............. 2.54% .60% 1.00%
</TABLE>
The Company manages its interest rate risk primarily by lengthening or
shortening the maturity structure of the Company's portfolio of investment
securities.
CAPITAL AND DIVIDENDS
On June 2, 1993, the Company sold 500,000 shares of its unregistered common
stock in a private placement for a cash price of $3,750,000. Substantially all
of the net proceeds of that placement were used to repay principal on the
Company's long-term debt. On August 12, 1993, the Company sold 2.87 million
shares of its common stock in a European offering. These shares were placed with
more than sixty institutional investors and the offering was made under
Regulation S of the United States Securities and Exchange Commission. Net
proceeds of this placement were approximately $21 million after expenses. The
net proceeds continue to be held in the general funds of the Company to be used
for general corporate purposes.
Separately, during the last half of 1993, USTC received approval from the
appropriate regulators to pay dividends of $5.25 million to the Company, on the
condition that those dividends would be promptly distributed to the Subsidiary
Banks. Of that total, $1.7 million was contributed as capital to the Company's
Connecticut banking subsidiary, UST/Conn, and $3.55 million was contributed as
capital to the Company's lead bank, USTrust. During the first quarter of 1994,
USTC paid dividends of $1.0 million to the Company. That total, plus an
additional $1.0 million from the Company, was contributed as capital to
UST/Conn.
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<PAGE> 10
In 1993, the Company adopted Statement of Financial Accounting Standards
No. 115 (SFAS 115), issued by the Financial Accounting Standards Board. This
Standard deals with the classification of all debt securities and equity
securities that have a ready market. According to SFAS 115, these securities
must be classified as either held to maturity, available for sale, or trading
and are reported at either amortized cost or fair value, depending upon the
classification. At both March 31, 1994 and December 31, 1993, all securities in
the Company's portfolio were classified as available for sale. The application
of SFAS 115 resulted in a decrease of $8.1 million to stockholders' equity
between December 31, 1993 and March 31, 1994, representing the change from an
unrealized gain in the portfolio of $3.3 million after tax at December 31, 1993
to an unrealized loss of $4.8 million after tax at March 31, 1994. The decline
reflects the rapid increase in rates in the first quarter of 1994 and
corresponding decline in market prices for bonds. The increase in rates
continued after the quarter end, with the effect that, as of April 30, 1994,
stockholder equity was reduced an additional $6.1 million, relating to
unrealized losses.
NONPERFORMING ASSETS
The Company maintains a reserve for loan losses to reduce the carrying
value of its loans to an amount estimated to be collectible. Adequacy of the
reserve for loan losses is determined using a consistent systematic methodology
which analyzes the size and risk of the loan portfolio on a monthly basis.
Factors in this analysis include past loan loss experience and asset quality, as
reflected by trends of delinquent, nonaccrual and restructured loans and the
Company's credit risk rating profile. Consideration is also given to the current
and expected economic conditions and in particular how such conditions affect
the types of credits in the portfolio and the market area in general. This
analysis is documented on a monthly basis using a combination of numerical,
statistical and qualitative analysis (including sensitivity tests) and a written
conclusion discussing the rationale supporting the monthly adequacy of the loan
loss reserve.
<TABLE>
The following table measures the Company's performance regarding some key
indicators of asset quality:
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1992 1991
--------- ------------ ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Nonperforming assets:
Nonaccrual loans.......................... $ 48.6 $ 49.3 $ 86.6 $ 89.4
Accruing loans 90 days or more past due... 1.3 .5 1.1 8.6
Other real estate owned (OREO)............ 16.2 19.5 43.2 51.5
Restructured loans........................ 25.8 41.5 44.9 36.3
-------- --------- --------- ---------
Total nonperforming assets................ $ 91.9 $110.8 $175.8 $185.8
======== ========= ========= =========
Reserve for loan losses at end of period.... $ 60.9 $ 62.5 $ 50.1 $ 50.1
Net chargeoffs during period................ $ 7.1 $ 51.8 $ 41.9 $ 39.6
OREO reserve**.............................. $ 6.6 $ 6.6 $ .7
Ratios:
Reserve to nonaccrual loans............... 125.2% 127.0% 57.9% 56.0%
Reserve to total of nonaccrual loans,
accruing loans 90 days or more past due
and restructured loans................. 80.5% 68.5% 37.8% 37.3%
Reserve to period-end loans............... 4.7% 4.7% 3.4% 3.0%
Nonaccrual loans to period-end loans...... 3.8% 3.7% 5.9% 5.4%
Nonaccrual and accruing loans over 90 days
past due to period-end loans........... 3.9% 3.8% 6.0% 5.9%
Restructured loans to period-end loans.... 2.1% 3.1% 3.1% 2.2%
Nonperforming assets to period-end loans
and OREO............................... 7.1% 8.3% 11.6% 10.9%
Nonperforming assets to total assets...... 4.6% 5.4% 8.1% 7.9%
Net chargeoffs to average loans........... 2.2%* 3.7% 2.7% 2.3%
OREO reserve to OREO**.................... 28.9% 25.2% 1.7%
<FN>
- ---------------
* Quarter annualized
** Prior to December 1992, when the Company adopted AICPA Statement of Position
92-3, OREO was reduced to its fair value by direct charges to the asset.
Since then, the Company, like other bank holding companies, has used reserves
to indicate the net realizable value of its OREO, minus estimated selling
costs.
</TABLE>
9
<PAGE> 11
CORE EARNINGS
The Company defines core earnings as pretax income before loan loss
provision, foreclosed asset and work out expense, securities gains, and other
nonrecurring income and expense items. Management believes that core earnings
are a useful measure of a bank's ability to withstand the adverse effects of
nonperforming assets. However, it should be noted that core earnings do not
represent potential pre-tax earnings, as credit costs (i.e., provision for loan
losses and collection expenses) occur in varying amounts in the normal course of
business. The following table reflects the Company's core earnings components on
a comparative basis:
<TABLE>
<CAPTION> YEAR ENDED DECEMBER 31,
------------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Pretax income (loss)............................ $(32.4) $ (7.7) $(12.5) $ .2 $43.1
Add back:
Loan loss provision........................... 64.3 41.9 53.7 43.7 9.8
Foreclosed asset and workout expense.......... 23.4 20.3 14.5 3.7
Securities gains.............................. (4.2) (13.5) (10.5) (3.0) (1.7)
Other non recurring (income)/expense items,
net........................................ (1.0) 5.3 (1.9) 1.2 2.8
------ ------ ------ ----- -----
Core earnings................................... $ 50.1 $ 46.3 $ 43.3 $45.8 $54.0
------ ------ ------ ----- -----
------ ------ ------ ----- -----
</TABLE>
SUPERVISION AND REGULATION
SUPERVISION AND REGULATION OF THE COMPANY AND ITS SUBSIDIARIES
GENERAL
As a bank holding company registered under the Bank Holding Company Act of
1956, as amended, the Company is subject to substantial regulation and
supervision by the Federal Reserve Board. As state-chartered banks, USTC,
USTrust and UST/Conn (collectively, the "Subsidiary Banks") are subject to
substantial regulation and supervision by the FDIC and the applicable state bank
regulatory agencies. Such activities are often intended primarily for the
protection of depositors or are aimed at carrying-out broad public policy goals
that may not be directly related to the financial services provided by the
Company and its subsidiaries. Federal and state banking and other laws impose a
number of requirements and restrictions on the business operations, investments
and other activities of depository institutions and their affiliates.
BANK REGULATORY AGREEMENTS AND ORDERS
In February 1992, the Company's two Massachusetts-based banking
subsidiaries, USTC and USTrust, each entered into a Consent Agreement and Order
with the FDIC and the Massachusetts Commissioner. In accordance with these
agreements, the banks agreed to, among other things, maintain a Tier 1 leverage
capital ratio at or in excess of 6% by February 1993. At March 31, 1994 the Tier
1 leverage capital ratio of USTrust was 6.72% and was 27.69% for USTC. This
compares with 6.49% and 23.75%, respectively, at December 31, 1993. In February
1994 the FDIC and the Massachusetts Commissioner terminated and lifted the
Consent Agreement and Order with USTC.
Since June 1991, the Company's Connecticut-based banking subsidiary,
UST/Conn, has been operating under a Stipulation and Agreement with the
Commissioner of Banks for the State of Connecticut. This agreement was amended
in August 1992 and November 1993 and requires UST/Conn to maintain a 6% Tier 1
leverage capital ratio. UST/Conn Tier 1 leverage capital ratio at March 31, 1994
was 6.44% compared with 6.21% at December 31, 1993. Subsequent to the close of
the quarter, regulators for UST/Conn required that a portion of its deferred tax
asset not be included in capital calculations. This had the effect of causing
UST/Conn to be below the 6% requirement, which was rectified promptly with the
declaration of a dividend subject to regulatory approval to UST/Conn by the
Company.
Effective August 3, 1992, the Company entered into a written agreement with
the Federal Reserve Bank of Boston and the Massachusetts Commissioner which
requires the Company to maintain Tier 1, Total risk-
10
<PAGE> 12
based and Tier 1 leverage capital ratios which conform to the Capital Adequacy
Guidelines of the Board of Governors of the Federal Reserve Board, and which
take into account the current and future capital requirements of the Subsidiary
Banks, without specifying a numeric minimum for the Tier 1 leverage capital
ratio. The Company believes its ratios meet the required minimums.
Additionally, per these agreements, the Company has agreed not to pay any
dividends to stockholders, nor take any dividends from its banking subsidiaries,
without prior regulatory approval. Similarly, the banking subsidiaries have
agreed to refrain from transferring funds in the form of dividends to the
Company without prior regulatory approval.
Even though in February 1994, the FDIC and Massachusetts Commissioner
terminated and lifted the Consent Agreement and Order with USTC, USTC has agreed
to continue to request regulatory consent prior to the payment of dividends.
Except as noted above, the Company and each Subsidiary Bank is currently in
compliance with its respective capital requirements under these regulatory
agreements. The Company and each Subsidiary Bank is also in satisfactory
compliance with the other terms of the respective regulatory agreements, except
with respect to the issues related to Director Francis X. Messina described
under "Potential Regulatory Sanctions" below.
As provided in the regulatory agreements, the Company, USTrust and UST/Conn
have instituted plans to reduce levels of non-performing assets (but without any
specific targets) and have developed written plans and policies (and continue to
refine such plans and policies as appropriate) concerning, among other matters,
credit administration, loan review and intercompany transactions and allocation
of tax payments among subsidiaries and the Company. USTrust and UST/Conn have
also revised and expanded their investment and funds management policies as
required by the agreements. Moreover, the Company has agreed to give the
FRB-Boston and the Massachusetts Commissioner prior notice of certain
significant expenditures and certain increases in management compensation. The
Company has filed (and will continue to file) with the regulatory agencies a
broad range of periodic reports and plans, including without limitation, updated
strategic, profit and management plans.
For a further discussion of the Regulatory Agreements, see Note 13 to
Consolidated Financial Statements in the Form 10-K. For a discussion of capital
in the context of the Regulatory Agreements, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Capital" in the
Form 10-K. For a discussion of related party transactions, see Note 14 to
Consolidated Financial Statements in the Form 10-K. See "Incorporation of
Certain Documents by Reference."
POTENTIAL REGULATORY SANCTIONS
Certain apparent and inadvertent violations of the insider lending
provisions (and related lending limit provisions) of Regulation O of the FRB
related to extensions of credit by USTrust to Director Francis X. Messina have
led the FDIC to require that corrective action be taken and to advise USTrust
orally that the FDIC may consider the imposition of civil money penalties with
respect to such matters. No FDIC representative has suggested to USTrust or the
Company that there was any willful or intentional misconduct on the part of
USTrust, Director Messina or USTrust's other institution-affiliated parties in
connection with these matters.
To address these issues, USTrust and Director Messina have undertaken a
program to reduce the aggregate balance of Mr. Messina's outstanding loans from
USTrust and to improve the collateral support for the remaining outstanding loan
balance. The elements of this program have been communicated to and reviewed by
the FDIC. In furtherance of the program, since late 1993, the outstanding
principal of the aggregate loans to Director Messina and his related interests
has been reduced by more than $11 million from approximately $30 million to less
than $19 million, and such loans are now below all applicable lending limits. To
date, the Company has incurred no losses with respect to any of these loans,
although they are characterized as "Substandard" in the Company's internal risk
rating profile, and all such loans are current as to both principal and
interest. These loans are included in the total "classified assets" as described
in "Risk
11
<PAGE> 13
Factors -- Proposed New Standards on Safety and Soundness -- Asset Quality and
Minimum Earnings Standards."
There has been no further action taken by any bank regulatory agency to
date. The FDIC has the authority to levy civil money penalties of various
amounts for violations of law or regulations, orders and written conditions and
agreements, which, depending upon the nature and severity of the violations, may
be, in situations where conduct has been egregious, as high as $1 million per
day for the period during which such violation continues. In connection with the
apparent violations described above, the FDIC has the authority to impose
penalties on any of USTrust, its Board of Directors, officers of the Bank,
Director Messina personally, "institution-affiliated parties" of USTrust or any
combination thereof.
While it is not possible to predict with certainty the probability of
penalties being assessed, the person or persons upon whom any penalty would be
assessed or the amounts of any such penalties, were they to be assessed,
management of the Company believes that it is unlikely that this matter will
have a material adverse effect on its financial condition or results of
operations. Consequently, no provision in respect of penalties has been made in
the Company's Consolidated Financial Statements. In the event penalties are
imposed, the Company and its legal counsel will evaluate the grounds upon which
the penalties are based, consider the size of such penalties, note upon which
entities or individuals such penalties are imposed and determine whether it will
independently (or jointly with the directly affected entity or individual)
contest the imposition of the penalty. See Note 15 to Consolidated Financial
Statements in the Form 10-K.
GENERAL SUPERVISION AND REGULATION
The Company, as a bank holding company under the Bank Holding Company Act
of 1956, as amended in 1970 (the "BHC Act"), is registered with the Federal
Reserve Board and is regulated under the provisions of the BHC Act. Under the
BHC Act the Company is prohibited, with certain exceptions, from acquiring
direct or indirect ownership or control of more than 5% of the voting shares of
any company which is not a bank and from engaging in any business other than
that of banking, managing or controlling banks or furnishing services to, or
acquiring premises for, its affiliated banks, except that the Company may engage
in and own voting shares of companies engaging in certain activities determined
by the Federal Reserve Board, by order or by regulation, to be so closely
related to banking or to managing or controlling banks "as to be a proper
incident thereto." The location of non-bank subsidiaries of the Company is not
restricted geographically under the BHC Act. In 1989, after the passage of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"),
the Federal Reserve Board amended its regulations under the BHC Act to permit
bank holding companies, as a non-banking activity, to own and operate savings
associations without geographical restrictions. The Company is required by the
BHC Act to file with the Federal Reserve Board an annual report and such
additional reports as the Federal Reserve Board may require. The Federal Reserve
Board also makes examinations of the Company and its subsidiaries.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve Board before it may acquire substantially all of
the assets of any bank, or ownership or control of any voting shares of any
bank, if, after such acquisition, it would own or control, directly or
indirectly, more than 5% of the voting shares of such bank.
Because the Company is also a bank holding company under the Massachusetts
General Laws, the Massachusetts Commissioner has authority to require certain
reports from the Company from time-to-time and to examine the Company and each
of its subsidiaries. The Massachusetts Commissioner also has enforcement powers
designed to prevent banks from engaging in unfair methods of competition or
unfair or deceptive acts or practices involving consumer transactions. Prior
approval of the Massachusetts Board of Bank Incorporation is also required
before the Company may acquire any additional commercial banks located in
Massachusetts or in those states which permit acquisitions of banking
institutions located in their states by Massachusetts bank holding companies.
The Connecticut General Statutes require that the Company furnish to the
Connecticut Commissioner such reports as the Connecticut Commissioner deems
appropriate to the proper supervision of the Company. The Connecticut
Commissioner is also authorized to make examinations of the Company and its
Connecticut
12
<PAGE> 14
subsidiaries including UST/Conn, and to order the Company to cease and desist
from engaging in any activity which constitutes a serious risk to the financial
safety, soundness or stability of a Connecticut subsidiary bank, or is
inconsistent with sound banking principles or the provisions of Chapter 658 (the
banking statute) of the Connecticut General Statutes.
The Subsidiary Banks, whose deposits are insured by the FDIC, and the
subsidiaries of such banks are subject to a number of regulatory restrictions,
including certain restrictions upon: (i) extensions of credit to the Company and
the Company's non-banking affiliates (collectively with the Company, the
"Affiliates"), (ii) the purchase of assets from Affiliates, (iii) the issuance
of a guarantee, acceptance of letter of credit on behalf of Affiliates and (iv)
investments in stock or other securities issued by Affiliates or acceptance
thereof as collateral for an extension of credit. In addition, all transactions
among the Company and its direct and indirect subsidiaries must be made on an
arm's length basis and valued on fair market terms. The Subsidiary Banks pay
substantial deposit insurance premiums to the FDIC. Such deposit premium rates
were substantially increased in 1992. They were further increased for the first
half of 1993 and decreased in the second half of 1993 pursuant to regulations
issued under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA").
Federal Reserve Board policy requires bank holding companies to serve as a
source of strength to their subsidiary banks by standing ready to use available
resources to provide adequate capital funds to subsidiary banks during periods
of financial stress or adversity. A bank holding company also can be liable
under certain provisions of FDICIA for the capital deficiencies of an
undercapitalized bank subsidiary. In the event of a bank holding company's
bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, the trustee will be
deemed to have assumed and is required to cure immediately any deficit under any
commitment by the debtor to any of the federal banking agencies to maintain the
capital of an insured depository institution, and any claim for breach of such
obligation will generally have priority over most other unsecured claims. Under
the cross-guarantee provisions of the Federal Deposit Insurance Act, if any or
all of the Subsidiary Banks were placed in conservatorship or receivership, the
Company, as sole stockholder, would likely lose its investment in the applicable
Subsidiary Bank or Subsidiary Banks.
The Company and all its subsidiaries are also subject to certain
restrictions with respect to engaging in the issue, flotation, underwriting,
public sale or distribution of certain types of securities. In addition, under
both Section 106 of the 1970 Amendments to the BHC Act and regulations which
have been issued by the Federal Reserve Board, the Company and its subsidiaries
are prohibited from engaging in certain tie-in arrangements in connection with
any extension of credit, lease or sale of any property or the furnishing of any
service. Various consumer laws and regulations also affect the operations of the
Subsidiary Banks.
The Subsidiary Banks, two of which are chartered under Massachusetts law
and one of which is chartered under Connecticut law, are subject to federal
requirements to maintain cash reserves against deposits, and to state mandated
restrictions upon the nature and amount of loans which may be made by the banks
(including restrictions upon loans to "insiders" of the Company and its
subsidiary banks) as well as to restrictions relating to dividends, investments,
branching and other bank activities.
FDICIA prescribes the supervisory and regulatory actions that will be taken
against undercapitalized insured depository institutions for the purposes of
promptly resolving problems at such institutions at the least possible long-term
loss to the FDIC. Five categories of depository institutions have been
established by FDICIA in accordance with their capital levels: "well
capitalized", "adequately capitalized", "undercapitalized", "significantly
undercapitalized" and "critically undercapitalized". The federal banking
agencies have adopted uniform regulations to implement the prompt regulatory
action provisions of FDICIA.
Under the uniform regulations, a well-capitalized institution has a minimum
tier 1 capital-to-total risk-based assets ratio of 6 percent, a minimum total
capital-to-total risk-based assets ratio of 10 percent and a minimum leverage
ratio of 5 percent and is not subject to any written capital order or directive.
An adequately capitalized institution meets all of its minimum capital
requirements under the existing capital adequacy guidelines. An undercapitalized
institution is one that fails to meet any one of the three minimum capital
requirements. A significantly undercapitalized institution has a tier 1
capital-to-total risk-based assets ratio of less than 3 percent, a tier 1
leverage ratio of less than 3 percent or a total capital-to-total risk-based
assets ratio
13
<PAGE> 15
of less than 6 percent. A critically undercapitalized institution has a tier l
leverage ratio of 2 percent or less. An institution whose capital ratios meet
the criteria for a well-capitalized institution may be classified as an
adequately capitalized institution due to qualitative and/or quantitative
factors other than capital adequacy. An adequately capitalized institution or
undercapitalized institution, may under certain circumstances, be required to
comply with supervisory action as it if were in the next lower category.
An undercapitalized institution is required to submit a capital restoration
plan for acceptance by the appropriate federal banking agency and will be
subject to close monitoring of both its condition and compliance with, and
progress made pursuant to, its capital restoration plan. The capital restoration
plan will be accepted only if (i) it specifies the steps that will be taken to
become adequately capitalized and the activities in which the institution will
engage, (ii) it is based upon realistic assumptions and its likely to succeed in
restoring the institution's capital, (iii) it does not appreciably increase the
institution's risk exposure and (iv) each holding company that controls the
institution provides appropriate assurances of performance and guaranties that
the institution will comply with the plan until the institution is adequately
capitalized on an average basis for each of four consecutive quarters. Liability
under the guaranty is the lesser of (i) five percent of the institution's total
assets at the time it become undercapitalized and (ii) the amount necessary to
bring the institution into compliance with all applicable capital standards as
of the time the institution fails to comply with the plan. An institution that
fails to submit an acceptable plan may be placed into conservatorship or
receivership unless its capital restoration plan is accepted. An
undercapitalized institution will also be subject to restrictions on asset
growth, acquisitions, branching, new activities, capital distributions and the
payment of management fees.
FDICIA requires the appropriate regulatory agencies to take one or more
specific actions against significantly undercapitalized institutions and
undercapitalized institutions that fail to submit capital restoration plans,
which actions include but are not limited to (i) requiring the institution to
sell shares or other obligations to raise capital, (ii) limiting deposit
interest rates, (iii) requiring the election of a new board of directors and/or
dismissing senior executive officers and directors who held such positions for
more than 180 days before the institution became undercapitalized, (iv)
prohibiting receipt of deposits from correspondent banks, (v) requiring
divestiture or liquidation of one or more subsidiaries and (vi) requiring the
parent company to divest the institution if such divestiture will improve the
institution's financial condition and future prospects. In addition, an insured
institution that receives a less-than-satisfactory rating for asset quality,
management, earnings or liquidity may be deemed by its appropriate federal
banking regulator to be engaging in an unsafe or unsound practice for purposes
of issuing an order to cease and desist or to take certain affirmative actions.
If the unsafe or unsound practice is likely to weaken the institution, cause
insolvency or substantial dissipation of assets or earnings or otherwise
seriously prejudice the interest of depositors or the FDIC, a receiver or
conservator could be appointed. Finally, subject to certain exceptions, FDICIA
requires critically undercapitalized institutions to be placed into receivership
or conservatorship within 90 days after becoming critically undercapitalized.
The Federal Reserve Board has indicated that it will consult with each
federal banking agency regulating the bank subsidiaries of a holding company to
monitor required supervisory actions, and based upon an assessment of these
developments, will take appropriate action at the holding company level.
Under FDICIA, federal bank regulators are also required to see that changes
are made in the operations and/or management of a bank or bank holding company
if the financial institution is deemed to be "undercapitalized." Under FDICIA, a
depository institution that is "adequately capitalized" but not "well
capitalized" is generally prohibited from accepting brokered deposits and
offering interest rates on deposits higher than the prevailing rate in its
market. In addition, "pass through" insurance coverage may not be available for
certain employee benefit accounts. The Company believes that the application of
these limitations to it would not have a material effect on its funding or
liquidity. USTC is currently classified as "well capitalized" and USTrust and
UST/Conn are each currently classified as "adequately capitalized."
New regulations adopted pursuant to FDICIA include: (1) real estate lending
standards for depository institutions, which provide guidelines concerning
loan-to-value ratios for various types of real estate loans; (2) rules requiring
depository institutions to develop and implement internal procedures to evaluate
and
14
<PAGE> 16
control credit and settlement exposure to their correspondent banks; (3) rules
implementing the FDICIA provisions prohibiting, with certain exceptions, insured
state banks from making equity investments or engaging in activities of the
types and amounts not permissible for national banks; and (4) rules and
guidelines for enhanced financial reporting and audit requirements. Rules
currently proposed for adoption pursuant to FDICIA include: (1) revisions to the
risk-based capital guidelines regarding interest rate risk, concentrations of
credit risk and the risks posed by "non-traditional activities"; and (2) rules
addressing various "safety and soundness" issues, including operations and
managerial standards, standards for asset quality, earnings and stock
valuations, and compensation standards. See "Risk Factors -- Proposed New
Standards on Safety and Soundness."
The status of the Company as a registered bank holding company does not
exempt it from certain federal and state laws and regulations applicable to
corporations generally, including, without limitation, certain provisions of the
federal securities laws and the Massachusetts corporate laws. With the passage
of FIRREA in 1989, the Crime Control Act in 1990 and FDICIA in 1991, federal
bank regulatory agencies including the Federal Reserve Board and the FDIC were
granted substantially broader enforcement powers to restrict the activities of
financial institutions and to impose or seek the imposition of increased civil
and/or criminal penalties upon financial institutions, the individuals who
manage or control such institutions and "institution affiliated parties" of such
entities.
Pursuant to the Community Reinvestment Act ("CRA"), federal regulatory
authorities review the performance of the Company and its subsidiary banks in
meeting the credit needs of the communities served by the subsidiary banks. The
applicable federal regulatory authority considers compliance with this law in
connection with applications for, among other things, approval of branches,
branch relocations and acquisitions of banks and bank holding companies.
USTrust's current CRA rating is "outstanding" and UST/Conn's current CRA rating
is "satisfactory." The FDIC has determined that it will no longer examine USTC,
which focuses upon trust and asset management activities, for CRA compliance.
The Massachusetts Commissioner has not yet determined whether it will continue
to examine USTC for CRA compliance.
Supervision, regulation and examination of the Subsidiary Banks by the bank
regulatory agencies are not intended for the protection of the Company's
security holders.
From time-to-time various proposals are made in the United States Congress
as well as state legislatures which would alter the powers of, and place
restrictions on, different types of bank organizations as well as bank and
nonbank activities. Such legislative proposals include interstate branching and
expansion of bank powers. It is impossible to predict whether any of the
proposals will be adopted and the impact of such adoption on the business of the
Company or its subsidiaries.
GOVERNMENTAL POLICIES AND ECONOMIC CONDITIONS
The earnings and business of the Company's subsidiaries are and will be
affected by a number of external influences, including general economic
conditions in the United States and particularly in New England and the policies
of various regulatory authorities of the United States, including the Federal
Reserve Board. The Federal Reserve Board regulates the supply of money and of
bank credit to influence general economic conditions within the United States
and throughout the world. From time-to-time, the Federal Reserve Board takes
specific steps to dampen domestic inflation and to control the country's money
supply. The instruments of monetary policy employed by the Federal Reserve Board
for these purposes (including the level of cash reserves banks, including
non-member banks such as all three of the Company's banking subsidiaries, are
required to maintain against deposits) influence in various ways the interest
rates paid on interest-bearing liabilities and the interest received on earning
assets, and the overall level of bank loans, investments and deposits. The
impact upon the future business and earnings of the Company of prospective
domestic economic conditions, and of the policies of the Federal Reserve Board
as well as other U.S. regulatory authorities, cannot be predicted accurately.
15
<PAGE> 17
LEGAL PROCEEDINGS
In the ordinary course of operations, the Company and its subsidiaries
become defendants in a variety of judiciary and administrative proceedings. In
the opinion of management, however, there is no proceeding pending, or to the
knowledge of management threatened, which is likely to result in a material
adverse change in the possible condition of results of operations of the Company
and its subsidiaries.
MANAGEMENT
BOARD OF DIRECTORS
Detailed information regarding each director of the Company is set out on
pages 2 through 5, in the 1994 Annual Meeting Proxy Statement under the caption
"Persons to be Nominated by Management for Election as Directors" which is
hereby incorporated by reference. Charles M. Goldman, who is 91 years old,
retired and ceased to be a Director as of June 22, 1993 and was elected Director
Emeritus of the Company as of that date. Additionally, William Schwartz,
Chairman of the Company and Vice Chairman of the Board of Directors, agreed in
July 1993 with Fox-Pitt Kelton, Inc. ("FPK") (placement agent for the $22
million overseas equity placement completed by the Company in August 1993) that
Mr. Schwartz would recommend to the Board of Directors that FPK be granted the
right to nominate one director deemed suitable by both FPK and the Company for
election to the Board. Mr. Schwartz made such a recommendation and it was
accepted by the Board in July 1993. As of May 25, 1994, no nominee had yet been
suggested by FPK. Separately, in January 1994, Robert L. Culver (age 48),
Treasurer and Chief Financial Officer of Northeastern University, joined the
Board of Directors of the Company.
PRINCIPAL SHAREHOLDERS
Management of the Company is unaware of any shareholder that beneficially
owned more than 5% of the Common Stock as of February 28, 1994. The Company is
unaware of any arrangements the operation of which may at a subsequent date
result in a change in control of the Company.
COMPENSATION OF DIRECTORS, EXECUTIVE COMPENSATION AND BENEFIT PLAN
Information concerning compensation of the Company's executive officers and
directors and the Company's other remuneration plans is set out on pages 6
through 15 of the 1994 Annual Meeting Proxy Statement under the caption
"Compensation of Executive Officers", which is hereby incorporated by reference.
EXECUTIVE OFFICERS OF THE COMPANY
EXECUTIVE POLICY COMMITTEE
In 1987, the Board of Directors of the Company created an Executive Policy
Committee which is the primary management forum of the Company for all strategic
and policy decisions. All decisions of the Executive Policy Committee are
subject to the review and approval of the Board of Directors of the Company. The
Executive Policy Committee has been directed by the Board of Directors to make
recommendations to the Board concerning adoption of policies, strategies and
programs concerning the following, among other matters: (a) acquisitions and
dispositions of corporate entities, assets and/or investments; (b) the issuance
of equity and/or debt; (c) engaging in new business activities; (d) the hiring,
termination, training and motivation of senior management; (e) the development
of marketing programs concerning financial services; (f) improvements to
operations, service delivery and implementation of procedures for cost control;
(g) improvements to the financial reporting and financial controls systems; (h)
improvements to the business information systems; and (i) improvements
concerning risk management and legal and regulatory compliance programs. As of
February 28, 1994, there were 11 members of the Executive Policy Committee. The
members of the Committee are identified and the background of each Committee
member is set forth below under "Executive Officers."
16
<PAGE> 18
EXECUTIVE OFFICERS
<TABLE>
The names and ages of the executive officers of the Company and each
executive officer's position with the Company and its subsidiaries are listed
below. Each such executive officer is elected annually by the Directors of the
Company (or the Directors of the applicable subsidiary of the Company) and
serves until his or her successor is duly chosen and qualified or until his or
her earlier death, removal or disqualification.
<CAPTION>
POSITIONS AND OFFICES WITH THE COMPANY (AND/OR WHERE
APPROPRIATE,
NAME (AGE) POSITION WITH ONE OF THE COMPANY'S SUBSIDIARIES)
---------- ----------------------------------------------------
<S> <C>
*Neal F. Finnegan (56)........... President and Chief Executive Officer, and Director of the
Company
William Schwartz (61)........... Chairman of the Company and Vice Chairman of the Board of
Directors of the Company
Paul M. Siskind (79)............ Chairman of the Board of Directors of the Company
*Walter E. Huskins, Jr. (54)..... Executive Vice President/Administration of the Company
*Domenic Colasacco (45).......... Executive Vice President and Director of the Company and
Chairman and President of USTC
*Eric R. Fischer (48)............ Executive Vice President, General Counsel and Clerk of the
Company and Executive Vice President, General Counsel and
Secretary of USTrust and USTC
William C. Brooks (57)........... Senior Vice President, Treasurer, and Chief Financial
Officer of the Company
*Linda J. Lerner (49)............ Senior Vice President/Human Resources of the Company
*Theodore M. Shediac (54)........ Chairman of the Board, USTrust
*Kathie S. Stevens (43).......... Executive Vice President and Senior Lending Officer,
USTrust
*Kenneth L. Sullivan (57)........ President, UST Data Services Corp.
*Robert T. McAlear (51).......... Vice Chairman, USTrust
*Katherine C. Armstrong (48)..... Senior Vice President/Credit Administration of the Company
George T. Clarke (47)........... Vice President and Controller of the Company
P. Clarke Dwyer (62)............ Senior Vice President/Loan Review of the Company
<FN>
- ---------------
*Member, Executive Policy Committee
</TABLE>
The following sets forth the principal occupation during the past five
years of each of the executive officers of the Company.
Mr. Finnegan has served as President and Chief Executive Officer of the
Company since April 1993. During the prior five years, Mr. Finnegan was
Executive Vice President in charge of Private Banking at Bankers Trust Company,
New York, New York. From 1986 to 1988, Mr. Finnegan was President and Chief
Operating Officer of Bowery Savings Bank in New York City. From 1982 to 1986 he
was Vice Chairman of Shawmut Corporation in Boston. Mr. Finnegan also serves as
Vice Chairman of the Board of Trustees of Northeastern University. Mr. Finnegan
is also a Director and President of USTrust and a Director and Chairman of the
Executive Committee of USTC.
Mr. Schwartz has served as Chairman of the Company since April 1993. Mr.
Schwartz has been Vice Chairman of the Board of Directors of the Company since
1981. Mr. Schwartz is Vice President/Academic Affairs at Yeshiva University and
is of counsel to the New York law firm of Cadwalader, Wickersham & Taft. Mr.
Schwartz formerly served as Dean of Boston University School of Law.
Mr. Siskind has served as Chairman of the Board of the Company since 1967.
He was Chief Operating Officer of the Company from 1976 through 1984 and General
Counsel of the Company in 1984 and 1985. From 1966 through 1976, Mr. Siskind
served as Dean of Boston University School of Law.
17
<PAGE> 19
Mr. Huskins was elected Executive Vice President/Administration of the
Company in August 1993. Mr. Huskins is also responsible for the leasing and
retail banking activities of the Company. Prior to joining the Company, Mr.
Huskins served as President, Sterling Protection Company, Watertown, MA
(security systems) from 1990 to 1993 and as Vice Chairman of Chancellor
Corporation, Boston, MA (leasing) from 1977 to 1989.
Mr. Colasacco was elected Executive Vice President and a Director of the
Company in 1990. In 1993, he was also elected Chairman of the Board and
President of USTC. Prior to that time, he served as an Executive Vice President
of USTC. He also directs the asset management and investment activities of the
Company and its subsidiaries. Mr. Colasacco has been an officer of the Company
or of one of its subsidiaries since 1974.
Mr. Fischer was elected Executive Vice President, General Counsel and Clerk
of the Company in 1992. Prior to 1992, he served as Senior Vice President,
General Counsel and Assistant Clerk of the Company. Before joining the Company
in 1986, he served as Assistant General Counsel of Bank of Boston Corporation
and its principal subsidiary, The First National Bank of Boston. Mr. Fischer is,
and has been since 1984, a member of the faculty of the Morin Center for Banking
Law Studies of Boston University School of Law. He also serves as Executive Vice
President, General Counsel and Secretary of USTC and USTrust, as a Director and
Clerk of UST Leasing Corporation, as Clerk of UST Data Services Corp. and UST
Capital Corp. and as Assistant Secretary of UST Bank/Connecticut.
Mr. Brooks has been a Senior Vice President of the Company since 1984 and
Treasurer since 1980. He is Chairman of the Asset and Liability Management
Committee of the Company. In addition, he serves as a Director of UST Data
Services Corp. and as a Director and Treasurer of UST Leasing Corporation. Mr.
Brooks has been an officer of the Company since 1967.
Ms. Lerner has served as Senior Vice President of the Company since she
joined the Company in 1988. She directs the Human Resources activities of the
Company. Prior to her joining the Company, Ms. Lerner served in a similar
capacity for the Provident Institution for Savings in Boston.
Mr. Shediac was elected Chairman of the Board of USTrust in 1993. Prior to
that time, he served as President of USTrust. His primary responsibilities
involve the retail banking operations of the Company's banking subsidiaries. Mr.
Shediac has been an officer of the Company or its subsidiaries since 1980.
Ms. Stevens was elected Executive Vice President and Senior Lending Officer
of USTrust in 1993. Since joining the Company in 1985 and until 1993, Ms.
Stevens served in the commercial banking function of USTC as Senior Vice
President from 1985 through 1990 and as Executive Vice President from 1990 until
1993.
Mr. Sullivan has served as President of UST Data Services Corp. since he
joined the Company in 1988. In that capacity, he has responsibility for the data
processing and information systems of the Company as well as for its operations
activities. Prior to 1988, Mr. Sullivan served as Executive Vice President of
Operations with BayBanks Systems, Inc. in Waltham, MA.
Mr. McAlear has served as Vice Chairman of USTrust since he joined the
Company in 1990. His primary responsibilities involve the supervision of the
controlled loan and real estate lending and workout functions of USTrust and the
Company. Prior to 1990, Mr. McAlear served as an Executive Vice President in the
lending area of the Bank of New England.
Ms. Armstrong was named Senior Vice President/Credit Administration of
USTrust in February 1994. She has served in the credit administration and credit
risk control functions of USTrust since she joined the Company in 1985. Ms.
Armstrong is the Chairman of the Senior Credit Committee of the Company and
USTrust.
Mr. Clarke has served as Vice President and Controller of the Company since
1988. Prior to joining the Company, Mr. Clarke was Deputy Comptroller of The
First National Bank of Boston.
Mr. Dwyer was elected Senior Vice President/Chief Loan Review Officer of
the Company in August 1993. Prior to joining the Company, Mr. Dwyer served as
Senior Vice President/Loan Workout at First New
18
<PAGE> 20
Hampshire Bank, Manchester NH from 1990 through mid-1993. Prior to 1990, Mr.
Dwyer was Senior Vice President/Corporate Credit Review at Shawmut Bank, N.A. in
Boston, MA.
There are no arrangements or understandings between any executive officer
and any other person pursuant to which he or she was selected as an executive
officer.
DESCRIPTION OF CAPITAL SECURITIES
THE COMPANY'S COMMON STOCK
The Company is authorized by its Articles of Organization to issue
30,000,000 shares of Common Stock. On April 30, 1994, there were outstanding
17,359,905 shares of Common Stock.
Dividend Rights. The ability of the Company and its bank subsidiaries to
pay dividends is subject to certain limitations imposed by statutes of the
Commonwealth of Massachusetts and by agreements with the Company's banking
regulators. Generally, with respect to the bank subsidiaries, the payment of
dividends is limited by statute to the amount of retained earnings, after
deducting losses and statutorily defined bad debts in excess of established
allowances for loan losses. Under the regulatory agreements and orders to which
the Company, USTrust and UST/Conn are subject (and pursuant to a vote of the
Board of Directors of USTC), no dividend may be paid by the Company to its
shareholders or by the bank subsidiaries to the Company, without prior written
approval of the applicable regulatory agencies.
Voting Rights. Holders of Common Stock are entitled to one vote for each
share on all matters voted upon by stockholders. Shares of Common Stock have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of directors can elect 100% of the directors
if they chose to do so.
Preemptive Rights. Authorized shares of Common Stock may be issued at any
time, and from time to time, in such amounts and for such consideration as may
be fixed by the Board of Directors. No holder of the Common Stock has any
preemptive or preferential right to purchase or to subscribe for any shares of
capital stock or other securities which may be issued by the Company.
Liquidation Rights. In the event of any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary, the holders of
Common Stock are entitled to share, on a share-for-share basis, in any of the
assets of the Company legally available for distribution to such shareholders
after the payment of all debts and other liabilities of the Company and any
preferential amounts attributable to any preferred stock that may then be
outstanding.
Assessments. Outstanding shares of Common Stock, including the Shares, are
fully paid and nonassessable.
Staggered Board of Directors. The Company's Articles of Organization and
By-Laws provide in accordance with Section 50A of Chapter 156B of the
Massachusetts General Laws ("Section 50A") for a Board of Directors of such
number, to be fixed by the stockholders, as is a multiple of three, serving
staggered three-year terms. A Director may be removed only for cause, as such
term is defined in Section 50A.
Transfer Agent and Registrar. USTC, 30 Court Street, Boston, Massachusetts
02108 serves as transfer agent and registrar for the Company's Common Stock.
THE COMPANY'S PREFERRED STOCK
The Company is authorized by its Articles of Organization to issue
4,000,000 shares of preferred stock (the "Preferred Stock"), none of which were
outstanding at March 31, 1994.
General. The Preferred Stock is of a serial or "blank check" nature. Under
Chapter 156B of the Massachusetts General Laws, after stockholder authorization
of such a class of preferred stock, one or more series of preferred stock may be
established and designated by action of the Board of Directors with varying
rights, preferences and limitations and without further stockholder action. The
Board of Directors may also fix
19
<PAGE> 21
the number of shares of the series. Series are established by the filing with
the Secretary of State of the Commonwealth of Massachusetts of a certificate
which is made a part of the filing company's Articles of Organization and which
sets forth the rights, preferences and limitations of the respective series.
Dividend and Liquidation Rights. Each series of the Preferred Stock, when
issued, would have preference over the Common Stock with respect to the payment
of all dividends and distribution of assets in the event of liquidation or
dissolution of the Company, and may have other preferences.
Determination to be Made by the Board. The determinations for each series
of Preferred Stock which would be made by the Board of Directors of the Company
include (1) the number of shares to constitute such series, (2) the dividend
rate or rates (or the manner of determining the same) on the shares of such
series, (3) whether dividends shall be cumulative, (4) whether the shares of the
series shall be redeemable and the terms thereof, (5) whether the shares of the
series shall be convertible into other securities of the Company, including the
Common Stock, and the terms and conditions thereof, (6) the special or relative
rights of holders of shares of the series in the event of liquidation,
distribution or sale of assets, dissolution or winding-up of the Company, (7)
the terms of voting rights, if any, of shares of the series, (8) the title or
designation of the series and (9) such other rights and privileges and any
qualifications, limitations or restrictions of such rights or privileges of such
series as may be permitted by applicable law. As noted above, before any series
would be issued, a certificate setting forth the terms thereof would be
authorized by the Board of Directors and filed pursuant to the MBCL but no
further stockholder action would be required for the issuance of such authorized
shares.
SELLING STOCKHOLDER
<TABLE>
The following table sets forth certain information provided to the Company
by the person offering shares of Company Common Stock pursuant to this
Prospectus, including the number of shares of Company Common Stock beneficially
owned by such person as of May 18, 1994, the number of shares of Company Common
Stock offered for the account of such person pursuant to this Prospectus and the
number of shares of Company Common Stock to be owned by such person after
completion of the offering. The Selling Stockholder acquired the Common Stock
being offered pursuant to this Prospectus in a transaction not involving the
public offering of Common Stock.
<CAPTION>
SHARES TO BE
SHARES SOLD PURSUANT SHARES TO BE
BENEFICIALLY TO THIS OWNED AFTER
NAME AND ADDRESS OF SELLING STOCKHOLDER OWNED PROSPECTUS THE OFFERING
--------------------------------------- ------------ ------------------ -----------
<S> <C> <C> <C>
Kidder, Peabody Group, Inc............................... 500,000 500,000 --
10 Hanover Square
New York, NY 10005
</TABLE>
All expenses incurred in connection with the offering will be borne by the
Company except brokerage commissions and discounts of underwriters, dealers or
agents, if any, and counsel fees of counsel to the Selling Stockholder, if any,
which will be borne by the Selling Stockholder. The Company has agreed to
indemnify the Selling Stockholder (and any underwriter it may utilize) against
certain liabilities arising out of this offering, including liabilities under
the Securities Act. The Shares were purchased by the Selling Stockholder from
the Company for cash pursuant to a Purchase Agreement between the Selling
Stockholder and the Company dated as of June 1, 1993. Affiliates of the Selling
Stockholder have performed various investment banking services for the Company
in the past and may do so again in the future. Except as aforesaid and as set
forth in "Use of Proceeds," the Selling Stockholder has not had any position,
office, or other material relationship with the Company or any of its
predecessors or affiliates.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from this offering. The
Shares may be sold from time to time to purchasers directly by the Selling
Stockholder, through its subsidiary, which is a broker-dealer registered with
the Securities and Exchange Commission under Section 15 of the Exchange Act, as
amended,
20
<PAGE> 22
or by means of ordinary brokers' transactions on the NASDAQ National Market
System or on any securities exchange on which the Shares may be listed.
Alternatively, the Selling Stockholder may from time to time offer the Shares
through other dealers or agents, who may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholder and/or the
purchasers of Shares for whom they may act as agent.
The Shares may be sold from time to time in one or more transactions at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices at the time of sale or at negotiated prices. Such
prices will be determined by the Selling Stockholder or by agreement between the
Selling Stockholder and such dealers or purchasers. If a dealer other than the
Selling Stockholder subsidiary is utilized in the sale of the Shares the Selling
Stockholder will sell the Shares to the dealer as principal. The dealer may then
resell the Shares to the public at varying prices to be determined by the dealer
at the time of sale. The Selling Stockholder's subsidiary, in the ordinary
course of its business, makes a market in the Common Stock and may continue to
do so during the period that the Shares are sold hereunder. As a result, from
time to time, the subsidiary may own, in the aggregate, a significant amount of
Common Stock.
USE OF PROCEEDS
The Company will not receive any of the proceeds of the offering. The
Company has been required to pay the Selling Stockholder a monthly fee for each
month (or fraction of a month) commencing December 2, 1993 during which the
Registration Statement of which this Prospectus is a part was not effective. The
aggregate fees paid by the Company to the Selling Stockholder pursuant to this
requirement, through the date of this Prospectus, have been approximately
$80,700.
EXPERTS
The consolidated financial statements incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen & Co., independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
LEGAL OPINION
The validity of the issuance of the Common Stock offered hereby on behalf
of the Selling Stockholder has been passed upon by Eric R. Fischer, Esq.,
General Counsel of the Company.
21
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
The expenses to be incurred by the Company in connection with the
registration of the securities being offered hereby are estimated as follows
(the Selling Stockholder will not bear any portion of such expenses):
<S> <C>
SEC Registration Fee..................................................... $ 2,145.00
Legal Fees and Disbursements............................................. 30,000.00
Accounting Fees.......................................................... 50,000.00
Miscellaneous............................................................ 4,855.00
----------
TOTAL.......................................................... $87,000.00
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 67 of Chapter 156B of the Massachusetts General Laws empowers a
corporation to indemnify any director, officer, employee or other agent of the
corporation to whatever extent specified in or authorized by its articles of
organization (or a by-law or a vote adopted by stockholders).
Article 6 of the Restated Articles of Organization of the Registrant
provides indemnity to the Registrant's directors and officers to the fullest
extent legally permissible, against all liabilities, costs and expenses incurred
by the director or officer in connection with the defense or disposition or
otherwise in connection with any action or proceeding in which the director or
officer is involved or threatened by reason of being or having been a director
or officer, or by reason of any action taken or not taken in that capacity,
unless the director or officer shall have been finally adjudicated by a court of
competent jurisdiction not to have acted in good faith in the reasonable belief
that his or her action was in the best interests of the Registrant. Article 6
also mandates the advancement of expenses, including counsel fees, by the
Registrant to any person defending such an action or proceeding, upon receipt of
an undertaking by the person to repay the advances if it shall ultimately be
determined that indemnification of such expenses is not authorized under the
foregoing standard. With respect to matters disposed of by settlement,
indemnification is permitted only if the settlement is approved as in the best
interests of the Registrant (a) by vote of a majority of disinterested directors
then in office (even though less than a quorum), (b) by any disinterested
person(s) to whom the question may be referred by a vote of a majority of such
disinterested directors, (c) by vote of the holders of the majority of the then
outstanding voting stock (excluding shares owned by any interested person) or
(d) by any disinterested person(s) to whom the question may be referred by vote
of the holders of a majority of such stock.
II-1
<PAGE> 24
ITEM 16. EXHIBITS
<TABLE>
The following exhibits are filed herewith or incorporated by reference
herein:
<CAPTION>
EXHIBIT REPORT OR REGISTRATION STATEMENT
NO. DESCRIPTION IN WHICH DOCUMENT IS CONTAINED
- -------- ----------- --------------------------------
<C> <S> <C>
4.1 Restated Articles of Organization of the Previously filed
Registrant as amended
4.2 By-laws of the Registrant as amended to Previously filed
date
4.3 Specimen of the Registrant's Common Stock Filed as Exhibit 4.1 to Registrant's
Certificate* Registration Statement No. 2-67787 on
Form S-1
5 Opinion of Eric R. Fischer, Esq., as to Previously filed
the validity of the Common Stock
23.1 Consent of Arthur Andersen & Co. Filed herewith
23.2 Consent of Eric R. Fischer, Esq. Contained in his opinion, previously
filed as Exhibit 5
24 Power of Attorney Contained on signature page hereof
<FN>
- ---------------
* Incorporated by reference.
</TABLE>
ITEM 17. UNDERTAKINGS
(A) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represents a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended (the "Securities Act"), each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(B) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d)
of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Exchange
Act that is incorporated by reference in the registration statement)
shall be deemed to be a new registration statement relating to the
securities
II-2
<PAGE> 25
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement (Reg. No. 33-52821) to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Boston, Massachusetts on
May 26, 1994.
UST CORP.
/s/ NEAL F. FINNEGAN
By: _______________________________
Neal F. Finnegan
Chief Executive Officer
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons on
May 26, 1994 in the capacities indicated.
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ NEAL F. FINNEGAN Chief Executive Officer and Director
- --------------------------------------------- (principal executive officer)
Neal F. Finnegan
WILLIAM C. BROOKS*
- --------------------------------------------- Senior Vice President and Treasurer
William C. Brooks (principal financial and accounting officer)
JAMES M. BREINER*
- --------------------------------------------- Director
James M. Breiner
DOMENIC COLASACCO*
- --------------------------------------------- Director
Domenic Colasacco
ROBERT L. CULVER*
- --------------------------------------------- Director
Robert L. Culver
WALTER A. GULESERIAN*
- --------------------------------------------- Director
Walter A. Guleserian
- --------------------------------------------- Director
Wallace M. Haselton
FRANCIS X. MESSINA*
- --------------------------------------------- Director
Francis X. Messina
</TABLE>
II-4
<PAGE> 27
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
GERALD M. RIDGE*
- --------------------------------------------- Director
Gerald M. Ridge
WILLIAM SCHWARTZ*
- --------------------------------------------- Director
William Schwartz
SAMUEL B. SHELDON*
- --------------------------------------------- Director
Samuel B. Sheldon
JAMES V. SIDELL*
- --------------------------------------------- Director
James V. Sidell
PAUL M. SISKIND*
- --------------------------------------------- Director
Paul M. Siskind
PAUL D. SLATER*
- --------------------------------------------- Director
Paul D. Slater
MICHAEL J. VERROCHI*
- --------------------------------------------- Director
Michael J. Verrochi
/s/ ERIC R. FISCHER
*By: ________________________________________
(Eric R. Fischer,
Attorney-in-fact)
</TABLE>
II-5
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated January 31,
1994, included in UST Corp.'s Form 10-K for the year ended December 31, 1993,
and to all references to our firm included in this registration statement.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts
May 24, 1994
