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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE #0-9623
UST CORP.
(Exact name of registrant as specified in its charter)
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MASSACHUSETTS 04-2436093
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
40 COURT STREET, 02108
BOSTON, MASSACHUSETTS (Zip Code)
(Address of principal executive offices)
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(617) 726-7000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.625
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by Reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The number of shares of common stock held by nonaffiliates of the
registrant as of March 10, 1995 was 15,081,592 for an aggregate market value of
$162,127,114.
At March 10, 1995, there were issued and outstanding 17,635,425 shares of
common stock, par value $0.625 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement for the 1995 Annual Meeting
are incorporated by reference in Items 10, 11, 12 and 13 of Part III.
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FORM 10-K
TABLE OF CONTENTS
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PAGE
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PART I
Item 1 Business..................................................................... 1
Item 2 Properties................................................................... 9
Item 3 Legal Proceedings............................................................ 10
Item 4 Submission of Matters to a Vote of Security Holders.......................... 10
PART II
Item 5 Market for the Registrant's Common Stock and Related Stockholder Matters..... 11
Item 6 Selected Financial Data...................................................... 12
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition at December 31, 1994..................................... 13
Results of Operations........................................................ 24
Item 8 Financial Statements and Supplementary Material.............................. 30
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................................ 55
PART III
Item 10 Directors and Executive Officers of the Registrant........................... 55
Item 11 Executive Compensation....................................................... 57
Item 12 Security Ownership of Certain Beneficial Owners and Management............... 57
Item 13 Certain Relationships and Related Transactions............................... 57
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.............. 57
Signatures................................................................... 61
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PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION OF BUSINESS
UST Corp. (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
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, indirectly through its banking subsidiaries, all of the
outstanding stock of three active nonbanking subsidiaries, all Massachusetts
corporations: UST Leasing Corporation, UST Data Services Corp. and UST Capital
Corp.
The Company engages in one line of business, that of providing financial
services through its banking and nonbanking subsidiaries. A broad range of
financial services is provided principally to individuals and small- and
medium-sized companies in New England including those located in low- and
moderate-income neighborhoods. In addition, an important component of the
Company's financial services is the provision of trust and money management
services to professionals, corporate executives, nonprofit 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, 1994, the Company's total
assets were approximately $1.8 billion and USTrust, the lead bank, had over $1.7
billion or 94% of the Company's consolidated assets.
THE SUBSIDIARY BANKS
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, venture capital and other fee generating businesses. Two of the
Company's banking subsidiaries are located in Massachusetts and one is located
in Connecticut.
RECENT DEVELOPMENTS
Recent Operating History and Asset Quality Summary
The Company reported net income of $4.75 million, or $0.27 per share for
1994, as compared with a net loss of $20.1 million, or $1.31 per share in 1993.
Non-performing assets at December 31, 1994, consisting of nonaccrual loans,
restructured loans, accruing loans greater than 90 days past due and other real
estate owned, were $84.9 million, down from a level of $110.8 million at
December 31, 1993. Loans measured as substandard by the Company's internal risk
rating system, also declined during the year from a level of $255 million at
December 31, 1993 to $115 million at December 31, 1994. Under the Company's
definition, substandard loans 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 loan so classified. See pages 20 and 24 in Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Bank Regulatory Agreements and Orders
In February 1992, USTC and USTrust entered into separate Consent Agreements
and Orders with the FDIC and the Massachusetts Commissioner. The Company also
entered into a written agreement with the Federal Reserve Bank of Boston (the
"FRB-Boston") and the Massachusetts Commissioner in August 1992. 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 (the "Connecticut Commissioner"), which agreement was
amended in August 1992, November 1993 and July
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1994. (The foregoing are hereinafter collectively referred to as the "Regulatory
Agreements."). In February 1994, the FDIC and the Massachusetts Commissioner
terminated and lifted the Consent Agreement and Order with USTC.
The remaining Regulatory Agreements require that the Company, USTrust and
UST/Conn refrain from paying dividends without prior regulatory consent and the
Company has not paid a cash dividend to its stockholders since July 1991.
Despite the termination of its Regulatory Agreement, USTC has agreed to continue
to request regulatory consent prior to the payment of dividends. The Regulatory
Agreements further require USTrust and UST/Conn to maintain Tier 1 leverage
capital ratios at or in excess of 6%. Each of the Company's subsidiary banks is
in compliance with its respective capital requirements. As provided in the
Regulatory Agreements, the Company, USTrust and UST/Conn have reduced levels of
nonperforming assets and have implemented written plans and policies concerning,
among other matters credit administration, loan review and intercompany
transactions. USTrust and UST/Conn have also revised and expanded their
investment and funds management policies as required by the Regulatory
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 updated strategic plans. 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" on page 18.
In addition to the foregoing, in 1994, UST/Conn entered into an informal
Memorandum of Understanding with the FDIC under the significant terms of which
UST/Conn undertook to: increase the level of Board monitoring of UST/Conn's
Community Reinvestment Act ("CRA") activities and lending data; develop and
implement an improved CRA marketing program; and consider more effective
utilization of available government lending programs and certain other matters.
Asset Management Employment Agreements
As of January 1, 1995, the Company and USTC, subject to regulatory
approval, entered into Employment Agreements with five key executives in the
Asset Management Division of USTC. These Employment Agreements are designed: (i)
to induce those key executives to continue in the employ of USTC and to accept
certain non-competition agreements; (ii) to raise the share of Asset Management
Division revenues retained by Management of the Division; (iii) to provide
assurances to those key executives that they will be allowed to continue to
manage the Division with the degree of independence they currently enjoy; and
(iv) to provide strong economic incentives for those executives to increase the
Division's aggregate revenues. Although the foregoing Employment Agreements were
entered into as of January 1, 1995, the revised revenue sharing arrangements
were effective as of July 1, 1994 and were reflected in the previously reported
third and fourth quarter financial results of the Company. Each of the
Employment Agreements provide for two and one-half year original terms
commencing January 1, 1995 and (unless terminated by the employee by giving the
Company and USTC six months prior notice) successive six month renewal terms
thereafter. In the event, however, that a Triggering Event or change in
ownership of USTC or the Company (as defined in the Employment Agreements)
occurs during the original term or a renewal term, a new, approximately
three-year term will be triggered and the key employee will receive in exchange
for an extension of his or her employment period together with the related
noncompetition agreements, a Formula Payment, as defined in the Employment
Agreement, which will be based upon the Asset Management Division's revenues
during the year preceding the Triggering Event. For a further discussion of the
financial impact of these new compensation arrangements, see pages 26 and 27 in
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
BUSINESS SERVICES
USTrust and UST/Conn provide commercial banking services, including
deposit, investment, cash management, payroll, wire transfer, leasing and
lending services throughout New England. Commercial and industrial lending takes
the form primarily of direct loans and includes lines of credit, revolving
credits, domestic and foreign letters of credit, term loans, mortgage loans,
receivable, inventory and equipment loans
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and other specialized lending services. Furthermore, the Company provides
additional services to small business customers through utilization of
government sponsored and assisted loan programs and through the Company's
Minority Enterprise loan program. In 1994, USTrust was certified by the SBA as a
"Small Business Association Lender". USTrust also provides merchant credit card
services. USTC provides deposit services and other banking services, but focuses
its activities on money management, venture capital and other fee generating
services. Through loan participations, each bank is able to provide credit to
businesses in its area up to the limit available to the combined banks. At
December 31, 1994, the combined lending limit to a single borrower of the
subsidiary banks was approximately $29 million.
CONSUMER SERVICES
Consumer services are provided by USTrust and UST/Conn to customers in
their respective areas. These services include savings and checking accounts,
NOW and money market accounts, consumer loans, night depositories, credit cards
(through a private label arrangement), safe deposit box facilities and
travelers' checks. In 1994 the Company repriced and added further enhancements
to its Choice Checking retail account product, which combines a relatively
modest fee structure with ancillary travel, insurance and other "lifestyle"
benefits. The Company in 1994 also began offering a basic savings account
service to accompany its basic checking account service, both of which are
designed to serve the needs of individual customers of moderate means. Consumer
loans include residential first mortgage and home equity loans and loans to
finance education costs as well as open-ended credit via cash reserve
facilities. Automobile loans reached a volume of approximately $94 million as of
December 31, 1994. In 1994, the Company's Affordable Mortgage Program, designed
to provide certain customers of USTrust and UST/Conn who may not qualify for
traditional mortgage financing with an alternate means of financing or
refinancing a residence, saw increased volume. The Company's banking
subsidiaries, which currently have an aggregate of 33 banking offices, maintain
an automated teller machine system which through membership in the Cirrus and
InfiNet Payment Services, Inc. networks provides the Company's customers with
access to their accounts at locations throughout the United States. Most of the
Company's ATM machines provide information to customers in three languages,
English, Spanish and Portuguese. The Company provides a broad range of services
in connection with its consumer automobile lending program. The Company's
banking subsidiaries offer an integrated Preferred Banking Services which
combines a wide range of the Company's retail banking products.
INVESTMENT SERVICES
The Investment Group located at USTrust and UST/Conn was formed in May
1994. The Investment Group, through Essex National Securities, Inc., an
unaffiliated, licensed broker-dealer, offers mutual funds (whose investments are
managed by nonaffiliated third parties), treasury bills, notes, corporate bonds,
state, federal and municipal bonds and discount brokerage services to the
customers of USTrust and UST/Conn.
SPECIALIZED SERVICES FOR INDIVIDUALS
The Company provides services to meet the financial needs of individuals,
such as self-employed professionals, corporate executives and entrepreneurs. The
Company's services include deposit accounts, specialized credit facilities, an
account management system for escrow funds, consumer banking and other personal
financial products.
REAL ESTATE SERVICES
USTrust and UST/Conn provide a broad range of industrial and commercial
real estate lending services, residential mortgage banking services and other
related financial services.
ASSET AND MONEY MANAGEMENT AND TRUST SERVICES
Asset and money management, custodial and trust services are provided by
USTC. In addition, USTC provides services as executor, administrator and trustee
of estates and acts, under the terms of agreements, in various capacities such
as escrow agent, bond trustee and trustee and agent of pension, profitsharing
and other employee benefit trusts. At December 31, 1994, the total assets under
management of USTC were
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approximately $3.1 billion. See "Recent Developments -- Asset Management
Employment Agreements", above.
SECURITIES PORTFOLIOS MAINTAINED BY THE COMPANY
The subsidiary banks maintain securities portfolios consisting primarily of
U.S. Treasury, U.S. Government Agency, corporate and municipal securities.
Essentially all of the Company's securities are deemed "available-for-sale"
which enhances the liquidity position of the Company and allows for flexibility
in management of interest rate risk. USTrust's securities portfolio also
includes certain other equity investments as allowed within limits prescribed by
Massachusetts law. Such investments currently include, among others, equity
interests in the Massachusetts Housing Investment Corporation's Limited
Partnership Equity Fund for Affordable Housing, and in the Massachusetts
Minority Enterprise Corporation. The Treasury Division of the Company provides
securities portfolio advisory services to the Company's affiliated banks.
PRINCIPAL NONBANKING SUBSIDIARIES
UST Leasing Corporation, a subsidiary of USTrust organized in 1987,
provides a broad range of equipment leasing services to major corporations
headquartered throughout the United States. In 1994, UST Leasing Corporation
developed a line of leasing products designed to meet the needs of the Company's
small business customers and other business entities with similar needs. As of
December 31, 1994, UST Leasing Corporation's total assets were approximately
$26.8 million.
UST Data Services Corp., organized in 1981 and a subsidiary of USTrust,
provides a full range of electronic data processing, deposit and other
operations services to the Company and its affiliates.
UST Capital Corp., organized in 1961 and acquired by the Company in 1969,
is a subsidiary of USTC and is a licensed Small Business Investment Company. It
specializes in equity and longterm debt financing for growth-oriented companies.
COMPETITIVE CONDITIONS
The Company's banking and nonbanking subsidiaries face substantial
competition throughout Massachusetts and Connecticut. This competition is
provided by commercial banks, savings banks, credit unions, consumer finance
companies, insurance companies, "nonbank 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 since
1983 as well as by the September 1994 enactment of the Riegle-Neal Interstate
Banking and Branching Act (discussed under "Supervision and Regulation of the
Company and its Subsidiaries" below). During the past several years, the
closing by regulators of a number of banks and bank holding companies in
Eastern Massachusetts and Connecticut followed, in general, by acquisitions of
small- and medium-sized banks and bank holding companies by the largest New
England bank holding companies, as well as recently somewhat improved economic
conditions within the region have resulted in fewer but financially stronger
competitors in the local markets served by the Company's banking subsidiaries.
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 "BHC Act"), 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. Since
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1992, the Company and its banking subsidiaries have been operating under
regulatory agreements and orders with state and federal bank regulatory
authorities. In February 1994, the order under which USTC was operating was
lifted and terminated. See "Recent Developments-Bank Regulatory Agreements and
Orders" above.
GENERAL SUPERVISION AND REGULATION
The Company, as a bank holding company under 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 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 periodic inspections 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 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 the Company or UST/Conn, or is
inconsistent with sound banking principles or the provisions of the banking laws
of Connecticut.
The location of nonbank 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 nonbanking activity, to own and operate savings
associations without geographical restrictions. Furthermore, in September, 1994,
the Riegle-Neal Interstate Banking and Branching Act of 1994 (the "Interstate
Banking Act") was enacted. The Interstate Banking Act's provisions, among other
things: (i) permit bank holding companies, under certain circumstances, to
acquire control of banks in any state beginning September 28, 1995, subject to
(a) specified maximum national and state deposit concentration limits; (b) any
applicable state law provisions requiring that the acquired bank has to have
been in existence for a specified period of up to 5 years; (c) any applicable
nondiscriminatory state provisions that make an acquisition of a bank contingent
upon a requirement to hold a portion of such bank's assets available for call by
a state sponsored housing entity; and (d) applicable anti-trust laws; (ii)
authorize interstate mergers by banks in different states, including branching
through bank mergers, beginning June 1, 1997, subject to the provisions noted in
(i) and to any state laws that opt in as of an earlier date or opt out of the
provision entirely; (iii) authorize states to enact legislation permitting
interstate de novo branching; and (iv) provide for parity of treatment for
foreign bank branch activities. Proposed legislation has been filed in each of
Massachusetts and
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Connecticut which, if enacted, would cause those jurisdictions to "opt-in" prior
to June 1, 1997. The full impact of the Interstate Banking Act will not be clear
until the state legislatures have voted and the banking regulatory agencies have
adopted final regulations.
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 nonbanking affiliates (collectively with the Company, the
"Affiliates"), (ii) the purchase of assets from Affiliates, (iii) the issuance
of a guarantee or acceptance of a 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 pursuant to regulations issued under the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). In
early 1995, the FDIC proposed that deposit premiums be reduced substantially,
except for banks with the most unfavorable risk profiles. It is too early to
determine whether this proposal will be implemented or what effect it will have
on the Company's earnings.
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, and, in addition, its investment in its
other Subsidiary Bank or Subsidiary Banks would be at risk.
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 agreement, order or capital
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
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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 of less than 6 percent. A
critically undercapitalized institution has a tier 1 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 it is 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 acceptable 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".
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<PAGE> 10
Additional 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 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 "nontraditional
activities", and (2) rules addressing various "safety and soundness" issues,
including operations and managerial standards, standards for asset quality,
earnings and compensation standards.
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 "needs improvement". UST/Conn in 1994 entered into an informal Memorandum of
Understanding concerning CRA matters with the FDIC as described under "Recent
Developments -- Bank Regulatory Agreements and Orders" above. 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 continued to examine USTC for CRA compliance, and currently rates USTC
"satisfactory".
On September 23, 1994, the federal Riegle Community Development and
Regulatory Improvement Act of 1994 (the "Community Development Act") was
enacted. The Community Development Act establishes financial and other
assistance for entities involved primarily in community development activities.
The Community Development Act's provisions also make changes in a number of
areas including, among others: (i) increasing restrictions on some types of high
interest loans; (ii) improving small business access to capital; (iii) requiring
federal banking agencies to, among other things, coordinate examinations and
establish uniform regulations and guidelines where appropriate; (iv) simplifying
and expediting the processing and approvals for certain applications; (v)
expanding the exemptions available to a holding company's subsidiary banks with
respect to FDICIA's audit requirements; (vi) adding flexibility to FDICIA's
safety and soundness standards by, among other things, permitting their issuance
as guidelines and allowing banking agencies more discretion in handling
noncompliance; (vii) amending certain requirements on insider loans; (viii)
modifying local residency requirements for national bank directors; (ix)
limiting the applicability of certain real estate settlement procedures; and (x)
extending some management interlocks exemptions. It is anticipated that the
Community Development Act will reduce slightly certain regulatory burdens on
financial institutions, including the Company's subsidiaries.
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 proposals related to
expansion of bank powers and increased consumer compliance disclosure
requirements. It is impossible to predict whether any of the current proposals
will be adopted and the impact of such adoption on the business of the Company
or its subsidiaries.
8
<PAGE> 11
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.
GOVERNMENTAL POLICIES, ECONOMIC CONDITIONS AND CREDIT RISK CONCENTRATION
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
nonmember 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.
During the period from 1990 through 1993, the Company's primary loan
market, the New England region, suffered from a weak economic environment. The
economic climate contributed to a decline in real estate values and adversely
affected the net worth of certain borrowing customers of the Company's
subsidiary banks and the Company's collateral position with respect to certain
loans. The New England regional economy improved somewhat in 1994, which aided
the Company's loan workout efforts in 1994. The New England region, however,
still lags behind the economic growth experienced in the other regions of the
United States. Most of the Company's loans outstanding are from borrowers
located in 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 1994, the Company's exposure to credit risk from
borrowers who had real estate as their primary collateral support, included $426
million of loans. In addition to the foregoing, during the second half of 1994
and early 1995 prevailing interest rates rose substantially. The current
increase and further increases, if any, in the Base Lending Rate used by the
Company's subsidiary banks may have an adverse effect upon the ability of some
borrowers to repay their loans. See "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" below.
GENERAL
No significant portion of the loans or deposits of any of the Company's
banking subsidiaries results from one or several accounts, the loss of which
would materially affect its business. The Company does not experience
significant seasonal fluctuations in its business.
EMPLOYEES
As of December 31, 1994, the Company and its subsidiaries employed
approximately 870 full-time plus part-time people.
ITEM 2. PROPERTIES
USTrust owns a twelve-story brick and steel building constructed in 1915
and located at Government Center, 30-40 Court Street, Boston, Massachusetts. The
banking premises of USTrust, USTC and the offices of the Company and all of its
nonbanking subsidiaries utilize 99.9% of the 89,014 square feet in the building
and the remaining space is leased as offices to one tenant.
The Company currently leases a three-story brick office building of
approximately 37,900 square feet as well as 29,003 square feet in a
recently-constructed adjacent office tower at 141 Portland Street, Cambridge,
Massachusetts, all of which is used by USTrust and UST Data Services Corp.
USTrust also leases approximately 26,080 square feet of space at 25-55 Court
Street, Boston, which is used primarily to house staff
9
<PAGE> 12
support services. In 1991, USTC sold the 25-55 Court Street, Boston, building to
a third party, unaffiliated with the Company.
USTrust owns six branch offices in Boston, Milton Village, Norwood,
Randolph, Stoughton and Swampscott, Massachusetts, all of which were acquired by
the Company in 1991 from the Resolution Trust Corporation as part of the
acquisition and assumption of certain assets, deposits and branches of Home
Owners Savings Bank F.S.B. USTrust also owns four branch offices in Canton,
Gloucester, Milton, and Natick, Massachusetts. UST/Conn owns one branch office
in Huntington, Connecticut. UST/Conn also owns a former branch building in
Shelton, Connecticut, which it expects to sell to a non-affiliated third party
in 1995. The remaining branch offices of the Company occupy leased premises.
The 1995 annual leasehold commitment for all premises leased by the
Company's subsidiaries totals approximately $3,955,000, not including expenses
related to tax or maintenance escalation provisions. See Note 14 to the
Company's Consolidated Financial Statements.
ITEM 3. 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 financial condition or results of operations of the
Company and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
--NONE--
10
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The common stock of the Company is traded over the counter and its price is
quoted on the NASDAQ National Market System. During the period January 1, 1993,
to December 31, 1994, the range of bid prices was as follows:
<TABLE>
<CAPTION>
1994 1993
-------------------------- --------------------------
LOWEST BID HIGHEST BID LOWEST BID HIGHEST BID
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
1st quarter......................... 10 1/2 13 1/2 8 3/4 12 1/2
2nd quarter......................... 12 5/8 14 3/8 7 3/8 9 1/2
3rd quarter......................... 11 1/4 13 1/2 7 1/2 10 7/8
4th quarter......................... 8 3/4 11 3/4 10 1/4 12
</TABLE>
Such over-the-counter market quotations reflect inter-dealer prices,
without retail markup, markdown or commission and may not represent actual
transactions.
The number of holders of record of common stock of the Company was 2,059 at
January 31,1995.
There were no dividends declared during 1994 and 1993.
Future dividends will depend upon the financial condition and earnings of
the Company and its subsidiaries, their need for funds and other factors,
including applicable government regulations and regulatory consent. See "Recent
Developments -- Bank Regulatory Agreements and Orders" in Part 1, Item 1 above,
and the discussion of capital in Management's Discussion and Analysis of
Financial Condition and Results of Operations below.
In connection with the $20 million senior debt private placement
transaction of August 1986 of which $8 million currently remains outstanding
(see Note 8 to the Notes to Consolidated Financial Statements of the Company),
the Company agreed not to make dividend payments in excess of 60% of cumulative
net earnings since December 31, 1985 plus $7 million. The Company does not
expect that this provision will adversely affect its ability to pay future
dividends which it deems appropriate.
11
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
UST CORP.
CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Earnings Data:
Interest income............... $ 132,312 $ 140,628 $ 157,024 $ 221,493 $ 272,949
Interest expense.............. 40,213 47,944 68,970 134,640 181,850
---------- ---------- ---------- ---------- ----------
Net interest income........... 92,099 92,684 88,054 86,853 91,099
Provision for possible loan
losses...................... 23,125 64,258 41,893 53,712 43,663
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for possible loan
losses...................... 68,974 28,426 46,161 33,141 47,436
Noninterest income............ 30,334 36,723 42,359 43,636 25,575
Noninterest expense........... 92,511 97,510 96,172 89,322 72,812
---------- ---------- ---------- ---------- ----------
Income (loss) before income
taxes....................... 6,797 (32,361) (7,652) (12,545) 199
---------- ---------- ---------- ---------- ----------
Applicable income taxes
(benefit)................... 2,051 (12,261) (2,931) (4,598) (1,667)
---------- ---------- ---------- ---------- ----------
Net income (loss)............. $ 4,746 $ (20,100) $ (4,721) $ (7,947) $ 1,866
========= ========= ========= ========= =========
Per share data(2):
Net income (loss)............. $ .27 $ (1.31) $ (.34) $ (.58) $ .14
Cash dividends declared....... -- -- -- $ .15 $ .60
Weighted average common shares
outstanding...................... 17,780,032 15,362,251 13,984,190 13,793,617 13,564,369
Consolidated Average Balances(4):
Total assets.................. $1,881,429 $2,042,567 $2,270,874 $2,696,992 $2,864,771
Loans......................... 1,274,090 1,422,497 1,570,206 1,776,261 1,865,423
Deposits...................... 1,527,113 1,635,178 1,826,738 2,172,984 2,081,321
Funds borrowed(3)............. 192,115 244,775 268,519 350,367 560,936
Stockholders' investment...... 152,256 143,149 147,440 150,193 159,559
Consolidated Ratios:
Net income (loss) to average
total assets................ .25% (.98)% (.21)% (.30)% .07%
Net income (loss) to average
stockholders' investment.... 3.12 (14.04) (3.20) (5.29) 1.17
Average stockholders'
investment to average total
assets...................... 8.09 7.01 6.49 5.57 5.57
Net chargeoffs to average
loans....................... 1.86 3.64 2.67 2.23 1.41
Reserve for possible loan
losses to period end
loans....................... 4.89 4.67 3.36 2.99 1.90
Average earning assets to
average total assets........ 93.45 92.40 90.62 90.65 90.95
Not
Dividend Payout Ratio......... meaningful 428.57
---------------
<FN>
(1) This information should be read in connection with Management's Discussion
and Analysis of Financial Condition and Results of Operations on pages 13 to
29 of this Form 10-K with particular reference to Credit Quality and Reserve
for Possible Loan Losses.
(2) The Company declared a 5% stock dividend to holders of record on September
30, 1991. All prior share and per share data have been adjusted to reflect
this transaction.
(3) Includes federal funds purchased, repurchase agreements, short-term and
other borrowings.
(4) Average balances do not include the effect of fair value adjustments under
SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities".
</TABLE>
12
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION AT DECEMBER 31, 1994
INTRODUCTION
During 1994 the Company continued its emphasis on the resolution of problem
assets. As a result, the Company successfully reduced the level of substandard
loans, as measured by the Company's internal risk rating system, by over 50
percent from a level of $255 million at December 31, 1993 to $115 million at
December 31, 1994. See "Credit Quality and Reserve for Possible Loan Losses" on
page 20 of this Form 10-K for a further discussion.
During the period 1990 to 1993, the Company's primary loan market, the New
England region, suffered from a weak economic environment. The economic climate
contributed to a decline in real estate values and adversely affected the net
worth of certain borrowing customers of the Company's subsidiary banks and the
Company's collateral position with respect to certain loans. The New England
regional economy improved throughout 1994 which has aided loan workout efforts.
The region, however, still lags behind the economic growth experienced
nationally.
The local economic factors and the Company's efforts to reduce
nonperforming assets and substandard loans continued to influence the Company's
financial results for 1994; particularly with regard to the provision for
possible loan losses and the high level of expenses associated with foreclosed
assets and loan workout.
This discussion should be read in conjunction with the financial
statements, notes, and tables included elsewhere in this Form 10-K. Certain
amounts reported for prior periods have been reclassified to conform with the
1994 presentation.
ASSETS
Total assets at December 31, 1994 were $1.80 billion compared with $2.04
billion a year ago. The Company's loan portfolio decreased 5 percent, or $72.7
million, to $1.27 billion. The decrease reflects a combination of normal
amortization and increased competition for the small-to-middle market credits.
Another factor in the reduction of the loan portfolio was the outflow of problem
loans through collection, chargeoff or third-party refinancing. See "Credit
Quality and Reserve for Possible Loan Losses" herein.
Presently, the Company anticipates a modest growth in earning assets in the
coming year from a combination of business development efforts to expand the
commercial and retail loan portfolios moderated by the continued reduction of
existing problem assets. Funding for asset growth will be provided by deposit
growth achieved through more aggressive pricing and deposit product promotion.
13
<PAGE> 16
Loans
The following table presents the composition of the loan portfolio:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial and financial(1).......... $ 702,134 $ 757,638 $ 858,465 $ 870,134 $1,000,174
Real estate:
Construction....................... 13,109 35,295 50,427 71,264 107,600
Developer, investor and land(1).... 259,065 315,700 359,666 462,133 491,819
Consumer:
Residential mortgage loans......... 89,551 84,846 56,364 51,395 43,275
Home equity loans.................. 64,068 63,188 67,010 67,179 67,709
Indirect automobile installment.... 90,255 31,848 42,786 83,039 104,861
Other consumer..................... 21,964 23,944 26,914 40,026 45,474
Lease financing(2)................... 25,945 26,348 28,312 31,561 30,833
---------- ---------- ---------- ---------- ----------
Total loans................ 1,266,091 1,338,807 1,489,944 1,676,731 1,891,745
Less:
Reserve for possible loan losses... 61,945 62,547 50,126 50,100 36,008
---------- ---------- ---------- ---------- ----------
$1,204,146 $1,276,260 $1,439,818 $1,626,631 $1,855,737
========= ========= ========= ========= =========
---------------
<FN>
(1) Certain loans for which the principal source of repayment is not real estate
collateral have been classified as commercial and financial for the 1992
through 1994 presentations. For 1991 and prior years these loans were
included in the Real Estate category. Information is not readily available
to reclassify loans for these years.
(2) Lease financing receivables have been included in loans beginning in 1994.
Prior years have been reclassified.
</TABLE>
Indirect automobile installment loans represent loans purchased without
recourse from automobile dealers. Automobile loans made directly to consumers
are not significant and are included with other consumer loans.
As a result of a 1990 transaction with the Resolution Trust Corporation
("RTC") wherein the Company purchased certain assets and assumed certain deposit
liabilities of a failed savings and loan institution, Home Owners Federal
Savings Bank F.S.B., the Company had $513.6 million of loans held for sale at
December 31, 1990, and, therefore, not included in the above table. All of these
loans were repurchased by the RTC in 1991.
Loan Maturity Distribution
The following table reflects the maturity and interest sensitivity of
commercial and financial, and real estate loans, at December 31, 1994:
<TABLE>
<CAPTION>
AFTER 1 YEAR
1 YEAR OR LESS THROUGH 5 YEARS AFTER 5 YEARS TOTAL
-------------- --------------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial and financial................ $388,750 $ 245,973 $67,411 $ 702,134
Real estate:
Construction....................... 4,559 6,290 2,260 13,109
Developer, investor and land....... 71,113 160,186 27,766 259,065
-------------- --------------- ------------- ---------
$464,422 $ 412,449 $97,437 $ 974,308
========== =========== ========== ========
Interest sensitivity of above loans;
With predetermined interest
rates............................ $ 75,829 $ 120,852 $56,403 $ 253,084
With floating interest rates....... 388,593 291,597 41,034 721,224
-------------- --------------- ------------- ---------
$464,422 $ 412,449 $97,437 $ 974,308
========== =========== ========== ========
</TABLE>
The Company does not have an automatic rollover (renewal) policy for
maturing loans. Renewal requests are reviewed and approved in substantially the
same manner as applications by new customers for extensions
14
<PAGE> 17
of credit. Additionally, any renewal of a loan rated Substandard or lower in the
Company's risk rating profile, irrespective of size, requires Senior Lending
Management and Board of Directors approval.
Securities
Securities decreased $72.3 million since year-end 1993 to $401.6 million at
December 31, 1994, reflecting the maturity of short-term U. S. Treasury and
Agency securities. At December 31, 1994, securities were principally comprised
of mortgage-backed securities, U. S. Treasury and Agency securities, and
corporate notes.
On December 31, 1993, the Company adopted Statement of Financial Accounting
Standards No. 115 ("SFAS No. 115"), "Accounting for Certain Investments in Debt
and Equity Securities," issued by the Financial Accounting Standards Board. The
Statement addresses the accounting and reporting for debt and equity securities
that have readily determinable market values. According to SFAS No. 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. Refer to Note 1 to the Notes to Consolidated Financial
Statements of this Form 10-K for a further discussion on SFAS No. 115. At
December 31, 1994, the Company's portfolio consisted of $.1 million of
securities held-to-maturity and $401.5 million available-for-sale. At December
31, 1993, all securities were classified in the available-for-sale category. The
application of SFAS No. 115 resulted in a net decrease of $26.9 million to
stockholders' investment in 1994, representing the change from an unrealized
gain of $3.3 million after tax at December 31, 1993 to an unrealized loss of
$23.6 million after tax at December 31, 1994. In light of the size of the
unrealized loss and its current level of taxable income, the Company concluded
that full recognition of the deferred tax amount was not appropriate and as such
limited the amount of the recorded benefit to $5.4 million at December 31, 1994.
The decline in market value reflects the rapid increase in interest rates and
corresponding decline in market prices for bonds, which occurred throughout
1994.
The Company has a policy of purchasing securities primarily rated A or
better by Moody's Investors Services and in U.S. Government securities. Due to
the Tax Reform Act of 1986, and the resulting reduction in their tax-exempt
nature, the Company decided to forego major new investments in its tax-exempt
portfolio. The following table sets forth the book value of the securities owned
by the Company. Data presented for 1994 and 1993 includes securities
available-for-sale at fair value of $401.5 million and $473.9 million,
respectively. Data presented for 1992 includes both the investment portfolio and
securities held for sale.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Mortgage-backed securities..................................... $195,009 $263,435 $307,014
U.S. Treasury securities and securities of other
U.S. Government agencies and corporations.................... 142,414 129,703 74,225
Obligations of states and political subdivisions(1)............ 3,593 3,887 5,181
Other securities............................................... 60,558 76,884 90,345
-------- -------- --------
Total................................................ $401,574 $473,909 $476,765
======== ======== ========
---------------
<FN>
(1) Non-taxable
</TABLE>
15
<PAGE> 18
The following table includes securities available-for-sale with their
maturities at December 31, 1994, and the approximate weighted tax equivalent
yields (at the statutory federal tax rate of 34%). Mortgage-backed securities
are shown at or based on their final maturity but are expected to have shorter
average lives. Yields presented in this table have been computed using the
amortized cost of the securities.
<TABLE>
<CAPTION>
SECURITIES MATURING IN
-----------------------------------------------------------------------------------------------
ONE YEAR 10 YRS. OR MORE EQUITY
OR LESS 1-YR. THRU 5 5-YRS. THRU 10 SECURITIES TOTAL
-------------- --------------- -------------- --------------- -------------- --------
BALANCE YIELD BALANCE YIELD BALANCE YIELD BALANCE YIELD BALANCE YIELD BALANCE
------- ----- -------- ----- ------- ----- -------- ----- ------- ----- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale:
Mortgage-backed securities.... $25,967 7.47 % $169,042 6.47 % $195,009
US Treasury securities and
securities of other US
Government agencies and
corporations................ $17,547 3.90 % $104,183 4.80 % 20,684 5.48 % 142,414
Obligations of states and
political subdivisions...... 1,300 5.66 % 824 5.94 % 1,369 6.34 % 3,493
Other securities.............. 5,077 5.74 % 53,564 7.09 % 67 4.67 % 30 5.50 % $1,820 8.40 % 60,558
------- -------- ------- -------- ------- --------
Total................... $22,624 4.31 % $159,047 5.58 % $47,542 6.63 % $170,441 6.47 % $1,820 8.40 % $401,474
======= ======== ======= ======== ======= ========
Held-to-maturity:
Obligations of states and
political subdivisions........ 100 7.30 % 100
-------- --------
Total................... $ 100 $ 100
======== ========
</TABLE>
At December 31, 1994 the Company owned the following corporate notes, whose
aggregate fair value was in excess of 10% of stockholders' investment.
<TABLE>
<CAPTION>
AGGREGATE
MARKET VALUE
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Ford Motor Credit Corp.................................... $ 18,677
General Motors Acceptance Corp............................ 19,543
Sears, Roebuck Medium Term Notes.......................... 20,051
</TABLE>
These securities are unsecured corporate notes of investment grade. They
carry the normal credit risk associated with such instruments.
All securities carry interest rate risk. Additionally, mortgage-backed
securities carry prepayment risk. See Note 1 to the Notes to Consolidated
Financial Statements, "Summary of Significant Accounting Policies" on page 36 of
this Form 10-K for a discussion of prepayment risk.
LIQUIDITY AND FUNDING
Liquidity involves the Company's ability to raise or gain access to funds
in order to fulfill its existing and anticipated financial obligations. It may
be provided through the maturity or sale of an entity's assets, such as loans
and securities available-for-sale, liability sources such as increased deposits
and purchased or borrowed funds, and access to the capital markets. While the
Company's security portfolio is currently classified almost entirely as
available-for-sale, the Company has no present intention or need to sell any of
its securities or existing loan portfolio, other than a nominal volume of
fixed-rate residential mortgage loans sold to investors as they are originated.
At December 31, 1994, liquidity, which includes excess cash, excess funds
sold and unpledged securities, totaled approximately $259 million, or 14% of
total assets, a $51 million decrease from 1993.
The funds needed to support the Company's loan and securities portfolios
are provided through a combination of commercial and retail deposits and
short-term borrowings. Total deposits decreased $150 million, or 9%, to $1.5
billion since December 31, 1993. Approximately 97% of the decline occurred in
savings and time deposits. For most of 1994, rate-conscious investors utilized
mutual funds and other nonbank
16
<PAGE> 19
vehicles to obtain higher rates of return but began to take advantage of the
bank's competitive certificate of deposit rates by the end of the year.
As shown in the Consolidated Statements of Cash Flows, cash and cash
equivalents increased $2.9 million during 1994. Cash provided by operations
resulted largely from net interest income from loans and securities, less the
net difference of noninterest expense over noninterest income. Cash provided by
investing activities was due principally to the net decreases in short-term
investments, net decreases in loans through repayment, and to an excess of
proceeds from sales and maturities of securities over securities purchases. Cash
used for financing activities was primarily the result of decreases in both
demand deposits and certificates of deposit and a net decrease in short-term
borrowings.
At December 31, 1994, the parent company had $16 million in securities
available-for-sale. This balance reflects the investment of proceeds received
from the sale of 2.87 million shares of the Company's common stock to more than
sixty institutional investors in a European offering made under Regulation S of
the United States Securities and Exchange Commission on August 12, 1993. These
investments were reduced from $21 million to $16 million during 1994 as the
Company paid its third annual principal installment of $4 million and accrued
interest on its 8.5% Senior Notes.
For the year ended December 31, 1994, the Company received a total of $3
million in dividends from its asset management and trust subsidiary, United
States Trust Company ("USTC"). During the same period $4.9 million was
contributed to UST Bank/Connecticut ("UST/Conn") and $500 thousand was
contributed to USTrust by the Company to supplement their respective equity
capital accounts.
Deposits
The following table sets forth the remaining maturities of certificates of
deposit in the amount of $100 thousand or more at December 31, 1994:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
-------------------
<S> <C>
Less than three months.................................. $50,944
Three to six months..................................... 14,042
Six to twelve months.................................... 9,865
Over twelve months...................................... 4,522
-------
Total......................................... $79,373
==================
</TABLE>
Short-term Borrowings
The Company's short-term borrowings consist primarily of federal funds
purchased and securities sold under agreements to repurchase. These instruments
are generally overnight funds.
<TABLE>
<CAPTION>
DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
--------------------------- ----------------------------------------------------
WEIGHTED AVERAGE MAXIMUM AMOUNT AVERAGE AMOUNT WEIGHTED AVERAGE
BALANCE INTEREST RATE AT ANY MONTH END OUTSTANDING INTEREST RATE
-------- ---------------- ---------------- -------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Federal funds purchased:
1994............... $ 19,296 6.00% $ 35,061 $ 29,090 4.14%
1993............... 35,913 3.25 80,126 42,965 3.14
1992............... 48,984 3.13 78,519 61,607 3.58
Securities sold under agreements to repurchase:
1994............... $126,597 4.48% $155,709 $137,139 3.22%
1993............... 158,618 2.31 221,549 167,696 2.55
1992............... 132,167 2.34 228,282 174,383 2.93
</TABLE>
INTEREST RATE RISK
Volatility in interest rates requires the Company to manage interest rate
risk which arises from differences in the timing of repricing of assets and the
liabilities. Management monitors and adjusts the difference between
interest-sensitive assets and interest-sensitive liabilities ("GAP" position)
within various
17
<PAGE> 20
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 more liabilities repricing than assets it is liability sensitive
("negative GAP"). Within GAP limits established by the Board of Directors, 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 Company's policy is to limit its one-year
cumulative GAP position to 2.5 times equity, presently equal to approximately
18% of total assets. The Company manages its interest rate GAP primarily by
lengthening or shortening the maturity structure of the Company's securities
portfolio.
The Company's GAP presentation may not reflect the degrees to which
interest-earning assets and core deposit costs respond to changes in market
interest rates. The Company's rate-sensitive assets consist primarily of loans
tied to the prime rate. As interest rates rose during 1994, the prime rate and,
therefore, the Company's yield on earning assets increased faster than the rate
paid on interest-bearing liabilities.
The following table summarizes the Company's GAP position at December 31,
1994. The majority of loans are included in 0-30 days as they reprice in
response to changes in the interest rate environment. Interest-bearing deposits
are classified according to their expected interest rate sensitivity. Actual
sensitivity of these deposits is reviewed periodically and adjustments are made
in the Company's GAP analysis that management deems appropriate. Securities and
noninterest-bearing demand deposits are categorized according to their expected
lives based on published industry prepayment estimates in the case of securities
and current management estimates for demand deposits. Securities are evaluated
in conjunction with the Company's asset/liability management strategy and may be
purchased or sold in response to expected or actual changes in interest rates,
prepayment risk, loan growth and similar factors. The reserve for possible loan
losses is included in the "Over 1 Year" category of loans. At December 31, 1994,
the one-year cumulative GAP position was slightly positive at $50 million, or
approximately 3% of total assets.
During the fourth quarter of 1994, management reclassified certain deposit
liabilities from 0-30 days to periods greater than 30 days. The effect of this
reclassification was an increase in cumulative GAP and higher percentages of
total assets for all periods presented.
<TABLE>
<CAPTION>
INTEREST SENSITIVITY PERIODS
-------------------------------------------------------------
0-30 DAYS 31-90 DAYS 91-365 DAYS OVER 1 YEAR TOTAL
--------- ---------- ----------- ----------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Loans, net of reserve...................... $ 812 $ 23 $ 83 $ 286 $1,204
Excess funds and other..................... 10 10
Securities................................. 1 5 18 378 402
Other assets............................... 5 182 187
----- ---- ----- ----- ------
Total assets..................... $ 823 $ 28 $ 106 $ 846 $1,803
----- ---- ----- ----- ======
Interest-bearing deposits.................. $ 487 $ 59 $ 185 $ 388 $1,119
Borrowed funds............................. 159 10 169
Noninterest-bearing demand deposits........ 17 355 372
Other liabilities and Stockholders'
equity................................... 143 143
----- ---- ----- ----- ------
Total liabilities and equity..... $ 663 $ 59 $ 185 $ 896 $1,803
----- ---- ----- ----- ======
GAP for period............................. $ 160 $(31) $ (79) $ (50)
===== ---- ----- ----- ------
Cumulative GAP............................. $129 $ 50 $ 0
===== ===== =====
As a percent of total assets............... 8.87% 7.15% 2.77%
</TABLE>
CAPITAL
There are three capital requirements which banks and bank holding companies
must meet. Two requirements take into consideration risks inherent in assets for
both on-balance and off-balance sheet items on a risk weighted basis
("risk-based assets"). Risk weightings are as determined by banking regulators
for the industry as a whole. Under these requirements, the Company must meet
minimum Tier 1 and Total risk-based capital ratios (capital, as defined in the
regulations, divided by risk-based assets) of 4% and 8%,
18
<PAGE> 21
respectively. Tier 1 capital is essentially shareholders' investment, net of
intangible assets and Tier 2 capital is the allowable portion of the loan loss
reserve (as defined) and discounted subordinated debt. Total capital is the
combination of Tier 1 and Tier 2. The third requirement is a leverage capital
ratio, defined as Tier 1 capital divided by total average assets, net of
intangibles. All but the most highly-rated banks are required to maintain a
minimum of 4%. While the Company has not been notified of a specific requirement
above the minimum, two of the Company's banking subsidiaries are required under
regulatory agreements to maintain, and in fact have, over 6% Tier 1 leverage
capital. Those two banking subsidiaries comprise almost all of the consolidated
assets of the Company. See discussion below concerning capital requirements for
the Company and its banking subsidiaries resulting from regulatory agreements.
At December 31, 1994 and 1993, the Company's consolidated risk-based assets
were $1.52 billion and $1.64 billion, respectively. The capital ratios and
regulatory minimum requirements applicable to the Company were:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Tier 1 capital:
Actual........................................... $149.7 9.82% $141.7 8.68%
Minimum required................................. 61.0 4.00% 65.3 4.00%
Total (Tier 1 and Tier 2) capital:
Actual........................................... 169.5 11.45% 164.5 10.35%
Minimum required................................. 118.5 8.00% 130.6 8.00%
Tier 1 leverage capital:.............................. $149.7 8.27% $141.7 7.06%
</TABLE>
Capital ratios have been calculated consistent with regulatory policy which
excludes the impact of SFAS No. 115 and the recording of an unrealized gain/loss
on securities available-for-sale. However, as required, any net unrealized loss
on marketable equity securities has been deducted from Tier 1 capital.
Effective August 3, 1992, UST Corp. entered into a written agreement with
the FRB-Boston and the Massachusetts Commissioner which requires the Company to
maintain Tier 1, Total risk-based and Tier 1 leverage capital ratios which
conform to the Capital Adequacy Guidelines of the Board of Governors of the
Federal Reserve System, 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
consolidated ratios meet the required minimums.
Additionally, per this agreement, 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 in
agreements with their primary regulators have agreed to refrain from
transferring funds in the form of dividends to the Company without prior
regulatory approval. See "Recent Developments -- Bank Regulatory Agreements and
Orders," page 1. The FDIC and Massachusetts Commissioner terminated and lifted
the Consent Agreement and Order with USTC in February 1994; however, USTC has
agreed to continue to request regulatory consent prior to the payment of
dividends. As previously mentioned in this Form 10-K, regulatory approval was
obtained for dividends to the Company of $3 million from USTC and the Company's
capital contribution of $4.9 million to UST/Conn and $500 thousand to USTrust.
The Tier 1 leverage capital ratios and regulatory minimum requirements for
the Company's subsidiary banks at December 31, 1994 and 1993 were:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------------------------- -------------------------------------
AMOUNT PERCENT AMOUNT PERCENT
----------------- ----------------- ----------------- -----------------
MINIMUM MINIMUM MINIMUM MINIMUM
ACTUAL REQUIRED ACTUAL REQUIRED ACTUAL REQUIRED ACTUAL REQUIRED
------ -------- ------ -------- ------ -------- ------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
USTrust............... $129.2 $102.6 7.55 % 6.00% $122.7 $113.4 6.49 % 6.00%
USTC.................. 4.3 .7 39.46 % n/a 2.7 .7 23.75 % 6.00%
UST/Conn.............. 6.7 6.3 6.40 % 6.00% 7.2 7.0 6.21 % 6.00%
</TABLE>
19
<PAGE> 22
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. In February 1994, the FDIC
and 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, November 1993 and July 1994 and requires UST/Conn to
maintain a 6% Tier 1 leverage capital ratio.
Recent amendments to risk-based capital guidelines will affect the amount
of deferred tax assets that may be included in Tier 1 capital for risk-based and
leverage capital purposes. Under the new rule, which becomes effective April 1,
1995, deferred tax assets would be limited to the amount that an institution
expects to realize within one year, or 10% of Tier 1 capital, whichever is less.
The Company's consolidated Tier 1, Total risk-based capital and leverage capital
ratios at December 31, 1994 would be unaffected by this new regulation. The
revised regulation would have an insignificant effect on the Tier 1 leverage
capital ratios of USTrust and USTC. Earlier this year UST/Conn's FDIC and state
regulators indicated that the bank should be using the more stringent
calculation which the December 31, 1994 numbers above reflect.
The Company and each of its subsidiary banks are currently in compliance
with their respective capital requirements under these regulatory agreements.
CREDIT QUALITY AND RESERVE FOR POSSIBLE LOAN LOSSES
In 1993 a strategy was adopted which recognized that many troubled credit
situations will need to be handled in an expeditious manner 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. It would increase the up-front cost of the workouts, however. As a
result, the company recorded a $64.3 million provision for possible loan losses
in that year. Included in that amount was a special provision of $30 million
recorded in the second quarter of 1993. 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 to be
recorded during the remainder of 1993 on these and other credits as a result of
recent events or new facts.
In 1994 the Company continued with its strategy to reduce the level of
problem credits while maintaining its reserve for possible loan losses position.
Net chargeoffs for the year were $23.7 million which were almost entirely
matched by provisions to the loan loss reserve. As a result, the reserve for
possible loan losses decreased only slightly to $61.9 million and equaled 4.9%
of loans outstanding, 126% of nonaccrual loans and 73% of total nonperforming
assets compared with 4.7%, 127% and 56%, respectively, a year ago. Total
nonperforming assets were reduced $25.9 million to $84.9 million, primarily as a
result of a lower level of troubled debt restructurings.
Loans classified as Substandard, Doubtful or Loss, as determined by the
Company in its internal credit risk rating profile, were $115 million at
December 31, 1994 compared with $255 million a year ago, a decrease of $140
million. Loans classified as Substandard and Doubtful were $96 million and $19
million, respectively, at year-end 1994 and no loans were classified as Loss.
The level of loans in these categories and their total are an important factor
in the Company's analysis of the adequacy of its reserve for possible loan
losses. Under the Company's definition, Substandard loans 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 loan so classified.
Loans classified as Doubtful have all the weaknesses inherent in Substandard
loans with the added characteristic that the weaknesses make collection of 100
percent of the assets questionable and improbable.
As of year end 1994, approximately 70 percent of loans classified as
Substandard or Doubtful were collateralized with real estate, and the remainder
were collateralized with accounts receivable, inventory, equipment and other
business assets. Of the loans secured by real estate, approximately 55 percent
were collateralized by commercial real estate development, approximately 30
percent by owner-occupied commer-
20
<PAGE> 23
cial properties and approximately 10 percent by residential real estate. The
remaining loans were collateralized by real estate under construction and raw
land.
Nonperforming Assets
The following table displays the Company's total nonperforming assets and
measures performance regarding key indicators of asset quality:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1994 1993 1992 1991 1990
------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonaccruals:(1)
Commercial and financial................ $33,814 $ 25,703 $ 51,768 $ 42,221 $ 15,724
Real estate:
Construction.......................... 551 1,025 16,558 12,830 13,570
Developer, investor and land.......... 11,887 19,210 15,256 27,726 34,413
Consumer:
Residential........................... 2,281 2,558 986 2,807 2,039
Home equity loans..................... 656 190 1,240 2,625 1,147
Indirect automobile installment....... 134 40 271 945 1,402
Other consumer........................ 29 540 550 246 1,085
Lease financing.........................
------- -------- -------- -------- --------
Total nonaccrual........................... 49,352 49,266 86,629 89,400 69,380
Accruing loans 90 days or more past due.... 1,409 557 1,091 8,554 26,550
Other real estate owned (OREO), net(2)..... 18,407 19,468 43,154 51,511 30,524
Restructured loans(1)(3)................... 15,757 41,477 44,899 36,311 4,108
------- -------- -------- -------- --------
Total nonperforming assets................... $84,925 $110,768 $175,773 $185,776 $130,562
======= ======== ======== ======== ========
Reserve for possible loan losses............. $61,945 $ 62,547 $ 50,126 $ 50,100 $ 36,008
Net chargeoffs............................... $23,727 $ 51,837 $ 41,867 $ 39,620 $ 26,372
OREO reserve(4).............................. $ 3,187 $ 6,553 $ 750
Ratios:
Reserve to nonaccrual loans.................. 125.5% 127.0% 57.9% 56.0% 51.9%
Reserve to total of nonaccrual loans,
accruing loans 90 days or more past due
and restructured loans..................... 93.1% 68.5% 37.8% 37.3% 36.0%
Reserve to period-end loans.................. 4.9% 4.7% 3.4% 3.0% 1.9%
Nonaccrual loans to period-end loans......... 3.9% 3.7% 5.8% 5.3% 3.7%
Nonaccrual loans and accruing loans over 90
days past due to period-end loans.......... 4.0% 3.7% 5.9% 5.8% 5.1%
Nonperforming assets to period-end loans and
OREO....................................... 6.6% 8.2% 11.5% 10.7% 6.8%
Nonperforming assets to total assets......... 4.7% 5.4% 8.1% 7.9% 4.3%
Net chargeoffs to average loans.............. 1.9% 3.7% 2.7% 2.3% 1.4%
OREO reserve to OREO(4)...................... 14.8% 25.2% 1.7%
</TABLE>
---------------
(1) The amount of interest on December 31, 1994 nonaccrual and restructured
loans that would have been recorded had the loans been paying in accordance
with their original terms during 1994 was approximately $6,259,000. The
amount of interest income on these loans included in net income in 1994 was
approximately $3,188,000.
(2) Other real estate owned ("OREO") represents assets to which title to the
collateral has been taken through foreclosure or in-substance. Other real
estate owned is recorded at the lower of the recorded investment in the loan
or fair value minus estimated costs to sell ("net realizable value"). Prior
to 1992, other real estate owned was recorded at the lower of recorded
investment in the loan or fair value. Included in OREO are automobiles owned
which are vehicles repossessed for reason of nonpayment. The balance is
stated at the lower of the recorded investment in the loan or net realizable
value.
(3) Restructured loans are those where interest rates and/or principal
repayments have been restructured to defer or reduce payment as a result of
financial difficulties of the borrower.
(4) 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.
21
<PAGE> 24
At December 31, 1994, in addition to loans on nonaccrual, loans over 90
days and accruing, troubled debt restructurings and other real estate owned, $67
million of accruing commercial and real estate loans, of which, 99 percent were
current, have nonetheless been classified as Substandard in the Company's
internal risk rating profile. This compares with $206 million a year ago.
Also, at December 31, 1994 loans rated Special Mention in the Company's
internal risk rating profile amounted to $16 million, of which 96 percent were
current. This compares with $30 million a year ago. Special Mention loans, 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. There were no loans
classified Doubtful that were not disclosed in the above table.
Adverse economic conditions in the future could result in further
deterioration of the Company's loan portfolio and the value of its OREO
portfolio. Such conditions would also likely result in increases in
delinquencies, nonperforming assets, restructured loans, and OREO writedowns
which individually or collectively could have a material negative effect on
future earnings through reduced interest income, increased provisions for
possible loan losses, and higher costs to collect loans and maintain repossessed
collateral.
CREDIT QUALITY MONITORING
Credit quality within the commercial and commercial real estate loan
portfolios of each subsidiary is quantified by a corporate credit rating system
designed to parallel regulatory criteria and categories of loan risk. Lenders
monitor their loans to ensure appropriate rating assignments are made on a
timely basis. Risk ratings and overall loan quality are also assessed on a
regular basis by an independent Loan Review Department which reports to the
Company's Board of Directors and its Asset Quality Committee. Loan Review
personnel conduct ongoing portfolio trend analyses and individual credit reviews
to evaluate loan risk and compliance with corporate lending policies. Results
and recommendations from this process provide senior management and the Board of
Directors with independent information on loan portfolio condition.
Installment and credit card loan quality is evaluated on the basis of
delinquent data due to the large number of such loans and relatively small size
of individual credits. Historical trend analysis reports are reviewed on a
monthly basis by senior lending officers and the Company's Board of Directors.
All past due loans, nonaccrual loans, and troubled debt restructurings are
reviewed at least quarterly by Loan Review Department management and Senior
Credit Committee whose membership includes the Chief Executive Officer of the
Company and the most senior lending officers in the major lending and
credit-related divisions. Loans are placed on nonaccrual when there is doubt as
to the collectibility of interest or principal or if loans are 90 days or more
past due unless they are both well secured and in the process of collection. In
every case, a loan reaching 180 days past due is placed on nonaccrual.
Greater levels of Board and Management attention are being focused on asset
quality. In 1992 an Asset Quality Committee of the Company's Board of Directors
was established which monitors asset quality trends, reviews the loan loss
reserve analyses monthly and actively monitors the large credit exposures. In
1994 this committee began reporting to the Audit Committee. Also in 1992 a new
loan administration function, the Credit Risk Control Department, was assigned
the responsibility of ensuring compliance with the lending policies, procedures
and administrative guidelines of the commercial lending portfolio. The
Department head reports to the Chief Executive Officer. An appraisal review
function was established within the group to review third-party appraisals for
adherence to Federal requirements and to establish policies relating to
collateral appraisal.
In a further step to increase the level of control over the troubled loan
portfolio and in order to focus specialized expertise, a Workout Department was
established during 1992. Most nonaccrual and other troubled loans are handled by
this group or in the Commercial Real Estate Department which is under the
22
<PAGE> 25
direction of the Workout Department management thereby allowing Commercial Loan
officers to concentrate their efforts on developing new lending relationships.
In 1993 staffing was increased in both the Loan Review and the Credit Risk
Control Departments. Furthermore, a number of systems changes were implemented
in 1993 and 1994 to improve control over credit administration. Smaller
commercial loans were transferred to the Installment Lending Department where
they can be more efficiently monitored.
RESERVE FOR POSSIBLE LOAN LOSSES
The Company maintains a reserve for possible loan losses to absorb future
chargeoffs of loans and leases in the existing portfolio. The reserve is
increased when a loan loss provision is recorded in the income statement. When a
loan, or portion thereof, is considered uncollectible, it is charged against the
reserve. Recoveries on amounts previously charged-off are added to the reserve
when collected. Adequacy of the reserve for possible loan losses is determined
using a consistent, systematic methodology which analyzes the size and risk of
the loan and lease portfolio on a monthly basis. Factors in this analysis
include historical loss experience and asset quality, as reflected by
delinquency trends, nonaccrual and restructured loans and the Company's credit
risk rating profile. The Company's credit risk rating profile uses categories of
risk based on those currently utilized by its primary regulators. Accuracy of
assigned ratings is monitored by an ongoing evaluation by the Company's Loan
Review Department. 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 monthly 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.
No portion of the reserve is restricted to any loan or group of loans, and
the entire reserve is available to absorb future realized losses. Realized
losses and the timing thereof may vary from current estimates. An allocation of
the loan loss reserve and ratio of loans in each category to total loans at
December 31, 1990 through 1994 is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------------------------------
1994 1993 1992 1991
----------------------- ------------------------ ------------------------ ------------------------
LOANS AS LOANS AS LOANS AS LOANS AS
A PERCENT A PERCENT A PERCENT A PERCENT
ALLOCATION OF TOTAL ALLOCATION OF TOTAL ALLOCATION OF TOTAL ALLOCATION OF TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
---------- ---------- ----------- ---------- ----------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amount of loan loss
reserve:
Commercial and
financial............ $ 29,471 55.5% $36,874 56.6% $25,583 57.6% $23,625 51.7%
Real Estate:
Construction....... 515 1.0% 1,601 2.6% 1,399 3.4% 1,790 4.3%
Developer, investor
and land......... 8,256 20.5% 11,804 23.6% 8,220 24.1% 9,847 27.6%
Consumer(1)........... 6,028 21.0% 5,470 15.2% 4,762 13.0% 5,324 14.5%
Lease financing....... 130 2.0% 132 2.0% 142 1.9% 158 1.9%
Unallocated........... 17,545 6,666 10,020 9,356
-------- ------ ------- ------ ------- ------ ------- ------
Total.......... $ 61,945 100.0% $62,547 100.0% $50,126 100.0% $50,100 100.0%
======== ====== ======= ====== ======= ======= ======= =======
<CAPTION>
1990
------------------------
LOANS AS
A PERCENT
ALLOCATION OF TOTAL
AMOUNT LOANS
----------- ----------
<S> <C> <C>
Amount of loan loss
reserve:
Commercial and
financial............ $17,224 52.9%
Real Estate:
Construction....... 1,716 5.7%
Developer, investor
and land......... 6,567 26.0%
Consumer(1)........... 7,954 13.8%
Lease financing....... 154 1.6%
Unallocated........... 2,393
------- ------
Total.......... $36,008 100.0%
======= ======
---------------
<FN>
(1) Consumer loans include indirect automobile installment loans, residential
mortgages and home equity lines of credit, credit cards, and check credit
loans.
</TABLE>
23
<PAGE> 26
A summary of loan loss experience for the years ended December 31, 1990
through 1994 is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Reserve for loan losses at beginning
of period.......................... $ 62,547 $ 50,126 $ 50,100 $ 36,008 $ 18,717
---------- ---------- ---------- ---------- ----------
Chargeoffs:
Commercial and financial
loans......................... $ 15,062 29,067 24,012 17,613 19,845
Real estate:
Construction loans............ 197 1,705 924 2,242
Developer, investor and
land....................... 12,906 21,774 10,788 10,366 1,978
Consumer:
Residential mortgage loans.... 801 418 1,250 2,839 469
Home equity loans(1).......... 119 370 673
Indirect automobile
installment................ 806 1,981 2,181 5,366 3,035
Other consumer................ 237 280 3,386 2,890 2,287
Lease financing.................
---------- ---------- ---------- ---------- ----------
Total chargeoffs................ 30,128 55,595 43,214 41,316 27,614
---------- ---------- ---------- ---------- ----------
Recoveries:
Commercial and financial
loans......................... 4,319 1,628 688 735 735
Real estate:
Construction loans............ 32 24 9
Developer, investor and
land....................... 1,034 928 56
Consumer:
Residential mortgage loans.... 62 11 36 78
Home equity loans(1).......... 48 101 66
Indirect automobile
installment................ 820 1,046 219 564 285
Other consumer................ 86 20 329 263 222
Lease financing.................
---------- ---------- ---------- ---------- ----------
Total recoveries.............. 6,401 3,758 1,347 1,696 1,242
---------- ---------- ---------- ---------- ----------
Net chargeoffs....................... 23,727 51,837 41,867 39,620 26,372
Provision charged to operations...... 23,125 64,258 41,893 53,712 43,663
---------- ---------- ---------- ---------- ----------
Reserve for loan losses at end of
period............................. $ 61,945 $ 62,547 $ 50,126 $ 50,100 $ 36,008
========== ========== ========== ========== ==========
Average loans........................ $1,274,090 $1,422,497 $1,570,206 $1,776,261 $1,865,423
Ratio of net chargeoffs to average
loans.............................. 1.86% 3.64% 2.67% 2.23% 1.41%
---------------
<FN>
(1) This information is available separately for 1994, 1993 and 1992 only. Prior
to 1992 the information is included in the other consumer category.
</TABLE>
RESULTS OF OPERATIONS
COMPARISON OF 1994 WITH 1993
For the year ended December 31, 1994, net income was $4.75 million, or
$0.27 per share, compared with a net loss of $20.1 million, or $1.31 per share
in 1993. A key factor behind 1994's positive results was a provision for
possible loan loss of $23.1 million compared with $64.3 million in 1993. In
addition, 1994 writedowns of other real estate owned were $3.8 million compared
with $16.2 million in 1993, a decrease of $12.4 million.
The Company's net interest income on a fully taxable equivalent basis
decreased slightly from $93.9 million in 1993 to $93.1 million. The decrease
reflects a lower volume of interest-earning assets offset by
24
<PAGE> 27
an improvement in interest rate spread and margin. Spread and margin benefited
from interest rate increases throughout the year. See "Net Interest Income
Analysis" below.
A comparative analysis for return on average assets and return on average
stockholder's investment is shown below:
Return on Average Assets -- Component Analysis
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1994 1993
----- -----
<S> <C> <C>
Net interest income................................................ 4.90% 4.54%
Provision for possible loan losses................................. (1.23) (3.15)
----- -----
Net interest income after provision for possible loan losses....... 3.67% 1.39%
Noninterest income................................................. 1.61 1.80
Noninterest expense................................................ (4.92) (4.77)
----- -----
Income (loss) before income tax.................................... .36 (1.58)
Income tax provision (benefit)..................................... .11 (.56)
----- -----
Net income (loss) before change in accounting method............... .25 (1.02)
Cumulative effect of change in method of accounting for income
taxes............................................................ .04
----- -----
Net income (loss)........................................ .25% (.98)%
===== =====
</TABLE>
Return on Average Equity -- Component Analysis
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1994 1993
------ ------
<S> <C> <C>
Net interest income.............................................. 60.49% 64.75%
Provision for possible loan losses............................... (15.19) (44.89)
------ ------
Net interest income after provision for possible loan losses..... 45.30% 19.86%
Noninterest income............................................... 19.92 25.65
Noninterest expense.............................................. (60.76) (68.12)
------ ------
Income (loss) before income tax.................................. 4.46 (22.61)
Income tax provision (benefit)................................... 1.34 (8.04)
------ ------
Net income (loss) before change in accounting method............. 3.12 (14.57)
Cumulative effect of change in method of accounting for income
taxes.......................................................... .53
------ ------
Net income (loss)...................................... 3.12% (14.04)%
====== ======
</TABLE>
Net Interest Income Analysis
After a decline in yield on earning assets, principally loans, in the
fourth quarter of 1993 and early 1994, yields, driven by higher interest rates,
rose considerably throughout the remainder of the year. The result was an
improvement in yield on earning assets from 7.51 percent in 1993 to 7.58 percent
in 1994. The cost of interest-bearing liabilities, principally deposits,
remained relatively stable during 1994 until the fourth quarter when the Company
adopted more aggressive deposit pricing. The cost of interest-bearing
liabilities for the year was 2.94 percent compared with 3.13 percent in 1993.
The increased yield on earning assets, which outpaced increases in the cost of
interest-bearing liabilities, produced an improvement in interest rate spread
and margin from 4.38 percent and 4.97 percent in 1993 to 4.64 percent and 5.29
percent, respectively, in 1994. The net effect from changes in rates was an
increase in net interest income of $5.4 million.
Current spreads and margins are at historically high levels and are not
expected to continue into the future. Rates on loans and other interest-earning
assets may continue to increase; however, rates on deposits are expected to rise
at a persistent pace, and narrow the current levels of spread and margin.
25
<PAGE> 28
Average loans outstanding during the year were $1.27 billion, a decrease of
$148 million from 1993. Average interest-bearing deposits were $1.18 billion,
$111 million below the 1993 level. The effect from changes in volume of loans,
deposits and other interest-bearing balances was a decrease in net interest
income of $6.2 million.
The following table attributes changes in interest income and interest
expense to changes in interest rates and changes in the volume of
interest-earning assets and interest-bearing liabilities for the year ended
December 31, 1994 when compared with the year ended December 31, 1993. Changes
attributable to both rate and volume are allocated on a weighted basis.
<TABLE>
<CAPTION>
INCREASE (DECREASE) FROM YEAR ENDED
DECEMBER 31, 1993
-------------------------------------
AMOUNT DUE TO
CHANGES IN
YEAR ENDED --------------------
DECEMBER 31, 1994 TOTAL CHANGE VOLUME RATE
----------------- ------------ -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans*.... $ 104,322 $ (7,264) $(12,001) $ 4,737
Interest and dividends on
securities:
Taxable................... 26,688 (2,008) 262 (2,270)
Non-taxable*.............. 556 (263) (499) 236
Interest on excess funds and
other........................ 1,716 1,013 792 221
--------- -------- -------- -------
Total interest
income*............ 133,282 (8,522) (11,446) 2,924
--------- -------- -------- -------
Interest expense:
Interest on deposits........... 32,907 (7,393) (3,323) (4,070)
Interest on short-term
borrowings................... 6,240 1 (1,455) 1,456
Interest on other borrowings... 1,066 (339) (448) 109
--------- -------- -------- -------
Total interest
expense............ 40,213 (7,731) (5,226) (2,505)
--------- -------- -------- -------
Net interest income................. $ 93,069 $ (791) $ (6,220) $ 5,429
========= ======== ======== =======
---------------
<FN>
* Fully taxable equivalent at the Federal income tax rate of 34% and includes
applicable State taxes net of Federal benefit. The tax equivalent adjustment
on loans was approximately $.8 million and on non-taxable securities was
approximately $.2 million.
</TABLE>
Noninterest Income
Total noninterest income was $30.3 million in 1994, a decrease of $6.4
million from 1993. Gains from the sale of securities decreased $3.3 million,
Asset Management fees decreased $1.4 million and service charges on deposit
accounts decreased $.5 million due to decline in fee-based deposit accounts as
well as higher average individual customer account balances which reduced the
amount of fees assessed. Residual income on maturing equipment leases decreased
$.8 million.
Other noninterest income of $1.4 million declined $.3 million from 1993.
Income recognized in connection with home equity loans purchased from the
Resolution Trust Corporation decreased $.4 million. These loans were originally
purchased at a substantial discount in 1991 and have returned principal on a
schedule closer to the original contractual amount. These decreases to other
noninterest income were partially offset by fees derived from sales of mutual
funds, a new product introduced in May 1994.
Noninterest Expense
Total noninterest expense decreased $5 million to $92.5 million in 1994.
Foreclosed asset and workout expense declined $13.4 million as a result of lower
writedowns of other real estate owned. Salary and employee benefits increased
$4.2 million over 1993. In 1994 salary and employee benefits includes expenses
related to severance agreements of $1 million and a $1.2 million asset
management division revenue-sharing provision (see discussion below). The
increase in salary and employee benefits also reflects the addition of a
qualified mutual fund sales staff and increases in professional staff to improve
loan administration and monitoring of
26
<PAGE> 29
credit quality. In addition, the rise reflects normal merit raises and employee
benefit cost increases. Occupancy expenses were $.9 million higher reflecting
writedowns of $.5 million in connection with a sale of two former UST/Conn
branch buildings. FDIC deposit insurance premiums declined $.4 million as a
result of a lower level of deposits compared with 1993.
Other noninterest expense increased $3.5 million in 1994, reflecting $1
million in increased legal fees, $1 million in advertising and promotion, $.4
million in collateral appraisal fees and $.9 million in fees for consulting
services by certain former Company executives. The higher other noninterest
expense also stems from a $.8 million reduction in the Company's reserve for
litigation recorded in 1993. The increases were partially offset by a reduction
in property and casualty insurance of $.4 million.
In 1994, the Company and senior executives of USTC's Asset Management
Division negotiated the terms of employment agreements designed to maximize the
profitability and grow the assets under management of the asset management
business. The agreements, which remain subject to regulatory approval, are
designed to increase the foregoing executives' participation in the value
created in the asset management business and, in a change-in-control situation,
increase the likelihood that a prospective purchaser will retain the services of
the executives. The agreements contain revenue-sharing provisions which will
permit the asset management division to use a specified percentage of its base
revenues for the payment of expenses of the operation, including incentive
compensation. In connection therewith, the Company recorded in 1994 a
revenue-sharing provision of $1.2 million.
Income Taxes
The Company recorded income taxes of $2.1 million in 1994 compared with a
$11.5 million tax benefit in 1993. The variations in income taxes are
attributable to the level and composition of pretax income or loss. Refer to
Note 11 to the Notes to Consolidated Financial Statements of this Form 10-K for
a further discussion of income taxes.
In 1993 the Company adopted 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 adopting the new standard on the balance sheet. Refer to Note 1 to the Notes
to Consolidated Financial Statements of this Form 10-K for a further discussion
of this matter.
As of December 31, 1994, the Company had a deferred tax asset of
approximately $11.7 million, net of a valuation allowance of $6.4 million,
included in other assets which is expected to be realized against future taxable
income. Management believes that it is more likely than not that the Company
will realize the benefit of these deferred assets.
Fair Value of Financial Instruments
In December 1991, the FASB approved SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments," effective for fiscal year ending December 31,
1992. The methods and assumptions used by the Company to estimate the fair value
of each class of financial instruments as of December 31, 1994 and 1993 are
disclosed in Note 17 to the Notes to Consolidated Financial Statements of this
Form 10-K. Financial instruments do not include all of the assets and
liabilities recorded on a company's balance sheet. Therefore, the aggregate fair
value amounts of the financial instruments do not represent the underlying value
of a company.
As a result of those assumptions and valuation methodologies, the estimated
fair value of Financial Instrument assets and liabilities of the Company as of
December 31, 1994 was $1.70 billion and $1.66 billion, respectively. The
estimated fair value of Financial Instrument assets and liabilities of the
Company as of December 31, 1993 was $1.92 billion and $1.89 billion,
respectively. The excess of fair value over the carrying value of Financial
Instrument assets increased slightly from a year ago. In the opinion of
management, the effect of higher interest rates on certain fair value
calculations at December 31, 1994, was more than offset by the positive effect
of lower substandard loans and resulting reduction in credit risk. The decreased
amount of excess in the valuation of Financial Instrument liabilities over their
carrying values, in the opinion of management, is attributed primarily to the
increase in interest rates. Refer to Note 17 to the Notes to Consolidated
Financial Statements of this Form 10-K for a further discussion.
27
<PAGE> 30
COMPARISON OF 1993 WITH 1992
Net Interest Income Analysis
The following table attributes changes in interest income and interest
expense to changes in interest rates and changes in the volume of
interest-earning assets and interest-earning liabilities for the year ended
December 31, 1993 when compared with the year ended December 31, 1992. Changes
attributable to both rate and volume are allocated on a weighted basis.
<TABLE>
<CAPTION>
INCREASE (DECREASE) FROM YEAR
ENDED
DECEMBER 31, 1992
----------------------------------
AMOUNT DUE TO
CHANGES IN
YEAR ENDED -------------------
DECEMBER 31, 1993 TOTAL CHANGE VOLUME RATE
----------------- ------------ -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans*......... $ 111,586 $(12,161) $(11,483) $ (678)
Interest and dividends on
securities:
Taxable........................ 28,696 (4,209) (1,274) (2,935)
Non-taxable*................... 819 (208) (368) 160
Income on excess funds and other.... 703 (195) (113) (82)
--------- -------- -------- --------
Total interest income*.... 141,804 (16,773) (13,238) (3,535)
--------- -------- -------- --------
Interest expense:
Interest on deposits................ 40,300 (19,144) (7,485) (11,659)
Interest on short-term borrowings... 6,239 (1,518) (575) (943)
Interest on other borrowings........ 1,405 (364) (267) (97)
--------- -------- -------- --------
Total interest expense.... 47,944 (21,026) (8,327) (12,699)
--------- -------- -------- --------
Net interest income...................... $ 93,860 $ 4,253 $ (4,911) $ 9,164
========= ======== ======== ========
---------------
<FN>
* Fully taxable equivalent at the federal income tax rate of 34% and includes
applicable State taxes net of federal benefit. The tax equivalent adjustment
on loans was approximately $.9 million and on non-taxable securities was
approximately $.2 million.
</TABLE>
Noninterest Income
Total noninterest income of $36.7 million declined $5.6 million in 1993.
Gains on sale of securities decreased $9.3 million. Asset management fees rose
by $3.3 million due to new business and appreciation of existing clients' asset
portfolios, partly offsetting the decrease in securities gains noted above.
Corporate services income increased $1 million, or 13%, in 1993 due to changes
in the fee system and continued expansion of the product base.
Other noninterest income decreased $.5 million in 1993 and the following
are the more significant reasons: Leasing fee income declined $.3 million as the
Company continued to minimize its activity in this area until taxable income
increases sufficiently. Real estate appraisal fees decreased $.2 million due to
a curtailment of third-party activities. Home equity loans purchased from the
Resolution Trust Corporation at a substantial discount in late 1991 returned
principal on a schedule closer to the original contractual amount. This
accounted for an increase of $.4 million compared with 1992 and partially offset
the decreases noted above. Additionally, in the first quarter of 1992, the
Company sold $5.7 million of its credit card portfolio to an unaffiliated bank.
This transaction produced a gain of $.2 million for the quarter ended March 31,
1992. All other miscellaneous noninterest income declined $.2 million.
Noninterest Expense
Noninterest expense of $97.5 million remained essentially unchanged in 1993
compared with 1992. Increases in foreclosed asset and workout expense amounted
to $3.1 million. Increases in writedowns of foreclosed real estate properties
totaled $1.7 million while other foreclosed asset and workout expenses increased
$1.4 million. Other noninterest income decreased $5.9 million in 1993. 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. The remaining decrease in other noninterest
expense was principally due to a reduction in the Company's provision for
litigation in 1993 as compared with 1992.
28
<PAGE> 31
AVERAGE BALANCES, INTEREST RATES AND INTEREST RATE DIFFERENTIAL
The table below presents the following information: average earning assets
(including nonaccrual loans) and average interest-bearing liabilities supporting
earning assets; and interest income and interest expense expressed as a
percentage of the related asset or liability. The average balances and,
therefore, the rates presented do not include the effect of fair value
adjustments under SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities."
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------------------------
1994 1993 1992
------------------------------- ------------------------------- -------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
---------- -------- ------- ---------- -------- ------- ---------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks..... $ 95,717 $ 100,755 $ 109,305
Excess funds sold to banks
and other................. 43,489 $ 1,716 3.95% 22,460 $ 703 3.13% 18,254 $ 706 3.87%
Securities(1)
Taxable................... 435,210 26,688 6.13 431,242 28,696 6.65 449,121 32,905 7.33
Non-taxable(2)............ 5,559 556 10.00 11,175 819 7.33 17,413 1,027 5.90
---------- -------- ---------- -------- ---------- --------
Total securities.......... 440,769 27,244 6.18 442,417 29,515 6.67 466,534 33,932 7.27
Trading account............. 2,967 192 6.47
Loans(2)(3)................. 1,274,09 104,322 8.19 1,422,497 111,586 7.84 1,570,206 123,747 7.88
Reserve for possible loan
losses.................... (62,203) (63,134) (51,298)
---------- ---------- ----------
Net loans................. 1,211,887 1,359,363 1,518,908
Other assets................ 89,567 117,572 154,906
---------- -------- ---------- -------- ---------- --------
Total assets/interest
income................ $1,881,429 $133,282 7.08% $2,042,567 $141,804 6.94% $2,270,874 $158,577 6.98%
========= ======== ========= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Deposits:
Noninterest-bearing
demand.................... $ 350,405 $ 346,980 $ 333,319
Interest-bearing demand (NOW
accounts)................. 163,841 $ 2,343 1.43% 144,255 $ 2,693 1.87% 134,274 $ 3,505 2.61%
Money market savings........ 288,489 6,372 2.21 346,314 8,429 2.43 429,963 13,986 3.25
Other savings............... 311,139 7,745 2.49 320,357 9,338 2.91 322,259 11,238 3.49
Time........................ 413,239 16,447 3.98 477,272 19,840 4.16 606,923 30,715 5.06
---------- -------- ---------- -------- ---------- --------
Total interest-bearing
deposits.............. 1,176,708 32,907 2.80 1,288,198 40,300 3.13 1,493,419 59,444 3.98
---------- ---------- ----------
Total deposits.......... 1,527,113 1,635,178 1,826,738
Short-term borrowings....... 180,325 6,240 3.46 227,944 6,239 2.74 247,185 7,757 3.14
Other borrowings............ 11,790 1,066 9.04 16,831 1,405 8.35 21,334 1,769 8.29
Other liabilities........... 9,945 19,465 28,177
Stockholders' investment.... 152,256 143,149 147,440
---------- -------- ---------- -------- ---------- --------
Total liabilities and
stockholders'
investment/interest
expense............... $1,881,429 $ 40,213 2.14% $2,042,567 $ 47,944 2.35% $2,270,874 $ 68,970 3.04%
========= ======== ========= ======== ========= ========
Earning assets -- interest
income.................... $1,758,348 $133,282 7.58% $1,887,374 $141,804 7.51% $2,057,961 $158,577 7.71%
Interest-bearing
liabilities -- interest
expense................... $1,368,823 40,213 2.94 $1,532,973 47,944 3.13 $1,761,938 68,970 3.91
-------- -------- --------
Net interest spread(4)...... 4.64 4.38 3.80
Net interest margin(5)...... $ 93,069 5.29% $ 93,860 4.97% $ 89,607 4.35%
======== ======== ========
---------------
<FN>
(1) For the purpose of this analysis, in 1994 and 1993, securities include
securities available-for-sale and securities held-to-maturity. For 1992,
securities include the investment portfolio and securities held for sale.
(2) Interest on loans to and obligations of public entities is not subject to
federal income tax. In order to make pretax yields comparable to taxable
loans and investments, a tax equivalent adjustment is utilized. The
adjustment is based on a 34% federal income tax rate and includes applicable
state taxes net of Federal tax benefit.
(3) For the purpose of this analysis, nonaccrual loans are included in the loan
category.
(4) Net interest spread is the excess of the interest rate on average earning
assets over the interest rate on average interest-bearing liabilities.
(5) Net interest margin is the excess of the interest earned over interest
expense divided by average earning assets.
</TABLE>
29
<PAGE> 32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY MATERIAL.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS PAGE
---------------------------------------------------------------------------------------- ----
<S> <C>
Report of Independent Public Accountants................................................ 31
Consolidated Balance Sheets -- December 31, 1994 and 1993............................... 32
Consolidated Statements of Income for the years ended December 31, 1994, 1993 and
1992.................................................................................. 33
Consolidated Statements of Changes in Stockholders' Investment for the years ended
December 31, 1994, 1993 and 1992...................................................... 34
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and
1992.................................................................................. 35
Notes to Consolidated Financial Statements.............................................. 36
</TABLE>
30
<PAGE> 33
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of UST Corp.:
We have audited the accompanying consolidated balance sheets of UST Corp.
(a Massachusetts corporation) and Subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income, changes in stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of UST Corp.
and Subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes and investments by
adopting Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" and Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," effective
January 1, 1993 and December 31, 1993, respectively.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 30, 1995
31
<PAGE> 34
UST CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash, due from banks and interest-bearing deposits (Note 2)......... $ 93,079 $ 90,198
Excess funds sold to banks and other short-term investments......... 10,166 96,647
Securities (Notes 1 and 3):
Securities available-for-sale:
Mortgage-backed securities................................ 195,009 263,435
U.S. Treasury, corporate notes, and other................. 206,465 210,474
---------- ----------
Total securities available-for-sale.................. 401,474 473,909
Securities held-to-maturity.................................... 100
---------- ----------
Total securities..................................... 401,574 473,909
Loans (Notes 4, 13, and 15):
Loans -- net of unearned discount of $17,589,000 in 1994 and
$11,359,000 in 1993........................................... 1,266,091 1,338,807
Reserve for possible loan losses............................... (61,945) (62,547)
---------- ----------
Total loans, net..................................... 1,204,146 1,276,260
Premises, furniture and equipment, net (Note 5)..................... 32,403 32,661
Goodwill............................................................ 2,070 2,192
Other real estate owned, net (Note 6)............................... 18,407 19,468
Other assets (Notes 9 and 11)....................................... 41,387 52,931
---------- ----------
Total Assets......................................... $1,803,232 $2,044,266
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Deposits:
Demand:
Noninterest-bearing....................................... $ 371,716 $ 373,793
Interest-bearing.......................................... 168,434 170,642
Savings:
Money market.............................................. 271,898 323,979
Other..................................................... 285,350 320,924
Time:
Certificates of deposit over $100,000..................... 79,373 72,911
Other..................................................... 314,035 378,549
---------- ----------
Total deposits....................................... 1,490,806 1,640,798
Short-term borrowings (Note 7)...................................... 158,989 226,268
Other borrowings (Note 8)........................................... 9,964 14,286
Other liabilities................................................... 10,839 10,095
---------- ----------
Total liabilities.................................... 1,670,598 1,891,447
Commitments and contingencies (Notes 14 and 15)
Stockholders' investment (Notes 1, 3, 8, 10, and 12):
Preferred stock $1 par value; Authorized -- 4,000,000 shares;
Outstanding -- None
Common stock $.625 par value; Authorized -- 30,000,000 shares;
Outstanding -- 17,614,792 and 17,304,795 shares in 1994 and
1993, respectively............................................ 11,009 10,815
Additional paid-in capital..................................... 72,129 69,694
Retained earnings.............................................. 73,183 68,437
Unrealized gain (loss) on securities available-for-sale, net of
tax........................................................... (23,601) 3,335
Deferred compensation and other................................ (86) 538
---------- ----------
Total stockholders' investment................................. 132,634 152,819
---------- ----------
Total Liabilities and Stockholders' Investment....... $1,803,232 $2,044,266
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
32
<PAGE> 35
<TABLE>
UST CORP.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1993 1992
----------- ----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans.................................. $ 103,526 $ 110,673 $ 122,522
Interest and dividends on securities:
Taxable................................................... 26,687 28,635 32,859
Non-taxable............................................... 215 265 467
Dividends................................................. 168 352 278
Interest on excess funds and other.......................... 1,716 703 898
----------- ----------- -----------
Total interest income................................ 132,312 140,628 157,024
----------- ----------- -----------
Interest expense:
Interest on deposits........................................ 32,907 40,300 59,444
Interest on short-term borrowings........................... 6,240 6,239 7,757
Interest on other borrowings................................ 1,066 1,405 1,769
----------- ----------- -----------
Total interest expense............................... 40,213 47,944 68,970
----------- ----------- -----------
Net interest income......................................... 92,099 92,684 88,054
Provision for possible loan losses (Note 4)................... 23,125 64,258 41,893
----------- ----------- -----------
Net interest income after provision for possible loan
losses.................................................... 68,974 28,426 46,161
----------- ----------- -----------
Noninterest income:
Asset management fees....................................... 14,419 15,798 12,526
Service charges on deposit accounts......................... 4,893 5,356 5,852
Gain on sale of securities, net (Note 3).................... 1,105 4,403 13,724
Lease residual income....................................... 362 1,148 753
Corporate services income................................... 8,198 8,365 7,380
Other....................................................... 1,357 1,653 2,124
----------- ----------- -----------
Total noninterest income............................. 30,334 36,723 42,359
----------- ----------- -----------
Noninterest expense:
Salary and employee benefits (Note 9)....................... 42,625 38,451 35,370
Net occupancy expense....................................... 8,317 7,419 7,384
Credit card processing expense.............................. 3,955 3,815 3,416
Deposit insurance assessment................................ 4,566 4,931 4,320
Foreclosed asset and workout expense........................ 9,976 23,356 20,272
Other (Note 18)............................................. 23,072 19,538 25,410
----------- ----------- -----------
Total noninterest expense............................ 92,511 97,510 96,172
----------- ----------- -----------
Income (loss) before income taxes............................. 6,797 (32,361) (7,652)
Income tax provision (benefit) (Note 11).................... 2,051 (11,511) (2,931)
----------- ----------- -----------
Net income (loss) before change in accounting method.......... 4,746 (20,850) (4,721)
Cumulative effect of change in method of accounting for income
taxes (Note 1).............................................. (750)
----------- ----------- -----------
Net income (loss).................................... $ 4,746 $ (20,100) $ (4,721)
=========== =========== ===========
Per share data:
Net income (loss)........................................... $ .27 $ (1.31) $ (.34)
Cash dividends declared..................................... -- -- --
Weighted average number of common shares (Note 10)............ 17,780,032 15,362,251 13,984,190
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
33
<PAGE> 36
UST CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNREALIZED DEFERRED
---------------- PAID-IN RETAINED GAIN/(LOSS) COMPENSATION
SHARES AMOUNT CAPITAL EARNINGS ON SECURITIES AND OTHER
------ ------- ---------- -------- ------------- ------------
(DOLLARS AND SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1991......... 13,903 $ 8,689 $ 46,126 $ 93,258 $ (150) $ (1,429)
Net loss........................ (4,721)
Stock option exercises and stock
issued under restricted stock
plans (Notes 9 and 10)....... 134 84 1,568
Change in unrealized loss on
equity securities (Note 3)... 133
Reduction in ESOP loan guarantee
(Note 8)..................... 322
------ ------- -------- -------- --------- --------
Balance December 31, 1992......... 14,037 8,773 47,694 88,537 (17) (1,107)
Net loss........................ (20,100)
Common stock sales (Note 12).... 3,155 1,972 21,271
Stock option exercises and stock
issued under restricted stock
plans (Notes 9 and 10)....... 96 59 622
Cumulative effect of change in
method of accounting for
investment securities, net of
tax (Note 1)................. 3,335
Change in unrealized loss on
equity securities (Note 3)... 17
Reduction in ESOP loan guarantee
(Note 8)..................... 321
Activity in Directors Deferred
Compensation Program, net
(Note 10).................... 17 11 107 1,324
------ ------- -------- -------- --------- --------
Balance December 31, 1993......... 17,305 10,815 69,694 68,437 3,335 538
Net income...................... 4,746
Stock option exercises and stock
issued under restricted stock
plans (Notes 9 and 10)....... 258 162 2,108 (664)
Change from net unrealized gain
to loss on securities
available-for-sale, net of
tax (Note 1)................. (26,936)
Reduction in ESOP loan guarantee
(Note 8)..................... 322
Activity in Directors Deferred
Compensation Program, net
(Note 10).................... 52 32 327 (282)
------ ------- -------- -------- --------- --------
Balance December 31, 1994......... 17,615 $11,009 $ 72,129 $ 73,183 $ (23,601) $ (86)
====== ======= ======== ======== ========= ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
34
<PAGE> 37
UST CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................... $ 4,746 $ (20,100) $ (4,721)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Cumulative effect of change in accounting method.................. (750)
Provision for possible loan losses................................ 23,125 64,258 41,893
Depreciation and amortization..................................... 5,295 5,029 5,031
Amortization of gain on sale/leaseback............................ (384) (384) (384)
Amortization of security premiums, net............................ 732 1,344 1,856
Trading account sales............................................. 209,917
Trading account purchases......................................... (173,260)
Gain on sale of securities, net................................... (1,105) (4,403) (13,724)
Writedowns of equity securities................................... 181 44
Trading account losses............................................ 132
(Gain) loss on sale of other real estate owned, net............... (515) 1,120 2,338
Writedowns of other real estate owned............................. 3,810 16,244 10,783
Deferred income tax benefit (expense)............................. 3,902 (4,494) 1,106
Increase (decrease) in accruals and other, net.................... 15,949 (1,241) 17,367
--------- --------- ---------
Net cash provided by operating activities.................... 55,555 56,804 98,378
Cash flows provided by investing activities:
Sales and maturities of investment securities....................... 5,584 4,889
Purchase of investment securities................................... (1,063) (334)
Proceeds from securities held for sale.............................. 321,517 371,663
Proceeds from sales of securities available-for-sale................ 61,669
Proceeds from maturities of securities available-for-sale........... 121,462
Purchases of securities held for sale............................... (312,866) (402,647)
Purchases of securities available-for-sale.......................... (144,794)
Purchases of securities held-to-maturity............................ (100)
Net decrease (increase) in short-term investments................... 86,481 (95,306) 577
Net loans paid...................................................... 34,266 87,939 117,439
Proceeds from other real estate owned............................... 12,491 19,567 13,800
Purchases of premises and equipment................................. (3,670) (1,268) (1,257)
--------- --------- ---------
Net cash provided by investing activities.................... 167,805 24,104 104,130
Cash flows used by financing activities:
Net (decrease) increase in nontime deposits......................... (91,940) (90,408) 3,195
Net payments on certificates of deposit............................. (58,052) (60,725) (209,726)
Net (payments) proceeds on short-term borrowings.................... (67,279) 24,217 20,528
Net payments on other borrowings.................................... (4,000) (4,000) (4,500)
Issuance of common stock for cash, net.............................. 792 23,677 120
--------- --------- ---------
Net cash used by financing activities........................ (220,479) (107,239) (190,383)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents.................... 2,881 (26,331) 12,125
Cash and cash equivalents at beginning of year...................... 90,198 116,529 104,404
--------- --------- ---------
Cash and cash equivalents at end of year............................ $ 93,079 $ 90,198 $ 116,529
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest.......................................................... $ 39,853 $ 48,959 $ 71,233
========= ========= =========
Income taxes...................................................... $ 2,204 $ 1,210 $ 2,495
========= ========= =========
Noncash transactions:
Transfers from investment portfolio to securities held for sale..... $ 7,103
=========
Transfers from other assets to securities available-for-sale........ $ 300
=========
Transfers from loans to other real estate owned..................... $ 29,640 $ 39,128 $ 41,751
========= ========= =========
Financed other real estate owned sales.............................. $ 14,917 $ 25,883 $ 23,184
========= ========= =========
Common stock issuance............................................... $ 1,837 $ 365 $ 1,532
========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
35
<PAGE> 38
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of UST Corp. (the "Company") conform
with generally accepted accounting principles and general practice in the
banking industry. The significant policies are summarized below.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All material intercompany balances and
transactions have been eliminated. The parent company only financial statements
contained in Note 16 reflect investments in subsidiaries using the equity method
of accounting.
Certain reclassifications have been made to prior year balances to conform
with the current year presentation. Assets owned by others and held in a
fiduciary or agency capacity are not included in the consolidated balance
sheets.
SECURITIES
On December 31, 1993 the Company adopted Statement of Financial Accounting
Standards No. 115 (SFAS No. 115), "Accounting for Certain Investments in Debt
and Equity Securities." This Statement addresses the accounting and reporting
for investments in equity securities that have readily determinable fair values
and for all investments in debt securities. Under this statement such securities
are classified as held-to-maturity, trading, or available-for-sale.
Securities Held-to-Maturity -- Debt securities which management has the
positive intent and ability to hold to maturity are classified as
held-to-maturity, and are carried at cost adjusted for the amortization of
premium or the accretion of discount.
Trading Securities -- Debt and equity securities with readily determinable
market values that are bought and held principally for the purpose of selling
them in the near term are classified as trading securities and are carried at
fair value, with unrealized gains and losses included in current earnings. At
December 31, 1994 and 1993, the Company had no securities classified as trading.
Securities Available-for-Sale -- Debt and equity securities not classified
as either held-to-maturity or trading are classified as available-for-sale and
carried at fair value, with unrealized after-tax gains and losses reported as a
separate component of stockholders' investment. At December 31, 1994,
stockholders' investment was reduced by an unrealized loss related to SFAS No.
115 of $29,023,000 net of an income tax benefit of $5,422,000.
Securities that do not have readily determinable market values are carried
at cost and classified in other assets. At December 31, 1994 and 1993 such
securities amounted to $3,908,000 and $5,071,000, respectively.
Prior to December 31, 1993, debt securities were designated at the time
they were purchased as either held for sale or held to maturity, based on
management intent at the time. Securities which management had the ability and
intent to hold on a long-term basis or until maturity were classified as held to
maturity. Securities which were to be held for indefinite periods of time and
not intended to be held to maturity or on a long-term basis were classified as
securities held for sale and carried at the lower of aggregate cost or market
value.
For mortgage-backed securities, the Company recalculates the effective
yield on the investment to reflect the actual prepayment results and anticipated
future payments. The net investment in these securities is adjusted to the
amount that would have existed had the new estimated average life and effective
yield been
36
<PAGE> 39
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
applied since the acquisition of the securities. Such adjustments are charged or
credited to interest income in the current period.
The Company determines the securities sold by the specific identification
method. The amount of taxes paid on gains is dependent upon the overall results
of operations of the subsidiary incurring the gain.
PREMISES, FURNITURE AND EQUIPMENT
Premises, furniture and equipment are stated at cost, less accumulated
depreciation and amortization. The Company provides for depreciation using the
straight-line method by charges to expense in amounts estimated to amortize the
cost over the estimated useful lives of the respective assets as follows:
<TABLE>
<S> <C>
Buildings and building improvements..................... 10-40 years
Furniture and equipment................................. 3-10 years
</TABLE>
Leasehold improvements are amortized over the life of the lease agreements.
LOAN INCOME AND FEES
Certain installment loans and commercial time loans are made on a
discounted basis. The unearned discount applicable to such loans is recorded as
income monthly by use of the actuarial method. Interest income on nondiscounted
loans is accrued based on the principal amount of loans outstanding.
Loans are placed on nonaccrual, with the reversal of all accrued interest
receivable, when there is doubt as to the collectibility of interest or
principal or if loans are 90 days or more past due unless they are both well
secured and in the process of collection. In every case, a loan reaching 180
days past due is placed on nonaccrual. Interest received on nonaccrual loans is
applied to principal if collection of principal is doubtful; otherwise, it is
reflected in interest income on a cash basis.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 114 (SFAS No. 114), "Accounting by Creditors for
Impairment of a Loan," as amended by SFAS No. 118. SFAS No. 114 requires that
impaired loans, as defined, be measured based on the present value of the
expected future cash flows discounted at the loan's effective interest rate, or
the fair value of the collateral if the loan is collateral dependent. This
Statement is effective for fiscal years beginning after December 15, 1994.
Management believes that adoption of this Statement will not have a material
effect on the financial condition or results of operations of the Company.
RESERVE FOR POSSIBLE LOAN LOSSES
The reserve for possible loan losses is maintained at a level considered
adequate by management to provide for possible losses from loans, leases and
commitments to extend credit. Adequacy of the reserve is determined by
management using a consistent 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 using a combination
of numerical, statistical and qualitative analysis (including sensitivity
tests), and a written conclusion discussing the rationale supporting reserve
adequacy. The reserve is based on estimates, and ultimate losses may vary from
current estimates. These estimates are reviewed periodically and, as adjustments
become necessary, they are reported in earnings in the current period.
37
<PAGE> 40
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER REAL ESTATE OWNED
Other real estate owned includes both actual and in-substance
repossessions. In December 1992 the Company adopted Statement of Position No.
92-3 ("SOP 92-3") issued by the American Institute of Certified Public
Accountants. This SOP states that foreclosed assets are presumed to be held for
sale. Therefore, they should be carried at the lower of cost or fair value,
minus estimated costs to sell ("net realizable value"). In 1992 the pretax
charge to income resulting from implementation was $750,000.
INCOME TAXES
The Company provides for income taxes in accordance with the comprehensive
income tax allocation method. This method recognizes the tax effects of all
income and expense transactions in each year's statement of income regardless of
the year in which the transactions are reported for tax purposes.
The Company follows the deferral method of accounting for investment tax
credits. Under the deferral method, the credit is reflected as a reduction of
tax expense ratably over the period during which the asset is depreciated for
financial reporting purposes.
FASB has issued SFAS No. 109 "Accounting for Income Taxes," a modification
of SFAS No. 96, effective January 1, 1993. While the FASB retained the existing
requirement to record deferred taxes for transactions that are reported in
different years for financial reporting and tax purposes, it revised the
computation of deferred taxes so that the amount of deferred taxes on the
balance sheet is adjusted whenever tax rates or other provisions of the income
tax law are changed. This is known as the "liability method" of providing
deferred income taxes. This change in accounting principle increased net income
$750,000 in January 1993, representing the cumulative effect of the new standard
on the balance sheet at the date of adoption.
EARNINGS (LOSS) PER SHARE
Earnings per share is computed using the weighted average number of shares
of common stock and common stock equivalents outstanding. Common stock
equivalents consist primarily of dilutive outstanding stock options computed
under the treasury stock method. Average dilutive common stock equivalents were
379,059 for 1994. Loss per share computations for 1993 and 1992 do not include
common stock equivalents due to their antidilutive effect. The dual presentation
of primary and fully diluted earnings per share is not presented since the
difference from earnings per share is less than 3 percent.
GOODWILL AND CORE DEPOSIT INTANGIBLES
Goodwill and core deposit intangibles are stated at cost less accumulated
amortization. Cost of purchased businesses in excess of net assets acquired
("goodwill") includes amounts being amortized over twenty- and forty-year
periods. Amortization expense was $122,500 in each of 1994, 1993 and 1992.
Values assigned to deposits of purchased businesses ("core deposit intangibles")
are being amortized over seven- and thirteen-year periods. Amortization expense
was $1,245,000 in each of 1994, 1993 and 1992.
On a periodic basis, the Company reviews its goodwill and core deposit
intangible assets for events or changes in circumstances that may indicate that
the carrying amount of the assets may not be recoverable.
RETIREMENT BENEFITS
In December 1990, the FASB issued SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS No. 106 is effective for
fiscal years beginning after December 15, 1992. This statement did not have any
impact on the Company's financial position or results of operations.
38
<PAGE> 41
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." SFAS No. 112 is effective for fiscal years beginning
after December 15, 1993. This statement did not have any impact on the Company's
financial position or results of operations.
STATEMENTS OF CASH FLOWS
For the purpose of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and interest-bearing deposits.
(2) RESTRICTIONS ON CASH AND DUE FROM BANKS
At December 31, 1994 and 1993, cash and due from banks included $34,173,000
and $42,072,000, respectively, to satisfy the reserve requirements of the
Federal Reserve Board.
(3) SECURITIES
A comparison of the amortized cost, estimated fair value and gross
unrealized gains and losses as of December 31, 1994 and December 31, 1993 for
securities available-for-sale and held-to-maturity follows:
<TABLE>
<CAPTION>
1994
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities available-for-sale:
Mortgage-backed securities:
FHLMC...................................... $ 132,241 $ 97 $ (8,765) $123,573
FNMA....................................... 77,761 45 (6,370) 71,436
--------- ---- --------- --------
Total mortgage-backed securities...... 210,002 142 (15,135) 195,009
US Treasury and Federal agencies.............. 154,823 5 (12,414) 142,414
States and municipalities..................... 3,577 49 (133) 3,493
Foreign governments........................... 425 425
Corporate debt securities..................... 59,716 208 (1,611) 58,313
Marketable equity securities.................. 1,954 120 (254) 1,820
--------- ---- --------- --------
Total................................. $ 430,497 $524 $ (29,547) $401,474
========= ==== ========= ========
Securities held-to-maturity:
States and municipalities..................... 100 (3) 97
--------- --------- --------
Total................................. $ 100 $ (3) $ 97
========= ========= ========
</TABLE>
39
<PAGE> 42
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1993
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Mortgage-backed securities:
FHLMC......................................... $ 177,600 $2,713 $ (749) $179,564
FNMA.......................................... 83,514 1,264 (907) 83,871
--------- ------ -------- --------
Total mortgage-backed securities...... 261,114 3,977 (1,656) 263,435
US Treasury and Federal agencies................ 130,192 795 (1,284) 129,703
States and municipalities....................... 3,712 178 (3) 3,887
Foreign governments............................. 451 451
Corporate debt securities....................... 70,579 2,915 (3) 73,491
Marketable equity securities.................... 2,112 886 (56) 2,942
--------- ------ -------- --------
Total securities...................... $ 468,160 $8,751 $ (3,002) $473,909
========= ====== ======== ========
</TABLE>
The amortized cost and estimated market value of debt securities at
December 31, 1994 and 1993, by contractual maturity, are shown in the table
below. Actual maturities are expected to differ from contractual maturities
because some borrowers have the right to prepay without prepayment penalty.
Mortgage-backed securities are shown at their final maturity but are expected to
have shorter average lives. Equity securities, which have no contractual
maturity, are presented in the aggregate.
<TABLE>
<CAPTION>
1994 1993
----------------------- -----------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities available-for-sale:
Mortgage-backed securities:
Due after 5 years through 10 years.......... $ 26,144 $ 25,967 $ 42,187 $ 43,005
Due after 10 years.......................... 183,858 169,042 218,927 220,430
--------- --------- --------- ---------
Total mortgage-backed securities.... 210,002 195,009 261,114 263,435
All other debt securities:
Due in 1 year or less....................... 22,706 22,624 2,255 2,253
Due after 1 year through 5 years............ 168,449 159,047 174,623 177,579
Due after 5 years through 10 years.......... 25,935 21,575 25,889 25,389
Due after 10 years.......................... 1,451 1,399 2,167 2,311
--------- --------- --------- ---------
Total debt securities............... 428,543 399,654 466,048 470,967
Total marketable equity
securities........................ 1,954 1,820 2,112 2,942
--------- --------- --------- ---------
Total............................... $ 430,497 $ 401,474 $ 468,160 $ 473,909
======== ======== ======== ========
Securities held-to-maturity:
Due after 1 year through 5 years............ 100 97
--------- ---------
Total............................... $ 100 $ 97
======== ========
</TABLE>
Proceeds from sales of debt securities held in the investment portfolio,
held for sale, or available-for-sale during 1994 were $60,061,000 and
$162,956,000 during 1993. Gross gains of $79,000 for 1994 and $3,038,000 for
1993 and gross losses of $137,000 for 1993 and none for 1994 were realized on
those sales. Net gains on sales of all securities held in the investment
portfolio, held for sale, trading accounts, and available-for-sale
40
<PAGE> 43
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
were $1,105,000, $4,403,000, and $13,724,000 for 1994, 1993, and 1992,
respectively. The 1994 gains were comprised principally from the sale of equity
securities.
At December 31, 1994, securities carried at $203,246,000 were pledged to
secure public and trust deposits, securities sold under agreements to repurchase
and for other purposes as required by law.
(4) LOANS
The composition of the loan portfolio (net of unearned discount) at
December 31, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial and financial loans.............................. $ 702,134 $ 757,638
Real estate:
Construction loans........................................ 13,109 35,295
Developer, investor and land.............................. 259,065 315,700
Consumer:
Residential mortgage loans................................ 89,551 84,846
Home equity loans......................................... 64,068 63,188
Indirect automobile installment........................... 90,255 31,848
Other consumer loans...................................... 21,964 23,944
Lease financing............................................. 25,945 26,348
---------- ----------
1,266,091 1,338,807
Reserve for possible loan losses............................ (61,945) (62,547)
---------- ----------
$1,204,146 $1,276,260
========== ==========
</TABLE>
Nonaccrual loans were $49.4 million and $49.3 million at December 31, 1994
and December 31, 1993, respectively. Accruing restructured loans totaled $15.8
million and $41.5 million at December 31, 1994 and 1993, respectively. Had
nonaccruing and accruing restructured loans been paying in accordance with their
original terms, approximately $3,071,000 and $6,247,000 of additional interest
income would have been recorded in 1994 and 1993, respectively.
Most of the Company's business activity is with customers located within
the states of Massachusetts and Connecticut. At year-end 1994, the Company's
exposure to credit risk principally secured by commercial real estate, home
equity and residential real estate included $426 million of loans. See Note 15
for additional discussion of concentration of credit risk.
Analysis of the reserve for possible loan losses for the three years ended
December 31, 1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period......................... $ 62,547 $ 50,126 $ 50,100
Loans charged-off...................................... (30,128) (55,595) (43,214)
Recoveries on loans previously charged-off............. 6,401 3,758 1,347
-------- -------- --------
Net chargeoffs......................................... (23,727) (51,837) (41,867)
Provided from operations............................... 23,125 64,258 41,893
-------- -------- --------
Balance at end of period............................... $ 61,945 $ 62,547 $ 50,126
======== ======== ========
</TABLE>
In June 1993 the Company recorded a special $30 million provision for loan
losses which is included in the above table.
41
<PAGE> 44
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) PREMISES, FURNITURE AND EQUIPMENT
A summary of the accounts as of December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land............................................................. $ 2,839 $ 2,899
Buildings and leasehold improvements............................. 34,861 34,499
Furniture and equipment.......................................... 15,450 17,744
------- -------
53,150 55,142
Less -- Accumulated depreciation and amortization................ 20,747 22,481
------- -------
$32,403 $32,661
======= =======
</TABLE>
Depreciation and amortization expenses reflected in the consolidated
statements of income were $3,927,000, $3,662,000 and $3,665,000 in 1994, 1993
and 1992, respectively.
On January 3, 1991, the Company sold one of its buildings to an
unaffiliated third party for $8.2 million. A portion of the building houses
certain functions of the Company which were leased back from the purchaser. This
transaction resulted in a gain of approximately $5 million of which $3 million
was recognized in 1991 with the difference amortized to income over the life of
the lease.
(6) OTHER REAL ESTATE OWNED
Other real estate owned includes in-substance foreclosures of $8,448,000
and $8,197,000 at December 31, 1994 and 1993, respectively. The balance is
stated net of valuation allowances of $3,187,000 in 1994 and $6,553,000 in 1993.
In 1994 provisions charged to foreclosed asset and workout expense were
$3,093,000 and chargeoffs recorded against the valuation reserve were
$6,883,000.
The net cost of other real estate owned included in foreclosed asset and
workout expense in the income statement was $6,504,000, $21,256,000 and
$18,276,000 in 1994, 1993 and 1992, respectively. These costs include the
above-mentioned provisions to reflect reductions in net realizable value, net
gain or loss on sales and cost of maintaining and operating the properties.
(7) SHORT-TERM BORROWINGS
Short-term borrowings consisted of the following at December 31, 1994 and
1993:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Federal funds purchased........................................ $ 19,296 $ 35,913
Securities sold under agreements to repurchase................. 126,597 158,618
Treasury tax and loan note account............................. 13,096 30,751
Other.......................................................... 986
-------- --------
$158,989 $226,268
======== ========
</TABLE>
The weighted average interest rates at December 31, 1994 and 1993 were
4.74% and 3.35%. The average outstanding short-term borrowings were $180,325,000
in 1994 and $227,944,000 in 1993. The approximate weighted average interest
rates during the year were 3.46% in 1994 and 2.74% in 1993. The maximum amount
of short-term borrowings outstanding at any month end was $212,174,000 in 1994
and $320,338,000 in 1993.
42
<PAGE> 45
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) OTHER BORROWINGS
Other borrowings consisted of the following at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
UST Corp.
8.5% Senior Notes due in installments from 1992 - 1996.......... $8,000 $12,000
Guaranteed ESOP debt at 84% of the prime rate, as established,
due in installments to 1996.................................. 464 786
UST Capital Corp.
11.505% note to the Small Business Administration due 1995...... 1,500 1,500
------ -------
$9,964 $14,286
====== =======
</TABLE>
Payments required under the above obligations were $4,322,000 in 1994 and
will amount to $5,821,000 in 1995 and the balance of $4,143,000 in 1996.
During 1986, the Company issued $20,000,000 of 8.5% subordinated notes to
an insurance company. The debt is payable in annual installments of $4 million
from 1992 through 1996. Under the terms of the agreement, the Company may not
make dividend payments in excess of 60% of cumulative net earnings since
December 31, 1985 plus $7 million.
The Company has an employee stock ownership plan ("ESOP") which covers
substantially all of its employees. The plan is administered by a committee
designated by the Board of Directors and is maintained in a separate trust
established for that purpose. The trustee obtained third-party financing to
purchase shares of UST Corp. common stock and UST Corp. has guaranteed this
debt. The purchased shares are allocated to the participants on a pro-rata
basis, over the period in which they are earned.
(9) EMPLOYEE BENEFIT PLANS
The Company has a noncontributory retirement plan covering all employees
who meet specified age and employment requirements. The plan provides pension
benefits that are based on the employee's compensation during the highest
consecutive five of the last ten years before retirement. The following summary
sets forth the plan's funded status and amounts included in the Company's
consolidated balance sheets as of December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.......................................... $11,929 $12,120
Nonvested benefit obligation....................................... 314 360
------- -------
Accumulated benefit obligation..................................... 12,243 12,480
Effect of projected future compensation levels..................... 3,048 4,670
------- -------
Projected benefit obligation for service rendered to date............ 15,291 17,150
Plan assets, primarily listed stocks and U.S. bonds.................. 16,811 17,574
------- -------
Excess of plan assets over projected benefit obligation.............. 1,520 424
Unrecognized loss.................................................... 1,482 3,423
Unrecognized prior service asset..................................... (308) (32)
Unrecognized net transition asset.................................... (1,625) (1,895)
------- -------
Prepaid costs included in other assets............................... $ 1,069 $ 1,920
======= =======
</TABLE>
43
<PAGE> 46
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted-average discount rate and rate of increase of future
compensation levels used in determining the actuarial present value of the
projected benefit obligation was 8.5% and 5.0%, respectively, for 1994 and 7.0%
and 5.0%, respectively, for 1993. The expected long-term rate of return on
assets used was 9.0% and 9.5%, respectively, for 1994 and 1993.
Net pension cost (income) for 1994, 1993 and 1992 included the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost benefit earned during the period............. $ 1,050 $ 880 $ 866
Interest cost on projected benefit obligation............. 1,265 1,179 1,059
Return on plan assets..................................... 325 (1,232) (939)
Net amortization and deferral............................. (1,789) (463) (1,251)
------- ------- -------
Net pension cost (income)............................... $ 851 $ 364 $ (265)
======= ======= =======
</TABLE>
The Company has a qualified Profit-Sharing Plan covering substantially all
employees. Under the plan, up to six percent of net income before income taxes,
as defined, may be contributed to the profit-sharing trust. The Company did not
make a contribution to the profit-sharing trust in 1994, 1993 or 1992.
In January 1994, the Company added an Employee's Savings feature to the
existing Profit Sharing Plan that qualifies as a deferred salary arrangement
under Section 401(k) of the Internal Revenue Code. The new plan was named the
UST Corp. Employee Savings Plan. Under the Savings feature, participating
employees may defer a portion up to 8% of their pretax earnings not to exceed
the Internal Revenue Service annual contribution limits. The Company matches 25%
of each eligible employee's contributions up to 4% of the employee's earnings.
The Company made a matching contribution of $198,000 in 1994, the first year of
the new feature.
The Company also has an ESOP for substantially all employees. Under the
plan, the Company contributes either a fixed amount or a percentage of
compensation of all participants.
The Company has a Restricted Stock Ownership Plan adopted in 1989 for key
employees under which 448,375 shares of common stock have been granted. The
shares vest to the employee over varying schedules. In 1994, 56,701 restricted
shares vested under this plan. At December 31, 1994 there were 87,700 unvested
restricted shares outstanding.
Expenses (income) relating to the plans were as follows:
<TABLE>
<CAPTION>
PROFIT SHARING
YEAR ENDED EMPLOYEE RESTRICTED (INCLUDING
DECEMBER 31, PENSION STOCK OWNERSHIP STOCK SAVINGS FEATURE)
------------------------------ ------- --------------- ---------- ---------------------------
<S> <C> <C> <C> <C>
1994........................ $ 851 $ 425 $558 $ 198
1993........................ 364 319 399
1992........................ (265) 425 287
</TABLE>
(10) STOCK OPTIONS
The Company has a Stock Compensation Plan adopted in 1992 and amended in
1994, under the terms of which the Company may issue incentive stock options,
nonqualified stock options and shares of restricted stock. At December 31, 1994,
8,479 shares of the Company's common stock remained available for future grants
to officers and key employees. The Company's Stock Compensation Plan provides
that the number of shares of common stock reserved for future grants under the
plan be increased by an amount equal to 1.25 percent of the number of shares
outstanding on the first day of each fiscal year. As a result, as of January 1,
1995, 220,185 additional common shares were reserved for future grants.
44
<PAGE> 47
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1990, the stockholders approved a Directors Stock Option Plan under
which each outside director would receive a grant of 5,250 shares. The total
number of shares outstanding at December 31, 1994 were 47,250. All shares to
current outside directors have been granted. The Directors Stock Option Plan
terminates on March 18, 1995, any outstanding options on that date will expire.
The Company has a Directors Deferred Compensation Program under which up to
250,000 shares of the Company's common stock may be granted to Directors of the
Company or its banking subsidiaries who choose to receive their Director's fees
or stipend in shares of the Company in lieu of cash.
The following table presents the activity for the employee stock option
program under the Stock Compensation Plan for the years ended December 31, 1994,
1993, and 1992:
<TABLE>
<CAPTION>
NUMBER OF SHARES OPTION PRICE
UNDER OPTION PER SHARE TOTAL
---------------- ------------ ------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1994.................. 1,254,914 $5.00-$12.00 $ 10,620,728
1993.................. 656,859 $5.00-$9.00 $ 4,463,412
1992.................. 583,886 $5.00-$9.125 $ 3,596,327
Exercisable at December 31, 1994.................. 721,936 $5.00-$12.00 $ 5,910,636
1993.................. 290,492 $5.00-$8.62 $ 1,770,462
1992.................. 221,592 $5.00-$6.07 $ 1,344,923
Exercised during the year 1994.................. 123,108 $6.07-$8.62 $ 760,209
1993.................. 65,696 $6.07 $ 398,869
1992.................. 19,621 $6.07 $ 119,115
Granted during the year 1994.................. 1,004,500 $9.00-$13.38 $ 10,459,688
1993.................. 300,000 $7.50-$12.00 $ 2,700,000
1992.................. 32,100 $5.00-$9.13 $ 246,214
Cancelled during the year 1994.................. 283,337 $6.07-$13.38 $ 3,542,162
1993.................. 161,331 $6.07-$9.18 $ 1,434,063
1992.................. 26,890 $6.07 $ 163,261
</TABLE>
In December 1989, April 1990, April 1991, and December 1994, the Board of
Directors authorized an option substitution program permitting employees to
surrender options with an option price of more than $14.29, $10.00, $6.07, and
$9.75, respectively, in exchange for new options. Outstanding options for
149,331, 513,817, 516,502, and 273,500, respectively, were exchanged under the
program. Options were exchanged on a one-for-one basis at an option price of
$14.29, $10.00, $6.07, and $9.75, respectively, per share, the fair market value
of the Company's common stock on the date of authorization. The new options vest
ratably over a five-year period.
45
<PAGE> 48
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) INCOME TAXES
The income tax provision (benefit) shown on the consolidated statements of
income consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense (benefit):
Federal............................................ $(6,230) $ (8,302) $(6,513)
State.............................................. 1,147 1,285 2,476
------- -------- -------
(5,083) (7,017) (4,037)
------- -------- -------
Deferred tax expense (benefit):
Federal............................................ 6,588 (4,448) 1,550
State.............................................. 546 (46) (444)
------- -------- -------
7,134 (4,494) 1,106
------- -------- -------
Total...................................... $ 2,051 $(11,511) $(2,931)
======= ======== =======
</TABLE>
At December 31, 1994 and 1993, cumulative net deferred income tax benefits
amounting to $11,679,000 and $10,911,000 were included in the consolidated
balance sheets as other assets. Additionally, at December 31, 1994 and 1993
there were tax refund receivables of $2,998,000 and $9,549,000, respectively,
included in other assets.
The components of the net deferred tax asset were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Book provision for loan losses in excess of tax..................... $ 26,175 $ 26,253
Net operating losses(1)............................................. 12,207 1,700
Alternative minimum tax credit...................................... 4,988 6,239
Investment tax credits.............................................. 4,730 3,809
Book writedowns on foreclosed real estate, not deducted for tax..... 3,009
Deferred compensation benefits not deducted for tax................. 1,264 1,187
Tax deductions on leveraged leases deferred for book................ (17,226) (19,185)
Loan mark to market adjustment for tax.............................. (11,228) (7,390)
Securities mark to market adjustment deferred for tax............... (1,779) (2,832)
Tax basis in core deposits less than book........................... (850) (1,115)
Pension expense deducted for tax not book........................... (850) (1,043)
Tax basis in partnership investment less than book.................. (708) (597)
Cumulative tax depreciation in excess of book....................... (675) (781)
Valuation allowance (state)......................................... (365) (538)
Valuation allowance (federal)(1).................................... (6,017)
Other, net.......................................................... 2,013 2,195
-------- --------
Total deferred tax asset.................................. $ 11,679 $ 10,911
======== ========
---------------
<FN>
(1) The Company recorded a cumulative $5.4 million tax benefit net of a $6
million valuation allowance, related to the unrealized loss on securities
available-for-sale under SFAS No. 115. The Company recognized the
unrealized loss as a current deduction for income tax purposes which
contributed to the increase in net operating losses for 1994. In light of
the size of the unrealized loss and its current level of taxable income,
the Company concluded that full recognition of the deferred tax amount was
not appropriate and as such limited the amount of the recorded benefit to
$5.4 million at December 31, 1994.
</TABLE>
46
<PAGE> 49
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provisions for income taxes differ from the amounts computed by
applying the U.S. statutory Federal tax rate of 34% in 1994 and 1992 and 35% in
1993 to income (loss) before income taxes principally due to:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------ -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Tax (benefit) at statutory rate............................... $2,311 $(11,326) $(2,601)
Increases (reductions) from:
Tax-exempt income on investment securities and loans........ (676) (832) (1,082)
State income taxes, net of federal income tax benefit....... 1,118 818 1,340
Low income housing credits.................................. (911) (862) (750)
Other, net.................................................. 209 691 162
------ -------- -------
Tax expense (benefit) recorded................................ $2,051 $(11,511) $(2,931)
====== ======== =======
</TABLE>
(12) CAPITAL AND REGULATORY AGREEMENTS
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.
The Company and its banking subsidiaries' ability to pay dividends is
subject to certain limitations imposed by statutes of the Commonwealth of
Massachusetts and the State of Connecticut, and limitations imposed by bank and
bank holding company regulators. Massachusetts statutes restrict the amount of
dividends payable by banks to be the balance of their undivided profits, net of
any amount transferred to capital in excess of par value. In the case of
Connecticut law, the limit is undivided profits plus reserve for possible loan
losses. In any event, it is not likely that bank and bank holding company
regulators would allow an institution to dividend any amounts which would reduce
that institution's capital to below the minimum capital requirement in effect at
that time.
In 1992 the Company and its two Massachusetts-based banking subsidiaries,
United States Trust Company ("USTC") and USTrust, signed written agreements with
the Federal Reserve Bank of Boston ("FRB-Boston"), Federal Deposit Insurance
Corporation ("FDIC") and the Banking Commissioner of the Commonwealth of
Massachusetts ("Massachusetts Commissioner"). In accordance with the agreements
the Company agreed not to pay any dividends to stockholders, nor take any
dividends from its banking subsidiaries, without prior regulatory approval.
Similarly, the banking subsidiaries agreed to refrain from transferring funds in
the form of dividends to the Company without prior regulatory approval. In 1994,
the Company received a total of $3 million in dividends from USTC. During the
same period $4.9 million was contributed to UST/Conn and $500 thousand was
contributed to USTrust by the Company to supplement their respective equity
capital accounts.
The banks also agreed to, among other matters, maintain a Tier 1 leverage
capital ratio at or in excess of 6% beginning in February 1993. Tier 1 leverage
capital ratio is defined by the Company's federal regulators to be essentially
stockholders' investment, less intangible assets, divided by total average
assets, less intangible assets. Based on average total assets at December 31,
1994, the Tier 1 leverage capital ratio was 39.46% for USTC and 7.55% for
USTrust. In February 1994, the FDIC and the Massachusetts Commissioner
terminated and lifted the Consent Agreement and Order with USTC. Despite the
termination of its Regulatory Agreement, USTC has agreed to continue to request
regulatory consent prior to the payment of dividends.
Since June 1991, UST/Conn has been operating under a Stipulation and
Agreement with the Banking Commissioner of the State of Connecticut. This
agreement was amended in August 1992, November 1993
47
<PAGE> 50
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and July 1994 and requires, among other things, that UST/Conn maintain a Tier 1
leverage capital ratio of 6%. At December 31, 1994 UST/Conn Tier 1 leverage
capital ratio was 6.40%.
Additionally, the Company agreed to maintain Tier 1, Total risk-based and
Tier 1 leverage capital ratios which conform to the Capital Adequacy Guidelines
of the Board of Governors of the Federal Reserve System. At December 31, 1994,
the Company's Tier 1, Total risk-based capital and Tier 1 leverage ratios were
9.82%, 11.45% and 8.27%, respectively. The Company believes its consolidated
ratios meet the required minimums.
(13) RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company's banking subsidiaries have
granted loans to certain of the Company's directors and executive officers. All
such transactions are made on substantially the same terms as those prevailing
at the same time for individuals not affiliated with the Company and its
subsidiaries and at the time they were granted did not involve more than the
normal risk of collectibility. At December 31, 1994, none of these transactions
were on nonaccrual status, nor did they involve delinquent or restructured
loans. However, at December 31, 1994 loans to directors of the Company or to
their affiliated companies in the amount of approximately $14 million (all to
Director Francis X. Messina and his related interests) were characterized as
Substandard, 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.
However, the Substandard classification does not imply ultimate loss for each
individual asset so classified.
An analysis of loans outstanding in excess of $60,000 to directors and
officers related to the foregoing entities at December 31, 1994 is as follows:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS
<S> <C>
Balance, December 31, 1993......................... $ 44,497
Additions.......................................... 18,311
Repayments......................................... (13,298)
Other reductions(1)................................ (7,294)
--------
Balance, December 31, 1994......................... $ 42,216
========
---------------
<FN>
(1) Other reductions include repayment of loans to directors and officers who
ceased to be directors and officers of the Company or its subsidiary banks.
</TABLE>
(14) COMMITMENTS AND CONTINGENCIES
Commitments for leased premises expire at various dates through 2012. At
December 31, 1994, minimum rental commitments for noncancelable leases are as
follows:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS
<S> <C>
1995............................................... $ 3,955
1996............................................... 3,654
1997............................................... 3,520
1998............................................... 1,852
1999............................................... 1,088
thereafter......................................... 1,888
--------
Total.................................... $ 15,957
========
</TABLE>
Rent expense for the years ended December 1994, 1993 and 1992 was
$4,132,820, $3,932,074 and $4,432,156, respectively.
48
<PAGE> 51
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In the ordinary course of business, the Company and its subsidiaries become
defendants in a variety of judicial and administrative proceedings. In the
opinion of management there is no proceeding pending, or to the knowledge of
management threatened, which in the event of an adverse decision, would be
likely to result in a material adverse change in the financial condition or
results of operations of the Company and its subsidiaries.
(15) FINANCIAL INSTRUMENTS WITH ON- AND OFF-BALANCE SHEET RISK
The Company is party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, standby
letters of credit and financial guarantees. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount contained in
the balance sheet. The contract or notional amounts of those instruments reflect
the extent of involvement the Company has in particular classes of financial
instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument or commitments to extend credit and
standby letters of credit and financial guarantees written is represented by the
contractual notional amount of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as it does for
on-balance sheet instruments.
The Company generally requires collateral or other security to support
financial instruments with credit risk.
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL AMOUNT
-----------------------------
DECEMBER 31, DECEMBER 31,
1994 1993
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Financial instruments whose contract amount represents credit risk:
Commitments to extend credit..................................... $308,000 $268,000
Standby letters of credit and financial guarantees written....... 64,000 63,000
Commercial letters of credit..................................... 2,000 3,000
Foreign exchange................................................. 1,000 1,000
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract during its
term. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being fully drawn upon and, in fact, have a maturity
of less than one year, the total commitment amounts do not necessarily represent
future cash requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. Of the total commitments to extend credit,
approximately $71 million and $31 million were secured by real estate at
December 31, 1994 and December 31, 1993, respectively.
The amount of collateral obtained is based on management's evaluation of
the credit risk. Collateral held on commitments and loans varies but may include
cash, accounts receivable, inventory, property, plant and equipment.
Standby and commercial letters of credit and financial guarantees written
are conditional commitments issued by the Company to guarantee the performance
of, or payment by, a customer to a third party. Those guarantees are primarily
issued to support private borrowing arrangements. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
loan facilities to customers. The Company holds various collateral to support
these commitments including (but not limited to) cash, accounts receivables,
inventory, property plant and equipment. The extent of collateral held for those
commitments
49
<PAGE> 52
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
varies from zero to one hundred percent. Of the total standby and commercial
letters of credit, approximately $15 million and $4 million were secured by real
estate at December 31, 1994 and 1993, respectively.
The Company's primary loan market is the New England region. 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. Over 90% of the Company's outstanding
commercial and real estate loans are collateralized.
The Company enters into offsetting agreements to purchase foreign currency
and, in turn, sells it to its customers. These contracts carry credit risk
because, in the event the customer fails to take delivery of the foreign
currency, the Company is required to resell it to the open market.
The Company's securities portfolio consists largely of mortgage-backed
securities. These securities carry prepayment risk due to the fact that
prevailing interest rates could decline. Under such circumstances an unusually
high percentage of homeowners may choose to refinance their first mortgages to
take advantage of these lower rates with the result that, under the Company's
accounting policy, adjustments reducing gross unamortized premiums would be
required. See Note (1), Securities Policies.
In October 1994, the Financial Standards Board issued Statement of
Financial Accounting Standards No. 119 (SFAS No. 119), "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments," which
is effective for fiscal years ending after December 15, 1994. SFAS No. 119
requires certain disclosures about derivative financial instruments including
futures, forward swap and option contracts and other financial instruments with
similar characteristics. As of December 31, 1994, the Company had no investments
requiring disclosure under SFAS No. 119.
(16) PARENT COMPANY FINANCIAL INFORMATION
Summarized information relative to the balance sheets at December 31, 1994
and 1993 and statements of income and cash flows for the three years in the
period ended December 31, 1994 of UST Corp. are presented as follows. All
dividend income in the periods shown below are from banking subsidiaries:
BALANCE SHEETS -- PARENT COMPANY ONLY
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS:
Cash, due from banks and interest-bearing deposits................. $ 2,258 $ 2,269
Securities purchased under agreements to resell.................... 21,000
Securities available-for-sale...................................... 15,957
Investment in banking subsidiaries................................. 124,548 143,719
Investment in nonbanking subsidiaries.............................. 46 46
Premises, furniture and equipment, net............................. 69 72
Other assets....................................................... 3,084 4,578
-------- --------
Total assets............................................... $145,962 $171,684
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT:
Other borrowings................................................... $ 8,464 $ 12,786
Other liabilities.................................................. 4,864 6,079
Stockholders' investment........................................... 132,634 152,819
-------- --------
Total liabilities and stockholders' investment............. $145,962 $171,684
======== ========
</TABLE>
50
<PAGE> 53
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF INCOME -- PARENT COMPANY ONLY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------ -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Dividend income............................................... $3,000 $ 5,250
Undistributed equity in net income (loss) of subsidiaries..... 2,492 (24,065) $(4,219)
Other income.................................................. 731 292 902
------ -------- -------
6,223 (18,523) (3,317)
Expenses...................................................... 1,477 1,577 1,404
------ -------- -------
Net income (loss)........................................ $4,746 $(20,100) $(4,721)
====== ======== =======
</TABLE>
STATEMENTS OF CASH FLOWS -- PARENT COMPANY ONLY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1993 1992
-------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................. $ 4,746 $(20,100) $(4,721)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization.............................. 447 447 447
Undistributed (income) loss of affiliates.................. (2,492) 24,065 4,219
Gain on sale of securities................................. (5) (8)
Decrease (increase) in other assets........................ 536 (338) 837
Increase (decrease) in other liabilities................... 316 1,543 (2,122)
-------- -------- -------
Net cash provided (used) by operating activities...... 3,548 5,617 (1,348)
Cash flows provided (used) by investing activities
Sale of securities............................................ 19,961 26,700 4,791
Purchase of securities........................................ (35,912) (47,750) (4,700)
Net decrease in short-term investments........................ 21,000
Loans repaid by affiliates.................................... 10,450
Equity contributed to affiliates.............................. 5,400 (5,250) (6,261)
-------- -------- -------
Net cash provided (used) by investing activities...... (351) (26,300) 4,280
Cash flows provided (used) by financing activities
Gross repayment of other borrowings........................... (4,000) (4,000) (4,000)
Proceeds from issuance of common stock, net................... 792 23,677 1,652
-------- -------- -------
Net cash provided (used) by financing activities...... (3,208) 19,677 (2,348)
-------- -------- -------
Net increase (decrease) in cash and cash equivalents.......... (11) (1,006) 584
Cash and cash equivalents beginning of year................... 2,269 3,275 2,691
-------- -------- -------
Cash and cash equivalents end of year......................... $ 2,258 $ 2,269 $ 3,275
======== ======== =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest................................................... $ 938 $ 1,415 $ 1,753
======== ======== =======
Income taxes............................................... $ 180
=======
</TABLE>
51
<PAGE> 54
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash dividends paid to the Company in 1994 by consolidated bank
subsidiaries totaled $3,000,000 and $5,250,000 in 1993. There were no cash
dividends paid to the Company in 1992. No cash dividends were paid to the
Company by other subsidiaries in these years.
(17) FINANCIAL INSTRUMENTS
In December 1991, the FASB issued SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments." SFAS No. 107 requires disclosure of the fair
market value of financial instruments, whether assets, liabilities or
off-balance sheet commitments, if practicable. The following methods and
assumptions were used to estimate the fair value of each class of financial
instruments. Fair value estimates which were derived from discounted cash flows
or broker quotes cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of the
instrument.
Cash and due from banks, excess funds sold and other short-term investments
-- For these short-term instruments the carrying amount is a reasonable estimate
of fair value.
Securities available-for-sale -- For marketable securities fair values are
based on quoted market prices or dealer quotes.
Loans -- For certain homogeneous categories of loans, such as residential
mortgages and home equity loans, fair value is estimated based on broker quotes
on sales of similar loans. The fair value of fixed rate loans was estimated by
discounting anticipated future cash flows using current rates at which similar
loans would be made to borrowers with similar credit ratings and for the same
remaining maturities. The fair value of performing variable rate loans is the
same as the book value at the reporting date because the loans reprice when the
market changes.
Deposit liabilities -- The fair value of noncertificate deposit accounts is
the amount payable on demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated by discounting the
anticipated future cash payments using the rates currently offered for deposits
of similar remaining maturities.
Short-term borrowings -- For these short-term instruments the carrying
amount is a reasonable estimate of fair value.
Other borrowings -- The fair value of other borrowings were determined by
discounting the anticipated future cash payments by using the rates currently
available to the Company for debt with similar terms and remaining maturities.
Commitments to extend credit/sell loans -- The great majority of
commitments, standby letters of credit and commercial letters of credit are
short term in nature and therefore have been valued at their carrying amount.
Values not determined -- SFAS No. 107 excludes certain assets from its
disclosure requirements including real estate included in banking premises and
equipment, and the intangible value inherent in the Company's deposit
relationships (i.e., core deposits). Accordingly, the aggregate fair value
amounts presented below do not represent the underlying value of the Company.
52
<PAGE> 55
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amount and estimated fair values of the Company's financial
instruments at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------------------------- --------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial instrument assets:
Cash and due from banks................. $ 93,079 $ 93,079 $ 90,198 $ 90,198
Securities.............................. 401,574 401,571 473,909 473,909
Excess funds sold to banks and other
short-term investments............... 10,166 10,166 96,647 96,647
Loans, net.............................. 1,178,201 1,194,092 1,249,912 1,263,456
Financial instrument liabilities:
Deposits
Demand............................... $ 371,716 $ 371,716 $ 373,793 $ 373,793
Savings.............................. 453,784 453,784 491,566 491,566
Money market......................... 271,898 271,898 323,979 323,979
Time................................. 393,408 396,030 451,460 457,075
Short-term borrowings................... 158,989 158,989 226,268 226,268
Other borrowings........................ 9,964 10,267 14,286 15,362
Unrecognized financial instruments:
Commitments to extend credit............ $ 308,000 $ 308,000 $ 268,000 $ 268,000
Standby letters of credit and financial
guarantees written................... 64,000 64,000 63,000 63,000
Commercial letters of credit............ 2,000 2,000 3,000 3,000
</TABLE>
(18) OTHER NONINTEREST EXPENSE
The major components of other noninterest expense were:
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Legal and consulting...................................... $ 3,553 $ 1,801 $ 1,556
Equipment and furniture................................... 3,476 3,614 3,859
Advertising and promotion................................. 2,307 1,280 944
Amortization of intangibles............................... 1,367 1,367 1,367
Service bureau and other data processing.................. 1,173 1,151 1,298
Provision for losses from securitized loans............... 3,800
Special provisions for litigation......................... (750) 2,100
Other..................................................... 11,196 11,075 10,486
------- ------- -------
Total........................................... $23,072 $19,538 $25,410
======= ======= =======
</TABLE>
53
<PAGE> 56
UST CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(19) CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1994 FOR YEAR ENDED DECEMBER 31, 1993
------------------------------------- --------------------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income.............................. $34,238 $33,471 $32,715 $31,888 $34,013 $35,210 $ 35,410 $35,995
Interest expense............................. 10,287 9,806 10,037 10,083 10,862 11,725 12,229 13,128
Net interest income.......................... 23,951 23,665 22,678 21,805 23,151 23,485 23,181 22,867
Provision for possible loan losses........... 4,500 6,600 6,575 5,450 3,175 8,050 42,650 10,383
Net interest income (loss) after provision
for possible loan losses................... 19,451 17,065 16,103 16,355 19,976 15,435 (19,469) 12,484
Noninterest income........................... 7,241 7,578 7,616 7,899 7,247 8,078 8,857 12,541
Noninterest expense.......................... 24,752 23,140 22,021 22,598 25,149 20,656 27,887 23,818
Income tax expense (benefit)................. 576 447 375 653 540 834 (13,567) (68)
Net income (loss)............................ 1,364 1,056 1,323 1,003 1,534 2,023 (24,932) 1,275
Earnings (loss) per share.................... $ 0.08 $ 0.06 $ 0.07 $ 0.06 $ 0.09 $ 0.12 $ (1.76) $ 0.09
</TABLE>
As shown above, the Company has been modestly profitable throughout the
two-year period, except for the second quarter of 1993, due to the high
provision for possible loan losses.
In the second quarter of 1993, management changed its strategy regarding
troubled credit situations. While the change would result in the handling of
these situations in an expeditious manner, it was recognized that the up-front
costs of these workouts would increase. As a result, the reserve for possible
loan losses was increased by $19.8 million during the second quarter. To achieve
the higher reserve level, the Company recorded a $42.7 million provision for
possible loan losses in the second quarter. Included in that amount was a
special provision of $50 million. This special provision was management's
estimate of the additional losses to be incurred from the strategic change
referred to above and a continued sluggish economic climate.
In 1994 the Company continued with its strategy to reduce the level of
problem credits while maintaining its reserve for loan loss position. Net
chargeoffs during each quarter were almost entirely matched by provisions to the
loan loss reserve.
Noninterest income decreased after the first quarter of 1993 due to
decreases in gains on sale of securities and declines in service charges on the
deposit accounts and asset management fees. Noninterest expense reflects the
high level of expenses associated with foreclosed asset and loan workouts,
particularly in the second and fourth quarters of 1993 due to writedowns of
other real estate owned.
54
<PAGE> 57
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
-- NONE --
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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 control systems; (h)
improvements to the business information systems; and (i) improvements
concerning risk management and legal and regulatory compliance programs. As of
March 25, 1995, there were 10 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".
EXECUTIVE OFFICERS
The names and ages of the executive officers of the Company and each
executive officer's position with the Company and its principal 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.
<TABLE>
<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 (57)............. President and Chief Executive Officer and Director of
the Company and of USTrust
*Walter E. Huskins, Jr. (55)....... Executive Vice President/Administration of the Company,
USTrust and UST Bank/Connecticut
*Domenic Colasacco (46)............ Executive Vice President/Trust and Asset Management of
the Company and Chairman and President of USTC
*Eric R. Fischer (49).............. Executive Vice President, General Counsel and Clerk of
the Company and Executive Vice President, General
Counsel and Secretary of USTrust and USTC
*James K. Hunt (51)................ Executive Vice President, Treasurer, and Chief Financial
Officer of the Company and USTrust
*Linda J. Lerner (50).............. Senior Vice President/Human Resources of the Company,
USTrust and USTC
*Robert T. McAlear (52)............ Executive Vice President/Controlled Loans of the Company
and Vice Chairman of USTrust
*Kathie S. Stevens (44)............ Executive Vice President and Senior Lending Officer of
the Company and of USTrust
*Kenneth L. Sullivan (58).......... Senior Vice President/Operations of the Company and
President, UST Data Services Corp.
*Katharine C. Armstrong (50)....... Senior Vice President/Credit Administration of the
Company and of USTrust
George T. Clarke (48).............. Senior Vice President and Controller of the Company
---------------
<FN>
* Member, Executive Policy Committee
</TABLE>
55
<PAGE> 58
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. 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. Huskins also serves as
a Director of UST/Conn and as Chairman of the Board of UST Leasing Corporation.
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 trust and asset management and 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
and Financial Law Studies of Boston University School of Law. He also serves as
Executive Vice President, General Counsel and Secretary of USTC and USTrust, and
as Assistant Secretary of UST/Conn.
Mr. Hunt was elected Executive Vice President, Treasurer and Chief
Financial Officer of the Company and of USTrust in July 1994. Prior to joining
the Company, Mr. Hunt served as Executive Vice President at Peoples Bancorp of
Worcester, Inc., Worcester, Massachusetts, from August 1987 through May 1994.
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. McAlear was elected Executive Vice President/Controlled Loans of the
Company in 1994. He 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. 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 Senior Vice President/Operations of the Company
since 1994 and President of UST Data Services Corp. since he joined the Company
in 1988 to the present. In those capacities, 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, Massachusetts.
Ms. Armstrong was named Senior Vice President/Credit Administration of the
Company and USTrust in 1994. She has served in the credit administration and
credit risk control functions of USTrust since she
56
<PAGE> 59
joined the Company in 1985. Ms. Armstrong is the Chairman of the Senior Credit
Committee of the Company and USTrust.
Mr. Clarke was elected Senior Vice President and Controller of the Company
in 1994. Prior to 1994 he served as Vice President and Controller of the Company
since 1988. Before joining the Company, Mr. Clarke served as Deputy Comptroller
of The First National Bank of Boston.
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.
Other than the information provided in the preceding paragraphs of this
Item 10, this item has been omitted since the Company will have filed a
definitive proxy statement within 120 days after December 31, 1994, the close of
its fiscal year. The additional information required by this item is
incorporated by reference to such proxy statement.
ITEM 11. EXECUTIVE COMPENSATION
This item has been omitted since the Company will have filed a definitive
proxy statement within 120 days after December 31, 1994, the close of its fiscal
year. The information required by this item is incorporated by reference to such
proxy statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This item has been omitted since the Company will have filed a definitive
proxy statement within 120 days after December 31, 1994, the close of its fiscal
year. The information required by this item is incorporated by reference to such
proxy statement.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Executive Officers and
Directors are required by the SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, the
Company believes that, during 1994, all such filing requirements applicable to
its executive officers and directors were complied with by such individuals.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This item has been omitted since the Company will have filed a definitive
proxy statement within 120 days after December 31, 1994, the close of its fiscal
year. The information required by this item is incorporated by reference to such
proxy statement.
PART IV
ITEM 14. EXHIBITS. FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) List the following documents filed as part of this report:
1.All financial statements
UST Corp. and Subsidiaries
See Index to Financial Statements on page 30.
2. Financial statement schedules required to be filed by Item 8 of Form
10-K and by Item 14(d)
None (Information included in Financial Statements).
57
<PAGE> 60
3. Exhibits required to be filed by Item 501 of Regulation S-K and by Item
13(c)
(3) Articles: By-Laws
3(a) Articles of Organization of the Company as amended to date.*
3(b) By-laws of the Company as amended to date.*
(4) Instruments defining the rights of security holders, including
indentures:
4(a) Specimen of the Company's Common Stock Certificate. (Exhibit
4.1 to Registrant's Registration Statement No. 2-67787 on
Form S-l.)**
4(b) Description of rights of the holders of the Company's Common
Stock (Appearing on Page 76 of Registrant's Registration
Statement No. 33-11118 on Form S-4).**
4(c) Note Agreement, dated August 8, 1986, between the Company
and holders of the Company's 8.5% Senior Notes Due August 1,
1996. (Exhibit 4(d) to Registrant's Annual Report on Form
10-K for the year ended December 31, 1986.)**
(10) Material Contracts
10(a) Deferred Compensation Program, as amended to June 16, 1992.
(Exhibit to Form 10-K for year ended December 31, 1992)**
10(b) Incentive Stock Option Plan, as amended to May 15, 1990.
(Exhibit to Form 10-K for year ended December 31, 1992)**
10(c) Pension Plan, as amended to January 1, 1990. (Exhibit to
Form 10-K for year ended December 31, 1991)**
10(c)(i) December 20, 1994 Amendment to Pension Plan*
10(d) Employee Stock Ownership Plan, as amended to January 1,
1991. (Exhibit to Form 10-K for year ended December 31,
1991)**
10(d)(i) December 20, 1994 Amendment to Employee Stock
Ownership Plan*
10(e) Employee Savings Plan (formerly known as Profit-Sharing
Plan), as amended to January 1, 1991. (Exhibit to Form 10-K
for year ended December 31, 1991)**
10(e)(i) Amendment, as of January 1, 1994, to Employee
Savings Plan*
10(f) 1992 Stock Compensation Plan. (Registration Statement Nos.
33-54390 and 2-77803)**
10(f)(i) 1992 Stock Compensation Plan as amended and
restated on November 15, 1994 (subject to
stockholder ratification and approval)*
10(g) Dividend Reinvestment Plan, as amended. (Exhibit to
Registration Statement No. 33-38836 on Form S-3.)**
10(h) 1989 Directors Stock Option Plan (Exhibit to Form 10-K for
year ended December 31, 1989)**
10(i) 1995 Stock Option Plan for Non-Employee Directors (subject
to stockholder ratification and approval, and, as to the
specific award to James V. Sidell, subject to receipt of
regulatory clearance)*
10(j) Purchase Agreement, dated as of June 1, 1993, between the
Company and Kidder, Peabody Group, Inc. related to the
private placement of 500,000 shares of UST Corp. Common
Stock. (Exhibit to Form 8-K for quarter ended June 30,
1993)**
10(k) Registration Rights Agreement, dated as of June 1, 1993,
between the Company and Kidder, Peabody Group, Inc. related
to the private placement of 500,000 shares of UST Corp.
Common Stock. (Exhibit to Form 8-K for quarter ended June
30, 1993)**
58
<PAGE> 61
10(l) Employment Agreement, dated as of April 20, 1993, between
the Company and Neal F. Finnegan, President and Chief
Executive Officer of the Company. (Exhibit to Form 8-K dated
March 25, 1993)**
10(l)(i) Amendment to Employment Agreement with Neal F.
Finnegan*
10(m) Placing Agreement, dated July 28, 1993, between the Company
and Fox-Pitt Kelton N.V., relating to the placement overseas
of 2,870,000 shares of the Company's Common Stock. (Exhibit
to Form 10-Q for quarter ended September 30, 1993)**
10(n) Transition Agreement, dated as of June 30, 1993, between the
Company and James V. Sidell, former President and Chief
Executive Officer of the Company. (Exhibit to Form 10-Q for
quarter ended September 30, 1993)**
10(o) Separation Agreement dated August 16, 1993, between the
Company and Robert G. Truslow, former President of the
Company's wholly-owned subsidiary, USTrust. (Exhibit to Form
10-Q for quarter ended September 30, 1993)**
10(p) Separation Agreement, dated September 20, 1993, between the
Company and Frank A. Morse, former President of the
Company's wholly-owned subsidiary, UST Bank/Connecticut.
(Exhibit to Form 10-Q for quarter ended September 30,
1993)**
10(q) Separation Agreement, dated April 6, 1994, between the
Company and Theodore M. Shediac, former Chairman of the
Company's wholly-owned subsidiary, USTrust.*
10(r) Retirement Agreement, dated September 27, 1994, between the
Company and Paul M. Siskind, former Chairman of the Board of
the Company*
10(s) Separation Agreement, dated March 31, 1994, between the
Company and William C. Brooks, former Chief Financial
Officer and Treasurer of the Company*
10(t) Resignation Agreement, dated as of February 1, 1995, and
effective February 28, 1995, between the Company and James
M. Breiner, former Director of the Company and Chairman of
the Board of Directors of the Company's wholly-owned
subsidiary, UST Bank/Connecticut.*
10(u) Employment Agreement as of July 11, 1990, between USTrust
and Robert T. McAlear, effective August 31, 1990.*
10(v) Executive Employment Agreements with certain members of
the Company's Executive Policy Committee, effective
October 24, 1994:
10(v)(i) Employment Agreement between UST Corp. and Walter
E. Huskins, Executive Vice-President of the
Company*
10(v)(ii) Employment Agreement between UST Corp. and James
K. Hunt, Executive Vice President, Chief
Financial Officer and Treasurer of the Company*
10(v)(iii) Employment Agreement between UST Corp. and Eric
R. Fischer, Executive Vice President, General
Counsel and Clerk of the Company*
10(v)(iv) Employment Agreement between UST Corp. and Linda
J. Lerner, Senior Vice President/Human Resources
of the Company*
10(v)(v) Employment Agreement between UST Corp. and
Kenneth L. Sullivan, President, UST Data Services
Corp., a wholly-owned subsidiary of the Company*
10(v)(vi) Employment Agreement between UST Corp. and
Katharine C. Armstrong, Senior Vice
President/Credit Administration of the Company*
10(w) Severance Pay Plan, effective January 1, 1995*
59
<PAGE> 62
10(x) Senior Officer Severance Pay Plan, effective January 1,
1995*
10(y) Asset Management Employment Agreement by and among
Employee/Principals of the Asset Management Division of the
United States Trust Company and United States Trust Company
and UST Corp., effective as of January 1, 1995:
10(y)(i) Employment Agreement among UST Corp, USTC and
Domenic Colasacco, President of USTC, a wholly
owned subsidiary of the Company*
10(y)(ii) Employment Agreement among UST Corp., USTC and
Robert A. Lincoln, Senior Vice President, Senior
Portfolio Manager of USTC*
10(y)(iii) Employment Agreement among UST Corp., USTC and
Stephen K. Moody, Senior Vice President, Senior
Portfolio Manager of USTC*
10(y)(iv) Employment Agreement among UST Corp., USTC and
Lucia B. Santini, Senior Vice
President/Administrator of USTC*
10(y)(v) Employment Agreement among UST Corp., USTC and
Robert B. Zevin, Senior Vice President, Economist
and Senior Portfolio Manager of USTC*
10(z) Asset Management Unifying Agreement by and among
Employee/Principals of the Asset Management Division of the
United States Trust Company and United States Trust Company
and UST Corp., effective as of January 1, 1995*
(11) Statement re: computation of per share earnings (See Note 1 to the
Notes to Consolidated Financial Statements.)*
(21) Subsidiaries of the Registrant*
(23) Consent of Arthur Andersen LLP.*
(27) Article 9 Summary Financial Information for 12 months ended
December 31, 1994
---------------
* Filed herewith
** Filed as part of a previous Commission filing and incorporated herein by
reference.
(b) Reports on Form 8-K
A Report on Form 8-K was filed by the Company during the fourth quarter of
1994 on October 3, 1994 (Retirement and related resignation of Paul M. Siskind
as Chairman of the Board and as a Director of the Company).
(c) Exhibits being filed
See Exhibit Index
(d) Financial Statement Schedules included in Financial Statements.
60
<PAGE> 63
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UST CORP.
<TABLE>
<S> <C>
By s/ NEAL F. FINNEGAN By s/ JAMES K. HUNT
-------------------------------------------- --------------------------------------------
Neal F. Finnegan James K. Hunt
President and Executive Vice President and Treasurer
Chief Executive Officer (Principal Financial Officer and
(Principal Executive Officer) Principal Accounting Officer)
Date: March 21, 1995 Date: March 21, 1995
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
By s/ DOMENIC COLASACCO By s/ FRANCIS X. MESSINA
-------------------------------------------- --------------------------------------------
Domenic Colasacco, Director and Francis X. Messina, Director
Executive Vice President Date: March 21, 1995
Date: March 21, 1995
By s/ ROBERT L. CULVER By s/ GERALD M. RIDGE
-------------------------------------------- --------------------------------------------
Robert L. Culver, Director Gerald M. Ridge, Director
Date: March 21, 1995 Date: March 21, 1995
By s/ NEAL F. FINNEGAN By s/ SAMUEL B. SHELDON
-------------------------------------------- --------------------------------------------
Neal F. Finnegan, Director, Samuel B. Sheldon, Director
President and Chief Executive Officer Date: March 21, 1995
Date: March 21, 1995
By s/ WALTER A. GULESERIAN By s/ JAMES V. SIDELL
-------------------------------------------- --------------------------------------------
Walter A. Guleserian, Director James V. Sidell, Director
Date: March 21, 1995 Date: March 21, 1995
By s/ WALLACE M. HASELTON By s/ PAUL D. SLATER
-------------------------------------------- --------------------------------------------
Wallace M. Haselton, Director Paul D. Slater, Director
Date: March 21, 1995 Date: March 21, 1995
By s/ BRIAN W. HOTAREK By s/ WILLIAM SCHWARTZ
-------------------------------------------- --------------------------------------------
Brian W. Hotarek, Director William Schwartz, Director
Date: March 21, 1995 Date: March 21, 1995
By s/ MICHAEL J. VERROCHI
--------------------------------------------
Michael J. Verrochi, Director
Date: March 21, 1995
</TABLE>
61
<PAGE> 1
EXHIBIT 3(a)
[COMMONWEALTH OF MASSACHUSETTS] [OFFICE OF THE SECRETARY OF STATE]
RESTATED ARTICLES OF ORGANIZATION
This certificate must be submitted to the Secretary of the
Commonwealth within sixty days after the date of the vote of stockholders
adopting the restated articles of organization. The fee for filing this
certificate is prescribed by General Laws, Chapter 156B, Section 114. Make
check payable to the Commonwealth of Massachusetts.
We, James V. Sidell, President and Eric R. Fischer, Assistant Clerk of UST Corp
located at 40 Court Street, Boston, Massachusetts 02108, do hereby certify that
the following restatement of the articles of organization of the corporation
was duly adopted at a meeting held on May 17, 1988 by vote of The Board of
Directors in accordance with M.G.L.C. 156B, Sec. 74.
1. The name by which the corporation shall be known is: UST Corp.
2. The purposes for which the corporation is formed are as follows: To
purchase, receive, hold and own bonds, shares of capital stock, mortgages,
debentures, notes and other securities, obligations, contracts and evidences of
indebtedness of any private, public or municipal corporation or the government
of the United States or any State, territory or colony thereof or of any
foreign state or country, to receive, collect and dispose of interest,
dividends and income upon and from any of the bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations, contracts,evidences of
indebtedness and other property held or owned by it and to exercise in respect
of all such property any and all the rights, powers and privileges of
individual owners thereof. To carry on any business permitted by the laws of
the Commonwealth of Massachusetts to a corporation organized under Chapter 156B
and subject to Chapter 167A.
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized to issue is as follows:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE
CLASS OF STOCK NUMBER OF SHARES
-------------- ----------------
<S> <C>
Preferred NONE
Common NONE
</TABLE>
<TABLE>
<CAPTION>
WITH PAR VALUE
CLASS OF STOCK NUMBER OF SHARES PAR VALUE
-------------- ---------------- ---------
<S> <C> <C>
Preferred NONE NONE
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
Common 30,000,000 0.625
</TABLE>
4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each class
thereof and any series now established: NOT APPLICABLE
5. The restrictions, if any, imposed by the articles of organization upon
the transfer of shares of stock of any class are as follows: NONE
6. Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders: SEE ATTACHED
RIDERS A AND B.
RIDER A: LIABILITY OF DIRECTORS
A Director of this Corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director notwithstanding any provision of law imposing such
liability, provided, however, that this provision of Article 6 shall not
eliminate the liability of a director to the extent such liability is imposed
by applicable law (i) for any breach of the director's duty of loyalty to this
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
for any transaction from which the director derived an improper personal
benefit, or (iv) for paying a dividend, approving a stock repurchase or making
loans which are illegal under certain provisions of Massachusetts law, as the
same exists or hereafter may be amended. If Massachusetts law is hereafter
amended to authorize the further limitation of the legal liability of the
directors of this Corporation, the liability of the directors shall then be
deemed to be limited to the fullest extent then permitted by Massachusetts law
as so amended. Any repeal or modification of this provision of Article 6 which
may hereafter be effected by the stockholders of this Corporation shall be
prospective only, and shall not adversely affect any limitation on the
liability of a director for acts or omissions prior to such repeal or
modification.
RIDER B: INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
The Corporation shall to the fullest extent legally permissible indemnify each
person who is or was a director, officer, employee or other agent of the
Corporation and each person who is or was serving at the request of the
Corporation as a director, trustee, officer, employee or other agent of another
corporation or of any partnership, join venture, trust, employee benefit plan
or other enterprise or organization against all liabilities, costs and
expenses, including but not limited to amounts paid in satisfaction of
judgments, in settlement or as fines and penalties, and counsel fees and
disbursements, reasonably incurred by him in connection with the defense or
disposition of or otherwise in connection with or resulting from any action,
suit or other proceeding, whether civil, criminal, administrative or
investigative, before any court or administrative or legislative or
investigative body, in which he may be or may have been involved as a party or
otherwise or with which he may be or may have been threatened, while in office
or thereafter, by reason of his being or having been such a director, officer,
employee,
<PAGE> 3
agent or trustee, or by reason of any action taken or not taken in any such
capacity, except with respect to any matter as to which he shall have been
finally adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that his action was in the best
interests of the Corporation (any person serving another organization in one or
more of the indicated capacities at the request of the Corporation who shall
not have been adjudicated in any proceeding not to have acted in good faith in
the reasonable belief that his action was in the best interest of such other
organization shall be deemed so to have acted in good faith with respect to the
Corporation) or to the extent that such matter relates to service with respect
to an employee benefit plan, in the best interest of the participants or
beneficiaries of such employee benefit plan. Expenses, including but not
limited to counsel fees and disbursements, so incurred by any such person in
defending any such action, suit or proceeding, shall be paid from time to time
by the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the person
indemnified to repay the amounts so paid if it shall ultimately be determined
that indemnification of such expenses is not authorized hereunder.
If, in an action, suit or proceeding brought by or in the name of the
Corporation, a director of the Corporation is held not liable for monetary
damages, whether because that director is relieved of personal liability under
the provisions of this Article 6 of the Articles of Organization, or otherwise,
that director shall be deemed to have met the standard of conduct set forth
above and to be entitled to indemnification for expenses reasonably incurred in
the defense of such action, suit or proceeding.
As to any matter disposed of by settlement by any such person, pursuant to a
consent decree or otherwise, no such indemnification either for the amount of
such settlement or for any other expenses shall be provided unless such
settlement shall be approved as in the best interests of the Corporation, after
notice that it involves such indemnification, (a) by vote of a majority of the
disinterested directors then in office (even though the disinterested directors
be less than a quorum), or (b) by any disinterested person or persons to whom
the question may be referred by vote of a majority of such disinterested
directors, or (c) by vote of the holders of a majority of the outstanding stock
at the time entitled to vote for directors, voting as a single class, exclusive
of any stock owned by any interested person, or (d) by any disinterested person
or persons to whom the question may be referred by vote of the holders of a
majority of such stock. No such approval shall prevent the recovery from any
such officer, director, employee, agent or trustee of any amounts paid to him
or on his behalf as indemnification in accordance with the preceding sentence
if such person is subsequently adjudicated by a court of competent jurisdiction
not to have acted in good faith in the reasonable belief that his action was in
the best interests of the Corporation.
The right of indemnification hereby provided shall not be exclusive of or
affect any other rights to which any director, officer, employee, agent or
trustee may be entitled or which may lawfully be granted to him. As used
herein, the terms "director", "officer", "employee", "agent", and "trustee"
include their respective executors, administrators and other legal
representatives, an "interested" person is one against whom the action, suit or
other proceeding in question or another action, suit or other proceeding on the
same or similar grounds is then or had been pending or threatened, and a
"disinterested" person is a person against whom no such action,
<PAGE> 4
suit or other proceeding is then or had been pending or threatened.
By action of the board of directors, notwithstanding any interest of the
directors in such action, the Corporation may purchase and maintain insurance,
in such amounts as the board of directors may from time to time deem
appropriate, on behalf of any person who is or was a director, officer,
employee or other agent of the Corporation, or is or was serving at the request
of the Corporation as director, trustee, officer, employee or other agent of
another corporation or of any partnership, joint venture, trust, employee
benefit plan or other enterprise or organization against any liability incurred
by him in any such capacity, or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against such
liability."
*We further certify that the foregoing restated articles of
organization effect no amendments to the articles of organization of the
corporation as heretofore amended, except amendments to the following articles:
None
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed
our names this nineteenth day of May in the year 1988
/s/ James V. Sidell, President
/s/ Eric R. Fischer, Assistant Clerk
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
I hereby approve the within restated articles of organization and, the filing
fee in the amount of $150.00, having been paid, said articles are deemed to
have been filed with me this 25th day of May, 1988
MICHAEL JOSEPH CONNOLLY
Secretary of State
<PAGE> 5
[COMMONWEALTH OF MASSACHUSETTS]
[OFFICE OF THE SECRETARY OF STATE]
ARTICLES OF AMENDMENT
This certificate must be submitted to the Secretary of the
Commonwealth within sixty days after the date of the vote of stockholders
adopting the amendment- The fee for filing this certificate is prescribed by
General Laws, Chapter 156B, section 114 Make check payable to the Commonwealth
of Massachusetts.
We, William C. Brooks, Senior Vice President, and Eric R. Fischer, Assistant
Clerk of UST Corp. located at 40 Court Street, Boston, MA 02108 do hereby
certify that the following amendment to the articles of organization of the
corporation was duly adopted at a meeting held on May 21, 1991, by vote of
9,077,657 shares of Common Stock out of 13,089,148 shares outstanding, being at
least two-thirds of each class outstanding and entitled to vote thereon and of
each class or series of stock whose rights are adversely affected thereby:
VOTED: To create a class of Preferred Stock consisting of 4,000,000
authorized shares with a par value of $1 per share.
TO CHANGE the number of shares and the par value, if any, of each class of
stock within the corporation fill in the following:
The total presently authorized is:
<TABLE>
<CAPTION>
NO PAR VALUE WITH PAR VALUE
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
<S> <C> <C> <C>
COMMON NONE 30,000,000 $0.625
PREFERRED NONE NONE NONE
</TABLE>
CHANGE the total to:
<TABLE>
<CAPTION>
NO PAR VALUE WITH PAR VALUE
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
<S> <C> <C> <C>
COMMON NONE 30,000,000 $0.625
PREFERRED NONE 4,000,000 $1.000
</TABLE>
The foregoing amendment will become effective when these articles of amendment
are filed in accordance with Chapter 1 56B, Section 6 of The General Laws
unless these articles
<PAGE> 6
specify, in accordance with the vote adopting the amendment, a later
effective date not more than thirty days after such filing, in which event the
amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed
our names this 3rd day of July, in the year 1991
/s/ William C. Brooks, Sr Vice President
/s/ Eric R. Fisher, Assistant Clerk
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment and, the filing fee in the
amount of $4,000.00 having been paid, said articles are deemed to have been
filed with me this 3rd day of July, 1991
/s/ MICHAEL JOSEPH CONNOLLY
Secretary of State
<PAGE> 7
[COMMONWEALTH OF MASSACHUSETTS]
[OFFICE OF THE SECRETARY OF STATE]
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
We, William C. Brooks, Senior Vice President, and Eric R. Fischer, Clerk, of
UST Corp. located at: 40 Court Street, Boston, Massachusetts do hereby certify
that these ARTICLES OF AMENDMENT affecting Articles NUMBERED: 4 of the
Articles of Organization were duly adopted at a meeting held on December 6 1990
and adjourned and concluded December 18, 1990 by a vote of: 9,365,747 shares of
Common Stock out of 12,996,940 shares outstanding and at a meeting held on May
21, 1991 by a vote of: 9,077,657 shares of Common Stock out of 13,089,148
shares outstanding being at least two-thirds of each type, class or series
outstanding and entitled to vote thereon and of each type, class or series of
stock whose rights are adversely affected thereby:
To amend Article IV of the Restated Articles of Organization as follows:
(A) There shall be a class of common stock having a par value of $0.625 per
share consisting of 30,000,000 shares. The holders of record of such common
stock shall have one vote for each share of such common stock held by them,
respectively.
(B) There shall be a class of Preferred Stock consisting of 4,000,000 shares
with a par value of $1.00 per share. The shares of the Preferred Stock are to
be issuable at any time or from time to time in one or more series as and when
established by the Board of Directors, each such series to have such
designation, preferences, voting powers, qualifications and special or relative
rights or privileges as may be fixed by the Directors prior to the issuance of
any shares thereof, and each such series may differ from every other series
already outstanding as may be determined by the Directors prior to the issuance
of any shares thereof, including, but not limited to, any or all of the
following:
(a) the dividend rate or rates or the manner of determining the same
to which holders of the Preferred Stock of any such series shall be entitled
and whether dividends shall be cumulative or non-cumulative;
(b) the terms and manner of the redemption by the Corporation of the
Preferred Stock of any such series;
(c) the special or relative rights of the holders of the Preferred
Stock of any such series in the event of the voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or winding-up of the
Corporation;
(d) the terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of any such series;
(e) the right, if any, of the holders of Preferred Stock of any such
series to convert
<PAGE> 8
the same into stock of any other class or classes or into other
securities of the Corporation, and the terms and conditions of such conversion;
(f) the voting rights, if any, of the holders of Preferred Stock of
any such series; and
(g) such other respects as may at the time of the authorization of
such shares be permitted by applicable law.
The foregoing amendment will become effective when these articles of amendment
are filed in accordance with Chapter 156B, Section 6 of The General Laws unless
these articles specify, in accordance with the vote adopting the amendment, a
later effective date not more than thirty days after such filing, in which
event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed
our names this 24th day of December , in the year 1993 .
/s/ William C. Brooks, Senior Vice President
/s/ Eric R. Fischer, Clerk
I hereby approve the within articles of amendment and. the filing fee
in the amount of $100.00 having been paid, said articles are deemed to have
been filed with me this 24th day of December, 1993
/s/ MICHAEL J. CONNOLLY
Secretary of State
<PAGE> 1
EXHIBIT 3(b)
BY-LAWS
-------
OF
--
UST CORP
--------
ARTICLE I
---------
Stockholders
------------
1. ANNUAL MEETING. The annual meeting of stockholders shall be
held on the third Tuesday in May in each year (or if that be a legal holiday in
the place where the meeting is to be held, on the next succeeding full business
day) at 11:00 o'clock A.M. unless a different hour is fixed by the Directors or
the President and stated in the notice of the meeting. The purposes for which
the annual meeting is to be held, in addition to those prescribed by law, by
the Articles of Organization or by this By-Laws, may be specified by the
Directors or the President. If no annual meeting is held in accordance with the
foregoing provisions, a special meeting may be held in lieu thereof, and any
action taken at such meeting shall have the same effect as if taken at the
annual meeting.
2. SPECIAL MEETINGS. Special meetings of stockholders may be
called by the President or by the Directors. Upon written application of one or
more stockholders who hold at least 10% of the capital stock entitled to vote
at the meeting, special meetings shall be called by the Clerk, or in the case
of the death, absence, incapacity or refusal of the Clerk, by any other
officer. The call for the meeting shall state the date, hour and place and the
purposes of the meeting.
3. PLACE OF MEETINGS. All meetings of stockholders shall be
held at the principal office of the corporation unless a different place
(within the United States) is fixed by the Directors or the President and
stated in the notice of the meeting.
4. NOTICE OF MEETINGS. A written notice of every meeting of
stockholders, stating the place, date and hour thereof, and the purposes for
which the meeting is to be held, shall be given by the Clerk or by the person
calling the meeting at least seven days before the meeting to each stockholder
entitled to vote thereat and to each stockholder, who by law, by the Articles
of Organization or by these By-Laws is entitled to such notice, by leaving such
notice with him or at his residence or usual place of business, or by mailing
it postage prepaid and addressed to such stockholder at his address as it
appears upon the books of the corporation. No notice need be given to any
stockholder if a written waiver of notice, executed before or after the meeting
by the stockholder or his attorney thereunto authorized, is filed with the
records of the meeting.
<PAGE> 2
6. VOTING AND PROXIES. Each stockholder shall have one vote
for each share of stock entitled to vote held by him of record according to
the records of the corporation, unless otherwise provided by the Articles of
Organization. Stockholders may vote either in person or by written proxy dated
not more than six months before the meeting named therein. Proxies shall be
filed with the Clerk of the meeting, or at any adjournment thereof, before
being voted. Except as otherwise limited therein, proxies shall entitle the
persons name therein to vote at any adjournment of such meeting. A proxy with
respect to stock held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a stockholder
shall be deemed valid unless challenged at or prior to its exercise.
7. ACTION AT MEETING. When a quorum is present, the holders of
a majority of the stock present or represented and voting on a matter, (or if
there are two or more classes of stock entitled to vote as separate classes,
then in the case of each such class, the holders of a majority of the stock
of that class present or represented and voting on a Matter) except where a
larger vote is required by law, the Articles of Organization or these
By-laws, shall decide any matter to be voted on by the stockholders. Any
election by stockholders shall be determined by a plurality of the votes cast
by the stockholders entitled to vote at the election. No ballot shall be
required for such election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election. The
corporation shall not directly or indirectly vote any share of its stock.
8. ACTION WITHOUT MEETING. Any action to be taken by
stockholders may be taken without a meeting if all stockholders entitled to
vote on the matter consent to the action by a writing filed with the records
of the meetings of stockholders. Such consent shall be treated for all
purposes as a vote at a meeting.
ARTICLE II
----------
Directors
---------
1. POWERS. The business of the corporation shall be managed by
a Board of Directors who may exercise all the powers of the corporation except
as otherwise provided by law, by the Articles of Organization or by these
By-Laws. In the event of a vacancy in the Board of Directors, the remaining
Directors, except as otherwise provided by law, may exercise the powers of the
full Board until the vacancy is filled.
2. ELECTION OF DIRECTORS. The Board shall consist of such
number of Directors, which is a multiple of three, as is fixed by the
stockholders at any Annual or Special meeting or by the Direct B by vote of a
majority then in office. In no event, however, will the number of Directors be
less than three
<PAGE> 3
(3) nor more than twenty-four (24). Members of the Board of Directors shall
be divided into three (3) classes and the term of the three classes shall
expire in different succeeding years. Directors elected at an annual
meeting of stockholders shall be elected for three-year terms and until
their respective successors are duly elected and qualified.
3. VACANCIES. Any vacancy in the Board of Directors, other
than a vacancy resulting from the enlargement of the Board, may be filled by
the stockholders or, in the absence of stockholder action, by the Directors.
4. ENLARGEMENT OF THE BOARD. Subject to such numerical
limitations as may be imposed by law, the Articles of Organization, as amended,
or these By-Laws, the number of Directors constituting the Board of Directors
may be increased and one or more additional Directors elected at any meeting of
the stockholders or by the Directors by vote of a majority of the Directors
then in office.
5. TENURE. Except for the eleven (11) Directors elected at the
1981 annual meeting of stockholders, and the four (4) Directors appointed by
the Board of Directors prior to the 1982 annual meeting, and except as
otherwise provided by law, by the Articles of Organization or by these By-Laws,
each Director shall hold office for a term of three (3) years until the third
annual meeting of stockholders next following his election and until his
successor is duly chosen and qualified. Any Director may resign by delivering
his written resignation to the President, Clerk or Secretary of the
Corporation. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some
other event.
6. REMOVAL. A Director may be removed from office (a) with or
without cause by vote of a majority of the stockholders entitled to vote in
the election of Directors, provided that the Directors of a class elected by
a particular class of stockholders may be removed only by the vote of the
holders of a majority of the shares of such class or (b) for cause by vote of
a majority of the Directors then in office. A Director may be removed for
cause only after reasonable notice and opportunity to be heard before the body
proposing to remove him.
7. MEETINGS. Regular meetings of the Directors may be held
without call or notice at such places and at such times the Directors may
from time to time determine, provided that any Director who is absent when
such determination is made shall be given notice of the determination. A
regular meeting of the Directors may be held without a call or notice at the
same place as the annual meeting of stockholders, or the special meeting held
in lieu thereof, following such meeting of stockholders.
Special meetings of the Directors may be held at any time and
place designated in a call by the President, Treasurer or two or more
Directors.
8. NOTICE OF MEETINGS. Notice of all special meetings
of the Directors shall be given to each Director by the Secretary, or if
there be no Secretary, by the Clerk, or Assistant Clerk, or in case of the
death, absence, incapacity or refusal of such persons, by the officer or one
of the Directors calling the meeting. Notice shall be given to each Director
in person or by telephone or by telegram sent to his business or home address
at least twenty four hours in advance of the meeting, or by written notice
mailed to his business or home address at least
<PAGE> 4
forty-eight hours in advance of the meeting. Notice need not be given to any
Director if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any Director who
attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. A notice or waiver of notice of a Director's
meeting need not specify the purposes of the meeting.
9. QUORUM. At any meeting of the Directors, a
majority of the Directors then in office shall constitute a quorum. Less than
a quorum may adjourn any meeting from time to time without further notice.
10. ACTION AT MEETING. At any meeting of the Directors at
which a quorum is present, the vote of a majority of those present, unless a
different vote is specified by law, by the Articles of Organization, or by
these By-Laws, shall be sufficient to decide such matter.
11. ACTION BY CONSENT. Any action by the Directors
may be taken without a meeting if a written consent thereto is signed by all
the Directors and filed with the records of the Directors' meetings Such
consent shall be treated as a vote of the Directors for all purposes.
12. COMMITTEES. The Directors may, by vote of a majority of
the Directors then in office, elect from their number an executive or other
committees and may by like vote delegate thereto some or all of their powers
except those which by law, the Articles of Organization or these By-Laws they
are prohibited from delegating. Except as the Directors may otherwise
determine, any such committee may make rules for the conduct of its business,
but unless otherwise provided by the Directors or in such rules, its business
shall be conducted as nearly as may be in the same manner as is provided by
these By-Laws for the Directors.
13. ATTENDANCE. Any Director who fails to attend three (3)
consecutive Directors' meetings, or who fails to attend at least 50% of the
Directors' meetings in any calendar year, shall not be eligible for
re-election as a Director at the annual meeting of stockholders, unless prior
to such annual meeting of stockholders, such Director is declared eligible for
re-election by the unanimous vote of all members of the Board of Directors who
have fulfilled the foregoing attendance requirements.
ARTICLE III
-----------
Officers
--------
1. ENUMERATION. The officers of the Corporation shall
consist of a President, a Chairman of the Board of Directors ("Chairman"), a
Treasurer, a Clerk, and such other officers, including one or more Vice
Presidents, Assistant Treasurers, Assistant Clerks and Secretary as the
Directors may determine.
2. ELECTION. The President, Chairman, Treasurer and Clerk
shall be elected annually by the Directors at their first meeting following
the annual meeting of stockholders.
<PAGE> 5
3. QUALIFICATION. The President may, but need not be, a
Director. The Chairman must be a Director. No officer need be a stockholder.
Any two or more offices may be held by the same person, provided that the
President and Clerk shall not be the same person. The Clerk shall be a resident
of Massachusetts unless the Corporation has a resident agent appointed for
the purpose of service of process. Any officer may be required by the
Directors to give bond for his faithful performance of his duties to the
Corporation in such amount and with such sureties as the Directors may
determine.
4. TENURE. Except as otherwise provided by law, by the
Articles of Organization or by these By-Laws, the President, Chairman,
Treasurer and Clerk shall hold office until the first meeting of the Directors
following the annual meeting of stockholders and thereafter until his
successor is chosen and qualified; and all of the officers shall hold office
until the first meeting of the Directors following the annual meeting of
stockholders, unless a shorter term is specified in the vote choosing or
appointing them. Any officer may resign by delivering his written resignation
to the Corporation at its principal office or to the President, Chairman,
Clerk or Secretary, and such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the
happening of some other event.
5. REMOVAL. The Directors may remove any officer with or
without cause by a vote of a majority of the entire number of Directors then
in office, provided that an officer may be removed for cause only after
reasonable notice and opportunity to be heard by the Board of Directors prior
to action thereon.
6. PRESIDENT AND VICE PRESIDENT. The President shall
be the chief executive officer of the Corporation and shall, subject to the
direction of the Directors, have general supervision and control of its
business. Unless otherwise provided by the Directors he shall preside, when
present, at all meetings of stockholders and of the Directors.
Any Vice President shall have such powers as the Directors may
from time to time designate.
7. CHAIRMAN. The Chairman of the Board of Directors shall be a
Director of the Corporation and shall be elected by the Directors from among
their number. If the Board of Directors so designates, the Chairman may also
serve as the chief executive officer or the chief operating officer of the
Corporation, and shall in such event, subject to the direction of the Board
of Directors, have the general powers and duties of supervision and
management of the day-to-day business of the Corporation
and its officers and agents.
8. TREASURER AND ASSISTANT TREASURERS. The Treasurer
shall, subject to the direction of the Director, have general charge of the
financial affairs of the corporation and shall cause to be kept accurate
books of account. He shall have custody of all funds, securities, and
valuable documents of the corporation, except as the Directors may
<PAGE> 6
otherwise provide.
Any Assistant Treasurer shall have such powers as the
Directors may from time to time designate.
9. CLERK AND ASSISTANT CLERKS. The Clerk shall keep a
record of the meetings of stockholders. Unless a Transfer Agent is appointed,
the Clerk shall keep or cause to be kept in Massachusetts, at the principal
office of the corporation or at this office, the stock and transfer records
of the corporation, in which are contained the names of all stockholders and
the record address, and the amount of stock held by each. The Clerk need not
be sworn.
In case a Secretary is not elected, the Clerk shall keep a
record of the meetings of the Directors.
Any Assistant Clerk shall have such powers as the Directors
may from time to time designate. In the absence of the Clerk from any meeting
of stockholders, an Assistant Clerk, if one be elected, otherwise a Temporary
Clerk designated by the person presiding at the meeting, shall perform the
duties of the Clerk.
10. SECRETARY AND ASSISTANT SECRETARIES. If a Secretary is
elected, he shall keep a record of the meetings of the Directors and in his
absence, an Assistant Secretary, if one be elected, otherwise a Temporary
Secretary designated by the person presiding at the meeting, shall keep a
record of the meetings of the Directors.
Any Assistant Secretary shall have such powers as the
Directors may from time to time designate.
11. OTHER POWERS AND DUTIES. Each officer shall, subject to
these By-Laws, have in addition to the duties and powers specifically set
forth in these By-Laws, such duties and powers as are customarily incident to
his office, and such duties and powers as the Directors may from time to time
designate.
ARTICLE IV
----------
Capital Stock
-------------
1. CERTIFICATES OF STOCK. Each stockholder shall be entitled
to a certificate of the capital stock of the corporation in such form as may
be prescribed from time to time by the Directors. The certificate shall be
signed by the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, but when a certificate is countersigned by a transfer
agent or a registrar, other than a Director, officer or employee of the
corporation, such signatures may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed on such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such officer at
the time of its issue.
Every certificate for shares of stock which are subject to
any restriction on transfer pursuant to the Articles of Organization, the
By-Laws or any agreement to which the corporation is a party, shall have
<PAGE> 7
the restriction noted conspicuously on the certificate and shall also set forth
on the face or back either the full text of the restriction or a statement of
the existence of such restriction and a statement that the corporation will
furnish a copy to the holder of such certificate upon written request and
without charge. Every certificate issued when the corporation is authorized
to issue more than one class or series of stock shall set forth on its face
or back either the full text of the preferences, voting powers, qualifications
and special and relative rights of the shares of each class and series
authorized to be issued or a statement of the existence of such preferences,
powers, qualifications and rights, and a statement that the corporation will
furnish a copy thereof to the holder of such certificate upon written request
and without charge.
2. TRANSFERS. Subject to any restrictions on transfer which
may be set forth in this Article IV, shares of stock may be transferred on
the books of the Corporation or by the surrender to the Corporation or its
transfer agent of the certificate therefor properly endorsed or accompanied by
written assignment and power of attorney properly executed, with necessary
transfer stamp affixed, and with such proof of the authenticity of signature
as the Corporation or its transfer agent may reasonably require. Except as may
be otherwise required by law, by the Articles of Organization or by these
By-Laws, the Corporation shall be entitled to treat the record holder of stock
as shown on its books as the owner of such stock for all purposes, including
the payment of dividends and the right to vote with respect thereto, regardless
of any transfer, pledge or other disposition of such stock, until the shares
have been transferred on the books of the Corporation in accordance with the
requirements of these By-Laws.
It shall be the duty of each stockholder to notify the
Corporation of his post office address.
3. RECORD DATE. The Directors may fix in advance a
time of not more than sixty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend or the making of
any distribution to stockholders, or the last day on which the consent or
dissent of stockholders may be effectively expressed for any purpose, as the
record date for determining the stockholders having the right to notice of
and to vote at such meeting, and any adjournment thereof, or the right to
receive such dividend or distribution or the right to give such consent or
dissent. In such case only stockholders of record on such record date shall
have such right, notwithstanding any transfer of stock on the books of the
corporation, after the record date. Without fixing such record date, the
Directors may for any of such purposes close the transfer books for all or
any part of such period.
4. REPLACEMENT OF CERTIFICATES. In case of the alleged loss
or destruction or the mutilation of a certificate of stock, a duplicate
certificate may be issued in place thereof, upon such terms as the Directors
may prescribe.
ARTICLE V
---------
<PAGE> 8
MISCELLANEOUS PROVISIONS
------------------------
1. FISCAL YEAR. Except as from time to time otherwise
determined by the Directors, the fiscal year of the corporation shall be the
twelve months ending on the last day of December.
2. SEAL. The seal of the corporation shall bear its name, the
word "Massachusetts", and the year of its corporation.
3. EXECUTION OF INSTRUMENTS. All deeds, leases, transfers,
contracts, bonds, notes and other obligations authorized to be executed by an
officer of the corporation in its behalf shall be signed by the President or
the Treasurer except as the Directors may generally or in particular cases
otherwise determine.
4. VOTING OF SECURITIES. Except as the Directors may otherwise
designate, the President or Treasurer may waive notice of, and appoint any
person or persons to act as proxy or attorney in fact for this corporation
(with or without power of substitution) at any meeting of stockholders or
shareholders of any corporation or organization, the securities of which may
be held by this corporation.
5. CORPORATE RECORDS. The original, or attested copies, of
the Articles of Organization, By-Laws and records of all meetings of the
incorporators and stockholders, and the stock and transfer records, which shall
contain the names of all stockholders and the record address and the amount of
stock held by each, shall be kept in Massachusetts at the principal office of
the corporation, or at an office of its transfer agent or of the Clerk. Said
copies and records need not all be kept in the same office. They shall be
available at all reasonable times to the inspection of any stockholder for any
proper purpose but not to secure a list of stockholders for the purpose of
selling said list or copies thereof or of using the same for a purpose other
than in the interest of the applicant, as a stockholder, relative to the
affairs of the corporation.
6. ARTICLES OF ORGANIZATION. All references in these
By-Laws to the Articles of Organization shall be deemed to refer to the
Articles of Organization of the corporation, as amended and in effect from
time to time.
7. AMENDMENTS. These By-laws may at any time be amended by
vote of the stockholders, provided that notice of the substance of the
proposed amendment is stated in the notice of the meeting, or may be amended
by vote of a majority of the Directors then in office. No change in the
date of the annual meeting may be made within sixty days before the date
fixed in these By-Laws. Not later than the time of giving notice of the
meeting of stockholders next following the making, amending or repealing by the
Directors of any By-Law, notice thereof stating the substance of such change
shall be given to all stockholders entitled to vote on amending the By-Laws.
<PAGE> 9
8. OPT-OUT FROM CONTROL SHARE ACQUISITION PROVISIONS
OF MASSACHUSETTS LAW. Until such time as this Section 8 of Article V shall be
repealed or the By-Laws shall otherwise be amended to provide to the
contrary, in each case in accordance with Article V, Section 7 of these
By-Laws, the provisions of Chapter 110D of the Massachusetts General Laws,
including any successor provisions thereto, ("Chapter 110D") shall not apply
to "control share acquisitions" of the corporation or of shares of the
corporation's capital stock within the meaning of said Chapter 110D.
ARTICLE VI
----------
DIRECTORS: INDEMNIFICATION. ETC.
--------------------------------
1. INDEMNIFICATION. Indemnification of Directors, officers,
employees and agents of the corporation shall be treated the manner set forth
in Article 6 of the Articles of Organization of the corporation.
2. POWERS OF DIRECTORS. The board of directors may exercise
all the powers of the corporation, except those by which by law, by the
Articles of Organization or by these By-Laws are conferred upon or reserved
to the stockholders. In particular, and without limiting the generality of
the foregoing, the board of directors may, by a majority vote of the entire
Board, issue all or part of the unissued capital stock of the corporation
from time to time authorized under the Articles of Organization, and may
determine, subject to any requirements of law, the consideration for which
stock is to be issued and the manner of allocating such consideration
between capital and surplus.
3. RESIGNATION AND REMOVAL. Any director or officer may resign
at any time by delivering, by mail or otherwise, his resignation in writing
to the board of directors or to the clerk, which resignation shall be
effective upon receipt.
4. HONORARY DIRECTORS. One or more Honorary Directors
may be appointed by the Stockholders at the Annual Meeting or by the
Directors at any regular meeting or any special meeting called for that
purpose. Any Honorary Director may be removed by the Stockholders; an Honorary
Director appointed by the Directors may be removed by the Directors.
Honorary Directors shall serve until the next Annual Meeting of the
Stockholders, unless sooner removed. No Honorary Director shall be deemed to be
an officer or member of the Board of Directors, nor shall he or she be required
to attend meetings or be authorized or required to perform any duties.
Honorary Directors may attend meetings of the Board of Directors, but shall
have no vote.
<PAGE> 1
EXHIBIT 10(c)(i)
FOURTH AMENDMENT TO THE
UST CORP. PENSION PLAN
WHEREAS, The UST Corp. Pension Plan (the "Plan") was amended and restated
effective January 1, 1989; and
WHEREAS, Section 17.1 of the Plan gives UST Corp. the authority to amend the
Plan; and
WHEREAS, the Employer desires to amend the Plan in a manner which will expand
eligibility for early retirement effective January 1, 1995; and
WHEREAS, it is necessary to amend the Plan to comply with the Tax Reform Act of
1986 and other applicable laws; and
WHEREAS, the Sponsoring Employer intends that the Plan and Trust shall continue
to be recognized as a qualified pension plan under Sections 401(a) and 501(a)
of the Code;
NOW THEREFORE, in consideration of the foregoing, the Plan is hereby amended
effective as of January 1, 1989, unless otherwise specified herein as follows:
1. Section 1.9 shall be amended effective January 1, 1994 by
replacing the first sentence of the third paragraph with the
following:
"In no event shall a Participant's Compensation taken into
account under the Plan for any Plan Year commencing on or after
January 1, 1989 exceed $200,000 ($150,000 for Plan Years
beginning after December 31, 1993) or such other amount as the
Secretary of the Treasury may determine for such Plan Year under
Section 401(a)(17) of the Code. Any change to the amount set
forth in the preceding sentence as may be determined by the
Secretary of the Treasury shall apply only to Compensation taken
into account for the Plan Year in which such change is
effective."
2. Section 4.1 shall be amended effective January 1, 1994 by adding
the following paragraph to the end thereof:
"In the case of a Participant whose Compensation for a Plan Year
prior to January 1, 1994 exceeded $150,000, such Participant's
Accrued Benefit shall not be less than the Accrued Benefit
determined as of December 31, 1993."
3. Section 5.4(b) shall be amended by adding the following
parenthetical phrase "(or April 1, 1990, if later)" immediately
after the phrase "attains age 70 1/2," which appears in the
first paragraph.
<PAGE> 2
4. Section 6.1 shall be amended effective January 1, 1995 by
replacing "ten or more years" with "five or more years."
5. Section 8.3 shall be amended effective January 1, 1995 by
deleting the phrase "who has completed ten or more years of
Vesting Service."
6. Section 9.2 shall be amended effective January 1, 1995 by
replacing the phrase "If the Participant had completed ten or
more years of Vesting Service, the" with "The."
7. Section 10.4(f) shall be amended in its entirety to read as
follows:
"(f) Restriction on Payment Options. An election of an
optional form of payment under Section 10.3 shall not be
effective unless the benefit payable under the form of
payment elected satisfies the requirements of Proposed
Income Tax Regulation 1.401(a)(9)-2 or other applicable
law."
8. Section 10.5(a) shall be amended by replacing:
"(iii) The rights of the Participant's Spouse; and
(iv) The right to revoke and the effect of revocation of the
Participant's election."
with
"(iii) The rights of the Participant's Spouse;
(iv) The right to revoke and the effect of revocation of the
Participant's election;
(v) The eligibility conditions and material features of the
optional forms of payment available under the Plan;
(vi) The relative values of the optional forms of payment
available under the Plan; and
(vii) Such other information as may be required under
applicable regulations.
The notice described above is not required if the Actuarial
Equivalent value of the Participant's nonforfeitable Accrued
Benefit is less than or equal to $3,500 on the date the
Participant's benefit commences.
If the Actuarial Equivalent value of the Participant's vested
Accrued Benefit does
2
<PAGE> 3
not exceed $3,500 on the date the Participant's benefit
commences, the notice furnished by the Benefits Committee shall
include an explanation of: (1) the rules under which a
distribution may be made in a direct rollover to an eligible
retirement plan; (2) the tax withholding rules for direct
rollovers and for the 60-day rollover option; and (3) the
requirements for favorable tax treatment in accordance with
applicable law."
9. Section 10.9 shall be amended by adding the following paragraph
to the end thereof:
"Notwithstanding any provision of the Plan to the contrary, all
distributions under the Plan shall comply with the requirements
of Section 401(a)(9) of the Code."
10. A new Section 10.12 shall be added effective January 1, 1993 to
read as follows:
"This Section 10.12 shall apply only to distributions made
pursuant to Section 10.6.
Notwithstanding any provision of the Plan to the contrary, if
any distribution to a Participant, surviving Spouse or Alternate
Payee (i) is made on or after January 1, 1993, (ii) totals $200
or more, and (iii) constitutes an "eligible rollover
distribution" (within the meaning of Section 402(c)(4) of the
Code), the individual may elect on a form provided by the
Benefits Committee to have all or part of such eligible rollover
distribution paid in a direct rollover to an "eligible
retirement Plan" selected by the individual. For this purpose,
an "eligible retirement Plan" means:
(a) an individual retirement account described in Section
408(a) of the Code;
(b) an individual retirement annuity (other than an endowment
contract) described in Section 408(b) of the Code;
(c) with respect to Participants and Alternate Payees only, a
qualified defined contribution plan and exempt trust
described in Sections 401(a) and 501(a) of the Code
respectively, the terms of which permit the acceptance of
rollover contributions; or
(d) with respect to Participants and Alternate Payees only,
an annuity plan described in Section 403(a) of the Code.
If an election is made to have only a part of an eligible
rollover distribution paid in a direct rollover, the amount of
the direct rollover must total $500 or more.
If the Participant, Participant's surviving Spouse or Alternate
Payee does not make
3
<PAGE> 4
a timely election whether or not to directly roll over the
distribution, such distribution shall be made directly to the
applicable individual.
Direct rollovers shall be accomplished in accordance with
procedures established by the Benefits Committee."
11. Section 12.1(b) shall be amended effective January 1, 1987 by
replacing the second sentence with the following:
"The adjustment required pursuant to the preceding sentence for
any year shall be the cost of living adjustment that is
effective as of the January 1 that occurs in such year. No such
adjustment shall be taken into account before the year for which
such adjustment first takes effect."
12. Section 12.1(f) shall be amended effective January 1, 1987 by
deleting the last sentence which reads as follows:
"This paragraph shall be applied separately with respect to each
change in benefit structure as defined by Section 415(b)(5)(D)
of the Code and regulations."
13. Section 12.2 shall be amended effective January 1, 1987 by
adding the following paragraph to the end thereof:
"If the sum of a Participant's defined benefit plan fraction and
defined contribution plan fraction determined as of December 31,
1986 would have exceeded 1.0 had the provisions of this Article
12 as in effect after December 31, 1986 been used to compute
such sum, an amount shall be subtracted from the numerator of
the defined contribution plan fraction (not exceeding such
numerator) so that the sum of the defined contribution plan
fraction and defined benefit plan fraction as of the first day
of the Limitation Year beginning in 1987 does not exceed 1.0.
Such amount shall be equal to the product of:
(i) the sum of the defined contribution plan fraction plus
the defined benefit plan fraction as of the determination
date minus one, times
(ii) the denominator of the defined contribution plan fraction
as of the determination date."
14. Section 12.4 shall be amended effective January 1, 1994 by
replacing paragraphs (b) through (e) with the following:
"(b) For purposes of this Section 12.4, the following terms
shall have the
4
<PAGE> 5
indicated meaning:
(i) "Benefits" means the sum of the Participant's
Accrued Benefit and all other benefits to which
he is entitled under the Plan, but excluding any
death benefit provided for by insurance on the
Participant's life.
(ii) "Restricted Participant" means, with respect to a
Plan Year, a highly compensated employee who is a
Participant and who, if there are more than 25
highly compensated employees, is one of the 25
highly compensated employees with the highest
Total Annual Pay. An individual who is a
Restricted Participant in a Plan Year shall be a
Restricted Participant in a subsequent Plan Year
only if he satisfies the conditions of the
previous sentence in that subsequent Plan Year.
If more than one individual has the same Total
Annual Pay, the younger individual shall be
deemed to have the higher Total Annual Pay.
(iii) "Total Annual Pay" means, with respect to any
Plan Year, (A) in the case of a highly
compensated employee who is not currently
employed by an Employer or an Affiliated
Employer, the greater of his compensation (as
defined under Section 415 of the Code for the
Plan Year he ceased to be employed by an Employer
or Affiliated Employer or his earnings for the
Plan Year immediately preceding that Plan Year
and (B) in the case of a highly compensated
employee who is currently employed by an Employer
or Affiliated Employer, the greater of his
earnings for the Plan Year in question or for the
prior Plan Year.
(c) Subject to paragraph (d) below, a Restricted Participant
may not receive his benefits under this Plan in the form
of a single sum payment, or other benefit form under
which payments during a single year would exceed the
annual payments that would be made on behalf of the
Participant under a single life annuity that is the
Actuarial Equivalent of his Benefits.
(d) The limitation of paragraph (c) above shall not apply to:
(i) payment of benefits attributable to transferred
balances from defined contribution plans or to
employee contributions,
(ii) any payment, if the value of Plan assets after
such payment equals or exceeds 110 percent of the
value of the Plan's "current liabilities" (within
the meaning of Section 412(1)(7) of the Code),
5
<PAGE> 6
(iii) any payment, if the value of the Restricted
Participant's Benefits is less than one percent
of the value of such "current liabilities," or
(iv) any payment, if the value of the Restricted
Participant's Benefits does not exceed $3,500.
(e) In the event that Congress provides by statute, or the
Internal Revenue Service provides by regulation or
ruling, that the limitations set forth in this Section
12.4 are not necessary for the Plan to meet the
requirements of Section 401(a) or other applicable
provisions of the Code then in effect, such limitations
shall become void and shall no longer apply without the
necessity of further amendment to the Plan."
15. A new Section 12.5 shall be added to read as follows:
"12.5 TRANSITIONAL BENEFIT LIMITATIONS
Notwithstanding any other provision of the Plan to the
contrary, in calculating the Accrued Benefit (including
the right to any optional benefit provided under the
Plan) of any Participant, such Participant shall accrue
no additional benefit under the Plan on or after the
Effective Date to the extent that such additional benefit
accrual exceeds the benefit which would otherwise accrue
in accordance with the terms of the Plan as amended to
comply with the qualification requirements described in
IRS Regulations Section 1.401(b)-1(b)(2)(ii)."
16. Section 13.4 shall be amended by adding the phrase "and
discretion" immediately following "The Benefits Committee shall
have such power."
17. Section 14.5 shall be amended by adding the following paragraph
to the end thereof:
"The Plan Administrator or the Sponsoring Employer may direct
the Trustee to pay from the Trust Fund any or all expenses of
administering the Plan, to the extent such expenses are
reasonable. The Plan Administrator or the Sponsoring Employer
will determine what constitutes a reasonable expense of
administering the Plan, and whether such expenses shall be paid
from the Trust Fund. Any such expenses not paid out of the
Trust Fund shall be paid by the Sponsoring Employer; provided,
however, that to the extent permitted by ERISA, the Plan
Administrator or the Sponsoring Employer may direct the Trustee
to reimburse the Sponsoring Employer out of the Trust Fund for a
reasonable expense of administering the Plan which is paid by
the Sponsoring Employer prior to a determination with respect to
such
6
<PAGE> 7
expense."
18. A new Section 16.5 shall be added to read as follows:
"16.5 APPROVAL BY INTERNAL REVENUE SERVICE: MISTAKE OF FACT
Nothing herein shall prohibit return to an Employer, within
one year after payment, of excess sums contributed to the
Trust Fund as a result of a mistake of fact.
Each Employer contribution is hereby conditioned on the
current deductibility of the contribution under Section 404
of the Code, and to the extent such contribution deduction
is disallowed, the contribution shall be returned to the
Employer within one year after the date of disallowance."
19. A new Section 16.6 shall be added to read as follows:
"16.6 BENEFITS PAYABLE ONLY FROM TRUST FUND
All benefits payable under this Plan shall be paid or
provided for solely from the Trust Fund, and neither any
Employer nor its shareholder, directors, employees, or any
member of the Benefits Committee shall have any liability
or responsibility therefor. Except as otherwise provided
by law, no Employer assumes any obligations under this Plan
except those specifically stated in the Plan."
20. Section 17.1 is amended in its entirety to read as follows:
"17.1 AMENDMENT
(a) The Sponsoring Employer, by written action of its
Board (or, to the extent permitted by resolution
of such Board, by action of the Benefits Committee
or a duly authorized officer of the Sponsoring
Employer), shall have the right at any time and
from time to time to amend, in whole or in part,
any or all of the provisions of this Plan. No
such amendment shall, however:
(i) Authorize or permit any part of the Trust
Fund (other than such part as is required
to pay taxes and administrative expenses)
to be used for or diverted to purposes
other than for the exclusive benefit of
the Participants or their Beneficiaries or
estates prior to the satisfaction of all
liabilities with respect to the
7
<PAGE> 8
Participants or their Beneficiaries or
estates;
(ii) Cause any reduction in the Accrued Benefit
of any Participant, or the elimination of
any optional forms of benefit payment or
retirement type subsidies (as defined in
applicable regulations) except as
permitted by law;
(iii) Cause or permit any portion of the Trust
Fund to revert to or become the property
of the Employer except to the extent
provided under Sections 17.2 and 16.5; or
(iv) Amend the Plan or Trust in such manner as
would increase the duties or liabilities
of the Trustee or affect his fee for
services hereunder, unless the Trustee
consents thereto in writing;
unless such modification or amendment is necessary
or appropriate to enable the Plan or Trust Fund to
qualify under Section 401(a) of the Code, or to
retain for the Plan or Trust Fund its qualified
status.
(b) If any Plan amendment changes the vesting schedule
set forth in Section 8.1, each Participant who has
completed at least three years of Vesting Service
on the effective date of the change in vesting
schedule shall have his vesting percentage
computed in accordance with the vesting schedule
which produces the highest vested benefit.
(c) All provisions of this Plan, and all benefits and
rights granted hereunder, are subject to any
amendments, modifications or alterations which are
necessary from time to time to qualify this Plan
under Section 401(a) of the Code, to continue the
Plan as so qualified or to comply with any other
provision of law. Accordingly, notwithstanding any
other provision of this Plan, the Sponsoring
Employer may amend, modify, or alter this Plan
with retroactive effect in any respect or manner
necessary to qualify this Plan under Section
401(a) of the Code, or to continue this Plan as so
qualified or to comply with any other provision of
applicable law.
(d) If the effect of any amendment is to increase the
current liability (as defined in Section
401(a)(29)(E) of the Code) under the Plan for a
Plan Year, and the funded current liability
percentage of the Plan for the Plan Year in which
the amendment would otherwise take effect is less
than sixty percent (60%), including the amount of
the unfunded current liability under the Plan
attributable to the amendment, the amendment
8
<PAGE> 9
shall not take effect until the Employer or Sponsoring
Employer (or any Affiliated Employer) provides
security to the Plan. The form and amount of the
security shall satisfy the requirements of Section
401(a)(29)(B) and (C) of the Code. The security may
be released provided the requirements of Section
401(a)(29)(D) of the Code are satisfied."
21. Section 17.2 is hereby amended by inserting the phrase ", by
written resolution of the Board," immediately following the
phrase "In the event."
22. Section 17.5 is hereby amended by inserting the phrase ", by
written resolution of the Board," immediately following the
phrase "In the event."
IN WITNESS WHEREOF, UST Corp. has caused this Amendment to be executed by its
duly authorized officer and its corporate seal to be affixed hereto this 20th
day of December, 1994.
UST Corp.
By: /s/ Neal F. Finnegan
--------------------
9
<PAGE> 1
EXHIBIT 10(d)(i)
UST CORP. EMPLOYEE STOCK OWNERSHIP PLAN
(AMENDED AND RESTATED AS OF JANUARY 1, 1989)
SECOND AMENDMENT
WHEREAS, the UST Corp. Employee Stock Ownership Plan (the "Plan") was
amended and restated effective January 1, 1989; and
WHEREAS, Section 13.1 gives UST Corp. the authorization to amend the
Plan; and
WHEREAS, UST Corp. desires to amend the Plan to comply with the
Unemployment Compensation Amendments of 1992 and other subsequent legislation;
NOW, THEREFORE, UST Corp. hereby amends the Plan in the following
respects:
1. Section 1.4, "Alternate Payee," is hereby amended, effective
January 1, 1993, by adding the following sentence:
"For purposes of Section 6.15, the term "Alternate Payee"
excludes a child or other dependent of the Participant."
2. Section 1.12, "Compensation", is hereby amended by deleting
the third paragraph thereof in its entirety and inserting in
its place the following:
"In no event shall a Participant's Compensation taken into
account under the Plan for any Plan Year commencing on or
after January 1, 1989 exceed $200,000 ($150,000 for Plan Years
beginning on or after January 1, 1994), or such other amount
as the Secretary of the Treasury may determine for such Plan
Year in accordance with Section 401(a)(17) of the Code. Any
change in the dollar amounts set forth above as adjusted by
the Secretary of the Treasury in accordance with Section
401(a)(17) of the Code shall apply only to Compensation taken
into account for Plan Years beginning with the Plan Year in
which such increase is effective.
In determining the Compensation of a Participant for purposes
of this dollar limitation, the rules of Section 414(q)(6) of
the Code shall apply, except that in applying such rules, the
term 'family' shall include only the Spouse of the Participant
and any lineal descendants of the Participant who have not
attained age 19 before the close of such year."
<PAGE> 2
3. A new Section, Section 6.15, is added effective January 1,
1993:
"6.15 DIRECT ROLLOVER DISTRIBUTIONS
(a) Notwithstanding any provision of the Plan to the
contrary, if any distribution to a Participant,
surviving Spouse or Alternate Payee (i) is made on or
after January 1, 1993, (ii) totals $200 or more, and
(iii) constitutes an "eligible rollover distribution"
(within the meaning of Section 402(c)(4) of the
Code), the individual may elect on a form provided by
the Committee to have all or part of such eligible
rollover distribution paid in a direct rollover to an
"eligible retirement plan" (as defined in paragraph
(b) below) selected by the individual.
(b) The term "eligible retirement plan" means:
(i) an individual retirement account described in
Section 408(a) of the Code;
(ii) an individual retirement annuity (other than an
endowment contract) described in Section 408(b) of
the Code;
(iii) with respect to Participants and Alternate Payees,
a qualified defined contribution plan and exempt
trust described in Sections 401(a) and 501(a) of
the Code respectively, the terms of which permit
the acceptance of rollover contributions; or
(iv) with respect to Participants and Alternate Payees,
an annuity plan described in Section 403(a) of the
Code.
If an election is made to have only a part of an eligible rollover
distribution paid in a direct rollover, the amount of the direct rollover must
total $500 or more.
Direct rollovers shall be accomplished in accordance with procedures
established by the Committee, including, in the case of distributions not
subject to the consent requirements of Section 411(a)(11) of the Code,
procedures for affirmatively waiving the minimum notice period described in
Income Tax Regulation 1.402(c)-2T.
The procedures established by the Committee shall be made in accordance
with the rules set forth in Income Tax Regulation 1.401(a)(31)-1T."
4. Section 13.1, "Amendment," is hereby amended by deleting that
Section in its entirety and inserting in its place the
following:
"The Sponsoring Employer may, by written resolution of its
Board, amend this instrument, from time to time, by an
instrument in writing duly executed by the
<PAGE> 3
Sponsoring Employer and delivered to the Trustee, provided
that no amendment which affects the Trustee shall be effective
without the Trustee's consent."
5. Section 13.3, "Termination," is hereby amended by deleting the
first sentence of the first paragraph thereof and inserting in
its place the following:
"Sponsoring Employer may terminate the Plan established hereunder at its
option at any time by written resolution of its Board."
IN WITNESS THEREOF, UST Corp. has caused this amendment to be
executed by its duly authorized officer and its corporate seal to be
affixed hereto this 20th day of December, 1994.
UST Corp.
By:/s/ Neal F. Finnegan
--------------------
88951\amend.d2
<PAGE> 1
EXHIBIT 10(e)(i)
UST CORP.
EMPLOYEE SAVINGS PLAN
(AMENDED AND RESTATED EFFECTIVE
AS OF JANUARY 1, 1994)
<PAGE> 2
88951\ESPC2.PD
<PAGE> 3
UST CORP.
EMPLOYEE SAVINGS PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i)
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Year of Service . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 One-Year Break in Service . . . . . . . . . . . . . . . . . . . 13
2.4 Excluded Years of Service . . . . . . . . . . . . . . . . . . . 14
2.5 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3 PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Eligibility to Participate . . . . . . . . . . . . . . . . . . . 15
3.2 Elections Required . . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Reemployed Employee . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 4 PARTICIPANT CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1 Participant Contributions . . . . . . . . . . . . . . . . . . . 17
4.2 Increase or Decrease in Rate of Contributions . . . . . . . . . 17
4.3 Suspension and Resumption of Contributions . . . . . . . . . . . 18
4.4 Rollover Contributions . . . . . . . . . . . . . . . . . . . . . 18
4.5 Maximum Amount of Salary Deferral and Cash
Option Deferral . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 5 EMPLOYER CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 Employer Profit Sharing Contribution . . . . . . . . . . . . . . 22
5.2 Employer Matching Contributions . . . . . . . . . . . . . . . . 25
5.3 Deductibility of Employer Contributions . . . . . . . . . . . . 25
5.4 Form and Timing of Employer Contributions . . . . . . . . . . . 25
</TABLE>
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ARTICLE 6 INVESTMENT PROVISIONS AND PARTICIPANT ACCOUNTS . . . . . . . . . . . . . 26
6.1 Investment Funds . . . . . . . . . . . . . . . . . . . . . . . . 26
6.2 Investment Election . . . . . . . . . . . . . . . . . . . . . . 27
6.3 Change in Investment Election . . . . . . . . . . . . . . . . . 27
6.4 Responsibility of Participant in Selecting
Investment Funds . . . . . . . . . . . . . . . . . . . . . . . . 28
6.5 Establishment of Participant Accounts . . . . . . . . . . . . . 28
6.6 Fair Market Value of Trust Assets . . . . . . . . . . . . . . . 29
6.7 Allocation of Trust Assets . . . . . . . . . . . . . . . . . . . 29
6.8 Correction of Error . . . . . . . . . . . . . . . . . . . . . . 29
6.9 Allocation Shall Not Vest Title . . . . . . . . . . . . . . . . 30
ARTICLE 7 BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Nature of Benefits . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Medium and Method of Distribution . . . . . . . . . . . . . . . 31
7.3 Timing of Distribution . . . . . . . . . . . . . . . . . . . . 31
7.4 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.5 Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Permanent and Total Disability . . . . . . . . . . . . . . . . 35
7.7 Distribution on Death . . . . . . . . . . . . . . . . . . . . . 35
7.8 Distribution to Alternate Payees . . . . . . . . . . . . . . . 37
7.9 Investment of Deferred Distributions . . . . . . . . . . . . . 37
7.10 Designation of Beneficiary . . . . . . . . . . . . . . . . . . 37
7.11 Advice of Benefits . . . . . . . . . . . . . . . . . . . . . . 38
7.12 Incapacity . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.13 Proof of Claim . . . . . . . . . . . . . . . . . . . . . . . . 38
7.14 Mandatory Payment of Distributions to
Certain Participants at Age 70 1/2 . . . . . . . . . . . . . . 39
7.15 Direct Rollover Distributions . . . . . . . . . . . . . . . . . 39
ARTICLE 8 LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1 Loan Availability . . . . . . . . . . . . . . . . . . . . . . . 41
8.2 Loan Conditions . . . . . . . . . . . . . . . . . . . . . . . . 42
8.3 Loan Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.4 Loans to Parties-In-Interest . . . . . . . . . . . . . . . . . 44
8.5 In Service Withdrawals After Age 59 1/2 . . . . . . . . . . . . 44
</TABLE>
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<TABLE>
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ARTICLE 9 THE BENEFITS COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.1 Establishment and Composition . . . . . . . . . . . . . . . . . 46
9.2 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.3 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.4 Powers and Duties . . . . . . . . . . . . . . . . . . . . . . . 47
9.5 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.6 Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.7 Authority to Sign . . . . . . . . . . . . . . . . . . . . . . . 48
9.8 Administration . . . . . . . . . . . . . . . . . . . . . . . . 48
9.9 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . 48
9.10 Prudence . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.11 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.12 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . 49
9.13 Compliance in General . . . . . . . . . . . . . . . . . . . . . 49
9.14 Investment Policy . . . . . . . . . . . . . . . . . . . . . . . 49
9.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 10 TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.1 Investment Responsibility . . . . . . . . . . . . . . . . . . . 51
10.2 Investment Direction by the Benefits Committee . . . . . . . . 52
10.3 Custody . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.4 Disbursements and Distributions . . . . . . . . . . . . . . . . 52
10.5 Allocation of Responsibilities Among Trustees
Regarding Plan Assets . . . . . . . . . . . . . . . . . . . . . 52
10.6 Fiduciary Status . . . . . . . . . . . . . . . . . . . . . . . 53
10.7 Administrative Expenses; Advisors . . . . . . . . . . . . . . 53
10.8 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.9 Trustee's Miscellaneous Powers . . . . . . . . . . . . . . . . 53
10.10 Trustee's Accounts . . . . . . . . . . . . . . . . . . . . . . 54
10.11 Indemnification of Trustee . . . . . . . . . . . . . . . . . . 55
ARTICLE 11 TOP HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.1 Top Heavy Definitions . . . . . . . . . . . . . . . . . . . . . 56
11.2 Determination of Top Heavy Status . . . . . . . . . . . . . . . 58
11.3 Procedures in the Event of Top Heavy Status . . . . . . . . . . 59
</TABLE>
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<TABLE>
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ARTICLE 12 MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . 62
12.1 Spendthrift Provisions . . . . . . . . . . . . . . 62
12.2 Bonding . . . . . . . . . . . . . . . . . . . . . . 62
12.3 No Contractual Obligations . . . . . . . . . . . . 63
12.4 Limitations on Contributions . . . . . . . . . . . . 63
12.5 Nondiscrimination Limitations on Participant
Contributions and Employer Matching Contributions . . 67
ARTICLE 13 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . 75
13.1 Amendment . . . . . . . . . . . . . . . . . . . . . 75
13.2 Merger, Consolidation or Transfer of Assets . . . . 75
13.3 Termination . . . . . . . . . . . . . . . . . . . . 75
13.4 Consequences of Termination . . . . . . . . . . . . 76
</TABLE>
<PAGE> 7
PREAMBLE
WHEREAS, UST Corp. (the "Sponsoring Employer") established the UST Corp.
Profit Sharing Plan & Trust (the "Plan") effective as of January 26, 1967,
amended from time to time thereafter and restated effective as of January 1,
1984 to comply with voluntary and statutory changes; and
WHEREAS, the principal purposes of the Plan are to (a) set aside a
portion of the profits of the Sponsoring Employer and other participating
Employers from time to time for the distribution to, and the benefit of,
Eligible Employees, and (b) to facilitate systematic savings by Eligible
Employees with funds for their retirement or possible earlier needs; and,
therefore, this Plan was established as a profit sharing plan pursuant to
Section 401(a) of the Internal Revenue Code with a cash or deferred arrangement
pursuant to Internal Revenue Code Section 401(k); and
WHEREAS, the Sponsoring Employer also established this Plan for the
exclusive benefit of its, and for the participating Employers', Eligible
Employees and their Beneficiaries and, except as permitted by law, neither the
principal nor the income of the Plan are to be paid to or reinvested in the
Sponsoring Employer or any other Employer or be used for any purpose other than
the exclusive benefit of their Eligible Employees and their Beneficiaries by
providing benefits as set forth herein, and by defraying reasonable expenses of
administering the Plan; and
WHEREAS, the Sponsoring Employer desires to amend the Plan, effective
January 1, 1994, to expand the cash or deferred features under the Plan; and
WHEREAS, the Sponsoring Employer desires to change the name of the Plan,
effective January 1, 1994; and
WHEREAS, it is necessary to amend the Plan to comply with the Tax Reform
Act of 1986 and other applicable laws;
NOW, THEREFORE, in consideration of the foregoing, the Plan is hereby
renamed the UST Corp. Employee Savings Plan and is hereby amended and restated
as hereinafter set forth, effective January 1, 1994 unless specifically stated
otherwise. It is the intention of the Sponsoring Employer that the Plan as
herein amended and restated shall continue to be recognized as a qualified
profit sharing plan and trust under Sections 401(a) and 501(a) of the Internal
Revenue Code. It is further intended that the amended cash or deferral
arrangement
(i)
<PAGE> 8
forming part of the Plan shall continue to qualify under Section 401(k) of the
Internal Revenue Code. The provisions of the Plan as set forth in this
document shall apply only to an Eligible Employee who terminates employment
with the Sponsoring Employer or a participating Employer on or after the
effective date of a provision as set forth herein. The rights and benefits, if
any, of an Employee who terminated employment prior to the effective date of a
provision as set forth herein shall be determined in accordance with the
provisions of the Plan as in effect on the date his employment terminated.
(ii)
<PAGE> 9
ARTICLE 1
DEFINITIONS
1.1 "AFFILIATED EMPLOYER" means any of the following:
(a) Any corporation which is a member of a controlled group of
corporations which includes an Employer, determined under the
provisions of Section 414(b) of the Code;
(b) Any trade or business (whether or not incorporated) which is under
common control (as defined in Section 414(c) of the Code) with an
Employer;
(c) Any organization (whether or not incorporated) which is a member
of an affiliated service group (as defined in Section 414(m) of
the Code) which includes an Employer; and
(d) Any other entity required to be aggregated with an Employer
pursuant to regulations under Section 414(o) of the Code.
A corporation, trade or business, or member of an affiliated service
group shall be treated as an Affiliated Employer only while it is a
member of the controlled group.
1.2 "ADVANCE CONTRIBUTION ACCOUNT" means the account which may be
established under the Plan in accordance with Section 5.1(g).
1.3 "ALTERNATE PAYEE" means any Spouse, child, or other dependent of a
Participant recognized by a Qualified Domestic Relations Order as having
a right to receive all, or a portion of, the Participant's
nonforfeitable benefits under the Plan.
1.4 "BEFORE-TAX CONTRIBUTION" means a contribution to the Trust Fund which
is made on behalf of a Participant pursuant to a Salary Deferral
Agreement and which is not included in the Participant's gross income
for Federal income tax purposes for the year in which such contribution
was made.
1.5 "BENEFICIARY" means any one or more members of the Participant's family
or any other person or persons, executor, or administrator, or any
trust, foundation, or other entity
(1)
<PAGE> 10
designated by a Participant or by the terms of the Plan as provided in
Section 7.10, who is or who may become entitled to receive benefits from
the Plan. Any person who is an Alternate Payee shall be considered a
Beneficiary for purposes of the Plan.
1.6 "BENEFIT COMMENCEMENT DATE" means the first Valuation Date following the
date on which all events have occurred which entitles the Participant,
or Beneficiary, to a Plan distribution in accordance with the applicable
provisions of the Plan.
1.7 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of UST
Corp.
1.8 "CASH OPTION" means a Participant's annual option to receive the Cash
Option Share of the Employer Profit Sharing Contribution for a Plan Year
as an immediate cash payment, instead of deferring payment thereof, as
further described in Section 5.1(b).
1.9 "CASH OPTION DEFERRAL" means such amount of the Cash Option Share of the
Employer Profit Sharing Contribution in any Plan Year for which a
Participant has not elected to receive as an immediate cash payment.
1.10 "CHANGE DATE" means the last day of each March, June, September, and
December.
1.11 "CODE" or "INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended from time to time. Reference to a specific provision
of the Code shall include such provision, any valid regulation or ruling
promulgated thereunder, and any comparable provision of future law that
amends, supplements, or supersedes such provision.
1.12 "COMMITTEE" or "BENEFITS COMMITTEE" means the committee appointed by the
Board as set forth in Article 9.
1.13 "COMPENSATION" means, in the case of each Employee, all earned income
paid for services rendered by an Employee for an Employer as reported on
Federal Income Tax Form W-2, but excluding bonuses, incentive payments,
overtime pay, director's fees, retainers and travel allowances and any
income imputed as a result of group life insurance, any Employer
Contribution under this Plan or any other qualified plan of an Employer,
vacation pay, moving expenses, tuition reimbursement, and any other
forms of extraordinary earnings or the value thereof.
In the event an Employee has entered into a salary deferral agreement
under Section 401(k) of the Code or a salary reduction agreement
pursuant to a cafeteria plan established
(2)
<PAGE> 11
under Section 125 of the Code, Compensation shall be determined as if
such agreements did not exist.
In no event shall a Participant's Compensation taken into account under
the Plan for any Plan Year commencing on or after January 1, 1989 exceed
$200,000 ($150,000 for Plan Years beginning on and after January 1,
1994) or such other amount as the Secretary of the Treasury may
determine for such Plan Year under Section 401(a)(17) of the Code. In
determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply,
except that in applying such rules, the term family shall include only
the Spouse of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the close of such year.
1.14 "COMPENSATION DEFERRAL LIMIT" for any Plan Year means the maximum
percentage (determined in accordance with the provisions of Section
12.5) of an Employee's Compensation which may be contributed to the Plan
pursuant to a Salary Deferral Agreement and Cash Option Deferral. The
Benefits Committee shall establish the Compensation Deferral Limit for
each Plan Year for the purpose of meeting the nondiscrimination tests of
Sections 401(k) and 401(m) of the Code, and shall apply the limit to
such Employees as is necessary to assure compliance with such tests.
1.15 "CONTRIBUTION PERCENTAGE LIMIT" means the maximum percentage (determined
in accordance with the provisions of Section 12.5) of an Employee's
Compenation which may be contributed to the Plan as Employer Matching
Contributions under Section 401(m) of the Code. The Benefits Committee
shall establish the Contribution Percentage Limit for each Plan Year for
the purpose of meeting the nondiscrimination tests of Section 401(m) of
the Code, and shall apply the limit to such Employees as is necessary to
assure compliance with such tests.
1.16 "DETERMINATION YEAR" means the Plan Year that is being tested for
purposes of determining if an Employee is a Highly Compensated Employee.
1.17 "DISABILITY" means Permanent and Total Disability, as further described
in Section 7.6.
1.18 "DISABILITY RETIREMENT DATE" means the date on which a Participant's
employment terminates due to Disability.
1.19 "EFFECTIVE DATE" means January 1, 1994 for this amended and restated
Plan. The original Effective Date of the Plan was January 26, 1967.
(3)
<PAGE> 12
1.20 "ELIGIBLE EMPLOYEE" means any person who is an Employee of an Employer,
excluding, however:
(a) Any Employee who is a member of a unit of employees covered by a
collective bargaining agreement to which an Employer is a party
and which does not specifically provide for the coverage of such
employees under the Plan;
(b) Any Employee who is a nonresident alien receiving no earned income
from sources within the United States; or
(c) Any Employee who is a leased employee (within the meaning of
Section 414(n)(2) of the Code).
1.21 "EMPLOYEE" means any person currently employed by an Employer or
Affiliated Employer. The term Employee also includes any leased
employees of an Employer within the meaning of Section 414(n)(2) of the
Code. If, however, such leased employees constitute twenty percent or
less of the Employer's nonhighly compensated work force (within the
meaning of Section 414(n)(5)(C)(ii) of the Code), the term Employee
shall not include those leased employees covered by a plan described in
Section 414(n)(5) of the Code.
1.22 "EMPLOYER" means any of the following corporations:
(a) UST Corp.;
(b) United States Trust Company;
(c) USTrust/Norfolk;
(d) USTrust;
(e) UST Data Services Corp.;
(f) UST Bank/Connecticut;
(g) UST Capital Corp.;
(h) UST Leasing Corporation;
(i) UST Merchant Bancorp, Inc.;
(j) Property Research Group, Inc.; and
(k) each parent, subsidiary, affiliate, successor or other corporation
which has, by invitation by the Board and by action of its own
board, elected to join the Plan.
The term "EMPLOYER" as herein defined shall mean UST Corp., individually
or in combination with any or all such affiliates as the context may
require.
(4)
<PAGE> 13
1.23 "EMPLOYER CONTRIBUTIONS" means the total contribution made by the
Employer on behalf of a Participant for a Plan Year, comprising the
following contributions:
(a) "EMPLOYER PROFIT SHARING CONTRIBUTION" - The portion of Employer
Contributions consisting of profit sharing contributions made in
accordance with Section 5.1.
(b) "EMPLOYER MATCHING CONTRIBUTION" - The portion of Employer
Contributions consisting of matching contributions made in
accordance with Section 5.2.
1.24 "EMPLOYMENT COMMENCEMENT DATE" means the date on which an Employee is
first credited with an Hour of Service for an Employer or Affiliated
Employer, excluding, however, hours of service credited for an
Affiliated Employer prior to the date such Employer became an Affiliated
Employer, unless such hours are recognized by the Board.
1.25 "ENTRY DATE" means the first January 1 or July 1 of a Plan Year as
determined under Section 3.1(b).
1.26 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Reference to a specific provision of ERISA
shall include such provision, any valid regulation or ruling promulgated
thereunder, and any comparable provision of future law that amends,
supplements, or supersedes such provision.
1.27 "FORFEITURE ACCOUNT" means the Participant's Regular Profit Sharing
Account maintained separately on the books of the Plan by the Trustee
for each terminated Participant with a forfeitable balance.
1.28 "HIGHLY COMPENSATED EMPLOYEE" means, with respect to a Plan Year, any
Employee who performs services for an Employer or Affiliated Employer
during the Determination Year and who, during the Look-Back Year:
(a) Was a 5% owner (within the meaning of Section 416(i)(l)(B)(i) of
the Code) at any time during such year;
(b) Received compensation from an Employer or Affiliated Employer in
excess of $75,000 (as adjusted pursuant to Section 415(d) of the
Code);
(c) Received compensation from an Employer or Affiliated Employer in
excess of $50,000 (as adjusted pursuant to Section 415(d) of the
Code) and was among the top
(5)
<PAGE> 14
20% of Employees when ranked on the basis of compensation paid
during the Look-Back Year, excluding however, Employees who:
(i) are under age 21;
(ii) ordinarily work less than six months per year;
(iii) ordinarily work less than 17 1/2 hours per week;
(iv) are included in a unit of Employees covered by a
collective bargaining agreement if 90% or more of the
Employer's Employees are covered by collective bargaining
agreements and the Plan covers only those Employees who
are not covered by such agreements; or
(d) Was an officer of an Employer or Affiliated Employer and received
compensation during the Look-Back Year of more than 50% of the
dollar limitation in effect under Section 415(b)(1)(A) of the
Code. No more than 50 Employees (or, if lesser, the greater of 3
Employees or 10% of the Employees) shall be treated as officers.
If no officer has satisfied this requirement during the Look-Back
Year, the highest paid officer for that year shall be treated as a
Highly Compensated Employee.
Any Employee who during the Determination Year is either a 5% owner at
any time during such year, or who (i) satisfies the requirements in
paragraphs (b), (c), or (d) above, or if no officer satisfies the
requirements of paragraph (d) for that year, the highest paid officer
for that year, and (ii) is among the top 100 Employees ranked by
compensation for the Determination Year shall be treated as a Highly
Compensated Employee.
The term Highly Compensated Employee shall also include any former
Highly Compensated Employee who terminated employment with an Employer
or Affiliated Employer prior to the Determination Year, performs no
services for an Employer or Affiliated Employer during the Determination
Year, and was a Highly Compensated Employee in either his year of
termination of employment or in any Determination Year ending on or
after his attainment of age 55.
If an Employee is, during a Determination Year or Look-Back Year, a
member of the "family" (within the meaning of Section 414(q)(6)(B) of
the Code) of a 5% owner or of one of the ten most Highly Compensated
Employees when ranked on the basis of compensation paid during such
year, then such individual shall not be treated as a separate
(6)
<PAGE> 15
Employee and any compensation received by such individual and any
contribution or benefit of such individual shall be aggregated with the
compensation and contribution or benefit of the 5% owner or Highly
Compensated Employee.
For purposes of determining an Employee's compensation under this
Section, "COMPENSATION" shall mean the Employee's total compensation
reportable on Form W-2, plus amounts not otherwise recognized as
compensation because of Sections 125, 402(a)(8) and 402(h)(1)(B) of the
Code.
1.29 "HOUR OF SERVICE" means those hours set forth below:
(a) Employees will receive credit for an Hour of Service for each hour
they are paid, or entitled to payment, for the performance of
duties for an Employer or Affiliated Employer during the Plan
Year.
(b) Except to the extent limited by paragraph (d) below, Employees
will receive credit for an Hour of Service for each hour for which
they are directly or indirectly paid, or entitled to payment, on
account of a period of time during which no duties are performed
for an Employer or Affiliated Employer (irrespective of whether
their employment relationship has terminated) due to and in
accordance with procedures regarding vacation, holiday, illness,
incapacity (including Disability) layoff, jury duty, military
duty, Maternity/Paternity Leave, or Leave of Absence.
(c) Employees will also receive credit for an Hour of Service for each
hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by an Employer or Affiliated Employer,
but the same Hours of Service will not be credited both under
paragraph (a) or paragraph (b), as the case may be, and under this
paragraph (c). Hours credited under this paragraph (c) shall be
credited to the Plan Year in which the award or agreement
pertains, rather than to the Plan Year in which the award,
agreement or payment is made.
(d) Notwithstanding the provisions of paragraph (b) above,
(i) No more than 501 Hours of Service will be credited to an
Employee under paragraph (b) on account of any single
continuous period during which the Employee performs no
duties; except that if the Employee meets the "Disability"
requirements hereunder or is absent due to service in the
Armed Forces of the United States and returns with
reemployment rights under
(7)
<PAGE> 16
applicable Federal law(s), such Employee shall continue
to earn Hours of Service solely for eligibility and
vesting purposes based on the number of hours he worked
on an annual basis prior to his Disability or military
service, whichever is applicable.
(ii) No Hours of Service will be credited to an Employee for a
period during which no duties are performed if payment to
the Employee was made or due under a plan maintained
solely for the purpose of complying with workers'
compensation, unemployment compensation or disability
insurance laws.
(iii) No Hours of Service will be credited for a payment which
solely reimburses an Employee for medical or medically
related expenses incurred by the Employee or his
dependents.
The determination of Hours of Service shall be in accordance with
the rules set forth in the United States Department of Labor's
Rules and Regulations for Minimum Standards for Employee Pension
Benefit Plans, Section 2530.200b-2(b) and (c) which are
incorporated herein by this reference.
1.30 "INVESTMENT MANAGER" means any person, firm, or corporation who:
(a) is a registered investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company;
(b) has the power to manage, acquire, or dispose of Plan assets; and
(c) acknowledges in writing a fiduciary responsibility to the Plan.
1.31 "LEAVE OF ABSENCE" means a period during which an Employee is:
(a) temporarily absent due to sickness or disability, an authorized
vacation, or jury duty;
(b) on approved extended leave of absence for any reason as granted in
a non-discriminatory manner in writing by an Employer; provided
that the Employee returns to work promptly upon the expiration
thereof;
(8)
<PAGE> 17
(c) temporarily laid off, provided however, that no additional Hours
of Service shall be credited to the Employee or Participant, after
12 consecutive calendar months of layoff;
(d) absent due to service in the Armed Forces of the United States,
provided, however, that the Employee shall have returned to
employment with the Employer within 90 days after the termination
of such service or within such longer period as his employment
rights are protected by law;
(e) absent due to a Maternity/Paternity Leave of Absence.
For purposes of the Plan a "MATERNITY/PATERNITY LEAVE OF ABSENCE",
means an absence for any period by reason of the Employee's
pregnancy, birth of the Employee's child, placement of a child
with the Employee in connection with the adoption of such child,
or any absence for the purpose of caring for such child for a
period immediately following such birth or placement.
1.32 "LOAN" means the amount provided as a Loan under the Plan to
Participants, pursuant to Article 8.
1.33 "LOAN FUND" means the fund to be invested in Loans to Participants.
1.34 "LOOK-BACK YEAR" means the period of twelve consecutive months
immediately preceding the Determination Year. In determining the
identity of a Highly Compensated Employee, however, the Committee may
elect that the Look-Back Year shall be the calendar year ending with or
within the Determination Year.
1.35 "NONHIGHLY COMPENSATED EMPLOYEE" means an Employee who is not a Highly
Compensated Employee.
1.36 "NORMAL RETIREMENT DATE" means a Participant's 65th birthday.
1.37 "PARTICIPANT" means an Employee participating in the Plan in accordance
with Article 3.
1.38 "PLAN" means the UST Corp. Employee Savings Plan (formerly the "UST
Corp. Profit Sharing Plan") as herein set forth, or as hereafter may be
amended from time to time. The Plan is also a declaration of trust by
the Trustee.
(9)
<PAGE> 18
1.39 "PLAN ADMINISTRATOR" means the Benefits Committee which shall be
responsible for disclosure and reporting as required under applicable
law. Compliance with the disclosure and reporting requirements of ERISA
shall be sufficient to discharge any duty to account which would
otherwise exist regarding the Plan.
1.40 "PLAN YEAR" means the twelve month period commencing on January 1st and
ending on December 31st of each calendar year.
1.41 "QUALIFIED DOMESTIC RELATIONS ORDER" means a domestic relations order
which meets the requirements of Section 414(p) of the Code, as
determined by the Benefits Committee.
1.42 "ROLLOVER CONTRIBUTION ACCOUNT" means a rollover of a distribution from
a qualified plan or conduit individual retirement account to this Plan,
provided the distribution is:
(a) either received from a qualified plan prior to January 1, 1993 as
a "qualified total distribution" (within the meaning of Section
402(a)(5)(E) of the Code prior to amendment by the Unemployment
Compensation Amendments of 1992), or is received from a qualified
plan on or after January 1, 1993 as an "eligible rollover
distribution" (within the meaning of Section 402(c)(4) of the
Code);
(b) eligible for a tax-free rollover to a qualified plan; and
(c) either rolled over within 60 days following the date the Eligible
Employee received the distribution, or paid to the Plan as a
"direct rollover" (within the meaning of Section 401(a)(31) of the
Code).
A Rollover Contribution may not include amounts attributable to
voluntary deductible employee contributions.
1.43 "SALARY DEFERRAL AGREEMENT" means an agreement provided by the Benefits
Committee in which an Eligible Employee agrees, on or after January 1,
1994, to reduce his Compensation paid after the execution of such
agreement and to have the amount of such reduction contributed by the
Employer to the Trust Fund on behalf of the Eligible Employee pursuant
to Section 401(k) of the Code. An Eligible Employee may execute a new
Salary Deferral Agreement from time to time pursuant to Article 4.
1.44 "SPONSORING EMPLOYER" means UST Corp. or its successor or successors.
(10)
<PAGE> 19
1.45 "SPOUSE" means the person, if any, to whom the Participant is lawfully
married at the date of his death, or at his Benefit Commencement Date,
whichever is earlier, provided, however, that a former spouse will be
treated as the Participant's Spouse to the extent provided under a
Qualified Domestic Relations Order.
1.46 "TOTAL ACCOUNT" - means the total amounts held under the Plan for a
Participant, consisting of the following accounts:
(a) "BASIC BEFORE-TAX CONTRIBUTION ACCOUNT" - The portion of the
Participant's Total Account consisting of Basic Before-Tax
Contributions made in accordance with Section 4.1(a), plus (or
minus) any investment earnings (or losses) on such contributions,
less any distributions from such Account.
(b) "SUPPLEMENTAL BEFORE-TAX CONTRIBUTION ACCOUNT" - The portion of
the Participant's Total Account consisting of Supplemental
Before-Tax Contributions made in accordance with Section 4.1(b),
plus (or minus) any investment earnings (or losses) on such
contributions, less any distributions from such Account.
(c) "CASH OPTION DEFERRED ACCOUNT" - The portion of the Participant's
Total Account consisting of Cash Option Deferrals made in
accordance with Section 5.1, plus (or minus) any investment
earnings (or losses) on such contributions, less any distributions
from such Account.
(d) "EMPLOYER MATCHING CONTRIBUTION ACCOUNT" - The portion of the
Participant's Total Account consisting of Employer Matching
Contributions made in accordance with Section 5.2, plus (or minus)
any investment earnings (or losses) on such contributions, less
any distributions from such Account.
(e) "REGULAR PROFIT SHARING ACCOUNT" - The portion of the
Participant's Total Account consisting of the Regular Profit
Sharing Contribution of the Employer made in accordance with
Section 5.1, plus (or minus) any investment earnings (or losses)
on such contributions, less any distributions from such Account.
(f) "ROLLOVER ACCOUNT" - The portion of the Participant's Total
Account consisting of any Rollover Contributions made on behalf of
the Participant in accordance with Section 4.4, plus (or minus)
any investment earnings (or losses) on such contributions, less
any distributions from such Account.
(11)
<PAGE> 20
1.47 "TRUST FUND" means the assets of the Trust Fund held by the Trustee
hereunder.
1.48 "TRUSTEE" means United States Trust Company, a banking corporation
organized under the laws of the Commonwealth of Massachusetts, in its
capacity as Trustee hereunder and any corporation or one or more
individuals who may from time to time be appointed as successor Trustee
or Trustees. A person so appointed shall become Trustee upon delivery
to the Benefits Committee of his or its acceptance. The duties,
responsibilities and other pertinent information concerning the Trustee
are set forth in Article 10.
1.49 "VALUATION" means the valuation of the assets of the Trust Fund and
adjustment of Participants' Accounts.
1.50 "VALUATION DATE" means the last day of each June and December prior to
January 1, 1994 and the last day of each March, June, September and
December thereafter and such other dates as the Trustee and/or the
Benefits Committee deem appropriate.
1.51 "YEAR OF SERVICE" means such year as specified in Article 2.
1.52 The masculine gender wherever appearing in the Plan shall be deemed to
include the feminine gender and the singular to include the plural,
unless the context clearly indicates the contrary.
(12)
<PAGE> 21
ARTICLE 2
SERVICE
2.1 SERVICE
"SERVICE" means active employment with the Employer as an Employee. For
purposes of determining Service, employment with any Affiliated Employer
as specified in Section 1.1 of this Plan and certain periods of absence
due to Disability or military leave as specified in Section 1.31(d) of
this Plan, shall be treated as employment with the Employer for vesting
purposes, but not for purposes of allocations hereunder, unless
otherwise provided herein. Service with a predecessor organization of
the Employer also shall be treated as Service with the Employer if the
Employer maintains the Plan of such predecessor organization. In
addition, the Board may recognize employment with an Affiliated Employer
for vesting purposes prior to the date such entity became affiliated
with the Employer.
2.2 YEAR OF SERVICE
The term "YEAR OF SERVICE" means a Plan Year during which an Employee
has completed at least 1,000 Hours of Service.
2.3 ONE-YEAR BREAK IN SERVICE
The term "ONE-YEAR BREAK IN SERVICE" means any Plan Year during which an
Employee fails to complete more than 500 Hours of Service.
Notwithstanding the foregoing, for purposes of determining whether a
One-Year Break in Service has occurred, Hours of Service shall be
credited for periods during which the Employee is on a
Maternity/Paternity Leave of Absence, as follows. Hours of Service
shall be credited for the Plan Year in which the absence from work
begins, only if credit in such year is necessary to prevent the Employee
from incurring a One-Year Break in Service, or, in any other case, in
the immediately following Plan Year. The Hours of Service credited for
a Maternity/Paternity Leave of Absence shall be those which would
normally have been credited but for such absence, or, in any case in
which the Benefits Committee is unable to determine such hours normally
credited, eight Hours of Service per day. The total Hours of Service
credited for a Maternity/Paternity Leave of Absence shall not exceed
501.
(13)
<PAGE> 22
2.4 EXCLUDED YEARS OF SERVICE
In determining the vested percentage of an Employee in his Regular
Profit Sharing Account at any point in time, all Years of Service shall
be taken into account, except as follows. Years of Service prior to a
One-Year Break in Service shall be disregarded if:
(a) The Participant had no vested interest in the Employer's Regular
Profit Sharing Contributions at the time the break occurred; and
(b) The number of consecutive One-Year Breaks in Service equals or
exceeds the greater of:
(i) Five; or
(ii) The Participant's Years of Service at the time the break
occurred.
Notwithstanding any of the above, Years of Service prior to a One-Year
Break in Service will not count for purposes of determining an
Employee's vesting percentage until the Employee has completed one Year
of Service following the Employee's reemployment date.
2.5 TRANSFERS
(a) If an Employee transfers from employment not covered by this Plan
(e.g., employment pursuant to a collective bargaining agreement)
and subsequently becomes an Eligible Employee hereunder, all of
his Service from his first date of employment with the Employer
shall be considered for purposes of calculating his Service for
vesting.
(b) If an Eligible Employee or Participant transfers to a noncovered
job classification, (e.g., employment covered by a collective
bargaining agreement), he shall cease to participate in the
allocation of contributions and forfeitures hereunder, but he
shall continue to participate in the Plan for purposes of
determining the vested interest in his Regular Profit Sharing
Account pursuant to Article 7.
(14)
<PAGE> 23
ARTICLE 3
PARTICIPATION
3.1 ELIGIBILITY TO PARTICIPATE
(a) Current Participants
--------------------
Each Eligible Employee of the Employer who was participating in
the Plan on December 31, 1993 shall continue to participate
hereunder, and shall be eligible to have a Basic Contribution
made on his Contribution pursuant to Section 5.2 provided he has
made the required elections pursuant to Section 3.2.
(b) Participation on or after January 1, 1994
-----------------------------------------
(i) Each Employee of the Employer shall automatically become a
Participant in the Plan on the date he becomes an Eligible
Employee.
(ii) Effective January 1, 1994, each Participant shall, on the
first Entry Date coincident with or next following the
date on which he has completed at least 6 months of
Service, be eligible to have a Basic Contribution made on
his behalf pursuant to Section 4.1 and receive an Employer
Matching Contribution pursuant to Section 5.2 provided he
has made the required elections pursuant to Section 3.2.
3.2 ELECTIONS REQUIRED
Each Eligible Employee must, upon satisfying the eligibility
requirements of Section 3.1(b)(ii), make elections in the manner
provided under the Plan and execute such forms as required by the
Benefits Committee. Any elections made pursuant to Section 4.1 shall
become effective beginning with the first paycheck received by the
Eligible Employee on or after the Entry Date which is 30 or more days
after the date the Eligible Employee files his executed forms with the
Benefits Committee. A Participant's elections made pursuant to Section
4.1 shall remain in effect (subject to the contribution limitations
under Sections 4.5, 12.4, and 12.5) while the Participant is an Eligible
Employee or until such time as he files a new election on the
appropriate form with the Benefits Committee.
An Eligible Employee who becomes a Participant shall be entitled to
share in the Regular Profit Sharing Contribution allocations provided
under Article 5 for a Plan Year,
(15)
<PAGE> 24
regardless of any elections required under this Section or any elections
made by the Eligible Employee pursuant to Section 4.1.
3.3 REEMPLOYED EMPLOYEE
In the case of an individual who ceases to be an Employee and is
subsequently rehired as an Employee, he shall resume participation in
the Plan on the date he becomes an Eligible Employee. Such Eligible
Employee may resume making contributions or having contributions made on
his behalf under the Plan as of the Entry Date following his date of
reemployment provided he has satisfied the eligibility requirement under
Section 3.1(b) and he has made the required elections pursuant to
Section 3.2
(16)
<PAGE> 25
ARTICLE 4
PARTICIPANT CONTRIBUTIONS
4.1 PARTICIPANT CONTRIBUTIONS
Effective January 1, 1994, each Eligible Employee may, after satisfying
the eligibility requirements of Section 3.1(b)(ii), elect to have a
contribution made on his behalf to the Trust Fund at the rate of 1% to
8% of Compensation. The rate of contribution will be in increments of
1%. Such election shall be in the form of a Salary Deferral Agreement
and shall be subject to the Compensation Deferral Limit, if any,
applicable to such Participant as established by the Committee from time
to time for purposes of meeting the nondiscrimination tests of Section
401(k) of the Code. Contributions made in accordance with this Section
4.1, shall also be subject to the maximum limits in effect under
Sections 4.5 and 12.4.
A Participant's contributions may consist of Basic Before-Tax
Contributions and Supplemental Before-Tax Contributions as described
below:
(a) BASIC BEFORE-TAX CONTRIBUTIONS - The first 4% of Compensation
for a payroll period which is contributed on the Participant's
behalf under a Salary Deferral Agreement shall be known as the
Participant's Basic Before-Tax Contributions and shall be
contributed to the Participant's Basic Before-Tax Contribution
Account.
(b) SUPPLEMENTAL BEFORE-TAX CONTRIBUTIONS - Contributions made on
the Participant's behalf under a Salary Deferral Agreement in
excess of 4% of Compensation for a payroll period shall be known
as the Participant's Supplemental Before-Tax Contributions and
shall be contributed to the Participant's Supplemental Before-Tax
Contribution Account.
Contributions made pursuant to this Section 4.1 shall be made by the
Employer directly to the Trustee no less frequently than once per
calendar month.
4.2 INCREASE OR DECREASE IN RATE OF CONTRIBUTIONS
A Participant may elect to change the rate of his Before-Tax
Contributions, effective as of any Change Date, provided that at least
30 days in advance of such Change Date the Participant files with the
Benefits Committee a new Salary Deferral Agreement. A
(17)
<PAGE> 26
Participant's change in his rate of Before-Tax Contributions shall be
subject to the contribution limitations in effect under Sections 4.5,
12.4, and 12.5 at the time the change is made.
4.3 SUSPENSION AND RESUMPTION OF CONTRIBUTIONS
A Participant may elect to suspend his Before-Tax Contributions
effective as of the first day of any succeeding payroll period, provided
that at least 7 days in advance of such date the Participant files with
the Benefits Committee a new Salary Deferral Agreement. Before-Tax
Contributions may be resumed as of any January 1 or July 1 which
coincides with or next follows a six month period of suspension,
provided that at least 30 days in advance of such date the Participant
files with the Benefits Committee a new Salary Deferral Agreement.
A Participant may not make up suspended Before-Tax Contributions.
During a period of suspension, the Participant's Total Account will
continue to share in the investment experience of the Trust Fund, and
the Participant will remain entitled to those benefits and rights under
the Plan not conditioned on Before- Tax Contributions, including the
right to receive an allocation of Regular Profit Sharing Contributions,
if any, and the right to make an in-service withdrawal or receive a Plan
Loan.
A Participant's election to resume making Before-Tax Contributions shall
remain in effect while the Participant is an Eligible Employee or until
such time as he files a new election on the appropriate form with the
Benefits Committee. Any election to resume making Before-Tax
Contributions shall be subject to the contribution limitations in effect
under Sections 4.5, 12.4, and 12.5.
4.4 ROLLOVER CONTRIBUTIONS
(a) ROLLOVERS - An Eligible Employee may file a written request with
the Benefits Committee to accept his Rollover Contribution. Any
such request shall state the amount of the Rollover Contribution
and include a statement that such contribution constitutes a
Rollover Contribution.
The Benefits Committee shall determine, in accordance with a
uniform and nondiscriminatory policy, whether or not such
contribution shall be accepted, and may require the Eligible
Employee to submit such other evidence and documentation
(18)
<PAGE> 27
as the Benefits Committee determines necessary to ensure that
the contribution qualifies as a Rollover Contribution.
All Rollover Contributions must be made in cash.
The amount paid to the Trust Fund in the form of a Rollover
Contribution and any subsequent investment experience on such
amount shall be credited to the Participant's Rollover Account.
(b) An Eligible Employee shall have at all times a nonforfeitable
interest in 100% of his Rollover Contribution, and any investment
experience on such amount.
(c) At the time the Rollover Contribution is made to the Trust Fund,
the Eligible Employee must elect to have it invested in
accordance with the terms of Section 6.2.
(d) An Eligible Employee who makes a Rollover Contribution to the
Trust Fund shall be deemed to be a Participant with respect to
such amount for all purposes of the Plan, except for purposes of
Sections 2.1 through 2.5, Sections 4.1 through 4.3, Sections 5.1
and 5.2, and Section 12.5.
(e) In no event shall any Rollover Contribution be subject to
Employer Matching Contributions.
4.5 MAXIMUM AMOUNT OF SALARY DEFERRAL AND CASH OPTION DEFERRAL
(a) On or after January 1, 1987, contributions made during a
Participant's taxable year (which is presumed to be the calendar
year) on behalf of the Participant under a Salary Deferral
Agreement and Cash Option Deferral shall be limited to $7,000 (or
such other limit as may be in effect at the beginning of such
taxable year under Section 402(g)(1) of the Code), reduced by the
amount of "elective deferrals" (as defined in Section 402(g)(3)
of the Code) made during the taxable year of the Participant
under any plans or agreements maintained by the Employer or an
Affiliated Employer other than this Plan. Elective deferrals
shall not include any elective deferrals returned to the Employee
pursuant to Section 12.4(d).
(b) If contributions made on a Participant's behalf for the preceding
taxable year of the Participant under a Salary Deferral
Agreement, and Cash Option Deferral, and any other elective
deferrals (within the meaning of Section 402(g)(3) of the Code)
made
(19)
<PAGE> 28
on the Participant's behalf under any other qualified cash or deferred
arrangement of the Employer or Affiliated Employer for such taxable year
exceed $7,000 (or such other amount as adjusted in accordance with
paragraph (a) above), the Participant shall notify the Benefits
Committee in writing within two months following the close of such
taxable year of the amount of such excess. Such notification shall
include a statement that if such amounts are not distributed, the excess
deferral amount, when added to amounts deferred under other plans or
arrangements described in Section 401(k), 408(k), or 403(b) of the Code,
will exceed the limit imposed on the Participant by Section 402(g) of
the Code for the taxable year of the Participant in which the deferral
occurred.
If the elective deferral limit is exceeded for a Participant for a
taxable year, the excess amount, adjusted (as described below) for
allocable gains or losses for the taxable year with respect to which the
deferral was made, shall be refunded to the Participant in a single
payment no later than 3 1/2 months following the Participant's taxable
year following the taxable year in which such excess deferral arose. If
the Participant's Before-Tax Contribution Account and/or Cash
Option Deferred Account is invested in more than one investment fund,
such refund shall be made pro rata, to the extent practicable, from all
such investment funds. The amount refunded shall not exceed the
Participant's Before-Tax Contributions and Cash Option Deferrals under
the Plan for the taxable year. If the foregoing refund is made, the
payment shall be deemed to have been made before the close of the
taxable year in which such excess deferral arose. Any Employer Matching
Contributions made with respect to returned excess deferral amounts
shall be forfeited.
Excess deferrals shall be adjusted for allocable gains or losses for the
taxable year in which the excess deferrals arose by multiplying the
gains or losses credited to the Participant's Basic and Supplemental
Before-Tax Contribution Accounts and Cash Option Deferred Account for
that taxable year by a fraction, the numerator of which is the excess
deferral amount made by the Participant for the taxable year, and the
denominator of which is the sum of (i) the balance in the Participant's
Basic and Supplemental Before-Tax Contribution Accounts and Cash
Option Deferred Account as of the beginning of the taxable year, and
(ii) the amount of Before-Tax Contributions and the Cash Option Share
credited to the Participant's Basic and Supplemental Before-Tax
Contribution Accounts and Cash Option Deferred Account for the taxable
year.
(20)
<PAGE> 29
If the Participant fails to notify the Benefits Committee by the
2-month period specified above, no refund will be made.
(21)
<PAGE> 30
ARTICLE 5
EMPLOYER CONTRIBUTIONS
5.1 EMPLOYER PROFIT SHARING CONTRIBUTION
(a) AMOUNT
An Employer may make a profit sharing contribution to the Trust
Fund, as of the end of each Plan Year, in such amount as is
determined in the discretion of the Board prior to the date on
which the contribution is required to be made.
For purposes of this Section, "NET PROFITS" means the net income
of the Employer before payment of any Federal and/or state income
taxes and/or any other Federal taxes imposed on or measured by
net income for the taxable year in question, determined in
accordance with generally accepted accounting principles,
provided, however, that in computing the Net Profits for any
taxable year, neither the amount of the contribution to be made
under this Plan nor the amount of any contribution made by the
Employer under any other plan qualified under Section 401(a) of
the Code shall be included among the deductions.
The Employer Profit Sharing Contribution shall consist of two
parts as described below:
(i) REGULAR PROFIT SHARING CONTRIBUTION - The portion of the
Employer Profit Sharing Contribution equal to 66-2/3% of
the total Employer Profit Sharing Contribution.
(ii) CASH OPTION SHARE - The portion of the Employer Profit
Sharing Contribution equal to 33-1/3% of the total
Employer Profit Sharing Contribution.
(b) CASH OPTION
(i) CASH OPTION ELECTION
Within a reasonable time prior to the close of each Plan
Year, the Trustee shall deliver to each Participant a Cash
Option election form. Pursuant to such form, each
Participant may elect in writing by the end of the Plan
Year
(22)
<PAGE> 31
to receive in cash his Cash Option Share. Any election
under this Section shall be irrevocable for the year in
which such election is made.
If a Participant fails to make an election to receive an
immediate cash payment of the Cash Option Share under this
Section, it shall be assumed that he intended to have his
Cash Option Share deferred and credited to his Cash Option
Deferred Account.
(ii) PAYMENT OF CASH OPTION SHARE
The Cash Option Share which a Participant elects to
receive in cash shall be paid to him as soon as
practicable after the year for which the election is made,
which generally shall be either February or March of such
following year; provided that in any event such payment
shall be made within any time limits prescribed by
applicable law.
(c) ALLOCATION OF EMPLOYER PROFIT SHARING CONTRIBUTIONS
The Trustee shall make an allocation under this Section 5.1(c)
and Section 7.5 to the Regular Profit Sharing Account and, if
applicable, the Cash Option Deferred Account of each Participant
who completed a Year of Service during, and is employed on the
last day of, the Plan Year to which the Employer Profit Sharing
Contribution relates. The Trustee shall allocate a portion of
the current Employer Profit Sharing Contribution to each such
Participant equal to a fraction as described below:
(i) The numerator shall be the Participant's Compensation for
the Plan Year,
(ii) The denominator shall be the total Compensation for all
Participants eligible to share in the contribution for
the Plan Year.
(d) ALLOCATION AMONG TOTAL ACCOUNT
As of the last day of each Plan Year, the Trustee shall allocate
to the Regular Profit Sharing Account and, if applicable, the
Cash Option Deferred Account of each Participant entitled, in
accordance with Section 5.1(c), to share in the Employer's Profit
Sharing Contribution and forfeitures for such Plan Year, an
amount (computed in dollars) equal to his proportionate share of
the Employer's Profit Sharing Contribution and forfeitures for
such Plan Year, as set forth in Sections
(23)
<PAGE> 32
5.1(c) and 7.5, respectively. Except as provided in Section
5.1(b), one third of the Employer's Profit Sharing Contribution
made on behalf of a Participant shall be credited to the
Participant's Cash Option Deferred Account. The remaining
portion of the Employer's Profit Sharing Contribution, together
with the Participant's share of forfeitures, shall be allocated
to the Participant's Regular Profit Sharing Account.
(e) SHARING OF EMPLOYER PROFIT SHARING CONTRIBUTION
To the extent an Employer is prevented from making a Profit
Sharing Contribution under this Section 5.1, because such
Employer has no current or accumulated Net Profits or because
such profits are less than the contributions it otherwise would
have made, the following shall occur. Such prevented
contribution shall be made by the other Employers out of their
Net Profits, provided that the contributions of these Employers
shall be limited, in cases which the Employers do not file a
consolidated Federal Corporate income tax return, as follows.
The amount contributed shall equal the proportion of each such
Employer's Net Profits remaining after adjustment for its
deductible contribution without regard to Section 404(a)(3)(B) of
the Code which the total prevented contribution bears to the Net
Profits of all the Employers remaining after adjustment for all
deductible contributions without regard to said Code Section.
(f) RESPONSIBILITY OF COMMITTEE AND TRUSTEE
If no contribution under this Section shall be made for any year,
the Employer shall so advise the Benefits Committee and the
Trustee. Neither the Trustee nor the Benefits Committee shall be
under any duty to inquire into the correctness of the amounts
contributed and paid over to the Trustee hereunder or to
determine whether any contribution is payable under this Section
5.1 or to enforce payment of any contribution by the Employer.
(g) ADVANCE CONTRIBUTIONS
The Employer, at any time, may make payments on account of its
contribution for the year. Such payment shall constitute a part
of the Trust Fund upon receipt by the Trustee but may be
segregated in an Advance Contribution Account which shall be held
in cash or such other property as may be permissible under
applicable law. The total market value of such Advance
Contribution Account on the last day of the
(24)
<PAGE> 33
Plan Year, together with any other contribution by the Employer,
shall be allocated as provided in Section 5.1(c).
5.2 EMPLOYER MATCHING CONTRIBUTIONS
As of each Valuation Date, an Employer Matching Contribution shall be
credited to the Employer Matching Contribution Account of each
Participant who made Basic Before-Tax Contributions to the Trust Fund
since the previous Valuation Date and who is employed by the Employer on
said Valuation Date. The amount of Employer Matching Contributions made
on behalf of each such Participant shall be 25% of the Participant's
Basic Before-Tax Contributions made since the previous Valuation Date.
No Employer Matching Contributions shall be made with respect to
Supplemental Before-Tax Contributions or Cash Option Deferrals made by
or on behalf of any Participant.
5.3 DEDUCTIBILITY OF EMPLOYER CONTRIBUTIONS
The Employer shall not make any Employer Contributions to the extent
such Contributions would exceed the maximum amount allowable as a
deduction under Section 404 of the Code for the Plan Year in question,
giving effect to the provisions for carryover of unused deductions, if
any.
5.4 FORM AND TIMING OF EMPLOYER CONTRIBUTIONS
Employer Contributions for each fiscal year shall be made by the
Employer within the period required by the provisions of the Code
applicable to such year. The Employer's Contribution for each year may
be paid to the Trustee either in cash or other property, to the extent
permissible under law; provided that any securities so contributed
shall be valued at fair market value on the date of the contribution
pursuant to the valuation methods set forth in Section 6.6.
(25)
<PAGE> 34
ARTICLE 6
INVESTMENT PROVISIONS AND PARTICIPANT ACCOUNTS
6.1 INVESTMENT FUNDS
The Trustee shall establish one or more investment funds as the
Sponsoring Employer may from time to time direct. The Sponsoring
Employer may direct that each investment fund be invested:
(a) At the discretion of the Trustee in accordance with such
investment guidelines and objectives as may be established by the
Sponsoring Employer for such investment fund; or
(b) At the discretion of a duly appointed Investment Manager in
accordance with such investment guidelines and objectives as may
be established by the Sponsoring Employer; or
(c) In such investments as the Sponsoring Employer may specify for
such investment fund.
Notwithstanding the foregoing, Employer Profit Sharing Contribution made
in accordance with Section 5.1 shall be invested in the UST Managed
Growth Retirement Fund. This Fund contains a balanced investment
portfolio consisting of stocks, bonds, and other fixed income
instruments.
The Sponsoring Employer may from time to time change its direction with
respect to any investment fund and may, at any time, eliminate any
investment fund or establish additional funds. Whenever an investment
fund is eliminated, the Trustee shall promptly liquidate the assets of
such investment fund and reinvest the proceeds thereof in accordance
with the directions of the Sponsoring Employer.
The Trustee may maintain from time to time reasonable amounts in cash or
cash equivalents in any fund. All expenses properly attributable to an
investment fund, including but not limited to brokerage fees and stock
transfer taxes, shall be paid from such investment fund, unless paid by
the Employer.
(26)
<PAGE> 35
All dividends, interest and other income of each investment fund, as
well as stock splits, stock dividends, and the like, shall be reinvested
in that investment fund.
6.2 INVESTMENT ELECTION
(a) At the time an Eligible Employee becomes a Participant in the
Plan and makes an election in accordance with Section 4.1, the
Eligible Employee must choose, on a form provided by the Benefits
Committee, the percentage in which contributions made by or on
behalf of such Participant are to be invested in each investment
fund. Such percentage may be 0%, or in increments of 10% or 25%,
up to a total of 100%. A Participant's investment elections must
total 100%.
(b) During the absence of a valid election by a Participant, the
contributions made by or on behalf of such Participant, and Loan
repayments, if any, shall be credited to the fund with the least
investment risk.
(c) Notwithstanding the foregoing, the Regular Profit Sharing Account
and Cash Option Deferred Account shall be invested solely in the
UST Managed Growth Retirement Fund.
6.3 CHANGE IN INVESTMENT ELECTION
A Participant may elect, effective as of any Change Date, to reallocate
in 10% or 25% increments his Basic and Supplemental Before-Tax
Contribution Accounts, Employer Matching Contribution Account, and
Rollover Account among the investment funds, provided that at least 30
days in advance of such Change Date the Participant files with the
Benefits Committee a new election on the appropriate form, and further
provided that any such election shall not apply to the Loan Fund. Any
elections made in accordance with this paragraph shall apply to the
amounts existing in the Participant's Basic and Supplemental Before-Tax
Contribution Accounts, Employer Matching Contribution Account, and
Rollover Account on the Change Date and to all contributions credited to
such Accounts on or after such Change Date.
(27)
<PAGE> 36
The Benefits Committee may from time to time:
(a) Limit or restrict a Participant's ability to change the
allocation of his Basic and Supplemental Before-Tax Contribution
Accounts, Employer Matching Contribution Account, and Rollover
Account among the investment funds and/or withdraw balances from
the various investment funds in order to conform to the
practices, provisions, or restrictions of any investment media
held in any such investment fund; and
(b) Adopt procedures relating to the determination and allocation of
the investment earnings among the Participants' Basic and
Supplemental Before-Tax Contribution Account, Employer Matching
Contribution Account, and Rollover Account, in order to
facilitate the administration of the Plan on an equitable and
practicable basis.
6.4 RESPONSIBILITY OF PARTICIPANT IN SELECTING INVESTMENT FUNDS
The selection of an investment fund or funds is the sole responsibility
of each Participant. The Benefits Committee, the Trustee, the
Investment Manager, the Employer, or any other fiduciary to the Plan
may not advise a Participant as to the election of any investment fund
or the manner in which contributions shall be invested. The fact that a
security is available to Participants for investment under the Plan
shall not be construed as a recommendation as to the purchase of that
security, nor shall the designation of an investment fund impose any
liability on the Benefits Committee, the Trustee, the Investment
Manager, or the Employer.
6.5 ESTABLISHMENT OF PARTICIPANT ACCOUNTS
(a) The Trustee shall establish and maintain for each Participant a
Total Account, consisting of the following accounts, and any such
other accounts as may be deemed necessary by the Benefits
Committee:
(i) Basic Before-Tax Contribution Account;
(ii) Supplemental Before-Tax Contribution Account;
(iii) Employer Matching Contribution Account;
(iv) Regular Profit Sharing Account;
(v) Cash Option Deferred Account; and
(vi) Rollover Account.
(28)
<PAGE> 37
(b) Within each of the accounts described in paragraph (a) above,
separate records shall be kept of the portion of the account
credited to each investment fund and the Loan Fund.
(c) Such accounts as described in Sections 6.5(a)(iv) and (v) above
shall be maintained primarily for bookkeeping purposes. The
Trustee shall not be required to segregate the assets in these
accounts of Participants for purposes of investment or otherwise.
6.6 FAIR MARKET VALUE OF TRUST ASSETS
The fair market value of all of the assets of the Trust Fund shall be
determined by the Trustee on each Valuation Date.
6.7 ALLOCATION OF TRUST ASSETS
The balance of each Participant's Total Account (including the Regular
Profit Sharing Account portion, if any, of a Forfeiture Account
attributable to a Participant and not yet available for reallocation
pursuant to Section 7.5) shall be adjusted as of each Valuation Date.
In addition to the rules set forth above, the credit balance of the
Total Accounts of Participants shall be reduced by any distributions
made since the most recent Valuation Date.
6.8 CORRECTION OF ERROR
The Benefits Committee may adjust the Total Accounts of any or all
Participants or Beneficiaries in order to correct errors or rectify
omissions, including, without limitation, any allocations to a
Participant's Total Account made in excess of the limits specified in
Sections 4.5, 12.4, and 12.5, in such manner as it believes will best
result in the equitable and nondiscriminatory administration of the
Plan.
(29)
<PAGE> 38
6.9 ALLOCATION SHALL NOT VEST TITLE
The fact that an allocation is made and amounts are credited to the
Total Account of a Participant shall not vest in such Participant any
right, title, or interest in and to any assets except at the time or
times and upon the terms and conditions expressly set forth in this
Plan, nor shall the Trustee be required to segregate physically the
assets of the Trust Fund by reason thereof.
(30)
<PAGE> 39
ARTICLE 7
BENEFITS
7.1 NATURE OF BENEFITS
The benefits provided by this Plan consist of the right of a Participant
to receive a distribution of the vested portion of his Total Account in
accordance with the provisions of this Article 7. The value of a
Participant's Total Account shall be determined as of the Valuation Date
preceding the date on which payment is made.
7.2 MEDIUM AND METHOD OF DISTRIBUTION
The amount payable to a Participant (or Beneficiary) under the terms of
the Plan shall be distributed in the form of a single lump sum payment
in cash.
7.3 TIMING OF DISTRIBUTION
Except as noted below and otherwise provided in this Plan, the vested
portion of a Participant's Total Account shall be paid as soon as
administratively feasible following the first Valuation Date following
the date the Employee's employment with the Employer or an Affiliated
Employer terminates.
If the value of a Participant's vested Account is in excess of $3,500,
payment to the Participant shall not be made in accordance with the
above unless the Participant consents to such distribution. In
addition, a Participant who elects not to receive his distribution in
accordance with the above, may elect to receive such distribution at any
time between the date the Participant attains age 59 1/2 and the April 1
following the calendar year in which the Participant attains age 70 1/2.
7.4 VESTING
A Participant shall always have a nonforfeitable, or 100% vested,
interest in his Basic and Supplemental Before-Tax Contribution Accounts,
Cash Option Deferred Account, Employer Matching Contribution Account,
and Rollover Account. A Participant's vested interest in his Regular
Profit Sharing Account shall become 100% vested, upon the earliest of
his:
(31)
<PAGE> 40
(a) Normal Retirement Date,
(b) Death (while actively employed), or
(c) Disability Retirement Date.
The vested interest of a Participant in his Regular Profit Sharing
Account at any time prior to the date indicated above, shall be based
upon the Participant's Years of Service in accordance with the
following:
<TABLE>
<CAPTION>
YEARS OF SERVICE VESTED PERCENTAGE
<S> <C>
Less than 3 0%
3 30%
4 40%
5 60%
6 80%
7 or more 100%
</TABLE>
If any Plan amendment changes the vesting schedule set forth above, each
Participant who has completed at least three Years of Service as of the
later of (a) the date the Plan amendment is adopted, or (b) the date the
Plan amendment becomes effective shall have the vested percentage of his
Regular Profit Sharing Account computed in accordance with the vesting
schedule that produces the higher vested benefit.
7.5 FORFEITURES
(a) Prior to January 1, 1985:
------------------------
If a Participant incurs a One-Year Break in Service before his
Regular Profit Sharing Account had become 100% vested pursuant to
the provisions of the Plan in effect on his date of termination,
the nonvested portion of such Account shall be forfeited
effective as of the last day of the Plan Year during which the
Participant incurred a One-Year Break in Service. Upon such
date, the amount forfeited shall be added to the Employer Profit
Sharing Contribution for the Plan Year ending on such date and
shall be allocated in the same manner as such Employer Profit
Sharing Contribution.
(32)
<PAGE> 41
(b) After January 1, 1985:
---------------------
(i) Timing of Forfeitures:
---------------------
If a Participant terminates his employment with the
Employer before his Regular Profit Sharing Account had
become 100% vested, the nonvested amount remaining in
such Participant's Regular Profit Sharing Account shall
be forfeited as of the last day of the Plan Year in
which the Participant's employment terminates. Solely
for purposes of this paragraph, a Participant who
terminates on the last day of a Plan Year shall be
treated as though he terminated employment on the first
day of the following Plan Year. The amount forfeited
shall be allocated in the same manner as the Regular
Profit Sharing Contribution for such year.
(ii) Rehire Within Five Years of Reemployment - Repayments
Permitted:
-----------------------------------------------------
In the event a Participant described in subparagraph (i)
above is rehired prior to incurring five consecutive
One-Year Breaks in Service, the Participant shall be
permitted to repay the entire amount of the distribution
in order to restore the nonvested portion of his Regular
Profit Sharing Account balance to his Total Account for
the purpose of future vesting as if he had not separated
from Service or received a distribution. The
permissible repayment period shall continue until the
fifth anniversary of the day on which the Employee is
reemployed by the Employer.
If such repayment is not made before such period, such
Participant's vested amount will be determined by
including Years of Service accrued before such
Participant's separation from Service but without regard
to amounts allocated prior to such separation.
In the event that the terminated Participant's vested
balance in his Regular Profit Sharing Account was zero,
(A) distribution of the vested balance in his Regular
Profit Sharing Account shall be deemed to have
been made to him as of the date of his termination
of employment,
(33)
<PAGE> 42
(B) repayment shall be deemed to be made on his
reemployment commencement date, and
(C) the balance in his Regular Profit Sharing Account
shall be restored accordingly.
(iii) Restoration of Regular Profit Sharing Account Balances:
------------------------------------------------------
A Participant who made or who is deemed to have made a
repayment pursuant to subparagraph (ii) above will have
recredited to his Regular Profit Sharing Account, as of
the last day of the Plan Year coinciding with or next
following his date of rehire, the portion of such
Account balance which he forfeited upon his prior
termination from Service with the Employer unadjusted
for any subsequent gains or losses. The sources for
restoring a previous forfeiture in a subsequent year
will be, in order of priority:
(A) Forfeitures occurring in the Plan Year in which
the Regular Profit Sharing Account balances are
recreated, if not sufficient then;
(B) Earnings allocable to nonsegregated Regular Profit
Sharing Account balances and realized during the
Plan Year in which such Account balances are
recreated, if still not sufficient then;
(C) Employer Profit Sharing Contributions made by the
Employer for the Plan Year in which the Regular
Profit Sharing Account balances are recreated.
Such reinstated Regular Profit Sharing Account balances
shall be subject to the vesting requirements described
in Article 7.4.
(iv) Rehire After Five Years:
-----------------------
In the event a former Participant is rehired after
incurring five consecutive One-Year Breaks in Service,
the portion of the Participant's Regular Profit Sharing
Account which he forfeited upon his prior termination
shall be deemed to be a permanent forfeiture and shall
not be recredited to the Participant's Regular Profit
Sharing Account if he subsequently becomes eligible to
participate in the Plan, except as follows:
(34)
<PAGE> 43
Such a former participant shall have his prior nonvested
portion in his Regular Profit Sharing Account restored,
if such former Participant repays the entire amount of
the distribution he previously received under the Plan
(upon his prior termination) by the close of five
consecutive One-Year Breaks in Service commencing after
such prior distribution.
To the extent applicable, the procedures of paragraph
(iii) above shall apply to the restoration of the
Participant's nonvested portion of his Regular Profit
Sharing Account if he repays his prior distribution
under this paragraph (iv).
7.6 PERMANENT AND TOTAL DISABILITY
"PERMANENT AND TOTAL DISABILITY" shall be a disability which satisfies
the requirements for benefit entitlement under the Social Security Act
and any long term disability plan or program sponsored by the Employer.
If any disabled Participant returns to the employ of the Employer, he
shall become a Participant on his reemployment date, and the various
Plan sections regarding reemployment with an Employer shall be applied
to him.
7.7 DISTRIBUTION ON DEATH
Upon the death of any Participant, the vested portion of the
Participant's Total Account shall be distributed to the Participant's
designated Beneficiary in accordance with the following rules:
(a) If the Participant has a Spouse at his date of death, the
distribution shall be paid to his Spouse as designated
Beneficiary. The distribution may be paid to a designated
Beneficiary other than the Participant's Spouse while the Spouse
is living only with the written consent of the Participant's
Spouse. A spousal consent must:
(i) Be in writing on a form provided by the Benefits
Committee;
(ii) Specify the Beneficiary;
(iii) Acknowledge the effect of such consent; and
(iv) Be witnessed by a notary public.
(35)
<PAGE> 44
Any such consent will be valid only with respect to the Spouse
who signs the consent. A spousal consent is not required,
however, if the Participant establishes to the satisfaction of
the Benefits Committee
(A) that there is no Spouse;
(B) that the Spouse cannot be located;
(C) that the Participant has been abandoned by the
Spouse within the meaning prescribed by applicable
law and evidenced by a court order; or
(D) that spousal consent is not required under other
applicable regulations.
If the Participant does not have a Spouse at his date of death,
the distribution shall be paid to the designated Beneficiary
elected by the Participant.
If a Participant's designated Beneficiary shall have predeceased
the Participant, or if a Beneficiary designation shall have
lapsed or failed for any reason, payment will be made to the
Beneficiary designated under Section 7.10.
(b) The distribution shall be paid to the Beneficiary as soon as
administratively feasible following the Valuation Date after the
date the Participant's death is reported to the Benefits
Committee; provided the designated Beneficiary has filed a
proper distribution election form with the Benefits Committee.
Distribution shall be made in a single lump sum cash payment.
(c) If the Participant's designated Beneficiary is his Spouse, such
Spouse may elect to defer distribution until any time between the
date the deceased Participant would have reached age 59 1/2, and
December 31 of the calendar year in which the deceased
Participant would have attained age 70 1/2. Such election must
be made no later than the date distribution is required under
paragraph (b) above. If the Participant's Spouse dies before any
distribution is made, the provisions of this Section shall be
applied as though the Spouse were the Participant.
(d) Notwithstanding the preceding, if the benefit payable to a
Beneficiary under this Section does not exceed $3,500,
distribution shall be made to the Beneficiary in a single lump
sum cash payment as soon as practicable after the Valuation Date
next following the date the Participant's death is reported to
the Benefits Committee.
(36)
<PAGE> 45
7.8 DISTRIBUTION TO ALTERNATE PAYEES
The Benefits Committee may authorize the Trustee to make a lump sum
distribution to an Alternate Payee pursuant to a Qualified Domestic
Relations Order as soon as administratively practicable after the
Valuation Date next following the earlier of:
(a) the date the Participant terminates employment; or
(b) the later of:
(i) the date the Participant attains age 50, or
(ii) the earliest date the Participant is entitled to a
distribution under the Plan,
provided the Alternate Payee has filed a request for distribution with
the Committee.
If the Alternate Payee's nonforfeitable interest in the Plan does not
exceed $3,500, distribution to the Alternate Payee shall be made at the
earliest possible date described above.
7.9 INVESTMENT OF DEFERRED DISTRIBUTIONS
Any amounts deferred in accordance with this Article 7 shall be held in
the Participant's Total Account and shall continue to share in the
investment experience of the Trust Fund as long as a balance remains.
7.10 DESIGNATION OF BENEFICIARY
(a) Each Participant may designate, on a form provided by the
Benefits Committee, a Beneficiary or Beneficiaries to receive any
benefits distributable hereunder after the death of the
Participant. Such designation of a Beneficiary or Beneficiaries
shall not be effective for any purpose unless and until it has
been filed by the Participant with the Benefits Committee,
provided, however, that a designation mailed by the Participant
to the Benefits Committee prior to his death and received by the
Benefits Committee after his death shall take effect upon such
receipt, but prospectively only and without prejudice to any
payor or payee on account of any payments made before receipt of
such designation by the Benefits Committee.
Notwithstanding the above, the following provisions shall apply:
(37)
<PAGE> 46
(i) A Participant's Beneficiary shall be his surviving
Spouse, if the Participant has a surviving Spouse,
unless the Participant has designated another
Beneficiary pursuant to the spousal consent requirements
of Section 7.7(a).
(ii) A Participant may from time to time change his
designated Beneficiary or Beneficiaries, but any such
designation which has the effect of naming a person
other than the Participant's surviving Spouse, if any,
as sole Beneficiary is subject to the spousal consent
requirements of Section 7.7(a).
(b) In the absence of a Beneficiary designation by the deceased
Participant, or if a designation of Beneficiary lapses or fails
for any reason, distribution of the deceased Participant's
nonforfeitable interest in the Trust Fund shall be distributed to
the surviving Spouse of the Participant or, if there be none
surviving, to the duly appointed and currently acting personal
representative of the Participant's estate.
7.11 ADVICE OF BENEFITS
The Benefits Committee shall establish such rules and procedures as it
deems necessary to properly advise all Participants and other persons as
to any rights they may have to a benefit under this Plan and may impose
upon any such person reasonable requirements with respect to filing
application for such benefits.
7.12 INCAPACITY
If any person to whom a benefit is payable hereunder is an infant or if
the Benefits Committee determines that any person to whom such benefit
is payable is incompetent by reason of physical or mental disability,
the Benefits Committee may cause the payments becoming due to such
person to be made to such person's legally appointed guardian or
conservator.
7.13 PROOF OF CLAIM
The Benefits Committee may require such proof of death and such evidence
of the right of any person to receive payment of the value of the vested
interest in the Trust Fund of a deceased Participant or former
Participant as the Benefits Committee may deem desirable.
(38)
<PAGE> 47
7.14 MANDATORY PAYMENT OF DISTRIBUTIONS TO CERTAIN PARTICIPANTS AT AGE 70 1/2
Notwithstanding anything in the Plan to the contrary, distribution of
Plan benefits shall commence no later than April 1 following the Plan
Year in which the Participant attains age 70 1/2, regardless of whether
the Participant has retired; provided, however, that any Participant who
attained age 70 1/2 on or before January 1, 1988 and who was not a 5%
owner of the Employer (as defined in Section 416(i)(1)(B) of the Code)
in the Plan Year in which he attained age 66 1/2 or in any succeeding
Plan Year, may elect to defer the commencement of his benefits until his
actual date of retirement. For purposes of this paragraph, any
Participant who on January 1, 1989 remains actively employed by the
Employer after having attained age 70 1/2 during 1988, and who is not a
5% owner of the Employer, shall be treated as having retired on January
1, 1989; benefits payable to such Participant shall commence no later
than April 1, 1990.
7.15 DIRECT ROLLOVER DISTRIBUTIONS
Notwithstanding any provision of the Plan to the contrary, if any
distribution to a Distributee (i) is made on or after January 1, 1993,
(ii) totals $200 or more, and (iii) constitutes an Eligible Rollover
Distribution, the Distributee may elect on a form provided by the
Benefits Committee to have all or part of such Eligible Rollover
Distribution paid in a direct rollover to an Eligible Retirement Plan
selected by the Distributee. For this purpose, a Distributee, an
Eligible Rollover Distribution, and an Eligible Retirement Plan shall be
defined as follows:
(a) Distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations
order, as defined in Section 414(p) of the Code, are Distributees
with regard to the interest of the spouse or former spouse.
(b) Eligible Rollover Distribution means any distribution of all or
any portion of the balance to the credit of a Distributee, except
that an Eligible Rollover Distribution does not include any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the
Distributee's designated beneficiary, or for a specified period
of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not
(39)
<PAGE> 48
includable in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
(c) Eligible Retirement Plan means a plan described below:
(i) an individual retirement account described in Section
408(a) of the Code;
(ii) an individual retirement annuity (other than an endowment
contract) described in Section 408(b) of the Code;
(iii) with respect to Participants and Distributees who are
alternate payees only, a qualified defined contribution
plan and exempt trust described in Sections 401(a) and
501(a) of the Code respectively, the terms of which
permit the acceptance of rollover contributions; or
(iv) with respect to Participants and Distributees who are
alternate payees only, an annuity plan described in
Section 403(a) of the Code.
If an election is made to have only a part of an eligible rollover
distribution paid in a direct rollover, the amount of the direct
rollover must total $500 or more.
Direct rollovers shall be accomplished in accordance with procedures
established by the Benefits Committee.
(40)
<PAGE> 49
ARTICLE 8
LOANS AND IN SERVICE WITHDRAWALS
8.1 LOAN AVAILABILITY
(a) Except to the extent provided in Section 8.4, any Participant who
is not an "owner-employee" within the meaning of Section 4975(d)
of the Code may request a Loan in an amount which does not exceed
an amount equal to the lesser of (i) or (ii) below:
(i) $50,000 reduced by the individual's highest outstanding
Loan balance from this Plan and all other qualified
plans of the Employer and all Affiliated Employers
during the 12 month period ending on the day before the
date the new Loan is made.
(ii) 50% of the individual's vested interest in his Total
Account reduced by the outstanding balance of all
previous Loans made to the individual from this Plan.
(b) An applicant may request a Loan from the Plan to meet certain
financial needs, as follows:
(i) To pay expenses associated with the purchase and/or
renovation of the applicant's primary residence;
(ii) To pay medical expenses incurred by the applicant or his
immediate family which are not covered by insurance or
to purchase medical insurance not paid by the Employer;
and
(iii) To pay educational expenses beyond the high school level
incurred by the applicant or applicant's immediate
family member.
(c) Loans shall be borrowed from the individual's Total Account in
the following order until the full amount of the Loan has been
provided:
(i) from his Supplemental Before-Tax Contribution Account;
(41)
<PAGE> 50
(ii) from his Basic Before-Tax Contribution Account;
(iii) from his Cash Option Deferred Account;
(iv) from his Rollover Account;
(v) from his Employer Matching Contribution Account; and
(vi) from his Regular Profit Sharing Account (to the extent
vested).
(d) Requests for Loans must be submitted in writing to the Benefits
Committee on a form designated for that purpose by the Benefits
Committee. Decisions by the Benefits Committee regarding Loans
shall be made on a uniform, nondiscriminatory basis, shall be
final and shall be communicated to the applicant approximately 30
days from the date the Loan application is received by the
Benefits Committee.
8.2 LOAN CONDITIONS
A Plan Loan shall be subject to the following conditions:
(a) A new Plan Loan shall not be made to an applicant until he fully
repays any previous Plan Loan.
(b) The minimum Loan shall be $1,000.
(c) The maximum Loan amount shall be based upon the vested balance in
the applicant's Total Account as of the Valuation Date preceding
the date the Loan is made.
(d) Each Loan shall bear interest at a rate equal to 1% point above
the United States Treasury rate for an instrument with a similar
maturity to that of the Plan Loan on the date the Plan Loan
request is made. Notwithstanding the foregoing, the Plan Loan
interest shall conform to the amount necessary to comply with
Department of Labor Regulation 2550.408b- 1(e).
(e) Each Loan shall be secured by collateral consisting of the
applicant's vested interest in his Total Account, supported by a
promissory note for the amount of the Loan, made payable to the
Trustee.
(42)
<PAGE> 51
(f) In applying for a Loan, the applicant shall agree to repay the
Loan plus interest over a period of years from one to five, as
elected by the Participant, unless the Loan is to be used for the
purchase of the Participant's principal place of residence, in
which case the repayment period may be any period of years up to
fifteen years, as elected by the Participant.
(g) Repayment by Participants actively employed by an Employer during
the repayment period shall be in equal installments by weekly or
bi-monthly payroll deductions and shall commence with the first
paycheck received by the Participant in the month following
receipt of the Loan.
(h) Full repayment of the entire outstanding balance of a Loan may be
as of the last day of any month during the repayment period.
(i) If any individual fails to repay a Plan Loan in accordance with
its terms, the Loan shall be in default. The balance will be
paid automatically from the applicant's Total Account (unless he
repays the Loan prior to the last day of the month in which he
terminates). If the Loan remains in default at the time the
applicant terminates employment, in accordance with governmental
regulations, the Benefits Committee shall authorize the Trustee
to cancel and distribute the promissory note and report a taxable
distribution to the Internal Revenue Service equal to the amount
transferred from his Total Account to repay the loan.
8.3 LOAN FUND
(a) The portion of an individual's Total Account constituting a Loan
shall be segregated into a separate fund, which shall be known as
the individual's Loan Fund. The Loan Fund as of any Valuation
Date shall equal the sum of the following components:
(i) the principal amount due his Supplemental Before-Tax
Contribution Account;
(ii) the principle amount due his Basic Before-Tax
Contribution Account;
(iii) the principal amount due his Cash Option Deferred
Account;
(iv) the principal amount due his Rollover Account;
(43)
<PAGE> 52
(v) the principal amount due his Employer Matching
Contribution Account; and
(vi) the principal amount due his Regular Profit Sharing
Account.
Each of the above amounts shall be increased with its
proportionate share of interest charged to the Loan Fund.
(b) As of each Valuation Date, the balance of the Loan Fund shall be
reduced by the payments made since the previous Valuation Date.
Loan repayments shall be applied in the reverse order designated
in paragraph (a) above.
(c) Loan repayments shall be allocated among the investment funds in
the same percentage as the individual's most recent investment
election in effect under the Plan, except that loan repayments to
the Regular Profit Sharing Account shall be invested in the UST
Managed Growth Retirement Fund.
8.4 LOANS TO PARTIES-IN-INTEREST
(a) Notwithstanding anything to the contrary in the Plan, Plan Loans
shall be made available to Participants (either active or former)
and Beneficiaries who are "parties-in-interest" as defined in
Section 3(14) of ERISA, to the extent required by applicable law.
(b) The provisions of this Section 8.4 shall be null and void without
amendment to the Plan in the event that by ruling of the
Commissioner of Internal Revenue and/or the Secretary of Labor
the rules herein set forth are no longer necessary to prevent any
prohibited discrimination that may occur in the Plan's Loan
program.
8.5 IN SERVICE WITHDRAWALS AFTER AGE 59 1/2
A Participant who has attained age 59 1/2 and completed ten or more
Years of Service may elect to withdraw all or any part of the vested
portion of his Total Account, by submitting a written request to the
Benefits Committee at least fifteen days prior to a Valuation Date.
The amount to be withdrawn shall be taken from the Participant's Total
Account in the following order, with the full amount available from each
account to be fully withdrawn before any amount is taken from the next
account:
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(a) from the Participant's Rollover Account;
(b) from the Participant's Employer Matching Contribution Account;
(c) from the Participant's Regular Profit Sharing Account (to the
extent vested);
(d) from the Participant's Cash Option Deferred Account;
(e) from the Participant's Supplemental Before-Tax Contribution
Account; and
(f) from the Participant's Basic Before-Tax Contribution Account.
The distribution shall be made as soon as practicable following the
Valuation Date following the date the application is received.
(45)
<PAGE> 54
ARTICLE 9
THE BENEFITS COMMITTEE
9.1 ESTABLISHMENT AND COMPOSITION
The general administration of the Plan and the responsibility for
carrying out its provisions shall be vested in the Benefits Committee,
which shall be composed of at least three persons appointed from time
to time by the Board. The Benefits Committee shall be the "NAMED
FIDUCIARY" of the Plan in accordance with Section 402(a) of ERISA.
Any one or more of the members of such Committee may be officers or
directors of the Employer and need not be Participants in the Plan.
The Trustee shall accept and rely upon a certification by the Board as
to the number and identity of the individuals comprising the Benefits
Committee at any time at its sole discretion. A person appointed to
be a member of such Committee shall signify his acceptance to the
Board in writing. He may resign by delivering his written resignation
to the Board and such resignation shall become effective upon its
delivery or any later date specified therein.
If at any time there shall be a vacancy in the membership of the
Benefits Committee, the remaining member or members of the Committee
shall continue to act until such vacancy is filled by action of the
Board. The Benefits Committee shall appoint from among its members a
chairman, and may appoint as secretary a person who may, but need not
be, a member of the Benefits Committee or a Participant in the Plan.
9.2 MEETINGS
The Benefits Committee shall hold meetings upon such notice, at such
place or places, and at such times as its members may from time to
time determine. A simple majority or three, whichever is less, of the
members of the Benefits Committee at the time in office shall
constitute a quorum for the transaction of business. All action taken
by the Benefits Committee at any meeting shall be by vote of the
simple majority of its members present at such meeting at which a
quorum is present, but the Benefits Committee may act without a
meeting by unanimous action of its members evidenced by a writing
signed by all such members; provided, however, that no member of such
(46)
<PAGE> 55
Committee shall take any part in any action relating solely to himself
or to his rights or benefits under the Plan.
9.3 BY-LAWS
Subject to the terms of the Plan, the Benefits Committee may from time
to time adopt by-laws, rules and regulations for the administration of
the Plan and the conduct and transaction of its business and affairs.
8.4 POWERS AND DUTIES
The Benefits Committee shall have and shall exercise complete
discretionary authority to discharge its duties hereunder, including,
but not limited to, the authority to interpret and construe the Plan
to determine all questions of eligibility, duration of service, dates
of birth, participation or retirement, allocation of benefits, value
of benefits, and similarly related matters for the purpose of the
Plan, the authority to prescribe forms to be used for designating
Beneficiaries or for changing or revoking such designation, and the
authority to take such other action not inconsistent with the Plan or
with any action of the Board as it deems appropriate in order to
administer the Plan. Any such construction, administration,
interpretation or application shall be final, binding and conclusive
upon all persons concerned. All matters falling outside the scope of
the powers and duties of the Benefits Committee, and not otherwise
provided for in the Plan, shall be referred to the Board which shall
have the power to act thereon.
9.5 RECORDS
All acts and determinations by the Benefits Committee shall be duly
recorded, and all such records, together with such other documents as
may be necessary for the administration of this Plan, shall be
preserved in the custody of the Benefits Committee.
9.6 INSTRUCTIONS
The Benefits Committee shall, from time to time, issue written
instructions to the Trustee with respect to the payments to be made
out of the Fund pursuant to the Plan.
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<PAGE> 56
9.7 AUTHORITY TO SIGN
From time to time, the Benefits Committee may authorize one or more of
its members to execute any or all documents on behalf of such
Committee and shall notify the Trustee in writing of the names of the
persons so designated. The Trustee shall accept and rely upon any
document executed by the person or persons so designated as
representing action by the Benefits Committee until receipt from such
Committee of a written revocation of such designation.
9.8 ADMINISTRATION
The Benefits Committee may retain or employ such legal, accounting and
clerical assistance as it deems expedient in carrying out the
provisions of the Plan, and may delegate to any member, or members of
the Benefits Committee and/or any employee or employees of the
Employer any ministerial or routine act or duty in connection with the
administration of the Plan.
9.9 PAYMENT OF EXPENSES
The Employer shall upon receipt of notice thereof from the Benefits
Committee promptly pay the operation and administrative expenses of
such Committee. No Employee of the Employer who is a member of the
Benefits Committee shall receive compensation for his services as a
member, but a member of the Benefits Committee who is not an Employee
may be compensated as the Board may determine.
9.10 PRUDENCE
Any person serving as a member of the Benefits Committee shall use
that standard of care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims.
9.11 DISCLOSURE
The Benefits Committee shall cause to be furnished to each Participant
a written summary of the Plan and any amendment thereto. Such summary
shall include the names of the members of the Benefits Committee and
the name of the Trustee, and shall set forth the Participant's rights
and duties with respect to the benefits available to him
(48)
<PAGE> 57
under the Plan. Any decisions of the Benefits Committee respecting an
Employee's or Participant's right to be included in the Plan or to
benefits hereunder shall be delivered to the Employee or Participant
in writing.
9.12 CLAIMS PROCEDURE
In the event that an Employee or Participant disagrees with any
decision of the Benefits Committee regarding his rights to receive a
benefit under the Plan, the amount of any such benefit, or any other
factor affecting his rights under the Plan, the Employee or
Participant may request a hearing before the full Benefits Committee
concerning his rights. Such a request must be made in writing to the
Benefits Committee within 60 days after receipt of such Committee's
decision. The Employee or Participant shall be entitled to review
documents pertinent to his claim and to submit issues and comments in
writing to the Benefits Committee. The Benefits Committee shall
within 60 days after receiving the Employee's or Participant's
request, grant the Employee or Participant such a hearing, at which
the Employee or Participant shall be entitled to have his attorney, or
other person of his choice, present. Within 120 days after the
request for such hearing is first received, the Benefits Committee
shall issue a written decision to the Employee or Participant with
respect to his case, giving specific reasons for its decision and
specific references to the pertinent Plan provisions on which the
decision is based.
9.13 COMPLIANCE IN GENERAL
The Benefits Committee shall exercise such authority and
responsibility as it deems appropriate in order to comply with ERISA
and governmental regulations issued thereunder relating to records of
Participant's service, Total Account balances and the percentage of
such Total Account balances which are nonforfeitable under the Plan,
notifications to Participants, registration with the Internal Revenue
Service, and reports to the Department of Labor.
9.14 INVESTMENT POLICY
Although the Trustee shall have the sole responsibility for the
specific investments chosen for the assets of the Trust Fund, the
Benefits Committee shall have the authority to establish general
investment policy guidelines that the Trustee shall rely upon in the
choice of investments for the Trust Fund. Such directions or
guidelines shall be contained in a document or documents executed by
such person or persons as are authorized to sign on behalf of the
Benefits Committee pursuant to Section 9.7.
(49)
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9.15 INSURANCE
The Benefits Committee shall have the right to purchase such insurance
as it deems necessary to protect the Plan and the Fund from loss due
to any breach of fiduciary responsibility by any person. Any premiums
due on such insurance may be paid from Fund assets provided that, if
such premiums are so paid, such policy of insurance must permit
recourse by the insurer against the person who breaches his fiduciary
responsibility. Nothing in this Section shall prevent the Benefits
Committee or the Employer, at its, or his own expense, from providing
insurance to any person to cover potential liability of that person as
a result of a breach of fiduciary responsibility, nor shall any
provisions of the Plan preclude the Employer from purchasing from any
insurance company the right of recourse under any policy issued by
such insurance company.
(50)
<PAGE> 59
ARTICLE 10
TRUSTEE
10.1 INVESTMENT RESPONSIBILITY
The responsibility for investment of the Trust Fund assets shall rest
with the Trustee, except to the extent that the Trustee has delegated
such responsibility to another Trustee or Trustees, as described in
Section 10.5, or to an Investment Manager.
In the absence of any direction to the contrary from the Benefits
Committee, the Trustee shall invest the assets of the Trust Fund in
such stocks, bonds or other securities or certificates of
participation or shares of any mutual investment company, trust or
fund, or any other property of any kind, real or personal, tangible or
intangible, as it may deem advisable, whether or not authorized under
any present or future laws for the investment of trust funds, provided
that the Trustee may hold funds of the Trust Fund uninvested without
liability for interest if and to the extent that it may deem advisable
from time to time; and the Trustee is authorized to commingle part or
all of the assets of the Trust Fund in or with any one or more trusts
created for the investments or collective investment of funds held
under Employees' retirement benefit plans or trusts which are
qualified within the meaning of and exempt from tax under the revenue
laws of the United States, and permitted by existing or future rulings
of the United States Treasury Department to pool their respective
funds in a group trust, and the terms of any such collective
investment trust shall be deemed incorporated herein and made a part
hereof. The Trustee may accumulate and invest income.
The Trustee, if a bank or trust company, is specifically authorized to
maintain checking and earnings accounts in its own bank or trust
company and is further authorized to purchase money market investments
issued by itself. If otherwise permitted by law the Trustee may hold
property in the name of a nominee without disclosure of its trust. No
transfer agent, bank or other person dealing with the Trustee need
inquire into the Trustee's authority to make transfers or need see to
the application of property received by the Trustee.
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10.2 INVESTMENT DIRECTION BY THE BENEFITS COMMITTEE
The Benefits Committee may establish certain investment policy
guidelines for the Trustee. Such authority shall include directions
to both purchase and sell such securities. The Trustee will not be
responsible for any loss incurred with respect to any investment made
or retained pursuant to any such direction or instructions, and the
Trustee shall not have any responsibility or duty to approve, review,
or follow the advisability of sale, retention or disposal of such
directed investment, nor to determine if any direction is consistent
with the purpose of the Plan and/or applicable law and shall not be
subject to any liability for action taken or omitted in reliance on
advice of counsel.
10.3 CUSTODY
The Trustee shall have the exclusive responsibility for custody of the
Trust Fund, including any income, from and after the receipt of an
Employer Contribution or other addition to the Trust Fund.
10.4 DISBURSEMENTS AND DISTRIBUTIONS
The Trustee shall make disbursements for the purposes of investment
pursuant to the direction of the Benefits Committee and in the absence
of such direction as the Trustee in its sole discretion deems
advisable and proper, provided, however, that such disbursement
decisions shall be made in a manner consistent with the general
investment policy guidelines established by the Benefits Committee
pursuant to Section 10.2. The Trustee shall make disbursements for
the payment of expenses upon approval by the Benefits Committee, and
the Trustee shall have no other responsibility with respect to such
disbursements. The Trustee shall make distributions to Participants
and their Beneficiaries in accordance with the written instructions of
the Benefits Committee, observing the names, addresses and other
similar instructions given by such Committee, and the Trustee shall
have no other responsibility with respect to such distributions.
10.5 ALLOCATION OF RESPONSIBILITIES AMONG TRUSTEES REGARDING PLAN ASSETS
If there shall be more than one Trustee, the Trustees shall jointly
manage and control the assets of the Trust Fund, except that with the
approval of the Benefits Committee the Trustees may by agreement
allocate any such specific responsibilities, obligations or duties
among themselves as they deem advisable, including (without
limitation) the duties of the Trustees respecting custody and
registration of securities.
(52)
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10.6 FIDUCIARY STATUS
The Trustee is a fiduciary and shall be free from interference by the
Employer with the discharge of its duties as set forth in the Plan and
the requirements of law. The Benefits Committee may remove the
Trustee for any reasons which the Benefits Committee, in its sole
discretion, deems sufficient.
10.7 ADMINISTRATIVE EXPENSES; ADVISORS
All administrative expenses of the Plan shall be charged to and paid
by the Employer. In the event that they are not so paid, such
expenses shall be charged to and paid out by the Trust Fund provided,
however, that all of the Trustee's administrative fees and expenses
may be charged against the Trust Fund without the prior approval of
the Benefits Committee. The Benefits Committee shall not approve any
expense whose payment would be inconsistent with the obligations of a
fiduciary under ERISA or would constitute a prohibited transaction
thereunder. Expenses payable hereunder include, without limitation,
Trustees' fees, actuarial, accounting and legal fees, appraisal
expenses incurred in the valuation of securities, and fees for
investment or insurance advice. The Benefits Committee, the Employer
and the Trustee may employ persons to render accounting, legal,
appraisal, investment or insurance advice and may rely upon such
advice.
10.8 RESIGNATION
The Trustee may resign upon 30 days' prior written notice to the
Benefits Committee.
10.9 TRUSTEE'S MISCELLANEOUS POWERS
The Trustee shall have the following powers exercisable without leave
of court and without limiting any power otherwise given to the
Trustee:
(a) VOTING. The Trustee may vote all securities held in the Trust
Fund either directly or by proxy.
(b) TRANSFERS. The Trustee may buy, sell, mortgage, grant a
security interest in, lease (for any length of time) or
otherwise deal with real or personal property on such terms as
the Trustee deems proper; the Trustee shall take any action
which the Benefits Committee directs regarding the sale or
exchange of securities in
(53)
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connection with any merger or other reorganization described in
the Code or otherwise; the Trustee may execute instruments of
conveyance in such form as the Trustee deems proper.
(c) CONTRACTS. The Trustee may make contracts binding upon the
trust estate without assuming personal liability therefor.
(d) LOANS. The Trustee may borrow and lend on such terms as the
Trustee deems proper.
(e) CLAIMS. The Trustee may pay a claim on such proof as the
Trustee deems sufficient and may compromise disputed claims of
or against the Trustee on such terms as the Trustee deems
adequate.
(f) BANKING TRANSACTIONS. The Trustee may authorize one or more
persons to sign checks and other commercial paper and engage in
banking transactions on behalf of the Trust Fund. A Trustee
which is a bank may use its own banking facilities, to the
extent permitted by law, for deposits of funds of the Trust
Fund.
10.10 TRUSTEE'S ACCOUNTS
The Trustee shall render periodic accounts to the Benefits Committee
and the Employer. It shall have no duty to account to Participants
and their Beneficiaries, who shall look exclusively to the Benefits
Committee as Plan Administrator for disclosure and reporting.
Within a reasonable time after the close of each fiscal year of the
Employer, or of any termination of the duties of the Trustee
hereunder, the Trustee shall prepare and deliver to the Benefits
Committee an account of its acts and transactions as Trustee during
such fiscal year or during such period from the close of the last
fiscal year to the termination of the Trustee's duties, respectively,
including a statement of the then current value of the Trust Fund.
Any such account shall be deemed accepted and approved by the Benefits
Committee, and the Trustee shall be relieved and discharged, as if
such account had been settled and allowed by a judgment or decree of a
court of competent jurisdiction, unless protested by written notice to
the Trustee within 60 days of receipt thereof by the Benefits
Committee.
The Trustee or the Benefits Committee shall have the right to apply at
any time to a court of competent jurisdiction for judicial settlement
of any account of the Trustee not
(54)
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previously settled as herein provided or for the determination of any
question of construction or for instructions. In any such action or
proceeding it shall be necessary to join as parties only the Trustee
and the Benefits Committee (although the Trustee may also join such
other parties as it may deem appropriate), and any judgment or decree
entered therein shall be conclusive.
10.11 INDEMNIFICATION OF TRUSTEE
The Employer and the Benefits Committee shall indemnify and hold
harmless the Trustee for any liability or expenses, including without
limitation reasonable attorney's fees, incurred by the Trustee with
respect to taking such investment direction as the Benefits Committee
may authorize, and, in addition, with respect to holding, managing,
investing or otherwise administering the Trust Fund, except for its
lack of good faith or lack of due care or except as may be judicially
determined.
(55)
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ARTICLE 11
TOP HEAVY PROVISIONS
11.1 TOP HEAVY DEFINITIONS
For purposes of this Article, the following terms shall have the
meanings indicated below:
(a) "KEY EMPLOYEE" means any employee or former employee (including
any deceased employee) of an Employer or an Affiliated Employer
who at any time during the Plan Year containing the
Determination Date for the Plan Year in question, or any of the
four preceding Plan Years is:
(i) An officer of an Employer or Affiliated Employer, if
such individual received Annual Compensation (as
defined below) of more than 50% of the dollar
limitation in effect under Section 415(b)(1)(A) of the
Code. No more than 50 employees (or, if lesser, the
greater of 3 employees or 10% of the employees) shall
be treated as officers (exclusive of employees
described in Section 414(q)(8) of the Code).
(ii) One of the 10 employees owning or considered as owning
(within the meaning of Section 416(i) of the Code) both
more than a 1/2 percent ownership interest and one of
the ten largest ownership interests in an Employer or
Affiliated Employer, if such employee's Annual
Compensation (as defined below) exceeds 100% of the
maximum annual limit under Section 415(c)(1)(A) of the
Code.
(iii) A 5% owner of an Employer or Affiliated Employer. A
"5% owner" means a person owning (or considered as
owning, within the meaning of Section 416(i) of the
Code) more than 5% of the outstanding stock of an
Employer or Affiliated Employer, or stock possessing
more than 5% of the total combined voting power of all
stock of an Employer or Affiliated Employer (or having
more than 5% of the capital or profits interest in any
Employer or Affiliated Employer that is not a
corporation determined under similar principles).
(iv) A 1% owner of an Employer or Affiliated Employer having
Annual Compensation (as defined below) of more than
$150,000. A "1% owner"
(56)
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means any person who would be described in paragraph
(a)(iii) above if "1%" were substituted for "5%" in
each place where it appears in paragraph (a)(iii).
A Key Employee shall be determined in accordance with
the provisions of Section 416(i) of the Code and the
regulations thereunder.
(b) "ANNUAL COMPENSATION"means for years beginning after 1988, 415
Compensation (as defined in Section 12.4(b)) in addition to any
amounts contributed on behalf of the Employee by an Employer or
an Affiliated Employer pursuant to a salary deferral agreement
or cash option deferral under the Plan (or any other cash or
deferred arrangement described in Section 401(k) of the Code) or
a salary reduction agreement pursuant to a cafeteria plan
established under Section 125 of the Code, or toward the
purchase of an annuity described in Section 403(b) of the Code.
(c) "DETERMINATION DATE" means the last day of the preceding Plan
Year, except that for the first Plan Year the Determination Date
is the last day of that Plan Year.
(d) "AGGREGATION GROUP" means either:
(i) A "REQUIRED AGGREGATION GROUP" which is each qualified
plan of an Employer or Affiliated Employer which
provides benefits to a Key Employee, and each other
qualified plan of an Employer or Affiliated Employer
(including terminated plans maintained within the
five-year period ending on the Determination Date), if
any, which is included with such plan during the period
of five years ending on such plan's Determination Date
for purposes of meeting the requirements of Section
401(a)(4) or Section 410 of the Code; or
(ii) A "PERMISSIVE AGGREGATION GROUP" which is this Plan
and each other qualified plan of an Employer or
Affiliated Employer which in total would continue to
meet the requirements of Section 401(a)(4) and Section
410 of the Code with such other qualified plan being
taken into account (i.e., such other qualified plan
provides comparable benefits and satisfies the coverage
test).
(e) "NON-KEY EMPLOYEE" means an employee who is not a Key Employee,
including any employee who is a former Key Employee.
(57)
<PAGE> 66
(f) "VALUATION DATE" means the date used to calculate the value of
account balances or accrued benefits for purposes of determining
the top heavy ratio specified in Section 11.2.
For purposes of this Plan, the Valuation Date shall be the
Determination Date. For each other plan, the Valuation Date
shall be, subject to Section 416 of the Code, the most recent
Valuation Date which falls within or ends within the period of
twelve months ending on the applicable determination date for
such plan.
(g) "EMPLOYEE", "FORMER EMPLOYEE", "KEY EMPLOYEE" and "NON-KEY
EMPLOYEE" shall also include Beneficiaries of such an employee.
11.2 DETERMINATION OF TOP HEAVY STATUS
The Plan shall be deemed a top heavy plan for a Plan Year if, as of a
Valuation Date, the sum of the account balances of Key Employees under
this Plan and all other defined contribution plans in the Aggregation
Group, and the present value of accrued benefits of Key Employees
under all defined benefit plans in the Aggregation Group exceeds 60%
of the sum of the account balances of all Participants under this Plan
and all other defined contribution plans in the Aggregation Group and
the present value of accrued benefits of all Participants under all
defined benefit plans in the Aggregation Group (but excluding
participants who are former Key Employees).
For purposes of this test, the following rules shall apply:
(a) Subject to paragraph (b) below, any distributions made during
the five Plan Years ending on the Determination Date shall be
taken into account.
(b) For Plan Years commencing after December 31, 1984, the accounts
of all former employees who have not been credited with at least
one Hour of Service during the period of five years ending on
the Determination Date shall be disregarded, provided, however,
that if such former Employee again completes an Hour of Service
with the Employer after such five year period, such former
Employee's accounts shall be taken into consideration.
(c) If an employee is a Non-Key Employee for the Plan Year
containing the Determination Date, but such individual was a Key
Employee during any previous Plan Year, the value of his
accounts shall not be taken into consideration.
(58)
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(d) Solely for purposes of determining if the Plan or any other plan
in the Required Aggregation Group is a top heavy plan for a Plan
Year, the accrued benefits of Non-Key Employees under any
defined benefit plans shall be determined for Plan Years
beginning after 1986 under the method, if any, which is
uniformly applied for accrual purposes under all defined benefit
plans maintained by an Employer or Affiliated Employer or, if
there is no such method, as if such benefit accrued not more
rapidly than under the slowest accrual rate permitted under
Section 411(b)(1)(C) of the Code.
(e) The determination of the present value of accrued benefits under
all defined benefit plans in the Aggregation Group shall be
based on the interest rate and mortality table specified in the
qualified defined benefit plan maintained by the Sponsoring
Employer.
In no event shall the Plan be considered top heavy if it is part of a
Required Aggregation Group or a Permissive Aggregation Group which is
not top heavy.
11.3 PROCEDURES IN THE EVENT OF TOP HEAVY STATUS
Notwithstanding any other provision of the Plan to the contrary, for
any Plan Year in which the Plan is deemed to be top heavy, the
following provisions shall apply:
(a) MINIMUM VESTING - Any Participant who completes an Hour of
Service in a Plan Year in which the Plan is deemed to be top
heavy shall have a nonforfeitable interest in the Employer
Profit Sharing Contribution made on his behalf to his Regular
Profit Sharing Account for such Plan Year. Furthermore, if the
vesting schedule under the Plan for any Plan Year shifts into or
out of the above schedule because of the Plan's top heavy
status, such shift shall be regarded as an amendment to the
Plan's vesting schedule and the provisions of Section 7.4 shall
be applied.
(b) MINIMUM CONTRIBUTION - The Employer shall make a minimum
contribution for each Participant who is a Non-Key Employee and
who is employed by an Employer or Affiliated Employer on the
last day of the Plan Year as follows:
(i) If the Participant is also a participant in a defined
benefit plan or another defined contribution plan
sponsored by an Employer or Affiliated Employer
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which provides a top heavy minimum benefit, then the
minimum contribution to this Plan is 0%.
(ii) If the Participant is also a participant in a defined
benefit plan or another defined contribution plan
sponsored by an Employer or Affiliated Employer which
provides a top heavy minimum benefit offset by the
minimum benefit under this Plan, or if the Participant
is not a participant in any other defined benefit plan
or defined contribution plan sponsored by the Employer,
then the minimum contribution to this Plan is the
lesser of:
(A) 3% of the Participant's Section 415 Compensation
(as defined in Section 12.4(b)) for such Plan
Year, or
(B) The largest percentage of Employer contributions,
as a percentage of Section 415 Compensation (as
defined in Section 12.4(b)), allocated to the
Total Account of any Key Employee for such Plan
Year.
For purposes of this paragraph (b)(ii), Participants
shall also include Eligible Employees who have waived
participation in this Plan, if applicable.
(c) In any Plan Year in which the Plan is top heavy, but not super
top heavy (substituting 90% for 60% in Section 11.2 above),
Section 12.4(e) shall be applied by substituting "1.0" for
"1.25", unless subparagraph (b)(ii)(A) above is amended to
substitute "4%" for "3%" therein.
(d) In any Plan Year in which the Plan is super top heavy
(substituting 90% for 60% in Section 11.2), the factor of "1.25"
shall be changed to "1.0" in Section 12.4(e).
(e) In any Plan Year that the Plan ceases to be top heavy, the above
provisions shall no longer apply, except that the portion of a
Participant's Regular Profit Sharing Account which was vested
pursuant to paragraph (a) above shall remain vested.
(f) The minimum allocation provisions of paragraph (b) above shall,
to the extent necessary, be satisfied by special contributions
made by the Employer for that purpose. Neither Before-Tax
Contributions nor Employer Matching Contributions shall be taken
into account in satisfying the minimum allocation provisions of
paragraph (b) above.
(60)
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(g) The provisions of this Section 11.3 above shall not apply to any
Employee included in a unit of Employees covered by a collective
bargaining agreement if, within the meaning of Section 416(i)(4)
of the Code, retirement benefits were the subject of good faith
bargaining.
(61)
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ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 SPENDTHRIFT PROVISION
No benefit payable under the Plan will, except as otherwise
specifically provided by law, be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt so to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge the same will be
void; nor will any benefit be in any manner liable for or subject to
the debts, contracts, loans, liabilities, engagements or torts of the
person entitled thereto, except for any loans or other indebtedness
due the Trust Fund within the limitations stated in Section 4975(d)(3)
of the Code and 1.401(a)-13 of the Code of Federal Regulations or
similar substitute provisions of applicable regulation. Upon the
occurrence or threatened occurrence of any act or thing in violation
of or contrary to the foregoing provision, then the benefit affected
will, in the discretion of the Benefits Committee, cease and
terminate, and in that event the Benefits Committee will make or hold
the payments which would otherwise be payable on account thereof to or
for the benefit of the Participant or Beneficiary involved, his
spouse, children or other dependents, or any of them, in such manner
and in such proportion as the Benefits Committee may deem proper.
This provision shall not apply to a Qualified Domestic Relations
Order, and those other domestic relations orders permitted to be so
treated by the Administrator under the provisions of the Retirement
Equity Act of 1984. The Administrator shall establish a written
procedure to determine the qualified status of domestic relations
orders and to administer distributions under such qualified orders.
Further, to the extent provided under a Qualified Domestic Relations
Order, a former spouse of a Participant shall be treated as the Spouse
or surviving Spouse for all purposes under the Plan.
12.2 BONDING
The requirement of giving bond by any Trustee or other fiduciary or of
giving surety on any bond shall be dispensed with to the extent
permitted or required by applicable law.
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12.3 NO CONTRACTUAL OBLIGATIONS
This Plan shall not constitute an express or implied contract between
the Employer and any Participant and nothing contained herein shall
give to any Employee or Participant the right to be retained in the
employ of the Employer or to interfere with the management of the
Employer's business or, except as otherwise provided by law, the right
of the Employer to discharge any Employee or Participant at any time,
nor shall it give the Employer the right to require any Employee to
remain in its employ, nor shall it interfere with the right of any
Employee to terminate his employment at any time.
12.4 LIMITATIONS ON CONTRIBUTIONS
(a) The maximum annual addition that may be contributed or allocated
to a Participant's accounts under this Plan, all other defined
contribution plans, all individual medical accounts (as defined
in Section 415(l)(2) of the Code) which are part of a defined
benefit plan, and, with respect to contributions paid or accrued
after December 31, 1985, all separate accounts for
post-retirement medical benefits of key employees (as defined in
Section 419A(d)(3) of the Code) under a welfare benefit fund
(as defined in Section 419(e) of the Code), maintained by all
Employers and Affiliated Employers for any Limitation Year
commencing on or after January 1, 1987 shall not exceed the
lesser of (i) or (ii) below:
(i) $30,000 (or, if greater, 25% of the defined benefit
dollar limitation in effect under Section 415(b)(1)(A)
of the Code for the Limitation Year), or
(ii) 25% of the Participant's "Section 415 Compensation" (as
defined in paragraph (b) below) for such Limitation
Year.
(b) The term "Section 415 Compensation" means wages, salaries, and
fees for professional services and other amounts received from
the Employer and all Affiliated Employers during the Limitation
Year (without regard to whether or not an amount is paid in
cash) for personal services actually rendered in the course of
employment with the Employer, to the extent such amounts are
includable in gross income, including, but not limited to,
overtime pay, tips, bonuses, commissions to paid salesmen,
compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, fringe benefits,
reimbursements, and expense allowances, and excluding the
following:
(63)
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(i) amounts contributed by the Employer or Affiliated
Employer on behalf of the Employee pursuant to a salary
deferral agreement under this Plan or any other cash or
deferred arrangement described in Section 401(k) of the
Code, to any salary reduction agreement pursuant to a
cafeteria plan established under Section 125 of the
Code, or to any other plan of deferred compensation,
and which are not includable in the Employee's gross
income for the taxable year in which contributed, or
any distributions from a plan of deferred compensation;
(ii) amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property)
held by the Employee either becomes freely transferable
or is no longer subject to a substantial risk of
forfeiture;
(iii) amounts realized with respect to the sale, exchange, or
other disposition of stock acquired under a qualified
stock option; and
(iv) other amounts which receive special tax benefits, or
contributions made by the Employer (whether or not
under a salary reduction agreement) towards the
purchase of an annuity described in Section 403(b) of
the Code (whether or not the amounts are excludable
from the Employee's gross income).
For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of this Section, the term
"Section 415 Compensation" means the compensation actually paid
or includable in the Employee's gross income for the Limitation
Year.
(c) For purposes of the Plan, an annual addition consists of the
amounts allocated to a Participant's accounts during the
Limitation Year that constitute:
(i) Employer Contributions (including Cash Option
Deferrals) and forfeitures allocable to a Participant
under all plans (or portions thereof) maintained by the
Employer subject to Section 415(c) of the Code;
(ii) the Participant's employee contributions under all such
plans (or portions thereof); and
(iii) amounts allocated after March 31, 1984 to an individual
medical account (as defined in Section 415(l)(2) of the
Code) under a pension or annuity
(64)
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plan maintained by the Employer, or amounts derived from
contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are
attributable to post-retirement medical benefits,
allocated to the separate account of a key employee (as
defined in Section 419(A)(d)(3) of the Code) under a
welfare benefit fund (as defined in Section 419(e) of the
Code) maintained by the Employer.
Any excess amount applied under paragraph (d) below in the
Limitation Year to reduce Employer Contributions shall be
considered annual additions for such Limitation Year.
A Participant's employee contributions as described in clause
(ii) above shall be determined without regard to any rollover
contributions, any employee contributions transferred directly
from another plan qualified under Section 401(a) of the Code, or
any Loan repayments.
Employer and employee contributions taken into account as annual
additions shall include "excess contributions" as defined in
Section 401(k)(8)(B) of the Code, "excess aggregate
contributions" as defined in Section 401(m)(6)(B) of the Code,
and "excess deferrals" as defined in Section 402(g) of the Code,
regardless of whether such amounts are distributed or forfeited,
unless such amounts constitute "excess deferrals" that were
distributed to the Participant no later than April 15 of the
taxable year following the taxable year of the Participant in
which such deferrals were made.
(d) In the event a Participant's total annual additions for a
Limitation Year exceed the limitations of paragraph (a) above,
Employer Contributions otherwise required with respect to such
Participants under Article 5 shall be reduced to the extent
necessary to comply with the limitations of paragraph (a) above.
If such reduction is not effected in time to prevent such
allocations for any Limitation Year from exceeding the
limitations of paragraph (a), such excess amount shall, if
permissible under Income Tax Regulation 1.415-6(b)(6)(iv), be
distributed to the Participant. If such excess amount is not
distributed, it shall be used to reduce Employer Contributions
for such Participant in the next Limitation Year, and each
succeeding Limitation Year, if necessary, provided that if the
Participant is not covered by the Plan at the end of the current
Limitation Year, the portion exceeding the limitation set forth
in paragraph (a) above shall be held unallocated in a suspense
account for such Limitation Year, and shall be reallocated in
the next Limitation Year to the
(65)
<PAGE> 74
accounts of other Participants to the extent such allocations do not
exceed the limitations of paragraph (a) above.
All amounts held in the suspense account shall be used to reduce
future Employer Contributions for all remaining Participants in
succeeding Limitation Years (subject to the limitations of
paragraph (a) above) before any Employer Contributions or
Before-Tax Contributions which would constitute annual additions
may be made to the Plan for the Limitation Year.
If a suspense account is in existence at any time during a
Limitation Year, it will participate in the allocation of the
Trust Fund's investment gains or losses.
Upon termination of the Plan, any unallocated amounts remaining
in a suspense account shall be allocated to the extent possible
under this Section for the Limitation Year of termination. Any
amount remaining in such suspense account upon termination of
the Plan shall be returned to the Employer, notwithstanding any
other provision of the Plan or Trust Agreement.
(e) If the Employer maintains, or at any time maintained, a
qualified defined benefit plan covering any Participant in this
Plan, the sum of the Participant's defined benefit plan fraction
and defined contribution plan fraction (as described below) for
any Limitation Year shall not exceed 1.0.
The DEFINED BENEFIT PLAN FRACTION for any Limitation Year is a
fraction, the numerator of which is the sum of the Participant's
projected annual benefits under all defined benefit plans
(whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 1.25 times the dollar
limit determined under Sections 415(b) and 415(d) of the Code
for the Limitation Year, or 1.4 times 100% of the Participant's
highest average annual Section 415 Compensation (including any
adjustments under Section 415(b) of the Code) for any three
consecutive years.
The DEFINED CONTRIBUTION PLAN FRACTION for any Limitation Year
is a fraction, the numerator of which is the sum of the annual
additions to the Participant's accounts under all defined
contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years
(including the annual additions attributable to the
Participant's nondeductible employee contributions to all
defined benefit plans (whether or not terminated) maintained by
the Employer,
(66)
<PAGE> 75
and the annual additions attributable to all welfare benefit
funds, as defined in Section 419(e) of the Code, and individual
medical accounts, as defined in Section 415(l)(2) of the Code)
maintained by the Employer, and the denominator of which is
the sum of the maximum aggregate amounts for the current and
all prior Limitation Years of service with the Employer
(regardless of whether a defined contribution plan was
maintained by the Employer). The maximum aggregate amount in
any Limitation Year is the lesser of 1.25 times the dollar
limitation determined under Sections 415(b) and 415(d) of the
Code in effect under Section 415(c)(1)(A) of the Code, or 35% of
the Participant's Section 415 Compensation for such Limitation
Year.
Any adjustment necessary to comply with the limitations of this
paragraph (e) shall be made in the Participant's benefit payable
under the relevant defined benefit plan; but under no
circumstances may the accrued benefit of a Participant in a
defined benefit plan decrease as a result of a Plan amendment to
change the combined plan limits.
(f) For purposes of this Section, the Employer and all Affiliated
Employers shall be considered one employer, and the limitations
shall be applicable to the total benefits received from the
Employer and all Affiliated Employers. Furthermore, in
determining who is an Affiliated Employer for this purpose, the
phrase "more than 50%" shall be substituted for "at least 80%"
each place it appears in Section 1563(a)(i) of the Code.
12.5 NONDISCRIMINATION LIMITATIONS ON PARTICIPANT CONTRIBUTIONS AND
EMPLOYER MATCHING CONTRIBUTIONS
(a) For purposes of this Section, the following terms shall have the
meaning indicated below:
(i) "ACTUAL DEFERRAL PERCENTAGE" means the average
(expressed as a percentage) of the deferral percentages
of Eligible Employees in a group. An Eligible
Employee's deferral percentage is equal to the ratio
(expressed as a percentage) of the Employee's
Before-Tax Contributions and Cash Option Deferrals
(including any Before-Tax Contributions and Cash Option
Deferrals returned to the Employee pursuant to Section
4.5(b) but excluding Before-Tax Contributions and Cash
Option Deferrals returned to the Employee pursuant to
Section 12.4(d) contributed to the Trust Fund in the
(67)
<PAGE> 76
Plan Year to the Eligible Employee's Compensation for
that Plan Year. The individual ratios and the
percentages for any groups of individuals shall be
calculated to the nearest one-hundredth of one percent
(.01%).
(ii) "ACTUAL CONTRIBUTION PERCENTAGE" means the average
(expressed as a percentage) of the contribution
percentages of Eligible Employees in a group. An
Eligible Employee's contribution percentage is equal to
the ratio of the Employer Matching Contributions
contributed to the Trust Fund in the Plan Year to the
Eligible Employee's Compensation for that Plan Year.
The individual ratios and the percentages for any
groups of individuals shall be calculated to the
nearest one-hundredth of one percent (.01%).
(iii) "ELIGIBLE EMPLOYEE" means any Employee of the Employer
who, during the Plan Year, is eligible to make
Before-Tax Contributions or Cash Option Deferrals in
accordance with the provision of Sections 4.1 and 5.1
respectively, or who is eligible to receive Employer
Matching Contributions in accordance with the
provisions of Section 5.2. An individual shall be
treated as an Eligible Employee for a Plan Year if he
so qualifies for any part of the Plan Year.
(iv) "COMPENSATION" means the Employee's Section 415
Compensation (as defined in Section 12.4(b)) but not in
excess of the limit under Section 401(a)(17) of the
Code, and including any amounts contributed by the
Employer or an Affiliated Employer on behalf of the
Employee pursuant to a salary deferral agreement or
cash option deferral under this Plan (or any other cash
or deferred arrangement described in Section 401(k) of
the Code) or a salary reduction agreement pursuant to a
cafeteria plan established under Section 125 of the
Code, or toward the purchase of an annuity described in
Section 403(b) of the Code.
Notwithstanding the foregoing, in determining the
amount of Compensation to be taken into account for
purposes of this Section, the Employer may limit the
period used to determine an Employee's Compensation for
the Plan Year to the portion of the Plan Year in which
the Employee was an Eligible Employee (as defined in
subparagraph (iii) above), provided that this limit is
applied uniformly to all Eligible Employees with
respect to such Plan Year.
(68)
<PAGE> 77
(b) For purposes of determining the Actual Deferral Percentage and
Actual Contribution Percentage of an Eligible Employee who is a
5% owner or one of the ten most Highly Compensated Employees,
and, for purposes of determining his excess contributions and
excess aggregate contributions, if any, the Compensation,
Before-Tax Contributions, Cash Optional Deferrals, and Employer
Matching Contributions of such Employee shall include the
Compensation, Before-Tax Contributions, Cash Option Deferrals,
and Employer Matching Contributions for the Plan Year of his
family members. For this purpose, the term "family member"
means such Employee's Spouse and lineal ascendants and
descendants, and the spouses of such lineal ascendants and
descendants. Family members shall be disregarded in determining
the Actual Deferral Percentage and Actual Contribution
Percentage for Eligible Employees who are not 5% owners or among
the ten most Highly Compensated Employees.
(c) If more than one plan providing for a cash or deferred
arrangement, or for matching contributions, or employee
contributions (within the meaning of Sections 401(k) and 401(m)
of the Code) is maintained by the Employer or an Affiliated
Employer, then the individual ratios of any Highly Compensated
Employee who participates in more than one such plan or
arrangement shall, for purposes of determining the individual's
Actual Contribution Percentage and Actual Deferral Percentage,
be determined as if all such arrangements were a single plan or
arrangement. If a Highly Compensated Employee participates in
two or more cash or deferred arrangements that have different
plan years, all cash or deferred arrangements ending with or
within the same calendar year shall be treated as a single
arrangement. Notwithstanding the foregoing, plans that are
mandatorily disaggregated pursuant to regulations under Section
401(k) of the Code shall not be aggregated for purposes of this
paragraph but shall be treated as separate plans.
(d) In the event that this Plan satisfies the requirements of
Sections 401(a)(4) and 410(b) of the Code only if aggregated
with one or more other plans, and for Plan Years beginning after
December 31, 1988 all such plans have the same Plan Year, then
this Section shall be applied by determining the Actual Deferral
Percentage and Actual Contribution Percentage of Eligible
Employees as if all such plans were a single plan.
(e) In accordance with the nondiscrimination requirements of Section
401(k) of the Code, the Committee shall establish a Compensation
Deferral Limit with respect to Before-Tax Contributions and the
Cash Option Share credited to a Participant's
(69)
<PAGE> 78
Total Account during a Plan Year and may adjust such deferral
limit (in accordance with paragraph (g)(i) below) from time to
time during the Plan Year in order to satisfy one of the
following tests:
(i) The Actual Deferral Percentage of the group of Eligible
Employees who are Highly Compensated Employees for the
Plan Year shall not exceed the Actual Deferral
Percentage of the group of Eligible Employees who are
Nonhighly Compensated Employees for the same Plan Year
multiplied by 1.25.
(ii) The Actual Deferral Percentage of the group of Eligible
Employees who are Highly Compensated Employees for the
Plan Year shall not exceed the Actual Deferral
Percentage of the group of Eligible Employees who are
Nonhighly Compensated Employees for the same Plan Year
multiplied by two, provided that the Actual Deferral
Percentage for such Highly Compensated Employees is not
more than two percentage points higher than the Actual
Deferral Percentage for such Nonhighly Compensated
Employees.
(f) In accordance with the nondiscrimination requirements of Section
401(m) of the Code, the Committee shall establish a Contribution
Percentage Limit with respect to Employer Matching Contributions
credited to a Participant's Total Account, and may adjust such
percentage limit (in accordance with paragraph (g)(i) below)
from time to time during the Plan Year in order to satisfy one
of the following tests:
(i) The Actual Contribution Percentage of the group of
Eligible Employees who are Highly Compensated Employees
for the Plan Year shall not exceed the Actual
Contribution Percentage of the group of Eligible
Employees who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 1.25.
(ii) The Actual Contribution Percentage of the group of
Eligible Employees who are Highly Compensated Employees
for the Plan Year shall not exceed the Actual
Contribution Percentage of the group of Eligible
Employees who are Nonhighly Compensated Employees for
the same Plan Year, multiplied by two, provided that
the Actual Contribution Percentage for such Highly
Compensated Employees is not more than two percentage
points higher than
(70)
<PAGE> 79
the Actual Contribution Percentage for such Nonhighly
Compensated Employees.
(g) The Committee may take the following actions to assure
compliance with the nondiscrimination limitations of Section
401(k) and/or Section 401(m) of the Code:
(i) If the average percentages described in paragraphs (e)
and/or (f) above applicable to the group of Eligible
Employees who are Highly Compensated Employees are
expected to exceed the maximum average percentage
necessary to comply with the rules described in said
paragraphs, the Committee may direct that the Actual
Deferral Percentage and/or the Actual Contribution
Percentage, as the case may be, for each member of such
group of Highly Compensated Employees be reduced,
prospectively only, beginning with the Highly Compensated
Employee whose Actual Deferral Percentage or Actual
Contribution Percentage, as the case may be, is the
highest so that the limit is not exceeded.
(ii) If the average percentages described in paragraphs (e)
and/or (f) above applicable to the group of Eligible
Employees who are Highly Compensated Employees exceed the
maximum average percentage necessary to comply with the
rules described in said paragraphs, the Committee shall
direct the successive reductions of the highest individual
Actual Deferral Percentage and/or Actual Contribution
Percentage attributable to one or more members of such
group of Highly Compensated Employees (beginning with the
Highly Compensated Employee whose Actual Deferral
Percentage or Actual Contribution Percentage, as the case
may be, is the highest) until the average percentage for
such group of Highly Compensated Employees does not exceed
the applicable limit.
The reduction of a Highly Compensated Employee's Actual Deferral
Percentage and/or Actual Contribution Percentage shall be made
in accordance with the following procedure:
FIRST, if a Highly Compensated Employee's Actual Deferral
Percentage for the Plan Year exceeds the limit described in
paragraph (e) above, his Actual Deferral Percentage shall be
reduced by returning to him all (or a portion) of the amount
contributed for such Plan Year in excess of such limit.
(71)
<PAGE> 80
Any amounts to be returned shall first be reduced, but not below
zero, by any excess deferrals contributed for the Plan Year and
previously returned to the Employee in the taxable year ending
with or within that Plan Year pursuant to Section 4.5.
The reduction of excess contributions shall be made by first
reducing the Participant's Supplemental Before-Tax Contributions
and, if that is insufficient, by reducing his Basic Before-Tax
Contributions and, if that is insufficient, by reducing his Cash
Option Deferrals.
SECOND, in the case of a Participant to whom Basic Before-Tax
Contributions are returned, the amount of his Employer Matching
Contributions shall be reduced by distributing to the
Participant his Employer Matching Contributions that were
attributable to such Basic Before-Tax Contributions.
THIRD, if a Highly Compensated Employee's Actual Contribution
Percentage for the Plan Year exceeds the limit described in
paragraph (f) above, his Actual Contribution Percentage shall be
reduced by returning to him the amount contributed for such Plan
Year in excess of such limit.
The reduction of excess aggregate contributions shall be made by
distributing Employer Matching Contributions to the Participant
on a pro rata basis.
Contributions which are returned, forfeited or distributed shall
be adjusted for allocable gains and losses for the Plan Year
with respect to which the contributions were made in accordance
with the method described below for such contributions.
ALLOCATING INCOME TO EXCESS CONTRIBUTIONS. Excess contributions
shall be adjusted for allocable gains or losses for the Plan
Year in which such excess contributions arose by multiplying the
gains or losses credited to the Participant's Basic and
Supplemental Before-Tax Contribution Accounts and Cash Option
Deferred Account for such Plan Year by a fraction, the numerator
of which is the Participant's excess contributions for the Plan
Year, and the denominator of which is the sum of (i) the balance
in the Participant's Basic and Supplemental Before-Tax
Contribution Accounts and Cash Option Deferred Account as of the
beginning of the Plan Year, and (ii) the amount of Before-Tax
Contributions and Cash Option Deferrals credited to the
Participant's Total Account for the Plan Year.
(72)
<PAGE> 81
ALLOCATING INCOME TO EXCESS AGGREGATE CONTRIBUTIONS. Excess
aggregate contributions shall be adjusted for allocable gains or
losses for the Plan Year in which such excess aggregate
contributions arose by multiplying the gains or losses credited
to the Participant's Employer Matching Contribution Account for
such Plan Year by a fraction, the numerator of which is the
Participant's excess aggregate contributions for the Plan Year,
and the denominator of which is the sum of (i) the balance in
the Participant's Employer Matching Contribution Account as of
the beginning of the Plan Year, and (ii) the amount of Employer
Matching Contributions credited to the Participant's Total
Account for the Plan Year.
Excess contributions and excess aggregate contributions (and
income allocable thereto) shall be returned, distributed, or, if
applicable, forfeited, not later than the last day of the Plan
Year following the close of the Plan Year in which such excess
arose. Excess contributions shall be allocated to Participants
who are subject to the family aggregation rules of Section
414(q)(6) of the Code in the manner prescribed by applicable
regulations.
(i) For purposes of this Section, the "aggregate limit" for any Plan
Year shall mean a percentage equal to the greater of (i) or (ii)
below:
(i) The percentage equal to the sum of (A) and (B) below:
(A) 125% of the greater of:
(1) The Actual Deferral Percentage for
Eligible Employees who are Nonhighly
Compensated Employees for the Plan Year,
or
(2) The Actual Contribution Percentage of
such Eligible Employees, and
(B) 2% plus the lesser of (A)(1) or (A)(2) above. In
no event, however, shall this percentage exceed
200% of the lesser of (A)(1) or (A)(2) above.
(ii) The percentage equal to the sum of (A) and (B) below:
(A) 125% of the lesser of:
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<PAGE> 82
(1) The Actual Deferral Percentage for
Eligible Employees who are Nonhighly
Compensated Employees for the Plan Year,
or
(2) The Actual Contribution Percentage of
such Eligible Employees, and
(B) 2% of the greater of (A)(1) or (A)(2) above. In
no event, however, shall this percentage exceed
200% of the greater of (A)(1) or (A)(2) above.
The "aggregate limit" shall be calculated to the nearest
one-hundredth of one percent (.01%).
The "aggregate limit" shall be applied to reduce allocations
otherwise permissible for a Plan Year if after application of
paragraph (g) above the sum of the average percentages described
in paragraphs (e) and (f) above applicable to the group of
Eligible Employees who are Highly Compensated Employees exceeds
the "aggregate limit" for such Plan Year.
The "aggregate limit" shall not apply to reduce allocations
otherwise permissible for a Plan Year unless the Actual Deferral
Percentage and the Actual Contribution Percentage for Eligible
Employees who are Highly Compensated Employees for the Plan Year
each exceed 125% of the corresponding percentages determined for
Eligible Employees who are Nonhighly Compensated Employees for
the Plan Year.
The reduction of the Actual Contribution Percentage and/or
Actual Deferral Percentage of the group of Eligible Employees
who are Highly Compensated Employees shall be applied to those
Highly Compensated Employees who are eligible to make Before-Tax
Contributions or Cash Option Deferrals, or are eligible to
receive Employer Matching Contributions. Reductions shall be
made in the manner described in paragraph (g) above to the
extent necessary to comply with the aggregate limit, except that
the reductions shall be applied first to reduce Actual
Contribution Percentages and then, if necessary, to reduce
Actual Deferral Percentages.
(j) The Committee shall maintain sufficient records to demonstrate
that the Plan satisfies the nondiscrimination tests described in
paragraphs (e) and (f) above.
(74)
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ARTICLE 13
AMENDMENT AND TERMINATION
13.1 AMENDMENT
The Sponsoring Employer may amend the Plan, from time to time, by a
written instrument duly executed by an authorized officer of the
Sponsoring Employer pursuant to a resolution of the Board and
delivered to the Trustee, provided that no amendment which affects the
Trustee shall be effective without the Trustee's consent.
13.2 MERGER, CONSOLIDATION OR TRANSFER OF ASSETS
In the case of any merger or consolidation of the Trust Fund with, or
transfer of assets or liabilities of the Trust Fund to, any trust
under any other plan, such transaction shall be structured in such a
way that each Participant would (if the Plan then terminated) receive
a benefit immediately after the transaction which is equal to or
greater than the benefit he would have been entitled to receive
immediately before the transaction (if the Plan had then terminated).
13.3 TERMINATION
The Sponsoring Employer may terminate the Plan established hereunder
at its option at any time by written resolution of the Board. Without
thereby undertaking a legal duty, however, the Sponsoring Employer
hereby expresses the intention of establishing a permanent plan under
which the Sponsoring Employer will make recurring and substantial
contributions. The Plan shall be automatically terminated if the
Sponsoring Employer is adjudicated bankrupt, makes an assignment for
benefit of creditors, suffers the appointment of a receiver, or
dissolves, except that the reorganization of the Employer under the
applicable sections of the Code shall not be deemed to result in
dissolution for purposes of this Section 13.3.
A participating Employer may discontinue or revoke its participation
in the Plan with respect to its Eligible Employees. At the time of
discontinuance or revocation, the Committee may authorize the Trustee
to transfer, deliver, and assign vested Trust Fund assets attributable
to the Participants employed by such participating Employer to a new
trustee as shall have been designated by the participating Employer,
in the event that it has established a separate qualified plan for its
employees. If a separate qualified plan
(75)
<PAGE> 84
is not established, the Trustee shall retain such assets for the
benefit of the Participants employed by such participating Employer.
In no event shall any part of the corpus or income of the Trust Fund
as it relates to such participating Employer be used for or diverted
to purposes other than for the exclusive benefit of the Participants
employed by such participating Employer and their Beneficiaries.
13.4 CONSEQUENCES OF TERMINATION
In the event that the Board shall decide to terminate the Plan, or in
the event of a partial termination or complete cessation of Employer
Contributions, the rights of Participants to the amounts in their
Total Accounts shall be fully vested. Thereupon, the Benefits
Committee shall direct the Trustee to liquidate the entire Trust Fund
after payment of all expenses and proportional adjustment of Total
Accounts to reflect such expenses and the value of the Fund. The
Trustees shall make payment of all amounts due to the Participants in
accordance with the applicable provisions of the Plan.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of this Plan
instrument by the Sponsoring Employer and the Trustee, the Sponsoring Employer
and the Trustee have caused these presents to be executed on their behalf and
the Corporate Seal of the Sponsoring Employer is to be hereunder affixed as of
this 22nd day of March, 1994.
ATTEST:
/s/ Eric R. Fischer
--------------------
Clerk
UST CORP.
By: /s/ Neal F. Finnegan
--------------------
President
UNITED STATES TRUST COMPANY AS TRUSTEE
By: /s/ Domenic Colasacco
---------------------
(76)
<PAGE> 85
(c) The reduction of a Highly Compensated Employee's Actual Deferral
Percentage shall be made in accordance with the following
procedure:
(i) If a Highly Compensated Employee's Actual Deferral
Percentage for the Plan Year exceeds the limit
described in paragraph (d) above, his Actual
Deferral Percentage shall be reduced by returning
to him all of the amount contributed for such Plan
Year in excess of such limit.
(ii) Excess contributions (and income allocable thereto)
shall be returned, distributed, or, if applicable,
forfeited, within 2 1/2 months of the beginning of
the next Plan Year, if practicable, but in no event
no later than the last day of the Plan Year
following the close of the Plan Year in which such
excess arose.
The following method shall be used to determine the
income allocable on excess contributions
accumulated from the last day of the Plan Year in
which the excess contributions arose to the date of
distribution of such excess ("gap period"):
The income on the excess contributions for the gap
period shall equal 10% of the income earned in the
Plan Year in which the excess arose multiplied by
the number of calendar months contained in the gap
period to the date of distribution of such excess.
A distribution of the excess occurring on one of
the first fifteen days of a calendar month shall be
deemed to have been made on the last day of the
preceding month. A distribution occurring after
the fifteenth day of a calendar month shall be
deemed to have been made on the first day of the
next succeeding calendar month.
(d) Notwithstanding anything in the Plan to the contrary and to the
extent permitted by applicable law, the Plan may be restructured
into component parts based on employee groups or any other
methods permitted by applicable law for a Plan Year in order to
determine whether the Plan meets the Code Section 401(k)
nondiscrimination requirements and/or the Code Section 401(a)(4)
nondiscrimination requirements for such year.
(77)
<PAGE> 1
EXHIBIT 10(f)(i)
UST CORP.
STOCK COMPENSATION PLAN
SECTION 1: PURPOSE; DEFINITIONS
The UST CORP. STOCK COMPENSATION PLAN (the "Plan") was established in
1992 to enable UST CORP. and its Subsidiaries to reward officers and other key
employees so as to encourage them to expend special efforts to increase
shareholder value. The amended and restated Plan set forth herein is a
continuation of the Plan as originally adopted and shall be effective as
provided at Section 10 below. Awards under the Plan as herein amended and
restated which are made prior to the stockholder approval described in Section
10 shall be subject to such approval.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CHANGE OF CONTROL" and "CHANGE OF CONTROL PRICE" have the
meanings set forth in Section 8.
(c) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto.
(d) "COMMITTEE" means the committee appointed by the Board to
administer the Plan in accordance with Section 2.
(e) "COMPANY" means UST Corp., a corporation organized under the
laws of the Commonwealth of Massachusetts, and any successor
corporation.
(f) "DISABILITY" means permanent and total disability as
determined under the Company's disability program.
(g) "DISINTERESTED PERSON" has the meaning set forth in Rule 16b-3
under the Securities Exchange Act of 1934 as applicable to the
Company on the date of reference.
(h) "ELIGIBLE EMPLOYEE" means an employee of the Company or any
Subsidiary as described in Section 4.
JMZSTECOM.US
<PAGE> 2
(i) "FAIR MARKET VALUE" means, as of any given date, the average
of the high and low trading prices of the Stock on the NASDAQ
National Market System on such date, or if the Stock did not
trade on such date, on the next preceding day on which trades
were made.
(j) "INCENTIVE STOCK OPTION" means any Stock Option intended to
qualify as an "incentive stock option" within the meaning of
Section 422 of the Code.
(k) "NON-QUALIFIED STOCK OPTION" means any Stock Option that is
not an Incentive Stock Option.
(l) "PARTICIPANT" means any Eligible Employee selected by the
Committee to receive grants under the Plan.
(m) "RESTRICTED STOCK" means Stock awarded pursuant to Section 6
that is subject to restrictions which lapse upon the
satisfaction of performance and/or service criteria specified
by the Committee.
(n) "STOCK" means the common stock of the Company.
(o) "STOCK OPTION" means any option to purchase shares of Stock
granted pursuant to Section 5.
(p) "SUBSIDIARY" means any corporation in which the Company owns,
directly or indirectly 50% or more of the total combined
voting power of all classes of stock of such corporation.
SECTION 2: ADMINISTRATION
The Plan shall be administered by a Committee composed of not fewer
than two members of the Board, all of whom are Disinterested Persons. Members
of the Committee shall be appointed by the Board and shall serve at the
pleasure of the Board.
The Committee shall have the power and authority, in its discretion:
(i) to select Participants from among those employees of the
Company and the Subsidiaries who are Eligible Employees;
(ii) to determine whether and to what extent Stock Options,
Restricted Stock, or any combination of the foregoing, are to
be granted to Eligible Employees hereunder;
JMZSTCOM.US -2-
<PAGE> 3
(iii) to determine the number of shares of Stock to be covered by
each such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder; and
(v) to determine the terms and conditions of any written
instruments evidencing Stock Options, Restricted Stock, or any
combination of the foregoing awarded under the Plan.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and the
Participants.
SECTION 3: STOCK SUBJECT TO PLAN
Subject to adjustment in accordance with the third and fourth
paragraphs of this Section 3, the maximum number of shares of Stock reserved
and available for awards made under the Plan in any calendar year shall be
equal to (i) 1 1/4% of the total number of shares of Stock outstanding as of
the beginning of that year, plus (ii) any unused portion of the annual limit
for prior years. In determining the number of shares available in 1994 and any
carryover from 1994, the number of shares determined under (i) above for 1994
shall be increased by 350,000. Notwithstanding the foregoing, no more than
1,000,000 shares of Stock in the aggregate (subject to adjustment under the
third and fourth paragraphs of this Section 3) may be issued pursuant to the
exercise of Incentive Stock Options under the Plan.
Subject to adjustment in accordance with the fourth paragraph of this
Section 3, no Participant may be awarded, in any calendar year, Stock Options
covering more than 175,000 shares. For purposes of the immediately preceding
sentence, the repricing of a Stock Option shall be treated as a new award and
shall count against the specified share limit. The provisions of this
paragraph and of the proviso set forth in the immediately following paragraph
shall apply to awards of Stock Options under the Plan only to the extent
required in order for Stock Options under the Plan to qualify
JMZSTCOM.US -3-
<PAGE> 4
for the performance-based compensation exception described in Section
162(m)(4)(C) of the Code.
To the extent that a Stock Option expires or is otherwise terminated
without being exercised, or shares of Restricted Stock are forfeited, the
shares of Stock underlying such Stock Option or the forfeited shares of
Restricted Stock, as the case may be, shall again be available for issuance in
connection with future awards under the Plan; provided, that any such future
award of a Stock Option (if made to the same Participant and in the same year
as the award of the expired or terminated Stock Option) shall count against the
annual per-Participant Stock Option award limit described in the preceding
paragraph.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate adjustment in (i)
the aggregate number of shares of Stock reserved for issuance under the Plan or
for which awards may be made under the Plan, and (ii) the number and Option
Price of shares of Stock subject to outstanding Stock Options granted under the
Plan; provided, that the number of shares of Stock subject to any award shall
always be a whole number. The Committee may make other substitutions or
adjustments, but no such substitution or adjustment shall be effective if it
would cause any Stock Option previously granted to an individual described in
Section 162(m)(3) of the Code to fail to qualify for the performance-based
compensation exception prescribed by Section 162(m)(4)(C) of the Code; and
further provided, that no such substitution or adjustment shall be effective,
without the Participant's consent, if it would cause the Incentive Stock
Options status of any Stock Option held by the Participant to be impaired.
Shares issued pursuant to Plan awards may consist in whole or in part
of authorized and unissued shares or of treasury shares.
SECTION 4: ELIGIBILITY
Officers and other key employees of the Company or Subsidiaries who
are responsible for or contribute to the growth and/or profitability of the
business of the Company or its Subsidiaries shall be eligible to be granted
awards hereunder. The Participants under the Plan shall be selected from time
to time by the Committee from among those Eligible Employees, and the Committee
shall determine the number of shares of Stock covered by each award.
JMZSTCOM.US -4-
<PAGE> 5
SECTION 5: STOCK OPTIONS
Stock Options may be granted alone, in addition to or in combination
with other awards granted under the Plan. Any Stock Option granted under the
Plan shall be in such form as the Committee may from time to time approve, and
the provisions of Stock Option awards need not be the same with respect to each
Participant. Recipients of Stock Options shall enter into a stock option
agreement with the Company, in such form as the Committee shall determine,
which agreement shall set forth, either expressly or by incorporation of the
terms of the Plan, among other things, the Option Price, the term of the Stock
Option and provisions regarding exercisability of the Stock Option granted
thereunder.
Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. The Committee
shall have the authority to grant any Participant Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options. Only those Stock
Options specifically designated as Incentive Stock Options shall be treated as
such; all other Stock Options shall be treated as Non-Qualified Stock Options.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Committee may determine:
(a) OPTION PRICE. The Option Price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at
the date of grant but in the case of an Incentive Stock Option
shall be not less than 100% of the Fair Market Value of the
Stock on such date.
(b) OPTION TERM. The term of each Stock Option shall be fixed by
the Committee, but no Stock Option shall be exercisable more
than ten years after the date such Stock Option is granted.
(c) EXERCISABILITY. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as
shall be determined by the Committee at or after grant. If
the Committee may accelerate the exercisability of a Stock
Option at any time, to such extent as it may determine.
JMZSTCOM.US -5-
<PAGE> 6
(d) TIMING AND METHOD OF EXERCISE. The exercise of a Stock Option
shall be accomplished by giving written notice of exercise to
the Company specifying the number of shares of Stock to be
purchased, accompanied by payment in full of the Option Price
in cash or check, by surrender of other shares of Stock which
have been held by the Participant for six months or more (or
for such other period as the Committee may determine) and
which have a value equal to the Option Price of the shares of
Stock as to which the Stock Option is being exercised, by
delivery of a properly executed exercise notice together with
irrevocable instructions to the Participant's broker to
deliver promptly to the Company the amount of sale proceeds
required to pay the Option Price, or by any combination of the
foregoing. The Company shall, prior to the delivery of any
shares of Stock subject to an exercise, make arrangements for
the payment of withholding taxes, if any, as provided in
Section 9(d).
(e) NON-TRANSFERABILITY OF OPTIONS. No Incentive Stock Option
shall be transferable by the Participant otherwise than by
will or by the laws of descent and distribution, and all
Incentive Stock Options shall be exercisable, during the
Participant's lifetime, only by the Participant. Nonqualified
Stock Options shall be transferable (i) only to the extent, if
any, determined by the Committee, and (ii) in the case of any
such Stock Option the grant of which is intended to be exempt
under Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended, only to the extent, if any, that
transferability is permitted (consistent with such exemption)
by such Rule.
(f) TERMINATION BY REASON OF DEATH. If a Participant's employment
with the Company or any Subsidiary terminates by reason of
death, any Stock Option held by the Participant at time of
death may thereafter be exercised, to the extent exercisable
immediately prior to death (or on such accelerated basis as
the Committee shall determine at or after grant), by the legal
representative of the estate or by the legatee of the
Participant under the will of the Participant, for a period of
one year (or such shorter period as the Committee shall
specify at grant) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever
period is shorter.
(g) TERMINATION BY REASON OF DISABILITY. If a Participant's
employment with the Company or any
JMZSTCOM.US -6-
<PAGE> 7
Subsidiary terminates by reason of Disability, any Stock
Option held by such Participant may thereafter be exercised to
the extent it was exercisable at the time of such termination
(or on such accelerated basis as the Committee shall determine
at or after grant), for a period of one year (or such shorter
period as the Committee shall specify at grant) from the date
of such termination of employment or until the expiration of
the stated term of such Stock Option, whichever period is
shorter, provided, however, that, if the Participant dies
within such one-year period (or such shorter period as the
Committee shall specify at grant), any unexercised Stock
Option held by such Participant shall thereafter be
exercisable to the extent to which it was exercisable at the
time of death for a period of one year (or such shorter period
as the Committee shall specify at grant) from the time of such
death or until the expiration of the stated term of such Stock
Option, whichever period is shorter.
(h) OTHER TERMINATION. Except as otherwise provided in this
Section 5, unless otherwise determined by the Committee, if a
Participant's employment with the Company or any Subsidiary
terminates for any reason other than death or Disability, the
Stock Option may thereafter be exercised to the extent it was
exercisable at the time of such termination (or on such
accelerated basis as the Committee shall determine at or after
grant) for the lesser of three months from the date of
termination or until the expiration of such Stock Option's
term; provided, that if the Participant's employment is
terminated for cause, all Stock Options then held by the
Participant shall terminate immediately.
SECTION 6: RESTRICTED STOCK
(a) GENERAL. Restricted Stock may be issued either alone or in
addition to other awards granted under the Plan. The
Committee shall determine the Eligible Employees to whom, and
the time or times at which, grants of Restricted Stock will be
made; the number of shares of Stock to be awarded; the price,
if any, to be paid by the recipient of Restricted Stock; any
performance objectives applicable to Restricted Stock awards;
the date or dates on which restrictions applicable to such
Restricted Stock shall lapse during the Restricted Period (as
defined at Section 6(c)(i) below); and all other conditions of
the Restricted Stock awards. The performance
JMZSTCOM.US -7-
<PAGE> 8
objectives, if any, to which a grant of Restricted Stock may
be subject may include, without limitation, objectives based
on the performance of the Company, the performance of one or
more Subsidiaries, the performance of one or more divisions or
other business segments, personal performance, or external
performance measures, all as determined by the Committee. The
Committee may also condition the grant of Restricted Stock
upon the exercise of Stock Options or upon such other criteria
as the Committee may determine. The provisions of Restricted
Stock awards need not be the same with respect to each
recipient.
(b) AWARDS AND CERTIFICATES. The prospective recipient of an
award of shares of Restricted Stock shall not have any rights
with respect to such award, unless and until such recipient
has executed an agreement evidencing the award (a "Restricted
Stock Award Agreement") and has delivered a fully executed
copy thereof to the Company, within a period of 60 days (or
such other period as the Committee may specify) after the
award date. The stock certificate or certificates issued in
respect of shares of Restricted Stock shall be registered in
the name of the Participant and shall bear an appropriate
legend referring to the terms, conditions, and restrictions
applicable to such award, substantially in the following form:
"The transferability of this certificate and the
shares of stock represented hereby are subject to
the terms and conditions (including forfeiture) of
the UST Corp. Stock Compensation Plan and a
Restricted Stock Award Agreement entered into
between the registered owner and UST Corp. Copies of
such Plan and Agreement are on file in the offices of
UST Corp."
The Committee may require that the stock certificates evidencing such
shares of Stock be held in the custody of the Company until the
restrictions thereon shall have lapsed, and that, as a condition of
any Restricted Stock award, the Participant shall have delivered a
stock power, endorsed in blank, related to the Stock covered by such
award.
(c) RESTRICTIONS AND CONDITIONS. The shares of Restricted Stock
awarded pursuant to this Section 6
JMZSTCOM.US -8-
<PAGE> 9
shall be subject to the following restrictions and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Award Agreement, during such period as may be set by the
Committee commencing on the grant date (the "Restricted
Period"), the Participant shall not be permitted to sell,
transfer, pledge or assign shares of Restricted Stock awarded
under the Plan. In the case of a Restricted Stock award
providing for the lapsing of restrictions only upon the
attainment of performance related goals, the Restricted Period
shall be deemed to continue until such performance related
goals have been met. Within these limits, the Committee may
provide for the lapse of restrictions in installments and may
accelerate or waive such restrictions in whole or in part
based on such factors and such circumstances as the Committee
may determine, including, but not limited to, the attainment
of performance related goals, the Participant's termination of
employment, death or Disability, or the occurrence of a
"Change of Control" as defined in Section 8 below.
(ii) Except as provided in clause (c)(i) above, the Participant
shall have, with respect to the shares of Restricted Stock,
all of the rights of a stockholder of the Company, including
the right to vote the shares and the right to receive any
dividends thereon. Certificates for shares of unrestricted
Stock shall be delivered to the Participant as soon as
practicable after the Restricted Period expires without such
shares of Stock having been forfeited. The Company's
obligation to deliver vested shares of Stock upon the
expiration of the Restricted Period (whether in the normal
course or on an accelerated basis as described in the
preceding paragraph) shall be subject to the Company's being
satisfied that arrangements for the payment of withholding
taxes, if any, as provided in Section 9(d) have been made.
(iii) Subject to the provisions of the Restricted Stock Award
Agreement and this Section 6, upon termination of employment
for any reason during the Restricted Period, all shares of
Stock still subject to restriction shall be forfeited by the
Participant, and the Participant shall only
JMZSTCOM.US -9-
<PAGE> 10
receive the amount, if any, paid by the
Participant for such Restricted Stock.
SECTION 7: AMENDMENT AND TERMINATION
The Board may amend, alter, or discontinue the Plan at any time;
provided, that no such amendment or alteration shall be effective without the
approval of the stockholders to the extent that stockholder approval is
required to preserve the qualification of the Plan under Section 162(m)(4)(C)
or Section 422 of the Code or its exemption under Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended. The Committee may, consistent
with the terms of the Plan, prospectively or retroactively amend the terms of
any previously granted award. In no event, however, shall any amendment or
alteration (whether affecting the Plan generally or particular awards) impair
the rights of any Participant under any then outstanding award without the
consent of such Participant.
SECTION 8: CHANGE OF CONTROL
The following acceleration and valuation provisions shall apply in the
event of a "Change of Control" as defined in this Section 8:
(a) As of the date of the "Change of Control":
(i) any Stock Options awarded under the Plan not previously
exercisable and vested shall become fully exercisable and
vested;
(ii) the restrictions applicable to any Restricted Stock awarded
under the Plan shall lapse and such shares shall be deemed
fully vested; and
(iii) any Participant to whom a Stock Option shall have been granted
shall have the right (subject to any legal limitations
applicable to such Stock Option, including any limitations
required to preserve the qualification under Section 422 of
the Code of any such Stock Option that is an Incentive Stock
Option) to receive in respect of such Stock Option, and in
extinguishment thereof, for each share of Stock subject to
such Stock Option an amount equal to the excess of (x) the
"Change of Control Price" (as defined in paragraph (c) of this
Section 8) of the securities, cash or other property, or
combination thereof, which would be received in
JMZSTCOM.US -10-
<PAGE> 11
connection with the transaction giving rise to the Change of
Control in respect of a share of Stock, over (y) the Option
Price of such Stock Option, unless provision is made in
connection with such transaction for the substitution for such
Stock Option of new options of the successor corporation or
parent thereof, with appropriate adjustments as to the number
and kind of shares and the per share Option Price as provided
in Section 3 hereof.
(b) For purposes of paragraph (a) of this Section 8, a "Change of
Control" shall be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and 14(d)
of the Securities and Exchange Act, (the "Exchange Act")
(other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(ii) during any period of two consecutive years (not including any
period prior to the execution of the Plan), individuals who at
the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has
entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this
Section 8(b)) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved (hereinafter referred to as "Continuing
Directors"), cease for any reason to constitute at least a
majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the
voting securities of
JMZSTCOM.US -11-
<PAGE> 12
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more
than 80% of the combined voting power of the voting securities
of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more than
25% of the combined voting power of the Company's then
outstanding securities shall not constitute a Change of
Control of the Company; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
(c) For purposes of this Section 8, "Change of Control Price"
means the higher of (i) the highest price per share paid or
offered in any transaction related to a Change of Control of
the Company or (ii) the highest price per share paid in any
transaction reported on the exchange on which the Stock is
traded at any time during the sixty-day period preceding the
Change of Control, as determined by the Committee; provided,
however, that, in the case of Incentive Stock Options such
price shall not be the higher of the foregoing items (i) and
(ii), but shall be the Fair Market Value of the securities,
cash or other property, or combination thereof, which would be
received in connection with the transaction on the date of
such Change of Control.
SECTION 9: GENERAL PROVISIONS
(a) The Committee may require each person purchasing shares of
Stock pursuant to a Stock Option to represent to and agree
with the Company in writing that such person is acquiring the
shares of Stock without a view to distribution thereof. The
certificates for such shares of Stock may include any legend
which the Committee deems appropriate to reflect any
restrictions on transfer.
(b) All certificates for shares of Stock delivered under the Plan
shall be subject to such stock-transfer
JMZSTCOM.US -12-
<PAGE> 13
orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements
of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed, and any applicable
Federal or state securities law, and the Committee may cause a
legend or legends to be put on any such certificates to make
appropriate references to such restrictions.
(c) Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements,
subject to stockholder approval if such approval is required;
and such arrangements may be either generally applicable or
applicable only in specific cases. The adoption of the Plan
shall not confer upon any employee of the Company or any
Subsidiary any right to continued employment with the Company
or a Subsidiary, as the case may be, nor shall it interfere in
any way with the right of the Company or a Subsidiary to
terminate the employment of any of its employees at any time.
(d) Each Participant shall, no later than the date as of which the
value of an award first becomes includible in the gross income
of the Participant for Federal income tax purposes, pay to the
Company, or make arrangements satisfactory to the Company
regarding payment of, any Federal, state, or local taxes of
any kind required by law to be withheld with respect to the
award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company
(and, where applicable, its Subsidiaries) shall, to the extent
permitted by law, have the right to deduct any such taxes from
any payment of any kind otherwise due to the Participant.
JMZSTCOM.US -13-
<PAGE> 14
(e) No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith
with respect to the Plan, and all members of the Board or the
Committee and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law,
be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
SECTION 10: EFFECTIVE DATE OF PLAN
The Plan as herein amended and restated shall be effective on the date
it is adopted by the Board, subject to the approval by the Company's
stockholders within twelve months of the date it is adopted by the Board.
SECTION 11: TERM OF PLAN
No Stock Option or Restricted Stock award shall be granted under the
Plan on or after ______________ _______, 2004,1 but awards granted prior to
said date may extend beyond that date.
* * * * END OF PLAN * * * *
________________________
1 [The day before the tenth anniversary of adoption by the Board.]
JMZSTCOM.US -14-
<PAGE> 1
EXHIBIT 10(i)
UST CORP.
1995 STOCK OPTION PLAN FOR DIRECTORS
1. PURPOSE
The purpose of this 1995 Stock Option Plan for Directors (the "Plan") is to
advance the interests of UST Corp. (the "Company") by enhancing the ability of
the Company and certain of its subsidiaries to attract and retain non-employee
directors who are in a position to make significant contributions to the
success of the Company and to reward directors for such contributions through
ownership of shares of the Company's common stock (the "Stock").
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the Board
of Directors (the "Board") of the Company designated by the Board for that
purpose. The Committee shall have authority, not inconsistent with the express
provisions of the Plan, (a) to issue options granted in accordance with the
formula set forth in this Plan to such directors as are eligible to receive
options; (b) to prescribe the form or forms of instruments evidencing options
and any other instruments required under the Plan and to change such forms from
time to time; (c) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (d) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in
connection with the Plan. Such determinations of the Committee shall be
conclusive and shall bind all parties. Transactions under this plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act"). To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which the Plan is approved by
the Board of Directors of the Company, subject to approval by the stockholders
of the Company. No option shall be granted under the Plan after the completion
of ten years from the date on which the Plan was adopted by the Board, but
options previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
(a) NUMBER OF SHARES. Subject to adjustment as provided in
Section 4(c), the
1
<PAGE> 2
aggregate number of shares of Stock that may be delivered
upon the exercise of options granted under the Plan shall be
150,000. If any option granted under the Plan terminates
without having been exercised in full, the number of shares
of Stock as to which such option was not exercised shall be
available for future grants within the limits set forth in
this Section 4(a).
(b) SHARES TO BE DELIVERED. Shares delivered under the Plan shall
be authorized but unissued Stock or previously issued Stock
acquired by the Company and held in treasury. No fractional
shares of Stock shall be delivered under the Plan.
(c) CHANGES IN STOCK. In the event of a stock dividend, stock
split or combination of shares, recapitalization or other
change in the Company's capital stock, after the effective
date of the Plan, the number and kind of shares of stock or
securities of the Company subject to options then outstanding
or subsequently granted under the Plan, the maximum number of
shares or securities that may be delivered under the Plan, the
exercise price, the "prescribed number" specified in Section
6(a), and other relevant provisions shall be appropriately
adjusted by the Committee, whose determination shall be
binding on all persons.
5. ELIGIBILITY FOR OPTIONS
Directors eligible to receive option grants under the Plan ("Eligible
Directors") shall be (a) those directors (including honorary but not including
emeritus directors) of the Company who are not employees of the Company or of
any subsidiary of the Company, and (b) those directors (not including honorary
or emeritus directors) of USTrust who are not employees of the Company or of
any subsidiary of the Company.
6. TERMS AND CONDITIONS OF OPTIONS
(a) NUMBER OF OPTIONS. On the date of the annual meeting of
stockholders at which this Plan is approved by stockholders
each individual then an Eligible Director shall be awarded on
such date an option covering shares of Stock equal in number
to the "prescribed number" as hereinafter defined.
Thereafter, on the date of each subsequent annual meeting,
there shall be awarded to each individual elected at such
meeting to serve as an Eligible Director and to each other
Eligible Director (if any) elected to office since the last
annual meeting by the board of directors of the corporation on
which he or she serves as a director, but excluding any
Eligible Director who has previously been granted options
under this Plan, an option covering the prescribed number of
shares of Stock. For purposes of this paragraph, the
"prescribed number" is: (i) 7,500 in the case of any Eligible
Director (other than an honorary director of the Company)
serving as a director both of the Company and of USTrust; (ii)
5,100 in the case of any Eligible Director (other than an
honorary director of the Company) serving as a director
2
<PAGE> 3
of the Company but not serving as a director of USTrust;
(iii) 4,500 in the case of any Eligible Director serving as
an honorary director of the Company; and (iv) 3,000 in the
case of any Eligible Director serving as a director of
USTrust but not serving as a director of the Company (other
than as an honorary director of the Company). The
"prescribed number" for an Eligible Director described in
both (iii) and (iv) shall be 7,500.
(b) EXERCISE PRICE. The exercise price of each option shall be
100% of the fair market value per share of the Stock on the
date the option is granted. In no event, however, shall the
option price be less, in the case of an original issue of
authorized stock, than par value per share. For purposes of
this paragraph, the fair market value of a share of Stock on
any date shall be the average of the high and low prices of
the Stock on the NASDAQ National System on such date, or if
the Stock did not trade on such date, on the next preceding
day on which trades were made.
(c) DURATION OF OPTIONS. The latest date on which an option may
be exercised (the "Final Exercise Date") shall be the fifth
anniversary of the date the option was granted.
(d) Exercise of Options.
-------------------
(1) Each option shall become exercisable as follows: (A)
to the extent of one-third (1/3) of the shares
covered by the option, on the earliest testing date
(as hereinafter defined) on which the per-share fair
market value of the Stock is at least three dollars
($3.00) higher than on the date of grant; (B) to the
extent of an additional one-third (1/3) of the
shares, on the earliest testing date on which the
per-share fair market value of the Stock is at least
six dollars ($6.00) higher than on the date of grant;
and (C) to the extent of an additional one-third
(1/3) of the shares, on the earliest testing date on
which the per- share fair market value is at least
nine dollars ($9.00) higher than on the date of
grant. For purposes of the preceding sentence, a
"testing date" with respect to any per-share dollar
value is the last day of any period of ten
consecutive trading days (commencing after the date
on which the Plan is approved by the stockholders of
the Company) on each day of which the per-share fair
market value of the Stock equaled or exceeded such
dollar value; provided, that a date shall not be
considered a "testing date" for purposes of
determining the exercisability of an option under
this paragraph if the director to whom the option was
awarded ceased to be a director of the Company and
its subsidiaries prior to the testing date. In all
events, each option shall become fully exercisable on
the third anniversary of the date of grant provided
the Eligible Director to whom the option was awarded
is still a director on such anniversary. For
purposes of the preceding sentence, the following
rules of construction shall apply: (A) with respect
3
<PAGE> 4
to any option grants described in Section 6(a)(iii),
an Eligible Director described therein shall be
treated as ceasing to be a director when he or she is
no longer an Eligible Director described inSection
5(a); (B) with respect to any option grants described
in Section 6(a)(iv), an Eligible Director described
therein shall be treated as ceasing to be a director
when he or she is no longer an Eligible Director
described in Section 5(b); and (C) with respect to
any option grants described in Section 6(a)(i) or
Section 6(a)(ii), an Eligible Director described
therein shall be treated as ceasing to be a director
when he or she ceases to be a director of the Company
or becomes an honorary or emeritus director of the
Company.
In addition to and not in limitation of the
foregoing, each option outstanding at the time of a
"Change of Control" as hereinafter defined shall
become fully exercisable upon the Change in Control.
A "Change of Control" shall be deemed to have
occurred if:
(i) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities
and Exchange Act, (the "Exchange Act") (other
than the Company, any trustee or other
fiduciary holding securities under an
employee benefit plan of the Company, or any
company owned, directly or indirectly, by the
stockholders of the Company in substantially
the same proportions as their ownership of
stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or
indirectly, of securities of the Company
representing 25% or more of the combined
voting power of the Company's then
outstanding securities;
(ii) during any period of two consecutive years
(not including any period prior to the
adoption of the Plan), individuals who at the
beginning of such period constitute the
Board, and any new director (other than a
director designated by a person who has
entered into an agreement with the Company to
effect a transaction described in clause (i),
(iii) or (iv) of this Section 6(d)(1)) whose
election by the Board or nomination for
election by the Company's stockholders was
approved by a vote of at least two-thirds
(2/3) of the directors then still in office
who either were directors at the beginning of
the period or whose election or nomination
for election was previously so approved
(hereinafter referred to as "Continuing
Directors"), cease for any reason to
constitute at least a majority thereof;
(iii) the stockholders of the Company approve a
merger or consolidation of the Company with
any other corporation, other than a merger or
consolidation which would result in the voting
4
<PAGE> 5
securities of the Company outstanding
immediately prior thereto continuing to
represent (either by remaining outstanding or
by being converted into voting securities of
the surviving entity) more than 80% of the
combined voting power of the voting
securities of the Company or such surviving
entity outstanding immediately after such
merger or consolidation; provided, however,
that a merger or consolidation effected to
implement a recapitalization of the Company
(or similar transaction) in which no "person"
(as hereinabove defined) acquires more than
25% of the combined voting power of the
Company's then outstanding securities shall
not constitute a Change of Control of the
Company; or
(iv) the stockholders of the Company approve a
plan of complete liquidation of the Company
or an agreement for the sale or disposition
by the Company of all or substantially all of
the Company's assets.
(2) Any exercise of an option shall be in writing, signed
by the proper person and delivered or mailed to the
Company, to the attention of the Company's General
Counsel, accompanied by (i) any documentation
required by the Committee and (ii) payment in full
for the number of shares for which the option is
exercised.
(3) The Committee shall withhold from the number of
shares otherwise issuable to the individual upon
exercise a number of shares with a fair market value
equal to any federal, state, or local withholding tax
requirements due upon the exercise of the option.
(4) If an option is exercised by the executor or
administrator of a deceased director, or by the
person or persons to whom the option has been
transferred by the director's will or the applicable
laws of descent and distribution, the Company shall
be under no obligation to deliver Stock pursuant to
such exercise until the Company is satisfied as to
the authority of the person or persons exercising the
option.
(e) PAYMENT FOR AND DELIVERY OF STOCK. Stock purchased under the
Plan shall be paid for in one or a combination of the
following forms of payment: (i) by cash or by check
(acceptable to the Company in accordance with guidelines
established for this purpose), bank draft or money order
payable to the order of the Company, (ii) by delivery of
shares of Stock (which, in the case of shares of Stock
acquired from the Company, have been outstanding for at least
six months) having a fair market value on the last business
day preceding the date of exercise equal to the purchase
price, or (iii) by delivery of a properly executed exercise
notice together with irrevocable instructions to the option
holder's broker to deliver promptly to the Company the amount
required to pay the exercise price.
5
<PAGE> 6
An option holder shall not have the rights of a stockholder
with regard to awards under the Plan except as to Stock
actually received by him or her under the Plan.
The Company shall not be obligated to deliver any shares of
Stock (A) until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been
complied with, and (B) if the outstanding Stock is at the time
listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange
upon official notice of issuance, and (C) until all other
legal matters in connection with the issuance and delivery of
such shares have been approved by the Company's counsel. If
the sale of Stock has not been registered under the Securities
Act of 1933, as amended, the Company may require, as a
condition to exercise of the option, such representations or
agreements as counsel for the Company may consider appropriate
to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend
restricting transfer.
(f) NONTRANSFERABILITY OF OPTIONS. No option may be transferred
other than by will or by the laws of descent and distribution,
and during an Eligible Director's lifetime an option may be
exercised only by him or her.
(g) RETIREMENT; DISABILITY. If an Eligible Director retires as a
director of the Company and its subsidiaries (i) at or after
65, or (ii) by reason of permanent disability whenever
occurring, all options held by the retired or disabled
Eligible Director, to the extent not otherwise exercisable,
shall become exercisable. The Eligible Director's options
shall remain exercisable for one year from retirement (subject
to paragraph (i) below) or for the remainder of their original
five-year option term if less, and then shall terminate to the
extent not previously exercised.
(h) OTHER TERMINATION. If an Eligible Director's service as a
director terminates for any reason other than retirement under
(g) above or death, all options held by the director that are
not then exercisable shall terminate. Options that are
exercisable on the date of termination shall continue to be
exercisable for a period of three months (subject to paragraph
(i) below) or for the remainder their original five-year term
if less, and then shall terminate to the extent not previously
exercised. For the purposes of this paragraph (h): (A) with
respect to any option grants described in Section 6(a)(iii),
an Eligible Director described therein shall be treated as
having terminated when he or she ceases to be an Eligible
Director described in Section 5(a) (other than by reason of
retirement under paragraph (g) above, or death); (B) with
respect to any option grants described in Section 6(a)(iv), an
Eligible Director described therein shall be treated as having
terminated when he or she ceases to be an Eligible Director
described in Section 5(b) (other than by reason of retirement
under paragraph (g) above, or death); and (C) with respect to
any option grants described in Section 6(a)(i) or Section
6(a)(ii), an Eligible Director described therein shall be
treated as having
6
<PAGE> 7
terminated when he or she ceases to be a director of the
Company (other than by reason of retirement under paragraph
(g) above, or death) or becomes an honorary or emeritus
director of the Company.
(i) DEATH. If an Eligible Director's service as a director of the
Company and its subsidiaries terminates by reason of death,
all options held by the Eligible Director which were not then
exercisable shall be treated as having become exercisable
immediately prior to death. If an Eligible Director dies at
any time while holding exercisable options (including options
treated as having become exercisable by reason of the
preceding sentence), all such options may be exercised by his
or her executor or administrator, or by the person or persons
to whom the option is transferred by will or the applicable
laws of descent and distribution, at any time within one year
after the director's death or during the remainder of the
original five-year option term if less. After completion of
that one-year (or shorter) period, such options shall
terminate to the extent not previously exercised.
(j) MERGERS, ETC. In the event of a consolidation or merger in
which the Company is not the surviving corporation or which
results in the acquisition of substantially all the Company's
outstanding Stock by a single person or entity or by a group
of persons and/or entities acting in concert, or in the event
of a sale or transfer of substantially all of the Company's
assets or a dissolution or liquidation of the Company, all
options hereunder will terminate; provided, that 20 days prior
to the effective date of any such merger, consolidation, sale,
dissolution, or liquidation, all options outstanding hereunder
that are not otherwise exercisable shall become immediately
exercisable.
7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, TERMINATION AND
EFFECTIVENESS
Neither adoption of the Plan nor the grant of options to a director shall
affect the Company's right to grant to such director options that are not
subject to the Plan, to issue to such directors Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
directors.
The Committee may at any time terminate the Plan as to any further grants of
options. The Committee may at any time or times amend the Plan for any purpose
which may at the time by permitted by law; provided, that except to the extent
expressly required or permitted by the Plan, no such amendment will, without
the approval of the stockholders of the Company, effectuate a change for which
stockholder approval is required in order for the Plan to continue to qualify
under Rule 16b-3 promulgated under Section 16 of the Exchange Act.
7
<PAGE> 1
EXHIBIT 10(l)(i)
AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT BETWEEN
UST CORP. AND NEAL F. FINNEGAN
------------------------------
This Agreement, dated as of August 2, 1993, constitutes Amendment No.
1 to the Employment Agreement (the "Agreement"), dated as of April 20, 1993, by
and between UST Corp. ("UST"), a bank holding company with its principal place
of business in Boston, Massachusetts, and Neal F. Finnegan, a resident formerly
of Rowayton, Connecticut and now of Cohasset, Massachusetts (the "Employee").
WITNESSETH
----------
WHEREAS, UST wishes to strengthen certain of the stock compensation
elements of the Employee's Agreement with UST in order to more directly align
the economic interests of the Employee with those of UST's stockholders; and
WHEREAS, the additional stock compensation and reduced stock option
exercise prices provided by this Amendment No. 1 to the Agreement have been
recommended to UST by UST's investment banking advisors, Fox-Pitt, Kelton
Limited and are desired by and acceptable to the Employee, and
WHEREAS, UST and the Employee desire to conform Employee's
remuneration with respect to business use of automobiles and clubs to UST's
general policy of reimbursement for senior executives as of January 1, 1994.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained in the Agreement as modified by this Amendment No. 1, the
parties do hereby agree as follows:
<PAGE> 2
1. The second paragraph of Article II of the Agreement is hereby
amended so that the revised paragraph reads in its entirety as follows:
"Moreover, the Employee will be granted by UST's Board of
Directors, stock options under UST Corp.'s Stock Compensation Plan
(the "Plan") having the terms described herein which will enable the
Employee to purchase up to an aggregate of 150,000 shares (subject to
anti-dilution provisions ) of UST Corp. Common Stock. Such options
shall vest (subject to a change-in-control) at a rate of 50,000 shares
per year over three years with each 50,000 share annual segment having
five (5) parts: 13,333 shares exercisable at a price of $7.50 per
share; 16,667 shares exercisable at $8 per share; 3,333 shares
exercisable at $9 per share; 6,667 shares exercisable at $10 per
share; and 10,000 shares exercisable at $12 per share. Any options
which are exercisable at a price lower than the fair market value of
UST Common Stock on the date of grant shall be nonstatutory options;
options with prices equal to or higher than such fair market value
beginning with the lowest such prices, subject to the limits of
applicable law and regulation, shall be incentive stock options."
2. An additional paragraph will be added to Article II of the
Agreement and inserted between the current second and third paragraphs of the
Agreement. This new, additional paragraph (which results in Article II as
modified having five paragraphs) will read in its entirety as follows:
"In addition to the foregoing, UST's Board of Directors will,
effective January 3, 1994, grant the Employee stock options under UST
Corp.'s Stock Compensation Plan which will enable the Employee to
acquire an additional 200,000 shares of UST Corp. Common Stock at an
exercise price of $9.00 per share. These Options will vest 1/3 on
April 20, 1994, 1/3 on April 20, 1995 and 1/3 on April 20, 1996,
unless vesting is accelerated in accordance with the provisions of the
Stock Compensation Plan."
3. The first paragraph of Article II of the Agreement is hereby
amended to delete the third and fourth sentences of such first paragraph. The
foregoing sentences related to UST payments to Employee for business use of an
automobile and annual dues at the Bay Club as well as at one country
<PAGE> 3
club. The Employee shall, in accordance with revised UST exclusive
compensation policies (and effective on the dates of the respective
implementation of such policies), in lieu of such payment receive an upward
salary adjustment to reflect the reasonable value of such benefits surrendered.
IN WITNESS WHEREOF, the parties hereto have cause this Amendment No. 1
to the Agreement to be executed in duplicate originals as of the date first
written above.
UST CORP.
By:/s/ Paul M. Siskind
-------------------
Paul M. Siskind
Title: Chairman of the Board
--------------------------
/s/ Neal F. Finnegan
--------------------
Neal F. Finnegan (Employee)
<PAGE> 1
EXHIBIT 10(q)
[UST Corp.]
Separation Agreement for Theodore Shediac
-----------------------------------------
Mr. Theodore M. Shediac April 6, 1994
52 Old Nugent Rd.
Gloucester, MA 01930
Dear Ted:
As we have discussed and agreed, your employment with UST Corp. and
its affiliated companies (collectively "UST") will terminate on June 30, 1994
and you will be paid through UST's payroll system through that date. The
purpose of this letter agreement is to set forth the terms and conditions
related to your separation from UST.
1. Salary continuation: Salary will continue for 12 months after
June 30, 1994. The form of payment will be in one lump sum of
$268,500 payable to you during the first week of July 1994.
2. Continuation of benefits: USTrust will continue to pay the
life insurance premiums on your current policy through June
30, 1994. Thereafter, if coverage is to continue, you will
have to convert the policy to an individual contract.
Disability insurance provided through USTrust will cease as of
your termination date.
Medical insurance premiums will continue to be paid to provide
coverage for you and your family under the Baystate Health
Care plan, through June 30, 1994. During this period, you will
continue to pay normal monthly contributions of $128.65.
Effective July 1, 1994, you will be able to continue medical
insurance coverage through COBRA for up to 18 months.
3. Vested profit sharing: You will be paid the account balance
credited to you under the company's profit sharing plan after
the 6/30/94 valuation. It is understood that as of 6/30/93
your vested balance was $214,520.33. It is further understood
that at the time of the valuation and payout, these amounts
may be higher or lower depending on the valuation.
4. Vested ESOP: You will be paid out the value of your vested
ESOP account after the 6/30/94 valuation. It is understood
that as of 6/30/93 your vested balance was 6,028.9514 shares
plus a cash balance of $79.26. It is further understood that
at the time of the valuation and payout, these amounts may be
higher or lower depending on the valuation.
<PAGE> 2
5. It is understood that you are 100% vested in the USTrust
qualified retirement plan. A schedule has been provided to
you, indicating the projected pay-out amounts at age 65.
6a. Incentive stock options (ISO): You will receive acceleration
of unvested Incentive Stock Options so that as of June 30,
1994, you will be fully vested in 18,375 shares at a purchase
price of $6.0714 and 5,000 shares at a purchase price of
$8.625. Your options expire 3 months after your termination
date.
6b. Restricted stock: As of June 30, 1994, you will be vested in
5,433 shares of restricted stock.
The value of the vested shares, determined as of the vesting
date, will be includible in your income for federal income tax
and Massachusetts tax purposes, and will be treated as "wages"
subject to withholding for employment tax (including FICA)
purposes, as of the time of vesting. A certificate
representing the vested shares will be delivered to you once
you have made arrangements satisfactory to the Company to pay
all required withholding taxes. You may satisfy this
withholding obligation by: (i) providing a certified or bank
check to the Company for the required withholding taxes, or
(ii) delivering stock powers to the Company authorizing the
sale of sufficient shares to pay the withholding taxes.
It is further understood that there are limitations on your
ability to sell these newly acquired shares in UST Corp.
stock. Shares must be held for six months after the date of
termination (i.e. after 6/30/94).
7. The above matter was presented to the UST Corp. Board of
Directors on March 15, 1994 and was preliminarily approved.
Pending a third party certification by The Wyatt Co. and a
definitive vote scheduled for April 19, 1994 of Board approval
based upon the Wyatt certificate, the above matters will be
subject only to the written approval of the Federal Reserve
Bank of Boston and the Massachusetts Commissioner of Banks.
8. Attached to this letter agreement as EXHIBIT A is a General
and Specific Release signed by you which releases UST Corp.
and its successors, assigns, subsidiaries, and its and their
respective officers, directors, employees, agents and
representatives from various liabilities and claims. The
foregoing Release, attached as EXHIBIT A, is incorporated into
this letter agreement and made a part hereof.
<PAGE> 3
If the foregoing is agreeable to you and you wish to accept the terms and
conditions of this letter agreement, please indicate your assent and agreement
by signing this letter agreement below and by attaching a signed and notarized
copy of EXHIBIT A.
Very truly yours,
/s/ Neal F. Finnegan
--------------------
ACCEPTED AND AGREED:
/s/ Theodore Shediac
--------------------
<PAGE> 4
EXHIBIT A
General and Specific Release
----------------------------
FOR AND IN CONSIDERATION of payments to be made to me in connection with my
separation of employment, as set out in the Separation Agreement between UST
Corp. and me, dated March 31, 1994, I, Theodore M. Shediac, hereby release UST
Corp. ("UST") and its successors, assigns, subsidiaries and its and their
respective officers, directors, employees, agents and representatives (all
collectively, "Releases") from any and all liability, claims, demands, actions,
causes of action of any type by reason of any matter, cause, act or omission
arising out of or in connection with my employment or separation from
employment with UST Corp. and/or its subsidiaries, including without
limitation, claims, demands or actions under Title VII of Civil Rights Act of
1964, as amended, the Rehabilitation Act of 1973, the Civil Rights Act of 1866,
the Massachusetts Fair Employment Practices Act, and any other Federal, state
or local statute or regulation regarding employment, discrimination in
employment or termination of employment; and I, Theodore M. Shediac, shall at
no time take any action that I am aware is inconsistent with this Release;
provided that I am not releasing and shall not be deemed to have released (i)
any claim arising under the terms of the Separation Agreement or the terms of
UST's employee pension plan, profit sharing plan, or stock ownership plan, each
as amended to the effective time of my termination of employment, or (ii) any
right of indemnification or contribution that may exist at or may arise after
such effective time and that I am or may be entitled to enforce against UST if
any claim is asserted or proceedings are brought against me by any governmental
or regulatory agency, or by any customer, creditor, employee or shareholder of
UST, or any self-regulatory organization, stock exchange or the like, related
or allegedly related to my having been an officer or employee of UST, or to any
of my activities as an officer or employee of UST. By acceptance of or reliance
upon this Release, UST promises that neither it nor any other of the Releases
affiliated with UST, will take any action that is designed, specifically with
respect to me or with respect to a class of similarly situated former
employees, to reduce or abrogate, or may reasonably be expected to result in an
abridgement or elimination of, any rights of indemnification or contribution
available to me under state law or pursuant to the Articles of Organization or
Bylaws of UST, or under any policy or policies of directors and officers
liability insurance affording coverage to former officers and in effect from
time to time.
IN WITNESS WHEREOF, I, Theodore M. Shediac, have set my and seal this 20th day
of April, 1994.
/s/ Theodore M. Shediac
-----------------------
<PAGE> 1
EXHIBIT 10(r)
[UST Corp.]
September 27, 1994
PRIVILEGED AND CONFIDENTIAL
---------------------------
Paul M. Siskind, Esq.
20 Hammond Pond Parkway
Apt. No. 505
Chestnut Hill, MA 02167
Dear Paul:
This letter agreement ("Letter Agreement") is intended to summarize
the terms of UST Corp.'s ("UST") agreement with you related to your resignation
as UST's Chairman of the Board.
1. You have submitted your resignation as Chairman of the Board and as
a Director of UST, effective October 18, 1994.
2. In recognition of certain additional remuneration from UST that you
will be foregoing and the additional health insurance costs which you
will be incurring as a result of your resignation, UST will make a
lump sum payment to you of $55,000 in January 1995.
3. In consideration of your providing guidance to the new Chairman of
the Board concerning the most effective way to perform his/her
responsibilities and your providing ongoing advice concerning the
corporate governance of UST, UST has also agreed to pay you $35,000
per annum (for each applicable year) throughout your lifetime. This
benefit will cease upon the date of your death. The foregoing payments
will be made semi-annually in advance: $17,500 in December and $17,500
in June of each applicable year. The first $17,500 payment will be
made in December 1994.
4. You will be given an opportunity to review and approve any portion
of the UST Press Release relating to your resignation as Chairman of
the Board.
5. Your Administrative Assistant, Maureen Reggiannini, will be paid
her salary at the rate of $17,500 per annum through December 31, 1994
and, after October 18, 1994, all of her work assignments will be
initiated only by you.
6. UST recognizes your tenancy-at-will (monthly) concerning Rm. No.
605, on the 6th Floor, 40 Court Street, Boston, Massachusetts and
described in the Agreement of Lease which you signed on March 30,
1994. You will be permitted to terminate this tenancy upon thirty (30)
days prior written notice with your rental obligation ending on the
later of the end of the notice period or your actual date of departure
from the premises.
<PAGE> 2
7. The financial terms of this Letter Agreement remain subject to
receipt of written approval from the Federal Reserve Bank of Boston
and the Office of the Massachusetts Commissioner of Banks.
8. All other benefits to you from UST, not covered above, will cease
as of October 18, 1994.
On behalf of the Board of Directors of UST Corp., I want to express
our enormous debt of gratitude to you for more than 25 years of outstanding
leadership.
Very truly yours,
/s/ Neal F. Finnegan
--------------------
Neal F. Finnegan
President and
Chief Executive Officer
AGREED AND ACCEPTED:
/s/ Paul M. Siskind
-------------------
cc: Eric R. Fischer, Clerk
Linda J. Lerner, Senior Vice President/Human Resources
<PAGE> 1
[UST Corp. letterhead]
EXHIBIT 10(s)
March 31, 1994
Mr. William C. Brooks
39 Oak Hill Rd.
Wayland, MA 01778
Dear Bill:
As we have discussed and agreed, your employment with UST Corp. and
its affiliated companies (collectively "UST") will terminate on July 31, 1994
and you will be paid through UST's payroll system through that date. The
purpose of this letter agreement is to set forth the terms and conditions
related to your separation from UST.
1. Your last regularly scheduled day in the bank will be March 31, 1994.
Thereafter, you will make yourself available at all such times as
needed and as requested by the CEO and will remain and perform the
duties of Chief Financial Officer of UST Corp. and Chief Accounting
Officer of USTrust until July 31, 1994 or until another CFO is hired,
whichever is first. Except as provided above, your resignation from
all offices and directorships (including offices, directorships and
committee memberships with UST Corp. and its subsidiaries) is
effective as of March 31, 1994.
2. Salary continuation: Salary will continue for 21 months after July 31,
1994. The form of payment will be in one lump sum of $274,706 payable
to you during the first week of August 1994.
In addition, $15,000 will be added to this lump sum payment to assist
with the cost of medical insurance, and $20,000 to provide
outplacement services will be in this lump sum payment. This total
lump sum amount is subject to applicable tax withholding.
Should you die before July 31, 1994, your wife will receive in full
satisfaction of this Agreement a sum equal to the amounts described in
this Section 2.
3. Continuation of benefits: UST will continue to pay the premiums for
your group term life coverage through July 31, 1994. Thereafter, if
coverage is to continue, you will have to convert the coverage to an
individual contract at your expense.
Disability insurance provided through USTrust will cease as of July
31, 1994.
Medical insurance premiums will continue to be paid to provide coverage
for you under the family Baystate Health Care plan through July 31,
1994. During this period, you will continue to
<PAGE> 2
pay normal monthly employee contributions of $128 65. Effective
August 1, 1994, you will be able to continue medical insurance
coverage through COBRA for up to 18 months.
4. Vested profit sharing: You will be paid the account balance credited
to you under the company's profit sharing plan after the 6/30/94
valuation. It is understood that as of 6/30/93 your vested balance was
$363,535.44. It is further understood that at the time of the
valuation and payout, these amounts may be higher or lower depending
on the valuation.
5. Vested ESOP: You will be paid out the value of your vested ESOP
account after the 6/30/94 valuation. It is understood that as of
6/30/93 your vested balance was 11,074.3837 shares plus a cash balance
of $122.81. It is further understood that at the time of the valuation
and payout, these amounts may be higher or lower depending on the
valuation.
6. It is understood that you are 100% vested in the UST qualified
retirement plan. A schedule has been provided to you indicating the
projected pay-out amounts at age 65.
7. Incentive stock options: Prior to March 15, 1994, you were vested in
6,720 options. It is understood that vesting in the additional 1,680
options was accelerated on March 15, 1994, so that at present, you are
fully vested in 8,400 options at a price of $6.0714. Your options
expire 3 months after July 31, 1994.
It is further understood that as an Executive Officer of UST Corp.
there are limitations on your ability to sell shares of UST Corp.
stock. Shares must be held for six months after the date of
termination (i.e. after 1/31/95) at which time you will cease to be
deemed an Executive Officer of UST Corp.
8. The above matter was presented to the UST Corp. Board of Directors on
March 15, 1994 and was preliminarily approved. Pending a third party
certification by The Wyatt Co. and a definitive vote scheduled for
April 19, 1994 of Board approval based upon the Wyatt certificate, the
above matters will be subject only to the written approval of the
Federal Reserve Bank of Boston and the Massachusetts Commissioner of
Banks.
9. Attached to this letter agreement as EXHIBIT A is a General and
Specific Release signed by you which releases UST Corp. and its
successors, assigns, subsidiaries, and its and their respective
officers, directors, employees, agents and representatives from
various liabilities and claims. The foregoing Release, attached
as EXHIBIT A, is incorporated into this letter agreement and made a
part hereof.
If the foregoing is agreeable to you and you wish to accept the terms and
conditions of this letter agreement, please indicate your assent and agreement
by signing this letter agreement below and
<PAGE> 3
by attaching a signed and notarized copy of EXHIBIT A.
Very truly yours,
/s/ Neal F. Finnegan
--------------------
Neal F. Finnegan
President and Chief Executive Officer
UST Corp.
ACCEPTED AND AGREED:
/s/ William C. Brooks
---------------------
William C. Brooks
<PAGE> 4
Exhibit A
General and Specific Release
FOR AND IN CONSIDERATION of payments to be made to me in connection with my
separation of employment, as set out in the Separation Agreement between UST
Corp. and me, dated March 31, 1994, I, William C. Brooks, hereby release UST
Corp. ("UST") and its successors, assigns, subsidiaries and its and their
respective officers, directors, employees, agents and representatives (all
collectively, "Releases") from any and all liability, claims, demands,
actions, causes of action of any type by reason of any matter, cause, act or
omission arising out of or in connection with my employment or separation from
employment with UST Corp. and/or its subsidiaries, including without
limitation, claims, demands or actions under Title VII of Civil Rights Act of
1964, as amended, the Rehabilitation Act of 1973, the Civil Rights Act of 1866,
the Massachusetts Fair Employment Practices Act, and any other Federal, state
or local statute or regulation regarding employment, discrimination in
employment or termination of employment; and I, William C. Brooks, shall at no
time take any action that I am aware is inconsistent with this Release;
provided that I am not releasing and shall not be deemed to have released (i)
any claim arising under the terms of the Separation Agreement or the terms of
UST's employee pension plan, profit sharing plan, or stock ownership plan,
each as amended to the effective time of my termination of employment, or (ii)
any right of indemnification or contribution that may exist at or may arise
after such effective time and that I am or may be entitled to enforce against
UST if any claim is asserted or proceedings are brought against me by any
governmental or regulatory agency, or by any customer, creditor, employee or
shareholder of UST, or any self-regulatory organization, stock exchange or the
like, related or allegedly related to my having been an officer or employee of
UST, or to any of my activities as an officer or employee of UST. By
acceptance of or reliance upon this Release, UST promises that neither it nor
any other of the Releases affiliated with UST, will take any action that is
designed, specifically with respect to me or with respect to a class of
similarly situated former employees, to reduce or abrogate, or may reasonably
be expected to result in an abridgement or elimination of, any rights of
indemnification or contribution available to me under state law or pursuant to
the Articles of Organization or Bylaws of UST, or under any policy or policies
of directors and officers liability insurance affording coverage to former
officers and in effect from time to time.
IN WITNESS WHEREOF, I, William C. Brooks, have set my and seal this 31st day of
March, 1994.
/s/ William C. Brooks
<PAGE> 1
EXHIBIT 10(t)
February 1, 1995
PRIVILEGED AND CONFIDENTIAL
---------------------------
Mr. James M. Breiner
3200 Park Avenue, #9E2
Bridgeport, CT 06606
Dear Jim:
This letter agreement ("Letter Agreement") is intended to summarize
the terms of UST Corp.'s agreement with you concerning your resignation as a
member of UST Corp.'s Board of Directors and as a member and Chairman of the
Board of Directors of UST Bank/Connecticut.
1. By signing below, you are resigning effective February 28, 1995 as
a Director of UST Corp. and as a Director and Chairman of the Board of UST
Bank/Connecticut.
2. In recognition of certain additional remuneration from UST Corp.
that you will be foregoing as a result of your resignation, UST Corp. will make
a lump sum payment to you of $32,500 on February 28, 1995.
3. You agree to provide guidance through December 31, 1995 to the
President and Chairman of the Board of UST Bank/Connecticut, at their request,
concerning UST Bank/Connecticut's strategies and customers.
4. You agree that from the date hereof to June 30, 1997, you will not
become a member of the Board of Directors of (or serve a comparable function
for) another financial institution (commercial bank, savings bank, savings and
loan, bank holding company or thrift holding company) which directly (or
indirectly through subsidiaries) has offices or branches located in either or
both of Fairfield County or New Haven County, Connecticut. You further agree
that from the date hereof to June 30, 1997, you will not directly or
indirectly, for your own account or for the account of any financial
institution with offices, branches, or subsidiaries located in either Fairfield
County or New Haven County, Connecticut, directly or indirectly (i) solicit the
business of persons whom you know to be customers of UST Bank/Connecticut or
USTrust with regard to the provision of any type of financial service; or (ii)
after notice from UST Corp., UST Bank/Connecticut, or USTrust that any person
or persons is or are a customer, commence or continue the solicitation of such
business from such person. The foregoing shall not be construed as prohibiting
you from continuing to serve as a Director or Officer of First Connecticut
Capital Corp. or State Street Mortgage Company nor from using your personal
funds to make a small number of second mortgage loans of types not generally
provided by UST Bank/Connecticut.
<PAGE> 2
Mr. James M. Breiner
February 1, 1995
Page 2
5. This Letter Agreement was subject to receipt of regulatory
clearance from the Federal Reserve Bank of Boston and the Office of the
Massachusetts Commissioner of Banks. Such regulatory clearance was received by
UST Corp. on January 23, 1995.
6. Under the terms of the UST Corp. Directors' Stock Option Plan (the
"Stock Plan"), you will have 90 days from the effective date of your
resignation to exercise your right to purchase up to 5,250 shares of UST Corp.
common stock at $6.0714 per share. As provided by the Stock Plan, if you do
not exercise your options within that 90 day time period, your right to
exercise those options will expire.
7. You will be given an opportunity to review and approve any portion
of the UST Press Release relating to your resignation as a Director of UST
Corp. and as a Director and Chairman of the Board of UST Bank/Connecticut.
8. You will continue to receive payments under the Deferred
Compensation Plan (the "Plan") dated June 1, 1985, between you and UST Corp.,
as successor to the Valley Bank and Trust Company. Under this Plan, you will
continue to receive payments of $692.83 per month through June 30, 1999. As
provided for by the Plan, should you die before that date, the net present
value of the remaining payments due under the Plan will be paid to your
beneficiary. Within 90 days of February 28, 1995, you will also receive a
stock certificate representing your aggregate interest in UST Corp.'s Deferred
Compensation Program.
9. All other benefits to you from UST Corp. and UST Bank/Connecticut,
not covered above, will cease as of the date hereof.
On behalf of the Boards of Directors of UST Corp. and UST
Bank/Connecticut, I want to express our gratitude to you for more than 21 years
of outstanding service.
Very truly yours,
/s/ Neal F. Finnegan
Neal F. Finnegan
President and
Chief Executive Officer
AGREED AND ACCEPTED:
/s/ James M. Breiner
--------------------
James M. Breiner
cc: Eric R. Fischer, Clerk
Linda J. Lerner, Senior Vice President/Human Resources
<PAGE> 1
EXHIBIT 10(u)
EMPLOYMENT AGREEMENT
--------------------
This Agreement made and entered into as of the 11th day of July, l99O
by and between USTrust, a commercial bank organized under the laws of
Massachusetts which has its principal place of business in Cambridge,
Massachusetts ("UST") and Robert T McAlear, a resident of Milton, Massachusetts
(the "Employee")
WITNESSETH
----------
WHEREAS, UST is engaged in the business of providing a variety of
banking and financial services to individual, corporate and governmental
customers; and
WHEREAS, UST desires to engage the Employee and the Employee desires
to be engaged by UST, as a Vice-Chairman of UST and in such other capacities as
hereinafter set forth, on a full-time basis and, on the terms and conditions
<PAGE> 2
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto do hereby agree as follows:
I. Employment:
----------
UST hereby employs the Employee as a Vice-Chairman of UST whose
activities will be focused upon the commercial lending activities, credit
monitoring, credit policymaking, and general administration of UST. In the
foregoing capacities the Employee will report to the Chief Executive Officer of
UST, who as of the date hereof, is Quinlan J. Sullivan, Jr. Subject to the
approval of Messrs. James V. Sidell and Quinlan J. Sullivan, Jr., the Employee
will be appointed Chief Lending Officer of UST on or about the date of the UST
Corp. Board of Directors meeting which follows the six month anniversary of the
Employee's commencement of employment and actual assumption oz his duties at
UST. The foregolng commencement date will not be later than August 31, 1990.
Employee may, at the discretion of the Board and/or the Chief Executive Officer
of UST Corp., be appointed, from time to time, to serve as a member of
committees which include executives of UST and its affiliates. The Employee
hereby agrees to accept such positions upon election or appointment. In
addition, if elected or appointed, the Employee may also serve as an officer or
Director of any other affiliate of UST, (even if such
<PAGE> 3
employment requires resignation from positions with UST) if such service is
deemed appropriate by the UST Corp. Board of Directors, and PROVIDED HOWEVER,
that in the case of a reassignment of duties no such reassignment shall require
the Employee, without his consent, to accept dutles which will diminish his
job status or change the substance of his duties from that of managing
commercial lending activities or require the Employee to move his office out of
the Greater Boston geographical area. All such activities and services shall be
rendered in a falthful, responsible and competent manner consistent with
standards that may reasonably be established and maintained by UST, and
consistent with banking industry standards.
II. Compensation:
------------
The Employee shall be paid at the rate of $200,000 per annum from
August 13, 1990 and during the balance of the term hereof; provided, however,
that should the pretax net earnings or earnings per share of UST Corp. decline
in any year from the prior year's level or stay flat, the Board of Directors
may, in its discretion, reduce such compensation in a manner substantially
proportional to the reductions incurred by other UST officers with similar
responsibilities. Increases, if any, over and above the annual base salary set
forth herein, or any bonuses or additional compensation shall be determined
annually by the Board of Directors of UST Corp. at the Board's sole discretion
after taking into consideration the Employee's performance and contribution as
well as the increases, if any, granted to other UST officers with similar
responsibility. In addition, the Employee shall receive an allowance of $673
per month which he shall use to defray the costs of the business use of an
automobile owned by the employee. Moreover, the employee shall receive
reimbursement for the parking expenses related to the foregoing automobile.
The Employee also shall be entitled to such fringe benefits, including paid
vacation time, as UST Corp. may provide to UST officers who bear similar levels
of responsibility. Moreover, the Employee will be granted by UST Corp.'s Board
of Directors, options under UST Corp.'s incentive stock option plan which will
enable the Employee to purchase up to 15,000 shares of UST Corp. common stock.
In the event the Employee shall be elected a Director of any of the UST Corp.
group of companies, he shall not receive any Directors' fees or Directors'
compensation for attendance at Directors' meetings nor as a
<PAGE> 4
retainer. UST will also pay the Employee's ordinary and usual charges,
including initiation and periodic fees, dues and assessments, for his
business use of a membership in a golf, tennis or swim club of the Employee's
choice, located in the Greater Boston geographical area.
III. Term:
----
Unless terminated by the earlier death or "Disabil1ty" of the Employee
as defined ln Article V hereof, Employee is engaged for an initial period
commencing with a date in August 1990 selected by the Employee but which will
not be later than August 31, 1990 and ending on the 31st day of August 1993.
Unless terminated by either party by six months' prior written notice to the
other party this Employment Agreement will automatically be renewed after
August 31, 1993 for additional one year periods. Notwithstanding the foregoing,
in the event there shall be a "charnge-in-control" of UST Corp. (as such term
is defined on the date hereof in UST Corp.'s Incentive Stock Option Plan), this
Employment Agreement shall be automatically extended to the conclusion of a
period ending two years from the date of consummation of the
"change-in-control" but, in no event earlier than August 31, 1993. In addition,
UST shall have the right to terminate this Employment Agreement at any time for
cause, which shall mean, dishonesty, willful absenteeism, willful failure to
perform reasonable duties assigned to him hereunder, gross malfeasance, gross
misconduct or the Employee's conviction of a felony or his willful violation of
any provision of federal or state banking or securities law or willful failure
to perform his obligations under any other provision of this Employment
Agreement. Except in the case of dishonesty UST agrees to give written notice
of at least ten days as to the particulars which are asserted to be the basis
for termination and an opportunity extending not more than ten days from
receipt by the employee of such notice to cure such event in a manner which
reasonably assures UST that such event will not recur. In the event the
Employee's employment with UST and all of its affiliated companies is
terminated by UST without cause during the period from September 1 i993 to
August 31 1995 the Employee will be entitled to receive a one time severance
payment of $25,000 in lieu of unvested retirement plan benefits.
IV. Scope of Service:
----------------
Employee shall devote his full time and effort to the faithful
performance of his duties hereunder and shall be engaged in no outside
business of employment during the course of his employment hereunder. It is
agreed that the provisions of this Article IV will not be deemed to be
violated by the holding of
<PAGE> 5
directorships or related positions in charitable educatioral or
not-for-profit organizations which do not involve continuous or substantial
time commitments nor by passive persona1 real estate or other personal
investment activities which the Employee is able to monitor outside of his
normal working hours.
II Disability:
----------
In the event the Employee shall be unable to perform his regular and
customary duties by reason of physical or mental ailment or other disability
for a period of six consecutive months or less (a "Disability") he shall be
entitled to receive regular compensation durlng that period. In the event said
illness or other disability shall continue for a period longer than six
consecutive months, UST Corp.'s and UST's obligations under this Employment
Agreement shall terminate and his compensation thereafter shall be limited to
the amounts received from insurance payments, if any, provided by UST.
VI. Non-competition:
---------------
In the event the Employee either (i) shall, without cause, leave his
employment at least 90 days prior to the end of the term hereof, or (ii) shall
be discharged for cause during the term hereof, the Employee agrees that he
will not enter into the employment of any other financial institution or entity
in Eastern Massachusetts or Southern Connecticut for a period equal to one
year. The foregoing restriction will not be applicable in the event that the
Employee is terminated as a result of disability as enumerated in Article V
above. The Employee further agrees that for a period of two years following the
termination of his employment for whatever reason hereunder, he will not
directly or indirectly, for his own account or for the account of others, (i)
solicit the business of persons whom he knows to be customers of UST, UST Corp.
or any of their affiliates with regard to the provision of any type of
financial service, or (ii) after notice from UST Corp. or UST that any person
or persons is or are a customer, commence or continue the solicitation of such
business from such person or (iii) solicit or hire personnel of UST Corp. or
any of its subsidiaries for the benefit of any entity controlled by the
Employee or by which the Employee is employed or from which the Employee
receives any form of fee or compensation.
VII. Confidential Information:
------------------------
<PAGE> 6
The Employee recognizes and acknowledges that there may be made
available to him in the course of his employment hereunder confidential
information of or relating to UST and its affiliates, including, without
limitation, client and customer lists, acquisition, expansion, and other
strategic plans (collectively the "Confidential Information"). The Employee
hereby acknowledges that the Confidential Information, as it may exist from
time to time, is a valuable, special and unique asset of the business of UST,
UST Corp. and their affiliates. UST hereby acknowledges that the Employee may,
in the performance of his duties obtain information of a general nature
concerning UST and its affiliates, which could be obtained by any person having
an interest in UST and its affiliates, and which general information is not
deemed included within the meaning of Confidential Information. The Employee
shall not, during or after the term of his employment hereunder, make any use
of Confidential Information or disclose any Confidential Information to any
person, firm, corporation, association or other entity for any reason or
purpose whatsoever, other than in connection with the normal performance of his
duties hereunder. UST or any of its affiliates shall be entitled to obtain
injunctive relief, restraining the Employee from disclosing or using any
Confidential Information in violation of this Article VII, and to recover any
and all costs and expenses incurred in enforcing this Employment Agreement, in
addition to any other relief provided by applicable law. The Employee
acknowledges that the nature of the business of UST and the value of the
Confidential Information render inadequate any remedy at law which may be
obtained by UST or any of its affiliates for a breach by the Employee of this
Articie VII and the Employee therefore hereby agrees that UST or any of its
affiliates may seek such equitable remedies.
VIII. Announcements:
-------------
Neither UST nor the Employee shall issue any press releases
concerning, or otherwise describe or characterize in writing this Employment
Agreement, its performance or termination, without the approval of the other
party, which approval shall not be unreasonably withheld.
IX. Notices:
-------
All notices required under this Employment Agreement shall be
sufficient if made by certified or registered mail, return receipt requested,
provided that any party may change such address by providing notice thereof:
If to the Employee:
Robert T. McAlear
4 Augusta Road
Milton, MA 02186
with a copy to:
Jay L. Fialkow, Esq.
100 Federal Street Boston, MA 02110
If to UST Corp.:
Attention: James V. Sidell, President
40 Court Street
Boston, MA 02108
with a copy to:
Eric R. Fischer, Esq. at the same address.
If to USTrust:
Attention: Quinlan J. Sullivan, Jr.
Chairman of the Board
<PAGE> 7
141 Portland Street
Cambridge, MA 02139
with a copy to Eric R. Fischer, Esq. at the same address.
X. Amendments and Waivers:
This Employment Agreement represents the exclusive statement of the
entire agreement between the parties concerning the subject matter hereof and
may not be amended, modified or revoked in whole or in part except by written
agreement of the parties.
XI. Governing Law:
This Employment Agreement shall be governed, construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts.
XII. Severability:
In the event that any part of this Employment Agreement shall be held
to be illegal or null and void by any court of competent jurisdiction, such
determination shall not affect the enforceability, validity or binding nature
of the remaining parts of this Employment Agreement and they shall remain in
full force and effect.
XIII. Binding Nature:
This Employment Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs (in the case of the
Employee) legal representatives and successors.
XIV. Non-Assignment:
Neither Employee nor UST may assign any of his or its
<PAGE> 8
rights or duties hereunder witnout the prior written consent of the other
party.
XV. No Conflicting Agreement:
The Employee hereby represents and warrants to UST and UST Corp. that
he is under no contract, agreement or obligation which (i) prohibits him from
entering into this Employment Agreement, (ii) conflicts with the terms of this
Employment Agreement or (iii) prevents him, in any way, from performing the
duties contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed in duplicate originals as of the date first written
above.
USTRUST
By:/s/ Quinlan J. Sullivan, Jr.
Quinlan J. Sullivn, Jr.
/s/ Robert T. McAlear
Robert T. McAlear (Employee)
<PAGE> 1
EXHIBIT 10(v)(i)
UST CORP.
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made by and between UST Corp., a Massachusetts
corporation, (the "Company") and Walter E. Huskins, Jr. (the "Employee") as of
the 24th day of October, 1994 (the "Effective Date").
In consideration of the mutual promises, terms and conditions
contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to continue the employment of
the Employee, and the Employee agrees to continue in the service of the
Company, subject to the terms and conditions contained in this Agreement.
2. TERM. Subject to earlier termination, as provided hereafter,
the Employee's employment hereunder shall be for an initial term of two (2)
years, commencing on the Effective Date, and may be renewed thereafter only by
written agreement, signed by the Employee and the Chief Executive Officer of
the Company. Notwithstanding the foregoing, in the event that this Agreement
is in effect on the date of consummation of a Change of Control, as hereafter
defined, this Agreement shall automatically be extended on said date such that
the remaining term of the Agreement shall then be two (2) years, but this
Agreement shall be renewable thereafter only by a written agreement signed by
the Employee and a duly authorized representative of the Company. The term of
this Agreement, as from time to time renewed or extended in accordance with
this Section 2, is hereafter referred to as "the term hereof" or "the term of
this Agreement".
3. PERFORMANCE.
a. During the term hereof, the Employee shall hold such
executive position or positions with the Company and/or any of its subsidiaries
as may be designated from time to time by the Board of Directors of the Company
(the "Board") and shall perform the duties and assume the responsibilities of
such positions and such other appropriate duties and responsibilities as may be
assigned by the Board or its designees.
b. During employment, the Employee shall devote his/her
full business time and best efforts, judgment, skill and knowledge exclusively
to the advancement of the Company's interests and to the discharge of his/her
duties and responsibilities for the Company. While employed by the Company,
the Employee shall not be engaged in any other business activity, except as
approved by the Board or its designee in writing. It is agreed, however, that
the provisions of this Section 3.b shall not be violated by the Employee's
holding of directorships or related positions in charitable, educational or
not-for-profit organizations which do not involve continuous or substantial
time commitments or by passive personal investment activities, provided that
such positions and activities are not in conflict, and do not otherwise
interfere, with the Employee's duties and responsibilities to the Company and
its subsidiaries.
<PAGE> 2
4. COMPENSATION. As compensation for all services performed for
the Company and its subsidiaries during the term of this Agreement, the Company
shall pay the Employee a base salary at an annual rate not less than the
Employee's base salary on the Effective Date, subject to increase from time to
time by the Company in its discretion. Notwithstanding the foregoing, the
Company may reduce the Employee's base salary, but (i) only in the event of a
salary reduction affecting all or substantially all of the Company's officers
employed under an executive employment agreement and only in proportion to the
salary reductions applicable to such other affected officers and (ii) only if
no Change of Control has occurred.
5. EMPLOYEE BENEFITS. During the term hereof, the Employee shall
be entitled to participate in any and all employee benefit plans from time to
time in effect for employees of the Company generally, excluding only plans
providing payments and/or other benefits in the event of termination of
employment. Such participation shall be subject to the terms of the applicable
plan documents, generally applicable Company policies and the discretion of the
Board or any administrative or other committee provided for in or contemplated
by such plan.
6. TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of
Section 2 above, the Employee's employment under this Agreement shall terminate
under the following circumstances and, in that event, the Company shall have
only such obligations to the Employee as are specified below under the
applicable termination provision:
a. UPON DEATH. In the event of the Employee's death
during the term hereof, the Employee's employment hereunder shall immediately
and automatically terminate. In such event, the Company shall pay to the
Employee's designated beneficiary or, if no beneficiary has been designated by
the Employee, to the Employee's estate, any base salary earned and unpaid
through the date of death.
b. AS A RESULT OF DISABILITY. In the event that the
Employee becomes disabled during the term hereof and, as a result, is unable to
perform substantially all of his/her duties for the Company for more than one
hundred and twenty (120) days during any period of three hundred and sixty-five
(365) days, the Company may terminate the Employee's employment without further
obligation upon notice to the Employee. In the event of such disability, the
Employee will continue to receive his/her base salary and benefits under
Sections 4 and 5 hereof until the earlier of the date the Employee becomes
eligible for disability income under the Company's long-term disability or
workers' compensation insurance plan or the date his/her employment terminates.
c. BY THE COMPANY FOR CAUSE. The Company may terminate
the Employee's employment for Cause at any time upon notice to the Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board in its reasonable judgment, shall constitute Cause for
termination: (i) the Employee's refusal to perform, or gross negligence in the
performance of, his/her duties or responsibilities on behalf of the Company;
(ii) the Employee's fraud, embezzlement or other material dishonesty with
respect to the Company or any of its subsidiaries; (iii) the Employee's gross
misconduct or his/her conviction of, or plea of no contest to, a felony. In
the event of such termination, the Company shall have no further obligation to
the Employee, other than for base salary earned through the date of
termination.
2
<PAGE> 3
d. BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate the Employee's employment other than for Cause at any time upon
notice to the Employee. In the event of such termination prior to, or more
than two years following, a Change of Control and provided that the Employee
executes the release of claims attached hereto and marked "A" (the "Employee
Release") within twenty-one (21) days of his/her receipt of notice of
termination of employment and does not timely revoke the Employee Release, the
Company shall:
i. pay the Employee severance pay in an amount equal
to twelve (12) months' base salary at the rate in effect on
the date of termination, which the Employee may elect to
receive (A) in a single lump sum, payable within thirty (30)
days following the effective date of the Employee Release or
(B) as salary continuation payable at the Company's regular
payroll periods and in accordance with its regular payroll
practices commencing on the next regular payday immediately
following the effective date of the Employee Release, but
retroactive to the date of termination and,
ii. (A) if the Employee and/or his/her eligible
dependents exercise their right to continue participation in
the Company's group health plan under applicable federal law
("COBRA"), then, for the period of twelve (12) months
following termination of the Employee's employment or, if
earlier, until the date the Employee ceases to be eligible for
continued participation under COBRA, the Company shall
continue to pay that share of the premium cost of Employee's
participation and that of his/her eligible dependents in the
Company's group health plan as it pays for active employees of
the Company and their eligible dependents generally OR (B) if
the Employee and his/her eligible dependents elect not to
continue participation in the Company's group health plan
under COBRA, the Company will pay the Employee a single lump
sum payment equal to the amount that the Company would have
expended if participation had been elected and continued for a
period of twelve (12) months, which lump sum shall be payable
within thirty (30) days following the effective date of the
Employee Release, and
iii. The Company shall pay the cost of outplacement
services for the Employee through a firm selected by the
Employee (and reasonably acceptable to the Company), up to a
maximum cost to the Company of not more than $20,000; it being
understood and agreed that no payment will be provided to the
Employee in lieu of outplacement services.
e. BY THE EMPLOYEE FOR GOOD REASON. The Employee may
terminate employment hereunder for Good Reason upon notice to the Company
setting forth in reasonable detail the nature of such Good Reason. The
following shall constitute Good Reason for termination by the Employee: (i)
failure of the Company to continue the Employee in an executive position; (ii)
material diminution in the nature or scope of the Employee's responsibilities,
duties or authority, other than as is materially consistent with the Employee's
assignment to another executive position; (iii) material failure of the Company
to provide the Employee base salary and benefits in accordance with the terms
of Sections 4 and 5 hereof; or (iv) a permanent transfer of the Employee to a
work site more than twenty-five miles distant from his/her work site on the
Effective Date.
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<PAGE> 4
In the event of termination in accordance with this Section 6.e, the Company
shall provide the Employee base salary and health insurance benefits in
accordance with Section 6.d hereof, provided that the Employee executes the
Employee Release within twenty-one (21) days of his/her notice of termination
of employment and provided further that the Employee does not timely revoke the
Employee Release.
f. BY THE EMPLOYEE OTHER THAN FOR GOOD REASON. The Employee
may resign employment other than for Good Reason at any time upon one month's
notice to the Company. In the event of such termination, the Company shall
have no further obligation to the Employee, other than for base salary earned
through the date of termination.
g. UPON A CHANGE OF CONTROL.
i. If a Change of Control occurs and, within two (2)
years following such Change of Control, the Company terminates the Employee's
employment other than for Cause, or the Employee terminates his/her employment
for Good Reason, and the Employee executes the Employee Release within
twenty-one (21) days of the date of notice of termination of his/her employment
and does not timely revoke it, then, in lieu of any payment and benefits to
which the Employee would otherwise be entitled under Section 6.d or 6.e hereof,
the Company
(1) shall pay the Employee an amount equal
to twenty-four (24) months' base salary at the rate in effect on the
date of termination of the Employee's employment, which the Employee
may elect to receive (A) in a single lump sum, payable within thirty
(30) days following the effective date of the Employee Release or (B)
as salary continuation payable at the Company's regular payroll
periods and in accordance with its regular payroll practices
commencing on the next regular payday immediately following the final
payment under Section 6.d or 6.e hereof, whichever is applicable,
(2) provided the Employee elects to receive
payment hereunder in the form of salary continuation and provided
further that the Employee has exercised his/her right to continue
participation in the Company's group health plan under applicable
federal law ("COBRA"), then, for the duration of the period in which
the Employee is receiving such salary continuation or, if earlier,
until the date the Employee ceases to be eligible for continued
participation under COBRA, the Company shall continue to pay that
share of the premium cost of Employee's participation and that of
his/her eligible dependents in the Company's group health plan as it
pays for active employees of the Company and their eligible dependents
generally or, if greater, the amount it was paying for active
employees of the Company and their eligible dependents generally
immediately prior to the Change of Control and
(3) shall pay the cost of outplacement
services for the Employee through a firm selected by the Employee (and
reasonably acceptable to the Company), up to a maximum cost to the
Company of not more than $20,000; it being understood and agreed that
no payment will be provided to the Employee in lieu of outplacement
services.
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<PAGE> 5
ii. A "Change of Control" shall be deemed to have
been consummated if hereafter
(A) any "person", as such term used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934 as
amended (the "Exchange Act") other than the Company or any of its
subsidiaries or affiliates or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries or affiliates, becomes a beneficial owner (within the
meaning of Rule 13d-3, as amended, as promulgated under the Exchange
Act), directly or indirectly, of securities representing twenty-five
(25%) percent or more of the combined voting power of the Company's
then outstanding securities; or
(B) during any period of two consecutive
years (not including any period prior to the Effective Date),
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (A), (C) or (D) of this Section 6.g.ii) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute at
least a majority thereof; or
(C) there occurs a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires
more than twenty-five percent (25%) of the combined voting power of
the Company's then outstanding securities shall not constitute a
Change of Control; or
(D) the stockholders of the Company approve a
plan of a complete liquidation of the Company; or
(E) there occurs a closing of a sale or other
disposition by the Company of all or substantially all of the
Company's assets.
h. UPON EXPIRATION OF THE TERM HEREOF. In the event
that the term of this Agreement expires and, at the time of such expiration,
the Company has not offered to extend or renew this Agreement on terms no less
favorable in the aggregate as those set forth herein, then such expiration
shall be treated as a termination by the Company of the Employee's employment
other than for Cause in accordance with Section 6.d hereof. In the event that
the Company has
5
<PAGE> 6
offered such extension or renewal prior to the expiration of the term hereof,
but such offer has not been accepted by the Employee at the time of such
expiration, then such expiration shall be treated as a termination by the
Employee of his employment other than for Good Reason.
7. CONFIDENTIAL INFORMATION.
a. The Employee acknowledges that the Company
continually develops Confidential Information, that the Employee may develop
Confidential Information for the Company and that the Employee may learn of
Confidential Information during the course of employment. The Employee agrees
to comply with the policies and procedures of the Company for protecting
Confidential Information and agrees that he shall never disclose to any person,
corporation or other entity, except as required for the proper performance of
his/her regular duties for the Company, and shall never use for his/her own
benefit or that of another, any Confidential Information obtained by the
Employee incident to his/her employment or other association with the Company
or any of its affiliates or subsidiaries. The Employee understands that this
restriction will continue to apply throughout his/her employment and after
his/her employment terminates, regardless of the reason for such termination.
b. As used in this Agreement, "Confidential Information"
means any and all information of the Company, its subsidiaries and affiliates,
that is not generally known by others with whom any of them competes or does
business, or with whom any of them plans to compete or do business, including
without limitation any and all information concerning the identity and special
needs of the customers of the Company, its subsidiaries and affiliates and the
people and organizations with whom any of them has business relationships and
those relationships. Confidential Information also includes any information
received by the Company or any of its subsidiaries or affiliates from others
with any understanding, express or implied, that it will not be disclosed.
8. NON-SOLICITATION. While the Employee is employed by the
Company and for a period of two years thereafter, the Employee shall not,
directly or indirectly, solicit or encourage any customer of the Company or any
of its subsidiaries or affiliates to terminate or diminish its relationship
with the Company or any of its subsidiaries or affiliates, or to conduct with
any person, corporation or other entity any business or activity which such
customer conducts or could conduct with the Company or any of its subsidiaries
or affiliates, nor shall the Employee conduct, on his/her own behalf or that of
another, any such business or activity with a customer of the Company or any of
its subsidiaries or affiliates.
9. REMEDIES. The Employee acknowledges that, if he/she were to
breach any of the provisions of Section 7 or Section 8 of this Agreement, the
harm to the Company would be irreparable. The Employee therefore agrees that,
in addition to any other remedies available to it, the Company shall be
entitled to obtain preliminary and permanent injunctive relief against any such
breach, without having to post bond.
10. TAXES. All payments made to the Employee under this Agreement
shall be reduced by any tax or other amount required to be withheld by the
Company under applicable law.
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<PAGE> 7
11. REDUCTIONS. Notwithstanding anything to the contrary
contained in this Agreement, (a) any and all payments and benefits to be
provided to the Employee hereunder are subject to reduction to the extent
required by applicable statutes, regulations, rules and directives of federal,
state and other governmental and regulatory bodies having jurisdiction over the
Company and/or any of its affiliates or subsidiaries and (b) the payments and
benefits to which the Employee would be entitled pursuant to Section 6.g hereof
or otherwise as a result of a Change of Control shall be reduced to the maximum
amount for which the Company will not be limited in its deduction pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended, or any successor
provision. Any such reduction shall be applied to the amounts due to the
Employee in such manner as the Employee may reasonably specify within thirty
(30) days following notice from the Company of the need for such reduction or,
if the Employee fails to so specify timely, as determined by the Company.
12. ASSIGNMENT. The Company may assign its rights and obligations
under this Agreement without the consent of the Employee in the event that the
Company shall hereafter effect a reorganization, consolidate with, or merge
into, any other person, corporation or other entity or transfer all or
substantially all of its assets to any other person, corporation or other
entity. The Company requires the personal services of the Employee and he/she
may not assign this Agreement. This Agreement shall inure to the benefit of
and be binding upon the Company and the Employee and their respective
successors, executors, administrators, heirs and permitted assigns.
13. MISCELLANEOUS. This Agreement sets forth the entire agreement
between the Company and the Employee and supersedes all prior communications,
agreements and understandings, whether written or oral, with respect to the
Employee's employment. The headings and captions contained herein are for
convenience of reference only and are not part of this Agreement. This
Agreement may not be modified or amended, its term may not be extended or
renewed, and no breach of this Agreement shall be deemed to be waived, unless
agreed to in writing by the Employee and the Company. This is a Massachusetts
contract and shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts.
14. NOTICES. Any notices provided for in this Agreement shall be
in writing and shall be effective when delivered in person or deposited in the
United States mail, postage prepaid, and addressed to the Employee at his last
known address on the books of the Company or, in the case of the Company, at
its main office, attention of the Senior Vice President, Human Resources with a
copy to the General Counsel of the Company.
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<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized representative, and by the
Employee, as of the date first written above.
THE EMPLOYEE UST CORP.
/s/ Walter E. Huskins, Jr. By: /s/ Neal F. Finnegan
-------------------------- --------------------
Walter E. Huskins, Jr. Title: President and CEO
<PAGE> 9
"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me in
connection with my separation of employment, as set forth in the employment
agreement between UST Corp and me dated as of the ____ day of _____________,
1994 (the "Employment Agreement"), I, on my own behalf and on behalf of my
heir, beneficiaries and representatives and all others connected with me,
hereby release and forever discharge UST Corp. (the "Company"), its
subsidiaries and affiliates, and all of their respective officers, directors,
employees, agents, representatives, successors and assigns and all others
connected with them (all collectively, the "Releasees"), both individually and
in their official capacities, from any and all liability, claims, demands,
actions and causes of action of any type (all collectively "Claims") which I
have had in the past, now have, or might now have, through the date of my
execution of this Release of Claims, in any way resulting from, arising out of
or connected with my employment or its termination or pursuant to any federal,
state or local employment law, regulation or other requirement (including
without limitation Title VII of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, as amended, and the Massachusetts fair employment practices
act, as amended).
Excluded from the scope of this Release of Claims is (i) any claim
arising hereafter under the terms of the Employment Agreement or under the
terms of any of the Company's employee qualified and non-qualified benefit
plans (including without limitation the Company's employee pension plan, profit
sharing plan or stock ownership plan) and (ii) any right of indemnification or
contribution pursuant to the Articles of Organization or By-Laws of the Company
that I have or hereafter acquire if any claim is assert or proceedings are
brought against me by any governmental or regulatory agency, or by any
customer, creditor, employee or shareholder of the Company, or by any
self-regulatory organization, stock exchange or the like, related or allegedly
related to my having been an officer or employee of the Company or to any of my
activities as an officer or employee of the Company.
By acceptance of or reliance on this Release of Claims, the Company
promises that neither it nor any of the other Releasees affiliated with the
Company will taken any action that is designed, specifically as to me or with
respect to a class of similarly situated former employees, to reduce or
abrogate, or may reasonably be expected to result in an abridgement or
elimination of, any rights of indemnification or contribution available to me
pursuant to the Articles of Organization or By-Laws of the Company, or under
any policy or policies of directors and officers liability insurance affording
coverage to former officers and in effect from time to time, unless any such
abridgement or elimination of rights is also generally applicable to
then-current officers and employees of the Company.
In signing this Release of Claims, I acknowledge that I have had at
least twenty-one (21) days from the date of my receipt of notice of termination
of my employment (or, if applicable, the date I gave such notice to the
Company) to consider the terms of this Release of Claims, that I am encouraged
by the Company to seek the advice of an attorney prior to signing this Release
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<PAGE> 10
of Claims and that I am signing this Release of Claims voluntarily and with a
full understanding of its terms. I understand that I may revoke this Release
of Claims at any time within seven (7) days of the date of my signing by
written notice to the President of the Company and that this Release of Claims
will take effect only upon the expiration of such seven-day revocation period
and only if I have not timely revoked it.
IN WITNESS WHEREOF, I have set my hand and seal on the date written
below.
Signature:_____________________________
<PAGE> 1
EXHIBIT 10(v)(ii)
UST CORP.
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made by and between UST Corp., a Massachusetts
corporation, (the "Company") and James K. Hunt (the "Employee") as of the 24th
day of October, 1994 (the "Effective Date").
In consideration of the mutual promises, terms and conditions
contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to continue the employment of
the Employee, and the Employee agrees to continue in the service of the
Company, subject to the terms and conditions contained in this Agreement.
2. TERM. Subject to earlier termination, as provided hereafter,
the Employee's employment hereunder shall be for an initial term of two (2)
years, commencing on the Effective Date, and may be renewed thereafter only by
written agreement, signed by the Employee and the Chief Executive Officer of
the Company. Notwithstanding the foregoing, in the event that this Agreement
is in effect on the date of consummation of a Change of Control, as hereafter
defined, this Agreement shall automatically be extended on said date such that
the remaining term of the Agreement shall then be two (2) years, but this
Agreement shall be renewable thereafter only by a written agreement signed by
the Employee and a duly authorized representative of the Company. The term of
this Agreement, as from time to time renewed or extended in accordance with
this Section 2, is hereafter referred to as "the term hereof" or "the term of
this Agreement".
3. PERFORMANCE.
a. During the term hereof, the Employee shall hold such
executive position or positions with the Company and/or any of its subsidiaries
as may be designated from time to time by the Board of Directors of the Company
(the "Board") and shall perform the duties and assume the responsibilities of
such positions and such other appropriate duties and responsibilities as may be
assigned by the Board or its designees.
b. During employment, the Employee shall devote his/her
full business time and best efforts, judgment, skill and knowledge exclusively
to the advancement of the Company's interests and to the discharge of his/her
duties and responsibilities for the Company. While employed by the Company,
the Employee shall not be engaged in any other business activity, except as
approved by the Board or its designee in writing. It is agreed, however, that
the provisions of this Section 3.b shall not be violated by the Employee's
holding of directorships or related positions in charitable, educational or
not-for-profit organizations which do not involve continuous or substantial
time commitments or by passive personal investment activities, provided that
such positions and activities are not in conflict, and do not otherwise
interfere, with the Employee's duties and responsibilities to the Company and
its subsidiaries.
<PAGE> 2
4. COMPENSATION. As compensation for all services performed for
the Company and its subsidiaries during the term of this Agreement, the Company
shall pay the Employee a base salary at an annual rate not less than the
Employee's base salary on the Effective Date, subject to increase from time to
time by the Company in its discretion. Notwithstanding the foregoing, the
Company may reduce the Employee's base salary, but (i) only in the event of a
salary reduction affecting all or substantially all of the Company's officers
employed under an executive employment agreement and only in proportion to the
salary reductions applicable to such other affected officers and (ii) only if
no Change of Control has occurred.
5. EMPLOYEE BENEFITS. During the term hereof, the Employee shall
be entitled to participate in any and all employee benefit plans from time to
time in effect for employees of the Company generally, excluding only plans
providing payments and/or other benefits in the event of termination of
employment. Such participation shall be subject to the terms of the applicable
plan documents, generally applicable Company policies and the discretion of the
Board or any administrative or other committee provided for in or contemplated
by such plan.
6. TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of
Section 2 above, the Employee's employment under this Agreement shall terminate
under the following circumstances and, in that event, the Company shall have
only such obligations to the Employee as are specified below under the
applicable termination provision:
a. UPON DEATH. In the event of the Employee's death
during the term hereof, the Employee's employment hereunder shall immediately
and automatically terminate. In such event, the Company shall pay to the
Employee's designated beneficiary or, if no beneficiary has been designated by
the Employee, to the Employee's estate, any base salary earned and unpaid
through the date of death.
b. AS A RESULT OF DISABILITY. In the event that the
Employee becomes disabled during the term hereof and, as a result, is unable to
perform substantially all of his/her duties for the Company for more than one
hundred and twenty (120) days during any period of three hundred and sixty-five
(365) days, the Company may terminate the Employee's employment without further
obligation upon notice to the Employee. In the event of such disability, the
Employee will continue to receive his/her base salary and benefits under
Sections 4 and 5 hereof until the earlier of the date the Employee becomes
eligible for disability income under the Company's long-term disability or
workers' compensation insurance plan or the date his/her employment terminates.
c. BY THE COMPANY FOR CAUSE. The Company may terminate
the Employee's employment for Cause at any time upon notice to the Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board in its reasonable judgment, shall constitute Cause for
termination: (i) the Employee's refusal to perform, or gross negligence in the
performance of, his/her duties or responsibilities on behalf of the Company;
(ii) the Employee's fraud, embezzlement or other material dishonesty with
respect to the Company or any of its subsidiaries; (iii) the Employee's gross
misconduct or his/her conviction of, or plea of no contest to, a felony. In
the event of such termination, the Company shall have no further obligation to
the Employee, other than for base salary earned through the date of
termination.
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<PAGE> 3
d. BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate the Employee's employment other than for Cause at any time upon
notice to the Employee. In the event of such termination prior to, or more
than two years following, a Change of Control and provided that the Employee
executes the release of claims attached hereto and marked "A" (the "Employee
Release") within twenty-one (21) days of his/her receipt of notice of
termination of employment and does not timely revoke the Employee Release, the
Company shall:
i. pay the Employee severance pay in an amount equal
to twelve (12) months' base salary at the rate in effect on
the date of termination, which the Employee may elect to
receive (A) in a single lump sum, payable within thirty (30)
days following the effective date of the Employee Release or
(B) as salary continuation payable at the Company's regular
payroll periods and in accordance with its regular payroll
practices commencing on the next regular payday immediately
following the effective date of the Employee Release, but
retroactive to the date of termination and,
ii. (A) if the Employee and/or his/her eligible
dependents exercise their right to continue participation in
the Company's group health plan under applicable federal law
("COBRA"), then, for the period of twelve (12) months
following termination of the Employee's employment or, if
earlier, until the date the Employee ceases to be eligible for
continued participation under COBRA, the Company shall
continue to pay that share of the premium cost of Employee's
participation and that of his/her eligible dependents in the
Company's group health plan as it pays for active employees of
the Company and their eligible dependents generally OR (B) if
the Employee and his/her eligible dependents elect not to
continue participation in the Company's group health plan
under COBRA, the Company will pay the Employee a single lump
sum payment equal to the amount that the Company would have
expended if participation had been elected and continued for a
period of twelve (12) months, which lump sum shall be payable
within thirty (30) days following the effective date of the
Employee Release, and
iii. The Company shall pay the cost of outplacement
services for the Employee through a firm selected by the
Employee (and reasonably acceptable to the Company), up to a
maximum cost to the Company of not more than $20,000; it being
understood and agreed that no payment will be provided to the
Employee in lieu of outplacement services.
e. BY THE EMPLOYEE FOR GOOD REASON. The Employee may
terminate employment hereunder for Good Reason upon notice to the Company
setting forth in reasonable detail the nature of such Good Reason. The
following shall constitute Good Reason for termination by the Employee: (i)
failure of the Company to continuethe Employee in an executive position; (ii)
material diminution in the nature or scope of the Employee's responsibilities,
duties or authority, other than as is materially consistent with the Employee's
assignment to another exeuctive position; (iii) material failure of the Company
to provide the Employee base salary and benefits in accordance with the terms
of Sections 4 and 5 hereof; or (iv) a permanent transfer of the Employee to a
work site more than twenty-five miles distant from his/her work site on the
Effective Date.
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<PAGE> 4
In the event of termination in accordance with this Section 6.e, the
Company shall provide the Employee base salary and health insurance benefits in
accordance with Section 6.d hereof, provided that the Employee executes the
Employee Release within twenty-one (21) days of his/her notice of termination
of employment and provided further that the Employee does not timely revoke the
Employee Release.
f. BY THE EMPLOYEE OTHER THAN FOR GOOD REASON. The Employee
may resign employment other than for Good Reason at any time upon one month's
notice to the Company. In the event of such termination, the Company shall
have no further obligation to the Employee, other than for base salary earned
through the date of termination.
g. UPON A CHANGE OF CONTROL.
i. If a Change of Control occurs and, within two (2)
years following such Change of Control, the Company terminates the Employee's
employment other than for Cause, or the Employee terminates his/her employment
for Good Reason, and the Employee executes the Employee Release within
twenty-one (21) days of the date of notice of termination of his/her employment
and does not timely revoke it, then, in lieu of any payment and benefits to
which the Employee would otherwise be entitled under Section 6.d or 6.e hereof,
the Company
(1) shall pay the Employee an amount equal
to twenty-four (24) months' base salary at the rate in effect on the
date of termination of the Employee's employment, which the Employee
may elect to receive (A) in a single lump sum, payable within thirty
(30) days following the effective date of the Employee Release or (B)
as salary continuation payable at the Company's regular payroll
periods and in accordance with its regular payroll practices
commencing on the next regular payday immediately following the final
payment under Section 6.d or 6.e hereof, whichever is applicable,
(2) provided the Employee elects to receive
payment hereunder in the form of salary continuation and provided
further that the Employee has exercised his/her right to continue
participation in the Company's group health plan under applicable
federal law ("COBRA"), then, for the duration of the period in which
the Employee is receiving such salary continuation or, if earlier,
until the date the Employee ceases to be eligible for continued
participation under COBRA, the Company shall continue to pay that
share of the premium cost of Employee's participation and that of
his/her eligible dependents in the Company's group health plan as it
pays for active employees of the Company and their eligible dependents
generally or, if greater, the amount it was paying for active
employees of the Company and their eligible dependents generally
immediately prior to the Change of Control and
(3) shall pay the cost of outplacement
services for the Employee through a firm selected by the Employee (and
reasonably acceptable to the Company), up to a maximum cost to the
Company of not more than $20,000; it being understood and agreed that
no payment will be provided to the Employee in lieu of outplacement
services.
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<PAGE> 5
ii. A "Change of Control" shall be deemed to have
been consummated if hereafter
(A) any "person", as such term used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934 as amended (the "Exchange
Act") other than the Company or any of its subsidiaries or affiliates
or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries or
affiliates, becomes a beneficial owner (within the meaning of Rule
13d-3, as amended, as promulgated under the Exchange Act), directly
or indirectly, of securities representing twenty-five (25%) percent or
more of the combined voting power of the Company's then outstanding
securities; or
(B) during any period of two consecutive years (not including
any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause
(A), (C) or (D) of this Section 6.g.ii) whose election by the Board
or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof; or
(C) there occurs a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than eighty percent (80%) of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires more than
twenty-five percent (25%) of the combined voting power of the
Company's then outstanding securities shall not constitute a Change
of Control; or
(D) the stockholders of the Company approve a plan of a
complete liquidation of the Company; or
(E) there occurs a closing of a sale or other
disposition by the Company of all or substantially all of the
Company's assets.
h. UPON EXPIRATION OF THE TERM HEREOF. In the event that the term
of this Agreement expires and, at the time of such expiration, the Company
has not offered to extend or renew this Agreement on terms no less favorable
in the aggregate as those set forth herein, then such expiration shall be
treated as a termination by the Company of the Employee's employment other
than for Cause in accordance with Section 6.d hereof. In the event that the
Company has
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<PAGE> 6
offered such extension or renewal prior to the expiration of the term
hereof, but such offer has not been accepted by the Employee at the time of
such expiration, then such expiration shall be treated as a termination by the
Employee of his employment other than for Good Reason.
7. CONFIDENTIAL INFORMATION.
a. The Employee acknowledges that the Company
continually develops Confidential Information, that the Employee may develop
Confidential Information for the Company and that the Employee may learn of
Confidential Information during the course of employment. The Employee agrees
to comply with the policies and procedures of the Company for protecting
Confidential Information and agrees that he shall never disclose to any person,
corporation or other entity, except as required for the proper performance of
his/her regular duties for the Company, and shall never use for his/her own
benefit or that of another, any Confidential Information obtained by the
Employee incident to his/her employment or other association with the Company
or any of its affiliates or subsidiaries. The Employee understands that this
restriction will continue to apply throughout his/her employment and after
his/her employment terminates, regardless of the reason for such termination.
b. As used in this Agreement, "Confidential Information"
means any and all information of the Company, its subsidiaries and affiliates,
that is not generally known by others with whom any of them competes or does
business, or with whom any of them plans to compete or do business, including
without limitation any and all information concerning the identity and special
needs of the customers of the Company, its subsidiaries and affiliates and the
people and organizations with whom any of them has business relationships and
those relationships. Confidential Information also includes any information
received by the Company or any of its subsidiaries or affiliates from others
with any understanding, express or implied, that it will not be disclosed.
8. NON-SOLICITATION. While the Employee is employed by the
Company and for a period of two years thereafter, the Employee shall not,
directly or indirectly, solicit or encourage any customer of the Company or any
of its subsidiaries or affiliates to terminate or diminish its relationship
with the Company or any of its subsidiaries or affiliates, or to conduct with
any person, corporation or other entity any business or activity which such
customer conducts or could conduct with the Company or any of its subsidiaries
or affiliates, nor shall the Employee conduct, on his/her own behalf or that of
another, any such business or activity with a customer of the Company or any of
its subsidiaries or affiliates.
9. REMEDIES. The Employee acknowledges that, if he/she were to
breach any of the provisions of Section 7 or Section 8 of this Agreement, the
harm to the Company would be irreparable. The Employee therefore agrees that,
in addition to any other remedies available to it, the Company shall be
entitled to obtain preliminary and permanent injunctive relief against any such
breach, without having to post bond.
10. TAXES. All payments made to the Employee under this Agreement
shall be reduced by any tax or other amount required to be withheld by the
Company under applicable law.
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<PAGE> 7
11. REDUCTIONS. Notwithstanding anything to the contrary
contained in this Agreement, (a) any and all payments and benefits to be
provided to the Employee hereunder are subject to reduction to the extent
required by applicable statutes, regulations, rules and directives of federal,
state and other governmental and regulatory bodies having jurisdiction over the
Company and/or any of its affiliates or subsidiaries and (b) the payments and
benefits to which the Employee would be entitled pursuant to Section 6.g hereof
or otherwise as a result of a Change of Control shall be reduced to the maximum
amount for which the Company will not be limited in its deduction pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended, or any successor
provision. Any such reduction shall be applied to the amounts due to the
Employee in such manner as the Employee may reasonably specify within thirty
(30) days following notice from the Company of the need for such reduction or,
if the Employee fails to so specify timely, as determined by the Company.
12. ASSIGNMENT. The Company may assign its rights and obligations
under this Agreement without the consent of the Employee in the event that the
Company shall hereafter effect a reorganization, consolidate with, or merge
into, any other person, corporation or other entity or transfer all or
substantially all of its assets to any other person, corporation or other
entity. The Company requires the personal services of the Employee and he/she
may not assign this Agreement. This Agreement shall inure to the benefit of
and be binding upon the Company and the Employee and their respective
successors, executors, administrators, heirs and permitted assigns.
13. MISCELLANEOUS. This Agreement sets forth the entire agreement
between the Company and the Employee and supersedes all prior communications,
agreements and understandings, whether written or oral, with respect to the
Employee's employment. The headings and captions contained herein are for
convenience of reference only and are not part of this Agreement. This
Agreement may not be modified or amended, its term may not be extended or
renewed, and no breach of this Agreement shall be deemed to be waived, unless
agreed to in writing by the Employee and the Company. This is a Massachusetts
contract and shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts.
14. NOTICES. Any notices provided for in this Agreement shall be
in writing and shall be effective when delivered in person or deposited in the
United States mail, postage prepaid, and addressed to the Employee at his last
known address on the books of the Company or, in the case of the Company, at
its main office, attention of the Senior Vice President, Human Resources with a
copy to the General Counsel of the Company.
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<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized representative, and by the
Employee, as of the date first written above.
THE EMPLOYEE UST CORP.
/s/ James K. Hunt By: /s/ Neal F. Finnegan
----------------- ------------------------
James K. Hunt
Title:President and CEO
-----------------
<PAGE> 9
"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me in
connection with my separation of employment, as set forth in the employment
agreement between UST Corp and me dated as of the ____ day of _____________,
1994 (the "Employment Agreement"), I, on my own behalf and on behalf of my
heir, beneficiaries and representatives and all others connected with me,
hereby release and forever discharge UST Corp. (the "Company"), its
subsidiaries and affiliates, and all of their respective officers, directors,
employees, agents, representatives, successors and assigns and all others
connected with them (all collectively, the "Releasees"), both individually and
in their official capacities, from any and all liability, claims, demands,
actions and causes of action of any type (all collectively "Claims") which I
have had in the past, now have, or might now have, through the date of my
execution of this Release of Claims, in any way resulting from, arising out of
or connected with my employment or its termination or pursuant to any federal,
state or local employment law, regulation or other requirement (including
without limitation Title VII of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, as amended, and the Massachusetts fair employment practices
act, as amended).
Excluded from the scope of this Release of Claims is (i) any claim
arising hereafter under the terms of the Employment Agreement or under the
terms of any of the Company's employee qualified and non-qualified benefit
plans (including without limitation the Company's employee pension plan, profit
sharing plan or stock ownership plan) and (ii) any right of indemnification or
contribution pursuant to the Articles of Organization or By-Laws of the Company
that I have or hereafter acquire if any claim is assert or proceedings are
brought against me by any governmental or regulatory agency, or by any
customer, creditor, employee or shareholder of the Company, or by any
self-regulatory organization, stock exchange or the like, related or allegedly
related to my having been an officer or employee of the Company or to any of my
activities as an officer or employee of the Company.
By acceptance of or reliance on this Release of Claims, the Company
promises that neither it nor any of the other Releasees affiliated with the
Company will taken any action that is designed, specifically as to me or with
respect to a class of similarly situated former employees, to reduce or
abrogate, or may reasonably be expected to result in an abridgement or
elimination of, any rights of indemnification or contribution available to me
pursuant to the Articles of Organization or By-Laws of the Company, or under
any policy or policies of directors and officers liability insurance affording
coverage to former officers and in effect from time to time, unless any such
abridgement or elimination of rights is also generally applicable to
then-current officers and employees of the Company.
In signing this Release of Claims, I acknowledge that I have had at
least twenty-one (21) days from the date of my receipt of notice of termination
of my employment (or, if applicable, the date I gave such notice to the
Company) to consider the terms of this Release of Claims, that I am encouraged
by the Company to seek the advice of an attorney prior to signing this Release
of
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<PAGE> 10
of Claims and that I am signing this Release of Claims voluntarily and with a
full understanding of its terms. I understand that I may revoke this Release
of Claims at any time within seven (7) days of the date of my signing by
written notice to the President of the Company and that this Release of Claims
will take effect only upon the expiration of such seven-day revocation period
and only if I have not timely revoked it.
IN WITNESS WHEREOF, I have set my hand and seal on the date written
below.
Signature:____________________________
<PAGE> 1
EXHIBIT 10(v)(iii)
UST CORP.
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made by and between UST Corp., a Massachusetts
corporation, (the "Company") and Eric R. Fischer (the "Employee") as of the
24th day of October, 1994 (the "Effective Date").
In consideration of the mutual promises, terms and conditions
contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to continue the employment of
the Employee, and the Employee agrees to continue in the service of the
Company, subject to the terms and conditions contained in this Agreement.
2. TERM. Subject to earlier termination, as provided hereafter,
the Employee's employment hereunder shall be for an initial term of two (2)
years, commencing on the Effective Date, and may be renewed thereafter only by
written agreement, signed by the Employee and the Chief Executive Officer of
the Company. Notwithstanding the foregoing, in the event that this Agreement
is in effect on the date of consummation of a Change of Control, as hereafter
defined, this Agreement shall automatically be extended on said date such that
the remaining term of the Agreement shall then be two (2) years, but this
Agreement shall be renewable thereafter only by a written agreement signed by
the Employee and a duly authorized representative of the Company. The term of
this Agreement, as from time to time renewed or extended in accordance with
this Section 2, is hereafter referred to as "the term hereof" or "the term of
this Agreement".
3. PERFORMANCE.
a. During the term hereof, the Employee shall hold such
executive position or positions with the Company and/or any of its subsidiaries
as may be designated from time to time by the Board of Directors of the Company
(the "Board") and shall perform the duties and assume the responsibilities of
such positions and such other appropriate duties and responsibilities as may be
assigned by the Board or its designees.
b. During employment, the Employee shall devote his/her
full business time and best efforts, judgment, skill and knowledge exclusively
to the advancement of the Company's interests and to the discharge of his/her
duties and responsibilities for the Company. While employed by the Company,
the Employee shall not be engaged in any other business activity, except as
approved by the Board or its designee in writing. It is agreed, however, that
the provisions of this Section 3.b shall not be violated by the Employee's
holding of directorships or related positions in charitable, educational or
not-for-profit organizations which do not involve continuous or substantial
time commitments or by passive personal investment activities, provided that
such positions and activities are not in conflict, and do not otherwise
interfere, with the Employee's duties and responsibilities to the Company and
its subsidiaries.
<PAGE> 2
4. COMPENSATION. As compensation for all services performed for
the Company and its subsidiaries during the term of this Agreement, the Company
shall pay the Employee a base salary at an annual rate not less than the
Employee's base salary on the Effective Date, subject to increase from time to
time by the Company in its discretion. Notwithstanding the foregoing, the
Company may reduce the Employee's base salary, but (i) only in the event of a
salary reduction affecting all or substantially all of the Company's officers
employed under an executive employment agreement and only in proportion to the
salary reductions applicable to such other affected officers and (ii) only if
no Change of Control has occurred.
5. EMPLOYEE BENEFITS. During the term hereof, the Employee shall
be entitled to participate in any and all employee benefit plans from time to
time in effect for employees of the Company generally, excluding only plans
providing payments and/or other benefits in the event of termination of
employment. Such participation shall be subject to the terms of the applicable
plan documents, generally applicable Company policies and the discretion of the
Board or any administrative or other committee provided for in or contemplated
by such plan.
6. TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of
Section 2 above, the Employee's employment under this Agreement shall terminate
under the following circumstances and, in that event, the Company shall have
only such obligations to the Employee as are specified below under the
applicable termination provision:
a. UPON DEATH. In the event of the Employee's death
during the term hereof, the Employee's employment hereunder shall immediately
and automatically terminate. In such event, the Company shall pay to the
Employee's designated beneficiary or, if no beneficiary has been designated by
the Employee, to the Employee's estate, any base salary earned and unpaid
through the date of death.
b. AS A RESULT OF DISABILITY. In the event that the
Employee becomes disabled during the term hereof and, as a result, is unable to
perform substantially all of his/her duties for the Company for more than one
hundred and twenty (120) days during any period of three hundred and sixty-five
(365) days, the Company may terminate the Employee's employment without further
obligation upon notice to the Employee. In the event of such disability, the
Employee will continue to receive his/her base salary and benefits under
Sections 4 and 5 hereof until the earlier of the date the Employee becomes
eligible for disability income under the Company's long-term disability or
workers' compensation insurance plan or the date his/her employment terminates.
c. BY THE COMPANY FOR CAUSE. The Company may terminate
the Employee's employment for Cause at any time upon notice to the Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board in its reasonable judgment, shall constitute Cause for
termination: (i) the Employee's refusal to perform, or gross negligence in the
performance of, his/her duties or responsibilities on behalf of the Company;
(ii) the Employee's fraud, embezzlement or other material dishonesty with
respect to the Company or any of its subsidiaries; (iii) the Employee's gross
misconduct or his/her conviction of, or plea of no contest to, a felony. In
the event of such termination, the Company shall have no further obligation to
the Employee, other than for base salary earned through the date of
termination.
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<PAGE> 3
d. BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate the Employee's employment other than for Cause at any time upon
notice to the Employee. In the event of such termination prior to, or more
than two years following, a Change of Control and provided that the Employee
executes the release of claims attached hereto and marked "A" (the "Employee
Release") within twenty-one (21) days of his/her receipt of notice of
termination of employment and does not timely revoke the Employee Release, the
Company shall:
i. pay the Employee severance pay in an amount equal
to twelve (12) months' base salary at the rate in effect on
the date of termination, which the Employee may elect to
receive (A) in a single lump sum, payable within thirty (30)
days following the effective date of the Employee Release or
(B) as salary continuation payable at the Company's regular
payroll periods and in accordance with its regular payroll
practices commencing on the next regular payday immediately
following the effective date of the Employee Release, but
retroactive to the date of termination and,
ii. (A) if the Employee and/or his/her eligible
dependents exercise their right to continue participation in
the Company's group health plan under applicable federal law
("COBRA"), then, for the period of twelve (12) months
following termination of the Employee's employment or, if
earlier, until the date the Employee ceases to be eligible for
continued participation under COBRA, the Company shall
continue to pay that share of the premium cost of Employee's
participation and that of his/her eligible dependents in the
Company's group health plan as it pays for active employees of
the Company and their eligible dependents generally OR (B) if
the Employee and his/her eligible dependents elect not to
continue participation in the Company's group health plan
under COBRA, the Company will pay the Employee a single lump
sum payment equal to the amount that the Company would have
expended if participation had been elected and continued for a
period of twelve (12) months, which lump sum shall be payable
within thirty (30) days following the effective date of the
Employee Release, and
iii. The Company shall pay the cost of outplacement
services for the Employee through a firm selected by the
Employee (and reasonably acceptable to the Company), up to a
maximum cost to the Company of not more than $20,000; it being
understood and agreed that no payment will be provided to the
Employee in lieu of outplacement services.
e. BY THE EMPLOYEE FOR GOOD REASON. The Employee may
terminate employment hereunder for Good Reason upon notice to the Company
setting forth in reasonable detail the nature of such Good Reason. The
following shall constitute Good Reason for termination by the Employee: (i)
failure of the Company to continue the Employee in an executive position; (ii)
material diminution in the nature or scope of the Employee's responsibilities,
duties or authority, other than as is materially consistent with the Employee's
assignment to another executive position; (iii) material failure of the Company
to provide the Employee base salary and benefits in accordance with the terms
of Sections 4 and 5 hereof; or (iv) a permanent transfer of the Employee to a
work site more than twenty-five miles distant from his/her work site on the
Effective Date.
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<PAGE> 4
In the event of termination in accordance with this Section 6.e, the Company
shall provide the Employee base salary and health insurance benefits in
accordance with Section 6.d hereof, provided that the Employee executes the
Employee Release within twenty-one (21) days of his/her notice of termination
of employment and provided further that the Employee does not timely revoke the
Employee Release.
f. BY THE EMPLOYEE OTHER THAN FOR GOOD REASON. The Employee
may resign employment other than for Good Reason at any time upon one month's
notice to the Company. In the event of such termination, the Company shall
have no further obligation to the Employee, other than for base salary earned
through the date of termination.
g. UPON A CHANGE OF CONTROL.
i. If a Change of Control occurs and, within two (2)
years following such Change of Control, the Company terminates the Employee's
employment other than for Cause, or the Employee terminates his/her employment
for Good Reason, and the Employee executes the Employee Release within
twenty-one (21) days of the date of notice of termination of his/her employment
and does not timely revoke it, then, in lieu of any payment and benefits to
which the Employee would otherwise be entitled under Section 6.d or 6.e hereof,
the Company
(1) shall pay the Employee an amount equal
to eighteen (18) months' base salary at the rate in effect on the date
of termination of the Employee's employment, which the Employee may
elect to receive (A) in a single lump sum, payable within thirty (30)
days following the effective date of the Employee Release or (B) as
salary continuation payable at the Company's regular payroll periods
and in accordance with its regular payroll practices commencing on the
next regular payday immediately following the final payment under
Section 6.d or 6.e hereof, whichever is applicable,
(2) provided the Employee elects to receive
payment hereunder in the form of salary continuation and provided
further that the Employee has exercised his/her right to continue
participation in the Company's group health plan under applicable
federal law ("COBRA"), then, for the duration of the period in which
the Employee is receiving such salary continuation or, if earlier,
until the date the Employee ceases to be eligible for continued
participation under COBRA, the Company shall continue to pay that
share of the premium cost of Employee's participation and that of
his/her eligible dependents in the Company's group health plan as it
pays for active employees of the Company and their eligible dependents
generally or, if greater, the amount it was paying for active
employees of the Company and their eligible dependents generally
immediately prior to the Change of Control and
(3) shall pay the cost of outplacement
services for the Employee through a firm selected by the Employee (and
reasonably acceptable to the Company), up to a maximum cost to the
Company of not more than $20,000; it being understood and agreed that
no payment will be provided to the Employee in lieu of outplacement
services.
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<PAGE> 5
ii. A "Change of Control" shall be deemed to have
been consummated if hereafter
(A) any "person", as such term used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934 as
amended (the "Exchange Act") other than the Company or any of its
subsidiaries or affiliates or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries or affiliates, becomes a beneficial owner (within the
meaning of Rule 13d-3, as amended, as promulgated under the Exchange
Act), directly or indirectly, of securities representing twenty-five
(25%) percent or more of the combined voting power of the Company's
then outstanding securities; or
(B) during any period of two consecutive
years (not including any period prior to the Effective Date),
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (A), (C) or (D) of this Section 6.g.ii) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute at
least a majority thereof; or
(C) there occurs a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires
more than twenty-five percent (25%) of the combined voting power of
the Company's then outstanding securities shall not constitute a
Change of Control; or
(D) the stockholders of the Company approve
a plan of a complete liquidation of the Company; or
(E) there occurs a closing of a sale or other
disposition by the Company of all or substantially all of the
Company's assets.
h. UPON EXPIRATION OF THE TERM HEREOF. In the event
that the term of this Agreement expires and, at the time of such expiration,
the Company has not offered to extend or renew this Agreement on terms no less
favorable in the aggregate as those set forth herein, then such expiration
shall be treated as a termination by the Company of the Employee's employment
other than for Cause in accordance with Section 6.d hereof. In the event that
the Company has
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<PAGE> 6
offered such extension or renewal prior to the expiration of the term hereof,
but such offer has not been accepted by the Employee at the time of such
expiration, then such expiration shall be treated as a termination by the
Employee of his employment other than for Good Reason.
7. CONFIDENTIAL INFORMATION.
a. The Employee acknowledges that the Company
continually develops Confidential Information, that the Employee may develop
Confidential Information for the Company and that the Employee may learn of
Confidential Information during the course of employment. The Employee agrees
to comply with the policies and procedures of the Company for protecting
Confidential Information and agrees that he shall never disclose to any person,
corporation or other entity, except as required for the proper performance of
his/her regular duties for the Company, and shall never use for his/her own
benefit or that of another, any Confidential Information obtained by the
Employee incident to his/her employment or other association with the Company
or any of its affiliates or subsidiaries. The Employee understands that this
restriction will continue to apply throughout his/her employment and after
his/her employment terminates, regardless of the reason for such termination.
b. As used in this Agreement, "Confidential Information"
means any and all information of the Company, its subsidiaries and affiliates,
that is not generally known by others with whom any of them competes or does
business, or with whom any of them plans to compete or do business, including
without limitation any and all information concerning the identity and special
needs of the customers of the Company, its subsidiaries and affiliates and the
people and organizations with whom any of them has business relationships and
those relationships. Confidential Information also includes any information
received by the Company or any of its subsidiaries or affiliates from others
with any understanding, express or implied, that it will not be disclosed.
8. NON-SOLICITATION. While the Employee is employed by the
Company and for a period of two years thereafter, the Employee shall not,
directly or indirectly, solicit or encourage any customer of the Company or any
of its subsidiaries or affiliates to terminate or diminish its relationship
with the Company or any of its subsidiaries or affiliates, or to conduct with
any person, corporation or other entity any business or activity which such
customer conducts or could conduct with the Company or any of its subsidiaries
or affiliates, nor shall the Employee conduct, on his/her own behalf or that of
another, any such business or activity with a customer of the Company or any of
its subsidiaries or affiliates.
9. REMEDIES. The Employee acknowledges that, if he/she were to
breach any of the provisions of Section 7 or Section 8 of this Agreement, the
harm to the Company would be irreparable. The Employee therefore agrees that,
in addition to any other remedies available to it, the Company shall be
entitled to obtain preliminary and permanent injunctive relief against any such
breach, without having to post bond.
10. TAXES. All payments made to the Employee under this Agreement
shall be reduced by any tax or other amount required to be withheld by the
Company under applicable law.
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<PAGE> 7
11. REDUCTIONS. Notwithstanding anything to the contrary
contained in this Agreement, (a) any and all payments and benefits to be
provided to the Employee hereunder are subject to reduction to the extent
required by applicable statutes, regulations, rules and directives of federal,
state and other governmental and regulatory bodies having jurisdiction over the
Company and/or any of its affiliates or subsidiaries and (b) the payments and
benefits to which the Employee would be entitled pursuant to Section 6.g hereof
or otherwise as a result of a Change of Control shall be reduced to the maximum
amount for which the Company will not be limited in its deduction pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended, or any successor
provision. Any such reduction shall be applied to the amounts due to the
Employee in such manner as the Employee may reasonably specify within thirty
(30) days following notice from the Company of the need for such reduction or,
if the Employee fails to so specify timely, as determined by the Company.
12. ASSIGNMENT. The Company may assign its rights and obligations
under this Agreement without the consent of the Employee in the event that the
Company shall hereafter effect a reorganization, consolidate with, or merge
into, any other person, corporation or other entity or transfer all or
substantially all of its assets to any other person, corporation or other
entity. The Company requires the personal services of the Employee and he/she
may not assign this Agreement. This Agreement shall inure to the benefit of
and be binding upon the Company and the Employee and their respective
successors, executors, administrators, heirs and permitted assigns.
13. MISCELLANEOUS. This Agreement sets forth the entire agreement
between the Company and the Employee and supersedes all prior communications,
agreements and understandings, whether written or oral, with respect to the
Employee's employment. The headings and captions contained herein are for
convenience of reference only and are not part of this Agreement. This
Agreement may not be modified or amended, its term may not be extended or
renewed, and no breach of this Agreement shall be deemed to be waived, unless
agreed to in writing by the Employee and the Company. This is a Massachusetts
contract and shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts.
14. NOTICES. Any notices provided for in this Agreement shall be
in writing and shall be effective when delivered in person or deposited in the
United States mail, postage prepaid, and addressed to the Employee at his last
known address on the books of the Company or, in the case of the Company, at
its main office, attention of the Senior Vice President, Human Resources with a
copy to the General Counsel of the Company.
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<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized representative, and by the
Employee, as of the date first written above.
THE EMPLOYEE UST CORP.
/s/ Eric R. Fischer By: /s/ Neal F. Finnegan
------------------- --------------------
Title: President and CEO
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<PAGE> 9
"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me in
connection with my separation of employment, as set forth in the employment
agreement between UST Corp and me dated as of the ____ day of _____________,
1994 (the "Employment Agreement"), I, on my own behalf and on behalf of my
heir, beneficiaries and representatives and all others connected with me,
hereby release and forever discharge UST Corp. (the "Company"), its
subsidiaries and affiliates, and all of their respective officers, directors,
employees, agents, representatives, successors and assigns and all others
connected with them (all collectively, the "Releasees"), both individually and
in their official capacities, from any and all liability, claims, demands,
actions and causes of action of any type (all collectively "Claims") which I
have had in the past, now have, or might now have, through the date of my
execution of this Release of Claims, in any way resulting from, arising out of
or connected with my employment or its termination or pursuant to any federal,
state or local employment law, regulation or other requirement (including
without limitation Title VII of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, as amended, and the Massachusetts fair employment practices
act, as amended).
Excluded from the scope of this Release of Claims is (i) any claim
arising hereafter under the terms of the Employment Agreement or under the
terms of any of the Company's employee qualified and non-qualified benefit
plans (including without limitation the Company's employee pension plan, profit
sharing plan or stock ownership plan) and (ii) any right of indemnification or
contribution pursuant to the Articles of Organization or By-Laws of the Company
that I have or hereafter acquire if any claim is assert or proceedings are
brought against me by any governmental or regulatory agency, or by any
customer, creditor, employee or shareholder of the Company, or by any
self-regulatory organization, stock exchange or the like, related or allegedly
related to my having been an officer or employee of the Company or to any of my
activities as an officer or employee of the Company.
By acceptance of or reliance on this Release of Claims, the Company
promises that neither it nor any of the other Releasees affiliated with the
Company will taken any action that is designed, specifically as to me or with
respect to a class of similarly situated former employees, to reduce or
abrogate, or may reasonably be expected to result in an abridgement or
elimination of, any rights of indemnification or contribution available to me
pursuant to the Articles of Organization or By-Laws of the Company, or under
any policy or policies of directors and officers liability insurance affording
coverage to former officers and in effect from time to time, unless any such
abridgement or elimination of rights is also generally applicable to
then-current officers and employees of the Company.
In signing this Release of Claims, I acknowledge that I have had at
least twenty-one (21) days from the date of my receipt of notice of termination
of my employment (or, if applicable, the date I gave such notice to the
Company) to consider the terms of this Release of Claims, that I am encouraged
by the Company to seek the advice of an attorney prior to signing this Release
of
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<PAGE> 10
Claims and that I am signing this Release of Claims voluntarily and with a full
understanding of its terms. I understand that I may revoke this Release of
Claims at any time within seven (7) days of the date of my signing by written
notice to the President of the Company and that this Release of Claims will
take effect only upon the expiration of such seven-day revocation period and
only if I have not timely revoked it.
IN WITNESS WHEREOF, I have set my hand and seal on the date written
below.
Signature: ____________________________
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<PAGE> 1
EXHIBIT 10(v)(iv)
UST CORP.
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made by and between UST Corp., a Massachusetts
corporation, (the "Company") and Linda J. Lerner (the "Employee") as of the
24th day of October, 1994 (the "Effective Date").
In consideration of the mutual promises, terms and conditions
contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to continue the employment of
the Employee, and the Employee agrees to continue in the service of the
Company, subject to the terms and conditions contained in this Agreement.
2. TERM. Subject to earlier termination, as provided hereafter,
the Employee's employment hereunder shall be for an initial term of two (2)
years, commencing on the Effective Date, and may be renewed thereafter only by
written agreement, signed by the Employee and the Chief Executive Officer of
the Company. Notwithstanding the foregoing, in the event that this Agreement
is in effect on the date of consummation of a Change of Control, as hereafter
defined, this Agreement shall automatically be extended on said date such that
the remaining term of the Agreement shall then be two (2) years, but this
Agreement shall be renewable thereafter only by a written agreement signed by
the Employee and a duly authorized representative of the Company. The term of
this Agreement, as from time to time renewed or extended in accordance with
this Section 2, is hereafter referred to as "the term hereof" or "the term of
this Agreement".
3. PERFORMANCE.
a. During the term hereof, the Employee shall hold such
executive position or positions with the Company and/or any of its subsidiaries
as may be designated from time to time by the Board of Directors of the Company
(the "Board") and shall perform the duties and assume the responsibilities of
such positions and such other appropriate duties and responsibilities as may be
assigned by the Board or its designees.
b. During employment, the Employee shall devote his/her
full business time and best efforts, judgment, skill and knowledge exclusively
to the advancement of the Company's interests and to the discharge of his/her
duties and responsibilities for the Company. While employed by the Company,
the Employee shall not be engaged in any other business activity, except as
approved by the Board or its designee in writing. It is agreed, however, that
the provisions of this Section 3.b shall not be violated by the Employee's
holding of directorships or related positions in charitable, educational or
not-for-profit organizations which do not involve continuous or substantial
time commitments or by passive personal investment activities, provided that
such positions and activities are not in conflict, and do not otherwise
interfere, with the Employee's duties and responsibilities to the Company and
its subsidiaries.
<PAGE> 2
4. COMPENSATION. As compensation for all services performed for
the Company and its subsidiaries during the term of this Agreement, the Company
shall pay the Employee a base salary at an annual rate not less than the
Employee's base salary on the Effective Date, subject to increase from time to
time by the Company in its discretion. Notwithstanding the foregoing, the
Company may reduce the Employee's base salary, but (i) only in the event of a
salary reduction affecting all or substantially all of the Company's officers
employed under an executive employment agreement and only in proportion to the
salary reductions applicable to such other affected officers and (ii) only if
no Change of Control has occurred.
5. EMPLOYEE BENEFITS. During the term hereof, the Employee shall
be entitled to participate in any and all employee benefit plans from time to
time in effect for employees of the Company generally, excluding only plans
providing payments and/or other benefits in the event of termination of
employment. Such participation shall be subject to the terms of the applicable
plan documents, generally applicable Company policies and the discretion of the
Board or any administrative or other committee provided for in or contemplated
by such plan.
6. TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of
Section 2 above, the Employee's employment under this Agreement shall terminate
under the following circumstances and, in that event, the Company shall have
only such obligations to the Employee as are specified below under the
applicable termination provision:
a. UPON DEATH. In the event of the Employee's death
during the term hereof, the Employee's employment hereunder shall immediately
and automatically terminate. In such event, the Company shall pay to the
Employee's designated beneficiary or, if no beneficiary has been designated by
the Employee, to the Employee's estate, any base salary earned and unpaid
through the date of death.
b. AS A RESULT OF DISABILITY. In the event that the
Employee becomes disabled during the term hereof and, as a result, is unable to
perform substantially all of his/her duties for the Company for more than one
hundred and twenty (120) days during any period of three hundred and sixty-five
(365) days, the Company may terminate the Employee's employment without further
obligation upon notice to the Employee. In the event of such disability, the
Employee will continue to receive his/her base salary and benefits under
Sections 4 and 5 hereof until the earlier of the date the Employee becomes
eligible for disability income under the Company's long-term disability or
workers' compensation insurance plan or the date his/her employment terminates.
C. BY THE COMPANY FOR CAUSE. The Company may terminate
the Employee's employment for Cause at any time upon notice to the Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board in its reasonable judgment, shall constitute Cause for
termination: (i) the Employee's refusal to perform, or gross negligence in the
performance of, his/her duties or responsibilities on behalf of the Company;
(ii) the Employee's fraud, embezzlement or other material dishonesty with
respect to the Company or any of its subsidiaries; (iii) the Employee's gross
misconduct or his/her conviction of, or plea of no contest to, a felony. In
the event of such termination, the Company shall have no further obligation to
the Employee, other than for base salary earned through the date of
termination.
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<PAGE> 3
d. BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate the Employee's employment other than for Cause at any time upon
notice to the Employee. In the event of such termination prior to, or more
than two years following, a Change of Control and provided that the Employee
executes the release of claims attached hereto and marked "A" (the "Employee
Release") within twenty-one (21) days of his/her receipt of notice of
termination of employment and does not timely revoke the Employee Release, the
Company shall:
i. pay the Employee severance pay in an amount equal
to twelve (12) months' base salary at the rate in effect on
the date of termination, which the Employee may elect to
receive (A) in a single lump sum, payable within thirty (30)
days following the effective date of the Employee Release or
(B) as salary continuation payable at the Company's regular
payroll periods and in accordance with its regular payroll
practices commencing on the next regular payday immediately
following the effective date of the Employee Release, but
retroactive to the date of termination and,
ii. (A) if the Employee and/or his/her eligible
dependents exercise their right to continue participation in
the Company's group health plan under applicable federal law
("COBRA"), then, for the period of twelve (12) months
following termination of the Employee's employment or, if
earlier, until the date the Employee ceases to be eligible for
continued participation under COBRA, the Company shall
continue to pay that share of the premium cost of Employee's
participation and that of his/her eligible dependents in the
Company's group health plan as it pays for active employees of
the Company and their eligible dependents generally OR (B) if
the Employee and his/her eligible dependents elect not to
continue participation in the Company's group health plan
under COBRA, the Company will pay the Employee a single lump
sum payment equal to the amount that the Company would have
expended if participation had been elected and continued for a
period of twelve (12) months, which lump sum shall be payable
within thirty (30) days following the effective date of the
Employee Release, and
iii. The Company shall pay the cost of outplacement
services for the Employee through a firm selected by the
Employee (and reasonably acceptable to the Company), up to a
maximum cost to the Company of not more than $20,000; it being
understood and agreed that no payment will be provided to the
Employee in lieu of outplacement services.
e. BY THE EMPLOYEE FOR GOOD REASON. The Employee may
terminate employment hereunder for Good Reason upon notice to the Company
setting forth in reasonable detail the nature of such Good Reason. The
following shall constitute Good Reason for termination by the Employee: (i)
failure of the Company to continue the Employee in an executive position; (ii)
material diminution in the nature or scope of the Employee's responsibilities,
duties or authority, other than as is materially consistent with the Employee's
assignment to another executive position; (iii) material failure of the Company
to provide the Employee base salary and benefits in accordance with the terms
of Sections 4 and 5 hereof; or (iv) a permanent transfer of the Employee to a
work site more than twenty-five miles distant from his/her work site on the
Effective Date.
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<PAGE> 4
In the event of termination in accordance with this Section 6.e, the Company
shall provide the Employee base salary and health insurance benefits in
accordance with Section 6.d hereof, provided that the Employee executes the
Employee Release within twenty-one (21) days of his/her notice of termination
of employment and provided further that the Employee does not timely revoke the
Employee Release.
f. BY THE EMPLOYEE OTHER THAN FOR GOOD REASON. The Employee
may resign employment other than for Good Reason at any time upon one month's
notice to the Company. In the event of such termination, the Company shall
have no further obligation to the Employee, other than for base salary earned
through the date of termination.
g. UPON A CHANGE OF CONTROL.
i. If a Change of Control occurs and, within two (2)
years following such Change of Control, the Company terminates the Employee's
employment other than for Cause, or the Employee terminates his/her employment
for Good Reason, and the Employee executes the Employee Release within
twenty-one (21) days of the date of notice of termination of his/her employment
and does not timely revoke it, then, in lieu of any payment and benefits to
which the Employee would otherwise be entitled under Section 6.d or 6.e hereof,
the Company
(1) shall pay the Employee an amount equal
to eighteen (18) months' base salary at the rate in effect on the date
of termination of the Employee's employment, which the Employee may
elect to receive (A) in a single lump sum, payable within thirty (30)
days following the effective date of the Employee Release or (B) as
salary continuation payable at the Company's regular payroll periods
and in accordance with its regular payroll practices commencing on the
next regular payday immediately following the final payment under
Section 6.d or 6.e hereof, whichever is applicable,
(2) provided the Employee elects to receive
payment hereunder in the form of salary continuation and provided
further that the Employee has exercised his/her right to continue
participation in the Company's group health plan under applicable
federal law ("COBRA"), then, for the duration of the period in which
the Employee is receiving such salary continuation or, if earlier,
until the date the Employee ceases to be eligible for continued
participation under COBRA, the Company shall continue to pay that
share of the premium cost of Employee's participation and that of
his/her eligible dependents in the Company's group health plan as it
pays for active employees of the Company and their eligible dependents
generally or, if greater, the amount it was paying for active
employees of the Company and their eligible dependents generally
immediately prior to the Change of Control and
(3) shall pay the cost of outplacement
services for the Employee through a firm selected by the Employee (and
reasonably acceptable to the Company), up to a maximum cost to the
Company of not more than $20,000; it being understood and agreed that
no payment will be provided to the Employee in lieu of outplacement
services.
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<PAGE> 5
ii. A "Change of Control" shall be deemed to have
been consummated if hereafter
(A) any "person", as such term used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934 as
amended (the "Exchange Act") other than the Company or any of its
subsidiaries or affiliates or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries or affiliates, becomes a beneficial owner (within the
meaning of Rule 13d-3, as amended, as promulgated under the Exchange
Act), directly or indirectly, of securities representing twenty-five
(25%) percent or more of the combined voting power of the Company's
then outstanding securities; or
(B) during any period of two consecutive
years (not including any period prior to the Effective Date),
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (A), (C) or (D) of this Section 6.g.ii) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute at
least a majority thereof; or
(C) there occurs a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires
more than twenty-five percent (25%) of the combined voting power of
the Company's then outstanding securities shall not constitute a
Change of Control; or
(D) the stockholders of the Company approve a
plan of a complete liquidation of the Company; or
(E) there occurs a closing of a sale or other
disposition by the Company of all or substantially all of the
Company's assets.
h. UPON EXPIRATION OF THE TERM HEREOF. In the event
that the term of this Agreement expires and, at the time of such expiration,
the Company has not offered to extend or renew this Agreement on terms no less
favorable in the aggregate as those set forth herein, then such expiration
shall be treated as a termination by the Company of the Employee's employment
other than for Cause in accordance with Section 6.d hereof. In the event that
the Company has
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<PAGE> 6
offered such extension or renewal prior to the expiration of the term hereof,
but such offer has not been accepted by the Employee at the time of such
expiration, then such expiration shall be treated as a termination by the
Employee of his employment other than for Good Reason.
7. CONFIDENTIAL INFORMATION.
a. The Employee acknowledges that the Company
continually develops Confidential Information, that the Employee may develop
Confidential Information for the Company and that the Employee may learn of
Confidential Information during the course of employment. The Employee agrees
to comply with the policies and procedures of the Company for protecting
Confidential Information and agrees that he shall never disclose to any person,
corporation or other entity, except as required for the proper performance of
his/her regular duties for the Company, and shall never use for his/her own
benefit or that of another, any Confidential Information obtained by the
Employee incident to his/her employment or other association with the Company
or any of its affiliates or subsidiaries. The Employee understands that this
restriction will continue to apply throughout his/her employment and after
his/her employment terminates, regardless of the reason for such termination.
b. As used in this Agreement, "Confidential Information"
means any and all information of the Company, its subsidiaries and affiliates,
that is not generally known by others with whom any of them competes or does
business, or with whom any of them plans to compete or do business, including
without limitation any and all information concerning the identity and special
needs of the customers of the Company, its subsidiaries and affiliates and the
people and organizations with whom any of them has business relationships and
those relationships. Confidential Information also includes any information
received by the Company or any of its subsidiaries or affiliates from others
with any understanding, express or implied, that it will not be disclosed.
8. NON-SOLICITATION. While the Employee is employed by the
Company and for a period of two years thereafter, the Employee shall not,
directly or indirectly, solicit or encourage any customer of the Company or any
of its subsidiaries or affiliates to terminate or diminish its relationship
with the Company or any of its subsidiaries or affiliates, or to conduct with
any person, corporation or other entity any business or activity which such
customer conducts or could conduct with the Company or any of its subsidiaries
or affiliates, nor shall the Employee conduct, on his/her own behalf or that of
another, any such business or activity with a customer of the Company or any of
its subsidiaries or affiliates.
9. REMEDIES. The Employee acknowledges that, if he/she were to
breach any of the provisions of Section 7 or Section 8 of this Agreement, the
harm to the Company would be irreparable. The Employee therefore agrees that,
in addition to any other remedies available to it, the Company shall be
entitled to obtain preliminary and permanent injunctive relief against any such
breach, without having to post bond.
10. TAXES. All payments made to the Employee under this Agreement
shall be reduced by any tax or other amount required to be withheld by the
Company under applicable law.
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<PAGE> 7
11. REDUCTIONS. Notwithstanding anything to the contrary
contained in this Agreement, (a) any and all payments and benefits to be
provided to the Employee hereunder are subject to reduction to the extent
required by applicable statutes, regulations, rules and directives of federal,
state and other governmental and regulatory bodies having jurisdiction over the
Company and/or any of its affiliates or subsidiaries and (b) the payments and
benefits to which the Employee would be entitled pursuant to Section 6.g hereof
or otherwise as a result of a Change of Control shall be reduced to the maximum
amount for which the Company will not be limited in its deduction pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended, or any successor
provision. Any such reduction shall be applied to the amounts due to the
Employee in such manner as the Employee may reasonably specify within thirty
(30) days following notice from the Company of the need for such reduction or,
if the Employee fails to so specify timely, as determined by the Company.
12. ASSIGNMENT. The Company may assign its rights and obligations
under this Agreement without the consent of the Employee in the event that the
Company shall hereafter effect a reorganization, consolidate with, or merge
into, any other person, corporation or other entity or transfer all or
substantially all of its assets to any other person, corporation or other
entity. The Company requires the personal services of the Employee and he/she
may not assign this Agreement. This Agreement shall inure to the benefit of
and be binding upon the Company and the Employee and their respective
successors, executors, administrators, heirs and permitted assigns.
13. MISCELLANEOUS. This Agreement sets forth the entire agreement
between the Company and the Employee and supersedes all prior communications,
agreements and understandings, whether written or oral, with respect to the
Employee's employment. The headings and captions contained herein are for
convenience of reference only and are not part of this Agreement. This
Agreement may not be modified or amended, its term may not be extended or
renewed, and no breach of this Agreement shall be deemed to be waived, unless
agreed to in writing by the Employee and the Company. This is a Massachusetts
contract and shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts.
14. NOTICES. Any notices provided for in this Agreement shall be
in writing and shall be effective when delivered in person or deposited in the
United States mail, postage prepaid, and addressed to the Employee at his last
known address on the books of the Company or, in the case of the Company, at
its main office, attention of the Senior Vice President, Human Resources with a
copy to the General Counsel of the Company.
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<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized representative, and by the
Employee, as of the date first written above.
THE EMPLOYEE UST CORP.
/s/ Linda J. Lerner By: /s/ Neal F. Finnegan
------------------- --------------------
Title: President and CEO
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<PAGE> 9
"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me in
connection with my separation of employment, as set forth in the employment
agreement between UST Corp and me dated as of the ____ day of _____________,
1994 (the "Employment Agreement"), I, on my own behalf and on behalf of my
heir, beneficiaries and representatives and all others connected with me,
hereby release and forever discharge UST Corp. (the "Company"), its
subsidiaries and affiliates, and all of their respective officers, directors,
employees, agents, representatives, successors and assigns and all others
connected with them (all collectively, the "Releasees"), both individually and
in their official capacities, from any and all liability, claims, demands,
actions and causes of action of any type (all collectively "Claims") which I
have had in the past, now have, or might now have, through the date of my
execution of this Release of Claims, in any way resulting from, arising out of
or connected with my employment or its termination or pursuant to any federal,
state or local employment law, regulation or other requirement (including
without limitation Title VII of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, as amended, and the Massachusetts fair employment practices
act, as amended).
Excluded from the scope of this Release of Claims is (i) any claim
arising hereafter under the terms of the Employment Agreement or under the
terms of any of the Company's employee qualified and non-qualified benefit
plans (including without limitation the Company's employee pension plan, profit
sharing plan or stock ownership plan) and (ii) any right of indemnification or
contribution pursuant to the Articles of Organization or By-Laws of the Company
that I have or hereafter acquire if any claim is assert or proceedings are
brought against me by any governmental or regulatory agency, or by any
customer, creditor, employee or shareholder of the Company, or by any
self-regulatory organization, stock exchange or the like, related or allegedly
related to my having been an officer or employee of the Company or to any of my
activities as an officer or employee of the Company.
By acceptance of or reliance on this Release of Claims, the Company
promises that neither it nor any of the other Releasees affiliated with the
Company will taken any action that is designed, specifically as to me or with
respect to a class of similarly situated former employees, to reduce or
abrogate, or may reasonably be expected to result in an abridgement or
elimination of, any rights of indemnification or contribution available to me
pursuant to the Articles of Organization or By-Laws of the Company, or under
any policy or policies of directors and officers liability insurance affording
coverage to former officers and in effect from time to time, unless any such
abridgement or elimination of rights is also generally applicable to
then-current officers and employees of the Company.
In signing this Release of Claims, I acknowledge that I have had at
least twenty-one (21) days from the date of my receipt of notice of termination
of my employment (or, if applicable, the date I gave such notice to the
Company) to consider the terms of this Release of Claims, that I am encouraged
by the Company to seek the advice of an attorney prior to signing this Release
of
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<PAGE> 10
Claims and that I am signing this Release of Claims voluntarily and with a full
understanding of its terms. I understand that I may revoke this Release of
Claims at any time within seven (7) days of the date of my signing by written
notice to the President of the Company and that this Release of Claims will
take effect only upon the expiration of such seven-day revocation period and
only if I have not timely revoked it.
IN WITNESS WHEREOF, I have set my hand and seal on the date written
below.
Signature: ____________________________
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<PAGE> 1
EXHIBIT 10(V)(V)
UST CORP.
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made by and between UST Corp., a Massachusetts
corporation, (the "Company") and Kenneth L. Sullivan (the "Employee") as of the
24th day of October, 1994 (the "Effective Date").
In consideration of the mutual promises, terms and conditions
contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to continue the employment of
the Employee, and the Employee agrees to continue in the service of the
Company, subject to the terms and conditions contained in this Agreement.
2. TERM. Subject to earlier termination, as provided hereafter,
the Employee's employment hereunder shall be for an initial term of two (2)
years, commencing on the Effective Date, and may be renewed thereafter only by
written agreement, signed by the Employee and the Chief Executive Officer of
the Company. Notwithstanding the foregoing, in the event that this Agreement
is in effect on the date of consummation of a Change of Control, as hereafter
defined, this Agreement shall automatically be extended on said date such that
the remaining term of the Agreement shall then be two (2) years, but this
Agreement shall be renewable thereafter only by a written agreement signed by
the Employee and a duly authorized representative of the Company. The term of
this Agreement, as from time to time renewed or extended in accordance with
this Section 2, is hereafter referred to as "the term hereof" or "the term of
this Agreement".
3. PERFORMANCE.
-----------
a. During the term hereof, the Employee shall hold such
executive position or positions with the Company and/or any of its subsidiaries
as may be designated from time to time by the Board of Directors of the Company
(the "Board") and shall perform the duties and assume the responsibilities of
such positions and such other appropriate duties and responsibilities as may be
assigned by the Board or its designees.
b. During employment, the Employee shall devote his/her
full business time and best efforts, judgment, skill and knowledge exclusively
to the advancement of the Company's interests and to the discharge of his/her
duties and responsibilities for the Company. While employed by the Company,
the Employee shall not be engaged in any other business activity, except as
approved by the Board or its designee in writing. It is agreed, however, that
the provisions of this Section 3.b shall not be violated by the Employee's
holding of directorships or related positions in charitable, educational or
not-for-profit organizations which do not involve continuous or substantial
time commitments or by passive personal investment activities, provided that
such positions and activities are not in conflict, and do not otherwise
interfere, with the Employee's duties and responsibilities to the Company and
its subsidiaries.
<PAGE> 2
4. COMPENSATION. As compensation for all services performed for
the Company and its subsidiaries during the term of this Agreement, the Company
shall pay the Employee a base salary at an annual rate not less than the
Employee's base salary on the Effective Date, subject to increase from time to
time by the Company in its discretion. Notwithstanding the foregoing, the
Company may reduce the Employee's base salary, but (i) only in the event of a
salary reduction affecting all or substantially all of the Company's officers
employed under an executive employment agreement and only in proportion to the
salary reductions applicable to such other affected officers and (ii) only if
no Change of Control has occurred.
5. EMPLOYEE BENEFITS. During the term hereof, the Employee shall
be entitled to participate in any and all employee benefit plans from time to
time in effect for employees of the Company generally, excluding only plans
providing payments and/or other benefits in the event of termination of
employment. Such participation shall be subject to the terms of the applicable
plan documents, generally applicable Company policies and the discretion of the
Board or any administrative or other committee provided for in or contemplated
by such plan.
6. TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of
Section 2 above, the Employee's employment under this Agreement shall terminate
under the following circumstances and, in that event, the Company shall have
only such obligations to the Employee as are specified below under the
applicable termination provision:
a. UPON DEATH. In the event of the Employee's death
during the term hereof, the Employee's employment hereunder shall immediately
and automatically terminate. In such event, the Company shall pay to the
Employee's designated beneficiary or, if no beneficiary has been designated by
the Employee, to the Employee's estate, any base salary earned and unpaid
through the date of death.
b. AS A RESULT OF DISABILITY. In the event that the
Employee becomes disabled during the term hereof and, as a result, is unable to
perform substantially all of his/her duties for the Company for more than one
hundred and twenty (120) days during any period of three hundred and sixty-five
(365) days, the Company may terminate the Employee's employment without further
obligation upon notice to the Employee. In the event of such disability, the
Employee will continue to receive his/her base salary and benefits under
Sections 4 and 5 hereof until the earlier of the date the Employee becomes
eligible for disability income under the Company's long-term disability or
workers' compensation insurance plan or the date his/her employment terminates.
c. BY THE COMPANY FOR CAUSE. The Company may terminate
the Employee's employment for Cause at any time upon notice to the Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board in its reasonable judgment, shall constitute Cause for
termination: (i) the Employee's refusal to perform, or gross negligence in the
performance of, his/her duties or responsibilities on behalf of the Company;
(ii) the Employee's fraud, embezzlement or other material dishonesty with
respect to the Company or any of its subsidiaries; (iii) the Employee's gross
misconduct or his/her conviction of, or plea of no contest to, a felony. In
the event of such termination, the Company shall have no further obligation to
the Employee, other than for base salary earned through the date of termination.
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<PAGE> 3
d. BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate the Employee's employment other than for Cause at any time upon
notice to the Employee. In the event of such termination prior to, or more
than two years following, a Change of Control and provided that the Employee
executes the release of claims attached hereto and marked "A" (the "Employee
Release") within twenty-one (21) days of his/her receipt of notice of
termination of employment and does not timely revoke the Employee Release, the
Company shall:
i. pay the Employee severance pay in an amount equal
to twelve (12) months' base salary at the rate in effect on
the date of termination, which the Employee may elect to
receive (A) in a single lump sum, payable within thirty (30)
days following the effective date of the Employee Release or
(B) as salary continuation payable at the Company's regular
payroll periods and in accordance with its regular payroll
practices commencing on the next regular payday immediately
following the effective date of the Employee Release, but
retroactive to the date of termination and,
ii. (A) if the Employee and/or his/her eligible
dependents exercise their right to continue participation in
the Company's group health plan under applicable federal law
("COBRA"), then, for the period of twelve (12) months
following termination of the Employee's employment or, if
earlier, until the date the Employee ceases to be eligible for
continued participation under COBRA, the Company shall
continue to pay that share of the premium cost of Employee's
participation and that of his/her eligible dependents in the
Company's group health plan as it pays for active employees of
the Company and their eligible dependents generally OR (B) if
the Employee and his/her eligible dependents elect not to
continue participation in the Company's group health plan
under COBRA, the Company will pay the Employee a single lump
sum payment equal to the amount that the Company would have
expended if participation had been elected and continued for a
period of twelve (12) months, which lump sum shall be payable
within thirty (30) days following the effective date of the
Employee Release, and
iii. The Company shall pay the cost of outplacement
services for the Employee through a firm selected by the
Employee (and reasonably acceptable to the Company), up to a
maximum cost to the Company of not more than $20,000; it being
understood and agreed that no payment will be provided to the
Employee in lieu of outplacement services.
e. BY THE EMPLOYEE FOR GOOD REASON. The Employee may
terminate employment hereunder for Good Reason upon notice to the Company
setting forth in reasonable detail the nature of such Good Reason. The
following shall constitute Good Reason for termination by the Employee: (i)
failure of the Company to continue the Employee in an executive position; (ii)
material diminution in the nature or scope of the Employee's responsibilities,
duties or authority, other than as is materially consistent with the Employee's
assignment to another executive position; (iii) material failure of the Company
to provide the Employee base salary and benefits in accordance with the terms
of Sections 4 and 5 hereof; or (iv) a permanent transfer of the Employee to a
work site more than twenty-five miles distant from his/her work site on the
Effective Date.
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<PAGE> 4
In the event of termination in accordance with this Section 6.e, the Company
shall provide the Employee base salary and health insurance benefits in
accordance with Section 6.d hereof, provided that the Employee executes the
Employee Release within twenty-one (21) days of his/her notice of termination
of employment and provided further that the Employee does not timely revoke the
Employee Release.
f. BY THE EMPLOYEE OTHER THAN FOR GOOD REASON. The Employee
may resign employment other than for Good Reason at any time upon one month's
notice to the Company. In the event of such termination, the Company shall
have no further obligation to the Employee, other than for base salary earned
through the date of termination.
g. UPON A CHANGE OF CONTROL.
i. If a Change of Control occurs and, within two (2)
years following such Change of Control, the Company terminates the Employee's
employment other than for Cause, or the Employee terminates his/her employment
for Good Reason, and the Employee executes the Employee Release within
twenty-one (21) days of the date of notice of termination of his/her employment
and does not timely revoke it, then, in lieu of any payment and benefits to
which the Employee would otherwise be entitled under Section 6.d or 6.e hereof,
the Company
(1) shall pay the Employee an amount equal
to eighteen (18) months' base salary at the rate in effect on the date
of termination of the Employee's employment, which the Employee may
elect to receive (A) in a single lump sum, payable within thirty (30)
days following the effective date of the Employee Release or (B) as
salary continuation payable at the Company's regular payroll periods
and in accordance with its regular payroll practices commencing on the
next regular payday immediately following the final payment under
Section 6.d or 6.e hereof, whichever is applicable,
(2) provided the Employee elects to receive
payment hereunder in the form of salary continuation and provided
further that the Employee has exercised his/her right to continue
participation in the Company's group health plan under applicable
federal law ("COBRA"), then, for the duration of the period in which
the Employee is receiving such salary continuation or, if earlier,
until the date the Employee ceases to be eligible for continued
participation under COBRA, the Company shall continue to pay that
share of the premium cost of Employee's participation and that of
his/her eligible dependents in the Company's group health plan as it
pays for active employees of the Company and their eligible dependents
generally or, if greater, the amount it was paying for active
employees of the Company and their eligible dependents generally
immediately prior to the Change of Control and
(3) shall pay the cost of outplacement
services for the Employee through a firm selected by the Employee (and
reasonably acceptable to the Company), up to a maximum cost to the
Company of not more than $20,000; it being understood and agreed that
no payment will be provided to the Employee in lieu of outplacement
services.
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<PAGE> 5
II. A "Change of Control" shall be deemed to have
been consummated if hereafter
(A) any "person", as such term used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934 as
amended (the "Exchange Act") other than the Company or any of its
subsidiaries or affiliates or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries or affiliates, becomes a beneficial owner (within the
meaning of Rule 13d-3, as amended, as promulgated under the Exchange
Act), directly or indirectly, of securities representing twenty-five
(25%) percent or more of the combined voting power of the Company's
then outstanding securities; or
(B) during any period of two consecutive
years (not including any period prior to the Effective Date),
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (A), (C) or (D) of this Section 6.g.ii) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute at
least a majority thereof; or
(C) there occurs a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires
more than twenty-five percent (25%) of the combined voting power of
the Company's then outstanding securities shall not constitute a
Change of Control; or
(D) the stockholders of the Company approve
a plan of a complete liquidation of the Company; or
(E) there occurs a closing of a sale or other
disposition by the Company of all or substantially all of the
Company's assets.
h. UPON EXPIRATION OF THE TERM HEREOF. In the event
that the term of this Agreement expires and, at the time of such expiration,
the Company has not offered to extend or renew this Agreement on terms no less
favorable in the aggregate as those set forth herein, then such expiration
shall be treated as a termination by the Company of the Employee's employment
other than for Cause in accordance with Section 6.d hereof. In the event that
the Company has
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<PAGE> 6
offered such extension or renewal prior to the expiration of the term hereof,
but such offer has not been accepted by the Employee at the time of such
expiration, then such expiration shall be treated as a termination by the
Employee of his employment other than for Good Reason.
7. CONFIDENTIAL INFORMATION.
------------------------
a. The Employee acknowledges that the Company
continually develops Confidential Information, that the Employee may develop
Confidential Information for the Company and that the Employee may learn of
Confidential Information during the course of employment. The Employee agrees
to comply with the policies and procedures of the Company for protecting
Confidential Information and agrees that he shall never disclose to any person,
corporation or other entity, except as required for the proper performance of
his/her regular duties for the Company, and shall never use for his/her own
benefit or that of another, any Confidential Information obtained by the
Employee incident to his/her employment or other association with the Company
or any of its affiliates or subsidiaries. The Employee understands that this
restriction will continue to apply throughout his/her employment and after
his/her employment terminates, regardless of the reason for such termination.
b. As used in this Agreement, "Confidential Information"
means any and all information of the Company, its subsidiaries and affiliates,
that is not generally known by others with whom any of them competes or does
business, or with whom any of them plans to compete or do business, including
without limitation any and all information concerning the identity and special
needs of the customers of the Company, its subsidiaries and affiliates and the
people and organizations with whom any of them has business relationships and
those relationships. Confidential Information also includes any information
received by the Company or any of its subsidiaries or affiliates from others
with any understanding, express or implied, that it will not be disclosed.
8. NON-SOLICITATION. While the Employee is employed by the
Company and for a period of two years thereafter, the Employee shall not,
directly or indirectly, solicit or encourage any customer of the Company or any
of its subsidiaries or affiliates to terminate or diminish its relationship
with the Company or any of its subsidiaries or affiliates, or to conduct with
any person, corporation or other entity any business or activity which such
customer conducts or could conduct with the Company or any of its subsidiaries
or affiliates, nor shall the Employee conduct, on his/her own behalf or that of
another, any such business or activity with a customer of the Company or any of
its subsidiaries or affiliates.
9. REMEDIES. The Employee acknowledges that, if he/she were to
breach any of the provisions of Section 7 or Section 8 of this Agreement, the
harm to the Company would be irreparable. The Employee therefore agrees that,
in addition to any other remedies available to it, the Company shall be
entitled to obtain preliminary and permanent injunctive relief against any such
breach, without having to post bond.
10. TAXES. All payments made to the Employee under this Agreement
shall be reduced by any tax or other amount required to be withheld by the
Company under applicable law.
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<PAGE> 7
11. REDUCTIONS. Notwithstanding anything to the contrary
contained in this Agreement, (a) any and all payments and benefits to be
provided to the Employee hereunder are subject to reduction to the extent
required by applicable statutes, regulations, rules and directives of federal,
state and other governmental and regulatory bodies having jurisdiction over the
Company and/or any of its affiliates or subsidiaries and (b) the payments and
benefits to which the Employee would be entitled pursuant to Section 6.g hereof
or otherwise as a result of a Change of Control shall be reduced to the maximum
amount for which the Company will not be limited in its deduction pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended, or any successor
provision. Any such reduction shall be applied to the amounts due to the
Employee in such manner as the Employee may reasonably specify within thirty
(30) days following notice from the Company of the need for such reduction or,
if the Employee fails to so specify timely, as determined by the Company.
12. ASSIGNMENT. The Company may assign its rights and obligations
under this Agreement without the consent of the Employee in the event that the
Company shall hereafter effect a reorganization, consolidate with, or merge
into, any other person, corporation or other entity or transfer all or
substantially all of its assets to any other person, corporation or other
entity. The Company requires the personal services of the Employee and he/she
may not assign this Agreement. This Agreement shall inure to the benefit of
and be binding upon the Company and the Employee and their respective
successors, executors, administrators, heirs and permitted assigns.
13. MISCELLANEOUS. This Agreement sets forth the entire agreement
between the Company and the Employee and supersedes all prior communications,
agreements and understandings, whether written or oral, with respect to the
Employee's employment. The headings and captions contained herein are for
convenience of reference only and are not part of this Agreement. This
Agreement may not be modified or amended, its term may not be extended or
renewed, and no breach of this Agreement shall be deemed to be waived, unless
agreed to in writing by the Employee and the Company. This is a Massachusetts
contract and shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts.
14. NOTICES. Any notices provided for in this Agreement shall be
in writing and shall be effective when delivered in person or deposited in the
United States mail, postage prepaid, and addressed to the Employee at his last
known address on the books of the Company or, in the case of the Company, at
its main office, attention of the Senior Vice President, Human Resources with a
copy to the General Counsel of the Company.
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<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized representative, and by the
Employee, as of the date first written above.
THE EMPLOYEE UST CORP.
/s/ Kenneth L. Sullivan By: /s/ Neal F. Finnegan
----------------------- --------------------
Title: President and CEO
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<PAGE> 9
"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me in
connection with my separation of employment, as set forth in the employment
agreement between UST Corp and me dated as of the ____ day of _____________,
1994 (the "Employment Agreement"), I, on my own behalf and on behalf of my
heir, beneficiaries and representatives and all others connected with me,
hereby release and forever discharge UST Corp. (the "Company"), its
subsidiaries and affiliates, and all of their respective officers, directors,
employees, agents, representatives, successors and assigns and all others
connected with them (all collectively, the "Releasees"), both individually and
in their official capacities, from any and all liability, claims, demands,
actions and causes of action of any type (all collectively "Claims") which I
have had in the past, now have, or might now have, through the date of my
execution of this Release of Claims, in any way resulting from, arising out of
or connected with my employment or its termination or pursuant to any federal,
state or local employment law, regulation or other requirement (including
without limitation Title VII of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, as amended, and the Massachusetts fair employment practices
act, as amended).
Excluded from the scope of this Release of Claims is (i) any claim
arising hereafter under the terms of the Employment Agreement or under the
terms of any of the Company's employee qualified and non-qualified benefit
plans (including without limitation the Company's employee pension plan, profit
sharing plan or stock ownership plan) and (ii) any right of indemnification or
contribution pursuant to the Articles of Organization or By-Laws of the Company
that I have or hereafter acquire if any claim is assert or proceedings are
brought against me by any governmental or regulatory agency, or by any
customer, creditor, employee or shareholder of the Company, or by any
self-regulatory organization, stock exchange or the like, related or allegedly
related to my having been an officer or employee of the Company or to any of my
activities as an officer or employee of the Company.
By acceptance of or reliance on this Release of Claims, the Company
promises that neither it nor any of the other Releasees affiliated with the
Company will taken any action that is designed, specifically as to me or with
respect to a class of similarly situated former employees, to reduce or
abrogate, or may reasonably be expected to result in an abridgement or
elimination of, any rights of indemnification or contribution available to me
pursuant to the Articles of Organization or By-Laws of the Company, or under
any policy or policies of directors and officers liability insurance affording
coverage to former officers and in effect from time to time, unless any such
abridgement or elimination of rights is also generally applicable to
then-current officers and employees of the Company.
In signing this Release of Claims, I acknowledge that I have had at
least twenty-one (21) days from the date of my receipt of notice of termination
of my employment (or, if applicable, the date I gave such notice to the
Company) to consider the terms of this Release of Claims, that I am encouraged
by the Company to seek the advice of an attorney prior to signing this Release
of
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<PAGE> 10
Claims and that I am signing this Release of Claims voluntarily and with a full
understanding of its terms. I understand that I may revoke this Release of
Claims at any time within seven (7) days of the date of my signing by written
notice to the President of the Company and that this Release of Claims will
take effect only upon the expiration of such seven-day revocation period and
only if I have not timely revoked it.
IN WITNESS WHEREOF, I have set my hand and seal on the date written
below.
Signature: ____________________________
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<PAGE> 1
EXHIBIT 10(v)(vi)
UST CORP.
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made by and between UST Corp., a Massachusetts
corporation, (the "Company") and Katharine C. Armstrong (the "Employee") as of
the 24th day of October, 1994 (the "Effective Date").
In consideration of the mutual promises, terms and conditions
contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to continue the employment of
the Employee, and the Employee agrees to continue in the service of the
Company, subject to the terms and conditions contained in this Agreement.
2. TERM. Subject to earlier termination, as provided hereafter,
the Employee's employment hereunder shall be for an initial term of two (2)
years, commencing on the Effective Date, and may be renewed thereafter only by
written agreement, signed by the Employee and the Chief Executive Officer of
the Company. Notwithstanding the foregoing, in the event that this Agreement
is in effect on the date of consummation of a Change of Control, as hereafter
defined, this Agreement shall automatically be extended on said date such that
the remaining term of the Agreement shall then be two (2) years, but this
Agreement shall be renewable thereafter only by a written agreement signed by
the Employee and a duly authorized representative of the Company. The term of
this Agreement, as from time to time renewed or extended in accordance with
this Section 2, is hereafter referred to as "the term hereof" or "the term of
this Agreement".
3. PERFORMANCE.
a. During the term hereof, the Employee shall hold such
executive position or positions with the Company and/or any of its subsidiaries
as may be designated from time to time by the Board of Directors of the Company
(the "Board") and shall perform the duties and assume the responsibilities of
such positions and such other appropriate duties and responsibilities as may be
assigned by the Board or its designees.
b. During employment, the Employee shall devote his/her
full business time and best efforts, judgment, skill and knowledge exclusively
to the advancement of the Company's interests and to the discharge of his/her
duties and responsibilities for the Company. While employed by the Company,
the Employee shall not be engaged in any other business activity, except as
approved by the Board or its designee in writing. It is agreed, however, that
the provisions of this Section 3.b shall not be violated by the Employee's
holding of directorships or related positions in charitable, educational or
not-for-profit organizations which do not involve continuous or substantial
time commitments or by passive personal investment activities, provided that
such positions and activities are not in conflict, and do not otherwise
<PAGE> 2
4. COMPENSATION. As compensation for all services performed for
the Company and its subsidiaries during the term of this Agreement, the Company
shall pay the Employee a base salary at an annual rate not less than the
Employee's base salary on the Effective Date, subject to increase from time to
time by the Company in its discretion. Notwithstanding the foregoing, the
Company may reduce the Employee's base salary, but (i) only in the event of a
salary reduction affecting all or substantially all of the Company's officers
employed under an executive employment agreement and only in proportion to the
salary reductions applicable to such other affected officers and (ii) only if
no Change of Control has occurred.
5. EMPLOYEE BENEFITS. During the term hereof, the Employee shall
be entitled to participate in any and all employee benefit plans from time to
time in effect for employees of the Company generally, excluding only plans
providing payments and/or other benefits in the event of termination of
employment. Such participation shall be subject to the terms of the applicable
plan documents, generally applicable Company policies and the discretion of the
Board or any administrative or other committee provided for in or contemplated
by such plan.
6. TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of
Section 2 above, the Employee's employment under this Agreement shall terminate
under the following circumstances and, in that event, the Company shall have
only such obligations to the Employee as are specified below under the
applicable termination provision:
a. UPON DEATH. In the event of the Employee's death
during the term hereof, the Employee's employment hereunder shall immediately
and automatically terminate. In such event, the Company shall pay to the
Employee's designated beneficiary or, if no beneficiary has been designated by
the Employee, to the Employee's estate, any base salary earned and unpaid
through the date of death.
b. AS A RESULT OF DISABILITY. In the event that the
Employee becomes disabled during the term hereof and, as a result, is unable to
perform substantially all of his/her duties for the Company for more than one
hundred and twenty (120) days during any period of three hundred and sixty-five
(365) days, the Company may terminate the Employee's employment without further
obligation upon notice to the Employee. In the event of such disability, the
Employee will continue to receive his/her base salary and benefits under
Sections 4 and 5 hereof until the earlier of the date the Employee becomes
eligible for disability income under the Company's long-term disability or
workers' compensation insurance plan or the date his/her employment terminates.
c. BY THE COMPANY FOR CAUSE. The Company may terminate
the Employee's employment for Cause at any time upon notice to the Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board in its reasonable judgment, shall constitute Cause for
termination: (i) the Employee's refusal to perform, or gross negligence in the
performance of, his/her duties or responsibilities on behalf of the Company;
(ii) the Employee's fraud, embezzlement or other material dishonesty with
respect to the Company or any of its subsidiaries; (iii) the Employee's gross
misconduct or his/her conviction of, or plea of no contest to, a felony. In
the event of such termination, the Company shall have no further obligation to
the Employee, other than for base salary earned through the date of
termination.
<PAGE> 3
d. BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate the Employee's employment other than for Cause at any time upon
notice to the Employee. In the event of such termination prior to, or more
than two years following, a Change of Control and provided that the Employee
executes the release of claims attached hereto and marked "A" (the "Employee
Release") within twenty-one (21) days of his/her receipt of notice of
termination of employment and does not timely revoke the Employee Release, the
Company shall:
i. pay the Employee severance pay in an amount equal
to twelve (12) months' base salary at the rate in effect on
the date of termination, which the Employee may elect to
receive (A) in a single lump sum, payable within thirty (30)
days following the effective date of the Employee Release or
(B) as salary continuation payable at the Company's regular
payroll periods and in accordance with its regular payroll
practices commencing on the next regular payday immediately
following the effective date of the Employee Release, but
retroactive to the date of termination and,
ii. (A) if the Employee and/or his/her eligible
dependents exercise their right to continue participation in
the Company's group health plan under applicable federal law
("COBRA"), then, for the period of twelve (12) months
following termination of the Employee's employment or, if
earlier, until the date the Employee ceases to be eligible for
continued participation under COBRA, the Company shall
continue to pay that share of the premium cost of Employee's
participation and that of his/her eligible dependents in the
Company's group health plan as it pays for active employees of
the Company and their eligible dependents generally OR (B) if
the Employee and his/her eligible dependents elect not to
continue participation in the Company's group health plan
under COBRA, the Company will pay the Employee a single lump
sum payment equal to the amount that the Company would have
expended if participation had been elected and continued for a
period of twelve (12) months, which lump sum shall be payable
within thirty (30) days following the effective date of the
Employee Release, and
iii. The Company shall pay the cost of outplacement
services for the Employee through a firm selected by the
Employee (and reasonably acceptable to the Company), up to a
maximum cost to the Company of not more than $20,000; it being
understood and agreed that no payment will be provided to the
Employee in lieu of outplacement services.
e. BY THE EMPLOYEE FOR GOOD REASON. The Employee may
terminate employment hereunder for Good Reason upon notice to the Company
setting forth in reasonable detail the nature of such Good Reason. The
following shall constitute Good Reason for termination by the Employee: (i)
failure of the Company to continue the Employee in an executive position; (ii)
material diminution in the nature or scope of the Employee's responsibilities,
duties or authority, other than as is materially consistent with the Employee's
assignment to another executive position; (iii) material failure of the Company
to provide the Employee base salary and benefits in accordance with the terms
of Sections 4 and 5 hereof; or (iv) a permanent transfer of the Employee to a
work site more than twenty-five miles distant from his/her work site on the
Effective Date.
<PAGE> 4
In the event of termination in accordance with this Section 6.e, the Company
shall provide the Employee base salary and health insurance benefits in
accordance with Section 6.d hereof, provided that the Employee executes the
Employee Release within twenty-one (21) days of his/her notice of termination
of employment and provided further that the Employee does not timely revoke the
Employee Release.
f. BY THE EMPLOYEE OTHER THAN FOR GOOD REASON. The Employee
may resign employment other than for Good Reason at any time upon one month's
notice to the Company. In the event of such termination, the Company shall
have no further obligation to the Employee, other than for base salary earned
through the date of termination.
g. UPON A CHANGE OF CONTROL.
i. If a Change of Control occurs and, within two (2)
years following such Change of Control, the Company terminates the Employee's
employment other than for Cause, or the Employee terminates his/her employment
for Good Reason, and the Employee executes the Employee Release within
twenty-one (21) days of the date of notice of termination of his/her employment
and does not timely revoke it, then, in lieu of any payment and benefits to
which the Employee would otherwise be entitled under Section 6.d or 6.e hereof,
the Company
(1) shall pay the Employee an amount equal
to eighteen (18) months' base salary at the rate in effect on the date
of termination of the Employee's employment, which the Employee may
elect to receive (A) in a single lump sum, payable within thirty (30)
days following the effective date of the Employee Release or (B) as
salary continuation payable at the Company's regular payroll periods
and in accordance with its regular payroll practices commencing on the
next regular payday immediately following the final payment under
Section 6.d or 6.e hereof, whichever is applicable,
(2) provided the Employee elects to receive
payment hereunder in the form of salary continuation and provided
further that the Employee has exercised his/her right to continue
participation in the Company's group health plan under applicable
federal law ("COBRA"), then, for the duration of the period in which
the Employee is receiving such salary continuation or, if earlier,
until the date the Employee ceases to be eligible for continued
participation under COBRA, the Company shall continue to pay that
share of the premium cost of Employee's participation and that of
his/her eligible dependents in the Company's group health plan as it
pays for active employees of the Company and their eligible dependents
generally or, if greater, the amount it was paying for active
employees of the Company and their eligible dependents generally
immediately prior to the Change of Control and
(3) shall pay the cost of outplacement
services for the Employee through a firm selected by the Employee (and
reasonably acceptable to the Company), up to a maximum cost to the
Company of not more than $20,000; it being understood and agreed that
no payment will be provided to the Employee in lieu of outplacement
services.
<PAGE> 5
ii. A "Change of Control" shall be deemed to have been
consummated if hereafter
(A) any "person", as such term used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934 as
amended (the "Exchange Act") other than the Company or any of its
subsidiaries or affiliates or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries or affiliates, becomes a beneficial owner (within the
meaning of Rule 13d-3, as amended, as promulgated under the Exchange
Act), directly or indirectly, of securities representing twenty-five
(25%) percent or more of the combined voting power of the Company's
then outstanding securities; or
(B) during any period of two consecutive
years (not including any period prior to the Effective Date),
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (A), (C) or (D) of this Section 6.g.ii) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute at
least a majority thereof; or
(C) there occurs a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires
more than twenty-five percent (25%) of the combined voting power of
the Company's then outstanding securities shall not constitute a
Change of Control; or
(D) the stockholders of the Company approve a
plan of a complete liquidation of the Company; or
(E) there occurs a closing of a sale or other
disposition by the Company of all or substantially all of the
Company's assets.
h. Upon Expiration of the Term Hereof. In the event
that the term of this Agreement expires and, at the time of such expiration,
the Company has not offered to extend or renew this Agreement on terms no less
favorable in the aggregate as those set forth herein, then such expiration
shall be treated as a termination by the Company of the Employee's employment
other than for Cause in accordance with Section 6.d hereof. In the event that
the Company has
<PAGE> 6
offered such extension or renewal prior to the expiration of the term hereof,
but such offer has not been accepted by the Employee at the time of such
expiration, then such expiration shall be treated as a termination
by the Employee of his employment other than for Good Reason.
7. CONFIDENTIAL INFORMATION.
a. The Employee acknowledges that the Company
continually develops Confidential Information, that the Employee may develop
Confidential Information for the Company and that the Employee may learn of
Confidential Information during the course of employment. The Employee agrees
to comply with the policies and procedures of the Company for protecting
Confidential Information and agrees that he shall never disclose to any person,
corporation or other entity, except as required for the proper performance of
his/her regular duties for the Company, and shall never use for his/her own
benefit or that of another, any Confidential Information obtained by the
Employee incident to his/her employment or other association with the Company
or any of its affiliates or subsidiaries. The Employee understands that this
restriction will continue to apply throughout his/her employment and after
his/her employment terminates, regardless of the reason for such termination.
b. As used in this Agreement, "Confidential Information"
means any and all information of the Company, its subsidiaries and affiliates,
that is not generally known by others with whom any of them competes or does
business, or with whom any of them plans to compete or do business, including
without limitation any and all information concerning the identity and special
needs of the customers of the Company, its subsidiaries and affiliates and the
people and organizations with whom any of them has business relationships and
those relationships. Confidential Information also includes any information
received by the Company or any of its subsidiaries or affiliates from others
with any understanding, express or implied, that it will not be disclosed.
8. NON-SOLICITATION. While the Employee is employed by the
Company and for a period of two years thereafter, the Employee shall not,
directly or indirectly, solicit or encourage any customer of the Company or any
of its subsidiaries or affiliates to terminate or diminish its relationship
with the Company or any of its subsidiaries or affiliates, or to conduct with
any person, corporation or other entity any business or activity which such
customer conducts or could conduct with the Company or any of its subsidiaries
or affiliates, nor shall the Employee conduct, on his/her own behalf or that of
another, any such business or activity with a customer of the Company or any of
its subsidiaries or affiliates.
9. REMEDIES. The Employee acknowledges that, if he/she were to
breach any of the provisions of Section 7 or Section 8 of this Agreement, the
harm to the Company would be irreparable. The Employee therefore agrees that,
in addition to any other remedies available to it, the Company shall be
entitled to obtain preliminary and permanent injunctive relief against any such
breach, without having to post bond.
10. TAXES. All payments made to the Employee under this Agreement
shall be reduced by any tax or other amount required to be withheld by the
Company under applicable law.
<PAGE> 7
11. REDUCTIONS. Notwithstanding anything to the contrary contained in
this Agreement, (a) any and all payments and benefits to be provided to the
Employee hereunder are subject to reduction to the extent required by
applicable statutes, regulations, rules and directives of federal, state and
other governmental and regulatory bodies having jurisdiction over the Company
and/or any of its affiliates or subsidiaries and (b) the payments and benefits
to which the Employee would be entitled pursuant to Section 6.g hereof or
otherwise as a result of a Change of Control shall be reduced to the maximum
amount for which the Company will not be limited in its deduction pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended, or any successor
provision. Any such reduction shall be applied to the amounts due to the
Employee in such manner as the Employee may reasonably specify within thirty
(30) days following notice from the Company of the need for such reduction or,
if the Employee fails to so specify timely, as determined by the Company.
12. ASSIGNMENT. The Company may assign its rights and obligations
under this Agreement without the consent of the Employee in the event that
the Company shall hereafter effect a reorganization, consolidate with, or
merge into, any other person, corporation or other entity or transfer all
or substantially all of its assets to any other other person, corporation
or other entity. The Company requires the personal services of the Employee
and he/she may not assign this Agreement. This Agreement shall inure to the
benefit of and be binding upon the Company and the Employee and their
respective successors, executors, administrators, heirs and permitted assigns.
13. MISCELLANEOUS. This Agreement sets forth the entire agreement
between the Company and the Employee and supersedes all prior communications,
agreements and understandings, whether written or oral, with respect to the
Employee's employment. The headings and captions contained herein are for
convenience of reference only and are not part of this Agreement. This
Agreement may not be modified or amended, its term may not be extended of
renewed, and no breach of this Agreement shall be deemed to be waived, unless
agreed to in writing by the Employee and the Company. This is a Massachusetts
contract and shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts.
14. NOTICES. Any notices provided for in this Agreement shall be
in writing and shall be effective when delivered in person or deposited in
the United States mail, postage prepaid, and addressed to the Employee at his
last known address on the books of the Company or, in the case of the Company,
at its main office, attention of the Senior Vice President, Human Resources
with a copy to the General Counsel of the Company.
<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized representative, and by the
Employee, as of the date first written above.
THE EMPLOYEE UST CORP.
/s/ Katharine C. Armstrong By: /s/ Neal F. Finnegan
-------------------------- --------------------
Katharine C. Armstrong Title: President and CEO
<PAGE> 9
"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me in
connection with my separation of employment, as set forth in the employment
agreement between UST Corp and me dated as of the ____ day of _____________,
1994 (the "Employment Agreement"), I, on my own behalf and on behalf of my
heir, beneficiaries and representatives and all others connected with me,
hereby release and forever discharge UST Corp. (the "Company"), its
subsidiaries and affiliates, and all of their respective officers, directors,
employees, agents, representatives, successors and assigns and all others
connected with them (all collectively, the "Releasees"), both individually and
in their official capacities, from any and all liability, claims, demands,
actions and causes of action of any type (all collectively "Claims") which I
have had in the past, now have, or might now have, through the date of my
execution of this Release of Claims, in any way resulting from, arising out of
or connected with my employment or its termination or pursuant to any federal,
state or local employment law, regulation or other requirement (including
without limitation Title VII of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, as amended, and the Massachusetts fair employment practices
act, as amended).
Excluded from the scope of this Release of Claims is (i) any claim
arising hereafter under the terms of the Employment Agreement or under the
terms of any of the Company's employee qualified and non-qualified benefit
plans (including without limitation the Company's employee pension plan, profit
sharing plan or stock ownership plan) and (ii) any right of indemnification or
contribution pursuant to the Articles of Organization or By-Laws of the Company
that I have or hereafter acquire if any claim is assert or proceedings are
brought against me by any governmental or regulatory agency, or by any
customer, creditor, employee or shareholder of the Company, or by any
self-regulatory organization, stock exchange or the like, related or allegedly
related to my having been an officer or employee of the Company or to any of my
activities as an officer or employee of the Company.
By acceptance of or reliance on this Release of Claims, the Company
promises that neither it nor any of the other Releasees affiliated with the
Company will taken any action that is designed, specifically as to me or with
respect to a class of similarly situated former employees, to reduce or
abrogate, or may reasonably be expected to result in an abridgement or
elimination of, any rights of indemnification or contribution available to me
pursuant to the Articles of Organization or By-Laws of the Company, or under
any policy or policies of directors and officers liability insurance affording
coverage to former officers and in effect from time to time, unless any such
abridgement or elimination of rights is also generally applicable to
then-current officers and employees of the Company.
In signing this Release of Claims, I acknowledge that I have had at
least twenty-one (21) days from the date of my receipt of notice of termination
of my employment (or, if applicable, the date I gave such notice to the
Company) to consider the terms of this Release of Claims, that I am encouraged
by the Company to seek the advice of an attorney prior to signing this Release
of
<PAGE> 10
Claims and that I am signing this Release of Claims voluntarily and with a
full understanding of its terms. I understand that I may revoke this Release
of Claims at any time within seven (7) days of the date of my signing by
written notice to the President of the Company and that this Release of Claims
will take effect only upon the expiration of such seven-day revocation period
and only if I have not timely revoked it.
IN WITNESS WHEREOF, I have set my hand and seal on the date written
below.
Signature: ____________________________
<PAGE> 1
EXHIBIT 10(w)
UST CORP.
SEVERANCE PAY PLAN
(AND SUMMARY PLAN DESCRIPTION)
JANUARY 1, 1995
I. PURPOSE
This Plan is intended to provide salary continuation to eligible
employees of UST Corp. (the "Company") in the event that their employment is
terminated as provided hereafter due to a reduction in force or a corporate
restructuring or following a Change of Control. This Plan is intended to
comply with all applicable requirements of the Employee Retirement Income
Security Act of 1974 ("ERISA") and the Regulations promulgated thereunder for
severance pay plans and is to be interpreted in a manner consistent with such
requirements. This document contains the provisions of the Plan and the
Summary Plan Description.
II. ELIGIBILITY TO PARTICIPATE
A. In order to be eligible to participate in this Plan:
1. You must be a regular full-time or part-time employee of
the Company. (Temporary employees as classified by the
Company are not eligible to participate in this Plan.)
2. You must have completed at least three (3) months of
employment with the Company at the time your employment
terminates.
III. QUALIFYING EVENTS
A. An employee eligible to participate in this Plan under Section II
above (a "participating employee") is entitled to receive
benefits under the Plan only if the employee is on the Company's
active payroll or on a leave of absence that has been approved in
writing, with guaranteed reinstatement, at the time his/her
employment terminates and only if termination occurs in one of
the following circumstances:
1. The participating employee's employment is terminated as
a result of the elimination of his/her position with the
Company in conjunction with a reduction in force or a
corporate restructuring and the employee is not offered
employment in a comparable position with the Company or
one of its Affiliates; or
2. The employee's employment is terminated other than for
Cause by the Company within twelve (12) months following
a Change of Control; and
<PAGE> 2
3. The employee is not then covered by another severance pay
plan or by an individual employment agreement or other
severance arrangement providing benefits that in the
aggregate are comparable to or exceed those for which the
employee would otherwise be eligible under this Plan.
IV. EXCLUSIONS
A. The following are examples of events in which an employee would
not qualify for benefits under this Plan:
1. The employee resigns or otherwise voluntarily leaves
his/her employment with the Company; or
2. The employee's employment is terminated by the Company
for Cause; or
3. The employee is offered comparable employment at the time
of the elimination of his/her position; or
4. The employee is temporarily laid off, as determined by
the Company; or
5. The employee is on a leave of absence which has not been
approved in writing or as to which reinstatement is not
guaranteed.
B. This Plan does not constitute a contract of employment for a
specific term or otherwise alter the at-will nature of the
employment relationship between any employee and the Company.
V. BENEFITS
A. Benefits under the Plan are determined as follows:
1. A participating employee with less than twenty (20) full
years of continuous service as of the date the employee's
employment terminates shall receive two (2) weeks salary,
at the participating employee's final base rate of pay,
for each full year of service with the Company as of the
date the employee's employment terminates, to a maximum
of twenty-six (26) weeks of pay; provided, however, that
no participating employee shall receive less than three
weeks pay, at that employee's final base rate.
2. A participating employee with twenty (20) full years or
more of continuous service as of the date the employee's
employment terminates shall receive thirty-nine (39)
weeks of salary, at the participating employee's final
base rate of pay.
-2-
<PAGE> 3
3. In the case of any participating employee employed on a
part-time basis, benefits hereunder shall be pro- rated,
based on the number of hours the employee is regularly
scheduled to work per week.
B. Provided that the participating employee elects to receive
benefits as salary continuation under option 2 of paragraph C of
this Section V, and provided further that the participating
employee is currently enrolled in, and exercises his/her right to
continue coverage under the Company's group health plan in
accordance with applicable federal law ("COBRA"), then, for the
duration of the period in which the participating employee is
receiving such salary continuation or, if earlier, until the date
the participating employee ceases to be eligible for continued
coverage in accordance with COBRA, the Company shall continue to
pay that share of the premium cost of the participating
employee's coverage and that of his/her eligible dependents under
the Company's group health plan that it pays for active employees
of the Company and their eligible dependents generally or,
following a Change of Control, the amount the Company was paying
for active employees of the Company and their eligible dependents
generally immediately prior to such Change of Control, if
greater.
C. Benefits under Section V.A for which a participating employee is
eligible shall be reduced by all taxes and other amounts which
the Company is required to withhold under applicable law and
shall be payable, at the participating employee's election, (1)
in a single lump sum within thirty (30) days following the date
of termination of the participating employee's employment or (2)
as salary continuation payable at the Company's regular payroll
periods and in accordance with its regular payroll practices
commencing on the next regular payday immediately following the
date of termination of the participating employee's employment.
D. Benefits otherwise payable under this Plan shall be reduced by
any amounts to which the employee is entitled under applicable
law as a result of the termination of his/her employment.
E. The Company pays the full cost of benefits provided under this
Plan from the Company's general assets.
F. Benefits under the Plan are not assignable or subject to
alienation. Likewise, benefits are not subject to attachments by
creditors or through legal process against the Company or any
employee.
G. Notwithstanding anything to the contrary contained herein, any
and all payments to be provided hereunder to or on behalf of any
participating employee are subject to reduction to the extent
required by applicable statutes, regulations, rules and
-3-
<PAGE> 4
directives of federal, state and other governmental and regulatory
bodies having jurisdiction over the Company and/or any of its
Affiliates.
VI. DEFINITIONS
A. Words or phrases which are initially capitalized or within
quotation marks shall have the meanings provided in this Section
VI and as provided elsewhere herein. For purposes of this Plan,
the following definitions apply:
1. An "Affiliate" means any individual, corporation or other
entity directly or indirectly controlling, controlled by
or under common control with the Company, where control
may be by management authority, equity interest or
otherwise.
2. "Cause" for termination means only (i) the employee's
refusal to perform or gross negligence in the performance
of, his/her duties and responsibilities for the Company
or (ii) the employee's fraud, embezzlement or other
material dishonesty with respect to the Company or any of
its Affiliates or (iii) an action or omission by the
employee in violation of the banking or other laws
governing the operations of the Company and/or (iv) the
employee's conviction of, or plea of no contest to, a
felony, each as communicated to the employee by notice
from the Company setting forth in reasonable detail the
nature of such Cause.
3. A "Change of Control" shall be deemed to have been
consummated if hereafter
(i) any "person", as such term used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934 as
amended (the "Exchange Act") other than the Company or
any of its subsidiaries or affiliates or any trustee or
other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries or
affiliates, becomes a beneficial owner (within the
meaning of Rule 13d-3, as amended, as promulgated under
the Exchange Act), directly or indirectly, of securities
representing twenty-five (25%) percent or more of the
combined voting power of the Company's then outstanding
securities; or
(ii) during any period of two consecutive years
(not including any period prior to the establishment of
this Plan), individuals who at the beginning of such
period constitute the Board of Directors of the Company
(the "Board"), and any new director (other than a
director designated by a person who has entered into an
agreement with the Company to effect a transaction
described in clause (i), (iii) or (iv) of this Section
V.A.3) whose election by the Board or nomination for
election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors
-4-
<PAGE> 5
then still in office who either were directors at the
beginning of the period or whose election or nomination
for election was previously so approved, cease for any
reason to constitute at least a majority thereof; or
(iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
more than eighty percent (80%) of the combined voting
power of the voting securities of the Company or such
surviving entity outstanding immediately after such
merger or consolidation; provided, however, that a merger
or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than
twenty-five percent (25%) of the combined voting power of
the Company's then outstanding securities shall not
constitute a Change of Control; or
(iv) the stockholders of the Company approve a
plan of complete liquidation of the Company; or
(v) there occurs a closing of a sale or other
disposition by the Company of all or substantially all of
the Company's assets.
4. The "Company" means UST Corp. or, following a Change of
Control, any successor of UST Corp.
VII. ADMINISTRATION, CLAIMS PROCEDURE AND GENERAL INFORMATION
A. The Company reserves the right to amend, modify and terminate the
Plan. Also, the Company, as the Plan administrator within the
meaning of ERISA, reserves full discretion to administer the Plan
in all of its details, subject to the requirements of law. The
Company shall have such discretionary powers as are necessary to
discharge its duties. Any interpretation or determination that
the Company makes regarding this Plan, including without
limitation determinations of eligibility, participation and
benefits, will be final and conclusive, in the absence of clear
and convincing evidence that the Company acted arbitrarily and
capriciously.
B. Notwithstanding anything to the contrary contained herein, this
Plan may not be modified, amended or terminated during the first
twelve (12) months following a Change of Control, excluding only
such administrative changes as may be required for the assumption
of this Plan by the successor of Company upon a Change of
Control, and any participating employee who is such for purposes
of this Plan at the
-5-
<PAGE> 6
time of a Change of Control will remain so for twelve (12) months
following that Change of Control.
C. If you believe you are being denied any rights under the Plan,
you may file a claim in writing with the Company, as Plan
administrator. If your claim is denied, in whole or in part, the
Plan administrator will notify you in writing, giving the
specific reasons for the decision, including specific reference
to the pertinent Plan provisions and a description of any
additional material or information necessary to perfect your
claim and an explanation of why such material or information is
necessary. The written notice will also advise you of your right
to request a review of your claim and the steps that need to be
taken if you wish to submit your claim for review. If the Plan
administrator does not notify you of its decision within 90 days
after it had received your claim (or within 180 days, if special
circumstances exist requiring additional time, and if you had
been given a written explanation for the extension within the
initial 90-day period), you should consider your claim to have
been denied. At this time you may request a review of the denial
of your claim.
A request for review must be made in writing by you or your duly
authorized representative to the Company, as Plan administrator,
within 60 days after you have received the notice of denial. As
part of your request, you may submit written issues and comments
to the Plan administrator, review pertinent documents, and
request a hearing. The Plan administrator's written decision
will be made within 60 days (or 120 days if a hearing is held or
if other special circumstances exist requiring more than 60 days
and written notice of the extension is provided to you within the
initial 60-day period) after your request has been received.
Again, the decision will include specific reasons, including
references to pertinent Plan provisions.
D. As a participant in the Plan, you are entitled to certain rights
and protections under ERISA. ERISA provides that all Plan
participants shall be entitled to:
1. examine, without charge, at the Plan administrator's
office, all Plan documents and copies of the documents
filed by the Plan administrator with the U.S. Department
of Labor; and
2. obtain copies of these documents and other Plan
information upon written request to the Plan
administrator. The Plan administrator may make a
reasonable charge for the copies.
In addition to creating rights for Plan participants, ERISA
imposes duties upon the people who are responsible for the
operation of the Plan. The people who operate the Plan, called
"fiduciaries", have a duty to do so prudently and in the interest
of Plan participants.
-6-
<PAGE> 7
Neither the Company nor any other person may discriminate against
an employee in any way to prevent him/her from obtaining benefits
or exercising rights under ERISA.
If a claim for benefits is denied in whole or in part, you must
receive a written explanation of the reason for the denial. You
have the right to have the Plan administrator review and
reconsider the claim.
Under ERISA, there are steps you can take to enforce the above
rights. For instance, if you request materials from the Plan
administrator and you do not receive them within 30 days, a suit
may be filed in federal court.
In such a case, the court may require the Plan administrator to
provide the materials and pay you up to $100 a day until they are
received, unless they were not sent due to reasons beyond the
Plan administrator's control. If you have a claim for benefits
which is denied or not processed, in whole or in part, a suit may
be pursued in a state or federal court. If you are discriminated
against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or may file suit in a federal
court.
The court will decide who should pay the court costs and legal
fees. If you are successful, the court may order the other party
to pay these costs and fees. If you should lose, the court may
order you to pay these costs and fees.
If you have any questions about the Plan, you should contact the
Plan administrator. If there are any questions about this
statement or about employee rights under ERISA, please contact
the nearest area office of Pension and Welfare Benefits, U.S.
Department of Labor.
E. The following information about this Plan is provided in
accordance with the applicable requirements of ERISA and the
regulations promulgated thereunder:
Plan Sponsor
------------
UST Corp.
40 Court Street
Boston, MA 02108
Employer Identification Number of Plan Sponsor
----------------------------------------------
04-2436093
Plan Number
-----------
515
-7-
<PAGE> 8
Plan Administrator
------------------
UST Corp.
40 Court Street
Boston, MA 02108
Attn: Human Resources Dept.
Tel. (617) 726-7000
Type of Administration
----------------------
Company-administered
Type of Plan
------------
The plan is a severance pay plan
Plan Year
---------
The plan year is the calendar year
Legal Process
-------------
The agent for service of legal
process with respect to the plan is:
General Counsel
UST Corp.
40 Court Street
Boston, MA 02108
-8-
<PAGE> 1
EXHIBIT 10(x)
UST CORP.
SENIOR OFFICER SEVERANCE PAY PLAN
JANUARY 1, 1995
I. PURPOSE
This Plan is intended to provide salary continuation to certain
designated Senior Officers of UST Corp. (the "Company") in the event that their
employment is terminated as provided hereafter due to a reduction in force or a
corporate restructuring or following a Change of Control.
II. ELIGIBILITY TO PARTICIPATE
A. In order to be eligible to participate in this Plan, you must be
currently designated, in writing, by the Chief Executive Officer
of the Company or his designee as a "Senior Officer" for purposes
of this Plan.
III. QUALIFYING EVENTS
A. An employee eligible to participate in this Plan under Section II
above (a "participating employee") is entitled to receive
benefits under the Plan only if all of the following three
conditions are met: (i) the employee is on the Company's active
payroll or on a leave of absence that has been approved in
writing, with guaranteed reinstatement, at the time his/her
employment terminates; and (ii) termination occurs in one of the
following circumstances:
1. The participating employee's employment is terminated as
a result of the elimination of his/her position with the
Company in conjunction with a reduction in force or a
corporate restructuring and the employee is not offered
employment in a comparable position with the Company or
one of its Affiliates; or
2. The employee's employment is terminated other than for
Cause by the Company within twelve (12) months following
a Change of Control; and
3. The employee is not then covered by another severance pay
plan or by an individual employment agreement or other
severance arrangement providing benefits that in the
aggregate are comparable to or exceed those for which the
employee would otherwise be eligible under this Plan;
<PAGE> 2
and (iii) the participating employee executes the release of claims
attached hereto and marked "A" (the "Employee Release") within
forty-five (45) days of the date on which he/she receives notice of
termination of his/her employment, and does not timely revoke it.
IV. EXCLUSIONS
A. The following are examples of events in which an employee would
not qualify for benefits under this Plan:
1. The employee resigns or otherwise voluntarily leaves
his/her employment with the Company; or
2. The employee's employment is terminated by the Company
for Cause; or
3. The employee is offered comparable employment at the time
of the elimination of his/her position; or
4. The employee is temporarily laid off, as determined by
the Company; or
5. The employee is on a leave of absence which has not been
approved in writing or as to which reinstatement is not
guaranteed; or
6. The employee elects not to execute the Employee Release.
B. This Plan does not constitute a contract of employment for a
specific term or otherwise alter the at-will nature of the
employment relationship between any employee and the Company.
V. BENEFITS
A. Benefits under this Plan are determined by length of service, as
follows:
1. Twenty-six (26) weeks pay, at the participating
employee's final base rate of pay, if the participating
employee has completed less than five (5) full years of
service with the Company as of the date employment
terminates; or
2. Thirty-nine (39) weeks pay, at the participating
employee's final base rate of pay, if the participating
employee has completed five (5) full years or more of
service with the Company as of the date his/her
employment terminates.
-2-
<PAGE> 3
3. In the case of any participating employee employed on a
part-time basis, benefits hereunder shall be pro- rated,
based on the number of hours the employee is regularly
scheduled to work per week.
B. Provided that the participating employee elects to receive
benefits as salary continuation under option 2 of paragraph D of
this Section V, and provided further that the participating
employee is currently enrolled in, and exercises his/her right to
continue coverage under the Company's group health plan in
accordance with applicable federal law ("COBRA"), then, for the
duration of the period in which the participating employee is
receiving such salary continuation or, if earlier, until the date
the participating employee ceases to be eligible for continued
coverage in accordance with COBRA, the Company shall continue to
pay that share of the premium cost of the participating
employee's coverage and that of his/her eligible dependents under
the Company's group health plan that it pays for active employees
of the Company and their eligible dependents generally or,
following a Change of Control, the amount the Company was paying
for active employees of the Company and their eligible dependents
generally immediately prior to such Change of Control, if
greater.
C. For purposes of determining the length of service of a
participating employee hereunder, service with the Company which
occurred prior to a break in service of two (2) years or more
shall not be included.
D. Benefits under Section V.A for which a participating employee is
eligible shall be reduced by all taxes and other amounts which
the Company is required to withhold under applicable law and
shall be payable, at the participating employee's election, (1)
in a single lump sum within thirty (30) days following the
effective date of the Employee Release or (B) as salary
continuation payable at the Company's regular payroll periods and
in accordance with its regular payroll practices commencing on
the next payday immediately following the effective date of the
Employee Release, but retroactive to the date of termination of
the participating employee's employment.
E. Benefits otherwise payable under this Plan shall be reduced by
any amounts to which the employee is entitled under applicable
law as a result of the termination of his/her employment.
F. The Company pays the full cost of benefits provided under this
Plan from the Company's general assets.
G. Benefits under this Plan are not assignable or subject to
alienation. Likewise, benefits are not subject to attachments by
creditors or through legal process against the Company or any
employee.
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H. Notwithstanding anything to the contrary contained herein, any
and all payments to be provided hereunder to or on behalf of any
participating employee are subject to reduction to the extent
required by applicable statutes, regulations, rules and
directives of federal, state and other governmental and
regulatory bodies having jurisdiction over the Company and/or any
of its Affiliates.
VI. DEFINITIONS
A. Words or phrases which are initially capitalized or within
quotation marks shall have the meanings provided in this Section
VI and as provided elsewhere herein. For purposes of this Plan,
the following definitions apply:
1. An "Affiliate" means any individual, corporation or other
entity directly or indirectly controlling, controlled by
or under common control with the Company, where control
may be by management authority, equity interest or
otherwise.
2. "Cause" for termination means only (i) the employee's
refusal to perform or gross negligence in the performance
of, his/her duties and responsibilities for the Company
or (ii) the employee's fraud, embezzlement or other
material dishonesty with respect to the Company or any of
its Affiliates or (iii) an action or omission by the
employee in violation of the banking or other laws
governing the operations of the Company and/or (iv) the
employee's conviction of, or plea of no contest to, a
felony, each as communicated to the employee by notice
from the Company setting forth in reasonable detail the
nature of such Cause.
3. A "Change of Control" shall be deemed to have been
consummated if hereafter
(i) any "person", as such term used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934 as
amended (the "Exchange Act") other than the Company or
any of its subsidiaries or affiliates or any trustee or
other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries or
affiliates, becomes a beneficial owner (within the
meaning of Rule 13d-3, as amended, as promulgated under
the Exchange Act), directly or indirectly, of securities
representing twenty-five (25%) percent or more of the
combined voting power of the Company's then outstanding
securities; or
(ii) during any period of two consecutive years
(not including any period prior to the establishment of
this Plan), individuals who at the
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beginning of such period constitute the Board of
Directors of the Company (the "Board"), and any new
director (other than a director designated by a person
who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii) or
(iv) of this Section V.A.3) whose election by the Board
or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the
directors then still in office who either were directors
at the beginning of the period or whose election or
nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof;
or
(iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
more than eighty percent (80%) of the combined voting
power of the voting securities of the Company or such
surviving entity outstanding immediately after such
merger or consolidation; provided, however, that a merger
or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than
twenty-five percent (25%) of the combined voting power of
the Company's then outstanding securities shall not
constitute a Change of Control; or
(iv) the stockholders of the Company approve a
plan of complete liquidation of the Company; or
(v) there occurs a closing of a sale or other
disposition by the Company of all or substantially all of
the Company's assets.
4. The "Company" means UST Corp. or, following a Change of
Control, any successor of UST Corp.
VII. ADMINISTRATION, CLAIMS PROCEDURE AND GENERAL INFORMATION
A. The Company reserves the right to amend, modify and terminate the
Plan. Also, the Company, as the Plan administrator within the
meaning of ERISA, reserves full discretion to administer the Plan
in all of its details, subject to the requirements of law. The
Company shall have such discretionary powers as are necessary to
discharge its duties. Any interpretation or determination that
the Company makes regarding this Plan, including without
limitation determinations of
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<PAGE> 6
eligibility, participation and benefits, will be final and
conclusive, in the absence of clear and convincing evidence that
the Company acted arbitrarily and capriciously.
B. Notwithstanding anything to the contrary contained herein, this
Plan may not be modified, amended or terminated during the first
twelve (12) months following a Change of Control, excluding only
such administrative changes as may be required for the assumption
of this Plan by the successor of the Company upon a Change of
Control, and any participating employee who is designated as an
"Senior Officer" for purposes of this Plan at the time of a
Change of Control will remain so designated for twelve (12)
months following that Change of Control.
C. If you believe you are being denied any rights under the Plan,
you may file a claim in writing with the Company, as Plan
administrator. If your claim is denied, in whole or in part, the
Plan administrator will notify you in writing, giving the
specific reasons for the decision, including specific reference
to the pertinent Plan provisions and a description of any
additional material or information necessary to perfect your
claim and an explanation of why such material or information is
necessary. The written notice will also advise you of your right
to request a review of your claim and the steps that need to be
taken if you wish to submit your claim for review. If the Plan
administrator does not notify you of its decision within 90 days
after it had received your claim (or within 180 days, if special
circumstances exist requiring additional time, and if you had
been given a written explanation for the extension within the
initial 90-day period), you should consider your claim to have
been denied. At this time you may request a review of the denial
of your claim.
A request for review must be made in writing by you or your duly
authorized representative to the Company, as Plan administrator,
within 60 days after you have received the notice of denial. As
part of your request, you may submit written issues and comments
to the Plan administrator, review pertinent documents, and
request a hearing. The Plan administrator's written decision
will be made within 60 days (or 120 days if a hearing is held or
if other special circumstances exist requiring more than 60 days
and written notice of the extension is provided to you within the
initial 60-day period) after your request has been received.
Again, the decision will include specific reasons, including
references to pertinent Plan provisions.
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<PAGE> 7
"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me in
connection with my separation of employment, as set forth in UST Corp. Senior
Officer Severance Pay Plan (the "Plan"), I, on my own behalf and on behalf of
my heirs, beneficiaries and representatives and all others connected with me,
hereby release and forever discharge UST Corp. (the "Company"), its
subsidiaries and affiliates, and all of their respective officers, directors,
employees, agents, representatives, sucessors and assigns and all others
connected with them (all collectively, the "Releasees"), both individually and
in their official capacities, from any and all liabilities, claims, demands,
actions and causes of action of any type (all collectively "Claims") which I
have had in the past, now have, or might now have, through the date of my
execution of this Release of Claims, in any way resulting from, arising out of
or connected with my employment or its termination or pursuant to any federal,
state or local employment law, regulation or other requirement (including
without limitation Title VII of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, as amended, and the Massachusetts fair employment practices
act, as amended).
Excluded from the scope of this Release of Claims is (i) any claim
arising hereafter under the terms of the Plan or under the terms of any of the
Company's other employee benefit plans (including without limitation the
Company's employee pension plan, profit sharing plan or stock ownership plan)
and (ii) any right of indemnification or contribution pursuant to the Articles
of Organization or By-Laws of the Company that I have or hereafter acquire if
any claim is assert or proceedings are brought against me by any governmental
or regulatory agency, or by any customer, creditor, employee or shareholder of
the Company, or by any self- regulatory organization, stock exchange or the
like, related or allegedly related to my having been an officer or employee of
the Company or to any of my activities as an officer or employee of the
Company.
By acceptance of or reliance on this Release of Claims, the Company
promises that neither it nor any of the other Releasees affiliated with the
Company will take any action that is designed, specifically as to me or with
respect to a class of similarly situated former employees, to reduce or
abrogate, or may reasonably be expected to result in an abridgement or
elimination of, any rights of indemnification or contribution available to me
pursuant to the Articles of Organization or By-Laws of the Company, or under
any policy or policies of directors and officers liability insurance affording
coverage to former officers and in effect from time to time, unless any such
abridgement or elimination of rights is also generally applicable to
then-current officers and employees of the Company.
In signing this Release of Claims, I acknowledge that I have had at
least forty-five (45) days from the date of my receipt of notice of termination
of my employment to consider the terms of this Release of Claims, that I am
encouraged by the Company to seek the advice of an attorney prior to signing
this Release of Claims and that I am signing this Release of Claims voluntarily
and
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<PAGE> 8
with a full understanding of its terms. I understand that I may revoke this
Release of Claims at any time within seven (7) days of the date of my signing
by written notice to the President of the Company and that this Release of
Claims will take effect only upon the expiration of such seven-day revocation
period and only if I have not timely revoked it.
IN WITNESS WHEREOF, I have set my hand and seal on the date written
below.
Signature: _________________________________
Date Signed: _______________________________
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<PAGE> 1
EXHIBIT 10(y)(i)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of February 14, 1995 and effective January 1, 1995
between United States Trust Company ("USTC"), a banking and trust company
having its principal place of business in Boston, Massachusetts, and joined in
as to certain matters by UST Corp. ("UST"), a Massachusetts corporation also
having its principal place of business in Boston, Massachusetts and the parent
of USTC; and Domenic Colasacco (the "Employee").
BACKGROUND
----------
The Employee and the other principals of the Asset Management Division
of USTC ("AM") listed on Schedule I hereto and such other principals as may be
added pursuant to the Unifying Agreement (as hereinafter defined) (all such
employees, while they remain principals, being referred to herein from time to
time as "Employee/Principals") are concerned that previous UST and USTC
practices have not allowed for enough spending to generate growth in AM's
business, or for fully competitive compensation for its principals; want
assurances of continued freedom to manage the AM business; want to participate
in an incentive compensation program which reflects the value created in this
business; and want to make it attractive to any potential acquirer of UST, USTC
or AM to (i) protect existing relationships with AM employees and clients, (ii)
avoid re-writing existing client contracts, and (iii) further AM as a separate
business conducted under the name "United States Trust Company".
UST and USTC want to stabilize and increase the profitability of AM;
pay competitive compensation; provide incentive compensation reflecting the
growth in the business of AM; and (in the event of a "Triggering Event" as
hereinafter defined) offer an opportunity to a prospective purchaser to retain
the services of Employee and the other Employee/Principals and thereby receive
a continuing stream of profits from AM.
UST and USTC recognize the importance of Employee to their business
and to USTC's ability to retain AM client relationships, and desire that USTC
employ Employee as an officer and principal of AM for the period of employment
and upon and subject to the terms herein provided.
UST and USTC wish to be assured that Employee will not compete with
AM's business during the period of employment, and in certain circumstances and
as set forth below will not for a period thereafter solicit any Past, Present,
or Potential Clients (as hereinafter defined) of AM and will not by such
solicitation damage USTC's and AM's goodwill among its clients and the general
public.
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Employee desires to be employed by USTC and serve as an
Employee/Principal of AM and to participate in the incentive compensation
program contemplated by this agreement, and to refrain from competing with USTC
or AM or soliciting AM's clients for the periods and upon and subject to the
terms herein provided.
Employee has been employed by USTC and AM for approximately 21 years;
has while so employed contributed to the acquisition and retention of AM's
clients, and will continue to seek to acquire and retain clients and to
generate goodwill for AM in the future as an officer and employee of USTC and
an Employee/Principal of AM for the periods and on the terms contemplated
hereby.
When the terms "AM," "AM's business," or the "AM Division" are used
herein, such terms specifically exclude the non- investment advisory business
of USTC such as (1) the business of UST Capital Corp. (venture capital) and (2)
the management of USTC's internal securities portfolio. Such terms, however,
include the investment return on allocated, but unexpended, portions of AM's
Share of Revenues as reflected on Schedule V. The investment return on
allocated, but unexpended, portions of AM's share of revenues shall be measured
at the end of each calendar quarter by multiplying the average of the month end
balances during such quarter by the published thirteen week U.S. Treasury Bill
Rate at the end of such calendar quarter and such interest income shall be
added to "AM's Share of Revenues". All current Employee/Principals are listed
on Schedule I.
Employee, the other Employee/Principals, UST and USTC have entered
into an agreement of even date herewith (the "Unifying Agreement") which
describes generally their agreements and certain procedures they have agreed to
follow among themselves. This Employment Agreement is executed pursuant to and
in accordance with the terms of the Unifying Agreement. Certain capitalized
terms used but not defined herein shall have the meanings given them in the
Unifying Agreement.
AGREEMENTS
----------
In consideration of the premises, the mutual covenants and the
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
SECTION 1. ORIGINAL TERM OF EMPLOYMENT; COMPENSATION. USTC agrees
to employ Employee for a period of two and one-half (2 1/2) years beginning
on the date hereof (the "Original Term") as an officer of USTC and an
Employee/Principal of AM; and Employee hereby accepts such employment. USTC
will pay Employee for Employee's services during the Original Term, and any
Renewal Term (as hereinafter provided) and any Phase II Term, the Annual Base
Salary set forth on Schedule I hereto, and such additional annual incentive
payments as shall be determined by the
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<PAGE> 3
Employee/Principals consistent with the Revenue Sharing Provision (Section 10
hereof), and subject to such payroll and withholding deductions as are
required by law. Consistent with the Revenue Sharing Provision, the Employee's
total compensation will be reviewed at least annually in accordance with the
Unifying Agreement, having in mind that such compensation be fair and
reasonable in light of Employee's position and the duties to be performed by
the Employee and the Employee's efforts to enhance the business of AM.
SECTION 2. RENEWAL TERMS. If no "Triggering Event" has occurred
and this Agreement has not been terminated by either party (all as hereinafter
provided) prior to the end of the Original Term, then the Original Term shall
be automatically extended for successive six month renewal terms (each referred
to herein as a "Renewal Term", or collectively as "Renewal Terms") until such
Triggering Event or termination has occurred, or until the Employee shall have
provided at least six months advance written notice to UST and USTC of election
not to enter a Renewal Term.
SECTION 3. NOTICE OF TERMINATION OF ORIGINAL TERM BY EMPLOYEE.
On or before the last day of the second year of the Original Term and assuming
that this Agreement has not been earlier terminated or entered upon the Phase
II Term (all as hereinafter provided), the Employee may give written notice to
UST and USTC of termination, whereupon all the provisions of this Agreement
will terminate (except as noted below in this Section 3) on the last day of the
Original Term. If there has been a material breach of this Agreement by
Employee at any time during the Original Term or any Renewal Term, and the
arbitration under Section 18 hereof has confirmed that a material breach has
been committed by the Employee and such breach is uncured during the applicable
grace period, then the Employee will be subject in full to all of the
restrictions of Section 12, 13 and 14 hereof for the remainder of the
applicable term plus 90 days. However, should the Employee terminate this
Agreement without a material breach at the end of the Original Term or at the
end of any Renewal Term, Sections 12, 13 and 14 of this Agreement shall not
apply. Notwithstanding the foregoing, should the Employee terminate this
Agreement as described in either of the immediately preceding two sentences,
UST and USTC will retain all of their respective common law rights against the
Employee with respect to confidentiality, protection of customer lists, trade
secrets, non-competition and similar matters.
SECTION 4. PHASE II TERM. If a Triggering Event occurs during
the Original or a Renewal Term, any such term shall automatically terminate and
the Phase II Term shall commence as of the earlier of the date of signing of a
definitive merger or acquisition agreement or the date of occurrence of such
Triggering Event. The Phase II Term shall be for a period of three years from
the Closing Date under such definitive merger, consolidation or acquisition
agreement, or the date of the agreement related to any other such Triggering
Event, but in no event for longer than four years from such signing date, and
shall be terminable in the same manner as the Original
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<PAGE> 4
Term under Section 3 above (the "Phase II Term"). The "Closing Date" shall mean
the date on which the merger or consolidation becomes effective, the
acquisition is consummated or the change in corporate ownership related to any
other such Triggering Event takes effect. If the revenues of the AM business
decline precipitously and the Formula Payment described in Section 11 below
would be less than $3 Million, then the Employee may decline to accept the
Formula Payment and the Phase II Term. If the AM revenues likewise decline,
and the Formula Payment described in Section 11 below would be less than $5
Million, the Employee/Principal may elect to reduce the Phase II Term by one
year.
SECTION 5. TERMINATION BY EMPLOYEE FOR BREACH OF "INDEPENDENCE
ASSURANCES." In the event of the material breach by UST or USTC (or their
respective successors) of any one or more of the "Independence Assurances"
listed below, the Employee/Principals, acting in accordance with the Unifying
Agreement, shall have the right (subject to compliance with Section 18 hereof)
but not the obligation, upon 30 days prior written notice to UST and USTC, to
terminate this Agreement.
(a) "Independence Assurances" shall consist of UST's and USTC's
non-interference (unless requested by the Employee/Principals of AM acting in
accordance with the Unifying Agreement) in the following:
(i) The Employee/Principals control of AM's investment
philosophy and investment approach, business strategy, conduct of investment
analysis, portfolio selection, marketing, client retention and acceptance of
new clients, and client service;
(ii) Authority of the Employee/Principals to hire and fire AM
personnel within the scope of UST's "Policies" (as hereinafter defined) and
applicable Federal and Massachusetts laws, subject to UST's right to approve
any person chosen by the Employee/Principals as the Senior Principal of AM,
which person shall also serve initially (i) as the Chief Executive Officer of
USTC, and (ii) on USTC Board of Directors. UST, as sole shareholder of USTC,
subject to the terms of the Unifying Agreement and this Agreement, will at all
times retain the right to select a Chief Executive Officer of USTC who is not
an employee of AM. USTC will not, however, select the Senior Principal;
(iii) The Employee/Principals' authority to set AM client
fees based on their judgment concerning the market for services rendered by AM;
(iv) The Employee/Principals' authority to establish AM's
operating expense budget and compensation practices, limited by "AM's Share of
Revenues" as provided in Section 10 (See Schedule V for example); and limited
further with respect to total cumulative cash incentive compensation for
Employee/Principals in the aggregate accrued in each of the years ending
December 31, 1994 and December 31, 1995, to $1.3 million plus incentive
compensation accrued in 1993 (it being understood
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<PAGE> 5
that the Formula Payment is not to be regarded as cash incentive compensation
for any purposes);
(v) The Employee/Principals' authority to add and delete
Employee/Principals of AM in accordance with the Unifying Agreement; and
(vi) The recognition by UST and USTC that AM, in pursuit
of its "socially-sensitive" investment objectives, may take some public
positions which may not represent the views of UST or USTC management. The
Employee, however, recognizes that Employee's actions will remain subject to
the provisions of the Code of Ethics, Employment Policies, and certain other
key corporate policies of UST and USTC listed on and attached to Schedule II
hereto ("Policies"), as revised from time to time on a company-wide basis in
the ordinary course of UST's and USTC's business (which revisions shall be made
available to Employee at UST's principal office in Boston); and applicable
Federal and Massachusetts laws, regulations, policies, orders or understandings
in use by or applicable to UST and USTC.
(b) In the event that any of the "Independence Assurances" have
been materially breached and not cured pursuant to Section 18, the Employee
may act either individually or in concert with any other Employee/Principal or
Employee/Principals or other employees so as to constitute a "person" as
defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), in electing to terminate their Employment Agreements, e.g.
they may collectively decide to give five (5) days notice and leave USTC to
form a new business which may directly compete with AM's business and Sections
12, 13 and 14 of this Agreement will not apply.
SECTION 5A. OVERSIGHT FUNCTION OF USTC'S BOARD OF DIRECTORS.
USTC's Board of Directors (a majority of whom shall not be Employee/Principals)
shall continue to exercise its oversight function of the business activities of
AM. In performing such oversight function, USTC's Board the Directors will
assure itself that AM's business and operations are being conducted in a manner
consistent with applicable law and regulations, and such Board will be expected
to meet its fiduciary responsibilities to USTC and its depositors, and to UST,
in all respects, including without limitation, the prevention of corporate
waste of assets and taking steps to see that AM's business is operated with
their respective best interests in mind. If in performing such oversight
function, the Board causes UST or USTC to breach an Independence Assurance and
such breach is (a) confirmed by the arbitrator under Section 18 or not
contested by UST or USTC and (b) not cured within the applicable grace period,
the Employee may terminate this Agreement and the Employee will leave with the
rights described in Section 5(b) of this Agreement.
SECTION 6. MATTERS NOT CONSTITUTING "INDEPENDENCE ASSURANCES".
The following shall specifically not be considered as "Independence Assurances"
but shall nevertheless govern the relationship by and among UST, USTC and AM:
5
<PAGE> 6
(a) The location of AM's business for a period of three years from
January 1, 1995 on two floors at 40 Court Street, Boston, MA. The Employee and
the other Employee/Principals shall cause AM to give twelve months written
notice of termination of such occupancy, if they so elect, no earlier than
December 31, 1996. "Fair Rental" shall be charged or allocated by UST or USTC
for AM's premises, and UST or USTC shall give AM "high priority" with respect
to remodeling and upgrading of space.
(b) Matters covered in a Memorandum dated September 14, 1994 on
"Capital Expenditures/Intercompany Charges" which is attached as Schedule VI
hereto.
(c) The taking of reasonable steps by the Employee and the other
Employee/Principals to cause that appropriate levels of profit from AM's
business to be reinvested in the business (infrastructure, systems, facilities,
product development, compensation to staff members who are not Principals,
additional staff) during the Total Term (as hereinafter defined). For the year
1995, the amount considered "appropriate" would be the investment of
approximately five percent (5%) of "Base Annual Revenues of AM" as defined in
Section 10.
(d) The amortization of AM capital expenditures over a period in
accordance with UST's and USTC's then current policy to the extent it is
consistent with GAAP. In connection with the foregoing capital expenditures,
at the reasonable request of AM funding will be provided by UST and/or USTC
which will charge AM a fair interest rate for the cost of capital employed.
(See also Schedule VI).
(e) The providing of such information as is reasonably necessary
for UST to manage its affairs and responsibilities subject to client
confidentiality, including but not limited to information necessary to comply
with generally accepted accounting principles ("GAAP") in the preparation of
financial statements, budgets and profit plans, and for shareholder
communications, and responses to regulatory requests.
(f) The actions of all Employee Principals shall remain subject,
without limitation, to the terms of UST's Code of Ethics, the Payment Approval
Policy and the other Policies set forth in Schedule II hereto.
SECTION 7. TERMINATION OF EMPLOYMENT BY USTC.
(a) Employee's employment may be terminated by USTC (by majority
vote of its Board of Directors) in the following circumstances:
At any time after due notice and reasonable opportunity to
correct such conduct, (i) in the event of Employee's material
breach of any of the terms of this Employment Agreement; (ii)
in the event of Employee
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causing a material breach of any of the other
Employee/Principals' duties to UST and USTC under Section 10
(Revenue Sharing Provision ); (iii) in the event of Employee's
willful misconduct in the performance of the Employee's duties
hereunder including, without limitation, but subject to
Sections 5 and 6 hereof, Employee's willful refusal to carry
out any "proper direction" by USTC's Board of Directors with
respect to the services to be rendered by Employee hereunder
or the manner of rendering such services; or (iv) in the event
of Employee's conviction of a crime involving moral turpitude.
The term "proper direction" as used in clause (iii) above, may
not be used in connection with an instruction, direction or
order which would cause UST or USTC to violate an
"Independence Assurance".
(b) In the event of Employee's death during the term of
employment, unless otherwise determined by the Employee/Principals acting
pursuant to the Unifying Agreement, USTC's and UST's obligations to pay further
compensation hereunder shall cease as of the date of death, except that any
amounts due under Section 11 hereof or otherwise owed to Employee under welfare
or benefit plans or for deferred compensation and any amounts heretofore
accrued under Sections 3.1 and 3.2 of the Unifying Agreement, shall be paid
when due to the Employee's estate or named beneficiary.
SECTION 8. Office and Duties. During the Original Term, any
Renewal Term, and the Phase II Term, if any, (hereinafter the "Total Term"),
Employee shall hold such positions and perform such duties relating to AM's
business and operations as are described on Schedule I hereto, and as may
otherwise from time to time be assigned to Employee by the Employee/Principals
consistent with all of the terms of this Agreement. During the Total Term and
while employed by USTC, Employee shall devote (except as noted on Schedule I)
substantially all of Employee's business time to the Employee's duties
hereunder and shall, to the best of Employee's ability, perform such duties in
a manner which will faithfully and diligently further the business and
interests of AM.
At any time while employed by USTC, Employee shall not directly or
indirectly solicit the business of any Past, Present, or Potential Clients (as
hereinafter defined) except on behalf and for the benefit of AM, or pursue any
other business activity, including, without limitation, serving as an officer,
director, employee, or adviser to any business entity other than AM, without
UST's and USTC's prior written consent; provided, however, that Employee may
without such consent, render without compensation investment advisory services
to immediate members of Employee's family, which shall include the Employee and
any trust or account which is comprised entirely of assets held for the benefit
of such Employee and/or immediate members of Employee's family, and may be
involved in such additional activities without such consent as are listed on
the Schedule I hereto. Employee agrees to travel to whatever
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<PAGE> 8
extent is reasonably necessary in the conduct of AM's business. Except when
engaged in such travel, Employee's place of employment shall be in the greater
Boston area of Massachusetts unless otherwise agreed to by Employee, UST and
USTC, and the Employee/Principals acting in accordance with the Unifying
Agreement.
The term "Past Client" shall mean at any particular time any person or
entity who within three years prior to such time had been but at such time is
not an advisee, investment advisory customer, or client of AM.
The term "Present Client" shall mean at any particular time any person
or entity who is at such time an advisee, investment advisory customer, or
client of AM.
The term "Potential Client" shall mean at any particular time any
person or entity to whom AM, through any of the Employee/Principals or other of
its employees, has within three years prior to such time offered (by means of a
personal meeting, telephone call, or a letter or a written proposal
specifically directed to the particular person or entity) to serve as
investment adviser but who is not at such time an advisee or investment
advisory customer or client of AM. The preceding sentence is meant to exclude
form letters and blanket mailings.
The terms "Client" or "Client List" when used herein shall mean all
Past, Present, and Potential Clients as heretofore defined. The term "Client"
when used in this Employment Agreement with respect to wrap accounts, shall
mean the wrap sponsors and the brokers employed by such wrap sponsors but not
the underlying wrap account holders.
SECTION 9. BENEFITS. Employee shall participate, to the extent
Employee is eligible and in a manner and to an extent that is fair and
appropriate in light of the position and duties granted to Employee hereunder,
in all pension, profit-sharing, group insurance, or other fringe benefit plans
(other than UST corporate stock compensation plans) which UST or USTC may
hereafter in their absolute discretion make available generally to employees of
AM, but neither UST nor USTC will be required to establish any such program or
plan. Employee shall be entitled to such vacations and to reimbursement of
such expenses as UST's or USTC's policies allow to all employees having
comparable responsibilities and duties. So long as such additional benefits
are payable out of or accrue to "AM's Share of Revenues" as hereinafter
defined, the Employee/Principals may provide additional executive benefits to
themselves in addition to those provided by UST, provided that no such benefit
be qualified under Section 401 of the Internal Revenue Code or non-qualified
(under Section 401 of the Internal Revenue Code) pursuant to the terms of a
plan or arrangement which operates in a manner that is substantially similar or
mirrors a qualified plan, and provided further that the award of any such
benefits does not increase the cost to UST of providing benefits to UST
employees who are not employees of AM.
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SECTION 10. REVENUE SHARING PROVISION. The purpose of this
Revenue Sharing Provision is to provide UST with an acceptable stream of income
and to permit AM to retain a specified percentage of its revenues for use by
Employee/Principals, including the Employee, in their discretion in paying
expenses of operation, including compensation. It is intended to allow the
Employee and the other Employee/Principals to be compensated for enhancing and
growing AM's revenues in a substantial manner and to make operating decisions
freely within the limits of "AM's Share of Revenues," as such term is defined
below. See Schedule V for examples of Revenue Sharing calculations.
(a) ALLOCATION OF REVENUES. "Base Annual Revenues of AM" in 1994
and all subsequent years for purposes of this Revenue Sharing Provision shall
be AM's actual 1994 Revenues less $750,000, such total amount to be
appropriately modified to reflect changes in the United States Bureau of Labor
Statistics Cost of Living Index for the Boston Metropolitan Statistical Area or
any designated successor index for 1995 and all subsequent years. The term
"Revenues" shall mean AM's revenues calculated on an accrual basis in
accordance with GAAP, (excluding shared revenues paid to investment or other
firms or professionals and generated from AM clients), consistent with USTC's
usual practice.
During the pro-rated six month period commencing July 1, 1994 and
ending December 31, 1994, and for each calendar year and for portions
thereof on a pro-rated basis thereafter, AM shall retain sixty percent
(60%) ("Base AM Retention"), of AM's pro-rated actual Revenues and AM
shall make available to USTC for distribution to UST forty percent
(40%) ("Base UST Amount"), subject to adjustment as set forth in this
Section 10(a).
In 1995 and for each calendar year and for portions thereof on a
pro-rated basis thereafter, for each dollar of AM's annual revenues
over Base Annual Revenues of AM, AM shall retain an additional $.40,
and an additional $.60 shall be allocated to UST, provided that in no
event shall UST's Share of Revenues exceed fifty percent (50%) of
actual Annual Revenues of AM.
In 1995 and for each calendar year and for portions thereof on a
pro-rated basis thereafter, for each dollar that actual Annual
Revenues of AM are less than Base Annual Revenues of AM, Base AM
Retention shall be reduced by $.40 and the Base UST Amount shall be
reduced by $.60, provided that in no event shall UST's Share of
Revenues be less than thirty percent (30%) of Annual Revenues of AM.
Amounts retained by AM as aforesaid are herein referred to as "AM's
Share of Revenues". Amounts allocated to UST as aforesaid are herein referred
to as "UST's Share of Revenues".
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(b) FLOOR INCENTIVE. In addition, during the Original Term of
this Agreement (thirty months), AM shall retain a "Floor Incentive" of $40,000
per month from "UST's Share of Revenues" ($1.2 million in the aggregate). The
"Floor Incentive" shall be accrued by USTC and paid pursuant to subsection
(d)(iv) hereof, and shall be excluded from the limitations of Section 5(a)(iv)
of this Agreement. In the event of a material breach by UST or USTC of this
Agreement during the Original Term (which breach is not cured during the
applicable grace period and is either confirmed by the arbitrator under Section
18 hereof or not contested by UST or USTC), the Employee/Principals (for
distribution in accordance with the Unifying Agreement) may elect to receive an
aggregate lump-sum payment determined by multiplying (x) the monthly "Floor
Incentive" by (y) the remaining months in the Original Term. If a "Triggering
Event" occurs during the period January 1, 1995 through June 30, 1998, the
aggregate Floor Incentive, net of tax, accrued during the four full calendar
quarters next preceding the date of the Triggering Event, shall not be deducted
from "AM's After Tax Revenues" for purposes of calculating the Section 11
Formula Payment. Moreover, if a Triggering Event occurred before all Floor
Incentives have been paid, UST or USTC's successor shall assume responsibility
to make the remaining Floor Incentive payments.
(c) SPECIAL PROVISIONS. It is understood and agreed that:
(i) The balance of "Base AM Retention" for the period
July 1, 1994 through December 31, 1994 shall be paid
by UST or USTC to AM no later than February 15, 1995.
(ii) All amounts due to Robert B. Zevin pursuant to his
agreement dated September 30, 1994 with USTC shall be
considered as expenses to come out of "AM's Share of
Revenues" in each year in accordance with the
Unifying Agreement.
(iii) The application of this Section may make it
unattractive for AM to enter a business activity with
a profit margin of less then 40%. Accordingly, the
parties have agreed to negotiate separate "side
letters" with respect to revenue sharing on any new,
lower-margin business opportunities identified in the
future by AM and regarded as worthy of pursuit by UST
and/or USTC.
(iv) The parties hereto further understand and acknowledge
that the term "Revenues" as used herein is intended
to cover revenues of AM as they now exist and as they
may grow or contract internally, and not revenues
from the acquisition by UST or USTC of another
investment advisory firm concerning which the parties
hereto agree to negotiate in good faith as to revenue
sharing.
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(v) The investment return on allocated, but unexpended,
portions of AM's Share of Revenues shall be measured
at the end of each calendar quarter by multiplying
the average of the month end balances during such
quarter by the published thirteen week U.S. Treasury
Bill Rate at the end of such calendar quarter.This
interest income shall be added to "AM's Share of
Revenues".
(d) TRANSFER OF REVENUES TO UST; RETENTION OF REVENUES BY
USTC;COMPENSATION OF EMPLOYEE/PRINCIPALS.
(i) The Employee/Principals and AM shall use AM's Share
of Revenues to pay and provide for AM's business
expenses and expenditures including, without
limitation, investment in AM's business and new
products (see Section 6(d) above) and salaries of its
employees, except that any federal, state or local
income tax to which USTC is subject shall be the
responsibility of UST and shall not be treated as a
business expense of AM.
(ii) The Employee/Principals shall incur no expenses or
obligations on behalf of AM which exceed USTC's
ability to pay or provide for them when due out of
AM's Share of Revenues. The Employee/Principals
shall not incur obligations or make binding
commitments on behalf of USTC or UST not related to
AM's business and requiring expenditures by USTC in
excess of $50,000, or make representations to third
parties that they have the authority to do so.
However, the Employee/Principals may represent and
advertise that AM is a division of USTC and an
affiliate of UST, and other than as limited above in
this Section 10 (d)(ii), may incur obligations or
make binding commitments on behalf of USTC in the
ordinary course of business.
(iii) The Employee/Principals may (subject to Policies and
applicable laws and regulations) pay to AM's
employees, including the Employee and the other
Employee/Principals, at times and in amounts and
proportions determined in accordance with the
Unifying Agreement, the balance of AM's Share of
Revenues remaining after the payment of all of the
amounts required under subsection (d)(i) hereof and
subject to Section 5(a)(iv).
(iv) The Employee's Revenue Sharing compensation out of
"AM's Share of Revenues" shall be allocated in
accordance with the terms of the Unifying Agreement.
The Employee/Principals have provided to UST and USTC
in the Unifying Agreement their procedures for
determining changes, if any, in the allocation of
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Revenues among the Employee/Principals. If an
Employee/Principal chooses to leave USTC's employ
after bypassing this change determination mechanism
or refusing to abide by its results, the
Employee/Principal shall be deemed to have committed
a material breach of this Employment Agreement.
(v) The Employee/Principals and AM shall make available
to UST, UST's Share of Revenues upon reasonable
request by UST and action by USTC's Board of
Directors. The Employee/Principals shall not spend
or incur obligations to spend any part of UST's Share
of Revenues.
(e) ADMINISTRATION. The parties hereto and the other
Employee/Principals agree to meet and consult to endeavor in good faith to
agree on appropriate procedures, in addition to Policies and applicable laws
and regulations, for administering the provisions of this Section 10.
The Employee/Principals shall retain control over all expenditures of
AM, subject to the power of USTC's Board of Directors to exercise its rights
under Section 5A, and subject to this Revenue Sharing Provision, and
recognizing that AM is a division of USTC.
(f) TERM AND STATUS AS PARTIES. This Revenue Sharing Provision
shall continue in effect until terminated by agreement of UST, USTC, and the
Employee/Principals acting in accordance with the Unifying Agreement. If the
employment of Employee by USTC ceases other than as a result of a material
breach by UST or USTC of this Employment Agreement, such Employee shall
thereupon automatically cease to be a party to this Revenue Sharing Provision
and to have any rights or obligations under this Section, and shall cease to be
an Employee/Principal for the purposes of this Provision. Nothing in this
Employment Agreement shall be construed to grant to the Employee any right to
be employed by USTC beyond the terms of this Employment Agreement.
SECTION 11. FORMULA PAYMENT. If Employee is still employed by
USTC at the time of a "Triggering Event" (as hereinafter defined), the Employee
shall receive Employee's share of a formula payment (the "Formula Payment") as
follows:
(a) Unless otherwise agreed by the Employee/Principals acting in
accordance with the Unifying Agreement, the Employee's share of the Formula
Payment shall be the percentage set forth after the Employee's name on Schedule
III hereto;
(b) The "Formula Payment" shall be 3.33 times "AM's After Tax
Revenues" (as hereinafter defined and meaning generally UST's Share of Revenues
minus taxes);
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(c) "AM's After Tax Revenues" shall be the portion of AM's
after-tax Revenues contributed, accruing or allocated to UST for the four full
calendar quarters next preceding the date of the Triggering Event; determined
in accordance with GAAP consistently applied in such periods. For purposes of
this Subsection, there shall be assumed a combined federal and state tax rate
of 38%, such rate to be appropriately adjusted to reflect changes in applicable
federal and state corporate tax rates. An example of this calculation is set
forth on Schedule V.
(d) The Formula Payment shall be adjusted in accordance with
Schedule IV hereto for gain or loss of AM clients between the signing of a
definitive merger, consolidation or acquisition agreement or an agreement
related to another Triggering Event and the Closing Date related to any such
Triggering Event.
(e)
(i) At the Closing Date of a Triggering Event, three Key
Employees shall be identified as follows. For every
person who has been an Employee/Principal at any time
during the previous 15 months there shall be
calculated a Weighted Average Share equal to the sum
of (a) the share of the Formula Payment such person
was entitled to receive from time-to-time during the
preceding 15 months in accordance with Schedule III
and subsequent changes thereto by the
Employee/Principals acting in accordance with the
Unifying Agreement times (b) the number of days such
person was entitled to each such share. The three
persons among those who are or have been
Employee/Principals on the Closing Date of the
Triggering Event or during the previous 15 months who
have the three highest Weighted Average Shares shall
be deemed the "Key Employees".
(ii) If only one of the three Key Employees is no longer
in the employ of USTC as of the Closing Date of such
Triggering Event, then all of that Key Employee's
Weighted Average Share of the Formula Payment
(expressed by X%) shall be placed in escrow in the
manner contemplated by Section 11(f). To determine
the distribution of each of the three escrowed
installments use the following formula. Revenues of
AM (as defined in Section 10(a)) for the last full
calendar year prior to a Triggering Event should then
be determined (the "Measuring Year"). Such Revenues
of AM for the Measuring Year multiplied by a decimal
representing 100% - X% equals the "Minimum Revenues".
If during the next full calendar year following the
Measuring Year, Revenues of AM are equal to or less
than Minimum Revenues none of the one-third of the
escrowed amount for such year will be paid to the
remaining Employee/Principals in accordance with this
Section and all of it will be retained by UST's or
USTC's successor. If Revenues of AM for
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<PAGE> 14
that calendar year exceed Minimum Revenues, (i) take
the U.S. Dollar amount of such excess above the
Minimum Revenues and divide it by the Revenues of AM
for the Measuring Year minus the Minimum Revenues,
(ii) then multiply the resulting fraction by
one-third of the full escrowed amount, (iii) the
product of the foregoing formula should be delivered
to the remaining Employee/Principals as a group for
distribution in accordance with the Unifying
Agreement and the remainder of that installment
should be retained by UST or UST's successor.
Similar calculations should be made for the second
and third installments, but in each case using the
same Minimum Revenues.
(iii) If two or more of the Key Employees are no longer in
the employ of USTC as of the Closing Date of such
Triggering Event, then 100% of the Formula Payment
shall be placed in escrow in the manner contemplated
by Section 11(f). To determine the distribution of
each of the three escrowed installments use the
following formula. If Revenues of AM for the last
full calendar year prior to the distribution date of
the applicable escrow installment equal or exceed
Revenues of AM for the Measuring Year, all of that
escrowed installment should be distributed to the
remaining Employee/Principals as a group for
distribution in accordance with the Unifying
Agreement and none should be retained by UST or
USTC's successor. If Revenues of AM for the last
full calendar year prior to the distribution date of
the applicable escrow installment are less than
Revenues of AM for the Measuring Year, divide the
U.S. Dollar amount of Revenues of AM for such last
full calendar year by the U.S. Dollar amount of
Revenues of AM for the Measuring Year and multiply
the resulting fraction by one-third of the full
escrowed amount. The product of the foregoing
calculation should be delivered to the remaining
Employee/Principals as a group for distribution in
accordance with the Unifying Agreement and the
remainder should be retained by UST's or USTC's
successor.
(f) Seventy percent (70%) of the Employee's share of the Formula
Payment shall be paid in cash within twenty (20) days of the Closing Date of
the Triggering Event. The remaining thirty percent (30%) shall be placed in
escrow with an escrow agent acceptable to both UST and Employee/Principals and
paid to the Employee or the Employee's estate as provided in Section 7(b) in
installments of one third of the escrowed amount at the end of years one, two
and three (which may not be calendar years) after the Closing Date of the
Triggering Event plus interest, at the interest rates on the date of the
Closing Date of the Triggering Event of one, two and three year Treasury
securities, provided that at the time of each such installment payment, the
Employee has not been terminated with cause or for a material breach or has not
voluntarily ceased to be employed by AM.
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(g) A "Triggering Event" shall be deemed to have occurred when:
(i) there occurs the signing of a definitive agreement of
merger or consolidation of UST or USTC with any other
corporation, other than a merger or consolidation
which would result in the voting securities of UST or
USTC outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of
UST or USTC, or such surviving entity outstanding
immediately after such merger or consolidation;
provided, however, that a merger or consolidation
effected to implement a recapitalization,
reorganization or restructuring of UST or USTC (or
similar transaction) in which no "person" (as defined
in (g)(iii) below) acquires more than fifty percent
(50%) of the combined voting power of UST's then
outstanding securities shall not constitute a
Triggering Event; or
(ii) there occurs a closing of a sale or other disposition
by UST of more than 50% of UST's, USTC's or AM's
business and assets; or
(iii) any "person", as such term used in Section 13(d) and
14(d) of the Exchange Act other than UST or USTC or
any of their respective subsidiaries or affiliates or
any trustee or other fiduciary holding securities
under an employee benefit plan of either of them or
any of their subsidiaries or affiliates, becomes a
beneficial owner (within the meaning of Rule 13d-3,
as amended, as promulgated under the Exchange Act),
directly or indirectly, of securities representing
50% percent or more of the combined voting power of
UST's or USTC's then outstanding securities.
If (i) more than 50% of UST's then outstanding common stock or assets
are acquired by a "person" whose consolidated assets prior to the Triggering
Event were less than $4 billion or (ii) UST's business assets and operations
are consolidated with those of another bank or bank holding company and the
resulting entity has consolidated assets of $5.5 billion or less, a Triggering
Event shall be deemed to have occurred, but the length of the Phase II term of
employment of the Employee shall be increased automatically by one additional
year.
(h) If UST agrees to be acquired by an entity with a public image
so starkly negative that AM's affiliation with that entity would be reasonably
likely, by itself, to cause a loss of more than 25% of AM's gross revenues in
one year (unless the parties
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<PAGE> 16
mutually agree to the contrary), the Employee/Principals at their option acting
pursuant to the terms of the Unifying Agreement (and provided such right is
exercised within 30 days of the public announcement of such acquisition) will
be relieved of all of the Employee's obligations under the Phase II Term and no
Formula Payment will be made.
(i) The parties acknowledge that any such Formula Payment is
intended to compensate the Employee for: (i) the automatic extension of this
Agreement occurring by reason of a Triggering Event; (ii) the Phase II
Non-Competition covenants specified in Section 12; and (iii) the loss of
opportunity to make up for reduced rate of compensation which such Employee
earned with USTC for periods prior to the effective date of this Agreement.
SECTION 12. PHASE II NON-COMPETITION COVENANTS.
(a) During the longer of the Phase II Term (as defined in Section
4) if Phase II shall commence while Employee is employed by USTC hereunder or
while Employee is employed by USTC during or after such Phase II Term
hereunder, Employee shall not, except in the course of his employment with
USTC, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an
officer, director, employee, partner, stockholder,
consultant, adviser, subsidiary, affiliate,
independent contractor or otherwise, investment
advisory services to any person or entity;
(ii) Interfere with AM's relations with any person or
entity who at any time during such period was a
Client (which means Past, Present, and Potential
Client); or
(iii) Induce or attempt to induce directly or indirectly
any professional employee of AM to terminate his or
her employment or hire or attempt to hire, directly
or indirectly, any such person, other than by
discharge of such person as a part of Employee's
duties.
(b) Until one year following the end of the Phase II Term, if the
Phase II Term should commence while Employee is employed by USTC hereunder or
one year following the termination of Employee's employment with USTC during or
after such Phase II Term, Employee shall not, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an
officer, director, employee, partner, independent
contractor or otherwise, investment advisory services
to any person or entity who as of the date of the
termination or expiration of Employee's employment
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<PAGE> 17
with USTC was or had been a Client (which means Past,
Present, and Potential Client);
(ii) Interfere with AM's relations with any person or
entity who as of the date of the termination or
expiration of Employee's employment with USTC was a
Client (which means Past, Present, and Potential
Client); or
(iii) Induce or attempt to induce directly or indirectly
any professional employee of AM to terminate his or
her employment or hire or attempt to hire, directly
or indirectly, any such person.
(c) Notwithstanding the provisions of subsections (a)(i) and
(b)(i), the Employee may render without compensation investment advisory
services to any immediate member of Employee's family, which shall include the
Employee and any trust or account which is comprised entirely of assets held
for the benefit of such Employee and/or immediate members of such Employee's
family, and may engage in such other activities as are listed on Schedule I
hereto.
(d) Employee and USTC agree that the periods of time and the
unlimited geographic area applicable to the covenants of this Section 12 are
reasonable, in view of the receipt and expected receipt of the Employee's share
of Revenue Sharing as provided in Section 10(c), and other compensation, and
the Formula Payment provided herein; the geographic scope and nature of the
business in which AM is engaged; Employee's knowledge of AM's business; and
Employee's relationships with AM's investment advisory clients. However, if
such period or such area should be adjudged unreasonable in any judicial
proceeding, then the period of time shall be reduced by such number of months
or such area shall be reduced by elimination of such portion of such area, or
both, as are deemed unreasonable, so that this covenant may be enforced in such
area and during such period of time as are adjudged to be reasonable.
SECTION 13. ALL BUSINESS TO BE THE PROPERTY OF USTC; ASSIGNMENT
OF INTELLECTUAL PROPERTY. During the Phase II Term if Phase II shall commence
while Employee is Employed by USTC hereunder and thereafter while Employee is
employed by AM and/or USTC:
(a) Employee agrees that any and all presently existing investment
advisory business of AM and all business developed by Employee or any other
employee of AM, including without limitation all investment advisory contracts,
fees, commissions, compensation records, Client Lists (as defined in Section
8), agreements, and any other incident of any business developed or sought by
AM or earned or carried on by Employee for AM, are and shall be the exclusive
property of USTC for its sole use, and (where applicable) shall be payable
directly to USTC.
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(b) Employee hereby grants to USTC (without any separate
remuneration or compensation other than that received by Employee from time to
time in the course of his or her employment) Employee's entire right, title,
and interest throughout the world in and to, all research, information, Client
Lists, and all other investment advisory, technical and research data made,
conceived, developed and/or acquired by Employee solely or jointly with others
during the period of Employee's employment by USTC, which relate to investment
advice as it was or is now rendered or as it may, from time to time, hereafter
be rendered or proposed to be rendered, but excluding such individual's ideas
and thought processes which are not embodied in written or machine readable
form (all such non-excluded items being referred to as "Intellectual
Property").
SECTION 14. CONFIDENTIALITY. Except in performance of services
for USTC, Employee shall not, either during the Phase II Term if Phase II shall
commence while the Employee is employed by USTC hereunder or thereafter while
employed by AM and/or USTC, use for Employee's own benefit or disclose to or
use for the benefit of any person outside USTC, any information not lawfully
available to the public concerning any Intellectual Property, including Client
Lists, whether Employee has such information in his or her memory or embodied
in writing or other tangible form. All such Intellectual Property and such
information concerning Intellectual Property, and all originals and copies of
any Intellectual Property, and any other written material relating to the
business of AM, shall be the sole property of USTC. During such Term or
thereafter, upon the termination of Employee's employment in any manner or for
any reason, Employee shall promptly surrender to USTC all originals and copies
of any Intellectual Property, and Employee shall not thereafter use any
Intellectual Property.
The foregoing notwithstanding, Employee will have no obligation to AM
or USTC with respect to the disclosure or use of any Intellectual Property or
information concerning Intellectual Property if:
(a) Such Intellectual Property or information is or becomes publicly
known or otherwise enters the public domain through no wrongful act of
Employee; or
(b) Such Intellectual Property or information is received from a
third party which has no obligation to UST or USTC to maintain it in
confidence.
Notwithstanding the references to Client Lists above, it shall not be
a violation of this Section or Section 13 hereof for Employee to communicate or
do business with any Past, Present or Potential Client in the course of
Employee's employment with AM and USTC, and any such conduct shall be limited,
if at all, solely by Section 12 hereof.
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SECTION 15. NOTICES. Any notice or other communication hereunder
shall be given as follows:
United States Trust Company
40 Court Street
Boston, MA 02108
Fax: (617) 726-7320
Attn: Neal F. Finnegan, Chairman, Executive
Committee
UST Corp.
40 Court Street
Boston, MA 02108
Fax: (617) 726-7320
Attn: Neal F. Finnegan, President & CEO
With copies to Eric R. Fischer, Executive Vice President and General
Counsel
Fax: (617) 726-7209
Employee:
Domenic Colasacco
21 Eaton Road
Needham, MA 02192
Fax: (if any)
with copy to Peter M. Rosenblum
Foley, Hoag & Eliot
1 Post Office Square
Boston, MA, 02109
Fax: (617) 832-7000
SECTION 16. ASSIGNABILITY. This Employment Agreement shall be
binding upon and inure to the benefit of UST, USTC, and to any person or firm
who may succeed to the business of UST, USTC, or AM. This Employment Agreement
shall not be assignable by Employee, but it shall inure to the benefit of
Employee's heirs, executors, administrators and legal representatives.
SECTION 17. ENTIRE AGREEMENT. This Employment Agreement and the
Unifying Agreement contain the entire agreement between USTC and Employee with
respect to the subject matter hereof, and supersede all prior oral and written
agreements between any of UST, USTC, AM and the Employee with respect to the
subject matter hereof, including without limitation any oral agreements
relating to compensation.
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SECTION 18. ARBITRATION. In the event the parties hereto
disagree as to whether a material breach has occurred of: (i) the "Independence
Assurances" under Section 5; (ii) USTC's right of termination of Employee's
employment under Section 7; (iii) this Agreement by USTC as described in
Section 19 (b); (iv) the revenue sharing provisions of Section 10; or (v) the
formula payment provisions of Section 11, such dispute shall be settled by
arbitration before a single arbitrator to be then named by UST and a majority
of the Employee/Principals acting in accordance with the Unifying Agreement, in
Boston, Massachusetts in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. If such arbitrator cannot serve, then a
successor shall be appointed in accordance with such Rules. If the arbitrator
finds that there has been a material breach (and such breach has not been cured
by UST or USTC within sixty (60) days of such finding or by Employee in
accordance with Section 7 hereof), then the remedies provided for in Section 19
shall become available, as appropriate.
SECTION 19. EQUITABLE RELIEF AND OTHER REMEDIES.
(a) Employee recognizes and agrees that UST's, USTC's or the
Employee/Principals' remedies at law for any breach of the provisions of
Sections 12, 13 and 14 hereof would be inadequate and that for breach of such
provisions UST, USTC and the Employee/Principals shall, in addition to such
other remedies as may be available to any of them at law or in equity or as
provided in this Employment Agreement, be entitled to injunctive relief and to
enforce their respective rights by an action for specific performance to the
extent permitted by law, and to the right of set-off against any amounts due to
the Employee by UST, USTC or AM. Should Employee engage in any activities
prohibited by this Employment Agreement, he or she agrees to pay over to USTC
or UST all compensation received in connection with such activities. Such
payment shall not impair any other rights or remedies of UST, USTC or AM or
affect the obligations or liabilities of Employee under this Employment
Agreement or applicable law.
(b) Any termination by USTC of Employee's employment which is not
authorized by Section 7 hereof shall constitute a material breach of this
Agreement. In the event of a material breach of this Agreement by UST or USTC
which is not cured pursuant to Section 18, in addition to any other rights or
remedies which the Employee may have, at law, in equity or otherwise, USTC
shall pay Employee the Employee's then current Annual Base Salary for a period
equal to the greater of (i) twelve months or (b) the balance of the then
current term of this Agreement. Any such payments shall not constitute part of
AM's Share of Revenues. Should such a material breach occur and not be so
cured, the Employee shall be free to compete, Sections 12, 13 and 14 shall not
apply and the Employee shall leave with the rights described in Section 5(b) of
this Agreement.
(c) Without limiting the generality of the foregoing, the parties
expressly agree
20
<PAGE> 21
that termination without cause of Employee's employment hereunder during the
Phase II Term by UST, USTC or any other person or entity will constitute a
material breach of this Agreement and, in addition to any other rights or
remedies which the Employee may have, at law, in equity or otherwise, shall
give Employee the right to salary continuation as set forth in Section 19(b)
hereof.
SECTION 20. WAIVERS AND FURTHER AGREEMENTS. Neither this
Employment Agreement nor any term or condition hereof, including without
limitation the terms and conditions of this Section 20, may be waived in whole
or in part as against UST, USTC, AM or Employee except by written instrument
executed by each of them, expressly stating that it is intended to operate as a
waiver of this Employment Agreement or the applicable term or condition hereof.
Each of the parties hereto agrees to execute all such further instruments and
documents and to take all such further action as the other party may reasonably
require in order to effectuate the terms and purposes of this Employment
Agreement as stated herein. Furthermore, no waiver may violate the terms of
the Unifying Agreement and any waiver shall require action of the
Employee/Principals in accordance with the Unifying Agreement authorizing such
waiver.
SECTION 21. AMENDMENTS. This Employment Agreement may not be
amended, nor shall any parties be added hereto, nor any change, modification,
consent, or discharge be effected except by written instrument executed by all
three of the Employee, USTC and UST. Furthermore, no amendment or modification
may violate the terms of the Unifying Agreement and any amendment or
modification shall require action of the Employee/Principals in accordance with
the Unifying Agreement authorizing such amendment or modification.
SECTION 22. SEVERABILITY. If any provision of this Employment
Agreement shall be held or deemed to be invalid, inoperative or unenforceable
in any jurisdiction or jurisdictions, because of conflicts with any
constitution, statute, rule or public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision in question
unenforceable in any other jurisdiction or in any other case or circumstance or
of rendering any other provisions herein contained unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Employment Agreement
shall be reformed and construed in any such jurisdiction or case as if such
invalid, inoperative, or unenforceable provision had never been contained
herein and such provision reformed so that it would be enforceable to the
maximum extent permitted in such jurisdiction or in such case.
SECTION 23. NO CONFLICTING OBLIGATIONS. Employee represents and
warrants to USTC and UST that Employee has no other interest or obligation
which is inconsistent or in conflict with this Employment Agreement or which
would prevent, limit, or impair, in any way, Employee's performance of any of
the covenants or duties
21
<PAGE> 22
hereinabove set forth.
SECTION 24. PARTIES. It is understood and agreed that UST joins
in this Employment Agreement only as to such matters where its name appears
herein. It is further understood and agreed that no person shall participate
in the benefits conferred on Employee/Principals by the terms of this and other
similar Employment Agreements unless such person has become a party to a
similar Employment Agreement or is described in Section 16.
SECTION 25. GOVERNING LAW. This Employment Agreement shall be
governed by and construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts which apply to contracts executed and performed
solely in Massachusetts. UST, USTC and the Employee hereby consent to the
jurisdiction of any state or federal court located within Suffolk County,
Massachusetts, and assent that service of process may be made by registered
mail to the parties' respective addresses as provided in Section 15 hereof and
shall be effective in the same manner as notices are effective under such
Section 15.
SECTION 26. ACTION OF THE EMPLOYEE/PRINCIPALS. Whenever the
Consent of the Employee/Principals shall be described herein, action by the
Employee/Principals or their duly authorized representative shall be required
in accordance with the Unifying Agreement, and such action shall be sufficient
hereunder.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as a sealed instrument as of the date first above written.
EMPLOYEE: UNITED STATES TRUST COMPANY
/s/ Domenic Colasacco By: /s/ Neal F. Finnegan
----------------------------- ---------------------------
Domenic Colasacco Title:
Joined in as to those matters where its name appears.
UST CORP.
By: /s/ Neal F. Finnegan
---------------------------
Title:
22
<PAGE> 23
<TABLE>
<CAPTION>
Schedule I: Names, Addresses, Other Personal Information of AM Employee/Principals;
------------------------------------------------------------------------------------
Salary; Permitted Non-AM Business Activities
--------------------------------------------
Name, Home USTC
Address and Social Title Years Name and Date of Annual
Security Number and Principal Employed Existing Agreement with Base
of Employee Duties by AM UST, USTC or AM, if any Salary
--------------------- ----------------------------- ----------------------- ------
<S> <C> <C> <C> <C>
Domenic Colasacco Chairman, 21 N/A $225,000
21 Eaton Rd. President and
Needham, MA 02192 Chief Executive
SS #: 013347898 Officer; Chief
Investment
Officer;
Senior Principal
Robert A. Lincoln Senior Vice 10 N/A $155,000
67 Conant Rd. President;
Lincoln, MA 01773 Senior Portfolio
SS #: 192389396 Manager
Stephen K. Moody Senior Vice 15 N/A $130,000
217 Lexington Ave. President;
Cambridge, MA 02138 Senior Portfolio
SS #: 529582536 Manager
Lucia B. Santini Senior Vice 12 N/A $100,000*
1691 West Street President;
Wrentham, MA 02093 Chief
SS #: 043501874 Administrative
Officer
Robert B. Zevin Senior Vice 20 Independent Contractor $185,000
71 Stewart Street President; Agreement for Consulting
W. Newbury, MA 01985 Economist and Services as of 9/30/94
SS #: 286320787 Senior Portfolio
Manager
<FN>
* Full time equivalent rate
</TABLE>
I-1
<PAGE> 24
Schedule II: List of Key Corporate "Policies" of UST and USTC
--------------------------------------------------------------
Code of Corporate Ethics
*Personnel Manual and Policy [currently in draft form]
Security Policy (Regulation P)
Bank Secrecy Act Policy
Know Your Customer Policy
Regulatory Compliance Policy
Reserve for Loan Loss Policy
CRA Policy & Statement
Bank Bribery Act Policy
*Purchasing Policy and related Payment Approval Procedures
Anti-Tying Policy
Report of Apparent Crime Policy
*Trust/Asset Management Policy
*Statement of Principles of Trust Department Management
*Financial Accounting Policy [currently being prepared]
Insider Trading Policy [currently in draft form]
Insider Lending Policy
Investment Policy for Securities Portfolios of UST Corp. subsidiary banks
* Changes to these policies after February 14, 1995 will apply to the
Asset Management Division of USTC only to the extent that such changes
do not have the effect of vitiating, or rendering ineffective, an
"Independence Assurance" set forth in Section 5 of this Employment
Agreement.
To the extent practicable and consistent with applicable laws and
regulations, in administering the foregoing policies and any amended
versions of such policies, UST, USTC and their successors will avoid
materially diminishing the scope or effect of the "Independence
Assurances".
II-1
<PAGE> 25
Schedule III: Allocation of Formula Payment
--------------------------------------------
<TABLE>
<CAPTION>
Share of
Employee/Principal Formula Payment
-------------------------- ---------------
<S> <C>
Domenic Colasacco 25%
Robert A. Lincoln 15%
Stephen K. Moody 10%
Lucia B. Santini 5%
Robert B. Zevin 20%
</TABLE>
The Balance of the Formula Payment, if any, shall be allocated in accordance
with Section 5.2(b) of the Unifying Agreement.
III-1
<PAGE> 26
Schedule IV
Adjustment in Formula Payment
In the event that USTC's assets under management diminish or increase between
the signing of a definitive merger or acquisition agreement or an agreement
related to another Triggering Event and the Closing Date related to such
Triggering Event, the Formula Payment otherwise calculated in accordance with
Section 11(b) shall be calculated as follows:
(a) The actual amount of AM's After Tax Revenues for the three
full calendar months preceding the Closing Date of the
Triggering Event shall be calculated and then multiplied by
four to determine an amount which shall be referred to herein
as "AM's Annualized After Tax Revenues".
(b) AM's Annualized After Tax Revenues shall then be divided by
AM's After Tax Revenues. The resulting percentage (rounded to
the nearest one-hundredth of a percent) shall be referred to
herein as the "Adjustment Percentage".
(c) If the Adjustment Percentage is greater than or equal to 95%
and less than or equal to 105%, there shall be no adjustment
to the Formula Payment.
(d) If the Adjustment Percentage is greater than 105%, then the
Formula Payment to be paid in accordance with this Schedule IV
shall equal the product of AM's Annualized After Tax Revenues
multiplied by 3.33.
(e) If the Adjustment Percentage is less than 95%, then the
Formula Payment to be paid in accordance with this Schedule IV
shall equal the product of AM's Annualized After Tax Revenues
multiplied by 3.50.
(f) For purposes of calculating "AM's Annualized After Tax
Revenues" and the "Adjustment Percentage" in sections (a) and
(b) above, if the Triggering Event occurs during the period
January 1, 1995 through June 30, 1998, the Floor Incentive
shall be treated in the same manner as it is treated in
Section 10(b) of the Employment Agreement for purposes of
calculating the Section 11 Formula Payment.
27
<PAGE> 27
Schedule IV (Continued)
AM AGREEMENT SCHEDULE IV - "ADJUSTMENT IN FORMULA PAYMENT"
EXAMPLES
TABLE
28
<PAGE> 28
Schedule V: Examples of Revenue Sharing and
Base Annual Revenues of AM Calculation
Table
29
<PAGE> 29
Schedule VI
TO: Neal Finnegan
FROM: Domenic Colasacco
DATE: September 14, 1994
RE: Capital Expenditure/Intercompany Charges
--------------------------------------------------------------------------------
As you requested, this memorandum summarizes our agreement in
addressing the issues of capital expenditures and intercompany charges within
the new operating structure that is being finalized between the Asset
Management Division of United States Trust Company (USTC) and UST Corp.
I will begin with capital expenditures. Our discussion earlier this
summer contemplated continuing to account for capital expenditures in a manner
similar to existing practice. Specifically, UST Corp. would leave sufficient
assets in USTC to pay for needed furniture, equipment and other capital items.
These items would be depreciated over standard UST Corp. time periods. The
annual depreciation would be charged to the USTC Asset Management 60% revenue
share. IN the past, USTC Asset Management has not been allocated an interest
charge on the un-depreciated portion. We agreed that an interest charge would
be appropriate going forward. The rate I propose is the equivalent U.S.
treasury note yield for the average life of the depreciation period of the
capital asset. For example, a 5 year, straight line depreciation asset would
carry the same rate (and charge to USTC Asset Management) as a 2-1/2 year U.S.
Treasury note at the time of the asset purchase.
Understandably, you had some concern on the potential size of the
capital budget. A combination of empirical evidence and the nature of the
business suggest that the potential amounts are low relative to the anticipated
income stream. A total of $526,921 has been spent on all Asset Management
capital items since 1986, which is as far back as I was able to obtain records.
Most of the funds were expended for furniture, telephone and computer
equipment. As of June 30, 1994, $247,337 had yet to be depreciated. USTC's
capital, of which the $247,337 is a part, was nearly $3 million at month end.
Most of this capital has been invested in Fed funds and the UST Capital Corp.
subsidiary. The attached August 31, 1994 USTC Balance Sheet outlines the
specific breakdown.
The largest capital expenditure I expect over the next several years
will be furniture related to space modernization. Walter is in a better
position to forecast an amount, but I would be surprised if it will total more
than $300,000. Other than furniture, computer replacements/upgrades are likely
to be the largest expenditures.
30
<PAGE> 30
These should total less than $200,000 per annum. The possible exception is
funding required to initiate a mutual fund. I would expect that UST Corp.
would have to provide prior approval for capital spending above these
anticipated levels, adjusted only for changes in the size of the asset
management business.
With respect to intercompany charges, in an early negotiating session
you mentioned the concept of offsetting general holding company overhead
allocation (Directors, management, corporate advertising, human resources,
legal, accounting, etc.) with non-direct fee advantages, mostly deposits, of
the asset management business. Only more direct easily accountable expenses
would be charged to the 60% Asset Management revenue share. Examples of such
charges include rent, telephone, travel, employee benefits, direct marketing,
stationery, etc. As per regulatory requirements, we all agreed that such
charges would be at a fair, arms-length market rate. As was the case at the
time of the discussion, I see no issues in incorporating the above-described
capital expenditure and overhead allocation understanding in the new operating
agreement. This practice would also be consistent with the approach used over
the past 10 years.
Please let me know if I have neglected to cover any relevant items or
if you have any questions on the above.
31
<PAGE> 1
EXHIBIT 10(y)(ii)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of February 14, 1995 and effective January 1, 1995
between United States Trust Company ("USTC"), a banking and trust company
having its principal place of business in Boston, Massachusetts, and joined in
as to certain matters by UST Corp. ("UST"), a Massachusetts corporation also
having its principal place of business in Boston, Massachusetts and the parent
of USTC; and Robert A. Lincoln (the "Employee").
BACKGROUND
----------
The Employee and the other principals of the Asset Management Division
of USTC ("AM") listed on Schedule I hereto and such other principals as may be
added pursuant to the Unifying Agreement (as hereinafter defined) (all such
employees, while they remain principals, being referred to herein from time to
time as "Employee/Principals") are concerned that previous UST and USTC
practices have not allowed for enough spending to generate growth in AM's
business, or for fully competitive compensation for its principals; want
assurances of continued freedom to manage the AM business; want to participate
in an incentive compensation program which reflects the value created in this
business; and want to make it attractive to any potential acquirer of UST, USTC
or AM to (i) protect existing relationships with AM employees and clients, (ii)
avoid re-writing existing client contracts, and (iii) further AM as a separate
business conducted under the name "United States Trust Company".
UST and USTC want to stabilize and increase the profitability of AM;
pay competitive compensation; provide incentive compensation reflecting the
growth in the business of AM; and (in the event of a "Triggering Event" as
hereinafter defined) offer an opportunity to a prospective purchaser to retain
the services of Employee and the other Employee/Principals and thereby receive
a continuing stream of profits from AM.
UST and USTC recognize the importance of Employee to their business
and to USTC's ability to retain AM client relationships, and desire that USTC
employ Employee as an officer and principal of AM for the period of employment
and upon and subject to the terms herein provided.
UST and USTC wish to be assured that Employee will not compete with
AM's business during the period of employment, and in certain circumstances and
as set forth below will not for a period thereafter solicit any Past, Present,
or Potential Clients (as hereinafter defined) of AM and will not by such
solicitation damage USTC's and AM's goodwill among its clients and the general
public.
1
<PAGE> 2
Employee desires to be employed by USTC and serve as an
Employee/Principal of AM and to participate in the incentive compensation
program contemplated by this agreement, and to refrain from competing with USTC
or AM or soliciting AM's clients for the periods and upon and subject to the
terms herein provided.
Employee has been employed by USTC and AM for approximately 21 years;
has while so employed contributed to the acquisition and retention of AM's
clients, and will continue to seek to acquire and retain clients and to
generate goodwill for AM in the future as an officer and employee of USTC and
an Employee/Principal of AM for the periods and on the terms contemplated
hereby.
When the terms "AM," "AM's business," or the "AM Division" are used
herein, such terms specifically exclude the non- investment advisory business
of USTC such as (1) the business of UST Capital Corp. (venture capital) and (2)
the management of USTC's internal securities portfolio. Such terms, however,
include the investment return on allocated, but unexpended, portions of AM's
Share of Revenues as reflected on Schedule V. The investment return on
allocated, but unexpended, portions of AM's share of revenues shall be measured
at the end of each calendar quarter by multiplying the average of the month end
balances during such quarter by the published thirteen week U.S. Treasury Bill
Rate at the end of such calendar quarter and such interest income shall be
added to "AM's Share of Revenues". All current Employee/Principals are listed
on Schedule I.
Employee, the other Employee/Principals, UST and USTC have entered
into an agreement of even date herewith (the "Unifying Agreement") which
describes generally their agreements and certain procedures they have agreed to
follow among themselves. This Employment Agreement is executed pursuant to and
in accordance with the terms of the Unifying Agreement. Certain capitalized
terms used but not defined herein shall have the meanings given them in the
Unifying Agreement.
AGREEMENTS
----------
In consideration of the premises, the mutual covenants and the
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
SECTION 1. ORIGINAL TERM OF EMPLOYMENT; COMPENSATION. USTC
agrees to employ Employee for a period of two and one-half (2 1/2) years
beginning on the date hereof (the "Original Term") as an officer of USTC and an
Employee/Principal of AM; and Employee hereby accepts such employment. USTC
will pay Employee for Employee's services during the Original Term, and any
Renewal Term (as hereinafter provided) and any Phase II Term, the Annual Base
Salary set forth on Schedule I hereto, and such additional annual incentive
payments as shall be determined by the
2
<PAGE> 3
Employee/Principals consistent with the Revenue Sharing Provision (Section 10
hereof), and subject to such payroll and withholding deductions as are
required by law. Consistent with the Revenue Sharing Provision, the Employee's
total compensation will be reviewed at least annually in accordance with the
Unifying Agreement, having in mind that such compensation be fair and
reasonable in light of Employee's position and the duties to be performed by
the Employee and the Employee's efforts to enhance the business of AM.
SECTION 2. RENEWAL TERMS. If no "Triggering Event" has occurred
and this Agreement has not been terminated by either party (all as hereinafter
provided) prior to the end of the Original Term, then the Original Term shall
be automatically extended for successive six month renewal terms (each referred
to herein as a "Renewal Term", or collectively as "Renewal Terms") until such
Triggering Event or termination has occurred, or until the Employee shall have
provided at least six months advance written notice to UST and USTC of election
not to enter a Renewal Term.
SECTION 3. NOTICE OF TERMINATION OF ORIGINAL TERM BY EMPLOYEE.
On or before the last day of the second year of the Original Term and assuming
that this Agreement has not been earlier terminated or entered upon the Phase
II Term (all as hereinafter provided), the Employee may give written notice to
UST and USTC of termination, whereupon all the provisions of this Agreement
will terminate (except as noted below in this Section 3) on the last day of the
Original Term. If there has been a material breach of this Agreement by
Employee at any time during the Original Term or any Renewal Term, and the
arbitration under Section 18 hereof has confirmed that a material breach has
been committed by the Employee and such breach is uncured during the applicable
grace period, then the Employee will be subject in full to all of the
restrictions of Section 12, 13 and 14 hereof for the remainder of the
applicable term plus 90 days. However, should the Employee terminate this
Agreement without a material breach at the end of the Original Term or at the
end of any Renewal Term, Sections 12, 13 and 14 of this Agreement shall not
apply. Notwithstanding the foregoing, should the Employee terminate this
Agreement as described in either of the immediately preceding two sentences,
UST and USTC will retain all of their respective common law rights against the
Employee with respect to confidentiality, protection of customer lists, trade
secrets, non-competition and similar matters.
SECTION 4. PHASE II TERM. If a Triggering Event occurs during
the Original or a Renewal Term, any such term shall automatically terminate and
the Phase II Term shall commence as of the earlier of the date of signing of a
definitive merger or acquisition agreement or the date of occurrence of such
Triggering Event. The Phase II Term shall be for a period of three years from
the Closing Date under such definitive merger, consolidation or acquisition
agreement, or the date of the agreement related to any other such Triggering
Event, but in no event for longer than four years from such signing date, and
shall be terminable in the same manner as the Original
3
<PAGE> 4
Term under Section 3 above (the "Phase II Term"). The "Closing Date" shall mean
the date on which the merger or consolidation becomes effective, the
acquisition is consummated or the change in corporate ownership related to any
other such Triggering Event takes effect. If the revenues of the AM business
decline precipitously and the Formula Payment described in Section 11 below
would be less than $3 Million, then the Employee may decline to accept the
Formula Payment and the Phase II Term. If the AM revenues likewise decline,
and the Formula Payment described in Section 11 below would be less than $5
Million, the Employee/Principal may elect to reduce the Phase II Term by one
year.
SECTION 5. TERMINATION BY EMPLOYEE FOR BREACH OF "INDEPENDENCE
ASSURANCES." In the event of the material breach by UST or USTC (or their
respective successors) of any one or more of the "Independence Assurances"
listed below, the Employee/Principals, acting in accordance with the Unifying
Agreement, shall have the right (subject to compliance with Section 18 hereof)
but not the obligation, upon 30 days prior written notice to UST and USTC, to
terminate this Agreement.
(a) "Independence Assurances" shall consist of UST's and USTC's
non-interference (unless requested by the Employee/Principals of AM acting in
accordance with the Unifying Agreement) in the following:
(i) The Employee/Principals control of AM's investment
philosophy and investment approach, business strategy, conduct of investment
analysis, portfolio selection, marketing, client retention and acceptance of
new clients, and client service;
(ii) Authority of the Employee/Principals to hire and fire AM
personnel within the scope of UST's "Policies" (as hereinafter defined) and
applicable Federal and Massachusetts laws, subject to UST's right to approve
any person chosen by the Employee/Principals as the Senior Principal of AM,
which person shall also serve initially (i) as the Chief Executive Officer of
USTC, and (ii) on USTC Board of Directors. UST, as sole shareholder of USTC,
subject to the terms of the Unifying Agreement and this Agreement, will at all
times retain the right to select a Chief Executive Officer of USTC who is not
an employee of AM. USTC will not, however, select the Senior Principal;
(iii) The Employee/Principals' authority to set AM client
fees based on their judgment concerning the market for services rendered by AM;
(iv) The Employee/Principals' authority to establish AM's
operating expense budget and compensation practices, limited by "AM's Share of
Revenues" as provided in Section 10 (See Schedule V for example); and limited
further with respect to total cumulative cash incentive compensation for
Employee/Principals in the aggregate accrued in each of the years ending
December 31, 1994 and December 31, 1995, to $1.3 million plus incentive
compensation accrued in 1993 (it being understood
4
<PAGE> 5
that the Formula Payment is not to be regarded as cash incentive compensation
for any purposes);
(v) The Employee/Principals' authority to add and delete
Employee/Principals of AM in accordance with the Unifying Agreement; and
(vi) The recognition by UST and USTC that AM, in pursuit
of its "socially-sensitive" investment objectives, may take some public
positions which may not represent the views of UST or USTC management. The
Employee, however, recognizes that Employee's actions will remain subject to
the provisions of the Code of Ethics, Employment Policies, and certain other
key corporate policies of UST and USTC listed on and attached to Schedule II
hereto ("Policies"), as revised from time to time on a company-wide basis in
the ordinary course of UST's and USTC's business (which revisions shall be made
available to Employee at UST's principal office in Boston); and applicable
Federal and Massachusetts laws, regulations, policies, orders or understandings
in use by or applicable to UST and USTC.
(b) In the event that any of the "Independence Assurances" have
been materially breached and not cured pursuant to Section 18, the Employee
may act either individually or in concert with any other Employee/Principal or
Employee/Principals or other employees so as to constitute a "person" as
defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), in electing to terminate their Employment Agreements, e.g.
they may collectively decide to give five (5) days notice and leave USTC to
form a new business which may directly compete with AM's business and Sections
12, 13 and 14 of this Agreement will not apply.
SECTION 5A. OVERSIGHT FUNCTION OF USTC'S BOARD OF DIRECTORS.
USTC's Board of Directors (a majority of whom shall not be Employee/Principals)
shall continue to exercise its oversight function of the business activities of
AM. In performing such oversight function, USTC's Board the Directors will
assure itself that AM's business and operations are being conducted in a manner
consistent with applicable law and regulations, and such Board will be expected
to meet its fiduciary responsibilities to USTC and its depositors, and to UST,
in all respects, including without limitation, the prevention of corporate
waste of assets and taking steps to see that AM's business is operated with
their respective best interests in mind. If in performing such oversight
function, the Board causes UST or USTC to breach an Independence Assurance and
such breach is (a) confirmed by the arbitrator under Section 18 or not
contested by UST or USTC and (b) not cured within the applicable grace period,
the Employee may terminate this Agreement and the Employee will leave with the
rights described in Section 5(b) of this Agreement.
SECTION 6. MATTERS NOT CONSTITUTING "INDEPENDENCE ASSURANCES".
The following shall specifically not be considered as "Independence Assurances"
but shall nevertheless govern the relationship by and among UST, USTC and AM:
5
<PAGE> 6
(a) The location of AM's business for a period of three years from
January 1, 1995 on two floors at 40 Court Street, Boston, MA. The Employee and
the other Employee/Principals shall cause AM to give twelve months written
notice of termination of such occupancy, if they so elect, no earlier than
December 31, 1996. "Fair Rental" shall be charged or allocated by UST or USTC
for AM's premises, and UST or USTC shall give AM "high priority" with respect
to remodeling and upgrading of space.
(b) Matters covered in a Memorandum dated September 14, 1994 on
"Capital Expenditures/Intercompany Charges" which is attached as Schedule VI
hereto.
(c) The taking of reasonable steps by the Employee and the other
Employee/Principals to cause that appropriate levels of profit from AM's
business to be reinvested in the business (infrastructure, systems, facilities,
product development, compensation to staff members who are not Principals,
additional staff) during the Total Term (as hereinafter defined). For the year
1995, the amount considered "appropriate" would be the investment of
approximately five percent (5%) of "Base Annual Revenues of AM" as defined in
Section 10.
(d) The amortization of AM capital expenditures over a period in
accordance with UST's and USTC's then current policy to the extent it is
consistent with GAAP. In connection with the foregoing capital expenditures,
at the reasonable request of AM funding will be provided by UST and/or USTC
which will charge AM a fair interest rate for the cost of capital employed.
(See also Schedule VI).
(e) The providing of such information as is reasonably necessary
for UST to manage its affairs and responsibilities subject to client
confidentiality, including but not limited to information necessary to comply
with generally accepted accounting principles ("GAAP") in the preparation of
financial statements, budgets and profit plans, and for shareholder
communications, and responses to regulatory requests.
(f) The actions of all Employee Principals shall remain subject,
without limitation, to the terms of UST's Code of Ethics, the Payment Approval
Policy and the other Policies set forth in Schedule II hereto.
SECTION 7. TERMINATION OF EMPLOYMENT BY USTC.
----------------------------------
(a) Employee's employment may be terminated by USTC (by majority
vote of its Board of Directors) in the following circumstances:
At any time after due notice and reasonable opportunity to
correct such conduct, (i) in the event of Employee's material
breach of any of the terms of this Employment Agreement; (ii)
in the event of Employee
6
<PAGE> 7
causing a material breach of any of the other
Employee/Principals' duties to UST and USTC under Section 10
(Revenue Sharing Provision ); (iii) in the event of Employee's
willful misconduct in the performance of the Employee's duties
hereunder including, without limitation, but subject to
Sections 5 and 6 hereof, Employee's willful refusal to carry
out any "proper direction" by USTC's Board of Directors with
respect to the services to be rendered by Employee hereunder
or the manner of rendering such services; or (iv) in the event
of Employee's conviction of a crime involving moral turpitude.
The term "proper direction" as used in clause (iii) above, may
not be used in connection with an instruction, direction or
order which would cause UST or USTC to violate an
"Independence Assurance".
(b) In the event of Employee's death during the term of
employment, unless otherwise determined by the Employee/Principals acting
pursuant to the Unifying Agreement, USTC's and UST's obligations to pay further
compensation hereunder shall cease as of the date of death, except that any
amounts due under Section 11 hereof or otherwise owed to Employee under welfare
or benefit plans or for deferred compensation and any amounts heretofore
accrued under Sections 3.1 and 3.2 of the Unifying Agreement, shall be paid
when due to the Employee's estate or named beneficiary.
SECTION 8. OFFICE AND DUTIES. During the Original Term, any
Renewal Term, and the Phase II Term, if any, (hereinafter the "Total Term"),
Employee shall hold such positions and perform such duties relating to AM's
business and operations as are described on Schedule I hereto, and as may
otherwise from time to time be assigned to Employee by the Employee/Principals
consistent with all of the terms of this Agreement. During the Total Term and
while employed by USTC, Employee shall devote (except as noted on Schedule I)
substantially all of Employee's business time to the Employee's duties
hereunder and shall, to the best of Employee's ability, perform such duties in
a manner which will faithfully and diligently further the business and
interests of AM.
At any time while employed by USTC, Employee shall not directly or
indirectly solicit the business of any Past, Present, or Potential Clients (as
hereinafter defined) except on behalf and for the benefit of AM, or pursue any
other business activity, including, without limitation, serving as an officer,
director, employee, or adviser to any business entity other than AM, without
UST's and USTC's prior written consent; provided, however, that Employee may
without such consent, render without compensation investment advisory services
to immediate members of Employee's family, which shall include the Employee and
any trust or account which is comprised entirely of assets held for the benefit
of such Employee and/or immediate members of Employee's family, and may be
involved in such additional activities without such consent as are listed on
the Schedule I hereto. Employee agrees to travel to whatever
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extent is reasonably necessary in the conduct of AM's business. Except when
engaged in such travel, Employee's place of employment shall be in the greater
Boston area of Massachusetts unless otherwise agreed to by Employee, UST and
USTC, and the Employee/Principals acting in accordance with the Unifying
Agreement.
The term "Past Client" shall mean at any particular time any person or
entity who within three years prior to such time had been but at such time is
not an advisee, investment advisory customer, or client of AM.
The term "Present Client" shall mean at any particular time any person
or entity who is at such time an advisee, investment advisory customer, or
client of AM.
The term "Potential Client" shall mean at any particular time any
person or entity to whom AM, through any of the Employee/Principals or other of
its employees, has within three years prior to such time offered (by means of a
personal meeting, telephone call, or a letter or a written proposal
specifically directed to the particular person or entity) to serve as
investment adviser but who is not at such time an advisee or investment
advisory customer or client of AM. The preceding sentence is meant to exclude
form letters and blanket mailings.
The terms "Client" or "Client List" when used herein shall mean all
Past, Present, and Potential Clients as heretofore defined. The term "Client"
when used in this Employment Agreement with respect to wrap accounts, shall
mean the wrap sponsors and the brokers employed by such wrap sponsors but not
the underlying wrap account holders.
SECTION 9. BENEFITS. Employee shall participate, to the extent
Employee is eligible and in a manner and to an extent that is fair and
appropriate in light of the position and duties granted to Employee hereunder,
in all pension, profit-sharing, group insurance, or other fringe benefit plans
(other than UST corporate stock compensation plans) which UST or USTC may
hereafter in their absolute discretion make available generally to employees of
AM, but neither UST nor USTC will be required to establish any such program or
plan. Employee shall be entitled to such vacations and to reimbursement of
such expenses as UST's or USTC's policies allow to all employees having
comparable responsibilities and duties. So long as such additional benefits
are payable out of or accrue to "AM's Share of Revenues" as hereinafter
defined, the Employee/Principals may provide additional executive benefits to
themselves in addition to those provided by UST, provided that no such benefit
be qualified under Section 401 of the Internal Revenue Code or non-qualified
(under Section 401 of the Internal Revenue Code) pursuant to the terms of a
plan or arrangement which operates in a manner that is substantially similar or
mirrors a qualified plan, and provided further that the award of any such
benefits does not increase the cost to UST of providing benefits to UST
employees who are not employees of AM.
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SECTION 10. REVENUE SHARING PROVISION. The purpose of this
Revenue Sharing Provision is to provide UST with an acceptable stream of income
and to permit AM to retain a specified percentage of its revenues for use by
Employee/Principals, including the Employee, in their discretion in paying
expenses of operation, including compensation. It is intended to allow the
Employee and the other Employee/Principals to be compensated for enhancing and
growing AM's revenues in a substantial manner and to make operating decisions
freely within the limits of "AM's Share of Revenues," as such term is defined
below. See Schedule V for examples of Revenue Sharing calculations.
(a) ALLOCATION OF REVENUES. "Base Annual Revenues of AM" in 1994
and all subsequent years for purposes of this Revenue Sharing Provision shall
be AM's actual 1994 Revenues less $750,000, such total amount to be
appropriately modified to reflect changes in the United States Bureau of Labor
Statistics Cost of Living Index for the Boston Metropolitan Statistical Area or
any designated successor index for 1995 and all subsequent years. The term
"Revenues" shall mean AM's revenues calculated on an accrual basis in
accordance with GAAP, (excluding shared revenues paid to investment or other
firms or professionals and generated from AM clients), consistent with USTC's
usual practice.
During the pro-rated six month period commencing July 1, 1994 and
ending December 31, 1994, and for each calendar year and for portions
thereof on a pro-rated basis thereafter, AM shall retain sixty percent
(60%) ("Base AM Retention"), of AM's pro-rated actual Revenues and AM
shall make available to USTC for distribution to UST forty percent
(40%) ("Base UST Amount"), subject to adjustment as set forth in this
Section 10(a).
In 1995 and for each calendar year and for portions thereof on a
pro-rated basis thereafter, for each dollar of AM's annual revenues
over Base Annual Revenues of AM, AM shall retain an additional $.40,
and an additional $.60 shall be allocated to UST, provided that in no
event shall UST's Share of Revenues exceed fifty percent (50%) of
actual Annual Revenues of AM.
In 1995 and for each calendar year and for portions thereof on a
pro-rated basis thereafter, for each dollar that actual Annual
Revenues of AM are less than Base Annual Revenues of AM, Base AM
Retention shall be reduced by $.40 and the Base UST Amount shall be
reduced by $.60, provided that in no event shall UST's Share of
Revenues be less than thirty percent (30%) of Annual Revenues of AM.
Amounts retained by AM as aforesaid are herein referred to as "AM's
Share of Revenues". Amounts allocated to UST as aforesaid are herein referred
to as "UST's Share of Revenues".
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(b) FLOOR INCENTIVE. In addition, during the Original Term of
this Agreement (thirty months), AM shall retain a "Floor Incentive" of $40,000
per month from "UST's Share of Revenues" ($1.2 million in the aggregate). The
"Floor Incentive" shall be accrued by USTC and paid pursuant to subsection
(d)(iv) hereof, and shall be excluded from the limitations of Section 5(a)(iv)
of this Agreement. In the event of a material breach by UST or USTC of this
Agreement during the Original Term (which breach is not cured during the
applicable grace period and is either confirmed by the arbitrator under Section
18 hereof or not contested by UST or USTC), the Employee/Principals (for
distribution in accordance with the Unifying Agreement) may elect to receive an
aggregate lump-sum payment determined by multiplying (x) the monthly "Floor
Incentive" by (y) the remaining months in the Original Term. If a "Triggering
Event" occurs during the period January 1, 1995 through June 30, 1998, the
aggregate Floor Incentive, net of tax, accrued during the four full calendar
quarters next preceding the date of the Triggering Event, shall not be deducted
from "AM's After Tax Revenues" for purposes of calculating the Section 11
Formula Payment. Moreover, if a Triggering Event occurred before all Floor
Incentives have been paid, UST or USTC's successor shall assume responsibility
to make the remaining Floor Incentive payments.
(c) SPECIAL PROVISIONS. It is understood and agreed that:
(i) The balance of "Base AM Retention" for the period
July 1, 1994 through December 31, 1994 shall be paid
by UST or USTC to AM no later than February 15, 1995.
(ii) All amounts due to Robert B. Zevin pursuant to his
agreement dated September 30, 1994 with USTC shall be
considered as expenses to come out of "AM's Share of
Revenues" in each year in accordance with the
Unifying Agreement.
(iii) The application of this Section may make it
unattractive for AM to enter a business activity with
a profit margin of less then 40%. Accordingly, the
parties have agreed to negotiate separate "side
letters" with respect to revenue sharing on any new,
lower-margin business opportunities identified in the
future by AM and regarded as worthy of pursuit by UST
and/or USTC.
(iv) The parties hereto further understand and acknowledge
that the term "Revenues" as used herein is intended
to cover revenues of AM as they now exist and as they
may grow or contract internally, and not revenues
from the acquisition by UST or USTC of another
investment advisory firm concerning which the parties
hereto agree to negotiate in good faith as to revenue
sharing.
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(v) The investment return on allocated, but unexpended,
portions of AM's Share of Revenues shall be measured
at the end of each calendar quarter by multiplying
the average of the month end balances during such
quarter by the published thirteen week U.S. Treasury
Bill Rate at the end of such calendar quarter.This
interest income shall be added to "AM's Share of
Revenues".
(d) Transfer of Revenues to UST; Retention of Revenues by
-----------------------------------------------------
USTC;Compensation of Employee/Principals.
-----------------------------------------
(i) The Employee/Principals and AM shall use AM's Share
of Revenues to pay and provide for AM's business
expenses and expenditures including, without
limitation, investment in AM's business and new
products (see Section 6(d) above) and salaries of its
employees, except that any federal, state or local
income tax to which USTC is subject shall be the
responsibility of UST and shall not be treated as a
business expense of AM.
(ii) The Employee/Principals shall incur no expenses or
obligations on behalf of AM which exceed USTC's
ability to pay or provide for them when due out of
AM's Share of Revenues. The Employee/Principals
shall not incur obligations or make binding
commitments on behalf of USTC or UST not related to
AM's business and requiring expenditures by USTC in
excess of $50,000, or make representations to third
parties that they have the authority to do so.
However, the Employee/Principals may represent and
advertise that AM is a division of USTC and an
affiliate of UST, and other than as limited above in
this Section 10 (d)(ii), may incur obligations or
make binding commitments on behalf of USTC in the
ordinary course of business.
(iii) The Employee/Principals may (subject to Policies and
applicable laws and regulations) pay to AM's
employees, including the Employee and the other
Employee/Principals, at times and in amounts and
proportions determined in accordance with the
Unifying Agreement, the balance of AM's Share of
Revenues remaining after the payment of all of the
amounts required under subsection (d)(i) hereof and
subject to Section 5(a)(iv).
(iv) The Employee's Revenue Sharing compensation out of
"AM's Share of Revenues" shall be allocated in
accordance with the terms of the Unifying Agreement.
The Employee/Principals have provided to UST and USTC
in the Unifying Agreement their procedures for
determining changes, if any, in the allocation of
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Revenues among the Employee/Principals. If an
Employee/Principal chooses to leave USTC's employ
after bypassing this change determination mechanism
or refusing to abide by its results, the
Employee/Principal shall be deemed to have committed
a material breach of this Employment Agreement.
(v) The Employee/Principals and AM shall make available
to UST, UST's Share of Revenues upon reasonable
request by UST and action by USTC's Board of
Directors. The Employee/Principals shall not spend
or incur obligations to spend any part of UST's Share
of Revenues.
(e) ADMINISTRATION. The parties hereto and the other
Employee/Principals agree to meet and consult to endeavor in good faith to
agree on appropriate procedures, in addition to Policies and applicable laws
and regulations, for administering the provisions of this Section 10.
The Employee/Principals shall retain control over all expenditures of
AM, subject to the power of USTC's Board of Directors to exercise its rights
under Section 5A, and subject to this Revenue Sharing Provision, and
recognizing that AM is a division of USTC.
(f) TERM AND STATUS AS PARTIES. This Revenue Sharing Provision
shall continue in effect until terminated by agreement of UST, USTC, and the
Employee/Principals acting in accordance with the Unifying Agreement. If the
employment of Employee by USTC ceases other than as a result of a material
breach by UST or USTC of this Employment Agreement, such Employee shall
thereupon automatically cease to be a party to this Revenue Sharing Provision
and to have any rights or obligations under this Section, and shall cease to be
an Employee/Principal for the purposes of this Provision. Nothing in this
Employment Agreement shall be construed to grant to the Employee any right to
be employed by USTC beyond the terms of this Employment Agreement.
SECTION 11. FORMULA PAYMENT. If Employee is still employed by
USTC at the time of a "Triggering Event" (as hereinafter defined), the Employee
shall receive Employee's share of a formula payment (the "Formula Payment") as
follows:
(a) Unless otherwise agreed by the Employee/Principals acting in
accordance with the Unifying Agreement, the Employee's share of the Formula
Payment shall be the percentage set forth after the Employee's name on Schedule
III hereto;
(b) The "Formula Payment" shall be 3.33 times "AM's After Tax
Revenues" (as hereinafter defined and meaning generally UST's Share of Revenues
minus taxes);
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(c) "AM's After Tax Revenues" shall be the portion of AM's
after-tax Revenues contributed, accruing or allocated to UST for the four full
calendar quarters next preceding the date of the Triggering Event; determined
in accordance with GAAP consistently applied in such periods. For purposes of
this Subsection, there shall be assumed a combined federal and state tax rate
of 38%, such rate to be appropriately adjusted to reflect changes in applicable
federal and state corporate tax rates. An example of this calculation is set
forth on Schedule V.
(d) The Formula Payment shall be adjusted in accordance with
Schedule IV hereto for gain or loss of AM clients between the signing of a
definitive merger, consolidation or acquisition agreement or an agreement
related to another Triggering Event and the Closing Date related to any such
Triggering Event.
(e)
(i) At the Closing Date of a Triggering Event, three Key
Employees shall be identified as follows. For every
person who has been an Employee/Principal at any time
during the previous 15 months there shall be
calculated a Weighted Average Share equal to the sum
of (a) the share of the Formula Payment such person
was entitled to receive from time-to-time during the
preceding 15 months in accordance with Schedule III
and subsequent changes thereto by the
Employee/Principals acting in accordance with the
Unifying Agreement times (b) the number of days such
person was entitled to each such share. The three
persons among those who are or have been
Employee/Principals on the Closing Date of the
Triggering Event or during the previous 15 months who
have the three highest Weighted Average Shares shall
be deemed the "Key Employees".
(ii) If only one of the three Key Employees is no longer
in the employ of USTC as of the Closing Date of such
Triggering Event, then all of that Key Employee's
Weighted Average Share of the Formula Payment
(expressed by X%) shall be placed in escrow in the
manner contemplated by Section 11(f). To determine
the distribution of each of the three escrowed
installments use the following formula. Revenues of
AM (as defined in Section 10(a)) for the last full
calendar year prior to a Triggering Event should then
be determined (the "Measuring Year"). Such Revenues
of AM for the Measuring Year multiplied by a decimal
representing 100% - X% equals the "Minimum Revenues".
If during the next full calendar year following the
Measuring Year, Revenues of AM are equal to or less
than Minimum Revenues none of the one-third of the
escrowed amount for such year will be paid to the
remaining Employee/Principals in accordance with this
Section and all of it will be retained by UST's or
USTC's successor. If Revenues of AM for
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that calendar year exceed Minimum Revenues, (i) take
the U.S. Dollar amount of such excess above the
Minimum Revenues and divide it by the Revenues of AM
for the Measuring Year minus the Minimum Revenues,
(ii) then multiply the resulting fraction by
one-third of the full escrowed amount, (iii) the
product of the foregoing formula should be delivered
to the remaining Employee/Principals as a group for
distribution in accordance with the Unifying
Agreement and the remainder of that installment
should be retained by UST or UST's successor.
Similar calculations should be made for the second
and third installments, but in each case using the
same Minimum Revenues.
(iii) If two or more of the Key Employees are no longer in
the employ of USTC as of the Closing Date of such
Triggering Event, then 100% of the Formula Payment
shall be placed in escrow in the manner contemplated
by Section 11(f). To determine the distribution of
each of the three escrowed installments use the
following formula. If Revenues of AM for the last
full calendar year prior to the distribution date of
the applicable escrow installment equal or exceed
Revenues of AM for the Measuring Year, all of that
escrowed installment should be distributed to the
remaining Employee/Principals as a group for
distribution in accordance with the Unifying
Agreement and none should be retained by UST or
USTC's successor. If Revenues of AM for the last
full calendar year prior to the distribution date of
the applicable escrow installment are less than
Revenues of AM for the Measuring Year, divide the
U.S. Dollar amount of Revenues of AM for such last
full calendar year by the U.S. Dollar amount of
Revenues of AM for the Measuring Year and multiply
the resulting fraction by one-third of the full
escrowed amount. The product of the foregoing
calculation should be delivered to the remaining
Employee/Principals as a group for distribution in
accordance with the Unifying Agreement and the
remainder should be retained by UST's or USTC's
successor.
(f) Seventy percent (70%) of the Employee's share of the Formula
Payment shall be paid in cash within twenty (20) days of the Closing Date of
the Triggering Event. The remaining thirty percent (30%) shall be placed in
escrow with an escrow agent acceptable to both UST and Employee/Principals and
paid to the Employee or the Employee's estate as provided in Section 7(b) in
installments of one third of the escrowed amount at the end of years one, two
and three (which may not be calendar years) after the Closing Date of the
Triggering Event plus interest, at the interest rates on the date of the
Closing Date of the Triggering Event of one, two and three year Treasury
securities, provided that at the time of each such installment payment, the
Employee has not been terminated with cause or for a material breach or has not
voluntarily ceased to be employed by AM.
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(g) A "Triggering Event" shall be deemed to have occurred when:
(i) there occurs the signing of a definitive agreement of
merger or consolidation of UST or USTC with any other
corporation, other than a merger or consolidation
which would result in the voting securities of UST or
USTC outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of
UST or USTC, or such surviving entity outstanding
immediately after such merger or consolidation;
provided, however, that a merger or consolidation
effected to implement a recapitalization,
reorganization or restructuring of UST or USTC (or
similar transaction) in which no "person" (as defined
in (g)(iii) below) acquires more than fifty percent
(50%) of the combined voting power of UST's then
outstanding securities shall not constitute a
Triggering Event; or
(ii) there occurs a closing of a sale or other disposition
by UST of more than 50% of UST's, USTC's or AM's
business and assets; or
(iii) any "person", as such term used in Section 13(d) and
14(d) of the Exchange Act other than UST or USTC or
any of their respective subsidiaries or affiliates or
any trustee or other fiduciary holding securities
under an employee benefit plan of either of them or
any of their subsidiaries or affiliates, becomes a
beneficial owner (within the meaning of Rule 13d-3,
as amended, as promulgated under the Exchange Act),
directly or indirectly, of securities representing
50% percent or more of the combined voting power of
UST's or USTC's then outstanding securities.
If (i) more than 50% of UST's then outstanding common stock or assets
are acquired by a "person" whose consolidated assets prior to the Triggering
Event were less than $4 billion or (ii) UST's business assets and operations
are consolidated with those of another bank or bank holding company and the
resulting entity has consolidated assets of $5.5 billion or less, a Triggering
Event shall be deemed to have occurred, but the length of the Phase II term of
employment of the Employee shall be increased automatically by one additional
year.
(h) If UST agrees to be acquired by an entity with a public image
so starkly negative that AM's affiliation with that entity would be reasonably
likely, by itself, to cause a loss of more than 25% of AM's gross revenues in
one year (unless the parties
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mutually agree to the contrary), the Employee/Principals at their option acting
pursuant to the terms of the Unifying Agreement (and provided such right is
exercised within 30 days of the public announcement of such acquisition) will
be relieved of all of the Employee's obligations under the Phase II Term and no
Formula Payment will be made.
(i) The parties acknowledge that any such Formula Payment is
intended to compensate the Employee for: (i) the automatic extension of this
Agreement occurring by reason of a Triggering Event; (ii) the Phase II
Non-Competition covenants specified in Section 12; and (iii) the loss of
opportunity to make up for reduced rate of compensation which such Employee
earned with USTC for periods prior to the effective date of this Agreement.
SECTION 12. PHASE II NON-COMPETITION COVENANTS.
(a) During the longer of the Phase II Term (as defined in Section
4) if Phase II shall commence while Employee is employed by USTC hereunder or
while Employee is employed by USTC during or after such Phase II Term
hereunder, Employee shall not, except in the course of his employment with
USTC, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an
officer, director, employee, partner, stockholder,
consultant, adviser, subsidiary, affiliate,
independent contractor or otherwise, investment
advisory services to any person or entity;
(ii) Interfere with AM's relations with any person or
entity who at any time during such period was a
Client (which means Past, Present, and Potential
Client); or
(iii) Induce or attempt to induce directly or indirectly
any professional employee of AM to terminate his or
her employment or hire or attempt to hire, directly
or indirectly, any such person, other than by
discharge of such person as a part of Employee's
duties.
(b) Until one year following the end of the Phase II Term, if the
Phase II Term should commence while Employee is employed by USTC hereunder or
one year following the termination of Employee's employment with USTC during or
after such Phase II Term, Employee shall not, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an
officer, director, employee, partner, independent
contractor or otherwise, investment advisory services
to any person or entity who as of the date of the
termination or expiration of Employee's employment
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with USTC was or had been a Client (which means
Past, Present, and Potential Client);
(ii) Interfere with AM's relations with any person or
entity who as of the date of the termination or
expiration of Employee's employment with USTC was a
Client (which means Past, Present, and Potential
Client); or
(iii) Induce or attempt to induce directly or indirectly
any professional employee of AM to terminate his or
her employment or hire or attempt to hire, directly
or indirectly, any such person.
(c) Notwithstanding the provisions of subsections (a)(i) and
(b)(i), the Employee may render without compensation investment advisory
services to any immediate member of Employee's family, which shall include the
Employee and any trust or account which is comprised entirely of assets held
for the benefit of such Employee and/or immediate members of such Employee's
family, and may engage in such other activities as are listed on Schedule I
hereto.
(d) Employee and USTC agree that the periods of time and the
unlimited geographic area applicable to the covenants of this Section 12 are
reasonable, in view of the receipt and expected receipt of the Employee's share
of Revenue Sharing as provided in Section 10(c), and other compensation, and
the Formula Payment provided herein; the geographic scope and nature of the
business in which AM is engaged; Employee's knowledge of AM's business; and
Employee's relationships with AM's investment advisory clients. However, if
such period or such area should be adjudged unreasonable in any judicial
proceeding, then the period of time shall be reduced by such number of months
or such area shall be reduced by elimination of such portion of such area, or
both, as are deemed unreasonable, so that this covenant may be enforced in such
area and during such period of time as are adjudged to be reasonable.
SECTION 13. ALL BUSINESS TO BE THE PROPERTY OF USTC; ASSIGNMENT
OF INTELLECTUAL PROPERTY. During the Phase II Term if Phase II shall commence
while Employee is Employed by USTC hereunder and thereafter while Employee is
employed by AM and/or USTC:
(a) Employee agrees that any and all presently existing investment
advisory business of AM and all business developed by Employee or any other
employee of AM, including without limitation all investment advisory contracts,
fees, commissions, compensation records, Client Lists (as defined in Section
8), agreements, and any other incident of any business developed or sought by
AM or earned or carried on by Employee for AM, are and shall be the exclusive
property of USTC for its sole use, and (where applicable) shall be payable
directly to USTC.
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(b) Employee hereby grants to USTC (without any separate
remuneration or compensation other than that received by Employee from time to
time in the course of his or her employment) Employee's entire right, title,
and interest throughout the world in and to, all research, information, Client
Lists, and all other investment advisory, technical and research data made,
conceived, developed and/or acquired by Employee solely or jointly with others
during the period of Employee's employment by USTC, which relate to investment
advice as it was or is now rendered or as it may, from time to time, hereafter
be rendered or proposed to be rendered, but excluding such individual's ideas
and thought processes which are not embodied in written or machine readable
form (all such non-excluded items being referred to as "Intellectual
Property").
SECTION 14. CONFIDENTIALITY. Except in performance of services
for USTC, Employee shall not, either during the Phase II Term if Phase II shall
commence while the Employee is employed by USTC hereunder or thereafter while
employed by AM and/or USTC, use for Employee's own benefit or disclose to or
use for the benefit of any person outside USTC, any information not lawfully
available to the public concerning any Intellectual Property, including Client
Lists, whether Employee has such information in his or her memory or embodied
in writing or other tangible form. All such Intellectual Property and such
information concerning Intellectual Property, and all originals and copies of
any Intellectual Property, and any other written material relating to the
business of AM, shall be the sole property of USTC. During such Term or
thereafter, upon the termination of Employee's employment in any manner or for
any reason, Employee shall promptly surrender to USTC all originals and copies
of any Intellectual Property, and Employee shall not thereafter use any
Intellectual Property.
The foregoing notwithstanding, Employee will have no obligation to AM
or USTC with respect to the disclosure or use of any Intellectual Property or
information concerning Intellectual Property if:
(a) Such Intellectual Property or information is or becomes publicly
known or otherwise enters the public domain through no wrongful act of
Employee; or
(b) Such Intellectual Property or information is received from a
third party which has no obligation to UST or USTC to maintain it in
confidence.
Notwithstanding the references to Client Lists above, it shall not be
a violation of this Section or Section 13 hereof for Employee to communicate or
do business with any Past, Present or Potential Client in the course of
Employee's employment with AM and USTC, and any such conduct shall be limited,
if at all, solely by Section 12 hereof.
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SECTION 15. NOTICES. Any notice or other communication hereunder
shall be given as follows:
United States Trust Company
40 Court Street
Boston, MA 02108
Fax: (617) 726-7320
Attn: Neal F. Finnegan, Chairman, Executive
Committee
UST Corp.
40 Court Street
Boston, MA 02108
Fax: (617) 726-7320
Attn: Neal F. Finnegan, President & CEO
With copies to Eric R. Fischer, Executive Vice President and General
Counsel
Fax: (617) 726-7209
Employee:
Robert A. Lincoln
67 Conant Road
Lincoln, MA 01773
Fax: (if any)
with copy to Peter M. Rosenblum
Foley, Hoag & Eliot
1 Post Office Square
Boston, MA, 02109
Fax: (617) 832-7000
SECTION 16. ASSIGNABILITY. This Employment Agreement shall be
binding upon and inure to the benefit of UST, USTC, and to any person or firm
who may succeed to the business of UST, USTC, or AM. This Employment Agreement
shall not be assignable by Employee, but it shall inure to the benefit of
Employee's heirs, executors, administrators and legal representatives.
SECTION 17. ENTIRE AGREEMENT. This Employment Agreement and the
Unifying Agreement contain the entire agreement between USTC and Employee with
respect to the subject matter hereof, and supersede all prior oral and written
agreements between any of UST, USTC, AM and the Employee with respect to the
subject matter hereof, including without limitation any oral agreements
relating to compensation.
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SECTION 18. ARBITRATION. In the event the parties hereto
disagree as to whether a material breach has occurred of: (i) the "Independence
Assurances" under Section 5; (ii) USTC's right of termination of Employee's
employment under Section 7; (iii) this Agreement by USTC as described in
Section 19 (b); (iv) the revenue sharing provisions of Section 10; or (v) the
formula payment provisions of Section 11, such dispute shall be settled by
arbitration before a single arbitrator to be then named by UST and a majority
of the Employee/Principals acting in accordance with the Unifying Agreement, in
Boston, Massachusetts in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. If such arbitrator cannot serve, then a
successor shall be appointed in accordance with such Rules. If the arbitrator
finds that there has been a material breach (and such breach has not been cured
by UST or USTC within sixty (60) days of such finding or by Employee in
accordance with Section 7 hereof), then the remedies provided for in Section 19
shall become available, as appropriate.
SECTION 19. EQUITABLE RELIEF AND OTHER REMEDIES.
(a) Employee recognizes and agrees that UST's, USTC's or the
Employee/Principals' remedies at law for any breach of the provisions of
Sections 12, 13 and 14 hereof would be inadequate and that for breach of such
provisions UST, USTC and the Employee/Principals shall, in addition to such
other remedies as may be available to any of them at law or in equity or as
provided in this Employment Agreement, be entitled to injunctive relief and to
enforce their respective rights by an action for specific performance to the
extent permitted by law, and to the right of set-off against any amounts due to
the Employee by UST, USTC or AM. Should Employee engage in any activities
prohibited by this Employment Agreement, he or she agrees to pay over to USTC
or UST all compensation received in connection with such activities. Such
payment shall not impair any other rights or remedies of UST, USTC or AM or
affect the obligations or liabilities of Employee under this Employment
Agreement or applicable law.
(b) Any termination by USTC of Employee's employment which is not
authorized by Section 7 hereof shall constitute a material breach of this
Agreement. In the event of a material breach of this Agreement by UST or USTC
which is not cured pursuant to Section 18, in addition to any other rights or
remedies which the Employee may have, at law, in equity or otherwise, USTC
shall pay Employee the Employee's then current Annual Base Salary for a period
equal to the greater of (i) twelve months or (b) the balance of the then
current term of this Agreement. Any such payments shall not constitute part of
AM's Share of Revenues. Should such a material breach occur and not be so
cured, the Employee shall be free to compete, Sections 12, 13 and 14 shall not
apply and the Employee shall leave with the rights described in Section 5(b) of
this Agreement.
(c) Without limiting the generality of the foregoing, the parties
expressly agree
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that termination without cause of Employee's employment hereunder during the
Phase II Term by UST, USTC or any other person or entity will constitute a
material breach of this Agreement and, in addition to any other rights or
remedies which the Employee may have, at law, in equity or otherwise, shall
give Employee the right to salary continuation as set forth in Section 19(b)
hereof.
SECTION 20. WAIVERS AND FURTHER AGREEMENTS. Neither this
Employment Agreement nor any term or condition hereof, including without
limitation the terms and conditions of this Section 20, may be waived in whole
or in part as against UST, USTC, AM or Employee except by written instrument
executed by each of them, expressly stating that it is intended to operate as a
waiver of this Employment Agreement or the applicable term or condition hereof.
Each of the parties hereto agrees to execute all such further instruments and
documents and to take all such further action as the other party may reasonably
require in order to effectuate the terms and purposes of this Employment
Agreement as stated herein. Furthermore, no waiver may violate the terms of
the Unifying Agreement and any waiver shall require action of the
Employee/Principals in accordance with the Unifying Agreement authorizing such
waiver.
SECTION 21. AMENDMENTS. This Employment Agreement may not be
amended, nor shall any parties be added hereto, nor any change, modification,
consent, or discharge be effected except by written instrument executed by all
three of the Employee, USTC and UST. Furthermore, no amendment or modification
may violate the terms of the Unifying Agreement and any amendment or
modification shall require action of the Employee/Principals in accordance with
the Unifying Agreement authorizing such amendment or modification.
SECTION 22. SEVERABILITY. If any provision of this Employment
Agreement shall be held or deemed to be invalid, inoperative or unenforceable
in any jurisdiction or jurisdictions, because of conflicts with any
constitution, statute, rule or public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision in question
unenforceable in any other jurisdiction or in any other case or circumstance or
of rendering any other provisions herein contained unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Employment Agreement
shall be reformed and construed in any such jurisdiction or case as if such
invalid, inoperative, or unenforceable provision had never been contained
herein and such provision reformed so that it would be enforceable to the
maximum extent permitted in such jurisdiction or in such case.
SECTION 23. NO CONFLICTING OBLIGATIONS. Employee represents and
warrants to USTC and UST that Employee has no other interest or obligation
which is inconsistent or in conflict with this Employment Agreement or which
would prevent, limit, or impair, in any way, Employee's performance of any of
the covenants or duties
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hereinabove set forth.
SECTION 24. PARTIES. It is understood and agreed that UST joins
in this Employment Agreement only as to such matters where its name appears
herein. It is further understood and agreed that no person shall participate
in the benefits conferred on Employee/Principals by the terms of this and other
similar Employment Agreements unless such person has become a party to a
similar Employment Agreement or is described in Section 16.
SECTION 25. GOVERNING LAW. This Employment Agreement shall be
governed by and construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts which apply to contracts executed and performed
solely in Massachusetts. UST, USTC and the Employee hereby consent to the
jurisdiction of any state or federal court located within Suffolk County,
Massachusetts, and assent that service of process may be made by registered
mail to the parties' respective addresses as provided in Section 15 hereof and
shall be effective in the same manner as notices are effective under such
Section 15.
SECTION 26. ACTION OF THE EMPLOYEE/PRINCIPALS. Whenever the
Consent of the Employee/Principals shall be described herein, action by the
Employee/Principals or their duly authorized representative shall be required
in accordance with the Unifying Agreement, and such action shall be sufficient
hereunder.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as a sealed instrument as of the date first above written.
EMPLOYEE: UNITED STATES TRUST COMPANY
/s/ Domenic Colasacco By: /s/ Neal F. Finnegan
--------------------- --------------------
Domenic Colasacco Title:
Joined in as to those matters where its name appears.
UST CORP.
By:/s/ Neal F. Finnegan
--------------------
Title:
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EXHIBIT 10(y)(iii)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of February 14, 1995 and effective January 1, 1995
between United States Trust Company ("USTC"), a banking and trust company
having its principal place of business in Boston, Massachusetts, and joined in
as to certain matters by UST Corp. ("UST"), a Massachusetts corporation also
having its principal place of business in Boston, Massachusetts and the parent
of USTC; and Stephen K. Moody (the "Employee").
BACKGROUND
----------
The Employee and the other principals of the Asset Management Division
of USTC ("AM") listed on Schedule I hereto and such other principals as may be
added pursuant to the Unifying Agreement (as hereinafter defined) (all such
employees, while they remain principals, being referred to herein from time to
time as "Employee/Principals") are concerned that previous UST and USTC
practices have not allowed for enough spending to generate growth in AM's
business, or for fully competitive compensation for its principals; want
assurances of continued freedom to manage the AM business; want to participate
in an incentive compensation program which reflects the value created in this
business; and want to make it attractive to any potential acquirer of UST, USTC
or AM to (i) protect existing relationships with AM employees and clients, (ii)
avoid re-writing existing client contracts, and (iii) further AM as a separate
business conducted under the name "United States Trust Company".
UST and USTC want to stabilize and increase the profitability of AM;
pay competitive compensation; provide incentive compensation reflecting the
growth in the business of AM; and (in the event of a "Triggering Event" as
hereinafter defined) offer an opportunity to a prospective purchaser to retain
the services of Employee and the other Employee/Principals and thereby receive
a continuing stream of profits from AM.
UST and USTC recognize the importance of Employee to their business
and to USTC's ability to retain AM client relationships, and desire that USTC
employ Employee as an officer and principal of AM for the period of employment
and upon and subject to the terms herein provided.
UST and USTC wish to be assured that Employee will not compete with
AM's business during the period of employment, and in certain circumstances and
as set forth below will not for a period thereafter solicit any Past, Present,
or Potential Clients (as hereinafter defined) of AM and will not by such
solicitation damage USTC's and AM's goodwill among its clients and the general
public.
<PAGE> 2
Employee desires to be employed by USTC and serve as an
Employee/Principal of AM and to participate in the incentive compensation
program contemplated by this agreement, and to refrain from competing with USTC
or AM or soliciting AM's clients for the periods and upon and subject to the
terms herein provided.
Employee has been employed by USTC and AM for approximately 21 years;
has while so employed contributed to the acquisition and retention of AM's
clients, and will continue to seek to acquire and retain clients and to
generate goodwill for AM in the future as an officer and employee of USTC and
an Employee/Principal of AM for the periods and on the terms contemplated
hereby.
When the terms "AM," "AM's business," or the "AM Division" are used
herein, such terms specifically exclude the non- investment advisory business
of USTC such as (1) the business of UST Capital Corp. (venture capital) and (2)
the management of USTC's internal securities portfolio. Such terms, however,
include the investment return on allocated, but unexpended, portions of AM's
Share of Revenues as reflected on Schedule V. The investment return on
allocated, but unexpended, portions of AM's share of revenues shall be measured
at the end of each calendar quarter by multiplying the average of the month end
balances during such quarter by the published thirteen week U.S. Treasury Bill
Rate at the end of such calendar quarter and such interest income shall be
added to "AM's Share of Revenues". All current Employee/Principals are listed
on Schedule I.
Employee, the other Employee/Principals, UST and USTC have entered
into an agreement of even date herewith (the "Unifying Agreement") which
describes generally their agreements and certain procedures they have agreed to
follow among themselves. This Employment Agreement is executed pursuant to and
in accordance with the terms of the Unifying Agreement. Certain capitalized
terms used but not defined herein shall have the meanings given them in the
Unifying Agreement.
AGREEMENTS
----------
In consideration of the premises, the mutual covenants and the
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
SECTION 1. ORIGINAL TERM OF EMPLOYMENT; COMPENSATION. USTC
agrees to employ Employee for a period of two and one-half (2 1/2) years
beginning on the date hereof (the "Original Term") as an officer of USTC and an
Employee/Principal of AM; and Employee hereby accepts such employment. USTC
will pay Employee for Employee's services during the Original Term, and any
Renewal Term (as hereinafter provided) and any Phase II Term, the Annual Base
Salary set forth on Schedule I hereto, and such additional annual incentive
payments as shall be determined by the
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<PAGE> 3
Employee/Principals consistent with the Revenue Sharing Provision (Section 10
hereof), and subject to such payroll and withholding deductions as are
required by law. Consistent with the Revenue Sharing Provision, the Employee's
total compensation will be reviewed at least annually in accordance with the
Unifying Agreement, having in mind that such compensation be fair and
reasonable in light of Employee's position and the duties to be performed by
the Employee and the Employee's efforts to enhance the business of AM.
SECTION 2. RENEWAL TERMS. If no "Triggering Event" has occurred
and this Agreement has not been terminated by either party (all as hereinafter
provided) prior to the end of the Original Term, then the Original Term shall
be automatically extended for successive six month renewal terms (each referred
to herein as a "Renewal Term", or collectively as "Renewal Terms") until such
Triggering Event or termination has occurred, or until the Employee shall have
provided at least six months advance written notice to UST and USTC of election
not to enter a Renewal Term.
SECTION 3. NOTICE OF TERMINATION OF ORIGINAL TERM BY EMPLOYEE.
On or before the last day of the second year of the Original Term and assuming
that this Agreement has not been earlier terminated or entered upon the Phase
II Term (all as hereinafter provided), the Employee may give written notice to
UST and USTC of termination, whereupon all the provisions of this Agreement
will terminate (except as noted below in this Section 3) on the last day of the
Original Term. If there has been a material breach of this Agreement by
Employee at any time during the Original Term or any Renewal Term, and the
arbitration under Section 18 hereof has confirmed that a material breach has
been committed by the Employee and such breach is uncured during the applicable
grace period, then the Employee will be subject in full to all of the
restrictions of Section 12, 13 and 14 hereof for the remainder of the
applicable term plus 90 days. However, should the Employee terminate this
Agreement without a material breach at the end of the Original Term or at the
end of any Renewal Term, Sections 12, 13 and 14 of this Agreement shall not
apply. Notwithstanding the foregoing, should the Employee terminate this
Agreement as described in either of the immediately preceding two sentences,
UST and USTC will retain all of their respective common law rights against the
Employee with respect to confidentiality, protection of customer lists, trade
secrets, non-competition and similar matters.
SECTION 4. PHASE II TERM. If a Triggering Event occurs during
the Original or a Renewal Term, any such term shall automatically terminate and
the Phase II Term shall commence as of the earlier of the date of signing of a
definitive merger or acquisition agreement or the date of occurrence of such
Triggering Event. The Phase II Term shall be for a period of three years from
the Closing Date under such definitive merger, consolidation or acquisition
agreement, or the date of the agreement related to any other such Triggering
Event, but in no event for longer than four years from such signing date, and
shall be terminable in the same manner as the Original
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<PAGE> 4
Term under Section 3 above (the "Phase II Term"). The "Closing Date" shall mean
the date on which the merger or consolidation becomes effective, the
acquisition is consummated or the change in corporate ownership related to any
other such Triggering Event takes effect. If the revenues of the AM business
decline precipitously and the Formula Payment described in Section 11 below
would be less than $3 Million, then the Employee may decline to accept the
Formula Payment and the Phase II Term. If the AM revenues likewise decline,
and the Formula Payment described in Section 11 below would be less than $5
Million, the Employee/Principal may elect to reduce the Phase II Term by one
year.
SECTION 5. TERMINATION BY EMPLOYEE FOR BREACH OF "INDEPENDENCE
ASSURANCES." In the event of the material breach by UST or USTC (or their
respective successors) of any one or more of the "Independence Assurances"
listed below, the Employee/Principals, acting in accordance with the Unifying
Agreement, shall have the right (subject to compliance with Section 18 hereof)
but not the obligation, upon 30 days prior written notice to UST and USTC, to
terminate this Agreement.
(a) "Independence Assurances" shall consist of UST's and USTC's
non-interference (unless requested by the Employee/Principals of AM acting in
accordance with the Unifying Agreement) in the following:
(i) The Employee/Principals control of AM's investment
philosophy and investment approach, business strategy, conduct of investment
analysis, portfolio selection, marketing, client retention and acceptance of
new clients, and client service;
(ii) Authority of the Employee/Principals to hire and fire AM
personnel within the scope of UST's "Policies" (as hereinafter defined) and
applicable Federal and Massachusetts laws, subject to UST's right to approve
any person chosen by the Employee/Principals as the Senior Principal of AM,
which person shall also serve initially (i) as the Chief Executive Officer of
USTC, and (ii) on USTC Board of Directors. UST, as sole shareholder of USTC,
subject to the terms of the Unifying Agreement and this Agreement, will at all
times retain the right to select a Chief Executive Officer of USTC who is not
an employee of AM. USTC will not, however, select the Senior Principal;
(iii) The Employee/Principals' authority to set AM client
fees based on their judgment concerning the market for services rendered by AM;
(iv) The Employee/Principals' authority to establish AM's
operating expense budget and compensation practices, limited by "AM's Share of
Revenues" as provided in Section 10 (See Schedule V for example); and limited
further with respect to total cumulative cash incentive compensation for
Employee/Principals in the aggregate accrued in each of the years ending
December 31, 1994 and December 31, 1995, to $1.3 million plus incentive
compensation accrued in 1993 (it being understood
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that the Formula Payment is not to be regarded as cash incentive compensation
for any purposes);
(v) The Employee/Principals' authority to add and delete
Employee/Principals of AM in accordance with the Unifying Agreement; and
(vi) The recognition by UST and USTC that AM, in pursuit
of its "socially-sensitive" investment objectives, may take some public
positions which may not represent the views of UST or USTC management. The
Employee, however, recognizes that Employee's actions will remain subject to
the provisions of the Code of Ethics, Employment Policies, and certain other
key corporate policies of UST and USTC listed on and attached to Schedule II
hereto ("Policies"), as revised from time to time on a company-wide basis in
the ordinary course of UST's and USTC's business (which revisions shall be made
available to Employee at UST's principal office in Boston); and applicable
Federal and Massachusetts laws, regulations, policies, orders or understandings
in use by or applicable to UST and USTC.
(b) In the event that any of the "Independence Assurances" have
been materially breached and not cured pursuant to Section 18, the Employee
may act either individually or in concert with any other Employee/Principal or
Employee/Principals or other employees so as to constitute a "person" as
defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), in electing to terminate their Employment Agreements, e.g.
they may collectively decide to give five (5) days notice and leave USTC to
form a new business which may directly compete with AM's business and Sections
12, 13 and 14 of this Agreement will not apply.
SECTION 5A. OVERSIGHT FUNCTION OF USTC'S BOARD OF DIRECTORS.
USTC's Board of Directors (a majority of whom shall not be Employee/Principals)
shall continue to exercise its oversight function of the business activities of
AM. In performing such oversight function, USTC's Board the Directors will
assure itself that AM's business and operations are being conducted in a manner
consistent with applicable law and regulations, and such Board will be expected
to meet its fiduciary responsibilities to USTC and its depositors, and to UST,
in all respects, including without limitation, the prevention of corporate
waste of assets and taking steps to see that AM's business is operated with
their respective best interests in mind. If in performing such oversight
function, the Board causes UST or USTC to breach an Independence Assurance and
such breach is (a) confirmed by the arbitrator under Section 18 or not
contested by UST or USTC and (b) not cured within the applicable grace period,
the Employee may terminate this Agreement and the Employee will leave with the
rights described in Section 5(b) of this Agreement.
SECTION 6. MATTERS NOT CONSTITUTING "INDEPENDENCE ASSURANCES".
The following shall specifically not be considered as "Independence Assurances"
but shall nevertheless govern the relationship by and among UST, USTC and AM:
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<PAGE> 6
(a) The location of AM's business for a period of three years from
January 1, 1995 on two floors at 40 Court Street, Boston, MA. The Employee and
the other Employee/Principals shall cause AM to give twelve months written
notice of termination of such occupancy, if they so elect, no earlier than
December 31, 1996. "Fair Rental" shall be charged or allocated by UST or USTC
for AM's premises, and UST or USTC shall give AM "high priority" with respect
to remodeling and upgrading of space.
(b) Matters covered in a Memorandum dated September 14, 1994 on
"Capital Expenditures/Intercompany Charges" which is attached as Schedule VI
hereto.
(c) The taking of reasonable steps by the Employee and the other
Employee/Principals to cause that appropriate levels of profit from AM's
business to be reinvested in the business (infrastructure, systems, facilities,
product development, compensation to staff members who are not Principals,
additional staff) during the Total Term (as hereinafter defined). For the year
1995, the amount considered "appropriate" would be the investment of
approximately five percent (5%) of "Base Annual Revenues of AM" as defined in
Section 10.
(d) The amortization of AM capital expenditures over a period in
accordance with UST's and USTC's then current policy to the extent it is
consistent with GAAP. In connection with the foregoing capital expenditures,
at the reasonable request of AM funding will be provided by UST and/or USTC
which will charge AM a fair interest rate for the cost of capital employed.
(See also Schedule VI).
(e) The providing of such information as is reasonably necessary
for UST to manage its affairs and responsibilities subject to client
confidentiality, including but not limited to information necessary to comply
with generally accepted accounting principles ("GAAP") in the preparation of
financial statements, budgets and profit plans, and for shareholder
communications, and responses to regulatory requests.
(f) The actions of all Employee Principals shall remain subject,
without limitation, to the terms of UST's Code of Ethics, the Payment Approval
Policy and the other Policies set forth in Schedule II hereto.
SECTION 7. TERMINATION OF EMPLOYMENT BY USTC.
(a) Employee's employment may be terminated by USTC (by majority
vote of its Board of Directors) in the following circumstances:
At any time after due notice and reasonable opportunity to
correct such conduct, (i) in the event of Employee's material
breach of any of the terms of this Employment Agreement; (ii)
in the event of Employee
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causing a material breach of any of the other
Employee/Principals' duties to UST and USTC under Section 10
(Revenue Sharing Provision ); (iii) in the event of Employee's
willful misconduct in the performance of the Employee's duties
hereunder including, without limitation, but subject to
Sections 5 and 6 hereof, Employee's willful refusal to carry
out any "proper direction" by USTC's Board of Directors with
respect to the services to be rendered by Employee hereunder
or the manner of rendering such services; or (iv) in the event
of Employee's conviction of a crime involving moral turpitude.
The term "proper direction" as used in clause (iii) above, may
not be used in connection with an instruction, direction or
order which would cause UST or USTC to violate an
"Independence Assurance".
(b) In the event of Employee's death during the term of
employment, unless otherwise determined by the Employee/Principals acting
pursuant to the Unifying Agreement, USTC's and UST's obligations to pay further
compensation hereunder shall cease as of the date of death, except that any
amounts due under Section 11 hereof or otherwise owed to Employee under welfare
or benefit plans or for deferred compensation and any amounts heretofore
accrued under Sections 3.1 and 3.2 of the Unifying Agreement, shall be paid
when due to the Employee's estate or named beneficiary.
SECTION 8. OFFICE AND DUTIES. During the Original Term, any
Renewal Term, and the Phase II Term, if any, (hereinafter the "Total Term"),
Employee shall hold such positions and perform such duties relating to AM's
business and operations as are described on Schedule I hereto, and as may
otherwise from time to time be assigned to Employee by the Employee/Principals
consistent with all of the terms of this Agreement. During the Total Term and
while employed by USTC, Employee shall devote (except as noted on Schedule I)
substantially all of Employee's business time to the Employee's duties
hereunder and shall, to the best of Employee's ability, perform such duties in
a manner which will faithfully and diligently further the business and
interests of AM.
At any time while employed by USTC, Employee shall not directly or
indirectly solicit the business of any Past, Present, or Potential Clients (as
hereinafter defined) except on behalf and for the benefit of AM, or pursue any
other business activity, including, without limitation, serving as an officer,
director, employee, or adviser to any business entity other than AM, without
UST's and USTC's prior written consent; provided, however, that Employee may
without such consent, render without compensation investment advisory services
to immediate members of Employee's family, which shall include the Employee and
any trust or account which is comprised entirely of assets held for the benefit
of such Employee and/or immediate members of Employee's family, and may be
involved in such additional activities without such consent as are listed on
the Schedule I hereto. Employee agrees to travel to whatever
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extent is reasonably necessary in the conduct of AM's business. Except when
engaged in such travel, Employee's place of employment shall be in the greater
Boston area of Massachusetts unless otherwise agreed to by Employee, UST and
USTC, and the Employee/Principals acting in accordance with the Unifying
Agreement.
The term "Past Client" shall mean at any particular time any person or
entity who within three years prior to such time had been but at such time is
not an advisee, investment advisory customer, or client of AM.
The term "Present Client" shall mean at any particular time any person
or entity who is at such time an advisee, investment advisory customer, or
client of AM.
The term "Potential Client" shall mean at any particular time any
person or entity to whom AM, through any of the Employee/Principals or other of
its employees, has within three years prior to such time offered (by means of a
personal meeting, telephone call, or a letter or a written proposal
specifically directed to the particular person or entity) to serve as
investment adviser but who is not at such time an advisee or investment
advisory customer or client of AM. The preceding sentence is meant to exclude
form letters and blanket mailings.
The terms "Client" or "Client List" when used herein shall mean all
Past, Present, and Potential Clients as heretofore defined. The term "Client"
when used in this Employment Agreement with respect to wrap accounts, shall
mean the wrap sponsors and the brokers employed by such wrap sponsors but not
the underlying wrap account holders.
SECTION 9. BENEFITS. Employee shall participate, to the extent
Employee is eligible and in a manner and to an extent that is fair and
appropriate in light of the position and duties granted to Employee hereunder,
in all pension, profit-sharing, group insurance, or other fringe benefit plans
(other than UST corporate stock compensation plans) which UST or USTC may
hereafter in their absolute discretion make available generally to employees of
AM, but neither UST nor USTC will be required to establish any such program or
plan. Employee shall be entitled to such vacations and to reimbursement of
such expenses as UST's or USTC's policies allow to all employees having
comparable responsibilities and duties. So long as such additional benefits
are payable out of or accrue to "AM's Share of Revenues" as hereinafter
defined, the Employee/Principals may provide additional executive benefits to
themselves in addition to those provided by UST, provided that no such benefit
be qualified under Section 401 of the Internal Revenue Code or non-qualified
(under Section 401 of the Internal Revenue Code) pursuant to the terms of a
plan or arrangement which operates in a manner that is substantially similar or
mirrors a qualified plan, and provided further that the award of any such
benefits does not increase the cost to UST of providing benefits to UST
employees who are not employees of AM.
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SECTION 10. REVENUE SHARING PROVISION. The purpose of this
Revenue Sharing Provision is to provide UST with an acceptable stream of income
and to permit AM to retain a specified percentage of its revenues for use by
Employee/Principals, including the Employee, in their discretion in paying
expenses of operation, including compensation. It is intended to allow the
Employee and the other Employee/Principals to be compensated for enhancing and
growing AM's revenues in a substantial manner and to make operating decisions
freely within the limits of "AM's Share of Revenues," as such term is defined
below. See Schedule V for examples of Revenue Sharing calculations.
(a) ALLOCATION OF REVENUES. "Base Annual Revenues of AM" in 1994
and all subsequent years for purposes of this Revenue Sharing Provision shall
be AM's actual 1994 Revenues less $750,000, such total amount to be
appropriately modified to reflect changes in the United States Bureau of Labor
Statistics Cost of Living Index for the Boston Metropolitan Statistical Area or
any designated successor index for 1995 and all subsequent years. The term
"Revenues" shall mean AM's revenues calculated on an accrual basis in
accordance with GAAP, (excluding shared revenues paid to investment or other
firms or professionals and generated from AM clients), consistent with USTC's
usual practice.
During the pro-rated six month period commencing July 1, 1994 and
ending December 31, 1994, and for each calendar year and for portions
thereof on a pro-rated basis thereafter, AM shall retain sixty percent
(60%) ("Base AM Retention"), of AM's pro-rated actual Revenues and AM
shall make available to USTC for distribution to UST forty percent
(40%) ("Base UST Amount"), subject to adjustment as set forth in this
Section 10(a).
In 1995 and for each calendar year and for portions thereof on a
pro-rated basis thereafter, for each dollar of AM's annual revenues
over Base Annual Revenues of AM, AM shall retain an additional $.40,
and an additional $.60 shall be allocated to UST, provided that in no
event shall UST's Share of Revenues exceed fifty percent (50%) of
actual Annual Revenues of AM.
In 1995 and for each calendar year and for portions thereof on a
pro-rated basis thereafter, for each dollar that actual Annual
Revenues of AM are less than Base Annual Revenues of AM, Base AM
Retention shall be reduced by $.40 and the Base UST Amount shall be
reduced by $.60, provided that in no event shall UST's Share of
Revenues be less than thirty percent (30%) of Annual Revenues of AM.
Amounts retained by AM as aforesaid are herein referred to as "AM's
Share of Revenues". Amounts allocated to UST as aforesaid are herein referred
to as "UST's Share of Revenues".
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(b) FLOOR INCENTIVE. In addition, during the Original Term of
this Agreement (thirty months), AM shall retain a "Floor Incentive" of $40,000
per month from "UST's Share of Revenues" ($1.2 million in the aggregate). The
"Floor Incentive" shall be accrued by USTC and paid pursuant to subsection
(d)(iv) hereof, and shall be excluded from the limitations of Section 5(a)(iv)
of this Agreement. In the event of a material breach by UST or USTC of this
Agreement during the Original Term (which breach is not cured during the
applicable grace period and is either confirmed by the arbitrator under Section
18 hereof or not contested by UST or USTC), the Employee/Principals (for
distribution in accordance with the Unifying Agreement) may elect to receive an
aggregate lump-sum payment determined by multiplying (x) the monthly "Floor
Incentive" by (y) the remaining months in the Original Term. If a "Triggering
Event" occurs during the period January 1, 1995 through June 30, 1998, the
aggregate Floor Incentive, net of tax, accrued during the four full calendar
quarters next preceding the date of the Triggering Event, shall not be deducted
from "AM's After Tax Revenues" for purposes of calculating the Section 11
Formula Payment. Moreover, if a Triggering Event occurred before all Floor
Incentives have been paid, UST or USTC's successor shall assume responsibility
to make the remaining Floor Incentive payments.
(c) SPECIAL PROVISIONS. It is understood and agreed that:
(i) The balance of "Base AM Retention" for the period
July 1, 1994 through December 31, 1994 shall be paid
by UST or USTC to AM no later than February 15, 1995.
(ii) All amounts due to Robert B. Zevin pursuant to his
agreement dated September 30, 1994 with USTC shall be
considered as expenses to come out of "AM's Share of
Revenues" in each year in accordance with the
Unifying Agreement.
(iii) The application of this Section may make it
unattractive for AM to enter a business activity with
a profit margin of less then 40%. Accordingly, the
parties have agreed to negotiate separate "side
letters" with respect to revenue sharing on any new,
lower-margin business opportunities identified in the
future by AM and regarded as worthy of pursuit by UST
and/or USTC.
(iv) The parties hereto further understand and acknowledge
that the term "Revenues" as used herein is intended
to cover revenues of AM as they now exist and as they
may grow or contract internally, and not revenues
from the acquisition by UST or USTC of another
investment advisory firm concerning which the parties
hereto agree to negotiate in good faith as to revenue
sharing.
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(v) The investment return on allocated, but unexpended,
portions of AM's Share of Revenues shall be measured
at the end of each calendar quarter by multiplying
the average of the month end balances during such
quarter by the published thirteen week U.S. Treasury
Bill Rate at the end of such calendar quarter.This
interest income shall be added to "AM's Share of
Revenues".
(d) TRANSFER OF REVENUES TO UST; RETENTION OF REVENUES BY
USTC;COMPENSATION OF EMPLOYEE/PRINCIPALS.
(i) The Employee/Principals and AM shall use AM's Share
of Revenues to pay and provide for AM's business
expenses and expenditures including, without
limitation, investment in AM's business and new
products (see Section 6(d) above) and salaries of its
employees, except that any federal, state or local
income tax to which USTC is subject shall be the
responsibility of UST and shall not be treated as a
business expense of AM.
(ii) The Employee/Principals shall incur no expenses or
obligations on behalf of AM which exceed USTC's
ability to pay or provide for them when due out of
AM's Share of Revenues. The Employee/Principals
shall not incur obligations or make binding
commitments on behalf of USTC or UST not related to
AM's business and requiring expenditures by USTC in
excess of $50,000, or make representations to third
parties that they have the authority to do so.
However, the Employee/Principals may represent and
advertise that AM is a division of USTC and an
affiliate of UST, and other than as limited above in
this Section 10 (d)(ii), may incur obligations or
make binding commitments on behalf of USTC in the
ordinary course of business.
(iii) The Employee/Principals may (subject to Policies and
applicable laws and regulations) pay to AM's
employees, including the Employee and the other
Employee/Principals, at times and in amounts and
proportions determined in accordance with the
Unifying Agreement, the balance of AM's Share of
Revenues remaining after the payment of all of the
amounts required under subsection (d)(i) hereof and
subject to Section 5(a)(iv).
(iv) The Employee's Revenue Sharing compensation out of
"AM's Share of Revenues" shall be allocated in
accordance with the terms of the Unifying Agreement.
The Employee/Principals have provided to UST and USTC
in the Unifying Agreement their procedures for
determining changes, if any, in the allocation of
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Revenues among the Employee/Principals. If an
Employee/Principal chooses to leave USTC's employ
after bypassing this change determination mechanism
or refusing to abide by its results, the
Employee/Principal shall be deemed to have committed
a material breach of this Employment Agreement.
(v) The Employee/Principals and AM shall make available
to UST, UST's Share of Revenues upon reasonable
request by UST and action by USTC's Board of
Directors. The Employee/Principals shall not spend
or incur obligations to spend any part of UST's Share
of Revenues.
(e) ADMINISTRATION. The parties hereto and the other
Employee/Principals agree to meet and consult to endeavor in good faith to
agree on appropriate procedures, in addition to Policies and applicable laws
and regulations, for administering the provisions of this Section 10.
The Employee/Principals shall retain control over all expenditures of
AM, subject to the power of USTC's Board of Directors to exercise its rights
under Section 5A, and subject to this Revenue Sharing Provision, and
recognizing that AM is a division of USTC.
(f) TERM AND STATUS AS PARTIES. This Revenue Sharing Provision
shall continue in effect until terminated by agreement of UST, USTC, and the
Employee/Principals acting in accordance with the Unifying Agreement. If the
employment of Employee by USTC ceases other than as a result of a material
breach by UST or USTC of this Employment Agreement, such Employee shall
thereupon automatically cease to be a party to this Revenue Sharing Provision
and to have any rights or obligations under this Section, and shall cease to be
an Employee/Principal for the purposes of this Provision. Nothing in this
Employment Agreement shall be construed to grant to the Employee any right to
be employed by USTC beyond the terms of this Employment Agreement.
SECTION 11. FORMULA PAYMENT. If Employee is still employed by
USTC at the time of a "Triggering Event" (as hereinafter defined), the Employee
shall receive Employee's share of a formula payment (the "Formula Payment") as
follows:
(a) Unless otherwise agreed by the Employee/Principals acting in
accordance with the Unifying Agreement, the Employee's share of the Formula
Payment shall be the percentage set forth after the Employee's name on Schedule
III hereto;
(b) The "Formula Payment" shall be 3.33 times "AM's After Tax
Revenues" (as hereinafter defined and meaning generally UST's Share of Revenues
minus taxes);
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(c) "AM's After Tax Revenues" shall be the portion of AM's
after-tax Revenues contributed, accruing or allocated to UST for the four full
calendar quarters next preceding the date of the Triggering Event; determined
in accordance with GAAP consistently applied in such periods. For purposes of
this Subsection, there shall be assumed a combined federal and state tax rate
of 38%, such rate to be appropriately adjusted to reflect changes in applicable
federal and state corporate tax rates. An example of this calculation is set
forth on Schedule V.
(d) The Formula Payment shall be adjusted in accordance with
Schedule IV hereto for gain or loss of AM clients between the signing of a
definitive merger, consolidation or acquisition agreement or an agreement
related to another Triggering Event and the Closing Date related to any such
Triggering Event.
(e)
(i) At the Closing Date of a Triggering Event, three Key
Employees shall be identified as follows. For every
person who has been an Employee/Principal at any time
during the previous 15 months there shall be
calculated a Weighted Average Share equal to the sum
of (a) the share of the Formula Payment such person
was entitled to receive from time-to-time during the
preceding 15 months in accordance with Schedule III
and subsequent changes thereto by the
Employee/Principals acting in accordance with the
Unifying Agreement times (b) the number of days such
person was entitled to each such share. The three
persons among those who are or have been
Employee/Principals on the Closing Date of the
Triggering Event or during the previous 15 months who
have the three highest Weighted Average Shares shall
be deemed the "Key Employees".
(ii) If only one of the three Key Employees is no longer
in the employ of USTC as of the Closing Date of such
Triggering Event, then all of that Key Employee's
Weighted Average Share of the Formula Payment
(expressed by X%) shall be placed in escrow in the
manner contemplated by Section 11(f). To determine
the distribution of each of the three escrowed
installments use the following formula. Revenues of
AM (as defined in Section 10(a)) for the last full
calendar year prior to a Triggering Event should then
be determined (the "Measuring Year"). Such Revenues
of AM for the Measuring Year multiplied by a decimal
representing 100% - X% equals the "Minimum Revenues".
If during the next full calendar year following the
Measuring Year, Revenues of AM are equal to or less
than Minimum Revenues none of the one-third of the
escrowed amount for such year will be paid to the
remaining Employee/Principals in accordance with this
Section and all of it will be retained by UST's or
USTC's successor. If Revenues of AM for
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<PAGE> 14
that calendar year exceed Minimum Revenues, (i) take
the U.S. Dollar amount of such excess above the
Minimum Revenues and divide it by the Revenues of AM
for the Measuring Year minus the Minimum Revenues,
(ii) then multiply the resulting fraction by
one-third of the full escrowed amount, (iii) the
product of the foregoing formula should be delivered
to the remaining Employee/Principals as a group for
distribution in accordance with the Unifying
Agreement and the remainder of that installment
should be retained by UST or UST's successor.
Similar calculations should be made for the second
and third installments, but in each case using the
same Minimum Revenues.
(iii) If two or more of the Key Employees are no longer in
the employ of USTC as of the Closing Date of such
Triggering Event, then 100% of the Formula Payment
shall be placed in escrow in the manner contemplated
by Section 11(f). To determine the distribution of
each of the three escrowed installments use the
following formula. If Revenues of AM for the last
full calendar year prior to the distribution date of
the applicable escrow installment equal or exceed
Revenues of AM for the Measuring Year, all of that
escrowed installment should be distributed to the
remaining Employee/Principals as a group for
distribution in accordance with the Unifying
Agreement and none should be retained by UST or
USTC's successor. If Revenues of AM for the last
full calendar year prior to the distribution date of
the applicable escrow installment are less than
Revenues of AM for the Measuring Year, divide the
U.S. Dollar amount of Revenues of AM for such last
full calendar year by the U.S. Dollar amount of
Revenues of AM for the Measuring Year and multiply
the resulting fraction by one-third of the full
escrowed amount. The product of the foregoing
calculation should be delivered to the remaining
Employee/Principals as a group for distribution in
accordance with the Unifying Agreement and the
remainder should be retained by UST's or USTC's
successor.
(f) Seventy percent (70%) of the Employee's share of the Formula
Payment shall be paid in cash within twenty (20) days of the Closing Date of
the Triggering Event. The remaining thirty percent (30%) shall be placed in
escrow with an escrow agent acceptable to both UST and Employee/Principals and
paid to the Employee or the Employee's estate as provided in Section 7(b) in
installments of one third of the escrowed amount at the end of years one, two
and three (which may not be calendar years) after the Closing Date of the
Triggering Event plus interest, at the interest rates on the date of the
Closing Date of the Triggering Event of one, two and three year Treasury
securities, provided that at the time of each such installment payment, the
Employee has not been terminated with cause or for a material breach or has not
voluntarily ceased to be employed by AM.
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(g) A "Triggering Event" shall be deemed to have occurred when:
(i) there occurs the signing of a definitive agreement of
merger or consolidation of UST or USTC with any other
corporation, other than a merger or consolidation
which would result in the voting securities of UST or
USTC outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of
UST or USTC, or such surviving entity outstanding
immediately after such merger or consolidation;
provided, however, that a merger or consolidation
effected to implement a recapitalization,
reorganization or restructuring of UST or USTC (or
similar transaction) in which no "person" (as defined
in (g)(iii) below) acquires more than fifty percent
(50%) of the combined voting power of UST's then
outstanding securities shall not constitute a
Triggering Event; or
(ii) there occurs a closing of a sale or other disposition
by UST of more than 50% of UST's, USTC's or AM's
business and assets; or
(iii) any "person", as such term used in Section 13(d) and
14(d) of the Exchange Act other than UST or USTC or
any of their respective subsidiaries or affiliates or
any trustee or other fiduciary holding securities
under an employee benefit plan of either of them or
any of their subsidiaries or affiliates, becomes a
beneficial owner (within the meaning of Rule 13d-3,
as amended, as promulgated under the Exchange Act),
directly or indirectly, of securities representing
50% percent or more of the combined voting power of
UST's or USTC's then outstanding securities.
If (i) more than 50% of UST's then outstanding common stock or assets
are acquired by a "person" whose consolidated assets prior to the Triggering
Event were less than $4 billion or (ii) UST's business assets and operations
are consolidated with those of another bank or bank holding company and the
resulting entity has consolidated assets of $5.5 billion or less, a Triggering
Event shall be deemed to have occurred, but the length of the Phase II term of
employment of the Employee shall be increased automatically by one additional
year.
(h) If UST agrees to be acquired by an entity with a public image
so starkly negative that AM's affiliation with that entity would be reasonably
likely, by itself, to cause a loss of more than 25% of AM's gross revenues in
one year (unless the parties
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<PAGE> 16
mutually agree to the contrary), the Employee/Principals at their option acting
pursuant to the terms of the Unifying Agreement (and provided such right is
exercised within 30 days of the public announcement of such acquisition) will
be relieved of all of the Employee's obligations under the Phase II Term and no
Formula Payment will be made.
(i) The parties acknowledge that any such Formula Payment is
intended to compensate the Employee for: (i) the automatic extension of this
Agreement occurring by reason of a Triggering Event; (ii) the Phase II
Non-Competition covenants specified in Section 12; and (iii) the loss of
opportunity to make up for reduced rate of compensation which such Employee
earned with USTC for periods prior to the effective date of this Agreement.
SECTION 12. PHASE II NON-COMPETITION COVENANTS.
(a) During the longer of the Phase II Term (as defined in Section
4) if Phase II shall commence while Employee is employed by USTC hereunder or
while Employee is employed by USTC during or after such Phase II Term
hereunder, Employee shall not, except in the course of his employment with
USTC, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an
officer, director, employee, partner, stockholder,
consultant, adviser, subsidiary, affiliate,
independent contractor or otherwise, investment
advisory services to any person or entity;
(ii) Interfere with AM's relations with any person or
entity who at any time during such period was a
Client (which means Past, Present, and Potential
Client); or
(iii) Induce or attempt to induce directly or indirectly
any professional employee of AM to terminate his or
her employment or hire or attempt to hire, directly
or indirectly, any such person, other than by
discharge of such person as a part of Employee's
duties.
(b) Until one year following the end of the Phase II Term, if the
Phase II Term should commence while Employee is employed by USTC hereunder or
one year following the termination of Employee's employment with USTC during or
after such Phase II Term, Employee shall not, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an
officer, director, employee, partner, independent
contractor or otherwise, investment advisory services
to any person or entity who as of the date of the
termination or expiration of Employee's employment
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<PAGE> 17
with USTC was or had been a Client (which means Past,
Present, and Potential Client);
(ii) Interfere with AM's relations with any person or
entity who as of the date of the termination or
expiration of Employee's employment with USTC was a
Client (which means Past, Present, and Potential
Client); or
(iii) Induce or attempt to induce directly or indirectly
any professional employee of AM to terminate his or
her employment or hire or attempt to hire, directly
or indirectly, any such person.
(c) Notwithstanding the provisions of subsections (a)(i) and
(b)(i), the Employee may render without compensation investment advisory
services to any immediate member of Employee's family, which shall include the
Employee and any trust or account which is comprised entirely of assets held
for the benefit of such Employee and/or immediate members of such Employee's
family, and may engage in such other activities as are listed on Schedule I
hereto.
(d) Employee and USTC agree that the periods of time and the
unlimited geographic area applicable to the covenants of this Section 12 are
reasonable, in view of the receipt and expected receipt of the Employee's share
of Revenue Sharing as provided in Section 10(c), and other compensation, and
the Formula Payment provided herein; the geographic scope and nature of the
business in which AM is engaged; Employee's knowledge of AM's business; and
Employee's relationships with AM's investment advisory clients. However, if
such period or such area should be adjudged unreasonable in any judicial
proceeding, then the period of time shall be reduced by such number of months
or such area shall be reduced by elimination of such portion of such area, or
both, as are deemed unreasonable, so that this covenant may be enforced in such
area and during such period of time as are adjudged to be reasonable.
SECTION 13. ALL BUSINESS TO BE THE PROPERTY OF USTC; ASSIGNMENT
OF INTELLECTUAL PROPERTY. During the Phase II Term if Phase II shall commence
while Employee is Employed by USTC hereunder and thereafter while Employee is
employed by AM and/or USTC:
(a) Employee agrees that any and all presently existing investment
advisory business of AM and all business developed by Employee or any other
employee of AM, including without limitation all investment advisory contracts,
fees, commissions, compensation records, Client Lists (as defined in Section
8), agreements, and any other incident of any business developed or sought by
AM or earned or carried on by Employee for AM, are and shall be the exclusive
property of USTC for its sole use, and (where applicable) shall be payable
directly to USTC.
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<PAGE> 18
(b) Employee hereby grants to USTC (without any separate
remuneration or compensation other than that received by Employee from time to
time in the course of his or her employment) Employee's entire right, title,
and interest throughout the world in and to, all research, information, Client
Lists, and all other investment advisory, technical and research data made,
conceived, developed and/or acquired by Employee solely or jointly with others
during the period of Employee's employment by USTC, which relate to investment
advice as it was or is now rendered or as it may, from time to time, hereafter
be rendered or proposed to be rendered, but excluding such individual's ideas
and thought processes which are not embodied in written or machine readable
form (all such non-excluded items being referred to as "Intellectual
Property").
SECTION 14. CONFIDENTIALITY. Except in performance of services
for USTC, Employee shall not, either during the Phase II Term if Phase II shall
commence while the Employee is employed by USTC hereunder or thereafter while
employed by AM and/or USTC, use for Employee's own benefit or disclose to or
use for the benefit of any person outside USTC, any information not lawfully
available to the public concerning any Intellectual Property, including Client
Lists, whether Employee has such information in his or her memory or embodied
in writing or other tangible form. All such Intellectual Property and such
information concerning Intellectual Property, and all originals and copies of
any Intellectual Property, and any other written material relating to the
business of AM, shall be the sole property of USTC. During such Term or
thereafter, upon the termination of Employee's employment in any manner or for
any reason, Employee shall promptly surrender to USTC all originals and copies
of any Intellectual Property, and Employee shall not thereafter use any
Intellectual Property.
The foregoing notwithstanding, Employee will have no obligation to AM
or USTC with respect to the disclosure or use of any Intellectual Property or
information concerning Intellectual Property if:
(a) Such Intellectual Property or information is or becomes publicly
known or otherwise enters the public domain through no wrongful act of
Employee; or
(b) Such Intellectual Property or information is received from a
third party which has no obligation to UST or USTC to maintain it in
confidence.
Notwithstanding the references to Client Lists above, it shall not be
a violation of this Section or Section 13 hereof for Employee to communicate or
do business with any Past, Present or Potential Client in the course of
Employee's employment with AM and USTC, and any such conduct shall be limited,
if at all, solely by Section 12 hereof.
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SECTION 15. NOTICES. Any notice or other communication hereunder
shall be given as follows:
United States Trust Company
40 Court Street
Boston, MA 02108
Fax: (617) 726-7320
Attn: Neal F. Finnegan, Chairman, Executive
Committee
UST Corp.
40 Court Street
Boston, MA 02108
Fax: (617) 726-7320
Attn: Neal F. Finnegan, President & CEO
With copies to Eric R. Fischer, Executive Vice President and General Counsel
Fax: (617) 726-7209
Employee:
Stephen K. Moody
217 Lexington Avenue
Cambridge, MA 02138
Fax: (if any)
with copy to Peter M. Rosenblum
Foley, Hoag & Eliot
1 Post Office Square
Boston, MA, 02109
Fax: (617) 832-7000
SECTION 16. ASSIGNABILITY. This Employment Agreement shall be
binding upon and inure to the benefit of UST, USTC, and to any person or firm
who may succeed to the business of UST, USTC, or AM. This Employment Agreement
shall not be assignable by Employee, but it shall inure to the benefit of
Employee's heirs, executors, administrators and legal representatives.
SECTION 17. ENTIRE AGREEMENT. This Employment Agreement and the
Unifying Agreement contain the entire agreement between USTC and Employee with
respect to the subject matter hereof, and supersede all prior oral and written
agreements between any of UST, USTC, AM and the Employee with respect to the
subject matter hereof, including without limitation any oral agreements
relating to compensation.
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SECTION 18. ARBITRATION. In the event the parties hereto
disagree as to whether a material breach has occurred of: (i) the "Independence
Assurances" under Section 5; (ii) USTC's right of termination of Employee's
employment under Section 7; (iii) this Agreement by USTC as described in
Section 19 (b); (iv) the revenue sharing provisions of Section 10; or (v) the
formula payment provisions of Section 11, such dispute shall be settled by
arbitration before a single arbitrator to be then named by UST and a majority
of the Employee/Principals acting in accordance with the Unifying Agreement, in
Boston, Massachusetts in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. If such arbitrator cannot serve, then a
successor shall be appointed in accordance with such Rules. If the arbitrator
finds that there has been a material breach (and such breach has not been cured
by UST or USTC within sixty (60) days of such finding or by Employee in
accordance with Section 7 hereof), then the remedies provided for in Section 19
shall become available, as appropriate.
SECTION 19. EQUITABLE RELIEF AND OTHER REMEDIES.
(a) Employee recognizes and agrees that UST's, USTC's or the
Employee/Principals' remedies at law for any breach of the provisions of
Sections 12, 13 and 14 hereof would be inadequate and that for breach of such
provisions UST, USTC and the Employee/Principals shall, in addition to such
other remedies as may be available to any of them at law or in equity or as
provided in this Employment Agreement, be entitled to injunctive relief and to
enforce their respective rights by an action for specific performance to the
extent permitted by law, and to the right of set-off against any amounts due to
the Employee by UST, USTC or AM. Should Employee engage in any activities
prohibited by this Employment Agreement, he or she agrees to pay over to USTC
or UST all compensation received in connection with such activities. Such
payment shall not impair any other rights or remedies of UST, USTC or AM or
affect the obligations or liabilities of Employee under this Employment
Agreement or applicable law.
(b) Any termination by USTC of Employee's employment which is not
authorized by Section 7 hereof shall constitute a material breach of this
Agreement. In the event of a material breach of this Agreement by UST or USTC
which is not cured pursuant to Section 18, in addition to any other rights or
remedies which the Employee may have, at law, in equity or otherwise, USTC
shall pay Employee the Employee's then current Annual Base Salary for a period
equal to the greater of (i) twelve months or (b) the balance of the then
current term of this Agreement. Any such payments shall not constitute part of
AM's Share of Revenues. Should such a material breach occur and not be so
cured, the Employee shall be free to compete, Sections 12, 13 and 14 shall not
apply and the Employee shall leave with the rights described in Section 5(b) of
this Agreement.
(c) Without limiting the generality of the foregoing, the parties
expressly agree
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that termination without cause of Employee's employment hereunder during the
Phase II Term by UST, USTC or any other person or entity will constitute a
material breach of this Agreement and, in addition to any other rights or
remedies which the Employee may have, at law, in equity or otherwise, shall
give Employee the right to salary continuation as set forth in Section 19(b)
hereof.
SECTION 20. WAIVERS AND FURTHER AGREEMENTS. Neither this
Employment Agreement nor any term or condition hereof, including without
limitation the terms and conditions of this Section 20, may be waived in whole
or in part as against UST, USTC, AM or Employee except by written instrument
executed by each of them, expressly stating that it is intended to operate as a
waiver of this Employment Agreement or the applicable term or condition hereof.
Each of the parties hereto agrees to execute all such further instruments and
documents and to take all such further action as the other party may reasonably
require in order to effectuate the terms and purposes of this Employment
Agreement as stated herein. Furthermore, no waiver may violate the terms of
the Unifying Agreement and any waiver shall require action of the
Employee/Principals in accordance with the Unifying Agreement authorizing such
waiver.
SECTION 21. AMENDMENTS. This Employment Agreement may not be
amended, nor shall any parties be added hereto, nor any change, modification,
consent, or discharge be effected except by written instrument executed by all
three of the Employee, USTC and UST. Furthermore, no amendment or modification
may violate the terms of the Unifying Agreement and any amendment or
modification shall require action of the Employee/Principals in accordance with
the Unifying Agreement authorizing such amendment or modification.
SECTION 22. SEVERABILITY. If any provision of this Employment
Agreement shall be held or deemed to be invalid, inoperative or unenforceable
in any jurisdiction or jurisdictions, because of conflicts with any
constitution, statute, rule or public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision in question
unenforceable in any other jurisdiction or in any other case or circumstance or
of rendering any other provisions herein contained unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Employment Agreement
shall be reformed and construed in any such jurisdiction or case as if such
invalid, inoperative, or unenforceable provision had never been contained
herein and such provision reformed so that it would be enforceable to the
maximum extent permitted in such jurisdiction or in such case.
SECTION 23. NO CONFLICTING OBLIGATIONS. Employee represents and
warrants to USTC and UST that Employee has no other interest or obligation
which is inconsistent or in conflict with this Employment Agreement or which
would prevent, limit, or impair, in any way, Employee's performance of any of
the covenants or duties
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hereinabove set forth.
SECTION 24. PARTIES. It is understood and agreed that UST joins
in this Employment Agreement only as to such matters where its name appears
herein. It is further understood and agreed that no person shall participate
in the benefits conferred on Employee/Principals by the terms of this and other
similar Employment Agreements unless such person has become a party to a
similar Employment Agreement or is described in Section 16.
SECTION 25. GOVERNING LAW. This Employment Agreement shall be
governed by and construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts which apply to contracts executed and performed
solely in Massachusetts. UST, USTC and the Employee hereby consent to the
jurisdiction of any state or federal court located within Suffolk County,
Massachusetts, and assent that service of process may be made by registered
mail to the parties' respective addresses as provided in Section 15 hereof and
shall be effective in the same manner as notices are effective under such
Section 15.
SECTION 26. ACTION OF THE EMPLOYEE/PRINCIPALS. Whenever the
Consent of the Employee/Principals shall be described herein, action by the
Employee/Principals or their duly authorized representative shall be required
in accordance with the Unifying Agreement, and such action shall be sufficient
hereunder.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as a sealed instrument as of the date first above written.
EMPLOYEE: UNITED STATES TRUST COMPANY
/s/ Stephen K. Moody By: /s/ Neal F. Finnegan
-------------------- --------------------
Stephen K. Moody Title
Joined in as to those matters where its name appears.
UST CORP.
By:/s/ Neal F. Finnegan
--------------------
Title:
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EXHIBIT 10(y)(iv)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of February 14, 1995 and effective January 1, 1995
between United States Trust Company ("USTC"), a banking and trust company
having its principal place of business in Boston, Massachusetts, and joined in
as to certain matters by UST Corp. ("UST"), a Massachusetts corporation also
having its principal place of business in Boston, Massachusetts and the parent
of USTC; and Lucia B. Santini (the "Employee").
BACKGROUND
----------
The Employee and the other principals of the Asset Management Division
of USTC ("AM") listed on Schedule I hereto and such other principals as may be
added pursuant to the Unifying Agreement (as hereinafter defined) (all such
employees, while they remain principals, being referred to herein from time to
time as "Employee/Principals") are concerned that previous UST and USTC
practices have not allowed for enough spending to generate growth in AM's
business, or for fully competitive compensation for its principals; want
assurances of continued freedom to manage the AM business; want to participate
in an incentive compensation program which reflects the value created in this
business; and want to make it attractive to any potential acquirer of UST, USTC
or AM to (i) protect existing relationships with AM employees and clients, (ii)
avoid re-writing existing client contracts, and (iii) further AM as a separate
business conducted under the name "United States Trust Company".
UST and USTC want to stabilize and increase the profitability of AM;
pay competitive compensation; provide incentive compensation reflecting the
growth in the business of AM; and (in the event of a "Triggering Event" as
hereinafter defined) offer an opportunity to a prospective purchaser to retain
the services of Employee and the other Employee/Principals and thereby receive
a continuing stream of profits from AM.
UST and USTC recognize the importance of Employee to their business
and to USTC's ability to retain AM client relationships, and desire that USTC
employ Employee as an officer and principal of AM for the period of employment
and upon and subject to the terms herein provided.
UST and USTC wish to be assured that Employee will not compete with
AM's business during the period of employment, and in certain circumstances and
as set forth below will not for a period thereafter solicit any Past, Present,
or Potential Clients (as hereinafter defined) of AM and will not by such
solicitation damage USTC's and AM's goodwill among its clients and the general
public.
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Employee desires to be employed by USTC and serve as an
Employee/Principal of AM and to participate in the incentive compensation
program contemplated by this agreement, and to refrain from competing with USTC
or AM or soliciting AM's clients for the periods and upon and subject to the
terms herein provided.
Employee has been employed by USTC and AM for approximately 21 years;
has while so employed contributed to the acquisition and retention of AM's
clients, and will continue to seek to acquire and retain clients and to
generate goodwill for AM in the future as an officer and employee of USTC and
an Employee/Principal of AM for the periods and on the terms contemplated
hereby.
When the terms "AM," "AM's business," or the "AM Division" are used
herein, such terms specifically exclude the non- investment advisory business
of USTC such as (1) the business of UST Capital Corp. (venture capital) and (2)
the management of USTC's internal securities portfolio. Such terms, however,
include the investment return on allocated, but unexpended, portions of AM's
Share of Revenues as reflected on Schedule V. The investment return on
allocated, but unexpended, portions of AM's share of revenues shall be measured
at the end of each calendar quarter by multiplying the average of the month end
balances during such quarter by the published thirteen week U.S. Treasury Bill
Rate at the end of such calendar quarter and such interest income shall be
added to "AM's Share of Revenues". All current Employee/Principals are listed
on Schedule I.
Employee, the other Employee/Principals, UST and USTC have entered
into an agreement of even date herewith (the "Unifying Agreement") which
describes generally their agreements and certain procedures they have agreed to
follow among themselves. This Employment Agreement is executed pursuant to and
in accordance with the terms of the Unifying Agreement. Certain capitalized
terms used but not defined herein shall have the meanings given them in the
Unifying Agreement.
AGREEMENTS
----------
In consideration of the premises, the mutual covenants and the
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
SECTION 1. ORIGINAL TERM OF EMPLOYMENT; COMPENSATION. USTC
agrees to employ Employee for a period of two and one-half (2 1/2) years
beginning on the date hereof (the "Original Term") as an officer of USTC and an
Employee/Principal of AM; and Employee hereby accepts such employment. USTC
will pay Employee for Employee's services during the Original Term, and any
Renewal Term (as hereinafter provided) and any Phase II Term, the Annual Base
Salary set forth on Schedule I hereto, and such additional annual incentive
payments as shall be determined by the
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Employee/Principals consistent with the Revenue Sharing Provision (Section 10
hereof), and subject to such payroll and withholding deductions as are
required by law. Consistent with the Revenue Sharing Provision, the Employee's
total compensation will be reviewed at least annually in accordance with the
Unifying Agreement, having in mind that such compensation be fair and
reasonable in light of Employee's position and the duties to be performed by
the Employee and the Employee's efforts to enhance the business of AM.
SECTION 2. RENEWAL TERMS. If no "Triggering Event" has occurred
and this Agreement has not been terminated by either party (all as hereinafter
provided) prior to the end of the Original Term, then the Original Term shall
be automatically extended for successive six month renewal terms (each referred
to herein as a "Renewal Term", or collectively as "Renewal Terms") until such
Triggering Event or termination has occurred, or until the Employee shall have
provided at least six months advance written notice to UST and USTC of election
not to enter a Renewal Term.
SECTION 3. NOTICE OF TERMINATION OF ORIGINAL TERM BY EMPLOYEE.
On or before the last day of the second year of the Original Term and assuming
that this Agreement has not been earlier terminated or entered upon the Phase
II Term (all as hereinafter provided), the Employee may give written notice to
UST and USTC of termination, whereupon all the provisions of this Agreement
will terminate (except as noted below in this Section 3) on the last day of the
Original Term. If there has been a material breach of this Agreement by
Employee at any time during the Original Term or any Renewal Term, and the
arbitration under Section 18 hereof has confirmed that a material breach has
been committed by the Employee and such breach is uncured during the applicable
grace period, then the Employee will be subject in full to all of the
restrictions of Section 12, 13 and 14 hereof for the remainder of the
applicable term plus 90 days. However, should the Employee terminate this
Agreement without a material breach at the end of the Original Term or at the
end of any Renewal Term, Sections 12, 13 and 14 of this Agreement shall not
apply. Notwithstanding the foregoing, should the Employee terminate this
Agreement as described in either of the immediately preceding two sentences,
UST and USTC will retain all of their respective common law rights against the
Employee with respect to confidentiality, protection of customer lists, trade
secrets, non-competition and similar matters.
SECTION 4. PHASE II TERM. If a Triggering Event occurs during
the Original or a Renewal Term, any such term shall automatically terminate and
the Phase II Term shall commence as of the earlier of the date of signing of a
definitive merger or acquisition agreement or the date of occurrence of such
Triggering Event. The Phase II Term shall be for a period of three years from
the Closing Date under such definitive merger, consolidation or acquisition
agreement, or the date of the agreement related to any other such Triggering
Event, but in no event for longer than four years from such signing date, and
shall be terminable in the same manner as the Original
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Term under Section 3 above (the "Phase II Term"). The "Closing Date" shall mean
the date on which the merger or consolidation becomes effective, the
acquisition is consummated or the change in corporate ownership related to any
other such Triggering Event takes effect. If the revenues of the AM business
decline precipitously and the Formula Payment described in Section 11 below
would be less than $3 Million, then the Employee may decline to accept the
Formula Payment and the Phase II Term. If the AM revenues likewise decline,
and the Formula Payment described in Section 11 below would be less than $5
Million, the Employee/Principal may elect to reduce the Phase II Term by one
year.
SECTION 5. TERMINATION BY EMPLOYEE FOR BREACH OF "INDEPENDENCE
ASSURANCES." In the event of the material breach by UST or USTC (or their
respective successors) of any one or more of the "Independence Assurances"
listed below, the Employee/Principals, acting in accordance with the Unifying
Agreement, shall have the right (subject to compliance with Section 18 hereof)
but not the obligation, upon 30 days prior written notice to UST and USTC, to
terminate this Agreement.
(a) "Independence Assurances" shall consist of UST's and USTC's
non-interference (unless requested by the Employee/Principals of AM acting in
accordance with the Unifying Agreement) in the following:
(i) The Employee/Principals control of AM's investment
philosophy and investment approach, business strategy, conduct of investment
analysis, portfolio selection, marketing, client retention and acceptance of
new clients, and client service;
(ii) Authority of the Employee/Principals to hire and fire AM
personnel within the scope of UST's "Policies" (as hereinafter defined) and
applicable Federal and Massachusetts laws, subject to UST's right to approve
any person chosen by the Employee/Principals as the Senior Principal of AM,
which person shall also serve initially (i) as the Chief Executive Officer of
USTC, and (ii) on USTC Board of Directors. UST, as sole shareholder of USTC,
subject to the terms of the Unifying Agreement and this Agreement, will at all
times retain the right to select a Chief Executive Officer of USTC who is not
an employee of AM. USTC will not, however, select the Senior Principal;
(iii) The Employee/Principals' authority to set AM client
fees based on their judgment concerning the market for services rendered by AM;
(iv) The Employee/Principals' authority to establish AM's
operating expense budget and compensation practices, limited by "AM's Share of
Revenues" as provided in Section 10 (See Schedule V for example); and limited
further with respect to total cumulative cash incentive compensation for
Employee/Principals in the aggregate accrued in each of the years ending
December 31, 1994 and December 31, 1995, to $1.3 million plus incentive
compensation accrued in 1993 (it being understood
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THAT the Formula Payment is not to be regarded as cash incentive compensation
for any purposes);
(v) The Employee/Principals' authority to add and delete
Employee/Principals of AM in accordance with the Unifying Agreement; and
(vi) The recognition by UST and USTC that AM, in pursuit
of its "socially-sensitive" investment objectives, may take some public
positions which may not represent the views of UST or USTC management. The
Employee, however, recognizes that Employee's actions will remain subject to
the provisions of the Code of Ethics, Employment Policies, and certain other
key corporate policies of UST and USTC listed on and attached to Schedule II
hereto ("Policies"), as revised from time to time on a company-wide basis in
the ordinary course of UST's and USTC's business (which revisions shall be made
available to Employee at UST's principal office in Boston); and applicable
Federal and Massachusetts laws, regulations, policies, orders or understandings
in use by or applicable to UST and USTC.
(b) In the event that any of the "Independence Assurances" have
been materially breached and not cured pursuant to Section 18, the Employee
may act either individually or in concert with any other Employee/Principal or
Employee/Principals or other employees so as to constitute a "person" as
defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), in electing to terminate their Employment Agreements, e.g.
they may collectively decide to give five (5) days notice and leave USTC to
form a new business which may directly compete with AM's business and Sections
12, 13 and 14 of this Agreement will not apply.
SECTION 5A. OVERSIGHT FUNCTION OF USTC'S BOARD OF DIRECTORS.
USTC's Board of Directors (a majority of whom shall not be Employee/Principals)
shall continue to exercise its oversight function of the business activities of
AM. In performing such oversight function, USTC's Board the Directors will
assure itself that AM's business and operations are being conducted in a manner
consistent with applicable law and regulations, and such Board will be expected
to meet its fiduciary responsibilities to USTC and its depositors, and to UST,
in all respects, including without limitation, the prevention of corporate
waste of assets and taking steps to see that AM's business is operated with
their respective best interests in mind. If in performing such oversight
function, the Board causes UST or USTC to breach an Independence Assurance and
such breach is (a) confirmed by the arbitrator under Section 18 or not
contested by UST or USTC and (b) not cured within the applicable grace period,
the Employee may terminate this Agreement and the Employee will leave with the
rights described in Section 5(b) of this Agreement.
SECTION 6. MATTERS NOT CONSTITUTING "INDEPENDENCE ASSURANCES".
The following shall specifically not be considered as "Independence Assurances"
but shall nevertheless govern the relationship by and among UST, USTC and AM:
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(a) The location of AM's business for a period of three years from
January 1, 1995 on two floors at 40 Court Street, Boston, MA. The Employee and
the other Employee/Principals shall cause AM to give twelve months written
notice of termination of such occupancy, if they so elect, no earlier than
December 31, 1996. "Fair Rental" shall be charged or allocated by UST or USTC
for AM's premises, and UST or USTC shall give AM "high priority" with respect
to remodeling and upgrading of space.
(b) Matters covered in a Memorandum dated September 14, 1994 on
"Capital Expenditures/Intercompany Charges" which is attached as Schedule VI
hereto.
(c) The taking of reasonable steps by the Employee and the other
Employee/Principals to cause that appropriate levels of profit from AM's
business to be reinvested in the business (infrastructure, systems, facilities,
product development, compensation to staff members who are not Principals,
additional staff) during the Total Term (as hereinafter defined). For the year
1995, the amount considered "appropriate" would be the investment of
approximately five percent (5%) of "Base Annual Revenues of AM" as defined in
Section 10.
(d) The amortization of AM capital expenditures over a period in
accordance with UST's and USTC's then current policy to the extent it is
consistent with GAAP. In connection with the foregoing capital expenditures,
at the reasonable request of AM funding will be provided by UST and/or USTC
which will charge AM a fair interest rate for the cost of capital employed.
(See also Schedule VI).
(e) The providing of such information as is reasonably necessary
for UST to manage its affairs and responsibilities subject to client
confidentiality, including but not limited to information necessary to comply
with generally accepted accounting principles ("GAAP") in the preparation of
financial statements, budgets and profit plans, and for shareholder
communications, and responses to regulatory requests.
(f) The actions of all Employee Principals shall remain subject,
without limitation, to the terms of UST's Code of Ethics, the Payment Approval
Policy and the other Policies set forth in Schedule II hereto.
SECTION 7. TERMINATION OF EMPLOYMENT BY USTC.
(a) Employee's employment may be terminated by USTC (by majority
vote of its Board of Directors) in the following circumstances:
At any time after due notice and reasonable opportunity to
correct such conduct, (i) in the event of Employee's material
breach of any of the terms of this Employment Agreement; (ii)
in the event of Employee
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causing a material breach of any of the other
Employee/Principals' duties to UST and USTC under Section 10
(Revenue Sharing Provision ); (iii) in the event of Employee's
willful misconduct in the performance of the Employee's duties
hereunder including, without limitation, but subject to
Sections 5 and 6 hereof, Employee's willful refusal to carry
out any "proper direction" by USTC's Board of Directors with
respect to the services to be rendered by Employee hereunder
or the manner of rendering such services; or (iv) in the event
of Employee's conviction of a crime involving moral turpitude.
The term "proper direction" as used in clause (iii) above, may
not be used in connection with an instruction, direction or
order which would cause UST or USTC to violate an
"Independence Assurance".
(b) In the event of Employee's death during the term of
employment, unless otherwise determined by the Employee/Principals acting
pursuant to the Unifying Agreement, USTC's and UST's obligations to pay further
compensation hereunder shall cease as of the date of death, except that any
amounts due under Section 11 hereof or otherwise owed to Employee under welfare
or benefit plans or for deferred compensation and any amounts heretofore
accrued under Sections 3.1 and 3.2 of the Unifying Agreement, shall be paid
when due to the Employee's estate or named beneficiary.
SECTION 8. OFFICE AND DUTIES. During the Original Term, any
Renewal Term, and the Phase II Term, if any, (hereinafter the "Total Term"),
Employee shall hold such positions and perform such duties relating to AM's
business and operations as are described on Schedule I hereto, and as may
otherwise from time to time be assigned to Employee by the Employee/Principals
consistent with all of the terms of this Agreement. During the Total Term and
while employed by USTC, Employee shall devote (except as noted on Schedule I)
substantially all of Employee's business time to the Employee's duties
hereunder and shall, to the best of Employee's ability, perform such duties in
a manner which will faithfully and diligently further the business and
interests of AM.
At any time while employed by USTC, Employee shall not directly or
indirectly solicit the business of any Past, Present, or Potential Clients (as
hereinafter defined) except on behalf and for the benefit of AM, or pursue any
other business activity, including, without limitation, serving as an officer,
director, employee, or adviser to any business entity other than AM, without
UST's and USTC's prior written consent; provided, however, that Employee may
without such consent, render without compensation investment advisory services
to immediate members of Employee's family, which shall include the Employee and
any trust or account which is comprised entirely of assets held for the benefit
of such Employee and/or immediate members of Employee's family, and may be
involved in such additional activities without such consent as are listed on
the Schedule I hereto. Employee agrees to travel to whatever
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extent is reasonably necessary in the conduct of AM's business. Except when
engaged in such travel, Employee's place of employment shall be in the greater
Boston area of Massachusetts unless otherwise agreed to by Employee, UST and
USTC, and the Employee/Principals acting in accordance with the Unifying
Agreement.
The term "Past Client" shall mean at any particular time any person or
entity who within three years prior to such time had been but at such time is
not an advisee, investment advisory customer, or client of AM.
The term "Present Client" shall mean at any particular time any person
or entity who is at such time an advisee, investment advisory customer, or
client of AM.
The term "Potential Client" shall mean at any particular time any
person or entity to whom AM, through any of the Employee/Principals or other of
its employees, has within three years prior to such time offered (by means of a
personal meeting, telephone call, or a letter or a written proposal
specifically directed to the particular person or entity) to serve as
investment adviser but who is not at such time an advisee or investment
advisory customer or client of AM. The preceding sentence is meant to exclude
form letters and blanket mailings.
The terms "Client" or "Client List" when used herein shall mean all
Past, Present, and Potential Clients as heretofore defined. The term "Client"
when used in this Employment Agreement with respect to wrap accounts, shall
mean the wrap sponsors and the brokers employed by such wrap sponsors but not
the underlying wrap account holders.
SECTION 9. BENEFITS. Employee shall participate, to the extent
Employee is eligible and in a manner and to an extent that is fair and
appropriate in light of the position and duties granted to Employee hereunder,
in all pension, profit-sharing, group insurance, or other fringe benefit plans
(other than UST corporate stock compensation plans) which UST or USTC may
hereafter in their absolute discretion make available generally to employees of
AM, but neither UST nor USTC will be required to establish any such program or
plan. Employee shall be entitled to such vacations and to reimbursement of
such expenses as UST's or USTC's policies allow to all employees having
comparable responsibilities and duties. So long as such additional benefits
are payable out of or accrue to "AM's Share of Revenues" as hereinafter
defined, the Employee/Principals may provide additional executive benefits to
themselves in addition to those provided by UST, provided that no such benefit
be qualified under Section 401 of the Internal Revenue Code or non-qualified
(under Section 401 of the Internal Revenue Code) pursuant to the terms of a
plan or arrangement which operates in a manner that is substantially similar or
mirrors a qualified plan, and provided further that the award of any such
benefits does not increase the cost to UST of providing benefits to UST
employees who are not employees of AM.
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SECTION 10. REVENUE SHARING PROVISION. The purpose of this
Revenue Sharing Provision is to provide UST with an acceptable stream of income
and to permit AM to retain a specified percentage of its revenues for use by
Employee/Principals, including the Employee, in their discretion in paying
expenses of operation, including compensation. It is intended to allow the
Employee and the other Employee/Principals to be compensated for enhancing and
growing AM's revenues in a substantial manner and to make operating decisions
freely within the limits of "AM's Share of Revenues," as such term is defined
below. See Schedule V for examples of Revenue Sharing calculations.
(a) ALLOCATION OF REVENUES. "Base Annual Revenues of AM" in 1994
and all subsequent years for purposes of this Revenue Sharing Provision shall
be AM's actual 1994 Revenues less $750,000, such total amount to be
appropriately modified to reflect changes in the United States Bureau of Labor
Statistics Cost of Living Index for the Boston Metropolitan Statistical Area or
any designated successor index for 1995 and all subsequent years. The term
"Revenues" shall mean AM's revenues calculated on an accrual basis in
accordance with GAAP, (excluding shared revenues paid to investment or other
firms or professionals and generated from AM clients), consistent with USTC's
usual practice.
During the pro-rated six month period commencing July 1, 1994 and
ending December 31, 1994, and for each calendar year and for portions
thereof on a pro-rated basis thereafter, AM shall retain sixty percent
(60%) ("Base AM Retention"), of AM's pro-rated actual Revenues and AM
shall make available to USTC for distribution to UST forty percent
(40%) ("Base UST Amount"), subject to adjustment as set forth in this
Section 10(a).
In 1995 and for each calendar year and for portions thereof on a
pro-rated basis thereafter, for each dollar of AM's annual revenues
over Base Annual Revenues of AM, AM shall retain an additional $.40,
and an additional $.60 shall be allocated to UST, provided that in no
event shall UST's Share of Revenues exceed fifty percent (50%) of
actual Annual Revenues of AM.
In 1995 and for each calendar year and for portions thereof on a
pro-rated basis thereafter, for each dollar that actual Annual
Revenues of AM are less than Base Annual Revenues of AM, Base AM
Retention shall be reduced by $.40 and the Base UST Amount shall be
reduced by $.60, provided that in no event shall UST's Share of
Revenues be less than thirty percent (30%) of Annual Revenues of AM.
Amounts retained by AM as aforesaid are herein referred to as "AM's
Share of Revenues". Amounts allocated to UST as aforesaid are herein referred
to as "UST's Share of Revenues".
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(b) FLOOR INCENTIVE. In addition, during the Original Term of
this Agreement (thirty months), AM shall retain a "Floor Incentive" of $40,000
per month from "UST's Share of Revenues" ($1.2 million in the aggregate). The
"Floor Incentive" shall be accrued by USTC and paid pursuant to subsection
(d)(iv) hereof, and shall be excluded from the limitations of Section 5(a)(iv)
of this Agreement. In the event of a material breach by UST or USTC of this
Agreement during the Original Term (which breach is not cured during the
applicable grace period and is either confirmed by the arbitrator under Section
18 hereof or not contested by UST or USTC), the Employee/Principals (for
distribution in accordance with the Unifying Agreement) may elect to receive an
aggregate lump-sum payment determined by multiplying (x) the monthly "Floor
Incentive" by (y) the remaining months in the Original Term. If a "Triggering
Event" occurs during the period January 1, 1995 through June 30, 1998, the
aggregate Floor Incentive, net of tax, accrued during the four full calendar
quarters next preceding the date of the Triggering Event, shall not be deducted
from "AM's After Tax Revenues" for purposes of calculating the Section 11
Formula Payment. Moreover, if a Triggering Event occurred before all Floor
Incentives have been paid, UST or USTC's successor shall assume responsibility
to make the remaining Floor Incentive payments.
(c) SPECIAL PROVISIONS. It is understood and agreed that:
(i) The balance of "Base AM Retention" for the period
July 1, 1994 through December 31, 1994 shall be paid
by UST or USTC to AM no later than February 15, 1995.
(ii) All amounts due to Robert B. Zevin pursuant to his
agreement dated September 30, 1994 with USTC shall be
considered as expenses to come out of "AM's Share of
Revenues" in each year in accordance with the
Unifying Agreement.
(iii) The application of this Section may make it
unattractive for AM to enter a business activity with
a profit margin of less then 40%. Accordingly, the
parties have agreed to negotiate separate "side
letters" with respect to revenue sharing on any new,
lower-margin business opportunities identified in the
future by AM and regarded as worthy of pursuit by UST
and/or USTC.
(iv) The parties hereto further understand and acknowledge
that the term "Revenues" as used herein is intended
to cover revenues of AM as they now exist and as they
may grow or contract internally, and not revenues
from the acquisition by UST or USTC of another
investment advisory firm concerning which the parties
hereto agree to negotiate in good faith as to revenue
sharing.
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(v) The investment return on allocated, but unexpended,
portions of AM's Share of Revenues shall be measured
at the end of each calendar quarter by multiplying
the average of the month end balances during such
quarter by the published thirteen week U.S. Treasury
Bill Rate at the end of such calendar quarter.This
interest income shall be added to "AM's Share of
Revenues".
(d) Transfer of Revenues to UST; Retention of Revenues by
-----------------------------------------------------
USTC;Compensation of Employee/Principals.
-----------------------------------------
(i) The Employee/Principals and AM shall use AM's Share
of Revenues to pay and provide for AM's business
expenses and expenditures including, without
limitation, investment in AM's business and new
products (see Section 6(d) above) and salaries of its
employees, except that any federal, state or local
income tax to which USTC is subject shall be the
responsibility of UST and shall not be treated as a
business expense of AM.
(ii) The Employee/Principals shall incur no expenses or
obligations on behalf of AM which exceed USTC's
ability to pay or provide for them when due out of
AM's Share of Revenues. The Employee/Principals
shall not incur obligations or make binding
commitments on behalf of USTC or UST not related to
AM's business and requiring expenditures by USTC in
excess of $50,000, or make representations to third
parties that they have the authority to do so.
However, the Employee/Principals may represent and
advertise that AM is a division of USTC and an
affiliate of UST, and other than as limited above in
this Section 10 (d)(ii), may incur obligations or
make binding commitments on behalf of USTC in the
ordinary course of business.
(iii) The Employee/Principals may (subject to Policies and
applicable laws and regulations) pay to AM's
employees, including the Employee and the other
Employee/Principals, at times and in amounts and
proportions determined in accordance with the
Unifying Agreement, the balance of AM's Share of
Revenues remaining after the payment of all of the
amounts required under subsection (d)(i) hereof and
subject to Section 5(a)(iv).
(iv) The Employee's Revenue Sharing compensation out of
"AM's Share of Revenues" shall be allocated in
accordance with the terms of the Unifying Agreement.
The Employee/Principals have provided to UST and USTC
in the Unifying Agreement their procedures for
determining changes, if any, in the allocation of
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<PAGE> 12
Revenues among the Employee/Principals. If an
Employee/Principal chooses to leave USTC's employ
after bypassing this change determination mechanism
or refusing to abide by its results, the
Employee/Principal shall be deemed to have committed
a material breach of this Employment Agreement.
(v) The Employee/Principals and AM shall make available
to UST, UST's Share of Revenues upon reasonable
request by UST and action by USTC's Board of
Directors. The Employee/Principals shall not spend
or incur obligations to spend any part of UST's Share
of Revenues.
(e) ADMINISTRATION. The parties hereto and the other
Employee/Principals agree to meet and consult to endeavor in good faith to
agree on appropriate procedures, in addition to Policies and applicable laws
and regulations, for administering the provisions of this Section 10.
The Employee/Principals shall retain control over all expenditures of
AM, subject to the power of USTC's Board of Directors to exercise its rights
under Section 5A, and subject to this Revenue Sharing Provision, and
recognizing that AM is a division of USTC.
(f) TERM AND STATUS AS PARTIES. This Revenue Sharing Provision
shall continue in effect until terminated by agreement of UST, USTC, and the
Employee/Principals acting in accordance with the Unifying Agreement. If the
employment of Employee by USTC ceases other than as a result of a material
breach by UST or USTC of this Employment Agreement, such Employee shall
thereupon automatically cease to be a party to this Revenue Sharing Provision
and to have any rights or obligations under this Section, and shall cease to be
an Employee/Principal for the purposes of this Provision. Nothing in this
Employment Agreement shall be construed to grant to the Employee any right to
be employed by USTC beyond the terms of this Employment Agreement.
SECTION 11. FORMULA PAYMENT. If Employee is still employed by
USTC at the time of a "Triggering Event" (as hereinafter defined), the Employee
shall receive Employee's share of a formula payment (the "Formula Payment") as
follows:
(a) Unless otherwise agreed by the Employee/Principals acting in
accordance with the Unifying Agreement, the Employee's share of the Formula
Payment shall be the percentage set forth after the Employee's name on Schedule
III hereto;
(b) The "Formula Payment" shall be 3.33 times "AM's After Tax
Revenues" (as hereinafter defined and meaning generally UST's Share of Revenues
minus taxes);
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<PAGE> 13
(c) "AM's After Tax Revenues" shall be the portion of AM's
after-tax Revenues contributed, accruing or allocated to UST for the four full
calendar quarters next preceding the date of the Triggering Event; determined
in accordance with GAAP consistently applied in such periods. For purposes of
this Subsection, there shall be assumed a combined federal and state tax rate
of 38%, such rate to be appropriately adjusted to reflect changes in applicable
federal and state corporate tax rates. An example of this calculation is set
forth on Schedule V.
(d) The Formula Payment shall be adjusted in accordance with
Schedule IV hereto for gain or loss of AM clients between the signing of a
definitive merger, consolidation or acquisition agreement or an agreement
related to another Triggering Event and the Closing Date related to any such
Triggering Event.
(e)
(i) At the Closing Date of a Triggering Event, three Key
Employees shall be identified as follows. For every
person who has been an Employee/Principal at any time
during the previous 15 months there shall be
calculated a Weighted Average Share equal to the sum
of (a) the share of the Formula Payment such person
was entitled to receive from time-to-time during the
preceding 15 months in accordance with Schedule III
and subsequent changes thereto by the
Employee/Principals acting in accordance with the
Unifying Agreement times (b) the number of days such
person was entitled to each such share. The three
persons among those who are or have been
Employee/Principals on the Closing Date of the
Triggering Event or during the previous 15 months who
have the three highest Weighted Average Shares shall
be deemed the "Key Employees".
(ii) If only one of the three Key Employees is no longer
in the employ of USTC as of the Closing Date of such
Triggering Event, then all of that Key Employee's
Weighted Average Share of the Formula Payment
(expressed by X%) shall be placed in escrow in the
manner contemplated by Section 11(f). To determine
the distribution of each of the three escrowed
installments use the following formula. Revenues of
AM (as defined in Section 10(a)) for the last full
calendar year prior to a Triggering Event should then
be determined (the "Measuring Year"). Such Revenues
of AM for the Measuring Year multiplied by a decimal
representing 100% - X% equals the "Minimum Revenues".
If during the next full calendar year following the
Measuring Year, Revenues of AM are equal to or less
than Minimum Revenues none of the one-third of the
escrowed amount for such year will be paid to the
remaining Employee/Principals in accordance with this
Section and all of it will be retained by UST's or
USTC's successor. If Revenues of AM for
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<PAGE> 14
that calendar year exceed Minimum Revenues, (i) take
the U.S. Dollar amount of such excess above the
Minimum Revenues and divide it by the Revenues of AM
for the Measuring Year minus the Minimum Revenues,
(ii) then multiply the resulting fraction by
one-third of the full escrowed amount, (iii) the
product of the foregoing formula should be delivered
to the remaining Employee/Principals as a group for
distribution in accordance with the Unifying
Agreement and the remainder of that installment
should be retained by UST or UST's successor.
Similar calculations should be made for the second
and third installments, but in each case using the
same Minimum Revenues.
(iii) If two or more of the Key Employees are no longer in
the employ of USTC as of the Closing Date of such
Triggering Event, then 100% of the Formula Payment
shall be placed in escrow in the manner contemplated
by Section 11(f). To determine the distribution of
each of the three escrowed installments use the
following formula. If Revenues of AM for the last
full calendar year prior to the distribution date of
the applicable escrow installment equal or exceed
Revenues of AM for the Measuring Year, all of that
escrowed installment should be distributed to the
remaining Employee/Principals as a group for
distribution in accordance with the Unifying
Agreement and none should be retained by UST or
USTC's successor. If Revenues of AM for the last
full calendar year prior to the distribution date of
the applicable escrow installment are less than
Revenues of AM for the Measuring Year, divide the
U.S. Dollar amount of Revenues of AM for such last
full calendar year by the U.S. Dollar amount of
Revenues of AM for the Measuring Year and multiply
the resulting fraction by one-third of the full
escrowed amount. The product of the foregoing
calculation should be delivered to the remaining
Employee/Principals as a group for distribution in
accordance with the Unifying Agreement and the
remainder should be retained by UST's or USTC's
successor.
(f) Seventy percent (70%) of the Employee's share of the Formula
Payment shall be paid in cash within twenty (20) days of the Closing Date of
the Triggering Event. The remaining thirty percent (30%) shall be placed in
escrow with an escrow agent acceptable to both UST and Employee/Principals and
paid to the Employee or the Employee's estate as provided in Section 7(b) in
installments of one third of the escrowed amount at the end of years one, two
and three (which may not be calendar years) after the Closing Date of the
Triggering Event plus interest, at the interest rates on the date of the
Closing Date of the Triggering Event of one, two and three year Treasury
securities, provided that at the time of each such installment payment, the
Employee has not been terminated with cause or for a material breach or has not
voluntarily ceased to be employed by AM.
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<PAGE> 15
(g) A "Triggering Event" shall be deemed to have occurred when:
(i) there occurs the signing of a definitive agreement of
merger or consolidation of UST or USTC with any other
corporation, other than a merger or consolidation
which would result in the voting securities of UST or
USTC outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of
UST or USTC, or such surviving entity outstanding
immediately after such merger or consolidation;
provided, however, that a merger or consolidation
effected to implement a recapitalization,
reorganization or restructuring of UST or USTC (or
similar transaction) in which no "person" (as defined
in (g)(iii) below) acquires more than fifty percent
(50%) of the combined voting power of UST's then
outstanding securities shall not constitute a
Triggering Event; or
(ii) there occurs a closing of a sale or other disposition
by UST of more than 50% of UST's, USTC's or AM's
business and assets; or
(iii) any "person", as such term used in Section 13(d) and
14(d) of the Exchange Act other than UST or USTC or
any of their respective subsidiaries or affiliates or
any trustee or other fiduciary holding securities
under an employee benefit plan of either of them or
any of their subsidiaries or affiliates, becomes a
beneficial owner (within the meaning of Rule 13d-3,
as amended, as promulgated under the Exchange Act),
directly or indirectly, of securities representing
50% percent or more of the combined voting power of
UST's or USTC's then outstanding securities.
If (i) more than 50% of UST's then outstanding common stock or assets
are acquired by a "person" whose consolidated assets prior to the Triggering
Event were less than $4 billion or (ii) UST's business assets and operations
are consolidated with those of another bank or bank holding company and the
resulting entity has consolidated assets of $5.5 billion or less, a Triggering
Event shall be deemed to have occurred, but the length of the Phase II term of
employment of the Employee shall be increased automatically by one additional
year.
(h) If UST agrees to be acquired by an entity with a public image
so starkly negative that AM's affiliation with that entity would be reasonably
likely, by itself, to cause a loss of more than 25% of AM's gross revenues in
one year (unless the parties
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<PAGE> 16
mutually agree to the contrary), the Employee/Principals at their option acting
pursuant to the terms of the Unifying Agreement (and provided such right is
exercised within 30 days of the public announcement of such acquisition) will
be relieved of all of the Employee's obligations under the Phase II Term and no
Formula Payment will be made.
(i) The parties acknowledge that any such Formula Payment is
intended to compensate the Employee for: (i) the automatic extension of this
Agreement occurring by reason of a Triggering Event; (ii) the Phase II
Non-Competition covenants specified in Section 12; and (iii) the loss of
opportunity to make up for reduced rate of compensation which such Employee
earned with USTC for periods prior to the effective date of this Agreement.
SECTION 12. PHASE II NON-COMPETITION COVENANTS.
(a) During the longer of the Phase II Term (as defined in Section
4) if Phase II shall commence while Employee is employed by USTC hereunder or
while Employee is employed by USTC during or after such Phase II Term
hereunder, Employee shall not, except in the course of his employment with
USTC, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an
officer, director, employee, partner, stockholder,
consultant, adviser, subsidiary, affiliate,
independent contractor or otherwise, investment
advisory services to any person or entity;
(ii) Interfere with AM's relations with any person or
entity who at any time during such period was a
Client (which means Past, Present, and Potential
Client); or
(iii) Induce or attempt to induce directly or indirectly
any professional employee of AM to terminate his or
her employment or hire or attempt to hire, directly
or indirectly, any such person, other than by
discharge of such person as a part of Employee's
duties.
(b) Until one year following the end of the Phase II Term, if the
Phase II Term should commence while Employee is employed by USTC hereunder or
one year following the termination of Employee's employment with USTC during or
after such Phase II Term, Employee shall not, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an
officer, director, employee, partner, independent
contractor or otherwise, investment advisory services
to any person or entity who as of the date of the
termination or expiration of Employee's employment
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<PAGE> 17
with USTC was or had been a Client (which means Past,
Present, and Potential Client);
(ii) Interfere with AM's relations with any person or
entity who as of the date of the termination or
expiration of Employee's employment with USTC was a
Client (which means Past, Present, and Potential
Client); or
(iii) Induce or attempt to induce directly or indirectly
any professional employee of AM to terminate his or
her employment or hire or attempt to hire, directly
or indirectly, any such person.
(c) Notwithstanding the provisions of subsections (a)(i) and
(b)(i), the Employee may render without compensation investment advisory
services to any immediate member of Employee's family, which shall include the
Employee and any trust or account which is comprised entirely of assets held
for the benefit of such Employee and/or immediate members of such Employee's
family, and may engage in such other activities as are listed on Schedule I
hereto.
(d) Employee and USTC agree that the periods of time and the
unlimited geographic area applicable to the covenants of this Section 12 are
reasonable, in view of the receipt and expected receipt of the Employee's share
of Revenue Sharing as provided in Section 10(c), and other compensation, and
the Formula Payment provided herein; the geographic scope and nature of the
business in which AM is engaged; Employee's knowledge of AM's business; and
Employee's relationships with AM's investment advisory clients. However, if
such period or such area should be adjudged unreasonable in any judicial
proceeding, then the period of time shall be reduced by such number of months
or such area shall be reduced by elimination of such portion of such area, or
both, as are deemed unreasonable, so that this covenant may be enforced in such
area and during such period of time as are adjudged to be reasonable.
SECTION 13. ALL BUSINESS TO BE THE PROPERTY OF USTC; ASSIGNMENT
OF INTELLECTUAL PROPERTY. During the Phase II Term if Phase II shall commence
while Employee is Employed by USTC hereunder and thereafter while Employee is
employed by AM and/or USTC:
(a) Employee agrees that any and all presently existing investment
advisory business of AM and all business developed by Employee or any other
employee of AM, including without limitation all investment advisory contracts,
fees, commissions, compensation records, Client Lists (as defined in Section
8), agreements, and any other incident of any business developed or sought by
AM or earned or carried on by Employee for AM, are and shall be the exclusive
property of USTC for its sole use, and (where applicable) shall be payable
directly to USTC.
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<PAGE> 18
(b) Employee hereby grants to USTC (without any separate
remuneration or compensation other than that received by Employee from time to
time in the course of his or her employment) Employee's entire right, title,
and interest throughout the world in and to, all research, information, Client
Lists, and all other investment advisory, technical and research data made,
conceived, developed and/or acquired by Employee solely or jointly with others
during the period of Employee's employment by USTC, which relate to investment
advice as it was or is now rendered or as it may, from time to time, hereafter
be rendered or proposed to be rendered, but excluding such individual's ideas
and thought processes which are not embodied in written or machine readable
form (all such non-excluded items being referred to as "Intellectual
Property").
SECTION 14. CONFIDENTIALITY. Except in performance of services
for USTC, Employee shall not, either during the Phase II Term if Phase II shall
commence while the Employee is employed by USTC hereunder or thereafter while
employed by AM and/or USTC, use for Employee's own benefit or disclose to or
use for the benefit of any person outside USTC, any information not lawfully
available to the public concerning any Intellectual Property, including Client
Lists, whether Employee has such information in his or her memory or embodied
in writing or other tangible form. All such Intellectual Property and such
information concerning Intellectual Property, and all originals and copies of
any Intellectual Property, and any other written material relating to the
business of AM, shall be the sole property of USTC. During such Term or
thereafter, upon the termination of Employee's employment in any manner or for
any reason, Employee shall promptly surrender to USTC all originals and copies
of any Intellectual Property, and Employee shall not thereafter use any
Intellectual Property.
The foregoing notwithstanding, Employee will have no obligation to AM
or USTC with respect to the disclosure or use of any Intellectual Property or
information concerning Intellectual Property if:
(a) Such Intellectual Property or information is or becomes publicly
known or otherwise enters the public domain through no wrongful act of
Employee; or
(b) Such Intellectual Property or information is received from a
third party which has no obligation to UST or USTC to maintain it in
confidence.
Notwithstanding the references to Client Lists above, it shall not be
a violation of this Section or Section 13 hereof for Employee to communicate or
do business with any Past, Present or Potential Client in the course of
Employee's employment with AM and USTC, and any such conduct shall be limited,
if at all, solely by Section 12 hereof.
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SECTION 15. NOTICES. Any notice or other communication hereunder
shall be given as follows:
United States Trust Company
40 Court Street
Boston, MA 02108
Fax: (617) 726-7320
Attn: Neal F. Finnegan, Chairman, Executive
Committee
UST Corp.
40 Court Street
Boston, MA 02108
Fax: (617) 726-7320
Attn: Neal F. Finnegan, President & CEO
With copies to Eric R. Fischer, Executive Vice President and General
Counsel
Fax: (617) 726-7209
Employee:
Lucia B. Santini
1691 West Street
Wrentham, MA 02093
Fax: (if any)
with copy to Peter M. Rosenblum
Foley, Hoag & Eliot
1 Post Office Square
Boston, MA, 02109
Fax: (617) 832-7000
SECTION 16. ASSIGNABILITY. This Employment Agreement shall be
binding upon and inure to the benefit of UST, USTC, and to any person or firm
who may succeed to the business of UST, USTC, or AM. This Employment Agreement
shall not be assignable by Employee, but it shall inure to the benefit of
Employee's heirs, executors, administrators and legal representatives.
SECTION 17. ENTIRE AGREEMENT. This Employment Agreement and the
Unifying Agreement contain the entire agreement between USTC and Employee with
respect to the subject matter hereof, and supersede all prior oral and written
agreements between any of UST, USTC, AM and the Employee with respect to the
subject matter hereof, including without limitation any oral agreements
relating to compensation.
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<PAGE> 20
SECTION 18. ARBITRATION. In the event the parties hereto
disagree as to whether a material breach has occurred of: (i) the "Independence
Assurances" under Section 5; (ii) USTC's right of termination of Employee's
employment under Section 7; (iii) this Agreement by USTC as described in
Section 19 (b); (iv) the revenue sharing provisions of Section 10; or (v) the
formula payment provisions of Section 11, such dispute shall be settled by
arbitration before a single arbitrator to be then named by UST and a majority
of the Employee/Principals acting in accordance with the Unifying Agreement, in
Boston, Massachusetts in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. If such arbitrator cannot serve, then a
successor shall be appointed in accordance with such Rules. If the arbitrator
finds that there has been a material breach (and such breach has not been cured
by UST or USTC within sixty (60) days of such finding or by Employee in
accordance with Section 7 hereof), then the remedies provided for in Section 19
shall become available, as appropriate.
SECTION 19. EQUITABLE RELIEF AND OTHER REMEDIES.
(a) Employee recognizes and agrees that UST's, USTC's or the
Employee/Principals' remedies at law for any breach of the provisions of
Sections 12, 13 and 14 hereof would be inadequate and that for breach of such
provisions UST, USTC and the Employee/Principals shall, in addition to such
other remedies as may be available to any of them at law or in equity or as
provided in this Employment Agreement, be entitled to injunctive relief and to
enforce their respective rights by an action for specific performance to the
extent permitted by law, and to the right of set-off against any amounts due to
the Employee by UST, USTC or AM. Should Employee engage in any activities
prohibited by this Employment Agreement, he or she agrees to pay over to USTC
or UST all compensation received in connection with such activities. Such
payment shall not impair any other rights or remedies of UST, USTC or AM or
affect the obligations or liabilities of Employee under this Employment
Agreement or applicable law.
(b) Any termination by USTC of Employee's employment which is not
authorized by Section 7 hereof shall constitute a material breach of this
Agreement. In the event of a material breach of this Agreement by UST or USTC
which is not cured pursuant to Section 18, in addition to any other rights or
remedies which the Employee may have, at law, in equity or otherwise, USTC
shall pay Employee the Employee's then current Annual Base Salary for a period
equal to the greater of (i) twelve months or (b) the balance of the then
current term of this Agreement. Any such payments shall not constitute part of
AM's Share of Revenues. Should such a material breach occur and not be so
cured, the Employee shall be free to compete, Sections 12, 13 and 14 shall not
apply and the Employee shall leave with the rights described in Section 5(b) of
this Agreement.
(c) Without limiting the generality of the foregoing, the parties
expressly agree
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that termination without cause of Employee's employment hereunder during the
Phase II Term by UST, USTC or any other person or entity will constitute a
material breach of this Agreement and, in addition to any other rights or
remedies which the Employee may have, at law, in equity or otherwise, shall
give Employee the right to salary continuation as set forth in Section 19(b)
hereof.
SECTION 20. WAIVERS AND FURTHER AGREEMENTS. Neither this
Employment Agreement nor any term or condition hereof, including without
limitation the terms and conditions of this Section 20, may be waived in whole
or in part as against UST, USTC, AM or Employee except by written instrument
executed by each of them, expressly stating that it is intended to operate as a
waiver of this Employment Agreement or the applicable term or condition hereof.
Each of the parties hereto agrees to execute all such further instruments and
documents and to take all such further action as the other party may reasonably
require in order to effectuate the terms and purposes of this Employment
Agreement as stated herein. Furthermore, no waiver may violate the terms of
the Unifying Agreement and any waiver shall require action of the
Employee/Principals in accordance with the Unifying Agreement authorizing such
waiver.
SECTION 21. AMENDMENTS. This Employment Agreement may not be
amended, nor shall any parties be added hereto, nor any change, modification,
consent, or discharge be effected except by written instrument executed by all
three of the Employee, USTC and UST. Furthermore, no amendment or modification
may violate the terms of the Unifying Agreement and any amendment or
modification shall require action of the Employee/Principals in accordance with
the Unifying Agreement authorizing such amendment or modification.
SECTION 22. SEVERABILITY. If any provision of this Employment
Agreement shall be held or deemed to be invalid, inoperative or unenforceable
in any jurisdiction or jurisdictions, because of conflicts with any
constitution, statute, rule or public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision in question
unenforceable in any other jurisdiction or in any other case or circumstance or
of rendering any other provisions herein contained unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Employment Agreement
shall be reformed and construed in any such jurisdiction or case as if such
invalid, inoperative, or unenforceable provision had never been contained
herein and such provision reformed so that it would be enforceable to the
maximum extent permitted in such jurisdiction or in such case.
SECTION 23. NO CONFLICTING OBLIGATIONS. Employee represents and
warrants to USTC and UST that Employee has no other interest or obligation
which is inconsistent or in conflict with this Employment Agreement or which
would prevent, limit, or impair, in any way, Employee's performance of any of
the covenants or duties
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hereinabove set forth.
SECTION 24. PARTIES. It is understood and agreed that UST joins
in this Employment Agreement only as to such matters where its name appears
herein. It is further understood and agreed that no person shall participate
in the benefits conferred on Employee/Principals by the terms of this and other
similar Employment Agreements unless such person has become a party to a
similar Employment Agreement or is described in Section 16.
SECTION 25. GOVERNING LAW. This Employment Agreement shall be
governed by and construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts which apply to contracts executed and performed
solely in Massachusetts. UST, USTC and the Employee hereby consent to the
jurisdiction of any state or federal court located within Suffolk County,
Massachusetts, and assent that service of process may be made by registered
mail to the parties' respective addresses as provided in Section 15 hereof and
shall be effective in the same manner as notices are effective under such
Section 15.
SECTION 26. ACTION OF THE EMPLOYEE/PRINCIPALS. Whenever the
Consent of the Employee/Principals shall be described herein, action by the
Employee/Principals or their duly authorized representative shall be required
in accordance with the Unifying Agreement, and such action shall be sufficient
hereunder.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as a sealed instrument as of the date first above written.
EMPLOYEE: UNITED STATES TRUST COMPANY
/s/ Lucia B. Santini By: /s/ Neal F. Finnegan
-------------------- --------------------
Lucia B. Santini Title:
Joined in as to those matters where its name appears.
UST CORP.
By: /s/ Neal F. Finnegan
--------------------
Title:
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EXHIBIT 10(y)(v)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of February 14, 1995 and effective January 1, 1995
between United States Trust Company ("USTC"), a banking and trust company
having its principal place of business in Boston, Massachusetts, and joined in
as to certain matters by UST Corp. ("UST"), a Massachusetts corporation also
having its principal place of business in Boston, Massachusetts and the parent
of USTC; and Robert B. Zevin (the "Employee").
BACKGROUND
----------
The Employee and the other principals of the Asset Management Division
of USTC ("AM") listed on Schedule I hereto and such other principals as may be
added pursuant to the Unifying Agreement (as hereinafter defined) (all such
employees, while they remain principals, being referred to herein from time to
time as "Employee/Principals") are concerned that previous UST and USTC
practices have not allowed for enough spending to generate growth in AM's
business, or for fully competitive compensation for its principals; want
assurances of continued freedom to manage the AM business; want to participate
in an incentive compensation program which reflects the value created in this
business; and want to make it attractive to any potential acquirer of UST, USTC
or AM to (i) protect existing relationships with AM employees and clients, (ii)
avoid re-writing existing client contracts, and (iii) further AM as a separate
business conducted under the name "United States Trust Company".
UST and USTC want to stabilize and increase the profitability of AM;
pay competitive compensation; provide incentive compensation reflecting the
growth in the business of AM; and (in the event of a "Triggering Event" as
hereinafter defined) offer an opportunity to a prospective purchaser to retain
the services of Employee and the other Employee/Principals and thereby receive
a continuing stream of profits from AM.
UST and USTC recognize the importance of Employee to their business
and to USTC's ability to retain AM client relationships, and desire that USTC
employ Employee as an officer and principal of AM for the period of employment
and upon and subject to the terms herein provided.
UST and USTC wish to be assured that Employee will not compete with
AM's business during the period of employment, and in certain circumstances and
as set forth below will not for a period thereafter solicit any Past, Present,
or Potential Clients (as hereinafter defined) of AM and will not by such
solicitation damage USTC's and AM's goodwill among its clients and the general
public.
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Employee desires to be employed by USTC and serve as an
Employee/Principal of AM and to participate in the incentive compensation
program contemplated by this agreement, and to refrain from competing with USTC
or AM or soliciting AM's clients for the periods and upon and subject to the
terms herein provided.
Employee has been employed by USTC and AM for approximately 21 years;
has while so employed contributed to the acquisition and retention of AM's
clients, and will continue to seek to acquire and retain clients and to
generate goodwill for AM in the future as an officer and employee of USTC and
an Employee/Principal of AM for the periods and on the terms contemplated
hereby.
When the terms "AM," "AM's business," or the "AM Division" are used
herein, such terms specifically exclude the non- investment advisory business
of USTC such as (1) the business of UST Capital Corp. (venture capital) and (2)
the management of USTC's internal securities portfolio. Such terms, however,
include the investment return on allocated, but unexpended, portions of AM's
Share of Revenues as reflected on Schedule V. The investment return on
allocated, but unexpended, portions of AM's share of revenues shall be measured
at the end of each calendar quarter by multiplying the average of the month end
balances during such quarter by the published thirteen week U.S. Treasury Bill
Rate at the end of such calendar quarter and such interest income shall be
added to "AM's Share of Revenues". All current Employee/Principals are listed
on Schedule I.
Employee, the other Employee/Principals, UST and USTC have entered
into an agreement of even date herewith (the "Unifying Agreement") which
describes generally their agreements and certain procedures they have agreed to
follow among themselves. This Employment Agreement is executed pursuant to and
in accordance with the terms of the Unifying Agreement. Certain capitalized
terms used but not defined herein shall have the meanings given them in the
Unifying Agreement.
AGREEMENTS
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In consideration of the premises, the mutual covenants and the
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
SECTION 1. ORIGINAL TERM OF EMPLOYMENT; COMPENSATION. USTC
agrees to employ Employee for a period of two and one-half (2 1/2) years
beginning on the date hereof (the "Original Term") as an officer of USTC and an
Employee/Principal of AM; and Employee hereby accepts such employment. USTC
will pay Employee for Employee's services during the Original Term, and any
Renewal Term (as hereinafter provided) and any Phase II Term, the Annual Base
Salary set forth on Schedule I hereto, and such additional annual incentive
payments as shall be determined by the
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Employee/Principals consistent with the Revenue Sharing Provision (Section 10
hereof), and subject to such payroll and withholding deductions as are
required by law. Consistent with the Revenue Sharing Provision, the Employee's
total compensation will be reviewed at least annually in accordance with the
Unifying Agreement, having in mind that such compensation be fair and
reasonable in light of Employee's position and the duties to be performed by
the Employee and the Employee's efforts to enhance the business of AM.
SECTION 2. RENEWAL TERMS. If no "Triggering Event" has occurred
and this Agreement has not been terminated by either party (all as hereinafter
provided) prior to the end of the Original Term, then the Original Term shall
be automatically extended for successive six month renewal terms (each referred
to herein as a "Renewal Term", or collectively as "Renewal Terms") until such
Triggering Event or termination has occurred, or until the Employee shall have
provided at least six months advance written notice to UST and USTC of election
not to enter a Renewal Term.
SECTION 3. NOTICE OF TERMINATION OF ORIGINAL TERM BY EMPLOYEE.
On or before the last day of the second year of the Original Term and assuming
that this Agreement has not been earlier terminated or entered upon the Phase
II Term (all as hereinafter provided), the Employee may give written notice to
UST and USTC of termination, whereupon all the provisions of this Agreement
will terminate (except as noted below in this Section 3) on the last day of the
Original Term. If there has been a material breach of this Agreement by
Employee at any time during the Original Term or any Renewal Term, and the
arbitration under Section 18 hereof has confirmed that a material breach has
been committed by the Employee and such breach is uncured during the applicable
grace period, then the Employee will be subject in full to all of the
restrictions of Section 12, 13 and 14 hereof for the remainder of the
applicable term plus 90 days. However, should the Employee terminate this
Agreement without a material breach at the end of the Original Term or at the
end of any Renewal Term, Sections 12, 13 and 14 of this Agreement shall not
apply. Notwithstanding the foregoing, should the Employee terminate this
Agreement as described in either of the immediately preceding two sentences,
UST and USTC will retain all of their respective common law rights against the
Employee with respect to confidentiality, protection of customer lists, trade
secrets, non-competition and similar matters.
SECTION 4. PHASE II TERM. If a Triggering Event occurs during
the Original or a Renewal Term, any such term shall automatically terminate and
the Phase II Term shall commence as of the earlier of the date of signing of a
definitive merger or acquisition agreement or the date of occurrence of such
Triggering Event. The Phase II Term shall be for a period of three years from
the Closing Date under such definitive merger, consolidation or acquisition
agreement, or the date of the agreement related to any other such Triggering
Event, but in no event for longer than four years from such signing date, and
shall be terminable in the same manner as the Original
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Term under Section 3 above (the "Phase II Term"). The "Closing Date" shall mean
the date on which the merger or consolidation becomes effective, the
acquisition is consummated or the change in corporate ownership related to any
other such Triggering Event takes effect. If the revenues of the AM business
decline precipitously and the Formula Payment described in Section 11 below
would be less than $3 Million, then the Employee may decline to accept the
Formula Payment and the Phase II Term. If the AM revenues likewise decline,
and the Formula Payment described in Section 11 below would be less than $5
Million, the Employee/Principal may elect to reduce the Phase II Term by one
year.
SECTION 5. TERMINATION BY EMPLOYEE FOR BREACH OF "INDEPENDENCE
ASSURANCES." In the event of the material breach by UST or USTC (or their
respective successors) of any one or more of the "Independence Assurances"
listed below, the Employee/Principals, acting in accordance with the Unifying
Agreement, shall have the right (subject to compliance with Section 18 hereof)
but not the obligation, upon 30 days prior written notice to UST and USTC, to
terminate this Agreement.
(a) "Independence Assurances" shall consist of UST's and USTC's
non-interference (unless requested by the Employee/Principals of AM acting in
accordance with the Unifying Agreement) in the following:
(i) The Employee/Principals control of AM's investment
philosophy and investment approach, business strategy, conduct of investment
analysis, portfolio selection, marketing, client retention and acceptance of
new clients, and client service;
(ii) Authority of the Employee/Principals to hire and fire AM
personnel within the scope of UST's "Policies" (as hereinafter defined) and
applicable Federal and Massachusetts laws, subject to UST's right to approve
any person chosen by the Employee/Principals as the Senior Principal of AM,
which person shall also serve initially (i) as the Chief Executive Officer of
USTC, and (ii) on USTC Board of Directors. UST, as sole shareholder of USTC,
subject to the terms of the Unifying Agreement and this Agreement, will at all
times retain the right to select a Chief Executive Officer of USTC who is not
an employee of AM. USTC will not, however, select the Senior Principal;
(iii) The Employee/Principals' authority to set AM client
fees based on their judgment concerning the market for services rendered by AM;
(iv) The Employee/Principals' authority to establish AM's
operating expense budget and compensation practices, limited by "AM's Share of
Revenues" as provided in Section 10 (See Schedule V for example); and limited
further with respect to total cumulative cash incentive compensation for
Employee/Principals in the aggregate accrued in each of the years ending
December 31, 1994 and December 31, 1995, to $1.3 million plus incentive
compensation accrued in 1993 (it being understood
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that the Formula Payment is not to be regarded as cash incentive compensation
for any purposes);
(v) The Employee/Principals' authority to add and delete
Employee/Principals of AM in accordance with the Unifying Agreement; and
(vi) The recognition by UST and USTC that AM, in pursuit
of its "socially-sensitive" investment objectives, may take some public
positions which may not represent the views of UST or USTC management. The
Employee, however, recognizes that Employee's actions will remain subject to
the provisions of the Code of Ethics, Employment Policies, and certain other
key corporate policies of UST and USTC listed on and attached to Schedule II
hereto ("Policies"), as revised from time to time on a company-wide basis in
the ordinary course of UST's and USTC's business (which revisions shall be made
available to Employee at UST's principal office in Boston); and applicable
Federal and Massachusetts laws, regulations, policies, orders or understandings
in use by or applicable to UST and USTC.
(b) In the event that any of the "Independence Assurances" have
been materially breached and not cured pursuant to Section 18, the Employee
may act either individually or in concert with any other Employee/Principal or
Employee/Principals or other employees so as to constitute a "person" as
defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), in electing to terminate their Employment Agreements, e.g.
they may collectively decide to give five (5) days notice and leave USTC to
form a new business which may directly compete with AM's business and Sections
12, 13 and 14 of this Agreement will not apply.
SECTION 5A. OVERSIGHT FUNCTION OF USTC'S BOARD OF DIRECTORS.
USTC's Board of Directors (a majority of whom shall not be Employee/Principals)
shall continue to exercise its oversight function of the business activities of
AM. In performing such oversight function, USTC's Board the Directors will
assure itself that AM's business and operations are being conducted in a manner
consistent with applicable law and regulations, and such Board will be expected
to meet its fiduciary responsibilities to USTC and its depositors, and to UST,
in all respects, including without limitation, the prevention of corporate
waste of assets and taking steps to see that AM's business is operated with
their respective best interests in mind. If in performing such oversight
function, the Board causes UST or USTC to breach an Independence Assurance and
such breach is (a) confirmed by the arbitrator under Section 18 or not
contested by UST or USTC and (b) not cured within the applicable grace period,
the Employee may terminate this Agreement and the Employee will leave with the
rights described in Section 5(b) of this Agreement.
SECTION 6. MATTERS NOT CONSTITUTING "INDEPENDENCE ASSURANCES".
The following shall specifically not be considered as "Independence Assurances"
but shall nevertheless govern the relationship by and among UST, USTC and AM:
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(a) The location of AM's business for a period of three years from
January 1, 1995 on two floors at 40 Court Street, Boston, MA. The Employee and
the other Employee/Principals shall cause AM to give twelve months written
notice of termination of such occupancy, if they so elect, no earlier than
December 31, 1996. "Fair Rental" shall be charged or allocated by UST or USTC
for AM's premises, and UST or USTC shall give AM "high priority" with respect
to remodeling and upgrading of space.
(b) Matters covered in a Memorandum dated September 14, 1994 on
"Capital Expenditures/Intercompany Charges" which is attached as Schedule VI
hereto.
(c) The taking of reasonable steps by the Employee and the other
Employee/Principals to cause that appropriate levels of profit from AM's
business to be reinvested in the business (infrastructure, systems, facilities,
product development, compensation to staff members who are not Principals,
additional staff) during the Total Term (as hereinafter defined). For the year
1995, the amount considered "appropriate" would be the investment of
approximately five percent (5%) of "Base Annual Revenues of AM" as defined in
Section 10.
(d) The amortization of AM capital expenditures over a period in
accordance with UST's and USTC's then current policy to the extent it is
consistent with GAAP. In connection with the foregoing capital expenditures,
at the reasonable request of AM funding will be provided by UST and/or USTC
which will charge AM a fair interest rate for the cost of capital employed.
(See also Schedule VI).
(e) The providing of such information as is reasonably necessary
for UST to manage its affairs and responsibilities subject to client
confidentiality, including but not limited to information necessary to comply
with generally accepted accounting principles ("GAAP") in the preparation of
financial statements, budgets and profit plans, and for shareholder
communications, and responses to regulatory requests.
(f) The actions of all Employee Principals shall remain subject,
without limitation, to the terms of UST's Code of Ethics, the Payment Approval
Policy and the other Policies set forth in Schedule II hereto.
SECTION 7. TERMINATION OF EMPLOYMENT BY USTC.
(a) Employee's employment may be terminated by USTC (by majority
vote of its Board of Directors) in the following circumstances:
At any time after due notice and reasonable opportunity to
correct such conduct, (i) in the event of Employee's material
breach of any of the terms of this Employment Agreement; (ii)
in the event of Employee
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causing a material breach of any of the other
Employee/Principals' duties to UST and USTC under Section 10
(Revenue Sharing Provision ); (iii) in the event of Employee's
willful misconduct in the performance of the Employee's duties
hereunder including, without limitation, but subject to
Sections 5 and 6 hereof, Employee's willful refusal to carry
out any "proper direction" by USTC's Board of Directors with
respect to the services to be rendered by Employee hereunder
or the manner of rendering such services; or (iv) in the event
of Employee's conviction of a crime involving moral turpitude.
The term "proper direction" as used in clause (iii) above, may
not be used in connection with an instruction, direction or
order which would cause UST or USTC to violate an
"Independence Assurance".
(b) In the event of Employee's death during the term of
employment, unless otherwise determined by the Employee/Principals acting
pursuant to the Unifying Agreement, USTC's and UST's obligations to pay further
compensation hereunder shall cease as of the date of death, except that any
amounts due under Section 11 hereof or otherwise owed to Employee under welfare
or benefit plans or for deferred compensation and any amounts heretofore
accrued under Sections 3.1 and 3.2 of the Unifying Agreement, shall be paid
when due to the Employee's estate or named beneficiary.
SECTION 8. OFFICE AND DUTIES. During the Original Term, any
Renewal Term, and the Phase II Term, if any, (hereinafter the "Total Term"),
Employee shall hold such positions and perform such duties relating to AM's
business and operations as are described on Schedule I hereto, and as may
otherwise from time to time be assigned to Employee by the Employee/Principals
consistent with all of the terms of this Agreement. During the Total Term and
while employed by USTC, Employee shall devote (except as noted on Schedule I)
substantially all of Employee's business time to the Employee's duties
hereunder and shall, to the best of Employee's ability, perform such duties in
a manner which will faithfully and diligently further the business and
interests of AM.
At any time while employed by USTC, Employee shall not directly or
indirectly solicit the business of any Past, Present, or Potential Clients (as
hereinafter defined) except on behalf and for the benefit of AM, or pursue any
other business activity, including, without limitation, serving as an officer,
director, employee, or adviser to any business entity other than AM, without
UST's and USTC's prior written consent; provided, however, that Employee may
without such consent, render without compensation investment advisory services
to immediate members of Employee's family, which shall include the Employee and
any trust or account which is comprised entirely of assets held for the benefit
of such Employee and/or immediate members of Employee's family, and may be
involved in such additional activities without such consent as are listed on
the Schedule I hereto. Employee agrees to travel to whatever
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extent is reasonably necessary in the conduct of AM's business. Except when
engaged in such travel, Employee's place of employment shall be in the greater
Boston area of Massachusetts unless otherwise agreed to by Employee, UST and
USTC, and the Employee/Principals acting in accordance with the Unifying
Agreement.
The term "Past Client" shall mean at any particular time any person or
entity who within three years prior to such time had been but at such time is
not an advisee, investment advisory customer, or client of AM.
The term "Present Client" shall mean at any particular time any person
or entity who is at such time an advisee, investment advisory customer, or
client of AM.
The term "Potential Client" shall mean at any particular time any
person or entity to whom AM, through any of the Employee/Principals or other of
its employees, has within three years prior to such time offered (by means of a
personal meeting, telephone call, or a letter or a written proposal
specifically directed to the particular person or entity) to serve as
investment adviser but who is not at such time an advisee or investment
advisory customer or client of AM. The preceding sentence is meant to exclude
form letters and blanket mailings.
The terms "Client" or "Client List" when used herein shall mean all
Past, Present, and Potential Clients as heretofore defined. The term "Client"
when used in this Employment Agreement with respect to wrap accounts, shall
mean the wrap sponsors and the brokers employed by such wrap sponsors but not
the underlying wrap account holders.
SECTION 9. BENEFITS. Employee shall participate, to the extent
Employee is eligible and in a manner and to an extent that is fair and
appropriate in light of the position and duties granted to Employee hereunder,
in all pension, profit-sharing, group insurance, or other fringe benefit plans
(other than UST corporate stock compensation plans) which UST or USTC may
hereafter in their absolute discretion make available generally to employees of
AM, but neither UST nor USTC will be required to establish any such program or
plan. Employee shall be entitled to such vacations and to reimbursement of
such expenses as UST's or USTC's policies allow to all employees having
comparable responsibilities and duties. So long as such additional benefits
are payable out of or accrue to "AM's Share of Revenues" as hereinafter
defined, the Employee/Principals may provide additional executive benefits to
themselves in addition to those provided by UST, provided that no such benefit
be qualified under Section 401 of the Internal Revenue Code or non-qualified
(under Section 401 of the Internal Revenue Code) pursuant to the terms of a
plan or arrangement which operates in a manner that is substantially similar or
mirrors a qualified plan, and provided further that the award of any such
benefits does not increase the cost to UST of providing benefits to UST
employees who are not employees of AM.
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SECTION 10. REVENUE SHARING PROVISION. The purpose of this
Revenue Sharing Provision is to provide UST with an acceptable stream of income
and to permit AM to retain a specified percentage of its revenues for use by
Employee/Principals, including the Employee, in their discretion in paying
expenses of operation, including compensation. It is intended to allow the
Employee and the other Employee/Principals to be compensated for enhancing and
growing AM's revenues in a substantial manner and to make operating decisions
freely within the limits of "AM's Share of Revenues," as such term is defined
below. See Schedule V for examples of Revenue Sharing calculations.
(a) ALLOCATION OF REVENUES. "Base Annual Revenues of AM" in 1994
and all subsequent years for purposes of this Revenue Sharing Provision shall
be AM's actual 1994 Revenues less $750,000, such total amount to be
appropriately modified to reflect changes in the United States Bureau of Labor
Statistics Cost of Living Index for the Boston Metropolitan Statistical Area or
any designated successor index for 1995 and all subsequent years. The term
"Revenues" shall mean AM's revenues calculated on an accrual basis in
accordance with GAAP, (excluding shared revenues paid to investment or other
firms or professionals and generated from AM clients), consistent with USTC's
usual practice.
During the pro-rated six month period commencing July 1, 1994 and
ending December 31, 1994, and for each calendar year and for portions
thereof on a pro-rated basis thereafter, AM shall retain sixty percent
(60%) ("Base AM Retention"), of AM's pro-rated actual Revenues and AM
shall make available to USTC for distribution to UST forty percent
(40%) ("Base UST Amount"), subject to adjustment as set forth in this
Section 10(a).
In 1995 and for each calendar year and for portions thereof on a
pro-rated basis thereafter, for each dollar of AM's annual revenues
over Base Annual Revenues of AM, AM shall retain an additional $.40,
and an additional $.60 shall be allocated to UST, provided that in no
event shall UST's Share of Revenues exceed fifty percent (50%) of
actual Annual Revenues of AM.
In 1995 and for each calendar year and for portions thereof on a
pro-rated basis thereafter, for each dollar that actual Annual
Revenues of AM are less than Base Annual Revenues of AM, Base AM
Retention shall be reduced by $.40 and the Base UST Amount shall be
reduced by $.60, provided that in no event shall UST's Share of
Revenues be less than thirty percent (30%) of Annual Revenues of AM.
Amounts retained by AM as aforesaid are herein referred to as "AM's
Share of Revenues". Amounts allocated to UST as aforesaid are herein referred
to as "UST's Share of Revenues".
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(b) FLOOR INCENTIVE. In addition, during the Original Term of
this Agreement (thirty months), AM shall retain a "Floor Incentive" of $40,000
per month from "UST's Share of Revenues" ($1.2 million in the aggregate). The
"Floor Incentive" shall be accrued by USTC and paid pursuant to subsection
(d)(iv) hereof, and shall be excluded from the limitations of Section 5(a)(iv)
of this Agreement. In the event of a material breach by UST or USTC of this
Agreement during the Original Term (which breach is not cured during the
applicable grace period and is either confirmed by the arbitrator under Section
18 hereof or not contested by UST or USTC), the Employee/Principals (for
distribution in accordance with the Unifying Agreement) may elect to receive an
aggregate lump-sum payment determined by multiplying (x) the monthly "Floor
Incentive" by (y) the remaining months in the Original Term. If a "Triggering
Event" occurs during the period January 1, 1995 through June 30, 1998, the
aggregate Floor Incentive, net of tax, accrued during the four full calendar
quarters next preceding the date of the Triggering Event, shall not be deducted
from "AM's After Tax Revenues" for purposes of calculating the Section 11
Formula Payment. Moreover, if a Triggering Event occurred before all Floor
Incentives have been paid, UST or USTC's successor shall assume responsibility
to make the remaining Floor Incentive payments.
(c) SPECIAL PROVISIONS. It is understood and agreed that:
(i) The balance of "Base AM Retention" for the period
July 1, 1994 through December 31, 1994 shall be paid
by UST or USTC to AM no later than February 15, 1995.
(ii) All amounts due to Robert B. Zevin pursuant to his
agreement dated September 30, 1994 with USTC shall be
considered as expenses to come out of "AM's Share of
Revenues" in each year in accordance with the
Unifying Agreement.
(iii) The application of this Section may make it
unattractive for AM to enter a business activity with
a profit margin of less then 40%. Accordingly, the
parties have agreed to negotiate separate "side
letters" with respect to revenue sharing on any new,
lower-margin business opportunities identified in the
future by AM and regarded as worthy of pursuit by UST
and/or USTC.
(iv) The parties hereto further understand and acknowledge
that the term "Revenues" as used herein is intended
to cover revenues of AM as they now exist and as they
may grow or contract internally, and not revenues
from the acquisition by UST or USTC of another
investment advisory firm concerning which the parties
hereto agree to negotiate in good faith as to revenue
sharing.
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(v) The investment return on allocated, but unexpended,
portions of AM's Share of Revenues shall be measured
at the end of each calendar quarter by multiplying
the average of the month end balances during such
quarter by the published thirteen week U.S. Treasury
Bill Rate at the end of such calendar quarter.This
interest income shall be added to "AM's Share of
Revenues".
(d) Transfer of Revenues to UST; Retention of Revenues by
-----------------------------------------------------
USTC; Compensation of Employee/Principals.
------------------------------------------
(i) The Employee/Principals and AM shall use AM's Share
of Revenues to pay and provide for AM's business
expenses and expenditures including, without
limitation, investment in AM's business and new
products (see Section 6(d) above) and salaries of its
employees, except that any federal, state or local
income tax to which USTC is subject shall be the
responsibility of UST and shall not be treated as a
business expense of AM.
(ii) The Employee/Principals shall incur no expenses or
obligations on behalf of AM which exceed USTC's
ability to pay or provide for them when due out of
AM's Share of Revenues. The Employee/Principals
shall not incur obligations or make binding
commitments on behalf of USTC or UST not related to
AM's business and requiring expenditures by USTC in
excess of $50,000, or make representations to third
parties that they have the authority to do so.
However, the Employee/Principals may represent and
advertise that AM is a division of USTC and an
affiliate of UST, and other than as limited above in
this Section 10 (d)(ii), may incur obligations or
make binding commitments on behalf of USTC in the
ordinary course of business.
(iii) The Employee/Principals may (subject to Policies and
applicable laws and regulations) pay to AM's
employees, including the Employee and the other
Employee/Principals, at times and in amounts and
proportions determined in accordance with the
Unifying Agreement, the balance of AM's Share of
Revenues remaining after the payment of all of the
amounts required under subsection (d)(i) hereof and
subject to Section 5(a)(iv).
(iv) The Employee's Revenue Sharing compensation out of
"AM's Share of Revenues" shall be allocated in
accordance with the terms of the Unifying Agreement.
The Employee/Principals have provided to UST and USTC
in the Unifying Agreement their procedures for
determining changes, if any, in the allocation of
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Revenues among the Employee/Principals. If an
Employee/Principal chooses to leave USTC's employ
after bypassing this change determination mechanism
or refusing to abide by its results, the
Employee/Principal shall be deemed to have committed
a material breach of this Employment Agreement.
(v) The Employee/Principals and AM shall make available
to UST, UST's Share of Revenues upon reasonable
request by UST and action by USTC's Board of
Directors. The Employee/Principals shall not spend
or incur obligations to spend any part of UST's Share
of Revenues.
(e) ADMINISTRATION. The parties hereto and the other
Employee/Principals agree to meet and consult to endeavor in good faith to
agree on appropriate procedures, in addition to Policies and applicable laws
and regulations, for administering the provisions of this Section 10.
The Employee/Principals shall retain control over all expenditures of
AM, subject to the power of USTC's Board of Directors to exercise its rights
under Section 5A, and subject to this Revenue Sharing Provision, and
recognizing that AM is a division of USTC.
(f) TERM AND STATUS AS PARTIES. This Revenue Sharing Provision
shall continue in effect until terminated by agreement of UST, USTC, and the
Employee/Principals acting in accordance with the Unifying Agreement. If the
employment of Employee by USTC ceases other than as a result of a material
breach by UST or USTC of this Employment Agreement, such Employee shall
thereupon automatically cease to be a party to this Revenue Sharing Provision
and to have any rights or obligations under this Section, and shall cease to be
an Employee/Principal for the purposes of this Provision. Nothing in this
Employment Agreement shall be construed to grant to the Employee any right to
be employed by USTC beyond the terms of this Employment Agreement.
SECTION 11. FORMULA PAYMENT. If Employee is still employed by
USTC at the time of a "Triggering Event" (as hereinafter defined), the Employee
shall receive Employee's share of a formula payment (the "Formula Payment") as
follows:
(a) Unless otherwise agreed by the Employee/Principals acting in
accordance with the Unifying Agreement, the Employee's share of the Formula
Payment shall be the percentage set forth after the Employee's name on Schedule
III hereto;
(b) The "Formula Payment" shall be 3.33 times "AM's After Tax
Revenues" (as hereinafter defined and meaning generally UST's Share of Revenues
minus taxes);
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(c) "AM's After Tax Revenues" shall be the portion of AM's
after-tax Revenues contributed, accruing or allocated to UST for the four full
calendar quarters next preceding the date of the Triggering Event; determined
in accordance with GAAP consistently applied in such periods. For purposes of
this Subsection, there shall be assumed a combined federal and state tax rate
of 38%, such rate to be appropriately adjusted to reflect changes in applicable
federal and state corporate tax rates. An example of this calculation is set
forth on Schedule V.
(d) The Formula Payment shall be adjusted in accordance with
Schedule IV hereto for gain or loss of AM clients between the signing of a
definitive merger, consolidation or acquisition agreement or an agreement
related to another Triggering Event and the Closing Date related to any such
Triggering Event.
(e)
(i) At the Closing Date of a Triggering Event, three Key
Employees shall be identified as follows. For every
person who has been an Employee/Principal at any time
during the previous 15 months there shall be
calculated a Weighted Average Share equal to the sum
of (a) the share of the Formula Payment such person
was entitled to receive from time-to-time during the
preceding 15 months in accordance with Schedule III
and subsequent changes thereto by the
Employee/Principals acting in accordance with the
Unifying Agreement times (b) the number of days such
person was entitled to each such share. The three
persons among those who are or have been
Employee/Principals on the Closing Date of the
Triggering Event or during the previous 15 months who
have the three highest Weighted Average Shares shall
be deemed the "Key Employees".
(ii) If only one of the three Key Employees is no longer
in the employ of USTC as of the Closing Date of such
Triggering Event, then all of that Key Employee's
Weighted Average Share of the Formula Payment
(expressed by X%) shall be placed in escrow in the
manner contemplated by Section 11(f). To determine
the distribution of each of the three escrowed
installments use the following formula. Revenues of
AM (as defined in Section 10(a)) for the last full
calendar year prior to a Triggering Event should then
be determined (the "Measuring Year"). Such Revenues
of AM for the Measuring Year multiplied by a decimal
representing 100% - X% equals the "Minimum Revenues".
If during the next full calendar year following the
Measuring Year, Revenues of AM are equal to or less
than Minimum Revenues none of the one-third of the
escrowed amount for such year will be paid to the
remaining Employee/Principals in accordance with this
Section and all of it will be retained by UST's or
USTC's successor. If Revenues of AM for
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<PAGE> 14
that calendar year exceed Minimum Revenues, (i) take
the U.S. Dollar amount of such excess above the
Minimum Revenues and divide it by the Revenues of AM
for the Measuring Year minus the Minimum Revenues,
(ii) then multiply the resulting fraction by
one-third of the full escrowed amount, (iii) the
product of the foregoing formula should be delivered
to the remaining Employee/Principals as a group for
distribution in accordance with the Unifying
Agreement and the remainder of that installment
should be retained by UST or UST's successor.
Similar calculations should be made for the second
and third installments, but in each case using the
same Minimum Revenues.
(iii) If two or more of the Key Employees are no longer in
the employ of USTC as of the Closing Date of such
Triggering Event, then 100% of the Formula Payment
shall be placed in escrow in the manner contemplated
by Section 11(f). To determine the distribution of
each of the three escrowed installments use the
following formula. If Revenues of AM for the last
full calendar year prior to the distribution date of
the applicable escrow installment equal or exceed
Revenues of AM for the Measuring Year, all of that
escrowed installment should be distributed to the
remaining Employee/Principals as a group for
distribution in accordance with the Unifying
Agreement and none should be retained by UST or
USTC's successor. If Revenues of AM for the last
full calendar year prior to the distribution date of
the applicable escrow installment are less than
Revenues of AM for the Measuring Year, divide the
U.S. Dollar amount of Revenues of AM for such last
full calendar year by the U.S. Dollar amount of
Revenues of AM for the Measuring Year and multiply
the resulting fraction by one-third of the full
escrowed amount. The product of the foregoing
calculation should be delivered to the remaining
Employee/Principals as a group for distribution in
accordance with the Unifying Agreement and the
remainder should be retained by UST's or USTC's
successor.
(f) Seventy percent (70%) of the Employee's share of the Formula
Payment shall be paid in cash within twenty (20) days of the Closing Date of
the Triggering Event. The remaining thirty percent (30%) shall be placed in
escrow with an escrow agent acceptable to both UST and Employee/Principals and
paid to the Employee or the Employee's estate as provided in Section 7(b) in
installments of one third of the escrowed amount at the end of years one, two
and three (which may not be calendar years) after the Closing Date of the
Triggering Event plus interest, at the interest rates on the date of the
Closing Date of the Triggering Event of one, two and three year Treasury
securities, provided that at the time of each such installment payment, the
Employee has not been terminated with cause or for a material breach or has not
voluntarily ceased to be employed by AM.
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<PAGE> 15
(g) A "Triggering Event" shall be deemed to have occurred when:
(i) there occurs the signing of a definitive agreement of
merger or consolidation of UST or USTC with any other
corporation, other than a merger or consolidation
which would result in the voting securities of UST or
USTC outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of
UST or USTC, or such surviving entity outstanding
immediately after such merger or consolidation;
provided, however, that a merger or consolidation
effected to implement a recapitalization,
reorganization or restructuring of UST or USTC (or
similar transaction) in which no "person" (as defined
in (g)(iii) below) acquires more than fifty percent
(50%) of the combined voting power of UST's then
outstanding securities shall not constitute a
Triggering Event; or
(ii) there occurs a closing of a sale or other disposition
by UST of more than 50% of UST's, USTC's or AM's
business and assets; or
(iii) any "person", as such term used in Section 13(d) and
14(d) of the Exchange Act other than UST or USTC or
any of their respective subsidiaries or affiliates or
any trustee or other fiduciary holding securities
under an employee benefit plan of either of them or
any of their subsidiaries or affiliates, becomes a
beneficial owner (within the meaning of Rule 13d-3,
as amended, as promulgated under the Exchange Act),
directly or indirectly, of securities representing
50% percent or more of the combined voting power of
UST's or USTC's then outstanding securities.
If (i) more than 50% of UST's then outstanding common stock or assets
are acquired by a "person" whose consolidated assets prior to the Triggering
Event were less than $4 billion or (ii) UST's business assets and operations
are consolidated with those of another bank or bank holding company and the
resulting entity has consolidated assets of $5.5 billion or less, a Triggering
Event shall be deemed to have occurred, but the length of the Phase II term of
employment of the Employee shall be increased automatically by one additional
year.
(h) If UST agrees to be acquired by an entity with a public image
so starkly negative that AM's affiliation with that entity would be reasonably
likely, by itself, to cause a loss of more than 25% of AM's gross revenues in
one year (unless the parties
15
<PAGE> 16
mutually agree to the contrary), the Employee/Principals at their option acting
pursuant to the terms of the Unifying Agreement (and provided such right is
exercised within 30 days of the public announcement of such acquisition) will
be relieved of all of the Employee's obligations under the Phase II Term and no
Formula Payment will be made.
(i) The parties acknowledge that any such Formula Payment is
intended to compensate the Employee for: (i) the automatic extension of this
Agreement occurring by reason of a Triggering Event; (ii) the Phase II
Non-Competition covenants specified in Section 12; and (iii) the loss of
opportunity to make up for reduced rate of compensation which such Employee
earned with USTC for periods prior to the effective date of this Agreement.
SECTION 12. PHASE II NON-COMPETITION COVENANTS.
(a) During the longer of the Phase II Term (as defined in Section
4) if Phase II shall commence while Employee is employed by USTC hereunder or
while Employee is employed by USTC during or after such Phase II Term
hereunder, Employee shall not, except in the course of his employment with
USTC, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an
officer, director, employee, partner, stockholder,
consultant, adviser, subsidiary, affiliate,
independent contractor or otherwise, investment
advisory services to any person or entity;
(ii) Interfere with AM's relations with any person or
entity who at any time during such period was a
Client (which means Past, Present, and Potential
Client); or
(iii) Induce or attempt to induce directly or indirectly
any professional employee of AM to terminate his or
her employment or hire or attempt to hire, directly
or indirectly, any such person, other than by
discharge of such person as a part of Employee's
duties.
(b) Until one year following the end of the Phase II Term, if the
Phase II Term should commence while Employee is employed by USTC hereunder or
one year following the termination of Employee's employment with USTC during or
after such Phase II Term, Employee shall not, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an
officer, director, employee, partner, independent
contractor or otherwise, investment advisory services
to any person or entity who as of the date of the
termination or expiration of Employee's employment
16
<PAGE> 17
with USTC was or had been a Client (which means
Past, Present, and Potential Client);
(ii) Interfere with AM's relations with any person or
entity who as of the date of the termination or
expiration of Employee's employment with USTC was a
Client (which means Past, Present, and Potential
Client); or
(iii) Induce or attempt to induce directly or indirectly
any professional employee of AM to terminate his or
her employment or hire or attempt to hire, directly
or indirectly, any such person.
(c) Notwithstanding the provisions of subsections (a)(i) and
(b)(i), the Employee may render without compensation investment advisory
services to any immediate member of Employee's family, which shall include the
Employee and any trust or account which is comprised entirely of assets held
for the benefit of such Employee and/or immediate members of such Employee's
family, and may engage in such other activities as are listed on Schedule I
hereto.
(d) Employee and USTC agree that the periods of time and the
unlimited geographic area applicable to the covenants of this Section 12 are
reasonable, in view of the receipt and expected receipt of the Employee's share
of Revenue Sharing as provided in Section 10(c), and other compensation, and
the Formula Payment provided herein; the geographic scope and nature of the
business in which AM is engaged; Employee's knowledge of AM's business; and
Employee's relationships with AM's investment advisory clients. However, if
such period or such area should be adjudged unreasonable in any judicial
proceeding, then the period of time shall be reduced by such number of months
or such area shall be reduced by elimination of such portion of such area, or
both, as are deemed unreasonable, so that this covenant may be enforced in such
area and during such period of time as are adjudged to be reasonable.
SECTION 13. ALL BUSINESS TO BE THE PROPERTY OF USTC; ASSIGNMENT
OF INTELLECTUAL PROPERTY. During the Phase II Term if Phase II shall commence
while Employee is Employed by USTC hereunder and thereafter while Employee is
employed by AM and/or USTC:
(a) Employee agrees that any and all presently existing investment
advisory business of AM and all business developed by Employee or any other
employee of AM, including without limitation all investment advisory contracts,
fees, commissions, compensation records, Client Lists (as defined in Section
8), agreements, and any other incident of any business developed or sought by
AM or earned or carried on by Employee for AM, are and shall be the exclusive
property of USTC for its sole use, and (where applicable) shall be payable
directly to USTC.
17
<PAGE> 18
(b) Employee hereby grants to USTC (without any separate
remuneration or compensation other than that received by Employee from time to
time in the course of his or her employment) Employee's entire right, title,
and interest throughout the world in and to, all research, information, Client
Lists, and all other investment advisory, technical and research data made,
conceived, developed and/or acquired by Employee solely or jointly with others
during the period of Employee's employment by USTC, which relate to investment
advice as it was or is now rendered or as it may, from time to time, hereafter
be rendered or proposed to be rendered, but excluding such individual's ideas
and thought processes which are not embodied in written or machine readable
form (all such non-excluded items being referred to as "Intellectual
Property").
SECTION 14. CONFIDENTIALITY. Except in performance of services
for USTC, Employee shall not, either during the Phase II Term if Phase II shall
commence while the Employee is employed by USTC hereunder or thereafter while
employed by AM and/or USTC, use for Employee's own benefit or disclose to or
use for the benefit of any person outside USTC, any information not lawfully
available to the public concerning any Intellectual Property, including Client
Lists, whether Employee has such information in his or her memory or embodied
in writing or other tangible form. All such Intellectual Property and such
information concerning Intellectual Property, and all originals and copies of
any Intellectual Property, and any other written material relating to the
business of AM, shall be the sole property of USTC. During such Term or
thereafter, upon the termination of Employee's employment in any manner or for
any reason, Employee shall promptly surrender to USTC all originals and copies
of any Intellectual Property, and Employee shall not thereafter use any
Intellectual Property.
The foregoing notwithstanding, Employee will have no obligation to AM
or USTC with respect to the disclosure or use of any Intellectual Property or
information concerning Intellectual Property if:
(a) Such Intellectual Property or information is or becomes publicly
known or otherwise enters the public domain through no wrongful act of
Employee; or
(b) Such Intellectual Property or information is received from a
third party which has no obligation to UST or USTC to maintain it in
confidence.
Notwithstanding the references to Client Lists above, it shall not be
a violation of this Section or Section 13 hereof for Employee to communicate or
do business with any Past, Present or Potential Client in the course of
Employee's employment with AM and USTC, and any such conduct shall be limited,
if at all, solely by Section 12 hereof.
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<PAGE> 19
SECTION 15. NOTICES. Any notice or other communication hereunder
shall be given as follows:
United States Trust Company
40 Court Street
Boston, MA 02108
Fax: (617) 726-7320
Attn: Neal F. Finnegan, Chairman, Executive
Committee
UST Corp.
40 Court Street
Boston, MA 02108
Fax: (617) 726-7320
Attn: Neal F. Finnegan, President & CEO
With copies to Eric R. Fischer, Executive Vice President and General
Counsel
Fax: (617) 726-7209
Employee:
Robert B. Zevin
71 Stewart Street
W. Newbury, MA 01985
Fax: (if any)
with copy to Peter M. Rosenblum
Foley, Hoag & Eliot
1 Post Office Square
Boston, MA, 02109
Fax: (617) 832-7000
SECTION 16. ASSIGNABILITY. This Employment Agreement shall be
binding upon and inure to the benefit of UST, USTC, and to any person or firm
who may succeed to the business of UST, USTC, or AM. This Employment Agreement
shall not be assignable by Employee, but it shall inure to the benefit of
Employee's heirs, executors, administrators and legal representatives.
SECTION 17. ENTIRE AGREEMENT. This Employment Agreement and the
Unifying Agreement contain the entire agreement between USTC and Employee with
respect to the subject matter hereof, and supersede all prior oral and written
agreements between any of UST, USTC, AM and the Employee with respect to the
subject matter hereof, including without limitation any oral agreements
relating to compensation.
19
<PAGE> 20
SECTION 18. ARBITRATION. In the event the parties hereto
disagree as to whether a material breach has occurred of: (i) the "Independence
Assurances" under Section 5; (ii) USTC's right of termination of Employee's
employment under Section 7; (iii) this Agreement by USTC as described in
Section 19 (b); (iv) the revenue sharing provisions of Section 10; or (v) the
formula payment provisions of Section 11, such dispute shall be settled by
arbitration before a single arbitrator to be then named by UST and a majority
of the Employee/Principals acting in accordance with the Unifying Agreement, in
Boston, Massachusetts in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. If such arbitrator cannot serve, then a
successor shall be appointed in accordance with such Rules. If the arbitrator
finds that there has been a material breach (and such breach has not been cured
by UST or USTC within sixty (60) days of such finding or by Employee in
accordance with Section 7 hereof), then the remedies provided for in Section 19
shall become available, as appropriate.
SECTION 19. EQUITABLE RELIEF AND OTHER REMEDIES.
(a) Employee recognizes and agrees that UST's, USTC's or the
Employee/Principals' remedies at law for any breach of the provisions of
Sections 12, 13 and 14 hereof would be inadequate and that for breach of such
provisions UST, USTC and the Employee/Principals shall, in addition to such
other remedies as may be available to any of them at law or in equity or as
provided in this Employment Agreement, be entitled to injunctive relief and to
enforce their respective rights by an action for specific performance to the
extent permitted by law, and to the right of set-off against any amounts due to
the Employee by UST, USTC or AM. Should Employee engage in any activities
prohibited by this Employment Agreement, he or she agrees to pay over to USTC
or UST all compensation received in connection with such activities. Such
payment shall not impair any other rights or remedies of UST, USTC or AM or
affect the obligations or liabilities of Employee under this Employment
Agreement or applicable law.
(b) Any termination by USTC of Employee's employment which is not
authorized by Section 7 hereof shall constitute a material breach of this
Agreement. In the event of a material breach of this Agreement by UST or USTC
which is not cured pursuant to Section 18, in addition to any other rights or
remedies which the Employee may have, at law, in equity or otherwise, USTC
shall pay Employee the Employee's then current Annual Base Salary for a period
equal to the greater of (i) twelve months or (b) the balance of the then
current term of this Agreement. Any such payments shall not constitute part of
AM's Share of Revenues. Should such a material breach occur and not be so
cured, the Employee shall be free to compete, Sections 12, 13 and 14 shall not
apply and the Employee shall leave with the rights described in Section 5(b) of
this Agreement.
(c) Without limiting the generality of the foregoing, the parties
expressly agree
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<PAGE> 21
that termination without cause of Employee's employment hereunder during the
Phase II Term by UST, USTC or any other person or entity will constitute a
material breach of this Agreement and, in addition to any other rights or
remedies which the Employee may have, at law, in equity or otherwise, shall
give Employee the right to salary continuation as set forth in Section 19(b)
hereof.
SECTION 20. WAIVERS AND FURTHER AGREEMENTS. Neither this
Employment Agreement nor any term or condition hereof, including without
limitation the terms and conditions of this Section 20, may be waived in whole
or in part as against UST, USTC, AM or Employee except by written instrument
executed by each of them, expressly stating that it is intended to operate as a
waiver of this Employment Agreement or the applicable term or condition hereof.
Each of the parties hereto agrees to execute all such further instruments and
documents and to take all such further action as the other party may reasonably
require in order to effectuate the terms and purposes of this Employment
Agreement as stated herein. Furthermore, no waiver may violate the terms of
the Unifying Agreement and any waiver shall require action of the
Employee/Principals in accordance with the Unifying Agreement authorizing such
waiver.
SECTION 21. AMENDMENTS. This Employment Agreement may not be
amended, nor shall any parties be added hereto, nor any change, modification,
consent, or discharge be effected except by written instrument executed by all
three of the Employee, USTC and UST. Furthermore, no amendment or modification
may violate the terms of the Unifying Agreement and any amendment or
modification shall require action of the Employee/Principals in accordance with
the Unifying Agreement authorizing such amendment or modification.
SECTION 22. SEVERABILITY. If any provision of this Employment
Agreement shall be held or deemed to be invalid, inoperative or unenforceable
in any jurisdiction or jurisdictions, because of conflicts with any
constitution, statute, rule or public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision in question
unenforceable in any other jurisdiction or in any other case or circumstance or
of rendering any other provisions herein contained unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Employment Agreement
shall be reformed and construed in any such jurisdiction or case as if such
invalid, inoperative, or unenforceable provision had never been contained
herein and such provision reformed so that it would be enforceable to the
maximum extent permitted in such jurisdiction or in such case.
SECTION 23. NO CONFLICTING OBLIGATIONS. Employee represents and
warrants to USTC and UST that Employee has no other interest or obligation
which is inconsistent or in conflict with this Employment Agreement or which
would prevent, limit, or impair, in any way, Employee's performance of any of
the covenants or duties
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<PAGE> 22
hereinabove set forth.
SECTION 24. PARTIES. It is understood and agreed that UST joins
in this Employment Agreement only as to such matters where its name appears
herein. It is further understood and agreed that no person shall participate
in the benefits conferred on Employee/Principals by the terms of this and other
similar Employment Agreements unless such person has become a party to a
similar Employment Agreement or is described in Section 16.
SECTION 25. GOVERNING LAW. This Employment Agreement shall be
governed by and construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts which apply to contracts executed and performed
solely in Massachusetts. UST, USTC and the Employee hereby consent to the
jurisdiction of any state or federal court located within Suffolk County,
Massachusetts, and assent that service of process may be made by registered
mail to the parties' respective addresses as provided in Section 15 hereof and
shall be effective in the same manner as notices are effective under such
Section 15.
SECTION 26. ACTION OF THE EMPLOYEE/PRINCIPALS. Whenever the
Consent of the Employee/Principals shall be described herein, action by the
Employee/Principals or their duly authorized representative shall be required
in accordance with the Unifying Agreement, and such action shall be sufficient
hereunder.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as a sealed instrument as of the date first above written.
EMPLOYEE: UNITED STATES TRUST COMPANY
/s/ Robert B. Zevin By: /s/ Neal F. Finnegan
------------------- --------------------
Robert B. Zevin Title:
Joined in as to those matters where its name appears.
UST CORP.
By: /s/ Neal F. Finnegan
--------------------
Title:
22
<PAGE> 1
EXHIBIT 10(z)
UNIFYING AGREEMENT
THIS UNIFYING AGREEMENT made this 14th day of February, 1995 and
effective January 1, 1995, by and among United States Trust Company ("USTC"), a
banking and trust company having its principal place of business in Boston,
Massachusetts, UST Corp. ("UST"), a Massachusetts corporation also having its
principal place of business in Boston, Massachusetts and the parent of USTC,
Domenic Colasacco of Needham, Massachusetts ("Colasacco"), Robert Lincoln of
Lincoln, Massachusetts ("Lincoln"), Stephen K. Moody of Cambridge,
Massachusetts ("Moody"), Lucia Santini of Mansfield, Massachusetts ("Santini")
and Robert B. Zevin of West Newbury, Massachusetts ("Zevin").
Whereas, the Asset Management Division ("AM") is a division of USTC
which provides investment advisory and trust management services and each of
the initial Principals (as defined in Section 1.1 hereof and as listed on
EXHIBIT A attached hereto) is currently employed by AM and has simultaneously
with the execution and delivery of this Agreement entered into an Employment
Agreement as provided by Section 1.2 hereof;
Whereas, the Principals are concerned that previous UST and USTC
practices have not allowed for enough spending to generate growth in AM's
business, or for fully competitive compensation for its principals;
Whereas, UST and USTC desire to stabilize and increase the
profitability of AM and to pay its employees competitive compensation;
Whereas, UST and USTC want to provide, and the Principals desire to
participate in, an incentive compensation program which reflects value created
in the AM business;
Whereas, the Principals want to make it attractive to any potential
acquiror of UST, USTC or AM to protect existing relationships with AM employees
and clients, avoid re-writing existing client contracts, and further AM as a
separate business conducted under the name "United States Trust Company"; and
Whereas, UST and USTC want, in a change of ownership situation, to
offer an opportunity to a prospective purchaser to retain the services of the
Principals and thereby receive a continuing stream of profits from AM;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and intending to be legally bound, the parties
hereby agree as follows:
ARTICLE I - PRINCIPALS
Section 1.1. NAMES AND ADDRESSES. The names and mailing addresses of
the persons who will initially serve as Principals in accordance with the terms
of this Agreement are set forth in EXHIBIT A attached hereto and made a part
hereof. Principals may be added or removed in accordance with Sections 1.6 and
1.8 hereof. The term "Principal" as used in any provision of this Agreement
shall mean each initial Principal listed on EXHIBIT A
<PAGE> 2
attached hereto and each new Principal added in accordance with Section 1.6
hereof who, in each case, as of the date or at the time of the event or period
relevant to such provision, shall be an offlcer of AM and a signatory to
this Agreement and shall not have resigned or been removed as an officer of AM
or a Principal hereunder.
Section 1.2. EMPLOYMENT AGREEMENTS. Concurrently with the execution of
this Agreement, each of the initial Principals shall enter into an Employment
Agreement with USTC, joined in as to certain matters by UST, in substantially
the form of EXHIBIT B hereto.
Section 1.3. THE PRINCIPALS COMMITTEE. The business of AM shall be
managed by a committee of the then serving Principals (the "Principals
Committee") which shall have and may exercise all the powers of AM except as
otherwise reserved to the Senior Principal, USTC or UST by this Agreement.
Section 1.4. VOTING. Each Principal shall have one vote on all matters
to be voted on by the Principals Committee hereunder.
Section 1.5. DUTIES OF THE PRINCIPALS. The Principals shall have such
duties as are set forth in their respective Employment Agreements and this
Agreement. Whenever called upon under this Agreement or under the Employment
Agreement, the Principals Committee shall act by vote of a majority of the
Principals, unless a vote of a Super-Majority (as defined in Section 1.6.
hereof) is required under this Agreement.
Section 1.6. ELECTION OF A NEW PRINCIPAL. The Principals Committee, by
vote of seventy percent (70%) of the Principals (a "Super-Majority"), may
elect a new Principal. At the time of such election, the Principals Committee,
in accordance with Section 5.2(c), shall decide on the percentage of the
Formula Payment (as defined in the form of Employment Agreement attached
hereto as EXHIBIT B and any amendment thereto) to allocate to such new
Principal. Such person shall then become a Principal for all purposes
hereunder and a party to this Agreement upon execution of a counterpart of this
Agreement, countersigned by the Senior Principal, and an Employment Agreement
with USTC and UST substantially in the form of EXHIBIT B attached hereto, with
an appropriately amended Schedule III attached.
Section 1.7. TERM. Each Principal shall remain a Principal until (i) he
dies, resigns, is removed or becomes disqualified, (ii) his Employment
Agreement is terminated with or without cause, or (iii) this Agreement is
terminated with or without cause pursuant to Article VI hereof.
Section 1.8. REMOVAL OF A PRINCIPAL. The Principals Committee, by vote
of a SuperMajority of the Principals, may instruct USTC to terminate, with or
without cause, a Principal's employment by USTC and of the related Employment
Agreement.
(a) If a Principal is terminated by the Principals Committee without
cause pursuant to this Section 1.8, (i) the Principal shall be entitled to
payment by AM of the greater of (A) the amount of compensation that such
Principal would have received under Section 3.1
<PAGE> 3
hereof for the remainder of the then current term of the Principal's Employment
Agreement, or (B) an amount equal to such Principal's then current Annual Base
Salary (as defined in Section 3.1) and (ii) the Principal's Employment
Agreement with UST and USTC (including, without limitation, Sections 12, 13
and 14 thereof) shall immediately terminate and the Principal shall be free to
compete with AM's business. The amounts payable to the terminated Principal
under this Section 1.8(a) shall be paid at such times and in such amounts as
would otherwise have been required under the terms of such Principal's
Employment Agreement UNLESS the Principals Committee, by vote of a
Super-Majority of the Principals (with the terminated Principal excluded from
voting), decides to accelerate payment of the amounts due hereunder.
(b) If a Principal is terminated by the Principals Committee for cause
pursuant to this Section 1.8, AM's obligations to pay further compensation
hereunder and under such Principal's Employment Agreement shall cease as of
the date of termination, except that any amounts theretofore accrued under
Section 3.1 hereof shall be paid when due to the Principal, and the provisions
of the Principal's Employment Agreement with UST and USTC shall immediately
terminate (except for the provisions of Sections 12 (b), 12(c), 12(d), 13 and
14 thereof).
(c) As used herein, "cause" shall mean (i) any material breach by a
Principal of his Employment Agreement; (ii) any act by a Principal causing a
material breach of AM's duties to UST and USTC under Section 10 of such
Principal's Employment Agreement; (iii) the conviction of a Principal for a
crime involving moral turpitude; or (iv) willful misconduct in the performance
by a Principal in connection with the Principal's duties under such
Principal's Employment Agreement after due notice and reasonable opportunity to
correct such conduct.
Section 1.9. DISABILITY. The Principals Committee, by vote of a
Super-Majority of the Principals, may terminate a Principal's employment upon
thirty (30) days' notice to such Principal if such Principal should be unable,
for one or more periods aggregating four (4) months during any consecutive
twelve (12) month period, because of illness, accident, or other disability
(mental or physical), to discharge substantially all of his duties hereunder,
and such disability shall be continuing at the time of such notice. After any
such termination, AM shall continue to pay such Principal for three (3)
consecutive months at his then current salary rate, UNLESS the Principals
Committee, by vote of a Super-Majority of the Principals, decides to increase
or otherwise change the amounts to be paid to any such disabled Principal
hereunder. The foregoing amounts and any additional amounts paid to such
disabled Principal hereunder shall be paid out of AM's Share of Revenues (as
defined in the form of Employment Agreement attached hereto as EXHIBIT B and
any amendment thereto).
Section 1.10. DEATH OF A PRINCIPAL. In the event of a Principal's death
during the term of this Agreement, AM's obligations to pay further
compensation hereunder and under such Principal's Employment Agreement shall
cease as of the date of death, except that any amounts theretofore accrued
under Sections 3.1 and 3.2 hereof shall be paid when due to the Principal's
estate, UNLESS the Principals Committee, by vote of a Super-Majority of the
Principals, decides to increase or otherwise change the total amounts to be
paid to any such deceased Principal hereunder. The foregoing amounts and any
additional amounts paid to such deceased Principal hereunder shall be paid out
of AM's Share of Revenues (as defined in the form of Employment Agreement
attached hereto as Exhibit B and any amendment thereto).
Section 1.11. RESIGNATION OF A PRINCIPAL. In the event that a
Principal resigns, AM's
<PAGE> 4
obligations to pay further compensation hereunder shall cease as of the date of
such resignation, except that any amounts theretofore accrued under Section 3.1
hereof shall be paid when due to the Principal.
ARTICLE II - SENIOR PRINCIPAL
Section 2.1. NOMINATION AND ELECTION OF THE SENIOR PRINCIPAL. On an
annual basis, the Principals Committee, by vote of a majority of the
Principals, shall nominate a person from among the Principals to be the Senior
Principal of AM. Such person shall serve as Senior Principal of AM unless his
nomination is vetoed by vote of USTC's Board of Directors taken within 60 days
of notification of such nomination. Colasacco shall serve as the Senior
Principal of AM for the term beginning January 1, 1995 and until his successor
is duly elected and qualified. No person elected under this Section 2.1. to
serve as the Senior Principal shall be precluded from serving more than one
term.
Section 2.2. REMOVAL OF THE SENIOR PRINCIPAL. During his term, the
Principals Committee may remove, with or without cause, a Principal as the
Senior Principal, by vote of a Super-Majority of the Principals.
Section 2.3. POWERS OF THE SENIOR PRINCIPAL. Subject to Section 2.5
hereof and the other terms and conditions of this Agreement, the Senior
Principal shall have general supervision and control over AM's business.
Recognizing that AM is a division of USTC, the Senior Principal shall control
all expenditures of AM subject to (i) the power of USTC's Board of Directors to
exercise its rights under Section 5A of the form of Employment Agreement
attached hereto as EXHIBIT B and any amendment thereto, (ii) the Revenue
Sharing Provision contained in Section 10 of the form of Employment Agreement
attached hereto as EXHIBIT B and any amendment thereto and (iii) approval by
the Principals Committee if required pursuant to the terms of this Agreement.
Section 2.4. DUTIES OF THE SENIOR PRINCIPAL. The Senior Principal
shall represent and act on behalf of AM on all matters, except those matters
specifically reserved to the Principals Committee under this Agreement and
those matters that may be delegated by the Senior Principal or the Principals
Committee hereunder. Without limiting the generality of the foregoing, whenever
a consent or approval of the Principals shall be required under any Employment
Agreement or this Agreement, the Senior Principal or, in the Senior Principal's
absence, another Principal designated in writing by the Principals Committee,
shall communicate any consent or approval authorized by the Principals.
Section 2.5. ISSUES REQUIRING THE PRINCIPALS COMMITTEE'S APPROVAL. The
Principals Committee, by a vote of a majority of the Principals, may require
that certain decisions of the Senior Principal be subject to prior approval of
the Principals Committee.
ARTICLE III - COMPENSATION OF THE PRINCIPALS
Section 3.1. ANNUAL BASE SALARY. Subject to the Revenue Sharing
Provision contained in Section
<PAGE> 5
10 of the form of Employment Agreement attached hereto as EXHIBIT B and any
amendment thereto, while employed by USTC under the Employment Agreement, each
of the Principals shall receive the annual base salary (the "Annual Base
Salary") set forth in EXHIBIT C attached hereto.
Section 3.2. INCENTIVE PAYMENTS. Subject to the Revenue Sharing
Provision contained in Section 10 of the form of Employment Agreement attached
hereto as EXHIBIT B and any amendment thereto, from time to time, but not less
than annually, the Senior Principal shall make recommendations to the
Principals concerning the incentive compensation payments that shall be paid by
AM to each of the Principals, including the Senior Principal. Unless a majority
of the Principals agree to a different incentive compensation payment
arrangement, the recommendations of the Senior Principal shall be implemented
in the manner proposed by the Senior Principal.
Section 3.3. THE ZEVIN AGREEMENT. The following provisions shall apply
with respect to the compensation to be paid to Zevin hereunder:
(a) USTC and Zevin are parties to an Independent Contractor Agreement
for Consulting Services dated September 30, 1994 (the "Independent Contractor
Agreement"). During the Original Term, any Renewal Term and the Phase II Term
(as defined in Zevin's Employment Agreement) of Zevin's Employment Agreement,
Zevin shall be compensated by UST and USTC solely in accordance with Sections
3.1 and 3.2 and Article V hereof. During such Terms, the provisions of the
Independent Contractor Agreement shall not be in effect. In the event of a
breach of Zevin's Employment Agreement or a breach of this Agreement by UST or
USTC, however, the provisions of the Independent Contractor Agreement shall
immediately be deemed to be in effect but shall not be effective retroactively.
If such an event shall occur, Section 3.3(b) hereof shall not apply.
(b) If Zevin resigns or is removed as a Principal at or after the
expiration of the Phase II Term of Zevin's Employment Agreement, the terms and
conditions of the Independent Contractor Agreement shall immediately be in
effect, and he shall thereafter be entitled to payment of all amounts earned
under the Independent Contractor Agreement, subject to the following
limitations. The foregoing sentence notwithstanding, if Zevin received an
initial payment of a Formula Payment (as defined in Zevin's Employment
Agreement) during the term of his Employment Agreement, AM shall not be
obligated to begin payments to Zevin under Section 4 of the Independent
Contractor Agreement until the amount calculated under Section 4 of the
Independent Contractor Agreement for the period after such initial payment is
made, which amount would otherwise be paid to Zevin under the Independent
Contractor Agreement, exceeds seventy-five percent (75%) of such initial
payment (the "Base Amount"). The Base Amount shall be adjusted upward if Zevin
receives additional amounts of the Formula Payment from the escrow established
under Section 11(f) of the Employment Agreement. In such case, AM shall not be
obligated to begin payments to Zevin under Section 4 of the Independent
Contractor Agreement until the total amount which would otherwise be paid to
Zevin under the Independent Contractor Agreement exceeds seventy-five percent
(75%) of the new Base Amount. For purposes of determining amounts which would
otherwise be paid to Zevin under this Section 3.3(b), only those accounts that
have heretofore been designated as Zevin's accounts under the Independent
Contractor Agreement and their "successor accounts" (as defined in the
Independent Contractor Agreement) shall be used.
ARTICLE IV - COMPENSATION OF EMPLOYEES OF AM WHO ARE NOT PRINCIPALS
Section 4.1. ANNUAL BASE SALARY. Subject to the Revenue Sharing
Provision contained in
<PAGE> 6
Section 10 of the form of Employment Agreement as attached hereto as EXHIBIT B
and any amendment thereto, each employee of AM who is not a Principal (each a
"Non-Principal") shall receive an annual base salary to be determined by the
Senior Principal in his sole discretion.
Section 4.2. INCENTIVE PAYMENTS. Subject to the Revenue Sharing
Provision contained in Section 10 of the form of Employment Agreement as
attached hereto as EXHIBIT B and any amendment thereto, from time to time, but
not less than annually, the Senior Principal shall make recommendations to the
Principals concerning incentive compensation payments to be paid by AM to the
Non-Principals. Unless a majority of the Principals agree to a different
incentive compensation payment arrangement, the recommendations of the Senior
Principal shall be implemented in the manner proposed by the Senior Principal.
ARTICLE V - FORMULA PAYMENTS
Section 5.1. FORMULA PAYMENTS. If a Triggering Event (as defined in
the form of Employment Agreement attached hereto as EXHIBIT B and any amendment
thereto) shall occur, UST shall be required to pay to the Principals then still
employed by UST a Formula Payment (as defined in the form of Employment
Agreement attached hereto as EXHIBIT B and any amendment thereto).
Section 5.2. ALLOCATION OF THE FORMULA PAYMENT.
(a) Unless modified in accordance with Section 5.2(c), the Formula
Payment shall be allocated among the Principals as follows:
<TABLE>
<S> <C>
Colasacco 25%
Zevin 20%
Lincoln 15%
Moody 10%
Santini 5%
</TABLE>
The balance of the Formula Payment shall be allocated in accordance with
Section 5.2(b).
(b) The Senior Principal shall make a recommendation to the Principals
Committee as to how any amounts not allocated under Section 5.2(a) should be
allocated among the Non-Principals and the Principals. Unless a majority of the
Principals agree to allocate such amounts in a different manner, the
recommendation of the Senior Principal will be implemented in the manner
proposed by the Senior Principal.
(c) The Principals Committee, by a vote of a Super-Majority of the
Principals, may at any time modify the allocation of the Formula Payment set
forth in Section 5.2(a) hereof and Schedule III to the Employment Agreements.
ARTICLE VI - TERM
This Agreement shall be effective until terminated by agreement of
UST, USTC and a Super-Majority of the Principals.
<PAGE> 7
ARTICLE VII - AMENDMENT OF THE EMPLOYMENT AGREEMENTS
The Employment Agreements to be executed by each of the initial
Principals concurrently with the execution of this Agreement and by persons
subsequently becoming Principals hereunder may not be amended, nor may any
change or modification thereof, or waiver of any provision thereof, be effected
except by written instrument executed or otherwise authorized in writing by the
affected Principal, a Super-Majority of the Principals, USTC and UST.
ARTICLE VIII - GENERAL PROVISIONS
Section 8.1. APPLICABLE LAW. This Agreement shall be governed by and
construed and enforced in accordance with the substantive laws of The
Commonwealth of Massachusetts which apply to contracts executed and performed
solely in Massachusetts without giving effect to its principles of conflicts of
law. UST, USTC and the Employee hereby consent to the jurisdiction of any state
or federal court located within Suffolk County, Massachusetts, and assent that
service of process may be made by registered mail to the parties' respective
addresses as provided in Section 8.7 hereof and shall be effective in the same
manner as notices are effective under such Section 8.7.
Section 8.2. WAIVERS: AMENDMENTS.
(a) WAIVERS. The operation or effect of any provision of this
Agreement may only be waived in accordance with this Section 8.2(a). UST, USTC
and a Super-Majority of the Principals may by written consent waive, either
prospectively or retrospectively and either for a specified period of time or
indefinitely, the operation or effect of any provision of this Agreement.
(b) AMENDMENTS. This Agreement may not be amended (except as provided
in Sections 1.6, 1.8 or 5.2(c)), nor shall any parties be added hereto (except
as provided in Section 1.6), nor any change or modification be effected except
by written instrument executed by a Super-Majority of the Principals, USTC and
UST.
Section 8.3. ACTIONS IN WRITING: Telephone Meetings. Any actions to be
taken by the Principals hereunder may be taken at a meeting, or may be taken
without a meeting, if a consent in writing, setting forth the action so taken,
is signed by no less than the number of Principals that would be necessary to
authorize or take such action at a meeting. Participation in a meeting by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at the same time
shall constitute presence in person at any such meeting.
Section 8.4. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of, and be binding upon, UST, USTC, any person or firm which may
succeed to the business of UST, USTC or AM, and each of the Principals and
their respective heirs, legal representatives, successors, and permitted
assigns.
Section 8.5 ENTIRE AGREEMENT. This Agreement and the applicable
Employment Agreements
<PAGE> 8
constitute the entire agreement among the parties concerning the subject
matter hereof and supersede all prior agreements and understandings,
written or oral, among them concerning such subject matter.
Section 8.6. SEVERABILITY. In the event that any provision of this
Agreement shall be determined to be unenforceable by any court of competent
jurisdiction by reason of its extending for too great a period of time or over
too large a geographic area or over too great a range of activities, it shall
be interpreted to extend only over the maximum period of time, geographic area
or range of activities as to which it may be enforceable. If any provision of
this Agreement shall be determined to be invalid, illegal or otherwise
unenforceable by any court of competent jurisdiction, the validity, legality
and enforceability of the other provisions of this Agreement shall not be
affected thereby. Except as otherwise provided in this paragraph, any invalid,
illegal or unenforceable provision of this Agreement shall be severable, and
after any such severance, all other provisions hereof shall remain in full
force and effect.
Section 8.7. NOTICES. All notices, consents, approvals, requests,
demands or other communications ("notices") which any of the parties to this
Agreement may desire or be required to give hereunder shall be in writing and
shall be deemed properly given if sent by certified or registered mail,
postage prepaid, return receipt requested, telefax with confirmation received,
or by express courier service, addressed as follows:
(a) to USTC at
United States Trust Company
40 Court Street
Boston, Massachusetts 02108
Fax: (617) 726-7320
Attn: Neal Finnegan, Chairman, Executive Committee
to UST at
UST Corp.
40 Court Street
Boston, Massachusetts 02108
Fax: (617) 726-7320
Attn: Neal Finnegan, President and Chief Executive Officer
with a copy to
Eric R. Fischer, Executive Vice President and General Counsel
Fax: (617) 726-7209
or to such other address as may be designated by UST or USTC by notice to all
Principals pursuant to the terms of this Section; and
(b) to the Principals at their respective addresses set forth
in EXHIBIT A or to such other addresses as
<PAGE> 9
may be designated by each Principal by notice to UST and USTC.
All notices shall be deemed effective upon receipt. Any notice given
to a Principal at that Principal's last known address shall be considered
effective upon delivery to such address.
Section 8.8. CAPTIONS. All section titles or captions contained in
this Agreement are for convenience of reference only and shall not be deemed
part of this Agreement.
Section 8.9. GENDER AND NUMBER. All nouns, pronouns and variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the context may require.
Section 8.10. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute a single agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Unifying
Agreement as of the day and year first above written.
UNITED STATES TRUST COMPANY
By: /s/ Neal F. Finnegan
--------------------
Its:
Joined in as to those matters where its name appears.
UST CORP.
By:/s/ Neal F. Finnegan
--------------------
Its:
<PAGE> 10
UNIFYING AGREEMENT
PRINCIPAL'S SIGNATURE PAGE
The undersigned hereby executes the Unifying Agreement among UST, USTC
and the other Principals, hereby agrees to all of the provisions of such
Unifying Agreement and hereby authorizes this signature page to be attached,
together with signature pages of the other Principals, to a counterpart of such
Unifying Agreement executed by UST and USTC.
Dated this 14th day of February, 1995.
By: /s/ Domenic Colasacco
---------------------
<PAGE> 11
UNIFYING AGREEMENT
PRINCIPAL'S SIGNATURE PAGE
The undersigned hereby executes the Unifying Agreement among UST, USTC
and the other Principals, hereby agrees to all of the provisions of such
Unifying Agreement and hereby authorizes this signature page to be attached,
together with signature pages of the other Principals, to a counterpart of such
Unifying Agreement executed by UST and USTC.
Dated this 14th day of February, 1995.
By: /s/ Robert A. Lincoln
---------------------
<PAGE> 12
UNIFYING AGREEMENT
PRINCIPAL'S SIGNATURE PAGE
The undersigned hereby executes the Unifying Agreement among UST, USTC
and the other Principals, hereby agrees to all of the provisions of such
Unifying Agreement and hereby authorizes this signature page to be attached,
together with signature pages of the other Principals, to a counterpart of such
Unifying Agreement executed by UST and USTC.
Dated this 14th day of February, 1995.
By: /s/ Stephen K. Moody
--------------------
<PAGE> 13
UNIFYING AGREEMENT
PRINCIPAL'S SIGNATURE PAGE
The undersigned hereby executes the Unifying Agreement among UST, USTC
and the other Principals, hereby agrees to all of the provisions of such
Unifying Agreement and hereby authorizes this signature page to be attached,
together with signature pages of the other Principals, to a counterpart of such
Unifying Agreement executed by UST and USTC.
Dated this 14th day of February, 1995.
By: /s/ Robert B. Zevin
-------------------
<PAGE> 14
EXHIBIT A
NAMES AND ADDRESSES OF PRINCIPALS
Domenic Colasacco
21 Eaton Road
Needham, MA 02192
Robert A. Lincoln
67 Conant Road
Lincoln, MA 01773
Stephen K. Moody
217 Lexington Avenue
Cambridge, MA 02138
Lucia B. Santini
1691 West Street
Wrentham, MA 02093
Robert B. Zevin
71 Stewart Street
West Newbury, MA 01985
<PAGE> 15
EXHIBIT B
(Attach form of Employment Agreement)
[See Exhibit 10(y) to this Form 10-K]
<PAGE> 16
EXHIBIT C
<TABLE>
<CAPTION>
Name Annual Base Salary
---- ------------------
<S> <C>
Domenic Colasacco $225,000
Robert A. Lincoln $155,000
Stephen K. Moody $130,000
Lucia B. Santini $100,000*
Robert B. Zevin $185,000
<FN>
* Full time equivalent rate.
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF UST CORP.(*)
USTRUST
UNITED STATES TRUST COMPANY
UST BANK/CONNECTICUT
UST LEASING CORPORATION(**)
UST DATA SERVICES CORP.(**)
UST CAPITAL CORP.(***)
(*) Other than UST Bank/Connecticut which is a Connecticut trust company, each
of the above subsidiaries of UST Corp. is a Massachusetts Corporation or
trust company and each of the above entities does business only under its
corporate name. The foregoing list does not include the names of inactive
subsidiaries or the names of subsidiaries of banking entities which
subsidiaries have been organized to hold foreclosed property, or other
assets held in satisfaction of debts previously contracted by the
applicable banking entity.
(**) Wholly-owned by USTrust
(***) Wholly-owned by United States Trust Company
62
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in
this Form 10-K of our report dated January 30, 1995. It should be noted that we
have not audited any financial statements of the Company subsequent to December
31, 1994 or performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 24, 1995
63
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UST CORP. AT AND FOR THE TWELVE MONTHS ENDED DECEMBER
31, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1.00
<CASH> 93,027
<INT-BEARING-DEPOSITS> 52
<FED-FUNDS-SOLD> 10,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 401,474
<INVESTMENTS-CARRYING> 100
<INVESTMENTS-MARKET> 97
<LOANS> 1,266,091
<ALLOWANCE> 61,945
<TOTAL-ASSETS> 1,803,232
<DEPOSITS> 1,490,806
<SHORT-TERM> 158,989
<LIABILITIES-OTHER> 10,839
<LONG-TERM> 9,964
<COMMON> 11,009
0
0
<OTHER-SE> 121,625
<TOTAL-LIABILITIES-AND-EQUITY> 1,803,232
<INTEREST-LOAN> 103,526
<INTEREST-INVEST> 27,070
<INTEREST-OTHER> 1,716
<INTEREST-TOTAL> 132,312
<INTEREST-DEPOSIT> 32,907
<INTEREST-EXPENSE> 40,213
<INTEREST-INCOME-NET> 92,099
<LOAN-LOSSES> 23,125
<SECURITIES-GAINS> 1,105
<EXPENSE-OTHER> 92,511
<INCOME-PRETAX> 6,797
<INCOME-PRE-EXTRAORDINARY> 4,746
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,746
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
<YIELD-ACTUAL> 5.29
<LOANS-NON> 49,352
<LOANS-PAST> 1,409
<LOANS-TROUBLED> 15,757
<LOANS-PROBLEM> 66,985
<ALLOWANCE-OPEN> 62,547
<CHARGE-OFFS> 30,128
<RECOVERIES> 6,401
<ALLOWANCE-CLOSE> 61,945
<ALLOWANCE-DOMESTIC> 61,945
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 17,545
</TABLE>
