UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE Required)
COMMISSION FILE #0-9623
UST CORP.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2436093
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
40 COURT STREET, BOSTON, MASSACHUSETTS 02108
(Address of principal executive offices) (Zip Code)
(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 February 20, 1996 was 15,168,635 for an aggregate market value of
$218,049,128.
At February 20, 1996, there were issued and outstanding 17,902,763 shares of
common stock, par value $0.625 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement for the 1996 Annual Meeting are
incorporated by reference in Items 10, 11, 12 and 13 of Part III.
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PART I
ITEM 1 Business 3
ITEM 2 Properties 11
ITEM 3 Legal Proceedings 11
ITEM 4 Submission of Matters to a Vote of Security Holders 11
PART II
ITEM 5 Market for the Registrant's Common Stock and Related Security Holder Matters 11
ITEM 6 Selected Financial Data 12
ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 12
Financial Condition at December 31,1995 13
Results of Operations 23
ITEM 8 Financial Statements and Supplementary Material 29
ITEM 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 52
PART III
ITEM 10 Directors and Executive Officers of the Registrant 52
ITEM 11 Executive Compensation 54
ITEM 12 Security Ownership of Certain Beneficial Owners and Management 54
ITEM 13 Certain Relationships and Related Transactions 55
PART IV
ITEM 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 55
Signatures 58
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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 Capital Corp. and JSA Financial
Corporation.
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 within the Company's defined Community
Reinvestment Act assessment area. 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 most of
whom are located in the New England region.
As of the close of business on December 31, 1995, the Company's total
assets were approximately $1.97 billion and USTrust, the lead bank, had over
$1.86 billion, or 94 percent 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 $15.0 million, or $0.83 per share for 1995,
as compared with net income of $4.7 million, or $0.27 per share in 1994.
Nonperforming assets at December 31, 1995, consisting of nonaccrual loans,
restructured loans, accruing loans greater than 90 days past due and other real
estate owned, were $29.0 million, down from a level of $87.1 million at December
31, 1994. At year-end 1995, the reserve for possible loan losses stood at $56.0
million, or 281 percent of nonaccrual loans and 193 percent of nonperforming
assets. For a more detailed discussion, refer to Management's Discussion and
Analysis of Financial Condition and Results of Operations below.
Potential One-time FDIC Insurance Premium Assessment and Subsequent Reduction of
Premium Costs
Federal legislation was proposed in 1995 to recapitalize the Savings Association
Insurance Fund which may result in a one-time assessment on certain deposits
assumed by the Company in connection with its 1990 acquisition of Home Owners
Savings Bank, F.S.B., a failed savings association. While the amount of such
potential assessment cannot be determined at this time, any assessment will be
charged against earnings during the period in which the enabling legislation is
enacted. Under the proposed legislation, subsequent to the one-time charge, the
insurance premium charged on the former thrift deposits would be reduced. For
further discussion, refer to Note 12 to the Notes to Consolidated Financial
Statements of this Form 10-K.
Regulatory Agreements and Orders
Between 1992 and mid-1995, the Company and its banking subsidiaries operated
under regulatory agreements and orders with state and federal bank regulatory
authorities, all of which were removed by September 30, 1995. For a description
of the foregoing agreements and orders which, as noted above, are no longer in
effect, refer to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
In June 1995, in conjunction with the release of the agreements and orders,
USTrust's Board of Directors adopted a resolution pursuant to which USTrust
agreed with the FDIC and Massachusetts
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Commissioner, among other matters: (i) to continue to maintain a Tier 1 leverage
capital ratio of at least 6 percent; (ii) not to pay a dividend which would
cause the Bank's Tier 1 leverage capital ratio to fall below 6 percent; (iii) to
continue to implement plans to reduce nonperforming assets and the aggregate
level of insider loans; and (iv) to provide a quarterly progress report to the
FDIC and Massachusetts Commissioner. USTC likewise has agreed with the FDIC and
Massachusetts Commissioner not to declare or pay dividends should the effect of
the payment of such dividends cause USTC's Tier 1 leverage capital ratio to fall
below 6 percent.
Adoption of Stock Repurchase Program
In late 1995, the Board approved a stock repurchase program, authorizing the
Company to repurchase up to 500,000 shares, or approximately 2.8 percent of the
Company's common stock outstanding, subject to prevailing market conditions and
other factors. The repurchased shares will be held as treasury shares to be used
for general corporate purposes, including employee benefit plans. Purchases may
be made on the open market or in privately negotiated transactions. At the date
of this Report no shares had been repurchased under this program.
Adoption of Shareholder Rights Plan
In 1995, the Company adopted a shareholder rights plan (the "Rights Plan"),
which is intended to strengthen the Board of Director's ability to fulfill its
fiduciary duties to the Company's shareholders in the event of an attempted
takeover of the Company. It is similar to plans adopted by a large number of
public companies, including many bank holding companies.
Under the Rights Plan, the Board declared a special dividend distribution
of one preferred share purchase right for each outstanding share of the
Company's common stock. This dividend was distributed on October 6, 1995 to
stockholders of record as of the close of business on that date.
The rights will become exercisable only if a person or group (i) acquires
15 percent or more of the common stock, (ii) announces a tender offer that would
result in ownership of 15 percent or more of the common stock, or (iii) is
declared to be an "Adverse Person" by the Board of Directors. "Adverse Person"
includes any person or group who owns at least 10 percent of the Company's
common stock and attempts an action that would adversely impact the Company.
Each right would entitle a stockholder to buy 1/100th of a share of a new series
of junior participating preferred stock.
Once a person or group has acquired 15 percent or more of the outstanding
common stock of the Company or is declared an "Adverse Person" by the Board of
Directors, each right may entitle its holder (other than the acquiring person or
adverse person) to purchase, at an exercise price of $40, shares of common stock
of the Company (or of any organization that acquires the Company) at a price
equal to 50 percent of their current market price. Under certain circumstances,
the Continuing Directors (as defined in the Rights Plan) may exchange the rights
for common stock (or equivalent securities) on a one-for-one basis excluding
rights held by the acquiring person or Adverse Person.
Until declaration of an Adverse Person, or ten days after public
announcement that any person or group has acquired 15 percent or more of the
Company's common stock, the rights are redeemable at the option of the Board of
Directors, in certain cases with the concurrence of the Continuing Directors.
Thereafter, they may be redeemed by the Continuing Directors in connection with
certain acquisitions not involving any acquiring person or Adverse Person or in
certain circumstances following a disposition of shares by the acquiring person
or Adverse Person. The redemption price is $.001 per right. The rights will
expire on October 6, 2005, unless redeemed prior to that date.
Business Services
USTrust and UST/Conn provide commercial banking services, including deposit,
investment, cash management, payroll, wire transfer, leasing, merchant credit
card 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 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. Since 1994,
USTrust has been certified by the SBA as a "Small Business Administration
Lender." 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 aggregate limit available to the Company's
subsidiary banks. At December 31, 1995, the combined lending limit to a single
borrower of the subsidiary banks was approximately $31.5 million.
Consumer Services
Consumer services are provided by USTrust and UST/Conn to customers in their
respective geographic areas. These services include savings and checking
accounts, NOW and money market accounts, consumer
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loans, credit cards (through a private label arrangement), ATM cards, safe
deposit box facilities and travelers' checks. Consumer loans include residential
first mortgage and home equity loans and lines of credit, automobile loans,
personal loans and loans to finance education costs as well as open-ended credit
via cash reserve facilities. Automobile loans increased substantially in 1995
and reached a level of approximately $197 million as of December 31, 1995. The
Company also makes available an Affordable Mortgage Program which is 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. The Company's banking subsidiaries, which currently
have an aggregate of 32 offices, maintain an automated teller machine system
which through membership in various networks provides the Company's customers
with access to their accounts at locations throughout the world. Most of the
Company's proprietary ATM machines provide information to customers in three
languages, English, Spanish and Portuguese, and also provide information adapted
for the visually impaired.
Investment Services
The Investment Group located at USTrust and UST/Conn was formed in 1994. The
Investment Group, through Essex National Securities, Inc. ("Essex"), 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. Essex also offers annuities to USTrust and
UST/Conn customers at branch locations.
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, profit sharing and
other employee benefit trusts. At December 31, 1995, the total assets under
management of USTC were approximately $2.9 billion. Approximately one-third of
total assets under management are those of clients who have requested that their
assets be managed with specified social as well as financial investment
objectives in mind. In 1995, USTC also became investment adviser to a newly
established balanced mutual fund, the Boston Managed Growth Fund.
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. 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 and
federal law. Such investments currently include, among others, equity interests
in the Massachusetts Housing Investment Corporation's Limited Partnership Equity
Fund for Affordable Housing. The Treasury Division of the Company provides
securities portfolio advisory services to the Company's affiliated banks. In
early 1996, USTrust's application to become a member of the Federal Home Loan
Bank of Boston was approved. This membership will provide USTrust with access to
an additional source of funds.
Principal Nonbanking Subsidiaries
UST Leasing Corporation, a subsidiary of USTrust organized in 1987, provides a
broad range of equipment leasing services to corporations headquartered
throughout the United States. UST Leasing Corporation offers 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, 1995, UST
Leasing Corporation's total assets were approximately $32 million.
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 long-term debt financing for growth-oriented
companies.
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UST Data Services Corp. was formally dissolved as a separate legal entity
as of December 31, 1995 and became a division of USTrust. In its new
configuration, it continues to provide a full range of electronic data
processing, deposit and other operations services to the Company and its
affiliates.
UST Securities Corp., a wholly-owned subsidiary of USTrust, was
incorporated in 1995 and commenced its operations on January 1, 1996. This
subsidiary was organized as a Massachusetts Securities Corporation to make
exclusively passive investments and serve USTrust by buying, selling, dealing in
and holding its securities.
JSA Financial Corporation, a wholly-owned subsidiary of the Company, was
organized in 1959. On June 30, 1995, this subsidiary acquired approximately $5.1
million of nonperforming assets from UST/Conn. Since that date, it has been
engaged in an active program to liquidate those assets. As of the date of this
Report, the value of the assets remaining on the books of JSA Financial
Corporation is approximately $2 million.
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," 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 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 six years several factors have resulted in
the development or establishment of fewer, but financially stronger competitors
in the local markets served by the Company's banking subsidiaries. The most
important of these factors include: (i) the closing by regulators of a number of
banks and bank holding companies in Eastern Massachusetts and Connecticut; (ii)
the acquisition during the early 1990's of small- and medium-sized banks and
bank holding companies by the largest New England bank holding companies; (iii)
the somewhat improved economic conditions during the mid-1990's within the
region; and (iv) most recently, the merger of Fleet Financial Group and Shawmut
National Corporation and the proposed merger of Bank of Boston Corporation and
BayBanks, Inc., which would result in the creation of two entities of what had
been four of the five largest bank holding companies in New England.
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. Between
1992 and mid-1995, the Company and its banking subsidiaries operated under
regulatory agreements and orders with state and federal bank regulatory
authorities; all of the agreements and orders were removed by September 30,
1995. For a description of the foregoing agreements and orders, refer to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 at
pages 1-2.
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 percent 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."
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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 percent 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 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, 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 Massachusetts which, if enacted, would
cause Massachusetts to "opt-in" prior to June 1, 1997. In 1995, the Connecticut
Legislature enacted legislation which caused Connecticut to "opt-in." The full
impact of the Interstate Banking Act will not be clear for the Company until the
Massachusetts Legislature has acted on the foregoing legislation. Unlike the
Company's banking subsidiaries, national banks have used the power available
under a federal charter to move a bank's headquarters 30 miles or less and by
that means have accelerated the pace of interstate branching.
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
deposit insurance premiums to the FDIC. In 1995, such premiums were reduced
substantially. As noted above, however, in 1996 a one-time charge may be
assessed on certain deposits assumed by the Company in connection with its 1990
acquisition of Home Owners Savings Bank, F.S.B. if federal legislation proposed
in 1995 to recapitalize the Savings Association Insurance Fund is adopted. Refer
to "Recent Developments-Potential One-time FDIC Insurance Premium Assessment and
Subsequent Reduction of Premium Costs" above.
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 the Federal Deposit Insurance Corporation
Improvement Act of 1991
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("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 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 if it were in the next lower category.
USTC, USTrust and UST/Conn are each classified as "well capitalized." In
June 1995, USTrust's Board of Directors adopted a resolution pursuant to which
USTrust agreed with the FDIC and Massachusetts Commissioner to continue to
maintain a Tier 1 leverage capital ratio of at least 6 percent.
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 became 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
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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 rates in its
market. In addition, "pass through" insurance coverage may not be available for
certain employee benefit accounts.
Additional regulations adopted pursuant to FDICIA include: (i) real estate
lending standards for depository institutions, which provide guidelines
concerning loan-to-value ratios for various types of real estate loans; (ii)
rules requiring depository institutions to develop and implement internal
procedures to evaluate and control credit and settlement exposure to their
correspondent banks; (iii) 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 (iv) rules and guidelines for enhanced financial reporting and audit
requirements. Rules currently proposed for adoption pursuant to FDICIA include:
(i) revisions to the risk-based capital guidelines regarding interest rate risk,
concentrations of credit risk and the risks posed by "nontraditional
activities;" and (ii) rules addressing various "safety and soundness" standards.
In late 1995, the Federal Reserve Board provided all bank holding companies
with new guidelines which direct examiners to provide separate supervisory
ratings for the risk management process of all bank holding companies. Pursuant
to the guidelines, examiners will evaluate the entire spectrum of risks facing
the Company including, but not limited to, credit, market, liquidity,
operational, legal and reputational risk. Under the guidelines, examiners are
directed to place primary consideration on findings relating to the following
elements: (i) active board and senior management oversight; (ii) adequate
policies, procedures and limits; (iii) adequate risk measurement, monitoring,
and management information systems; and (iv) comprehensive internal controls. In
December 1995, the Company established a Risk Management Committee to coordinate
the Company's management of applicable risks.
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") and similar provisions
of Massachusetts and Connecticut law, 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 regulatory
authorities consider 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 and UST/Conn both have
received "outstanding" ratings from the FDIC. In 1995, the FDIC adopted new
regulations whereby an institution that offers a narrow product line to a
regional or broader market can apply for status as a "Limited Purpose
Institution" and be examined as such by the FDIC for CRA compliance. USTC will
apply for this status since its focus is only upon trust and asset management
activities. The Massachusetts Commissioner has continued to examine USTC for CRA
compliance, and currently rates USTC "satisfactory."
9
<PAGE>
In 1994, the federal Riegle Community Development and Regulatory
Improvement Act of 1994 (the "Community Development Act") was enacted. The
Community Development Act established financial and other assistance for
entities involved primarily in community development activities. The Community
Development Act's provisions also, among other items, (i) increased restrictions
on some types of high interest loans; (ii) improved small business access to
capital; (iii) required federal banking agencies to, among other things,
coordinate examinations and establish uniform regulations and guidelines where
appropriate; and (iv) amended certain requirements on insider loans. The
Community Development Act had the effect of reducing 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. In 1995, federal legislation was proposed which, if adopted, would
have granted bank holding companies broader powers with respect to securities
activities. At this time it does not appear that such legislation will be
adopted, at least in its current form. 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.
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 the mid-1990's,
which aided the Company's loan workout efforts over the past several years. The
New England region, however, still lags behind the economic growth experienced
in the other regions of the United States. In 1995, revenues of employers in the
Company's principal markets did not grow substantially and the level of creation
of net new jobs was low. Most of the Company's loans outstanding are from
borrowers located in Community Reinvestment Act delineated communities in
Massachusetts and Connecticut 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 1995, the Company's exposure to credit risk from
borrowers who had real estate as their primary collateral support included $381
million of loans. In addition to the foregoing, during the second half of 1994
and early 1995 prevailing interest rates rose substantially. Although interest
rates have declined modestly during the second half of 1995, any renewed
increases 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.
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, 1995, the Company and its subsidiaries had approximately 880
full-time and part-time employees.
10
<PAGE>
ITEM 2. Properties
USTrust owns a twelve-story, 89,014 square foot brick and steel building
constructed in 1915 and located at Government Center, 30-40 Court Street,
Boston, Massachusetts which houses the banking premises of USTrust, USTC and the
offices of the Company and all of its nonbanking subsidiaries.
The Company currently leases a three-story brick office building of
approximately 37,900 square feet at 196 Broadway, Cambridge, Massachusetts, all
of which is used by USTrust, as well as 29,003 square feet in an adjacent office
tower at 141 Portland Street, Cambridge, Massachusetts. USTrust also leases
approximately 26,080 square feet of space at 25-55 Court Street, Boston, which
is used primarily to house staff support services. In 1991, USTC sold the 25-55
Court Street, Boston, building to a third party, unaffiliated with the Company.
USTrust owns ten branch offices in Boston, Canton, Gloucester, Milton,
Milton Village, Natick, Norwood, Randolph, Stoughton and Swampscott,
Massachusetts. The remaining branch offices of the Company occupy leased
premises.
The 1996 annual leasehold commitment for all premises leased by the
Company's subsidiaries totals $3,857,000 not including expenses related to tax
or maintenance escalation provisions. Refer to Note 16 to the Notes to the
Consolidated Financial Statements of this Form 10-K.
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
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, 1994
to December 31, 1995, the range of high and low sales prices for the Company's
common stock was as follows:
1995 1994
Low High Low High
1st Quarter 9 3/4 11 3/8 10 1/2 13 1/2
2nd Quarter 10 1/2 13 1/2 12 5/8 14 3/8
3rd Quarter 13 1/4 15 1/2 11 1/4 13 1/2
4th Quarter 12 3/4 15 1/2 8 3/4 11 3/4
Such over-the-counter market quotations reflect interdealer 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 1,913 at
January 31, 1996.
The Company did not pay cash dividends from mid-1991 until the fourth
quarter of 1995. In December 1995, the Company paid a cash dividend of $0.05 per
share to each holder of its common stock.
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 the absence of regulatory
objection. In June 1995, USTrust's Board of Directors adopted a resolution
pursuant to which USTrust agreed with the FDIC and Massachusetts Commissioner
not to pay a dividend which would cause the Bank's Tier 1 leverage capital ratio
to fall below 6 percent. USTC likewise has agreed with the FDIC and
Massachusetts Commissioner not to declare or pay dividends should the effect of
the payment of such dividends cause USTC's Tier 1 leverage capital ratio to fall
below 6 percent. Refer to the discussion of capital in Management's Discussion
and Analysis of Financial Condition and Results of Operations below.
11
<PAGE>
ITEM 6. Selected Financial Data
Consolidated Summary of Selected Financial Data (1)
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands, except share amounts) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Earnings Data:
Interest income $ 147,969 $ 132,312 $ 140,628 $ 157,024 $ 221,493
Interest expense 52,535 40,213 47,944 68,970 134,640
------ ------ ------ ------ -------
Net interest income 95,434 92,099 92,684 88,054 86,853
Provision for possible loan losses 13,090 24,281 68,427 42,245 53,712
------ ------ ------ ------ ------
Net interest income after provision
for possible loan losses 82,344 67,818 24,257 45,809 33,141
Noninterest income 29,970 30,334 36,723 42,359 43,636
Noninterest expense 88,187 91,355 93,341 95,820 89,322
------ ------ ------ ------ ------
Income (loss) before income taxes 24,127 6,797 (32,361) (7,652) (12,545)
Income tax provision (benefit) 9,169 2,051 (12,261) (2,931) (4,598)
----- ----- ------- ------ ------
Net income (loss) $ 14,958 $ 4,746 $ (20,100) $ (4,721) $ (7,947)
=========== =========== ========== =========== ==========
Per share data:
Net income (loss) $ .83 $ .27 $ (1.31) $ (.34) $ .(58)
Cash dividends declared $ .05 $ .15
Weighted average common shares outstanding 18,068,203 17,780,032 15,362,251 13,984,190 13,793,617
Consolidated Average Balances(2):
Total assets $ 1,836,229 $ 1,881,429 $2,042,567 $ 2,270,874 $2,696,992
Loans 1,265,098 1,283,464 1,435,665 1,584,390 1,784,302
Deposits 1,474,636 1,527,113 1,635,178 1,826,738 2,172,984
Funds borrowed(3) 185,666 192,115 244,775 268,519 350,367
Stockholders' investment 163,651 152,256 143,149 147,440 150,193
Consolidated Ratios:
Net income (loss) to average total assets .81% .25% (.98)% (.21)% (.30)%
Net income (loss) to average
stockholders' investment 9.14% 3.12% (14.04)% (3.20)% (5.29)%
Average stockholders' investment to
average total assets 8.9% 8.1% 7.0% 6.5% 5.6%
Net chargeoffs to average loans 1.7% 1.9% 3.8% 2.6% 2.2%
Reserve for possible loan losses to period end loans 4.4% 5.0% 4.8% 3.4% 3.0%
Average earning assets to average total assets 94.8% 93.9% 93.0% 91.2% 87.5%
Not
Dividend Payout Ratio 6.0% meaningful
</TABLE>
(1) This information should be read in connection with Management's Discussion
and Analysis of Financial Condition and Results of Operations of this Form
10-K with particular reference to "Credit Quality and Reserve for Possible
Loan Losses."
(2) Average balances do not include the effect of fair value adjustments under
SFAS No. 115, " Accounting for Certain Investments in Debt and Equity
Securities."
(3) Includes federal funds purchased, repurchase agreements, short-term and
other borrowings.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction
The operating results for the year ended December 31, 1995, are highlighted by a
substantial improvement in earnings and continued progress in the resolution of
problem assets. Net income for 1995 was $15.0 million, or $0.83 per share, well
above 1994 results of $4.7 million, or $0.27 per share, as costs associated with
problem assets, including loan loss provisions and loan workout expense, were
significantly reduced. Refer to "Results of Operations-Comparison of 1995 with
1994" for a further discussion.
Substandard loans, as determined by the Company's internal credit risk
rating system, peaked at $265 million at year-end 1993, following a three-year
recessionary period in the local economy. Such loans were reduced $82 million
during 1995 for a total reduction of over 80 percent, or $221 million since
1993, to $44 million at December 31, 1995. Nonperforming assets, consisting of
substandard nonaccrual loans which are included in the aforementioned figures,
restructured loans, accruing loans
12
<PAGE>
greater than 90 days past due and other real estate owned also reflect the
Company's successful efforts to reduce problem assets. Nonperforming assets were
decreased $58 million in 1995 to $29 million at year end. During the fourth
quarter, the Company initiated a program for the accelerated disposition of $20
million of such substandard and nonperforming assets. These $20 million of
troubled loans are classified as loans held-for-sale, net of $6.9 million in
chargeoffs, at December 31, 1995. Refer to "Credit Quality and Reserve for
Possible Loan Losses" for a further discussion of asset quality.
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
1995 presentation.
Financial Condition at December 31, 1995
Assets
Total assets at December 31, 1995 were $1.97 billion, an increase of $166
million from $1.80 billion a year ago. The asset growth was primarily in
securities which increased $174 million during the year. Funding for the higher
level of securities was provided by an increase in deposits and short-term
borrowings. Also contributing to the increase in securities was a $31 million
change from a gross unrealized loss to an unrealized gain on securities
available-for-sale. Refer to "Securities" herein for a further discussion.
Slightly offsetting the higher level of securities were decreases in loans of $5
million, other real estate owned of $7 million and excess funds sold decreased
to zero from $10 million a year ago.
This year's increase in total assets is in contrast to the downward trend
in the level of assets over the past several years which was led by declining
loan volume. Presently the Company anticipates a relatively stable level of
total and interest-earning assets in the coming year. Loan growth is expected to
be funded by a combination of maturing securities, and additional short-term
borrowings or deposit growth, as needed.
Loans
The following table presents the composition of the loan portfolio:
<TABLE>
<CAPTION>
December 31,
(Dollars in thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Commercial and financial(1) $ 642,940 $ 705,075 $ 760,446 $ 862,590 $ 872,366
Commercial real estate:
Construction 16,937 13,109 35,295 50,427 71,264
Developer, investor and land(1) 207,710 265,624 321,965 368,871 467,113
Consumer:
Residential mortgage 85,806 90,643 85,889 57,896 52,224
Home equity 70,066 64,068 63,188 67,010 67,179
Indirect automobile installment(2) 197,148 90,255 31,848 42,786 83,039
Other consumer(2) 23,015 21,964 23,944 26,914 40,026
Lease financing 28,455 25,945 26,348 28,312 31,561
------ ------ ------ ------ ------
Total loans(3) 1,272,077 1,276,683 1,348,923 1,504,806 1,684,772
Reserve for possible loan losses (56,029) (64,088) (64,465) (50,478) (50,100)
------- ------- ------- ------- -------
$ 1,216,048 $ 1,212,595 $ 1,284,458 $ 1,454,328 $ 1,634,672
============ ============ ============ ============ ============
</TABLE>
(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 1995 presentations. For 1991 these loans were included in the
commercial real estate category. Information is not readily available to
reclassify loans for that year.
(2) Indirect automobile installment loans represent loans purchased without
recourse from automobile dealers subject to adherence to the Company's
underwriting standards. Automobile loans made directly to consumers are not
significant and are included with other consumer loans.
(3) Not included in the loan balances at December 31, 1995 were $13 million in
troubled loans held-for-sale, recorded at net realizable value and
classified as other assets. Refer to "Credit Quality and Reserve for
Possible Loan Losses" for a discussion.
The Company's commercial and commercial real estate loan portfolios have been
experiencing a decline due to the combination of normal amortization and the
aggressive reduction of problem loans through collection, chargeoff, third-party
refinancing, or sale. The future outflow is expected to subside due to the
significantly reduced level of troubled loans. Commercial and commercial real
estate loan portfolios are expected to experience modest growth, tempered by
increasing competition for small-to-middle market credits.
13
<PAGE>
The indirect automobile loan portfolio has grown considerably since 1993
due to the Company's increased marketing efforts supported by the automation of
this business unit's operations. Indirect automobile loans grew 118 percent, or
$107 million in 1995, compared with growth of 183 percent, or $58 million in
1994. The Company anticipates continued growth in this portfolio in the coming
year. In the aggregate, the remaining loan and lease portfolios, home equity,
other consumer and equipment lease financing, are expected to continue with
their current level of moderate growth.
Loan Maturity Distribution
The following table reflects the maturity and interest sensitivity of commercial
and financial, and commercial real estate loans at December 31, 1995:
<TABLE>
<CAPTION>
After 1 Year
(Dollars in thousands) 1 Year or Less through 5 Years After 5 Years Total
<S> <C> <C> <C> <C>
Commercial and financial $ 401,480 $ 189,411 $ 52,049 $ 642,940
Commercial real estate:
Construction 5,519 10,482 936 16,937
Developer, investor and land 70,296 106,638 30,776 207,710
------ ------- ------ -------
$ 477,295 $ 306,531 $ 83,761 $ 867,587
=============== =============== ============== ===============
Interest sensitivity of above loans:
With predetermined interest rates $ 90,125 $ 116,069 $ 44,600 $ 250,794
With floating interest rates 387,170 190,462 39,161 616,793
------- ------- ------ -------
$ 477,295 $ 306,531 $ 83,761 $ 867,587
=============== =============== ============== ===============
</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 of credit.
Additionally, any renewal of a loan rated Substandard or lower in the Company's
credit risk rating profile, requires the Controlled Loan Department head
approval and for certain size loans and circumstances, the approval of the
Senior Credit Committee and Board of Directors.
Securities
Securities increased $174 million during the year to $576 million at December
31, 1995. The growth in the portfolio reflects purchases of U.S. Government
agency securities, mortgage-backed and asset-backed securities. In addition, the
increase in securities reflects the change from an unrealized loss on securities
available-for-sale of $29.0 million to an unrealized gain of $1.7 million, a
$30.7 million improvement. This improvement was the result of a lower interest
rate environment and corresponding higher bond prices in 1995. The upward trend
this year compares with the sharp decline in bond prices in 1994 due to the
rapid rise in interest rates. Refer to Note 2 to the Notes to Consolidated
Financial Statements for a further discussion of the unrealized valuation
adjustment to market value of securities available-for-sale as required under
Statement of Financial Accounting Standards No. 115 ("SFAS No. 115"),
"Accounting for Certain Investments in Debt and Equity Securities."
The change in unrealized valuation to market value on securities
available-for-sale also had the positive effect of increasing stockholders'
investment by $24.6 million from a year ago. The unrealized loss reported as
part of stockholders' investment of $23.6 million, net of a $5.4 million
deferred tax benefit at December 31, 1994 changed to a unrealized gain of $1.0
million, net of a $.7 million deferred tax provision at December 31, 1995.
In the fourth quarter of this year the Company redesignated a $100 thousand
municipal bond, its sole held-to-maturity designated security, to the
available-for-sale designation. This change was in response to a one-time
opportunity permitted by the "Financial Accounting Standards Board" ("FASB") to
reassess the appropriateness of the designations of an institution's securities
that are affected by FASB No. 115. As of December 31, 1995, the Company's entire
securities portfolio of $576 million was designated as available-for-sale.
The Company has a policy of purchasing securities primarily rated A or
better by Moody's Investors Services and U.S. Government securities to minimize
credit risk. All securities, however, carry interest rate risk which affects
their market value such that as market yields increase, the value of the
Company's securities declines and vice versa. Additionally, mortgage-backed
securities carry prepayment risk where expected yields may not be achieved due
to an inability to re-invest the proceeds from prepayment at comparable yields.
Moreover, such mortgage-backed securities may not benefit from price
appreciation in periods of declining rates to the same extent as the remainder
of the portfolio. Refer to Note 2 to the
14
<PAGE>
Notes to Consolidated Financial Statements, "Summary of Significant Accounting
Policies" of this Form 10-K for a further discussion of prepayment risk. The
following table sets forth the book value of the securities owned by the
Company:
<TABLE>
<CAPTION>
December 31,
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Available-for-sale:
Mortgage-backed securities $ 246,521 $ 195,009 $ 263,435
U.S. Treasury securities and securities of other
U.S. Government agencies and corporations 196,967 142,414 129,703
Obligations of states and political subdivisions* 3,254 3,493 3,887
Other securities 128,931 60,724 152,531
------- ------ -------
Total $ 575,673 $ 401,640 $ 549,556
=============== =============== ===============
Held-to-maturity:
Obligations of states and political subdivisions $ 100
===============
* Non-taxable
</TABLE>
The following table presents maturities for the Company's securities at December
31, 1995, and the approximate weighted tax equivalent yields (at the statutory
federal tax rate of 35 percent). Mortgage-backed securities are shown at or
based on their final maturity but are expected to have shorter average lives.
Considering this, the Company estimates the average life of the entire portfolio
to be 2.3 years. Yields presented in this table have been computed using the
amortized cost of the securities.
<TABLE>
<CAPTION>
Securities Maturing In
1 Year After 1-Yr. 5-Yrs. 10 Yrs. Equity
or Less through 5 thru 10 or more Securities Total
(Dollars in thousands) Balance Yield Balance Yield Balance Yield Balance Yield Balance Yield Balance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale:
Mortgage-backed securities $ 38,521 6.47% $208,000 6.35% $246,521
U.S. Treasury securities and
securities of other U.S.
Government agencies and
corporations $11,286 6.00% $161,244 5.81% 24,437 5.48% 196,967
Obligations of states and
political subdivisions 560 10.55% 867 8.21% 867 8.96% 960 9.80% 3,254
All other securities 10,527 8.96% 71,565 6.15% 44,894 5.98% $1,945 22.78% 128,931
------ ------ ------ -------- ------ --------
Total $22,373 7.51% $233,676 5.92% $108,719 6.06% $208,960 6.36% $1,945 22.78% $575,673
======= ======== ======== ======== ====== ========
</TABLE>
At December 31, 1995 the Company owned the following corporate notes and
asset-backed securities, whose aggregate fair value was in excess of 10 percent
of stockholders' investment.
<TABLE>
<CAPTION>
(Dollars in thousands) Aggregate Market Value
<S> <C>
General Motors Acceptance Corporation Medium Term Notes $20,440
Sears, Roebuck Medium Term Notes 20,333
Nissan Automobile Receivables Grantor Trust 18,104
</TABLE>
The corporate notes are unsecured. The Nissan asset-backed securities are
secured by automobile loan receivables. Both the corporate notes and
asset-backed securities are of investment grade and carry the normal credit risk
associated with such instruments.
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 securities portfolio is currently classified entirely as
available-for-sale, the Company has no present intention or need to sell
15
<PAGE>
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.
As discussed in the "Introduction" the Company has classified $13 million of
troubled loans as held-for-sale at December 31, 1995.
At December 31, 1995, liquidity, which includes excess cash, excess funds
sold and unpledged securities, totaled approximately $317 million, or 16 percent
of total assets, a $58 million increase from 1994.
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 increased $22 million, or 1.5 percent, to $1.51
billion since December 31, 1994. NOW, money market and regular savings deposits
decreased $104.1 million while time deposits increased $124.8 million reflecting
investors attraction to the Company's competitively aggressive certificate of
deposit rates throughout much of the year. Demand deposits experienced a slight
increase of $1.2 million during 1995.
As shown in the Consolidated Statements of Cash Flows, cash and cash
equivalents decreased $3.3 million during 1995. 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
financing activities was due principally to the net increases in deposits and in
short-term borrowings, offset in part by payments on other borrowings. Net cash
used by investing activities was due to an excess of purchases of securities
over the proceeds from the sales and maturities of securities.
At December 31, 1995, the parent company had $1 million in cash and due
from banks and $5 million in short-term securities purchased under agreements to
resell, compared with $2.3 million in cash and due from banks and $16 million in
U.S. Treasury securities at December 31,1994. During 1995, the Company paid the
remaining principal of $8 million plus accrued interest on its 8.5% Senior
Notes.
For the year ended December 31, 1995, the Company received a total of $3
million in dividends from its asset management and trust subsidiary, United
States Trust Company ("USTC"), $1 million from USTrust and $1 million from JSA
Financial Corporation ("JSA"), a nonbanking subsidiary of the Company
specializing in the liquidation of problem assets. During the same period $1
million was contributed to UST Bank/Connecticut ("UST/Conn") and $6.5 million
was contributed to JSA. This capital contribution to JSA facilitated the
purchase of $5.1 million in problem assets from UST/Conn and provided JSA with
additional operating capital.
Deposits
The following table sets forth the remaining maturities of certificates of
deposit in the amount of $100 thousand or more at December 31, 1995:
(Dollars in thousands)
Less than three months $ 72,739
Three to six months 20,894
Six to twelve months 14,178
Over twelve months 4,615
-----
Total $ 112,426
==============
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
(Dollars in thousands) Balance Interest Rate At Any Month End Outstanding Interest Rate
<S> <C> <C> <C> <C> <C>
Federal funds purchased:
1995 $ 57,406 5.63% $ 58,013 $ 40,020 5.86%
1994 19,296 6.00% 35,061 29,090 4.14%
1993 35,913 3.25% 80,126 42,965 3.14%
Securities sold under
agreements to repurchase:
1995 $172,689 4.73% $172,689 $127,752 4.85%
1994 126,597 4.48% 155,709 137,139 3.22%
1993 158,618 2.31% 221,549 167,696 2.55%
</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
liabilities. Management monitors and adjusts the difference
16
<PAGE>
between interest-sensitive assets and interest-sensitive liabilities ("GAP"
position) within various time frames. An institution with more assets repricing
than liabilities within a given time frame is considered asset sensitive
("positive GAP") and in time frames with 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 22 percent of total assets. The Company manages its
interest rate GAP primarily by lengthening or shortening the maturity structure
of its 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 and to a lesser extent the London Interbank Offered Rate
("LIBOR"). As interest rates rose during the first quarter of 1995, the prime
rate and, therefore, the Company's yield on earning assets increased faster than
the rate paid on interest-bearing liabilities. After a period of interest rate
stability experienced within the second quarter, interest rates decreased during
the last half of 1995, effecting a reduced prime rate. This had a predictable
effect on the Company's margin with the yield on earning assets decreasing
faster than the rate paid on interest-bearing liabilities.
The following table summarizes the Company's GAP position at December 31,
1995. 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 as 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
and credit risk, 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, 1995, the one-year cumulative GAP position was negative at $57
million, or approximately 3 percent of total assets.
<TABLE>
<CAPTION>
Interest Sensitivity Periods
(Dollars in millions) 0-30 Days 31-90 Days 91-365 Days Over 1 Year Total
<S> <C> <C> <C> <C> <C>
Loans, net of reserve $ 728 $ 24 $ 93 $ 371 $ 1,216
Securities 20 25 108 423 576
Other assets 23 2 152 177
-- - --- --- ---
Total assets $ 771 $ 51 $ 201 $ 946 $ 1,969
----------- ---------- ----------- ----------- =============
Interest-bearing deposits $ 315 $ 50 $ 333 $ 442 $ 1,140
Borrowed funds 243 243
Noninterest-bearing demand deposits 123 250 373
Other liabilities and Stockholders' equity 16 197 213
-- ---- ------ ------ -----
Total liabilities and equity $ 697 $ 50 $ 333 $ 889 $ 1,969
----------- ---------- ----------- ----------- =============
GAP for period $ 74 $ 1 $ (132) $ 57
=========== ---------- ----------- -----------
Cumulative GAP $ 75 $ (57) $ 0
========== =========== ===========
As a percent of total assets 3.76% 3.81% (2.89)%
</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- 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 percent and 8 percent, 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 percent. The Company
has not been notified of a specific requirement above the minimum.
17
<PAGE>
At December 31, 1995 and 1994, the Company's consolidated risk-based assets
were $1.63 billion and $1.52 billion, respectively. The capital ratios and
regulatory minimum requirements applicable to the Company were:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Amount Percent Amount Percent
Minimum Minimum Minimum Minimum
(Dollars in millions) Actual Required Actual Required Actual Required Actual Required
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 capital $167.4 $ 65.3 10.24% 4.00% $149.7 $ 61.0 9.82% 4.00%
Total (Tier 1 and Tier 2) capital 187.8 127.7 11.75% 8.00% 169.5 118.5 11.45% 8.00%
Tier 1 leverage capital 167.4 75.8 8.83% 4.00% 149.7 71.3 8.27% 4.00%
</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.
The Tier 1 leverage capital ratios and regulatory minimum requirements for
the Company's subsidiary banks at December 31, 1995 and 1994 were:
<TABLE>
<CAPTION>
December 31, 1995* December 31, 1994
Amount Percent Amount Percent
Minimum Minimum Minimum Minimum
(Dollars in millions) Actual Required Actual Required Actual Required Actual Required
<S> <C> <C> <C> <C> <C> <C> <C> <C>
USTrust $141.7 $107.3 7.92% 6.00% $129.2 $102.6 7.55% 6.00%
USTC 5.0 .9 32.99% 6.00% 4.3 .7 39.46% 6.00%
UST/Conn 9.1 4.4 8.31% 4.00% 6.7 6.3 6.40% 6.00%
* Refer to "Former Agreements with Bank Regulatory Agencies" below for a
discussion of regulatory capital requirements for the Company's subsidiary
banks.
</TABLE>
The Company and each of its subsidiary banks are in compliance with their
respective capital requirements.
In the fourth quarter of 1995 the Company declared and paid a cash dividend
of $0.05 per share to stockholders for a total dividend of $888 thousand. During
this year the Company received dividends from subsidiaries of $3 million from
USTC, $1 million from USTrust and $1 million from JSA Financial Corporation.
During the same period the Company contributed as capital to its subsidiaries
totaling $1 million to UST/Conn and $6.5 million to JSA Financial Corporation.
In 1995, the Company's Board of Directors approved a stock repurchase
program and the Company adopted a shareholder rights plan, refer to Part I
Recent Developments, "Adoption of Stock Repurchase Program," and "Adoption of
Shareholder Rights Plan," respectively, of this Form 10-K for a discussion.
Former Agreements with Bank Regulatory Agencies
On July 21, 1995, the Company was released from the terms of its Written
Agreement originally entered into on August 3, 1992, by the Federal Reserve Bank
of Boston ("FRB-Boston") and the Office of the Massachusetts Commissioner of
Banks ("Massachusetts Commissioner"). For a discussion of the Agreement which is
no longer in effect, refer to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
In June 1995, the Company's Massachusetts-based and largest subsidiary
bank, USTrust, was released by the Federal Deposit Insurance Corporation
("FDIC") and the Massachusetts Commissioner from the terms of its Cease and
Desist Order, originally issued in January 1992. In conjunction with the release
of the Order, USTrust's Board of Directors adopted a resolution pursuant to
which USTrust agreed, among other matters: (i) to continue to maintain a Tier 1
leverage capital ratio of at least 6 percent; (ii) not to pay a dividend which
would cause the Bank's Tier 1 leverage capital ratio to fall below 6 percent;
(iii) to continue to implement plans to reduce nonperforming assets and the
aggregate level of insider loans; and (iv) to provide a quarterly progress
report to the FDIC and the Massachusetts Commissioner. For a discussion of the
Order which is no longer in effect, refer to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994. The Company's second
Massachusetts-based banking subsidiary, USTC, was released from a similar Order
in 1994, and has also agreed not to declare or pay dividends should the effect
of the payment of such dividends cause USTC's Tier 1 leverage capital ratio to
fall below 6 percent. On September 14, 1995, UST/Conn was released by the
Commissioner of Banks for the State of Connecticut from the terms of its
Stipulation and Agreement, originally issued in
18
<PAGE>
June 1991. For a discussion of the Agreement which is no longer in effect, refer
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994.
Credit Quality and Reserve for Possible Loan Losses
Improving credit quality has been a major strategic focus of the Company since
1993. The success of the program is evidenced by the Company's aggressive
reduction in the level of problem assets in 1994 and this year. At December 31,
1995, substandard loans were $44 million compared with $126 million a year ago
and a peak of $265 million at the end of 1993. Loans reported as substandard for
the purpose of this discussion include loans classified as Substandard or
Doubtful, as determined by the Company in its internal credit risk rating
system. 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.
At December 31, 1995, Substandard and Doubtful loans were $42.9 million and
$.9 million, respectively. Substandard loans include $24.5 million of accruing
commercial and commercial real estate loans, of which 99 percent were current,
and $18.4 million in loans that were on nonaccrual and included in nonperforming
assets. All of the loans rated Doubtful were on nonaccrual and included in
nonperforming assets. Also, at December 31, 1995, loans rated Special Mention in
the Company's internal credit risk rating profile amounted to $1.6 million, all
of which were current. This compares with $16 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.
As of year-end 1995, approximately 65 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 45 percent
were collateralized by owner-occupied commercial properties, approximately 40
percent were collateralized by commercial real estate development, and
approximately 10 percent by residential real estate. The remaining loans were
collateralized by real estate under construction and raw land.
19
<PAGE>
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,
(Dollars in thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonaccruals:(1)
Commercial and financial $14,531 $36,754 $ 28,511 $ 55,893 $ 44,453
Commercial real estate:
Construction 44 551 1,025 16,558 12,830
Developer, investor and land 3,114 18,447 25,475 24,461 32,706
Consumer:
Residential 956 3,373 3,601 2,518 3,636
Home equity 741 656 190 1,240 2,625
Indirect automobile installment 446 134 40 271 945
Other consumer 98 29 540 550 246
Lease financing
------- ------- -------- -------- --------
Total nonaccrual 19,930 59,944 59,382 101,491 97,441
Accruing loans 90 days or more 257 1,409 557 1,091 8,554
Other real estate owned (OREO), 3,015 9,958 11,270 28,644 43,470
Restructured loans(1)(3) 5,783 15,757 41,477 44,899 36,311
----- ------ ------ ------ ------
Total nonperforming assets $28,985 $87,068 $112,686 $176,125 $185,776
======= ======= ======== ======== ========
Reserve for possible loan losses $56,029 $64,088 $ 64,465 $ 50,478 $ 50,100
Net chargeoffs $21,149 $24,658 $ 54,440 $ 41,867 $ 39,620
OREO reserve(4) $ 568 $ 1,044 $ 4,635 $ 389
Ratios:
Reserve to nonaccrual loans 281.1% 106.9% 108.6% 49.7% 51.4%
Reserve to total of nonaccrual loans, accruing loans 90 days
or more past due and restructured loans 215.7% 83.1% 63.6% 34.2% 35.2%
Reserve to period-end loans 4.4% 5.0% 4.8% 3.4% 3.0%
Nonaccrual loans to period-end loans 1.6% 4.7% 4.4% 6.7% 5.8%
Nonaccrual loans and accruing loans over 90 days past due
to period-end loans 1.6% 4.8% 4.4% 6.8% 6.3%
Nonperforming assets to period-end loans and OREO 2.3% 6.8% 8.3% 11.5% 10.7%
Nonperforming assets to total assets 1.5% 4.8% 5.5% 8.1% 7.9%
Net chargeoffs to average loans 1.7% 1.9% 3.8% 2.6% 2.2%
OREO reserve to OREO(4) 15.9% 9.5% 29.1% 1.3%
(1) The amount of interest on December 31, 1995 nonaccrual and restructured
loans that would have been recorded had the loans been paying in accordance
with their original terms during 1995 was approximately $3,131,000. The
amount of interest income on these loans included in net income in 1995 was
approximately $2,522,000.
(2) Other real estate owned ("OREO") represents assets to which title to the
collateral has been taken through foreclosure or in settlement of loans.
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 payments 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.
</TABLE>
The improvement in credit quality is also exhibited in the Company's
successful reduction of nonperforming assets. During 1995, these assets were
reduced 67 percent , or $58.1 million to $29.0 million. Nonperforming assets
were 1.5 percent of total assets at December 31, 1995 compared with 4.8 percent
and 5.5 percent at year-end 1994 and 1993, respectively. The lower level of
nonperformers has
20
<PAGE>
also directly contributed to the decreasing amount of net chargeoffs recorded by
the Company. This year net chargeoffs were $21.1 million compared with 1994 and
1993 chargeoffs of $24.7 million and $54.4 million, respectively. The 1995 net
chargeoffs included a charge of $6.9 million recorded in connection with a
program for the accelerated disposition of $20 million in troubled assets which
are classified as loans held-for-sale at December 31, 1995. The Company
continues to consider further accelerated disposition programs for the remaining
balance of troubled loans.
At December 31, 1995, total impaired loans were $25.7 million, comprised of
$1.4 million that required a reserve for possible loan losses of $.3 million and
$24.3 million that did not require a related reserve. Impaired loans, as defined
in Statement of Financial Accounting Standards No. 114 ("SFAS No. 114") are
loans recognized by the Company as nonaccrual and restructured. Refer to Note 5
to the Notes to Consolidated Financial Statements of this Form 10-K for a
further discussion on SFAS No. 114.
The reserve for possible loan losses decreased from $64.1 million at
year-end 1994 to $56.0 million this year. Provisions for possible loan losses
were recorded at amounts relatively consistent with the level of net chargeoffs
throughout much of the year. The exception was the late fourth quarter $6.9
million charge related to the accelerated disposition program. Despite the
decrease in the reserve balance, the reserve coverage continually strengthened
throughout 1995 equaling 281 percent of nonaccrual loans at year end compared
with 108 percent last year and 109 percent in 1993.
Credit Quality Monitoring
Credit quality within the commercial and commercial real estate loan portfolios
of each subsidiary is quantified by an internal credit risk 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 and its Asset Quality Committee with independent information on loan
portfolio condition. The Asset Quality Committee, which reports to the Audit
Committee of the Company's Board of Directors, monitors asset quality monthly
and actively reviews the large credit exposures.
The Company's commercial lending, credit and loan administration
departments are charged with ensuring compliance with lending policies,
procedures and administrative guidelines for the commercial portfolio. In
addition, an Appraisal Department reviews third-party real estate loan
collateral appraisals to ensure adherence to federal requirements and the
Company's lending policies. There is a Controlled Loan Department with
specialized expertise in handling most of the Company's nonaccrual and other
troubled loans. In order to ensure the effectiveness of credit quality
monitoring systems, monitoring controls are periodically reviewed and tested by
the Company's Internal Audit Department.
The credit quality of the lease financing receivables portfolio is measured
by the same credit rating system described above. Consumer 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.
Past due nonconsumer loans, nonaccrual loans, and troubled debt
restructurings are reviewed at least quarterly by a Special Assets Committee
whose membership includes the Chief Executive Officer of the Company, Loan
Review Department management 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.
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. 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 and qualitative analysis and
includes sensitivity testing and a written conclusion.
21
<PAGE>
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. The amount and
timing of realized losses and future reserve allocations 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, 1991 through 1995 is presented below:
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
Loans as a Loans as a Loans as a Loans as a Loans as a
Allocation Percent of Allocation Percent of Allocation Percent of Allocation Percent of Allocation Percent of
(Dollars in Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans
thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amount of loan
loss reserve:
Commercial and
financial $20,055 50.6% $30,962 55.3% $38,123 56.3% $25,702 57.3% $23,568 51.8%
Commercial
real estate:
Construction 495 1.3% 538 1.0% 1,648 2.6% 1,399 3.4% 1,781 4.2%
Developer,
investor and
land 4,802 16.3% 8,885 20.8% 12,426 23.9% 8,453 24.5% 9,913 27.7%
Consumer* 8,515 29.6% 6,028 20.9% 5,470 15.2% 4,762 12.9% 5,324 14.4%
Lease financing 356 2.2% 130 2.0% 132 2.0% 142 1.9% 158 1.9%
Unallocated 21,806 17,545 6,666 10,020 9,356
------ ----- ------- ----- ------- ----- ------- ----- ------ -----
Total $56,029 100.0% $64,088 100.0% $64,465 100.0% $50,478 100.0% $50,100 100.0%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
* Consumer loans include indirect automobile installment loans, residential
mortgages and home equity lines of credit, credit cards, and check credit
loans.
</TABLE>
A summary of loan loss experience for the years ended December 31, 1991 through
1995 is presented below:
<TABLE>
<CAPTION>
December 31,
(Dollars in thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Reserve for loan losses at beginning of period $ 64,088 $ 64,465 $ 50,478 $ 50,100 $ 36,008
Chargeoffs:
Commercial and financial 8,823 15,320 29,789 24,012 17,613
Commercial real estate:
Construction 511 197 1,705 924 2,242
Developer, investor and land 16,531 13,483 23,387 10,788 10,366
Consumer:
Residential mortgage 1,845 897 686 1,250 2,839
Home equity* 403 119 370 673
Indirect automobile installment 844 806 1,981 2,181 5,366
Other consumer 117 237 280 3,386 2,890
Lease financing
---------- --------- --------- ---------- --------
Total chargeoffs 29,074 31,059 58,198 43,214 41,316
------ ------ ------ ------ ------
Recoveries:
Commercial and financial 4,236 4,319 1,628 688 735
Commercial real estate:
Construction 181 32 24 9
Developer, investor and land 1,799 1,034 928 56
Consumer:
Residential mortgage 982 62 11 36 78
Home equity* 46 48 101 66
Indirect automobile installment 642 820 1,046 219 564
Other consumer 39 86 20 329 263
Lease financing
----------- ---------- ----------- -------- --------
Total recoveries 7,925 6,401 3,758 1,347 1,696
----- ----- ----- ----- -----
Net chargeoffs 21,149 24,658 54,440 41,867 39,620
Provisions charged to operations 13,090 24,281 68,427 42,245 53,712
------ ------ ------ ------ ------
Reserve for loan losses at end of period $ 56,029 $ 64,088 $ 64,465 $ 50,478 $ 50,100
============= ============== ============== =============== =============
Average loans $ 1,265,098 $ 1,283,464 $ 1,435,665 $ 1,584,390 $ 1,784,302
============= ============== ============== =============== =============
Ratio of net chargeoffs to average loans 1.7% 1.9% 3.8% 2.6% 2.2%
* This information is available separately for 1992-1995 only. The 1991
information is included in the other consumer category.
</TABLE>
22
<PAGE>
Results of Operations
Comparison of 1995 with 1994
For the year ended December 31, 1995, net income was $15.0 million, or $0.83 per
share, a substantial increase over the $4.7 million, $0.27 per share, earned in
1994. The improvement in earnings was the direct result of a $11.2 million
reduction in the provision for possible loan losses from $24.3 million last year
to $13.1 million for 1995. In addition, a stronger net interest margin and
notable reductions in noninterest expense, particularly foreclosed asset and
workout expense and FDIC deposit insurance assessments, also contributed to a
higher level of net income. This year's stronger earnings results are also
reflected in an improved return on average stockholders' investment of 9.14
percent compared with 3.12 percent last year, and an improved return on average
assets of .81 percent compared with .25 percent in 1994. A comparative analysis
for return on average assets and return on average stockholders' investment is
shown below:
<TABLE>
<CAPTION>
Return on Average Assets -- Component Analysis
Year Ended December 31, 1995 1994
<S> <C> <C>
Net interest income 5.20% 4.90%
Provision for possible loan losses (.72) (1.29)
---- -----
Net interest income after provision for possible loan losses 4.48 3.61
Noninterest income 1.63 1.61
Noninterest expense (4.80) (4.86)
----- -----
Income before income tax 1.31 .36
Income tax provision .50 .11
--- ---
Net income .81% .25%
=== ===
</TABLE>
<TABLE>
<CAPTION>
Return on Average Stockholders' Investment -- Component Analysis
Year Ended December 31, 1995 1994
<S> <C> <C>
Net interest income 58.32% 60.49%
Provision for possible loan losses (8.00) (15.95)
----- ------
Net interest income after provision for possible loan losses 50.32 44.54
Noninterest income 18.31 19.92
Noninterest expense (53.89) (60.00)
------ ------
Income before income tax 14.74 4.46
Income tax provision 5.60 1.34
---- ----
Net income 9.14% 3.12%
==== ====
</TABLE>
Net Interest Income Analysis
The Company's net interest income on a fully taxable equivalent basis was
$96.4 million, $3.3 million higher than the $93.1 million in 1994. The increase
reflects the positive effect on net interest income of a higher level of
interest rates in 1995 compared with 1994. The average interest rate spread was
relatively level with 1994 while the average interest rate margin was higher
than a year ago. Partially offsetting the effect of a stronger interest rate
margin was a decline in the volume of earning assets, particularly loans, and a
shift by deposit customers from savings products to higher cost certificates of
deposit during the year.
23
<PAGE>
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,
1995 1994 1993
Average Average Average Average Average Average
(Dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Cash and due from banks $ 89,490 $ 95,717 $ 100,755
Excess funds sold and other 51,908 $ 3,047 5.87% 24,095 $ 1,197 4.97% 2,704 $ 96 3.55%
Securities:
Taxable 418,484 25,746 6.15 452,700 27,206 6.01 450,998 29,303 6.50
Non-taxable(1) 5,097 750 14.71 5,559 557 10.02 11,175 819 7.33
----- --- ----- --- ------ ---
Total securities 423,581 26,496 6.26 458,259 27,763 6.06 462,173 30,122 6.52
Loans(1) 1,265,098 119,375 9.44 1,283,464 104,322 8.13 1,435,665 111,586 7.77
Reserve for possible loan losses (63,039) (64,063) (64,531)
------- ------- -------
Net loans 1,202,059 1,219,401 1,371,134
Other assets 69,191 83,957 105,801
------ -------- ------ -------- ------- --------
Total assets/interest income $1,836,229 $148,918 8.11% $1,881,429 $133,282 7.08% $2,042,567 $141,804 6.94%
========== ======== ========== ======== ========== ========
Liabilities and Stockholders' Investment
Deposits:
Noninterest-bearing demand $ 336,931 $ 350,405 $ 346,980
Interest-bearing demand
(NOW accounts) 158,636 $ 2,176 1.37% 163,841 $ 2,343 1.43% 144,255 $ 2,693 1.87%
Money market 237,580 6,580 2.77 288,489 6,372 2.21 346,314 8,429 2.43
Regular savings 254,496 7,104 2.79 311,139 7,745 2.49 320,357 9,338 2.91
Time 486,993 26,823 5.51 413,239 16,447 3.98 477,272 19,840 4.16
------- ------ ------- ------ ------- ------
Total interest-bearing deposits 1,137,705 42,683 3.75 1,176,708 32,907 2.80 1,288,198 40,300 3.13
------- ------- -------
Total deposits 1,474,636 1,527,113 1,635,178
Short-term borrowings 179,260 9,281 5.18 180,325 6,240 3.46 227,944 6,239 2.74
Other borrowings 6,406 571 8.91 11,790 1,066 9.04 16,831 1,405 8.35
Other liabilities 12,276 9,945 19,465
Stockholders' investment 163,651 152,256 143,149
------- ------ ------- ------ ------- ------
Total liabilities and stockholders'
investment/interest expense $1,836,229 $ 52,535 2.86% $1,881,429 $ 40,213 2.14% $2,042,567 $ 47,944 2.35%
========== ======== ========== ========= ========== ========
Earning assets-- interest income $1,740,587 $148,918 8.56% $1,765,818 $ 133,282 7.55% $1,900,542 $141,804 7.46%
Interest-bearing liabilities-- interest
expense $1,323,371 52,535 3.97% $1,368,823 40,213 2.94% $1,532,973 47,944 3.13%
------ ------ ------
Net interest spread(2) 4.59% 4.61% 4.33%
Net interest margin(3) $ 96,383 5.54% $ 93,069 5.27% $ 93,860 4.94%
======== ========= ========
(1) Interest on loans to and obligations of states and political subdivisions
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 35 percent federal income tax rate
in 1995 and 1993, and 34 percent in 1994 and includes applicable state
taxes, net of federal tax benefit.
(2) Net interest spread is the excess of the interest rate on average earning
assets over the interest rate on average interest-bearing liabilities.
(3) Net interest margin is the excess of the interest earned over interest
expense divided by average earning assets.
</TABLE>
Interest rates moved downward in the second half of 1995 following a period
of rapid interest rate rise from early 1994 through the first quarter of 1995.
The result of this year's higher level of interest rates was an improvement in
yield on earning assets of 101 basis points from 7.55 percent last year to 8.56
percent this year. The cost of interest-bearing liabilities, principally
deposits, increased by 103 basis points from 2.94 percent last year to 3.97
percent in 1995. Yields on prime-based loans and excess funds, which reprice
daily, reached their peak in the first quarter of this year and decreased
steadily throughout the remainder of the year consistent with the movement of
interest rates.
While the Company initially refrained from increasing deposit rates in the
rising interest rate environment of 1994, to satisfy liquidity needs and in
response to competition for deposits, more aggressive deposit pricing was
adopted in late 1994 and the first quarter of this year. Beginning with the
second quarter and continuing through the rest of 1995, the Company moved to a
less competitive
24
<PAGE>
pricing policy. The result was a rising cost of deposits
earlier this year which subsided during the latter half of the year. The Company
anticipates that deposit rates will be relatively level in the first half of
1996 and move downward in the second half in response to lower interest rates.
This year's interest rate spread of 4.59 percent was approximately equal
with the 1994 spread of 4.61 percent as the rise in yield on earning assets
equaled the increase in cost of interest-bearing liabilities. The net interest
rate margin improved 27 basis points to 5.54 percent reflecting the positive
impact of an equal rise in rates on the larger balance of average earning assets
which totaled $1.74 billion compared with interest-bearing liabilities which
totaled $1.32 billion. Also contributing to the increased net interest rate
margin was a reduction in interest-bearing liabilities of $45 million which
exceeded a decrease in interest-earning assets by $20 million. The net effect on
net interest income from changes in rates in 1995 compared with 1994 was an
increase of $5.5 million.
Despite the year-to-year increase in interest rate margin and level
interest rate spread, both spread and margin were in a downward trend since
peaking at historical highs in the first quarter of this year. The narrowing of
rate and margin is expected to continue due to declining interest rates, which
will reduce yield on interest earning assets, particularly loans. In the short
term, rates on new deposits are expected to remain relatively stable with little
impact on margin and spread.
Average earning assets decreased $25 million from $1.77 billion in 1994 to
$1.74 billion in 1995. The decrease reflects declines in average loans of $18
million and securities of $35 million which was partially offset by an increase
in lower yielding excess funds of $28 million. Average interest-bearing
liabilities decreased $45 million from last year to $1.32 billion. In addition,
interest-bearing liabilities experienced a shift in the mix of average deposits
from savings and money market deposits to higher cost certificates of deposit.
Regular savings, NOW and money market deposits decreased $113 million while time
deposits increased $74 million. Further changes in the mix from savings deposit
products to higher cost time deposit products would negatively impact net
interest income. The net effect on net interest income from changes in volume of
loans, deposits and other interest-bearing balances in 1995 compared with 1994
was a decrease of $2.2 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, 1995 when compared with the year ended December 31, 1994. Changes
attributable to both rate and volume are allocated on a weighted basis.
<TABLE>
<CAPTION>
Increase (Decrease) From Year Ended December 31, 1994
Year Ended Amount Due to Changes in
(Dollars in thousands) December 31, 1995 Total Change Volume Rate
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans* $ 119,375 $ 15,053 $ (1,512) $ 16,565
Interest and dividends on securities:
Taxable 25,746 (1,460) (2,093) 633
Non-taxable* 750 193 (50) 243
Interest on excess funds sold and other 3,047 1,850 1,599 251
----- ----- ----- ---
Total interest income* 148,918 15,636 (2,056) 17,692
------- ------ ------ ------
Interest expense:
Interest on NOW, money market and
regular savings deposits 15,860 (600) (2,599) 1,999
Interest on time deposits 26,823 10,376 3,293 7,083
Interest on short-term borrowings 9,281 3,041 (37) 3,078
Interest on other borrowings 571 (495) (480) (15)
--- ---- ---- ---
Total interest expense 52,535 12,322 177 12,145
------ ------ --- ------
Net interest income $ 96,383 $ 3,314 $ (2,233) $ 5,547
=============== ============= ============== ==============
* Fully taxable equivalent at the federal income tax rate of 35 percent and
includes applicable state taxes net of federal benefit. The tax equivalent
adjustment on loans was approximately $.7 million and on non-taxable
securities was approximately $.2 milion.
</TABLE>
Noninterest Income
Total noninterest income was $30.0 million in 1995, a slight decrease of $.3
million from 1994. Asset management fees decreased $1.1 million due to timing
differences in the recognition of fee income in 1994 and a slight decrease in
the level of assets under management this year compared to last year. Offsetting
the lower asset management fees were increases in corporate services income,
residual income on maturing equipment leases and higher realized gains from the
sale of primarily equity securities held by an investment company subsidiary.
25
<PAGE>
Noninterest Expense
Total noninterest expense was reduced $3.2 million in 1995 to $88.2 million
compared to a year ago due largely to decreases in foreclosed asset and workout
expense and deposit insurance assessments. The lower level of problem assets
this year resulted in a $3.0 million decrease in foreclosed asset and workout
expense. Further declines in loan workout expense are expected as the level of
problem assets is reduced. Deposit insurance assessments decreased $1.5 million
in 1995 due to the reduction in insurance premium rates by the FDIC. Refer to
Note 12 to the Notes to Consolidated Financial Statements, "Deposit Insurance
Assessment," for a further discussion of deposit insurance.
Salary and employee benefits increased $1.6 million in 1995 to $44.3
million. The increase was largely due to a full year of asset management
revenue-sharing provisions in 1995 compared with only a half-year provision in
1994. Refer to the paragraph below for a further discussion of the
revenue-sharing provisions. Included in salary and employee benefits was $.7
million and $1.0 million in expenses related to severance agreements for 1995
and 1994, respectively.
In late 1994 and early 1995, the Company and senior executives of USTC's
Asset Management Division negotiated and entered into employment agreements
designed to maximize the profitability and grow the assets under management of
the asset management business. The agreements 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. Certain
provisions of the agreements became effective July 1, 1994, and contain
revenue-sharing provisions which 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.
Other noninterest expense was reduced $.6 million in 1995 to $23.0 million.
Included in other noninterest expense were provisions recorded in connection
with space consolidation, including the writedown to market value of Company
facilities offered for sale and the writeoff of leases on abandoned facilities,
lease subsidies and leasehold improvements. The facility consolidation
provisions were $1.9 million in 1995 compared with $.5 million in 1994. In
addition, this year the Company accelerated the amortization of certain core
deposit intangible assets after conducting a review of the expected future
economic benefits derived from these assets and their current carrying amount.
The amount of accelerated amortization expense recorded this year was $.6
million which resulted in an increase in amortization of intangible asset
expense of $.4 million compared with 1994. Excluding such special items, other
noninterest expense was reduced over 10 percent, or $2.6 million, in 1995. The
largest reductions were in legal and consulting $1.2 million and all other
noninterest expense of $1.2 million. The decrease in all other noninterest
expense was due to reductions across numerous expense categories, the largest
were declines in appraisal fees, litigation expense and audit fees. The major
components of other noninterest expense were:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands) 1995 1994
<S> <C> <C>
Furniture and equipment $ 3,572 $ 3,476
Legal and consulting 2,356 3,553
Advertising and promotion 2,123 2,307
Facility consolidation provisions 1,895 480
Amortization of intangibles 1,798 1,367
Service bureau and other data processing 1,274 1,173
All other 9,951 11,171
----- ------
Total other noninterest expense $22,969 $23,527
======= =======
</TABLE>
Income Taxes
The Company recorded income taxes of $9.2 million in 1995 compared with $2.1
million in 1994. The increase is the direct result of the significantly higher
level of pre-tax income recorded this year. Refer to Note 13 to the Notes to
Consolidated Financial Statements of this Form 10-K for a further discussion of
income taxes.
In 1993 the Company adopted Statement of Financial Accounting Standards No.
109 " Accounting for Income Taxes." This Standard changed the accounting for
deferred income taxes 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 2 to the Notes to Consolidated Financial Statements of this Form 10-K for a
further discussion of this matter.
As of December 31, 1995, included in other assets was a deferred tax asset
of approximately $7.0 million, net of a valuation allowance of $.2 million,
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
The methods and assumptions used by the Company to estimate the fair value of
each class of financial instruments as of December 31, 1995 and 1994, in
accordance with SFAS No. 107, "Disclosures about Fair
26
<PAGE>
Value of Financial Instruments," are discussed in Note 19 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, 1995 was $1.91 billion and $1.76 billion, or $43 million and $4
million in excess of carrying value, respectively. The estimated fair value of
Financial Instrument assets and liabilities as of December 31, 1994 was $1.71
billion and $1.66 billion, or $16 million and $3 million in excess of carrying
value, respectively. The increase in excess of fair value over the carrying
value of Financial Instrument assets of $27 million is attributed, in the
opinion of management, to the large decline in substandard loans and resulting
reduction in credit risk, and the effect of lower market interest rates from a
year ago. The slight increase in excess of fair value over carrying value of
Financial Instrument liabilities, is attributed, in the opinion of management,
to the decline in market interest rates at December 31, 1995, particularly
deposit rates, compared with a year ago.
Comparison of 1994 with 1993
Net Interest Income Analysis
Net interest income on a fully taxable equivalent basis decreased slightly from
$93.9 million in 1993 to $93.1 million in 1994. The decrease reflects a lower
volume of interest-earning assets offset by an improvement in interest rate
spread and margin. Spread and margin benefited from interest rate increases
throughout the year.
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 7.46 percent in 1993 to 7.55 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 4.33 percent and 4.94 percent in 1993 to 4.61 percent and 5.27
percent, respectively, in 1994. The net effect from changes in rates was an
increase in net interest income of $5.1 million.
Average loans outstanding in 1994 were $1.28 billion, a decrease of $152
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 $5.9 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
Year Ended Amount Due to Changes in
(Dollars in thousands) December 31, 1994 Total Change Volume Rate
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans* $ 104,322 $ (7,264) $ (12,208) $ 4,944
Interest and dividends on securities:
Taxable 27,206 (2,097) 110 (2,207)
Non-taxable* 557 (262) (499) 237
Interest on excess funds sold and other 1,197 1,101 1,048 53
----- ----- ----- --
Total interest income* 133,282 (8,522) (11,549) 3,027
------- ------ ------- -----
Interest expense:
Interest on NOW, money market and regular savings 16,460 (4,000) (1,147) (2,853)
Interest on time deposits 16,447 (3,393) (2,576) (817)
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) (5,626) (2,105)
------ ------ ------ ------
Net interest income $ 93,069 $ (791) $ (5,923) $ 5,132
=============== ============== =============== =============
* Fully taxable equivalent at the federal income tax rate of 34 percent 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>
27
<PAGE>
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 $3.1 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 $.5 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 $2 million to $91.4 million in 1994.
Foreclosed asset and workout expense declined $10.4 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 included expenses
related to severance agreements of $1 million and a $1.2 million Asset
Management Division revenue-sharing provision. Refer to "Comparison of 1995 with
1994" under Noninterest Expense for a discussion of USTC revenue-sharing
provisions. The increase in salary and employee benefits also reflected the
addition of a qualified mutual fund sales staff and increases in professional
staff to improve loan administration and monitoring of credit quality. In
addition, the rise reflects normal merit raises and employee benefit cost
increases. FDIC deposit insurance premiums declined $.4 million as a result of a
lower level of deposits compared with 1993.
Other noninterest expense increased $4.0 million in 1994, reflecting $1
million in increased legal fees, $1 million in advertising and promotion, $.4
million in collateral appraisal fees, $.5 million in facility consolidation
provisions 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 the cost of property and
casualty insurance of $.4 million. The major components of other noninterest
expense were:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands) 1994 1993
<S> <C> <C>
Legal and consulting $ 3,553 $ 1,801
Furniture and equipment 3,476 3,614
Advertising and promotion 2,307 1,280
Amortization of intangibles 1,367 1,367
Service bureau and other data processing 1,173 1,151
Special provisions for litigation (750)
Other 11,651 11,059
------ ------
Total other noninterest expense $ 23,527 $ 19,522
============== =============
</TABLE>
28
<PAGE>
ITEM 8. Financial Statements and Supplementary Material
<TABLE>
<CAPTION>
Index to Financial Statements
Financial Statements Page
<S> <C>
Report of Independent Public Accountants 30
Consolidated Balance Sheets-- December 31, 1995 and 1994 31
Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993 32
Consolidated Statements of Changes in Stockholders' Investment for the years ended December 31, 1995, 1994 and 1993 33
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 34
Notes to Consolidated Financial Statements 35
</TABLE>
29
<PAGE>
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, 1995 and 1994,
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, 1995. 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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As explained in Note 2 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.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
January 29, 1996
<PAGE>
30
<TABLE>
<CAPTION>
Consolidated Balance Sheets
December 31,
(Dollars in thousands, except share amounts) 1995 1994
<S> <C> <C>
Assets
Cash, due from banks and interest-bearing deposits (Note 3) $ 89,799 $ 93,079
Excess funds sold 10,000
Securities (Notes 2 and 4):
Securities available-for-sale:
Mortgage-backed securities 246,521 195,009
U.S. Treasury, corporate notes and other 329,152 206,631
------- -------
Total securities available-for-sale 575,673 401,640
Securities held-to-maturity 100
-------- ---
Total securities 575,673 401,740
Loans (Notes 5, 15, and 17):
Loans-- net of unearned discount of $33,419 in 1995 and $18,604 in 1994 1,272,077 1,276,683
Reserve for possible loan losses (56,029) (64,088)
------- -------
Total loans, net 1,216,048 1,212,595
Premises, furniture and equipment, net (Note 6) 31,840 32,403
Loans held-for-sale (Note 2) 13,098
Intangible assets, net 4,650 6,445
Other real estate owned, net (Note 7) 3,015 9,958
Other assets (Notes 10 and 13) 34,965 37,012
------ ------
Total Assets $1,969,088 $1,803,232
========== ==========
Liabilities and Stockholders' Investment
Deposits:
Demand $ 372,917 $ 371,716
Interest-bearing demand (NOW accounts) 166,011 168,434
Money market 210,924 271,898
Regular savings 244,680 285,350
Time:
Certificates of deposit over $100 thousand 112,426 79,373
Other 405,779 314,035
------- -------
Total deposits 1,512,737 1,490,806
Short-term borrowings (Note 8) 242,962 158,989
Other borrowings (Note 9) 143 9,964
Other liabilities (Note 10) 39,578 10,839
------ ------
Total liabilities 1,795,420 1,670,598
Commitments and contingencies (Notes 16 and 17)
Stockholders' investment (Notes 2, 4, 9, 11, and 14):
Preferred stock $1 par value; Authorized -- 4,000,000 shares; Outstanding -- None
Common stock $.625 par value; Authorized -- 30,000,000 shares;
Outstanding-- 17,843,582 and 17,614,792 shares in 1995 and 1994, respectively 11,152 11,009
Additional paid-in capital 74,158 72,129
Retained earnings 87,253 73,183
Unrealized gain (loss) on securities available-for-sale, net of tax 961 (23,601)
Deferred compensation and other 144 (86)
--- ---
Total stockholders' investment 173,668 132,634
------- -------
Total Liabilities and Stockholders' Investment $1,969,088 $1,803,232
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income
Year Ended December 31,
(Dollars in thousands, except share amounts) 1995 1994 1993
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 118,666 $ 103,526 $ 110,673
Interest and dividends on securities:
Taxable 25,746 27,206 29,242
Non-taxable 204 215 265
Dividends 306 168 352
Interest on excess funds and other 3,047 1,197 96
----- ----- --
Total interest income 147,969 132,312 140,628
------- ------- -------
Interest expense:
Interest on deposits 42,683 32,907 40,300
Interest on short-term borrowings 9,281 6,240 6,239
Interest on other borrowings 571 1,066 1,405
--- ----- -----
Total interest expense 52,535 40,213 47,944
------ ------ ------
Net interest income 95,434 92,099 92,684
Provision for possible loan losses (Note 5) 13,090 24,281 68,427
------ ------ ------
Net interest income after provision for possible loan losses 82,344 67,818 24,257
------ ------ ------
Noninterest income:
Asset management fees 13,276 14,419 15,798
Corporate services income 8,529 8,198 8,365
Service charges on deposit accounts 4,637 4,893 5,356
Securities gains, net (Note 4) 1,802 1,105 4,222
Lease residual income 682 362 1,148
Other 1,044 1,357 1,834
----- ----- -----
Total noninterest income 29,970 30,334 36,723
------ ------ ------
Noninterest expense:
Salary and employee benefits (Note 10) 44,287 42,650 38,467
Net occupancy expense 7,672 7,837 7,419
Foreclosed asset and workout expense (Note 7) 5,784 8,820 19,187
Credit card processing expense 4,408 3,955 3,815
Deposit insurance assessment (Note 12) 3,067 4,566 4,931
Other (Note 12) 22,969 23,527 19,522
------ ------ ------
Total noninterest expense 88,187 91,355 93,341
------ ------ ------
Income (loss) before income taxes 24,127 6,797 (32,361)
Income tax provision (benefit) (Note 13) 9,169 2,051 (11,511)
----- ----- -------
Net income (loss) before change in accounting method 14,958 4,746 (20,850)
Cumulative effect of change in method of accounting for income taxes (Note 2) (750)
------- ------- ----
Net income (loss) $ 14,958 $ 4,746 $ (20,100)
=============== =============== ===============
Per share data:
Net income (loss) $ .83 $ .27 $ (1.31)
Cash dividends declared $ .05
Weighted average number of common shares (Note 11) 18,068,203 17,780,032 15,362,251
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Stockholders' Investment
Common Stock Unrealized Deferred
Additional Retained Gain/(Loss Compensation)
(Dollars and shares in thousands) Shares Amount Paid-in Capital Earnings on Securities) and Other)
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992 14,037 $ 8,773 $ 47,694 $ 88,537 $ (17) $ (1,107)
Net loss (20,100)
Common stock sales (Note 14) 3,155 1,972 21,271
Stock option exercises and stock issued under restricted
stock plans (Notes 10 and 11) 96 59 622
Cumulative effect of change in method of accounting
for investment securities, net of tax (Note 2) 3,335
Change in unrealized loss on equity securities 17
Reduction in ESOP loan guarantee (Note 9) 321
Activity in Directors Deferred Compensation Program,
net (Note 11) 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 10 and 11) 258 162 2,108 (664)
Change from net unrealized gain to loss on securities
available-for-sale, net of tax (Note 2) (26,936)
Reduction in ESOP loan guarantee (Note 9) 322
Activity in Directors Deferred Compensation Program,
net (Note 11) 52 32 327 (282)
-- -- --- ---- ---- ----
Balance December 31, 1994 17,615 11,009 72,129 73,183 (23,601) (86)
Net income 14,958
Stock option exercises and stock issued under
restricted stock plans (Notes 10 and 11) 223 139 1,987 (171)
Change from net unrealized loss to gain on
securities available-for-sale, net of
tax (Note 2) 24,562
Reduction in ESOP loan guarantee (Note 9) 321
Activity in Directors Deferred Compensation
Program, net (Note 11) 6 4 42 80
Cash dividends declared (888)
--- --- --- ---- ----- ----
Balance December 31, 1995 17,844 $ 11,152 $ 74,158 $ 87,253 $ 961 $ 144
====== ========= ========== ========== ======== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 14,958 $ 4,746 $ (20,100)
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 13,090 24,281 68,427
Depreciation and amortization 5,244 5,295 5,029
Amortization of gain on sale/leaseback (372) (384) (384)
Amortization of security premiums and discounts, net 481 732 1,344
Securities gains, net (1,802) (1,105) (4,222)
(Gain) loss on sale of other real estate owned, net (450) (384) 1,075
Writedowns of other real estate owned 2,035 2,360 10,346
Deferred income tax (benefit) expense (1,558) 7,134 (4,494)
Increase in accruals and other, net 13,668 13,149 22,099
------ ------ ------
Net cash provided by operating activities 45,294 55,824 78,370
Cash flows (used) provided by investing activities:
Sales and maturities of investment securities 5,584
Purchase of investment securities (1,063)
Proceeds from sales of securities held for sale 321,517
Proceeds from sales of securities available-for-sale 56,019 61,669
Proceeds from maturities of securities available-for-sale 25,599 196,943
Purchases of securities held for sale (387,472)
Purchases of securities available-for-sale (223,026) (144,794)
Purchases of securities held-to-maturity (100)
Net decrease (increase) in excess funds sold 10,000 11,000 (20,700)
Net (increase) decrease in loans (21,689) 37,735 72,247
Proceeds from other real estate owned 10,503 8,753 13,693
Purchases of premises and equipment (2,884) (3,670) (1,268)
------ ------ ------
Net cash (used) provided by investing activities (145,478) 167,536 2,538
Cash flows provided (used) by financing activities:
Net decrease in nontime deposits (102,866) (91,940) (90,408)
Net increase (decrease) in certificates of deposit 124,797 (58,052) (60,725)
Net increase (decrease) in short-term borrowings 83,973 (67,279) 24,217
Payments on other borrowings (9,500) (4,000) (4,000)
Cash dividends paid (888)
Issuance of common stock for cash, net 1,388 792 23,677
----- --- ------
Net cash provided (used) by financing activities 96,904 (220,479) (107,239)
------ -------- --------
(Decrease) increase in cash and cash equivalents (3,280) 2,881 (26,331)
Cash and cash equivalents at beginning of year 93,079 90,198 116,529
------ ------ -------
Cash and cash equivalents at end of year $ 89,799 $ 93,079 $ 90,198
============== ============= ===============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 51,730 $ 39,853 $ 48,959
============== ============= ===============
Income taxes $ 7,768 $ 2,204 $ 1,210
============== ============= ===============
Noncash transactions:
Transfers from investment portfolio to securities held for sale $ 7,103
Transfers from securities held-to-maturity to securities available-for-sale $ 100 ===============
==============
Transfers from other assets to securities available-for-sale $ 499 $ 300
============== =============
Transfers from loans to other real estate owned $ 6,175 $ 24,872 $ 35,827
============== ============= ===============
Transfers from loans to loans held-for-sale, net $ 13,098
==============
Financed other real estate owned sales $ 565 $ 14,732 $ 24,885
============== ============= ===============
Common stock issuance $ 784 $ 1,837 $ 365
============== ============= ===============
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
34
<PAGE>
Notes to Consolidated Financial Statements, December 31, 1995
(1) Nature of Operations
UST Corp. is a bank holding company with three principal banking subsidiaries:
USTrust and United States Trust Company ("USTC"), each headquartered in Boston,
Massachusetts, and UST Bank/Connecticut ("UST/Conn"), headquartered in
Bridgeport, Connecticut. UST Corp. and its banking and nonbanking subsidiaries
(the "Company") is engaged in a single line of business, that of providing a
broad range of financial services principally to individuals and small- and
medium-sized companies in the New England region. Included in these services are
commercial banking, consumer services, trust and money management, and equipment
leasing. The Company through its banking subsidiaries operates 28 banking
branches in the greater Boston area and 4 banking branches in the Bridgeport
area.
(2) Summary of Significant Accounting Policies
The accounting and reporting policies of the Company conform with generally
accepted accounting principles and general practice in the banking industry. The
preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect the reporting and disclosure of assets and liabilities, including
those that are of a contingent nature, at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The significant accounting and
reporting policies of the Company are summarized below.
Principles of Consolidation
The consolidated financial statements include the accounts of UST Corp. and its
wholly-owned subsidiaries. All material intercompany balances and transactions
have been eliminated. The parent company only financial statements contained in
Note 18 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, 1995 and 1994, 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, 1995,
stockholders' investment was increased by an unrealized gain related to SFAS No.
115 of $961,000 net of taxes of $721,000.
Securities that do not have readily determinable market values are carried
at cost and classified in other assets. At December 31, 1995 and 1994, such
securities amounted to $4,201,000 and $3,908,000, respectively.
For mortgage-backed securities, the Company recalculates the effective
yield on the investment to reflect the actual prepayment results and estimated
future prepayments. 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 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.
35
<PAGE>
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:
Buildings and building improvements 10-40 years
Furniture and equipment 3-10 years
Leasehold improvements are amortized over the life of the lease agreements
plus one renewal period.
Loan Income and Fees
Most installment loans and certain 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.
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 and qualitative analysis and includes sensitivity testing and a
written conclusion. 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.
Loans Held-For-Sale
In December 1995, the Company transferred certain loans to an accelerated
disposition portfolio, "Loans held-for-sale." Such loans were transferred at
their estimated disposition values less estimated cost of disposal. The excess,
if any, of the loan balance over the estimated disposition value less estimated
cost of disposal was charged to the reserve for possible loan losses.
Other Real Estate Owned
Other real estate owned ("OREO") includes properties which the Company has
acquired through foreclosure or in settlement of loans. All OREO is held for
sale and carried at the lower of the loan value or fair value of the property
acquired, less estimated costs to sell ("net realizable value"). At the time of
foreclosure, the excess, if any, of the loan value over the net realizable
value, is charged to the reserve for possible loan losses. The carrying value of
OREO is reviewed periodically. Subsequent declines in the fair value of the
property and net operating results of the property are included in noninterest
expense, "Foreclosed asset and workout expense."
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.
The Company adopted SFAS No. 109, "Accounting for Income Taxes," on January
1, 1993. This statement requires the use of the "liability method" of providing
deferred income taxes under which the amount of deferred taxes on the balance
sheet is adjusted whenever tax rates or provisions of income tax law are
changed. 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.
36
<PAGE>
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 382,206
for 1995 and 379,059 for 1994. Loss per share computations for 1993 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 not material.
Intangible Assets
Intangible assets include goodwill and core deposit intangibles which 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 1995, 1994
and 1993. Values assigned to deposits of purchased businesses ("core deposit
intangibles") are being amortized over seven- and thirteen-year periods.
Amortization expense was $1,675,500 in 1995 and $1,245,000 in 1994 and 1993.
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, and, if appropriate,
reduces the carrying amount through a charge to other noninterest expense.
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.
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.
Recent Accounting Developments
The FASB issued in March 1995, SFAS No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of." This Statement
requires a review for impairment of long-lived assets and certain identifiable
intangibles to be held and used by an entity whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. An impairment would be estimated if the sum of the expected future
cash flows to result from the use and eventual disposition of the asset is less
than the carrying amount of the asset. This Statement does not apply to
financial instruments, core deposit intangibles, mortgage and other servicing
rights, or deferred tax assets. This Statement would apply for fiscal years
beginning after December 15, 1995. While the effect on the Company has not yet
been determined, the adoption of this Statement could have a material impact on
the Company's results of operations in future periods.
As an amendment to SFAS No. 65, "Accounting for Mortgage Banking
Activities," the FASB issued in May 1995, SFAS No. 122, "Accounting for Mortgage
Servicing Rights." This Statement amends certain SFAS No. 65 provisions
prohibiting the capitalization of mortgage loan servicing rights acquired
through loan origination activities, by requiring that both originated and
purchase mortgage loan servicing rights be capitalized. In addition, FASB No.
122 requires all capitalized mortgage loan service rights be evaluated for
impairment based on their fair values. This Statement would apply prospectively
for fiscal years beginning after December 15, 1995. The adoption of this
Statement is not expected to have a material impact on the Company's results of
operations.
37
<PAGE>
(3) Restrictions on Cash and Due From Banks
At December 31, 1995 and 1994, cash and due from banks included $34,830,000 and
$34,173,000, respectively, to satisfy the reserve requirements of the Federal
Reserve Board.
(4) Securities
A comparison of the amortized cost, estimated fair value and gross unrealized
gains and losses as of December 31, 1995 and December 31, 1994 for securities
available-for-sale and held-to-maturity follows:
<TABLE>
<CAPTION>
1995
Gross Gross
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities available-for-sale:
Mortgage-backed securities:
FHLMC $ 155,916 $ 1,486 $ (411) $ 156,991
FNMA 89,239 799 (508) 89,530
------ --- ---- ------
Total mortgage-backed securities 245,155 2,285 (919) 246,521
U.S. Treasury and federal agencies 197,641 570 (1,244) 196,967
Asset-backed securities 85,157 443 85,600
Corporate debt securities 40,499 323 (2) 40,820
States and municipalities 3,169 85 3,254
Marketable equity securities 1,806 159 (20) 1,945
Foreign governments 390 390
All other securities 176 176
--------------- ------------- -------------- ---------------
Total securities available-for-sale $ 573,993 $ 3,865 $ (2,185) $ 575,673
=============== ============= ============== ===============
</TABLE>
<TABLE>
<CAPTION>
1994
Gross Gross
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
<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
U.S. Treasury and federal agencies 154,823 5 (12,414) 142,414
Corporate debt securities 59,716 208 (1,611) 58,313
States and municipalities 3,577 49 (133) 3,493
Marketable equity securities 1,954 120 (254) 1,820
Foreign governments 425 425
All other securities 166 166
--- ------ --- ------
Total securities available-for-sale $ 430,663 $ 524 $ (29,547) $ 401,640
=============== ========== =============== ===============
Securities held-to-maturity:
States and municipalities $ 100 $ (3) $ 97
=============== =============== ===============
Total securities held-to-maturity $ 100 $ (3) $ 97
=============== =============== ===============
</TABLE>
38
<PAGE>
The amortized cost and estimated fair value of debt securities at December 31,
1995 and 1994, 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 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>
1995 1994
Amortized Estimated Amortized Estimated
(Dollars in thousands) Cost Fair Value Cost Fair Value
<S> <C> <C> <C> <C>
Securities available-for-sale:
Mortgage-backed securities:
Due after 5 years through 10 years $ 38,276 $ 38,521 $ 26,144 $ 25,967
Due after 10 years 206,879 208,000 183,858 169,042
------- ------- ------- -------
Total mortgage-backed securities 245,155 246,521 210,002 195,009
All other debt securities:
Due in 1 year or less 22,052 22,197 22,706 22,624
Due after 1 year through 5 years 233,296 233,676 168,449 159,047
Due after 5 years through 10 years 70,594 70,198 25,935 21,575
Due after 10 years 914 960 1,451 1,399
--- --- ----- -----
Total debt securities 572,011 573,552 428,543 399,654
Total marketable equity securities and all other securities 1,982 2,121 2,120 1,986
----- ----- ----- -----
Total $ 573,993 $ 575,673 $ 430,663 $ 401,640
=========== =========== =========== ===========
Securities held-to-maturity:
Due after 1 year through 5 years $ 100 $ 97
=========== ===========
Total $ 100 $ 97
=========== ===========
</TABLE>
Proceeds from sales of debt securities available-for-sale during 1995 were
$53,474,000 and $60,061,000 during 1994. Gross gains of $132,000 for 1995 and
$79,000 for 1994 and gross losses of $229,000 for 1995 and none for 1994 were
realized on those sales. Net gains on all securities were $1,802,000,
$1,105,000, and $4,222,000 for 1995, 1994, and 1993, respectively. The 1995
gains were comprised principally from the sale of equity securities.
At December 31, 1995, securities carried at $215,276,000 were pledged to
secure public and trust deposits, securities sold under agreements to repurchase
and for other purposes as required by law.
(5) Loans
The composition of the loan portfolio (net of unearned discount) at December 31,
1995 and 1994 was as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
<S> <C> <C>
Commercial and financial $ 642,940 $ 705,075
Commercial real estate:
Construction 16,937 13,109
Developer, investor and land 207,710 265,624
Consumer:
Residential mortgage 85,806 90,643
Home equity 70,066 64,068
Indirect automobile installment 197,148 90,255
Other consumer 23,015 21,964
Lease financing 28,455 25,945
------ ------
1,272,077 1,276,683
Reserve for possible loan losses (56,029) (64,088)
------- -------
$1,216,048 $1,212,595
========== ==========
</TABLE>
39
<PAGE>
Most of the Company's lending activity is with customers located within the
states of Massachusetts and Connecticut. At year-end 1995, the Company's
exposure to credit risk principally secured by commercial real estate, home
equity and residential real estate included $381 million of loans. Refer to Note
17 for additional discussion of concentration of credit risk.
Reserve for Possible Loan Losses
Analysis of the reserve for possible loan losses for the three years ended
December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of period $ 64,088 $ 64,465 $ 50,478
Loans charged-off (29,074) (31,059) (58,198)
Recoveries on loans previously charged-off 7,925 6,401 3,758
----- ----- -----
Net chargeoffs (21,149) (24,658) (54,440)
Provisions charged to operations 13,090 24,281 68,427
------ ------ ------
Balance at end of period $ 56,029 $ 64,088 $ 64,465
============== ============== ==============
</TABLE>
In June 1993 the Company recorded a special $30 million provision for loan
losses which is included in the above table.
Impaired Loans
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 114 ("SFAS No. 114"), "Accounting by Creditors for
Impairment of a Loan," which the Company adopted on January 1, 1995. SFAS No.
114 requires, among other things, that creditors measure impaired loans at the
present value of expected future cash flows, discounted at the loan's effective
interest rate or, as a practical expedient, at the loan's observable market
price or the fair value of the collateral if the loan is collateral dependent.
For purposes of this Statement, a loan is considered impaired when it is
probable that a creditor will be unable to collect all amounts due, including
interest, according to the contractual terms of the loan agreement. SFAS No. 114
as amended by SFAS No. 118, allows creditors to use their existing methods of
recognizing interest income on impaired loans.
Loans recognized by the Company as nonaccrual and restructured have been
classified "impaired loans" by the Company in accordance with SFAS No. 114. At
December 31, 1995, total impaired loans were $25.7 million, comprised of $1.4
million that required reserves of $.3 million and $24.3 million that did not
require a related reserve since there was no dollar impairment as measured by
the Statement's provisions. The average recorded investment in impaired loans
for the year ended December 31, 1995 was $45 million. The reserve for possible
loan losses has not required an additional loan loss provision as a result of
the adoption of this Statement. The methodology used in the required reserve
calculation utilized the fair value of collateral.
SFAS No. 114 also requires that in-substance foreclosures be reported as
part of loans and the in-substance foreclosure valuation reserve be included in
the reserve for possible loan losses. The effect at January 1, 1995, the date of
adoption of SFAS No. 114, on the Company's balance sheet was an increase to
loans of $10.6 million, an increase to the reserve for possible loan losses of
$2.1 million and a decrease in other real estate owned of $8.5 million. In
addition, prior period balances have been reclassified to reflect loans, OREO,
reserve for possible loan losses, loan loss provision and in-substance
foreclosure writedown expense on a basis comparable to the classification that
would have been used under SFAS No. 114. There was no effect on net income of
the Company as a result of the adoption of this Statement.
Nonaccrual loans were $19.9 million and $59.9 million at December 31, 1995
and December 31, 1994, respectively. Accruing restructured loans totaled $5.8
million and $15.8 million at December 31, 1995 and 1994, respectively. For the
years ended December 31, 1995 and 1994, the amount of interest income on
nonaccrual and restructured loans that would have been recognized if the loans
had been paying in accordance with their original terms, was $3,131,000 and
$6,259,000, respectively, while the amount recognized as interest income in the
same periods was $2,522,000 and $3,188,000, respectively.
40
<PAGE>
(6) Premises, Furniture and Equipment
A summary of the accounts as of December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
<S> <C> <C>
Land $ 2,746 $ 2,839
Buildings and leasehold improvements 33,037 34,861
Furniture and equipment 15,343 15,450
------ ------
51,126 53,150
Accumulated depreciation and amortization (19,286) (20,747)
------- -------
$ 31,840 $ 32,403
============= =============
</TABLE>
Depreciation and amortization expenses reflected in the consolidated
statements of income were $3,445,000, $3,927,000 and $3,662,000 in 1995, 1994
and 1993, 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.
(7) Other Real Estate Owned
Other real estate owned is stated net of valuation allowances. Analysis of the
valuation allowances for the three years ended December 31, 1995, 1994 and 1993
is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of period $ 1,044 $ 4,635 $ 389
Chargeoffs (2,511) (5,951) (6,100)
Provisions charged to operations 2,035 2,360 10,346
----- ----- ------
Balance at end of period $ 568 $ 1,044 $ 4,635
============= ============= ===========
</TABLE>
The net cost of other real estate owned included in foreclosed asset and
workout expense in the income statement was $3,596,000, $5,348,000 and
$17,087,000 in 1995, 1994 and 1993, respectively. These costs include provisions
charged to operations to reflect reductions in net realizable value, net gain or
loss on sales and cost of maintaining and operating the properties.
(8) Short-term Borrowings
Short-term borrowings consisted of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
<S> <C> <C>
Federal funds purchased $ 57,406 $ 19,296
Securities sold under agreements to repurchase 172,689 126,597
Treasury tax and loan note account 12,867 13,096
------ ------
$ 242,962 $158,989
========= ========
</TABLE>
The weighted average interest rates at December 31, 1995 and 1994 were 4.98
percent and 4.74 percent, respectively. The average outstanding short-term
borrowings were $179,260,000 in 1995 and $180,325,000 in 1994. The approximate
weighted average interest rates during the year were 5.18 percent in 1995 and
3.46 percent in 1994. The maximum amount of short-term borrowings outstanding at
any month end was $242,962,000 in 1995 and $212,174,000 in 1994.
41
<PAGE>
(9) Other Borrowings
Other borrowings consisted of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
<S> <C> <C>
UST Corp.
8.5% Senior Notes due in installments from 1992 - 1996 $8,000
Guaranteed ESOP debt at 84% of the prime rate, as established, due in installments to 1996 $143 464
UST Capital Corp.
11.505% note to the Small Business Administration due 1995 1,500
---- -----
$143 $9,964
==== ======
</TABLE>
Payments required under the above obligations were $5,821,000 in 1995 and
the balance of $143,000 due in 1996. In addition to the required payment in
1995, the Company elected to prepay the final $4,000,000 installment due in 1996
on the 8.5% Senior Notes. Effective with this payment the Company was released
from all terms and conditions of the Note agreement.
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.
(10) Employee Benefit Plans
The Company has a noncontributory, defined benefit retirement plan covering all
employees who meet specified age and employment requirements. The Company also
has a nonqualified, unfunded supplemental retirement plan, which covers certain
officers of the Company. The plans provide pension benefits that are based on
the employee's compensation during the highest four consecutive years before
retirement. The following summary sets forth each plan's funded status and
amounts included in the Company's consolidated balance sheets as of December 31,
1995 and 1994:
<TABLE>
<CAPTION>
Qualified Plan Supplemental Plan
(Dollars in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 15,124 $ 10,980 $ 1,186 $ 949
Nonvested benefit obligation 402 309 26 5
--- --- -- -
Accumulated benefit obligation 15,526 11,289 1,212 954
Effect of projected future compensation levels 3,863 2,959 330 89
----- ----- --- --
Projected benefit obligation for service rendered to date 19,389 14,248 1,542 1,043
Plan assets, primarily listed stocks and U.S. bonds 20,514 16,811
------ ------ ------ ------
Excess (deficiency) of plan assets over projected benefit obligation 1,125 2,563 (1,542) (1,043)
Unrecognized loss (gain) 2,753 1,924 (197) (442)
Unrecognized prior service asset (obligation) (683) (751) 292 443
Unrecognized net transition asset (1,354) (1,625)
------ ------ ------ -------
Prepaid (accrued) costs included in other assets (other liabilities) $ 1,841 $ 2,111 $ (1,447) $ (1,042)
============== ============= ============ ===========
</TABLE>
The actuarial assumptions used for both plans were as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Discount rate 7.0% 8.5%
Rate of increase of future compensation levels 4.0% 5.0%
Expected rate of return on plan assets 9.0% 9.0%
</TABLE>
42
<PAGE>
Net pension cost for 1995, 1994 and 1993 included the following components:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Service cost benefit earned during the period $ 862 $ 1,050 $ 880
Interest cost on projected benefit obligation 1,377 1,265 1,179
Return on plan assets (4,248) 325 (1,232)
Net amortization and deferral 2,805 (1,789) (463)
----- ------ ----
Net pension cost $ 796 $ 851 $ 364
========== ============= ===========
</TABLE>
The Company has an Employee Savings Plan which qualifies as a deferred
salary arrangement under Section 401(k) of the Internal Revenue Code. Under the
Plan, which originated in January 1994 and was amended in October 1995,
participating employees may defer a portion up to 10 percent of their pretax
earnings not to exceed the Internal Revenue Service annual contribution limits.
The Company matches each eligible employee's contribution up to 5 percent of the
employee's earnings. The rate of matching is 100 percent for the first 1 percent
of each employee's contribution and a rate of 25 percent for contributions of
greater than 1 percent up to the 5 percent maximum. The Company made a matching
contribution of $273,000 and $198,000, respectively, in 1995 and 1994.
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.
Certain key employees are awarded shares of the Company's common stock
through the Company's Restricted Stock Ownership Plan adopted in 1989 and the
restricted stock program of the Stock Compensation Plan adopted in 1992 and
amended in 1994. Under these restricted stock plans 498,570 shares of common
stock have been granted. The shares vest to the employee over varying schedules.
In 1995, 53,229 restricted shares vested under this plan. At December 31, 1995,
there were 84,666 unvested restricted shares outstanding.
Expenses relating to the plans were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
Employee Employee Savings
(Dollars in thousands) Pension Stock Ownership Restricted Stock Plan 401(k)
<C> <C> <C> <C> <C>
1995 $796 $425 $490 $273
1994 851 425 558 198
1993 364 319 399
</TABLE>
(11) 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, 1995,
112,069 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, 1996, 223,045 additional common shares will be reserved for future
grants. The Company records stock compensation in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
43
<PAGE>
The following table presents the activity for the employee stock option program
under the Stock Compensation Plan for the years ended December 31, 1995, 1994,
and 1993:
<TABLE>
<CAPTION>
Number of Shares
Under Option Option Price Per Share Total
<S> <C> <C> <C>
Outstanding December 31, 1992 583,886 $ 5.00 - $ 9.13 $ 3,596,343
Granted in 1993 300,000 $ 7.50 - $12.00 2,700,000
Canceled in 1993 (161,331) $ 6.07 - $ 9.18 (1,434,063)
Exercised in 1993 (65,696) $ 6.07 (398,869)
------- ------ --------
Outstanding December 31, 1993 656,859 $ 5.00 - $12.00 4,463,411
------- ------ ------ ---------
Granted in 1994 1,004,500 $ 9.00 - $13.38 10,459,688
Canceled in 1994 (283,337) $ 6.07 - $13.38 (3,542,162)
Exercised in 1994 (123,108) $ 6.07 - $ 8.62 (760,209)
-------- ------ ------ --------
Outstanding December 31, 1994 1,254,914 $ 5.00 - $12.00 10,620,728
--------- ------ ------ ----------
Granted in 1995 164,100 $10.75 - $14.13 2,207,700
Canceled in 1995 (26,365) $ 6.07 - $ 9.75 (228,862)
Exercised in 1995 (147,956) $ 5.00 - $ 9.75 (1,028,062)
-------- ------ ------ ----------
Outstanding December 31, 1995 1,244,693 $ 5.00 - $14.13 $11,571,504
========= ====== ====== ===========
Options exercisable at:
December 31, 1993 290,492 $ 5.00 - $ 8.62 $ 1,770,462
December 31, 1994 721,936 $ 5.00 - $12.00 $ 5,910,636
December 31, 1995 838,614 $ 5.00 - $14.13 $ 7,112,906
</TABLE>
In December 1994, the Board of Directors authorized an option substitution
program permitting employees to surrender options with an option price of more
than $9.75 (the fair market value) in exchange for new options on a one-for-one
basis. Outstanding options for 273,500 were exchanged under the program.
In May 1995, the stockholders approved the 1995 Stock Option Plan for
Directors under which each eligible director would receive option grants for
7,500 shares at fair value. A total of 150,000 shares of the Company's common
stock has been reserved for issuance under this Plan. As of December 31, 1995,
118,200 shares were granted and outstanding.
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.
(12) Noninterest Expense
Deposit Insurance Assessment
On August 8, 1995, the Federal Deposit Insurance Corporation ("FDIC") voted to
reduce insurance premiums paid to the Bank Insurance Fund ("BIF") by the best
managed and capitalized banks to 4 cents per $100 of deposits from the then
current rate of 23 cents per $100 of deposits. Premiums for savings and loan
associations ("Thrifts") insured by the Savings Association Insurance Fund
("SAIF") remain unchanged, ranging from 23 cents for the best managed and
capitalized Thrifts to 31 cents per $100 of deposits for those institutions
which present a higher risk to the insurance fund. In 1990, the Company
purchased the deposits of a failed Thrift institution. Accordingly, the
Company's deposit insurance premiums reflect a combination of SAIF and BIF
assessments. In the third quarter of this year the Company received a $700
thousand rebate of deposit insurance premiums paid earlier in 1995 as a result
of the aforementioned action to reduce premium rates on insured deposits.
Proposed Federal legislation may result in a one-time assessment on Thrift
deposits that would supplement the weaker Thrift deposit insurance fund followed
by a merger of SAIF and BIF. The amount of such a one-time assessment cannot be
determined at this time but could have a material impact on the operating
results of the Company. Under the proposed legislation, subsequent to the
one-time charge, the insurance premium charged on the former Thrift deposits
would be reduced.
44
<PAGE>
Other Noninterest Expense
The major components of other noninterest expense were:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Furniture and equipment $ 3,572 $ 3,476 $ 3,614
Legal and consulting 2,356 3,553 1,801
Advertising and promotion 2,123 2,307 1,280
Facility consolidation provisions 1,895 480
Amortization of intangibles 1,798 1,367 1,367
Service bureau and other data processing 1,274 1,173 1,151
All other 9,951 11,171 10,309
----- ------ ------
Total other noninterest expense $ 22,969 $ 23,527 $ 19,522
============== ============== ==============
</TABLE>
(13) Income Taxes
The income tax provision (benefit) included in the consolidated statements of
income consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Current tax expense (benefit)*:
Federal $ 7,860 $ (6,230) $ (8,302)
State 2,867 1,147 1,285
----- ----- -----
10,727 (5,083) (7,017)
------ ------ ------
Deferred tax expense (benefit):
Federal (1,735) 6,588 (4,448)
State 177 546 (46)
--- --- ---
(1,558) 7,134 (4,494)
------ ----- ------
Total $ 9,169 $ 2,051 $ (11,511)
============= ============= ===============
* The 1995 current provision does not reflect $286 thousand of tax benefits
related to stock options exercised that have been credited directly to
additional paid-in capital.
</TABLE>
At December 31, 1995 and 1994, cumulative net deferred income tax benefits
amounting to $6,983,000 and $11,679,000 were included in the consolidated
balance sheets as other assets. Additionally, at December 31, 1995, there were
current taxes payable of $1,810,000 included in other liabilities, while at
December 31, 1994, there were tax refund receivables of $2,998,000 included in
other assets.
The components of the net deferred tax asset were as follows:
<TABLE>
<CAPTION>
December 31,
(Dollars in thousands) 1995 1994
<S> <C> <C>
Book reserve for loan losses in excess of tax $ 23,117 $ 26,175
Alternative minimum tax credit 6,768 4,988
Investment tax credits 5,498 4,730
Deferred compensation benefits not deducted for tax 1,449 1,264
Securities mark to market adjustment deferred for tax (1,198) (1,779)
Book writedowns on foreclosed real estate, not deducted for tax 240 323
Net operating losses* 12,207
Tax deductions on leveraged leases deferred for book (14,919) (17,226)
Loan mark to market adjustment for tax (12,990) (11,228)
Pension expense deducted for tax not book (741) (850)
Tax basis in partnership investment less than book (704) (708)
Cumulative tax depreciation in excess of book (583) (675)
Tax basis in core deposits less than book (355) (850)
Valuation allowance (state) (181) (365)
Valuation allowance (federal)* (6,017)
Other, net 1,582 1,690
----- -----
Total deferred tax asset $ 6,983 $ 11,679
============= ==============
* The federal valuation allowance in 1994 was related primarily to the
unrealized loss on securities available-for-sale. This amount was reversed
during 1995 as the market value of the securities portfolio increased and
the tax effect on the unrealized loss component of stockholders' investment
decreased.
</TABLE>
45
<PAGE>
The provisions for income taxes differ from the amounts computed by
applying the U.S. statutory federal tax rate of 35 percent in 1995 and 1993 and
34 percent in 1994 to income (loss) before income taxes principally due to:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Tax (benefit) at statutory rate $ 8,444 $ 2,311 $ (11,326)
Increases (reductions) from:
Tax-exempt income on investment securities and loans (596) (676) (832)
State income taxes, net of federal income tax benefit 1,979 1,118 818
Low income housing credits (724) (911) (862)
Other, net 66 209 691
-- --- ---
Tax expense (benefit) recorded $ 9,169 $ 2,051 $ (11,511)
============= ============= ===============
</TABLE>
(14) Capital and Former Regulatory Agreements
In 1993, the Company sold 500,000 shares of its 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.
Also in 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.
Dividends
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. Refer to "Former Agreements with Bank Regulatory Agencies" below for
additional discussion on dividend restrictions.
In the fourth quarter of 1995, the Company declared and paid a cash
dividend of $0.05 per share to stockholders for a total dividend of $888
thousand. During the year the Company received dividends from subsidiaries of $3
million from USTC, $1 million from USTrust and $1 million from JSA Financial
Corporation, a nonbanking subsidiary. During 1995 the Company contributed
capital to its subsidiaries totaling $1 million to UST/Conn and $6.5 million to
JSA Financial Corporation.
Shareholder Rights Plan
On September 22, 1995, the Company declared a special dividend distribution of
one preferred share purchase right for each outstanding share of the Company's
common stock. This dividend was distributed on October 6, 1995 to stockholders
of record as of the close of business on that date.
The rights will become exercisable only if a person or group (i) acquires
15 percent or more of the Company's common stock, (ii) announces a tender offer
that would result in ownership of 15 percent or more of the common stock, or
(iii) is declared to be an "Adverse Person" by the Company's Board of Directors.
"Adverse Person" includes any person or group who owns at least 10 percent of
the Company's common stock and attempts an action that would adversely impact
the Company. Each right would entitle a stockholder to buy 1/100th of a share of
a new series of junior participating preferred stock.
Once a person or group has acquired 15 percent or more of the outstanding
common stock of the Company or is declared an "Adverse Person" by the Company's
Board of Directors, each right may entitle its holder (other than the acquiring
person or Adverse Person) to purchase, at an exercise price of $40, shares of
common stock of the Company (or any organization that acquires the Company) at a
price equal to 50 percent of their current market price. Under certain
circumstances, the Continuing Directors (as defined in the rights plan) may
exchange the rights for common stock (or equivalent securities) on a one-for-one
basis excluding rights held by the acquiring person or Adverse Person.
Until declaration of an Adverse Person, or ten days after public
announcement that any person or group has acquired 15 percent or more of the
Company's common stock, the rights are redeemable at the option of the Company's
Board of Directors, in certain cases with the concurrence of the Continuing
46
<PAGE>
Directors. Thereafter, they may be redeemed by the Continuing Directors in
connection with certain acquisitions not involving any acquiring person or
Adverse Person or in certain circumstances following a disposition of shares by
the acquiring person or Adverse Person. The redemption price is $.001 per right.
The rights will expire on October 6, 2005, unless redeemed prior to that date.
Distribution of the rights is not taxable to stockholders.
Stock Repurchase Program
On October 17, 1995, the Company's Board of Directors approved a stock
repurchase program. Under the program, the Company is authorized to repurchase
up to 500,000 shares, which was approximately 2.8 percent of the Company's
common stock outstanding on the date of authorization. The stock buyback is
authorized to take place from time to time, subject to prevailing market
conditions. Purchases may be made on the open market or in privately negotiated
transactions. Shares repurchased are to be held as treasury shares to be used
for general corporate purposes, including employee benefit plans.
Former Agreements with Bank Regulatory Agencies
On July 21, 1995, the Company was released from the terms of its Written
Agreement originally entered into on August 3, 1992, by the Federal Reserve Bank
of Boston ("FRB-Boston") and the Office of the Massachusetts Commissioner of
Banks ("Massachusetts Commissioner"). For a discussion of the Agreement which is
no longer in effect, refer to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
In June 1995, the Company's Massachusetts-based and largest subsidiary
bank, USTrust, was released by the Federal Deposit Insurance Corporation
("FDIC") and the Massachusetts Commissioner from the terms of its Cease and
Desist Order, originally issued in January 1992. In conjunction with the release
of the Order, USTrust's Board of Directors adopted a resolution pursuant to
which USTrust agreed, among other matters: (i) to continue to maintain a Tier 1
leverage capital ratio of at least 6 percent; (ii) not to pay a dividend which
would cause the Bank's Tier 1 leverage capital ratio to fall below 6 percent;
(iii) to continue to implement plans to reduce nonperforming assets and the
aggregate level of insider loans; and (iv) to provide a quarterly progress
report to the FDIC and the Massachusetts Commissioner. For a discussion of the
Order which is no longer in effect, refer to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994. The Company's second
Massachusetts-based banking subsidiary, USTC, was released from a similar Order
in 1994; and has also agreed not to declare or pay dividends should the effect
of the payment of such dividends cause USTC's Tier 1 leverage capital ratio to
fall below 6 percent. On September 14, 1995, UST/Conn was released by the
Commissioner of Banks for the State of Connecticut from the terms of its
Stipulation and Agreement, originally issued in June 1991. For a discussion of
the Agreement which is no longer in effect, refer to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994.
All banks and bank holding companies are required to meet certain capital
requirements. The Company's Tier 1 capital, Total risk-based capital and Tier 1
leverage capital ratios at December 31, 1995 were 10.24 percent, 11.75 percent
and 8.83 percent, respectively. The Tier 1 leverage capital ratios for the
Company's subsidiary banks, USTrust, USTC and UST/Conn, were 7.92 percent, 32.99
percent and 8.31 percent, respectively. The Company believes its consolidated
capital ratios and the capital ratios of its subsidiary banks exceed required
minimums.
(15) 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, 1995, none of these transactions
were on nonaccrual status, nor did they involve delinquent or restructured
loans. However, at December 31, 1995, loans to directors of the Company or to
their affiliated companies in the amount of approximately $6 million (all to
Director Francis X. Messina and his related interests) were characterized as
Substandard, in the Company's internal risk rating system. 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.
However, the Substandard classification does not imply ultimate loss for each
individual loan so classified.
47
<PAGE>
An analysis of loans outstanding in excess of $60,000 to directors and officers
related to the foregoing entities at December 31, 1995 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Balance, December 31, 1994 $46,626
Additions 1
Repayments (27,883)
-------
Balance, December 31, 1995 $18,744
=======
</TABLE>
(16) Commitments and Contingencies
Commitments for leased premises expire at various dates through 2010. At
December 31, 1995, minimum rental commitments for noncancelable leases are as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
<C> <C>
1996 $ 3,857
1997 3,707
1998 3,343
1999 2,820
2000 2,667
thereafter 3,819
-----
Total $ 20,213
========
</TABLE>
As part of a space consolidation program, the Company recorded a $1.3
million provision in 1995 for future lease commitments on abandoned leased
facilities. The 1995 provision will reduce the amount of noninterest expense
recorded in future periods for lease commitments listed in the above table. Rent
expense for the years ended December 1995, 1994 and 1993 was $3,927,000,
$4,133,000, and $3,932,000, respectively.
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 result
in a material adverse change in the financial condition or results of operations
of the Company.
(17) Financial Instruments With On- and Off-Balance Sheet Risk
The Company is a 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
(Dollars in thousands) December 31, 1995 December 31, 1994
<S> <C> <C>
Financial instruments whose contract amount represents credit risk:
Commitments to extend credit $ 387,000 $ 308,000
Standby letters of credit and financial guarantees written 48,000 64,000
Commercial letters of credit 3,000 2,000
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
48
<PAGE>
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, 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 $70 million and $76
million were secured by real estate at December 31, 1995 and December 31, 1994,
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, account receivables,
inventory, property, plant and equipment. The extent of collateral held for
those commitments varies from zero to one hundred percent. Of the total standby
and commercial letters of credit, approximately $12 million and $15 million were
secured by real estate at December 31, 1995 and 1994, 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. Approximately 95 percent of the Company's
outstanding commercial and real estate loans are collateralized.
The Company enters into foreign currency exchange contracts exclusively as
a service to its customers. Contracts are purchased on the open market and have
offsetting customer agreements. The Company is exposed to credit risk in the
event the customer fails to deliver or take delivery of the agreed upon
currency.
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. Refer to Note 2, 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, 1995, there were no derivative
financial instruments held by the Company requiring disclosure under SFAS No.
119.
(18) Parent Company Financial Information
Summarized information relative to the balance sheets at December 31, 1995 and
1994 and statements of income and cash flows for the three years in the period
ended December 31, 1995 of UST Corp. (parent company only) are presented as
follows:
<TABLE>
<CAPTION>
Balance Sheets -- Parent Company Only
December 31,
(Dollars in thousands) 1995 1994
<S> <C> <C>
Assets:
Cash, due from banks and interest-bearing deposits $ 952 $ 2,258
Securities purchased under agreements to resell 5,000
Securities available-for-sale 15,957
Investment in banking subsidiaries 161,920 124,548
Investment in nonbanking subsidiaries 5,139 46
Premises, furniture and equipment, net 76 69
Other assets 3,645 3,084
----- -----
Total assets $ 176,732 $ 145,962
=============== ===============
Liabilities and Stockholders' Investment:
Other borrowings $ 143 $ 8,464
Other liabilities 2,921 4,864
Stockholders' investment 173,668 132,634
------- -------
Total liabilities and stockholders' investment $ 176,732 $ 145,962
=============== ===============
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Statements of Income -- Parent Company Only
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Dividend income $ 5,000 $ 3,000 $ 5,250
Undistributed equity in net income (loss) of subsidiaries 10,518 2,492 (24,065)
Other income 4,216 731 292
----- --- ---
19,734 6,223 (18,523)
Expenses 4,776 1,477 1,577
----- ----- -----
Net income (loss) $ 14,958 $ 4,746 $ (20,100)
============== ============= ===============
</TABLE>
<TABLE>
<CAPTION>
Statements of Cash Flows -- Parent Company Only
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 14,958 $ 4,746 $ (20,100)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 125 447 447
Undistributed (income) loss of affiliates (10,518) (2,492) 24,065
Loss (gain) on sale of securities 2 (5)
(Increase) decrease in other assets (568) 536 (338)
(Decrease) increase in other liabilities (1,262) 316 1,543
------ --- -----
Net cash provided by operating activities 2,737 3,548 5,617
Cash flows provided (used) by investing activities:
Proceeds from securities 15,957 19,961 26,700
Purchase of securities (35,912) (47,750)
Net (increase) decrease in short-term investments (5,000) 21,000
Equity contributed to affiliates (7,500) (5,400) (5,250)
------ ------ ------
Net cash provided (used) by investing activities 3,457 (351) (26,300)
Cash flows provided (used) by financing activities:
Repayment of other borrowings (8,000) (4,000) (4,000)
Proceeds from issuance of common stock, net 1,388 792 23,677
Cash dividends paid (888)
---- ------ -------
Net cash provided (used) by financing activities (7,500) (3,208) 19,677
------ ------ ------
Decrease in cash and cash equivalents (1,306) (11) (1,006)
Cash and cash equivalents beginning of year 2,258 2,269 3,275
----- ----- -----
Cash and cash equivalents end of year $ 952 $ 2,258 $ 2,269
============== ============= ===============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 607 $ 938 $ 1,415
============== ============= ===============
Income taxes $ 550
==============
</TABLE>
Cash dividends paid to the Company in 1995 by consolidated bank
subsidiaries totaled $4,000,000 and $3,000,000 in 1994 and none in 1993. Cash
dividends paid to the Company by nonbank subsidiaries in 1995 totaled $1,000,000
and none in 1994 and 1993.
(19) Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," 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.
50
<PAGE>
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.
Off-balance sheet financial instruments -- For commitments to extend
credit, standby and commercial letters of credit and foreign exchange contracts,
the carrying amount which represents accruals of deferred income (fees) arising
from these instruments, and the fair value of such deferred income is not
material. Refer to Note 17 for notional or contract amounts and a further
discussion of off-balance sheet financial instruments.
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.
The carrying amount and estimated fair values of the Company's financial
instruments at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
(Dollars in thousands) Carrying Amount Fair Value Carrying Amount Fair Value
<S> <C> <C> <C> <C>
Financial instrument assets:
Cash and due from banks $ 89,799 $ 89,799 $ 93,079 $ 93,079
Securities 575,673 575,673 401,740 401,737
Excess funds sold 10,000 10,000
Loans, net 1,187,949 1,230,762 1,186,650 1,202,541
Loans held-for-sale 13,098 13,098
Financial instrument liabilities:
Deposits
Demand $ 372,917 $ 372,917 $ 371,716 $ 371,716
Interest-bearing demand (NOW accounts) 166,011 166,011 168,434 168,434
Money market 210,924 210,924 271,898 271,898
Regular savings 244,680 244,680 285,350 285,350
Time 518,205 522,189 393,408 396,030
Short-term borrowings 242,962 242,962 158,989 158,989
Other borrowings 143 143 9,964 10,267
</TABLE>
51
<PAGE>
(20) Consolidated Selected Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
For Year Ended December 31, 1995 For Year Ended December 31, 1994
Fourth Third Second First Fourth Third Second First
(Dollars in thousands, except per share amounts) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $37,954 $37,626 $36,467 $35,920 $34,238 $33,471 $32,715 $31,887
Interest expense 14,311 13,921 12,867 11,436 10,287 9,806 10,036 10,082
Net interest income 23,643 23,705 23,600 24,484 23,951 23,665 22,679 21,805
Provision for possible loan losses 1,800 2,790 3,670 4,830 4,801 7,223 6,545 5,713
Net interest income after provision
for possible loan losses 21,843 20,915 19,930 19,654 19,150 16,442 16,134 16,092
Noninterest income 7,170 7,083 7,007 8,710 7,241 7,578 7,616 7,900
Noninterest expense 21,619 21,287 21,211 24,070 24,451 22,517 22,051 22,336
Income tax expense 2,895 2,566 2,182 1,524 576 447 376 653
Net income 4,499 4,145 3,544 2,770 1,364 1,056 1,323 1,003
Earnings per share $ 0.25 $ 0.23 $ 0.20 $ 0.16 $ 0.08 $ 0.06 $ 0.07 $ 0.06
</TABLE>
As shown above, the net income of the Company has experienced substantial growth
from the modest level of earnings achieved in the early quarters of 1994 to the
fourth quarter of 1995 high of $4.5 million. The largest contributor to earnings
growth was the quarterly reductions in provision for possible loan losses
consistent with the declining level of troubled assets. The lower level of
troubled assets also led to a reduction in foreclosed asset and workout expense
which is reflected in the quarterly declines in noninterest expense. Net
interest income increased throughout the four quarters of 1994 and peaked in the
first quarter of 1995 reflecting the positive effect of a rise in interest rates
on interest earning assets while the Company controlled the level of costs of
interest-bearing liabilities. Noninterest income has remained relatively
constant except for quarterly fluctuations due to the recognition of gains on
sale of securities.
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
February 20, 1996, there were 11 members of the Executive Policy Committee. The
members of the Committee are identified and the background of each Committee
member is set forth below under "Executive Officers".
52
<PAGE>
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>
Name age Positions and Offices with the Company
(and/or where appropriate, position with one of the Company's subsidiaries)
<S> <C> <C>
* Neal F. Finnegan 58 President, Chief Executive Officer and Director of the Company and Chairman,
President and Chief Executive Officer of USTrust
* Domenic Colasacco 47 Executive Vice President/Trust and Investment Management and Director of the Company
and Chairman and President of USTC
* James K. Hunt 52 Executive Vice President, Chief Financial Officer and Treasurer of the Company
and Chief Financial Officer and Executive Vice President of USTrust; Treasurer of
UST Leasing Corporation
* Eric R. Fischer 50 Executive Vice President, General Counsel and Clerk of the Company and Executive Vice
President, General Counsel and Secretary of USTrust and USTC; Clerk of UST Capital
Corp. and UST Leasing Corporation
* Kathie S. Stevens 45 Executive Vice President and Senior Lending Officer of the Company and USTrust
and Vice Chairman of USTrust; President of UST Capital Corp.
* Katharine C. Armstrong 51 Executive Vice President/Commercial Lending of the Company and USTrust
* Robert T. McAlear 53 Executive Vice President/Controlled Loans and Credit of the Company and
Vice Chairman of USTrust
* Suzanne Moot 46 Executive Vice President/Marketing and Retail Banking of the Company and USTrust
* Walter E. Huskins, Jr. 56 Executive Vice President/Administration of the Company and USTrust;
Acting President of UST Bank/Connecticut and President of UST Leasing Corporation
* Linda J. Lerner 51 Senior Vice President/Human Resources of the Company, USTrust and USTC
* Kenneth L. Sullivan 59 Senior Vice President/Operations of the Company and Senior Vice President of USTrust
George T. Clarke 49 Senior Vice President and Controller of the Company and USTrust;
Treasurer of UST Capital Corp.
</TABLE>
* Member, Executive Policy Committee
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 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 Chairman,
President and Chief Executive Officer of USTrust and a Director and Chairman of
the Executive Committee of USTC.
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 investment management 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. Hunt was elected Executive Vice President, Treasurer and Chief
Financial Officer of the Company in 1994. Prior to joining the Company, Mr. Hunt
served as Executive Vice President at Peoples Bancorp of Worcester, Inc.,
Worcester, Massachusetts, from 1987 through mid-1994. He also serves as
Executive Vice President and Chief Financial Officer of USTrust and as Treasurer
of UST Leasing Corporation and various other nonbanking subsidiaries.
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
53
<PAGE>
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, Assistant Secretary of UST/Conn, and Clerk of UST
Capital Corp., UST Leasing Corporation and various other nonbanking
subsidiaries.
Ms. Stevens who has served as Executive Vice President and Senior Lending
Officer of the Company since 1993 was also elected to the positions of Vice
Chairman of USTrust and Chairman of the Senior Credit Committee of the Company
and USTrust in 1995. Ms. Stevens has been a senior officer in the Commercial
Lending function since she joined the Company in 1985. Ms. Stevens is also
President of UST Capital Corp.
Ms. Armstrong was named Executive Vice President/Commercial Lending of the
Company and USTrust in 1995. In that capacity she oversees the commercial
lending, asset-based lending and commercial real estate lending functions of the
Company. From 1993 to 1995 Ms. Armstrong served as Senior Vice President/Credit
Administration of the Company. Ms. Armstrong joined the Company in 1985 and
served in various credit administration functions from 1985 until she assumed
her position as Executive Vice President/Commercial Lending in 1995.
Mr. McAlear was elected Executive Vice President/Controlled Loans and
Credit 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, owned real estate and credit administration
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. Moot joined the Company in 1995 and serves as Executive Vice
President/Marketing and Retail Banking of the Company and USTrust. Prior to
joining the Company, Ms. Moot served as a consultant to more than two dozen
commercial and savings bank clients between 1988 and 1995 and served as Vice
President of Commercial Marketing at Shawmut Bank, Boston, MA from 1985 to 1988.
Mr. Huskins was elected Executive Vice President/Administration of the
Company in August 1993. Mr. Huskins is also responsible for the leasing
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 and Acting
President of UST/Conn and as Chairman of the Board and President of UST Leasing
Corporation.
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. Sullivan has served as Senior Vice President/Operations of the Company
since 1994. He also serves as Senior Vice President of USTrust. 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. Prior to 1995, he also served as
President of UST Data Services Corp. which as of December 31, 1995 was dissolved
and became a division of USTrust.
Mr. Clarke was elected Senior Vice President and Controller of the Company
in 1994 and of USTrust in 1996. 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. Mr. Clarke is
also Treasurer of UST Capital Corp.
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, 1995, 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, 1995, 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, 1995, 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
54
<PAGE>
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 1995, 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, 1995, 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.
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).
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.)**
4(d) Rights Agreement, dated September 19, 1995, between UST Corp. and
United States Trust Company, as Rights Agent. (Exhibit to
Registrant's Form 8-A filed September 26, 1995)**
4(d)(i) Certificate of Vote Establishing a Series of a Class of
Stock. (Exhibit A to Rights Agreement between the Company
and United States Trust Company, dated September 19, 1995
and filed as an Exhibit to Registrant's Form 8-A filed
September 26, 1995.)**
4(d)(ii) Form of Rights Certificate. (Exhibit B to Rights
Agreement between the Company and United States Trust
Company, dated September 19, 1995 and filed as an Exhibit to
Registrant's Form 8-A filed September 26, 1995.)**
4(d)(iii) Summary of Rights to Purchase Preferred Shares.
(Exhibit C to Rights Agreement between the Company and
United States Trust Company, dated September 19, 1995 and
filed as an Exhibit to Registrant's Form 8-A filed September
26, 1995.)**
(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)**
55
<PAGE>
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**
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**
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)**
10(l)Restated and amended Employment Agreement, dated as of November
21, 1995, between the Company and Neal F. Finnegan, President and
Chief Executive Officer of the Company.*
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,
USTBank/Connecticut.**
10(u)Executive Employment Agreements with certain members of the
Company's Executive Policy Committee, dated as of February 1,
1996:
56
<PAGE>
10(u)(i) Restated Employment Agreement between UST Corp. and
Walter E. Huskins, Executive Vice-President/Administration
of the Company*
10(u)(ii) Restated Employment Agreement between UST Corp. and
James K. Hunt, Executive Vice President, Chief Financial
Officer and Treasurer of the Company*
10(u)(iii) Restated Employment Agreement between UST Corp. and
Eric R. Fischer, Executive Vice President, General Counsel
and Clerk of the Company*
10(u)(iv) Restated Employment Agreement between UST Corp. and
Linda J. Lerner, Senior Vice President/Human Resources of
the Company*
10(u)(v) Restated Employment Agreement between UST Corp. and
Kenneth L. Sullivan, Senior Vice President/Operations of the
Company*
10(u)(vi) Restated Employment Agreement between UST Corp. and
Katharine C. Armstrong, Executive Vice President/Commercial
Lending of the Company*
10(u)(vii) Restated Employment Agreement between UST Corp. and
Suzanne Moot, Executive Vice President/Marketing and Retail
Banking of the Company*
10(u)(viii)Employment Agreement between UST Corp. and Robert T.
McAlear, Executive Vice President/Controlled Loans and
Credit of the Company*
10(u)(ix) Employment Agreement between UST Corp. and Kathie S.
Stevens, Executive Vice President, Senior Lending Officer of
the Company*
10(v) Severance Pay Plan, effective January 1, 1995**
10(w)Senior Officer Severance Pay Plan, effective January 1, 1995**
10(x)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(x)(i) Employment Agreement among UST Corp, USTC and Domenic
Colasacco, President of USTC, a wholly owned subsidiary of
the Company**
10(x)(ii) Employment Agreement among UST Corp., USTC and Robert
A. Lincoln, Senior Vice President, Senior Portfolio Manager
of USTC**
10(x)(iii) Employment Agreement among UST Corp., USTC and Stephen
K. Moody, Senior Vice President, Senior Portfolio Manager of
USTC**
10(x)(iv) Employment Agreement among UST Corp., USTC and Lucia B.
Santini, Senior Vice President/Administrator of USTC**
10(x)(v) Employment Agreement among UST Corp., USTC and Robert B.
Zevin, Senior Vice President, Economist and Senior Portfolio
Manager of USTC**
10(y)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 2 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, 1995*
* Filed herewith
** Filed as part of a previous Commission filing and incorporated herein by
reference.
(b) Reports on Form 8-K
None.
(d) Exhibits being filed
See Exhibit Index
(e) Financial Statement Schedules included in Financial Statements.
57
<PAGE>
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 Chief Executive Officer Executive Vice President and Treasurer
(Principal Executive Officer) (Principal Financial Officer and
Date: February 20, 1996 Principal Accounting Officer)
Date: February 20, 1996
</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/ ROBERT M. COARD By /s/ WALLACE M. HASELTON
-------------------- -------------------------
Robert M. Coard, Director Wallace M. Haselton, Director
Date: February 20, 1996 Date: February 20, 1996
By /s/ DOMENIC COLASACCO By /s/ BRIAN W. HOTAREK
---------------------- ---------------------
Domenic Colasacco, Director and Brian W. Hotarek, Director
Executive Vice President Date: February 20, 1996
Date: February 20, 1996
By /s/ ROBERT L. CULVER By /s/ FRANCIS X. MESSINA
---------------------- ------------------------
Robert L. Culver, Director Francis X. Messina, Director
Date: February 20, 1996 Date: February 20, 1996
By /s/ ALAN K. DERKAZARIAN By /s/ SYDNEY L. MILLER
------------------------ ---------------------
Alan K. Derkazarian, Director Sydney L. Miller, Director
Date: February 20, 1996 Date: February 20, 1996
By /s/ DONALD C. DOLBEN By /s/ VIKKI L. PRYOR
--------------------- ---------------------
Donald C. Dolben, Director Vikki L. Pryor, Director
Date: February 20, 1996 Date: February 20, 1996
By /s/ NEAL F. FINNEGAN By /s/ GERALD M. RIDGE
--------------------- ---------------------
Neal F. Finnegan, Director, Gerald M. Ridge, Director
President and Chief Executive Officer Date: February 20, 1996
Date: February 20, 1996
By /s/ WALTER A. GULESERIAN By /s/ WILLIAM SCHWARTZ
------------------------- -----------------------
Walter A. Guleserian, Director William Schwartz, Director
Date: February 20, 1996 Date: February 20, 1996
By /s/ EDWARD GUZOVSKY By /s/ SAMUEL B. SHELDON
------------------------ ------------------------
Edward Guzovsky, Director Samuel B. Sheldon, Director
Date: February 20, 1996 Date: February 20, 1996
By /s/ JAMES V. SIDELL By /s/ BARBARA C. SIDELL
---------------------- -------------------------
James V. Sidell, Director Barbara C. Sidell, Director
Date: February 20, 1996 Date: February 20, 1996
By /s/ PAUL D. SLATER By /s/ MICHAEL J. VERROCHI
--------------------- ------------------------
Paul D. Slater, Director Michael J. Verrochi, Director
Date: February 20, 1996 Date: February 20, 1996
By /s/ EDWARD J. SULLIVAN By /s/ GORDON M. WEINER
------------------------ ----------------------
Edward J. Sullivan, Director Gordon M. Weiner, Director
Date: February 20, 1996 Date: February 20, 1996
</TABLE>
EXHIBIT 10(l)
FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This First Amended and Restated Employment Agreement (hereafter, this
"Employment Agreement") made and entered into as of the 21st day of November,
1995 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 of
Cohasset, Massachusetts, (the "Employee"), amending in part and restating that
certain Employment Agreement between the parties dated as of the 20th day of
April, 1993, as amended on July 13, 1993 and February 15, 1994 (the "Original
Agreement").
WITNESSETH:
WHEREAS, the parties entered in the Original Agreement as of April 20, 1993
in connection with the employment of the Employee as President and Chief
Executive Officer of UST and thereafter amended the Original Agreement on July
13, 1993 and February 15, 1994 and wish to further amend the Original Agreement
hereby;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto do hereby agree as follows:
<PAGE>
I. Employment:
UST hereby employs the Employee as President, Chief Executive Officer and
as a Director of UST and as a Director of UST's subsidiary banks, USTrust and
United States Trust Company. The Employee may also at the pleasure of UST's
Board of Directors be appointed or elected from time to time, to serve as a
member of committees of the Board of Directors of UST and/or its subsidiaries.
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, if such service is
deemed appropriate by the UST Board of Directors. All such activities and
services shall be rendered by the Employee in good faith and in a manner
consistent with banking industry standards.
II. Compensation:
Effective as of January 1, 1996, the Employee shall be paid a base salary
at the rate of not less than $360,000 per annum during the term hereof, payable
on the first and third Fridays of each month (or upon such other schedule as
executive UST Officers are then paid). Increases, if any, over and above the
annual base salary set forth herein shall be determined annually by the Board of
Directors of UST.
The Employee shall be eligible to be considered for an annual bonus of up
to a maximum of fifty percent (50%) of his annual base salary for each full
calendar year during the term hereof. The determination of whether bonus
compensation will be granted and, if so, the amount of any such bonus shall be
determined by the Board of Directors of UST in its discretion based on its
assessment of the Employee's performance during the applicable calendar year and
taking into consideration the Employee's total compensation (including but not
limited to the value of Restricted Stock, as hereafter defined, granted him) in
comparison with that of other chief executive officers in businesses comparable
to UST. The Employee
-2-
<PAGE>
shall not be eligible to participate in any other bonus plan, program or
arrangement of UST during the term hereof unless expressly so authorized by the
Board of Directors of UST.
In addition, the Employee shall receive an allowance of $790 per month
which he shall use to defray the costs of the business use of an automobile
owned by the Employee. The Employee's annual dues and reasonable business
expenses related to UST's business at the Bay Club and the Union Club shall also
be reimbursed by UST. Except as otherwise provided herein, the Employee also
shall be entitled to such fringe benefits, including without limitation benefits
under UST's Supplemental Retirement Benefits Plan(s), and paid vacation time, as
UST may provide to other executive UST officers.
Pursuant to the Original Agreement, the Employee was granted by UST's Board
of Directors, stock options under UST's Stock Compensation Plan as amended by
UST from time to time (the "Plan"), enabling the Employee to purchase up to an
aggregate of 150,000 shares (subject to anti-dilution provisions) of UST Common
Stock. All such options have vested as of the effective date hereof. The
Employee was granted additional options to purchase 200,000 shares of UST Common
Stock under the Plan thereafter, which options have also vested.
Pursuant to the Original Agreement, the Employee was granted 60,000 shares
of UST Restricted Common Stock ("Restricted Stock") under the Plan, 40,000
shares of which have vested as of the effective date hereof and the remaining
20,000 shares of which shall vest on April 20, 1996, in accordance with the
Plan.
As of the effective date hereof, the Employee has been granted an
additional 45,000 shares of Restricted Stock under the Plan, one third of which
shares shall vest on each of January 2, 1997, January 2, 1998 and January 4,
1999, in accordance with the Plan.
-3-
<PAGE>
In addition to the options granted the Employee, as described above, the
Employee has been granted by UST's Board of Directors, as of the effective date
hereof, stock options under the Plan, having the terms described herein, which
will enable the Employee to purchase up to an aggregate of 150,000 additional
shares of UST Common Stock at the fair market value of UST Common Stock at the
close of trading on November 21, 1995, as reported by the Wall Street Journal,
i.e., at 13 7/16 (the "Exercise Price"). The options shall vest as follows: (i)
one third of the shares on January 2, 1996; (ii) one third on the earlier of
January 2, 1997 or the first trading day on which the closing price of UST
Common Stock shall have equaled or exceeded for ten consecutive trading days the
Exercise Price plus Three Dollars ($3.00); and (iii) the last third on the
earlier of January 2, 1998 or the first trading day on which the closing price
of UST Common Stock shall have equaled or exceeded for ten consecutive trading
days the Exercise Price plus Six Dollars ($6.00).
All stock options granted the Employee hereunder shall be treated as
incentive stock options to the extent permitted by applicable law.
The Employee shall not receive any Directors' fees or Directors'
compensation for attendance at UST or UST subsidiary Directors' meetings.
III. Term:
Unless earlier terminated by the death or "Disability" of the Employee as
defined in Section V hereof or as otherwise provided in this Employment
Agreement, the Employee is engaged for a period commencing on the effective date
hereof and ending on January 4, 1999, which term shall automatically renew
thereafter for successive terms of one year each unless either party gives
notice to the other at least sixty (60) days prior to the expiration of the
original or any renewal term that this Employment Agreement shall not renew.
-4-
<PAGE>
UST shall have the right to terminate this Employment Agreement for Cause,
meaning dishonesty which materially and adversely affects UST, 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 his willful failure to perform his obligations under this Employment
Agreement. Except in the case of dishonesty, UST agrees to give written notice
of at least ten (10) business days as to the particulars which are asserted to
be the basis for termination and an opportunity extending not more than ten (10)
business days to cure such event in a manner which reasonably assures UST that
such event will not recur. Should the Employee be terminated for any of the
reasons set forth in this Section III, he shall be paid salary, earned
additional compensation, awarded bonuses and other fringe benefits through the
date of termination, but shall forfeit his rights to any unvested compensation,
benefits, securities or other consideration under this Employment Agreement as
of the date of such termination.
The Employee shall have the right to terminate this Employment Agreement
for Good Reason, meaning (i) failure of UST to continue the Employee in his
position as President and Chief Executive Officer; (ii) material diminution in
the nature or scope of the Employee's responsibilities, duties or authority;
(iii) material failure of UST to provide the Employee base salary and benefits
in accordance with the terms of Section II hereof, other than an insubstantial
failure not occurring in bad faith and which is remedied by UST within 10
business days of receipt of notice from the Employee; or (iv) a permanent
transfer of the Employee to a work site more than twenty-five miles distant from
his work site on the effective date hereof.
-5-
<PAGE>
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 or
employment during the course of his employment hereunder. It is agreed that the
provisions of this Section will not be deemed to be violated by the holding of
directorships or related positions in charitable, educational or not-for-profit
organizations which do not involve continuous or substantial time commitments or
such other directorships as the Board of Directors of UST may approve, or by
passive personal real estate or other personal investment activities which the
Employee is able to monitor outside of his normal working hours.
V. 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 during that period. In the event said
illness or other disability shall continue for a period longer than six
consecutive months, UST's obligations under this Employment Agreement shall
terminate and his compensation thereafter shall be limited to the amounts
received from insurance payments provided by UST.
-6-
<PAGE>
VI. Non-competition:
In the event the Employee shall leave his employment without Good Reason
during the term hereof or shall be discharged during the term hereof for one or
more of the causes set forth in Section III, the Employee agrees that he will
not enter into the employment of any other financial institution or entity in
Eastern Massachusetts or the Bridgeport, Connecticut banking market (as defined
by the Federal Reserve Bank of Boston) having assets in excess of $1 billion for
a period equal to the balance of the term provided for herein or for a period of
six months, whichever is greater. The Employee further agrees that for a period
of two years following such termination of his employment 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 or any of
its subsidiaries or affiliates with regard to the provision of any type of
financial service provided by UST or any of its subsidiaries, or (ii) after
notice from 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 executive personnel of UST 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.
-7-
<PAGE>
VII. Confidential Information:
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 subsidiaries and 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 and its
subsidiaries and affiliates. Except as may be required by law, 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 subsidiaries or affiliates shall be entitled to obtain
injunctive relief, restraining the Employee from disclosing or using any
Confidential Information in violation of this Section VII or from any violation
of Section VI hereof, 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 subsidiaries or affiliates for a
breach by the Employee of Section VI hereof or this Section VII and the Employee
therefore hereby agrees that UST or any of its subsidiaries or affiliates may
seek such equitable remedies.
VIII.Change of Control:
In the event that during the term of this Employment Agreement there shall
have occurred a "Change of Control" (as defined in Section 8 of the Plan) in the
ownership of UST,
-8-
<PAGE>
the person(s), corporation(s) or other entity or entities so acquiring control
of UST shall assume UST's obligations under this Employment Agreement.
A. Elective Termination:
In addition, upon such a Change of Control, the Employee shall be entitled
to terminate this Employment Agreement by a written notice to UST or its
successor, and in such event (in addition to whatever entitlements the Employee
shall then have under this Employment Agreement for any benefits other than
salary, additional compensation or bonus not yet earned), the Employee shall be
entitled to receive a cash severance payment equal to 2.99 times the "base
amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986,
as amended, but excluding his W-2 earnings resulting from the exercise of stock
options, payable in one lump sum on the date of termination.
B. Involuntary Termination:
In addition, in the event that, subsequent to such a Change of Control, UST
or its successor terminates the Employee's employment (other than for the causes
specified in Section III hereof), UST or its successor otherwise breaches this
Employment Agreement, or the successor to UST does not expressly assume UST's
obligations under this Employment Agreement, then the Employee shall be entitled
to receive a severance payment as set forth in Section VIII. A. above (in
addition to whatever other entitlements the Employee shall then have under this
Employment Agreement for any benefits other than salary, additional compensation
or bonus not yet earned). For these purposes, any diminution in the rights,
benefits or entitlements of the Employee or positions or authorities occupied by
the Employee prior to the Change of Control shall be conclusively deemed to be a
breach of this Employment Agreement.
C. Elective or Involuntary Termination:
-9-
<PAGE>
Upon a "Change of Control," as defined in the Plan, the vesting of any
Restricted Stock or stock options to purchase UST Common Stock granted to the
Employee and not yet exercised, expired, surrendered or canceled shall be in
accordance with the Plan.
If, in connection with a Change of Control, any other employees who hold
stock options under the Plan or UST Restricted Common Stock will have their
options or Restricted Stock or both cashed out, whether under the Plan or
otherwise, the Employee shall have the right to have all or any of such options
or Restricted Stock or both cashed out on the same basis and at the same time
the options and Restricted Stock of such other employees are cashed out.
D. Reductions. Notwithstanding anything to the contrary contained in this
Employment Agreement, the payments and benefits to which the Employee would be
entitled pursuant to this Section VIII or otherwise as a result of a Change of
Control shall be reduced (i) by any severance pay or comparable payments to
which the Employee is entitled under applicable law as a result of the
termination of his/her employment and (ii) to the maximum amount for which UST
will not be limited in its deduction pursuant to Section 280G of the Internal
Revenue Code of 1986, as amended, or any successor provision or pursuant to any
other provision of applicable law. 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 UST of the need for such
reduction or, if the Employee fails to so specify timely, as determined by UST.
IX. Indemnification Undertakings:
UST shall, and UST shall use its best efforts to cause its subsidiaries and
affiliates to, indemnify the Employee to the maximum extent permitted by law and
regulation in connection with any liability, expense or damage which the
Employee incurs or to which the Employee is
-10-
<PAGE>
exposed as a result of the Employee's employment and positions with UST and its
subsidiaries and affiliates as contemplated by this Employment Agreement,
provided that the Employee shall not be indemnified with respect to any matter
as to which he shall 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 UST and its subsidiaries and affiliates. UST, on behalf of itself and its
subsidiaries and affiliates, hereby confirms that the occupancy of all offices
and positions which in the future are or were occupied or held by the Employee
have been so occupied or held at the request of and for the benefit of UST and
its subsidiaries and affiliates for purposes of the Employee's entitlement to
indemnification under applicable provisions of the respective articles of
organizations and/or by-laws or other similar documents of UST and its
subsidiaries and affiliates.
X. Notices:
All notices required under this Employment Agreement shall be sufficient if
made in writing, by certified or registered mail, return receipt requested, or
by hand delivery provided that any party may change such address by providing
notice thereof:
If to the Employee:
Neal F. Finnegan
87 Atlantic Avenue
Cohasset, Massachusetts 02025
with a copy to
Neal J. Curtin, Esq.
Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
If to UST Corp.:
-11-
<PAGE>
Attention: Linda Lerner, Senior Vice President
40 Court Street
Boston, Massachusetts 02108
with a copy to
Eric R. Fischer, Esq.
40 Court Street
Boston, Massachusetts 02108
XI. Withholding:
All payments made by UST under this Employment Agreement shall be reduced
by any tax or other amounts required to be withheld by UST under applicable law.
XII. Amendments and Waivers:
This Employment Agreement represents the exclusive statement of the entire
agreement between the parties concerning the subject matter hereof; provided,
however, that this Employment Agreement shall not terminate or supersede any
additional obligations of the Employee pursuant to any other agreement with
respect to the Confidential Information or the like or with respect to any
restrictions on the activities of the Employee or the like or with respect to
the securities of UST. This Employment Agreement may not be amended, modified or
revoked in whole or in part except by written agreement of the parties. No
waiver of any provision hereof shall be effective unless made in writing and
signed by the waiving party. The failure of either party to require the
performance of any term or obligation of this Employment Agreement, or the
waiver by either party of any breach of this Employment Agreement, shall not
prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach.
XIII. Governing Law:
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<PAGE>
This Employment Agreement shall be governed, construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts, without regard to
the conflict of laws principles thereof.
XIV. Severability:
In the event that any provision of Section VI or VII hereof shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its being extended over too great a time, too large a geographic area or too
great a range of activities, such provision shall be deemed to be modified to
permit its enforcement to the maximum extent permitted by law.
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.
-13-
<PAGE>
XV. Non-Assignment:
Neither the Employee nor UST may make any assignment of this Employment
Agreement or any interest herein, by operation of law or otherwise, without the
prior written consent of the other; provided, however, that UST may assign its
rights and obligations under this Employment Agreement without the consent of
the Employee to any person(s), corporation(s) or other entity or entities with
which UST shall hereafter affect a reorganization, consolidate with, or merge
into or to which UST shall hereafter transfer all or substantially all of its
properties or assets if in so doing UST assigns the entire Employment Agreement
and all rights and obligations of the Employee and UST thereunder.
XVI. Binding Nature:
This Employment Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, executors, administrators, legal
representatives, successors and permitted assigns.
XVII. No Conflicting Agreement:
The Employee hereby represents and warrants to UST 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. UST CORP.
By: /s/ Wallace M. Haselton
--------------------------------
Title: Chairman, Compensation Committee
--------------------------------
and Authorized Signer
--------------------------------
/s/ Neal F. Finnegan
--------------------
-14-
EXHIBIT 10(u)(i)
FIRST AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
This First Amended Executive Employment Agreement (hereafter referred to as
this "Agreement") is made by and between UST Corp., a Massachusetts corporation,
(the "Company") and Walter E. Huskins (the "Employee") as of the 1st day of
February, 1996 (the "Effective Date"), amending in part and restating that
certain Executive Employment Agreement between the parties dated as of the 24th
day of October, 1994 (the "Original Agreement").
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, which term shall automatically renew
thereafter for successive terms of one year each unless either party gives
notice to the other at least sixty (60) days prior to the expiration of the
initial or any renewal term that this Agreement shall not renew. Notwithstanding
the foregoing, in the event that this Agreement is in effect on the date of
consummation of a Change of Control, as defined in Section 6.g.ii below, 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 as he/she held on the Effective Date
hereof and/or such other executive position or positions with the Company, its
affiliates and subsidiaries to which the parties may hereafter from time to time
agree and the Employee 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 of Directors of the Company (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, the President or the Board's 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
1
<PAGE>
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.
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
2
<PAGE>
gross negligence in the performance of, his/her duties or responsibilities on
behalf of the Company and, if applicable, its affiliates and subsidiaries; (ii)
the Employee's fraud, embezzlement or other material dishonesty with respect to
the Company or any of its affiliates or 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.
d. By the Company other than for Cause. The Company may terminate the
Employee's employment other than for Cause upon notice to the Employee under
this subsection d or under subsection g below, whichever is applicable. 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:
i. shall 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. at the Employee's election, (A) shall continue to pay, for
the period of twelve (12) months following termination of the
Employee's employment or, if earlier, until the date the Employee is
covered under another employer's health plan that is comparable to
that of the Company (the "Post-Employment Health Coverage Period"),
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) shall 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 the Employee
and his/her eligible dependents may exercise any rights they have
under COBRA to continue participation in the group health plan at
their cost, effective as of the date the Employee's employment
terminates. Should the Employee elect option (A) above, the period of
any continued health coverage to which the Employee and his/her
eligible dependents may be entitled under Sections 601-607 of ERISA
and Section 4980B of the Internal Revenue Code (collectively referred
to as "COBRA") as a result of the Employee's termination of employment
will commence at the end of the above-defined Post-Employment Health
Coverage Period. Notwithstanding anything to the contrary contained
herein, the Employee may only elect option (A) directly above
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if the Employee elects to receive payment under subparagraph d.i.,
directly above, in the form of salary continuation.
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 his/her executive position; (ii) a change adverse to
the Employee in the Employee's primary reporting relationship; (iii) material
diminution in the nature or scope of the Employee's responsibilities, duties or
authority; (iv) 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
(v) 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. 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 (as defined in subsection g.ii below)
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 following the
effective date of the Employee Release, but retroactive to the date of
termination, and
(2) at the Employee's election, (A) shall continue to pay, for the
period of twenty-four months following termination of the Employee's
employment or, if earlier, until the date the Employee is covered under
another employer's health plan that is comparable to that of the Company
(the "Post-Employment Health Coverage Period"), that share of the premium
cost of Employee's participation and that of his/her eligible
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dependents in the Company's group health plan as it pays for active
employees of the Company and their eligible dependents generally OR (B)
shall 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 twenty-four (24) months, which lump sum shall be
payable within thirty (30) days following the effective date of the
Employee Release, and the Employee and his/her eligible dependents may
exercise their rights under COBRA to continue participation in the group
health plan at their cost effective as of the date his/her employment
terminates. Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her eligible
dependents may be entitled under COBRA as a result of the Employee's
termination of employment will commence at the end of the above-defined
Post-Employment Health Coverage Period. Notwithstanding anything to the
contrary contained herein, the Employee may only elect option (A) directly
above if the employee elects to receive payment under subparagraph g.i.(1)
in the form of salary continuation.
(3) Upon a Change of Control as defined in the Company's Stock
Compensation Plan as amended by the Company from time to time (the
"Plan"), the vesting of any UST Restricted Common Stock ("Restricted
Stock") or stock options to purchase UST Common Stock granted to the
Employee and not yet exercised, expired, surrendered or canceled shall be
in accordance with the Plan.
(4) If in connection with a Change of Control as defined in the Plan
any other employees who hold stock options under the Plan or Restricted
Stock will have their options or Restricted Stock or both cashed out,
whether under the Plan or otherwise, the Employee shall have the right to
have all or any of such options or Restricted Stock or both cashed out on
the same basis and at the same time the options and Restricted Stock of
such other employees are cashed out.
ii. Except as otherwise provided with respect to subparagraphs
g.i.(3) and g.i.(4) directly above, 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
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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. Notice by the Company pursuant to
Section 2 hereof that this Agreement shall not renew shall be treated as
termination by the Company other than for Cause pursuant to Section 6.d. Notice
by the Employee pursuant to Section 2 hereof that this Agreement shall not renew
shall be treated as a termination by the Employee of his/her 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; provided, however, that the obligations contained
in this Section 7 shall not apply to any Confidential Information that becomes
publicly known through no fault of the Employee or that the Employee is
otherwise required by law or regulation to disclose.
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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 (a)
for a period of two years following the termination of his/her employment
pursuant to Section 6.b or 6.c or 6.f hereof or (b) in the event of termination
pursuant to Section 6.d or 6.e or 6.g hereof, for a period equal to the months
of severance pay provided the Employee thereunder:
(i) 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 substantially its relationship with the Company or any
of its subsidiaries or affiliates and
(ii) the Employee shall not, directly or indirectly, hire or attempt to
hire any executive personnel of the Company or any of its subsidiaries or
affiliates or solicit or encourage any executive personnel of the Company or any
of its subsidiaries or affiliates to discontinue employment with the Company or
any of its subsidiaries or affiliates.
For purposes of this Section 8, the term "months of severance pay" shall mean
the quotient of the total sum of payments to be made to the Employee under the
applicable termination provision divided by the Employee's base salary at the
monthly rate in effect on the date of termination.
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.
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
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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. Indemnification. The Company shall, and the Company shall use its best
efforts to cause its subsidiaries and affiliates to, indemnify the Employee to
the maximum extent permitted by law and regulation in connection with any
liability, expense or damage which the Employee incurs or to which the Employee
is exposed as a result of the Employee's employment and positions with the
Company and its subsidiaries and affiliates as contemplated by this Agreement,
provided that the Employee shall not be indemnified with respect to any matter
as to which he/she shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his/her action was in the best
interest of the Company and its subsidiaries and affiliates. The Company, on
behalf of itself and its subsidiaries and affiliates, hereby confirms that the
occupancy of all offices and positions which in the future are or were occupied
or held by the Employee have been so occupied or held at the request of and for
the benefit of the Company and its subsidiaries and affiliates for purposes of
the Employee's entitlement to indemnification under applicable provisions of the
respective articles of organization and/or other similar documents of the
Company and its subsidiaries and affiliates.
14. 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; provided, however, that this Agreement shall not terminate or
supersede any additional obligations of the Employee pursuant to the Original
Agreement or any other agreement with respect to the Confidential Information or
the like or with respect to any restrictions on the activities of the Employee
or the like or with respect to the securities of the Company. The headings and
captions contained herein are for convenience of reference only and are not part
of this
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Agreement. This Agreement may not be modified or amended, 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.
15. 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.
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 By: /s/ Wallace M. Haselton
- --------------------- -----------------------
Walter E. Huskins Wallace M. Haselton
Executive Vice President, Chairman, Compensation Committee
Administration and authorized signer
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"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 asserted 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 abridgment 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
abridgment 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,
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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 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: _______________________________
11
EXHIBIT 10(u)(ii)
FIRST AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
This First Amended Executive Employment Agreement (hereafter referred to as
this "Agreement") is made by and between UST Corp., a Massachusetts corporation,
(the "Company") and James K. Hunt (the "Employee") as of the 1st day of
February, 1996 (the "Effective Date"), amending in part and restating that
certain Executive Employment Agreement between the parties dated as of the 27th
day of June, 1994 (the "Original Agreement").
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, which term shall automatically renew
thereafter for successive terms of one year each unless either party gives
notice to the other at least sixty (60) days prior to the expiration of the
initial or any renewal term that this Agreement shall not renew. Notwithstanding
the foregoing, in the event that this Agreement is in effect on the date of
consummation of a Change of Control, as defined in Section 6.g.ii below, 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 as he/she held on the Effective Date hereof and/or
such other executive position or positions with the Company, its affiliates and
subsidiaries to which the parties may hereafter from time to time agree and the
Employee 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 of Directors of the Company (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, the President or the Board's 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
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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.
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 and,
if applicable, its affiliates and subsidiaries; (ii) the Employee's fraud,
embezzlement or other material dishonesty with respect to the Company or any of
its affiliates or subsidiaries; (iii) the Employee's gross
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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.
d. By the Company other than for Cause. The Company may terminate
the Employee's employment other than for Cause upon notice to the Employee under
this subsection d or under subsection g below, whichever is applicable. 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:
i. shall 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. at the Employee's election, (A) shall continue to
pay, for the period of twelve (12) months following
termination of the Employee's employment or, if earlier, until
the date the Employee is covered under another employer's
health plan that is comparable to that of the Company (the
"Post-Employment Health Coverage Period"), 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) shall 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 the Employee and his/her eligible
dependents may exercise any rights they have under COBRA to
continue participation in the group health plan at their cost,
effective as of the date the Employee's employment terminates.
Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her
eligible dependents may be entitled under Sections 601-607 of
ERISA and Section 4980B of the Internal Revenue Code
(collectively referred to as "COBRA") as a result of the
Employee's termination of employment will commence at the end
of the above-defined Post-Employment Health Coverage Period.
Notwithstanding anything to the contrary contained herein, the
Employee may only elect option (A) directly above if the
Employee elects to receive payment under subparagraph d.i.,
directly above, in the form of salary continuation.
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
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Employee: (i) failure of the Company to continue the Employee in his/her
executive position; (ii) a change adverse to the Employee in the Employee's
primary reporting relationship; (iii) material diminution in the nature or scope
of the Employee's responsibilities, duties or authority; (iv) 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 (v) 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. 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 (as defined in subsection g.ii
below) 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 following
the effective date of the Employee Release, but retroactive to the date of
termination, and
(2) at the Employee's election, (A) shall continue to
pay, for the period of twenty-four months following termination of the
Employee's employment or, if earlier, until the date the Employee is
covered under another employer's health plan that is comparable to that of
the Company (the "Post-Employment Health Coverage Period"), 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)
shall 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 twenty-four (24) months, which lump sum shall be
payable within thirty (30) days following the effective date of the
Employee Release, and the Employee and his/her eligible dependents may
exercise their rights under COBRA to continue participation in the group
health plan at their cost effective as of the date his/her employment
terminates.
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Should the Employee elect option (A) above, the period of any continued
health coverage to which the Employee and his/her eligible dependents may
be entitled under COBRA as a result of the Employee's termination of
employment will commence at the end of the above-defined Post-Employment
Health Coverage Period. Notwithstanding anything to the contrary contained
herein, the Employee may only elect option (A) directly above if the
employee elects to receive payment under subparagraph g.i.(1) in the form
of salary continuation.
(3) Upon a Change of Control as defined in the
Company's Stock Compensation Plan as amended by the Company from time to
time (the "Plan"), the vesting of any UST Restricted Common Stock
("Restricted Stock") or stock options to purchase UST Common Stock granted
to the Employee and not yet exercised, expired, surrendered or canceled
shall be in accordance with the Plan.
(4) If in connection with a Change of Control as
defined in the Plan any other employees who hold stock options under the
Plan or Restricted Stock will have their options or Restricted Stock or
both cashed out, whether under the Plan or otherwise, the Employee shall
have the right to have all or any of such options or Restricted Stock or
both cashed out on the same basis and at the same time the options and
Restricted Stock of such other employees are cashed out.
ii. Except as otherwise provided with respect to
subparagraphs g.i.(3) and g.i.(4) directly above, 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
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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. Notice by the Company
pursuant to Section 2 hereof that this Agreement shall not renew shall be
treated as termination by the Company other than for Cause pursuant to Section
6.d. Notice by the Employee pursuant to Section 2 hereof that this Agreement
shall not renew shall be treated as a termination by the Employee of his/her
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; provided, however, that the obligations contained
in this Section 7 shall not apply to any Confidential Information that becomes
publicly known through no fault of the Employee or that the Employee is
otherwise required by law or regulation to disclose.
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.
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8. Non-Solicitation. While the Employee is employed by the Company and (a)
for a period of two years following the termination of his/her employment
pursuant to Section 6.b or 6.c or 6.f hereof or (b) in the event of termination
pursuant to Section 6.d or 6.e or 6.g hereof, for a period equal to the months
of severance pay provided the Employee thereunder:
(i) 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 substantially its relationship with the Company or any
of its subsidiaries or affiliates and
(ii) the Employee shall not, directly or indirectly, hire or
attempt to hire any executive personnel of the Company or any of its
subsidiaries or affiliates or solicit or encourage any executive personnel of
the Company or any of its subsidiaries or affiliates to discontinue employment
with the Company or any of its subsidiaries or affiliates.
For purposes of this Section 8, the term "months of severance pay" shall mean
the quotient of the total sum of payments to be made to the Employee under the
applicable termination provision divided by the Employee's base salary at the
monthly rate in effect on the date of termination.
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.
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
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the Employee and their respective successors, executors, administrators, heirs
and permitted assigns.
13. Indemnification. The Company shall, and the Company shall use its best
efforts to cause its subsidiaries and affiliates to, indemnify the Employee to
the maximum extent permitted by law and regulation in connection with any
liability, expense or damage which the Employee incurs or to which the Employee
is exposed as a result of the Employee's employment and positions with the
Company and its subsidiaries and affiliates as contemplated by this Agreement,
provided that the Employee shall not be indemnified with respect to any matter
as to which he/she shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his/her action was in the best
interest of the Company and its subsidiaries and affiliates. The Company, on
behalf of itself and its subsidiaries and affiliates, hereby confirms that the
occupancy of all offices and positions which in the future are or were occupied
or held by the Employee have been so occupied or held at the request of and for
the benefit of the Company and its subsidiaries and affiliates for purposes of
the Employee's entitlement to indemnification under applicable provisions of the
respective articles of organization and/or other similar documents of the
Company and its subsidiaries and affiliates.
14. 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; provided, however, that this Agreement shall not terminate or
supersede any additional obligations of the Employee pursuant to the Original
Agreement or any other agreement with respect to the Confidential Information or
the like or with respect to any restrictions on the activities of the Employee
or the like or with respect to the securities of the Company. The headings and
captions contained herein are for convenience of reference only and are not part
of this
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Agreement. This Agreement may not be modified or amended, 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.
15. 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.
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/ Wallace M. Haselton
- ----------------- -----------------------
James K. Hunt Wallace M. Haselton
Executive Vice President, Chairman, Compensation Committee
Chief Financial Officer and authorized signer
and Treasurer
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"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 asserted 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 abridgment 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
abridgment 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
Claims and that I am signing this Release of Claims voluntarily and with a full
understanding of its
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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: _______________________________
11
EXHIBIT 10(u)(iii)
FIRST AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
This First Amended Executive Employment Agreement (hereafter referred to as
this "Agreement") is made by and between UST Corp., a Massachusetts corporation,
(the "Company") and Eric R. Fischer (the "Employee") as of the 1st day of
February, 1996 (the "Effective Date"), amending in part and restating that
certain Executive Employment Agreement between the parties dated as of the 24th
day of October, 1994 (the "Original Agreement").
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, which term shall automatically renew
thereafter for successive terms of one year each unless either party gives
notice to the other at least sixty (60) days prior to the expiration of the
initial or any renewal term that this Agreement shall not renew. Notwithstanding
the foregoing, in the event that this Agreement is in effect on the date of
consummation of a Change of Control, as defined in Section 6.g.ii below, 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 as he/she held on the Effective Date hereof and/or
such other executive position or positions with the Company, its affiliates and
subsidiaries to which the parties may hereafter from time to time agree and the
Employee 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 of Directors of the Company (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, the President or the Board's 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
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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.
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
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gross negligence in the performance of, his/her duties or responsibilities on
behalf of the Company and, if applicable, its affiliates and subsidiaries; (ii)
the Employee's fraud, embezzlement or other material dishonesty with respect to
the Company or any of its affiliates or 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.
d. By the Company other than for Cause. The Company may terminate
the Employee's employment other than for Cause upon notice to the Employee under
this subsection d or under subsection g below, whichever is applicable. 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:
i. shall 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. at the Employee's election, (A) shall continue to
pay, for the period of twelve (12) months following
termination of the Employee's employment or, if earlier, until
the date the Employee is covered under another employer's
health plan that is comparable to that of the Company (the
"Post-Employment Health Coverage Period"), 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) shall 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 the Employee and his/her eligible
dependents may exercise any rights they have under COBRA to
continue participation in the group health plan at their cost,
effective as of the date the Employee's employment terminates.
Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her
eligible dependents may be entitled under Sections 601-607 of
ERISA and Section 4980B of the Internal Revenue Code
(collectively referred to as "COBRA") as a result of the
Employee's termination of employment will commence at the end
of the above-defined Post-Employment Health Coverage Period.
Notwithstanding anything to the contrary contained herein, the
Employee may only elect option (A) directly above
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if the Employee elects to receive payment under subparagraph
d.i., directly above, in the form of salary continuation.
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 his/her executive position; (ii) a change adverse to
the Employee in the Employee's primary reporting relationship; (iii) material
diminution in the nature or scope of the Employee's responsibilities, duties or
authority; (iv) 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
(v) 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. 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 (as defined in subsection g.ii
below) 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 following
the effective date of the Employee Release, but retroactive to the date of
termination, and
(2) at the Employee's election, (A) shall continue to
pay, for the period of twenty-four months following termination of the
Employee's employment or, if earlier, until the date the Employee is
covered under another employer's health plan that is comparable to that of
the Company (the "Post-Employment Health Coverage Period"), that share of
the premium cost of Employee's participation and that of his/her eligible
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dependents in the Company's group health plan as it pays for active
employees of the Company and their eligible dependents generally OR (B)
shall 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 twenty-four (24) months, which lump sum shall be
payable within thirty (30) days following the effective date of the
Employee Release, and the Employee and his/her eligible dependents may
exercise their rights under COBRA to continue participation in the group
health plan at their cost effective as of the date his/her employment
terminates. Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her eligible
dependents may be entitled under COBRA as a result of the Employee's
termination of employment will commence at the end of the above-defined
Post-Employment Health Coverage Period. Notwithstanding anything to the
contrary contained herein, the Employee may only elect option (A) directly
above if the employee elects to receive payment under subparagraph g.i.(1)
in the form of salary continuation.
(3) Upon a Change of Control as defined in the
Company's Stock Compensation Plan as amended by the Company from time to
time (the "Plan"), the vesting of any UST Restricted Common Stock
("Restricted Stock") or stock options to purchase UST Common Stock granted
to the Employee and not yet exercised, expired, surrendered or canceled
shall be in accordance with the Plan.
(4) If in connection with a Change of Control as
defined in the Plan any other employees who hold stock options under the
Plan or Restricted Stock will have their options or Restricted Stock or
both cashed out, whether under the Plan or otherwise, the Employee shall
have the right to have all or any of such options or Restricted Stock or
both cashed out on the same basis and at the same time the options and
Restricted Stock of such other employees are cashed out.
ii. Except as otherwise provided with respect to subparagraphs g.i.(3)
and g.i.(4) directly above, 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
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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. Notice by the Company
pursuant to Section 2 hereof that this Agreement shall not renew shall be
treated as termination by the Company other than for Cause pursuant to Section
6.d. Notice by the Employee pursuant to Section 2 hereof that this Agreement
shall not renew shall be treated as a termination by the Employee of his/her
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; provided, however, that the obligations contained
in this Section 7 shall not apply to any Confidential Information that becomes
publicly known through no fault of the Employee or that the Employee is
otherwise required by law or regulation to disclose.
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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 (a)
for a period of two years following the termination of his/her employment
pursuant to Section 6.b or 6.c or 6.f hereof or (b) in the event of termination
pursuant to Section 6.d or 6.e or 6.g hereof, for a period equal to the months
of severance pay provided the Employee thereunder:
(i) 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 substantially its relationship with the Company or any
of its subsidiaries or affiliates and
(ii) the Employee shall not, directly or indirectly, hire or
attempt to hire any executive personnel of the Company or any of its
subsidiaries or affiliates or solicit or encourage any executive personnel of
the Company or any of its subsidiaries or affiliates to discontinue employment
with the Company or any of its subsidiaries or affiliates.
For purposes of this Section 8, the term "months of severance pay" shall mean
the quotient of the total sum of payments to be made to the Employee under the
applicable termination provision divided by the Employee's base salary at the
monthly rate in effect on the date of termination.
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.
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
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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. Indemnification. The Company shall, and the Company shall use its best
efforts to cause its subsidiaries and affiliates to, indemnify the Employee to
the maximum extent permitted by law and regulation in connection with any
liability, expense or damage which the Employee incurs or to which the Employee
is exposed as a result of the Employee's employment and positions with the
Company and its subsidiaries and affiliates as contemplated by this Agreement,
provided that the Employee shall not be indemnified with respect to any matter
as to which he/she shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his/her action was in the best
interest of the Company and its subsidiaries and affiliates. The Company, on
behalf of itself and its subsidiaries and affiliates, hereby confirms that the
occupancy of all offices and positions which in the future are or were occupied
or held by the Employee have been so occupied or held at the request of and for
the benefit of the Company and its subsidiaries and affiliates for purposes of
the Employee's entitlement to indemnification under applicable provisions of the
respective articles of organization and/or other similar documents of the
Company and its subsidiaries and affiliates.
14. 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; provided, however, that this Agreement shall not terminate or
supersede any additional obligations of the Employee pursuant to the Original
Agreement or any other agreement with respect to the Confidential Information or
the like or with respect to any restrictions on the activities of the Employee
or the like or with respect to the securities of the Company. The headings and
captions contained herein are for convenience of reference only and are not part
of this
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Agreement. This Agreement may not be modified or amended, 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.
15. 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.
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/ Wallace M. Haselton
- ------------------- -----------------------
Eric R. Fischer Wallace M. Haselton
Executive Vice President, Chairman, Compensation Committee
General Counsel and Clerk and authorized signer
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"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 asserted 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 abridgment 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
abridgment 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,
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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 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: _______________________________
11
EXHIBIT 10(u)(iv)
FIRST AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
This First Amended Executive Employment Agreement (hereafter referred to as
this "Agreement") is made by and between UST Corp., a Massachusetts corporation,
(the "Company") and Linda J. Lerner (the "Employee") as of the 1st day of
February, 1996 (the "Effective Date"), amending in part and restating that
certain Executive Employment Agreement between the parties dated as of the 24th
day of October, 1994 (the "Original Agreement").
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, which term shall automatically renew
thereafter for successive terms of one year each unless either party gives
notice to the other at least sixty (60) days prior to the expiration of the
initial or any renewal term that this Agreement shall not renew. Notwithstanding
the foregoing, in the event that this Agreement is in effect on the date of
consummation of a Change of Control, as defined in Section 6.g.ii below, 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 as he/she held on the Effective Date hereof and/or
such other executive position or positions with the Company, its affiliates and
subsidiaries to which the parties may hereafter from time to time agree and the
Employee 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 of Directors of the Company (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, the President or the Board's 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
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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.
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
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gross negligence in the performance of, his/her duties or responsibilities on
behalf of the Company and, if applicable, its affiliates and subsidiaries; (ii)
the Employee's fraud, embezzlement or other material dishonesty with respect to
the Company or any of its affiliates or 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.
d. By the Company other than for Cause. The Company may terminate
the Employee's employment other than for Cause upon notice to the Employee under
this subsection d or under subsection g below, whichever is applicable. 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:
i. shall 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. at the Employee's election, (A) shall continue to
pay, for the period of twelve (12) months following
termination of the Employee's employment or, if earlier, until
the date the Employee is covered under another employer's
health plan that is comparable to that of the Company (the
"Post-Employment Health Coverage Period"), 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) shall 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 the Employee and his/her eligible
dependents may exercise any rights they have under COBRA to
continue participation in the group health plan at their cost,
effective as of the date the Employee's employment terminates.
Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her
eligible dependents may be entitled under Sections 601-607 of
ERISA and Section 4980B of the Internal Revenue Code
(collectively referred to as "COBRA") as a result of the
Employee's termination of employment will commence at the end
of the above-defined Post-Employment Health Coverage Period.
Notwithstanding anything to the contrary contained herein, the
Employee may only elect option (A) directly above
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if the Employee elects to receive payment under subparagraph
d.i., directly above, in the form of salary continuation.
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 his/her executive position; (ii) a change adverse to
the Employee in the Employee's primary reporting relationship; (iii) material
diminution in the nature or scope of the Employee's responsibilities, duties or
authority; (iv) 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
(v) 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. 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 (as defined in subsection g.ii
below) 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 following
the effective date of the Employee Release, but retroactive to the date of
termination, and
(2) at the Employee's election, (A) shall continue to
pay, for the period of twenty-four months following termination of the
Employee's employment or, if earlier, until the date the Employee is
covered under another employer's health plan that is comparable to that of
the Company (the "Post-Employment Health Coverage Period"), that share of
the premium cost of Employee's participation and that of his/her eligible
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dependents in the Company's group health plan as it pays for active
employees of the Company and their eligible dependents generally OR (B)
shall 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 twenty-four (24) months, which lump sum shall be
payable within thirty (30) days following the effective date of the
Employee Release, and the Employee and his/her eligible dependents may
exercise their rights under COBRA to continue participation in the group
health plan at their cost effective as of the date his/her employment
terminates. Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her eligible
dependents may be entitled under COBRA as a result of the Employee's
termination of employment will commence at the end of the above-defined
Post-Employment Health Coverage Period. Notwithstanding anything to the
contrary contained herein, the Employee may only elect option (A) directly
above if the employee elects to receive payment under subparagraph g.i.(1)
in the form of salary continuation.
(3) Upon a Change of Control as defined in the
Company's Stock Compensation Plan as amended by the Company from time to
time (the "Plan"), the vesting of any UST Restricted Common Stock
("Restricted Stock") or stock options to purchase UST Common Stock granted
to the Employee and not yet exercised, expired, surrendered or canceled
shall be in accordance with the Plan.
(4) If in connection with a Change of Control as
defined in the Plan any other employees who hold stock options under the
Plan or Restricted Stock will have their options or Restricted Stock or
both cashed out, whether under the Plan or otherwise, the Employee shall
have the right to have all or any of such options or Restricted Stock or
both cashed out on the same basis and at the same time the options and
Restricted Stock of such other employees are cashed out.
ii. Except as otherwise provided with respect to
subparagraphs g.i.(3) and g.i.(4) directly above, 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
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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. Notice by the Company
pursuant to Section 2 hereof that this Agreement shall not renew shall be
treated as termination by the Company other than for Cause pursuant to Section
6.d. Notice by the Employee pursuant to Section 2 hereof that this Agreement
shall not renew shall be treated as a termination by the Employee of his/her
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; provided, however, that the obligations contained
in this Section 7 shall not apply to any Confidential Information that becomes
publicly known through no fault of the Employee or that the Employee is
otherwise required by law or regulation to disclose.
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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 (a)
for a period of two years following the termination of his/her employment
pursuant to Section 6.b or 6.c or 6.f hereof or (b) in the event of termination
pursuant to Section 6.d or 6.e or 6.g hereof, for a period equal to the months
of severance pay provided the Employee thereunder:
(i) 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 substantially its relationship with the Company or any
of its subsidiaries or affiliates and
(ii) the Employee shall not, directly or indirectly, hire or
attempt to hire any executive personnel of the Company or any of its
subsidiaries or affiliates or solicit or encourage any executive personnel of
the Company or any of its subsidiaries or affiliates to discontinue employment
with the Company or any of its subsidiaries or affiliates.
For purposes of this Section 8, the term "months of severance pay" shall mean
the quotient of the total sum of payments to be made to the Employee under the
applicable termination provision divided by the Employee's base salary at the
monthly rate in effect on the date of termination.
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.
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
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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. Indemnification. The Company shall, and the Company shall use its best
efforts to cause its subsidiaries and affiliates to, indemnify the Employee to
the maximum extent permitted by law and regulation in connection with any
liability, expense or damage which the Employee incurs or to which the Employee
is exposed as a result of the Employee's employment and positions with the
Company and its subsidiaries and affiliates as contemplated by this Agreement,
provided that the Employee shall not be indemnified with respect to any matter
as to which he/she shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his/her action was in the best
interest of the Company and its subsidiaries and affiliates. The Company, on
behalf of itself and its subsidiaries and affiliates, hereby confirms that the
occupancy of all offices and positions which in the future are or were occupied
or held by the Employee have been so occupied or held at the request of and for
the benefit of the Company and its subsidiaries and affiliates for purposes of
the Employee's entitlement to indemnification under applicable provisions of the
respective articles of organization and/or other similar documents of the
Company and its subsidiaries and affiliates.
14. 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; provided, however, that this Agreement shall not terminate or
supersede any additional obligations of the Employee pursuant to the Original
Agreement or any other agreement with respect to the Confidential Information or
the like or with respect to any restrictions on the activities of the Employee
or the like or with respect to the securities of the Company. The headings and
captions contained herein are for convenience of reference only and are not part
of this
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Agreement. This Agreement may not be modified or amended, 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.
15. 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.
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/ Wallace M. Haselton
- ------------------- -----------------------
Linda J. Lerner Wallace M. Haselton
Senior Vice President, Chairman, Compensation Committee
Human Resources and authorized signer
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"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 asserted 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 abridgment 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
abridgment 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,
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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 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: _______________________________
11
EXHIBIT 10(u)(v)
FIRST AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
This First Amended Executive Employment Agreement (hereafter referred to as
this "Agreement") is made by and between UST Corp., a Massachusetts corporation,
(the "Company") and Kenneth L. Sullivan (the "Employee") as of the 1st day of
February, 1996 (the "Effective Date"), amending in part and restating that
certain Executive Employment Agreement between the parties dated as of the 24th
day of October, 1994 (the "Original Agreement").
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, which term shall automatically renew
thereafter for successive terms of one year each unless either party gives
notice to the other at least sixty (60) days prior to the expiration of the
initial or any renewal term that this Agreement shall not renew. Notwithstanding
the foregoing, in the event that this Agreement is in effect on the date of
consummation of a Change of Control, as defined in Section 6.g.ii below, 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 as he/she held on the Effective Date hereof and/or
such other executive position or positions with the Company, its affiliates and
subsidiaries to which the parties may hereafter from time to time agree and the
Employee 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 of Directors of the Company (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, the President or the Board's 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
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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.
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
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gross negligence in the performance of, his/her duties or responsibilities on
behalf of the Company and, if applicable, its affiliates and subsidiaries; (ii)
the Employee's fraud, embezzlement or other material dishonesty with respect to
the Company or any of its affiliates or 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.
d. By the Company other than for Cause. The Company may terminate
the Employee's employment other than for Cause upon notice to the Employee under
this subsection d or under subsection g below, whichever is applicable. 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:
i. shall 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. at the Employee's election, (A) shall continue to
pay, for the period of twelve (12) months following
termination of the Employee's employment or, if earlier, until
the date the Employee is covered under another employer's
health plan that is comparable to that of the Company (the
"Post-Employment Health Coverage Period"), 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) shall 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 the Employee and his/her eligible
dependents may exercise any rights they have under COBRA to
continue participation in the group health plan at their cost,
effective as of the date the Employee's employment terminates.
Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her
eligible dependents may be entitled under Sections 601-607 of
ERISA and Section 4980B of the Internal Revenue Code
(collectively referred to as "COBRA") as a result of the
Employee's termination of employment will commence at the end
of the above-defined Post-Employment Health Coverage Period.
Notwithstanding anything to the contrary contained herein, the
Employee may only elect option (A) directly above
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if the Employee elects to receive payment under subparagraph
d.i., directly above, in the form of salary continuation.
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 his/her executive position; (ii) a change adverse to
the Employee in the Employee's primary reporting relationship; (iii) material
diminution in the nature or scope of the Employee's responsibilities, duties or
authority; (iv) 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
(v) 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. 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 (as defined in subsection g.ii
below) 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 following
the effective date of the Employee Release, but retroactive to the date of
termination, and
(2) at the Employee's election, (A) shall continue to
pay, for the period of twenty-four months following termination of the
Employee's employment or, if earlier, until the date the Employee is
covered under another employer's health plan that is comparable to that of
the Company (the "Post-Employment Health Coverage Period"), that share of
the premium cost of Employee's participation and that of his/her eligible
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dependents in the Company's group health plan as it pays for active
employees of the Company and their eligible dependents generally OR (B)
shall 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 twenty-four (24) months, which lump sum shall be
payable within thirty (30) days following the effective date of the
Employee Release, and the Employee and his/her eligible dependents may
exercise their rights under COBRA to continue participation in the group
health plan at their cost effective as of the date his/her employment
terminates. Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her eligible
dependents may be entitled under COBRA as a result of the Employee's
termination of employment will commence at the end of the above-defined
Post-Employment Health Coverage Period. Notwithstanding anything to the
contrary contained herein, the Employee may only elect option (A) directly
above if the employee elects to receive payment under subparagraph g.i.(1)
in the form of salary continuation.
(3) Upon a Change of Control as defined in the
Company's Stock Compensation Plan as amended by the Company from time to
time (the "Plan"), the vesting of any UST Restricted Common Stock
("Restricted Stock") or stock options to purchase UST Common Stock granted
to the Employee and not yet exercised, expired, surrendered or canceled
shall be in accordance with the Plan.
(4) If in connection with a Change of Control as
defined in the Plan any other employees who hold stock options under the
Plan or Restricted Stock will have their options or Restricted Stock or
both cashed out, whether under the Plan or otherwise, the Employee shall
have the right to have all or any of such options or Restricted Stock or
both cashed out on the same basis and at the same time the options and
Restricted Stock of such other employees are cashed out.
ii. Except as otherwise provided with respect to subparagraphs
g.i.(3) and g.i.(4) directly above, 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
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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. Notice by the Company
pursuant to Section 2 hereof that this Agreement shall not renew shall be
treated as termination by the Company other than for Cause pursuant to Section
6.d. Notice by the Employee pursuant to Section 2 hereof that this Agreement
shall not renew shall be treated as a termination by the Employee of his/her
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; provided, however, that the obligations contained
in this Section 7 shall not apply to any Confidential Information that becomes
publicly known through no fault of the Employee or that the Employee is
otherwise required by law or regulation to disclose.
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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 (a)
for a period of two years following the termination of his/her employment
pursuant to Section 6.b or 6.c or 6.f hereof or (b) in the event of termination
pursuant to Section 6.d or 6.e or 6.g hereof, for a period equal to the months
of severance pay provided the Employee thereunder:
(i) 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 substantially its relationship with the Company or any
of its subsidiaries or affiliates and
(ii) the Employee shall not, directly or indirectly, hire or
attempt to hire any executive personnel of the Company or any of its
subsidiaries or affiliates or solicit or encourage any executive personnel of
the Company or any of its subsidiaries or affiliates to discontinue employment
with the Company or any of its subsidiaries or affiliates.
For purposes of this Section 8, the term "months of severance pay" shall mean
the quotient of the total sum of payments to be made to the Employee under the
applicable termination provision divided by the Employee's base salary at the
monthly rate in effect on the date of termination.
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.
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
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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. Indemnification. The Company shall, and the Company shall use its best
efforts to cause its subsidiaries and affiliates to, indemnify the Employee to
the maximum extent permitted by law and regulation in connection with any
liability, expense or damage which the Employee incurs or to which the Employee
is exposed as a result of the Employee's employment and positions with the
Company and its subsidiaries and affiliates as contemplated by this Agreement,
provided that the Employee shall not be indemnified with respect to any matter
as to which he/she shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his/her action was in the best
interest of the Company and its subsidiaries and affiliates. The Company, on
behalf of itself and its subsidiaries and affiliates, hereby confirms that the
occupancy of all offices and positions which in the future are or were occupied
or held by the Employee have been so occupied or held at the request of and for
the benefit of the Company and its subsidiaries and affiliates for purposes of
the Employee's entitlement to indemnification under applicable provisions of the
respective articles of organization and/or other similar documents of the
Company and its subsidiaries and affiliates.
14. 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; provided, however, that this Agreement shall not terminate or
supersede any additional obligations of the Employee pursuant to the Original
Agreement or any other agreement with respect to the Confidential Information or
the like or with respect to any restrictions on the activities of the Employee
or the like or with respect to the securities of the Company. The headings and
captions contained herein are for convenience of reference only and are not part
of this
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Agreement. This Agreement may not be modified or amended, 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.
15. 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.
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/ Wallace M. Haselton
- ----------------------- -----------------------
Kenneth L. Sullivan Wallace M. Haselton
Senior Vice President, Chairman, Compensation Committee
Operations and authorized signer
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"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 asserted 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 abridgment 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
abridgment 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,
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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 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: _______________________________
11
EXHIBIT 10(u)(vi)
FIRST AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
This First Amended Executive Employment Agreement (hereafter referred to as
this "Agreement") is made by and between UST Corp., a Massachusetts corporation,
(the "Company") and Katharine C. Armstrong (the "Employee") as of the 1st day of
February, 1996 (the "Effective Date"), amending in part and restating that
certain Executive Employment Agreement between the parties dated as of the 24th
day of October, 1994 (the "Original Agreement").
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, which term shall automatically renew
thereafter for successive terms of one year each unless either party gives
notice to the other at least sixty (60) days prior to the expiration of the
initial or any renewal term that this Agreement shall not renew. Notwithstanding
the foregoing, in the event that this Agreement is in effect on the date of
consummation of a Change of Control, as defined in Section 6.g.ii below, 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 as he/she held on the Effective Date hereof and/or
such other executive position or positions with the Company, its affiliates and
subsidiaries to which the parties may hereafter from time to time agree and the
Employee 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 of Directors of the Company (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, the President or the Board's 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
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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.
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
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gross negligence in the performance of, his/her duties or responsibilities on
behalf of the Company and, if applicable, its affiliates and subsidiaries; (ii)
the Employee's fraud, embezzlement or other material dishonesty with respect to
the Company or any of its affiliates or 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.
d. By the Company other than for Cause. The Company may terminate
the Employee's employment other than for Cause upon notice to the Employee under
this subsection d or under subsection g below, whichever is applicable. 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:
i. shall 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. at the Employee's election, (A) shall continue to
pay, for the period of twelve (12) months following
termination of the Employee's employment or, if earlier, until
the date the Employee is covered under another employer's
health plan that is comparable to that of the Company (the
"Post-Employment Health Coverage Period"), 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) shall 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 the Employee and his/her eligible
dependents may exercise any rights they have under COBRA to
continue participation in the group health plan at their cost,
effective as of the date the Employee's employment terminates.
Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her
eligible dependents may be entitled under Sections 601-607 of
ERISA and Section 4980B of the Internal Revenue Code
(collectively referred to as "COBRA") as a result of the
Employee's termination of employment will commence at the end
of the above-defined Post-Employment Health Coverage Period.
Notwithstanding anything to the contrary contained herein, the
Employee may only elect option (A) directly above
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if the Employee elects to receive payment under subparagraph
d.i., directly above, in the form of salary continuation.
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 his/her executive position; (ii) a change adverse to
the Employee in the Employee's primary reporting relationship; (iii) material
diminution in the nature or scope of the Employee's responsibilities, duties or
authority; (iv) 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
(v) 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. 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 (as defined in subsection g.ii
below) 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 following
the effective date of the Employee Release, but retroactive to the date of
termination, and
(2) at the Employee's election, (A) shall continue to
pay, for the period of twenty-four months following termination of the
Employee's employment or, if earlier, until the date the Employee is
covered under another employer's health plan that is comparable to that of
the Company (the "Post-Employment Health Coverage Period"), that share of
the premium cost of Employee's participation and that of his/her eligible
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dependents in the Company's group health plan as it pays for active
employees of the Company and their eligible dependents generally OR (B)
shall 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 twenty-four (24) months, which lump sum shall be
payable within thirty (30) days following the effective date of the
Employee Release, and the Employee and his/her eligible dependents may
exercise their rights under COBRA to continue participation in the group
health plan at their cost effective as of the date his/her employment
terminates. Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her eligible
dependents may be entitled under COBRA as a result of the Employee's
termination of employment will commence at the end of the above-defined
Post-Employment Health Coverage Period. Notwithstanding anything to the
contrary contained herein, the Employee may only elect option (A) directly
above if the employee elects to receive payment under subparagraph g.i.(1)
in the form of salary continuation.
(3) Upon a Change of Control as defined in the
Company's Stock Compensation Plan as amended by the Company from time to
time (the "Plan"), the vesting of any UST Restricted Common Stock
("Restricted Stock") or stock options to purchase UST Common Stock granted
to the Employee and not yet exercised, expired, surrendered or canceled
shall be in accordance with the Plan.
(4) If in connection with a Change of Control as
defined in the Plan any other employees who hold stock options under the
Plan or Restricted Stock will have their options or Restricted Stock or
both cashed out, whether under the Plan or otherwise, the Employee shall
have the right to have all or any of such options or Restricted Stock or
both cashed out on the same basis and at the same time the options and
Restricted Stock of such other employees are cashed out.
ii. Except as otherwise provided with respect to subparagraphs
g.i.(3) and g.i.(4) directly above, 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
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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. Notice by the Company
pursuant to Section 2 hereof that this Agreement shall not renew shall be
treated as termination by the Company other than for Cause pursuant to Section
6.d. Notice by the Employee pursuant to Section 2 hereof that this Agreement
shall not renew shall be treated as a termination by the Employee of his/her
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; provided, however, that the obligations contained
in this Section 7 shall not apply to any Confidential Information that becomes
publicly known through no fault of the Employee or that the Employee is
otherwise required by law or regulation to disclose.
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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 (a)
for a period of two years following the termination of his/her employment
pursuant to Section 6.b or 6.c or 6.f hereof or (b) in the event of termination
pursuant to Section 6.d or 6.e or 6.g hereof, for a period equal to the months
of severance pay provided the Employee thereunder:
(i) 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 substantially its relationship with the Company or any
of its subsidiaries or affiliates and
(ii) the Employee shall not, directly or indirectly, hire or
attempt to hire any executive personnel of the Company or any of its
subsidiaries or affiliates or solicit or encourage any executive personnel of
the Company or any of its subsidiaries or affiliates to discontinue employment
with the Company or any of its subsidiaries or affiliates.
For purposes of this Section 8, the term "months of severance pay" shall mean
the quotient of the total sum of payments to be made to the Employee under the
applicable termination provision divided by the Employee's base salary at the
monthly rate in effect on the date of termination.
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.
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
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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. Indemnification. The Company shall, and the Company shall use its best
efforts to cause its subsidiaries and affiliates to, indemnify the Employee to
the maximum extent permitted by law and regulation in connection with any
liability, expense or damage which the Employee incurs or to which the Employee
is exposed as a result of the Employee's employment and positions with the
Company and its subsidiaries and affiliates as contemplated by this Agreement,
provided that the Employee shall not be indemnified with respect to any matter
as to which he/she shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his/her action was in the best
interest of the Company and its subsidiaries and affiliates. The Company, on
behalf of itself and its subsidiaries and affiliates, hereby confirms that the
occupancy of all offices and positions which in the future are or were occupied
or held by the Employee have been so occupied or held at the request of and for
the benefit of the Company and its subsidiaries and affiliates for purposes of
the Employee's entitlement to indemnification under applicable provisions of the
respective articles of organization and/or other similar documents of the
Company and its subsidiaries and affiliates.
14. 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; provided, however, that this Agreement shall not terminate or
supersede any additional obligations of the Employee pursuant to the Original
Agreement or any other agreement with respect to the Confidential Information or
the like or with respect to any restrictions on the activities of the Employee
or the like or with respect to the securities of the Company. The headings and
captions contained herein are for convenience of reference only and are not part
of this
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Agreement. This Agreement may not be modified or amended, 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.
15. 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.
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/ Wallace M. Haselton
- ----------------------- -----------------------
Katharine C. Armstrong Wallace M. Haselton
Executive Vice President, Chairman, Compensation Committee
Commercial Lending and authorized signer
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"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 asserted 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 abridgment 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
abridgment 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,
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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 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: _______________________________
11
EXHIBIT 10(u)(vii)
FIRST AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
This First Amended Executive Employment Agreement (hereafter referred to as
this "Agreement") is made by and between UST Corp., a Massachusetts corporation,
(the "Company") and Suzanne Moot (the "Employee") as of the 1st day of February,
1996 (the "Effective Date"), amending in part and restating that certain
Executive Employment Agreement between the parties dated as of the 24th day of
October, 1994 (the "Original Agreement").
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, which term shall automatically renew thereafter for
successive terms of one year each unless either party gives notice to the other
at least sixty (60) days prior to the expiration of the initial or any renewal
term that this Agreement shall not renew. Notwithstanding the foregoing, in the
event that this Agreement is in effect on the date of consummation of a Change
of Control, as defined in Section 6.g.ii below, 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 as he/she held on the Effective Date hereof and/or
such other executive position or positions with the Company, its affiliates and
subsidiaries to which the parties may hereafter from time to time agree and the
Employee 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 of Directors of the Company (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, the President or the Board's 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
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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.
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
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gross negligence in the performance of, his/her duties or responsibilities on
behalf of the Company and, if applicable, its affiliates and subsidiaries; (ii)
the Employee's fraud, embezzlement or other material dishonesty with respect to
the Company or any of its affiliates or 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.
d. By the Company other than for Cause. The Company may terminate
the Employee's employment other than for Cause upon notice to the Employee under
this subsection d or under subsection g below, whichever is applicable. 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:
i. shall 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. at the Employee's election, (A) shall continue to
pay, for the period of twelve (12) months following
termination of the Employee's employment or, if earlier, until
the date the Employee is covered under another employer's
health plan that is comparable to that of the Company (the
"Post-Employment Health Coverage Period"), 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) shall 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 the Employee and his/her eligible
dependents may exercise any rights they have under COBRA to
continue participation in the group health plan at their cost,
effective as of the date the Employee's employment terminates.
Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her
eligible dependents may be entitled under Sections 601-607 of
ERISA and Section 4980B of the Internal Revenue Code
(collectively referred to as "COBRA") as a result of the
Employee's termination of employment will commence at the end
of the above-defined Post-Employment Health Coverage Period.
Notwithstanding anything to the contrary contained herein, the
Employee may only elect option (A) directly above
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if the Employee elects to receive payment under subparagraph
d.i., directly above, in the form of salary continuation.
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 his/her executive position; (ii) a change adverse to
the Employee in the Employee's primary reporting relationship; (iii) material
diminution in the nature or scope of the Employee's responsibilities, duties or
authority; (iv) 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
(v) 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. 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 (as defined in subsection g.ii
below) 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 following the effective date of the Employee Release, but
retroactive to the date of termination, and
(2) at the Employee's election, (A) shall
continue to pay, for the period of twenty-four months following termination
of the Employee's employment or, if earlier, until the date the Employee is
covered under another employer's health plan that is comparable to that of
the Company (the "Post-Employment Health Coverage Period"), that share of
the premium cost of Employee's participation and that of his/her eligible
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dependents in the Company's group health plan as it pays for active
employees of the Company and their eligible dependents generally OR (B)
shall 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 twenty-four (24) months, which lump sum shall be
payable within thirty (30) days following the effective date of the
Employee Release, and the Employee and his/her eligible dependents may
exercise their rights under COBRA to continue participation in the group
health plan at their cost effective as of the date his/her employment
terminates. Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her eligible
dependents may be entitled under COBRA as a result of the Employee's
termination of employment will commence at the end of the above-defined
Post-Employment Health Coverage Period. Notwithstanding anything to the
contrary contained herein, the Employee may only elect option (A) directly
above if the employee elects to receive payment under subparagraph g.i.(1)
in the form of salary continuation.
(3) Upon a Change of Control as defined in
the Company's Stock Compensation Plan as amended by the Company from time
to time (the "Plan"), the vesting of any UST Restricted Common Stock
("Restricted Stock") or stock options to purchase UST Common Stock granted
to the Employee and not yet exercised, expired, surrendered or canceled
shall be in accordance with the Plan.
(4) If in connection with a Change of
Control as defined in the Plan any other employees who hold stock options
under the Plan or Restricted Stock will have their options or Restricted
Stock or both cashed out, whether under the Plan or otherwise, the Employee
shall have the right to have all or any of such options or Restricted Stock
or both cashed out on the same basis and at the same time the options and
Restricted Stock of such other employees are cashed out.
ii. Except as otherwise provided with respect to
subparagraphs g.i.(3) and g.i.(4) directly above, 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
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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. Notice by the Company
pursuant to Section 2 hereof that this Agreement shall not renew shall be
treated as termination by the Company other than for Cause pursuant to Section
6.d. Notice by the Employee pursuant to Section 2 hereof that this Agreement
shall not renew shall be treated as a termination by the Employee of his/her
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; provided, however, that the obligations contained
in this Section 7 shall not apply to any Confidential Information that becomes
publicly known through no fault of the Employee or that the Employee is
otherwise required by law or regulation to disclose.
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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 (a) for a
period of two years following the termination of his/her employment pursuant to
Section 6.b or 6.c or 6.f hereof or (b) in the event of termination pursuant to
Section 6.d or 6.e or 6.g hereof, for a period equal to the months of severance
pay provided the Employee thereunder:
(i) 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 substantially its relationship with the Company or any
of its subsidiaries or affiliates and
(ii) the Employee shall not, directly or indirectly, hire or
attempt to hire any executive personnel of the Company or any of its
subsidiaries or affiliates or solicit or encourage any executive personnel of
the Company or any of its subsidiaries or affiliates to discontinue employment
with the Company or any of its subsidiaries or affiliates.
For purposes of this Section 8, the term "months of severance pay" shall mean
the quotient of the total sum of payments to be made to the Employee under the
applicable termination provision divided by the Employee's base salary at the
monthly rate in effect on the date of termination.
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.
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
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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. Indemnification. The Company shall, and the Company shall use its best
efforts to cause its subsidiaries and affiliates to, indemnify the Employee to
the maximum extent permitted by law and regulation in connection with any
liability, expense or damage which the Employee incurs or to which the Employee
is exposed as a result of the Employee's employment and positions with the
Company and its subsidiaries and affiliates as contemplated by this Agreement,
provided that the Employee shall not be indemnified with respect to any matter
as to which he/she shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his/her action was in the best
interest of the Company and its subsidiaries and affiliates. The Company, on
behalf of itself and its subsidiaries and affiliates, hereby confirms that the
occupancy of all offices and positions which in the future are or were occupied
or held by the Employee have been so occupied or held at the request of and for
the benefit of the Company and its subsidiaries and affiliates for purposes of
the Employee's entitlement to indemnification under applicable provisions of the
respective articles of organization and/or other similar documents of the
Company and its subsidiaries and affiliates.
14. 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; provided, however, that this Agreement shall not terminate or
supersede any additional obligations of the Employee pursuant to the Original
Agreement or any other agreement with respect to the Confidential Information or
the like or with respect to any restrictions on the activities of the Employee
or the like or with respect to the securities of the Company. The headings and
captions contained herein are for convenience of reference only and are not part
of this
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Agreement. This Agreement may not be modified or amended, 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.
15. 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.
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/ Suzanne Moot By: /s/ Wallace M. Haselton
- ---------------- -----------------------
Suzanne Moot Wallace M. Haselton
Executive Vice President, Chairman, Compensation Committee
Marketing and Retail and authorized signer
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"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 asserted 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 abridgment 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
abridgment 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,
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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 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: _______________________________
EXHIBIT 10(u)(viii)
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (hereafter referred to as this
"Agreement") is made by and between UST Corp., a Massachusetts corporation, (the
"Company") and Robert T. McAlear (the "Employee") as of the 1st day of February,
1996 (the "Effective Date"). This Agreement supersedes the Executive Employment
Agreement between the Employee and USTrust dated as of the 11th day of July,
1990 (the "Original Agreement") which both parties mutually agree (except with
respect to the Employee's obligations related to the Original Agreement pursuant
to Section 14 hereof) to terminate as of January 31, 1996.
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, which term shall automatically renew thereafter for
successive terms of one year each unless either party gives notice to the other
at least sixty (60) days prior to the expiration of the initial or any renewal
term that this Agreement shall not renew. Notwithstanding the foregoing, in the
event that this Agreement is in effect on the date of consummation of a Change
of Control, as defined in Section 6.g.ii below, 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 as he/she held on the Effective Date hereof and/or
such other executive position or positions with the Company, its affiliates and
subsidiaries to which the parties may hereafter from time to time agree and the
Employee 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 of Directors of the Company (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, the President or the Board's 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
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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.
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 and,
if applicable, its affiliates and subsidiaries; (ii) the Employee's fraud,
embezzlement or other material dishonesty
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with respect to the Company or any of its affiliates or 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.
d. By the Company other than for Cause. The Company may terminate
the Employee's employment other than for Cause upon notice to the Employee under
this subsection d or under subsection g below, whichever is applicable. 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:
i. shall 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. at the Employee's election, (A) shall continue to
pay, for the period of twelve (12) months following
termination of the Employee's employment or, if earlier, until
the date the Employee is covered under another employer's
health plan that is comparable to that of the Company (the
"Post-Employment Health Coverage Period"), 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) shall 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 the Employee and his/her eligible
dependents may exercise any rights they have under COBRA to
continue participation in the group health plan at their cost,
effective as of the date the Employee's employment terminates.
Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her
eligible dependents may be entitled under Sections 601-607 of
ERISA and Section 4980B of the Internal Revenue Code
(collectively referred to as "COBRA") as a result of the
Employee's termination of employment will commence at the end
of the above-defined Post-Employment Health Coverage Period.
Notwithstanding anything to the contrary contained herein, the
Employee may only elect option (A) directly above if the
Employee elects to receive payment under subparagraph d.i.,
directly above, in the form of salary continuation.
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
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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 his/her executive position; (ii) a change adverse to the Employee in the
Employee's primary reporting relationship; (iii) material diminution in the
nature or scope of the Employee's responsibilities, duties or authority; (iv)
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 (v) 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. 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 (as defined in subsection g.ii
below) 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 following
the effective date of the Employee Release, but retroactive to the date of
termination, and
(2) at the Employee's election, (A) shall
continue to pay, for the period of twenty-four months following termination
of the Employee's employment or, if earlier, until the date the Employee is
covered under another employer's health plan that is comparable to that of
the Company (the "Post-Employment Health Coverage Period"), 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)
shall 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 twenty-four (24) months, which lump sum shall be
payable within thirty (30) days following the effective date of the
Employee Release, and the Employee and his/her eligible dependents may
exercise their rights under COBRA to continue participation in
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the group health plan at their cost effective as of the date his/her
employment terminates. Should the Employee elect option (A) above, the
period of any continued health coverage to which the Employee and his/her
eligible dependents may be entitled under COBRA as a result of the
Employee's termination of employment will commence at the end of the
above-defined Post-Employment Health Coverage Period. Notwithstanding
anything to the contrary contained herein, the Employee may only elect
option (A) directly above if the employee elects to receive payment under
subparagraph g.i.(1) in the form of salary continuation.
(3) Upon a Change of Control as defined in the
Company's Stock Compensation Plan as amended by the Company from time to
time (the "Plan"), the vesting of any UST Restricted Common Stock
("Restricted Stock") or stock options to purchase UST Common Stock granted
to the Employee and not yet exercised, expired, surrendered or canceled
shall be in accordance with the Plan.
(4) If in connection with a Change of Control as
defined in the Plan any other employees who hold stock options under the
Plan or Restricted Stock will have their options or Restricted Stock or
both cashed out, whether under the Plan or otherwise, the Employee shall
have the right to have all or any of such options or Restricted Stock or
both cashed out on the same basis and at the same time the options and
Restricted Stock of such other employees are cashed out.
ii. Except as otherwise provided with respect to
subparagraphs g.i.(3) and g.i.(4) directly above, 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
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(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. Notice by the
Company pursuant to Section 2 hereof that this Agreement shall not renew
shall be treated as termination by the Company other than for Cause
pursuant to Section 6.d. Notice by the Employee pursuant to Section 2
hereof that this Agreement shall not renew shall be treated as a
termination by the Employee of his/her 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; provided, however, that the obligations contained
in this Section 7 shall not apply to any Confidential Information that becomes
publicly known through no fault of the Employee or that the Employee is
otherwise required by law or regulation to disclose.
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.
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8. Non-Solicitation. While the Employee is employed by the Company and (a) for a
period of two years following the termination of his/her employment pursuant to
Section 6.b or 6.c or 6.f hereof or (b) in the event of termination pursuant to
Section 6.d or 6.e or 6.g hereof, for a period equal to the months of severance
pay provided the Employee thereunder:
(i) 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 substantially its relationship with the Company or any
of its subsidiaries or affiliates and
(ii) the Employee shall not, directly or indirectly, hire or
attempt to hire any executive personnel of the Company or any of its
subsidiaries or affiliates or solicit or encourage any executive personnel of
the Company or any of its subsidiaries or affiliates to discontinue employment
with the Company or any of its subsidiaries or affiliates.
For purposes of this Section 8, the term "months of severance pay" shall mean
the quotient of the total sum of payments to be made to the Employee under the
applicable termination provision divided by the Employee's base salary at the
monthly rate in effect on the date of termination.
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.
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
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the Employee and their respective successors, executors, administrators, heirs
and permitted assigns.
13. Indemnification. The Company shall, and the Company shall use its best
efforts to cause its subsidiaries and affiliates to, indemnify the Employee to
the maximum extent permitted by law and regulation in connection with any
liability, expense or damage which the Employee incurs or to which the Employee
is exposed as a result of the Employee's employment and positions with the
Company and its subsidiaries and affiliates as contemplated by this Agreement,
provided that the Employee shall not be indemnified with respect to any matter
as to which he/she shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his/her action was in the best
interest of the Company and its subsidiaries and affiliates. The Company, on
behalf of itself and its subsidiaries and affiliates, hereby confirms that the
occupancy of all offices and positions which in the future are or were occupied
or held by the Employee have been so occupied or held at the request of and for
the benefit of the Company and its subsidiaries and affiliates for purposes of
the Employee's entitlement to indemnification under applicable provisions of the
respective articles of organization and/or other similar documents of the
Company and its subsidiaries and affiliates.
14. 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; provided, however, that this Agreement shall not terminate or
supersede any additional obligations of the Employee pursuant to the Original
Agreement or any other agreement with respect to the Confidential Information or
the like or with respect to any restrictions on the activities of the Employee
or the like or with respect to the securities of the Company. The headings and
captions contained herein are for convenience of reference only and are not part
of this
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Agreement. This Agreement may not be modified or amended, 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.
15. 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.
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/ Robert T. McAlear By: /s/ Wallace M. Haselton
- --------------------- -----------------------
Robert T. McAlear Wallace M. Haselton
Executive Vice President, Chairman, Compensation Committee
Controlled Loans and Credit and authorized signer
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"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 asserted 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 abridgment 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
abridgment 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
Claims and that I am signing this Release of Claims voluntarily and with a full
understanding of its
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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: _______________________________
11
EXHIBIT 10(u)(ix)
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (hereafter referred to as this
"Agreement") is made by and between UST Corp., a Massachusetts corporation, (the
"Company") and Kathie S. Stevens (the "Employee") as of the 1st day of February,
1996 (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, which term shall automatically renew
thereafter for successive terms of one year each unless either party gives
notice to the other at least sixty (60) days prior to the expiration of the
initial or any renewal term that this Agreement shall not renew. Notwithstanding
the foregoing, in the event that this Agreement is in effect on the date of
consummation of a Change of Control, as defined in Section 6.g.ii below, 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 as he/she held on the Effective Date hereof and/or
such other executive position or positions with the Company, its affiliates and
subsidiaries to which the parties may hereafter from time to time agree and the
Employee 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 of Directors of the Company (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, the President or the Board's 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,
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and do not otherwise interfere, with the Employee's duties and responsibilities
to the Company and its subsidiaries.
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 and,
if applicable, its affiliates and subsidiaries; (ii) the Employee's fraud,
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embezzlement or other material dishonesty with respect to the Company or any of
its affiliates or 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.
d. By the Company other than for Cause. The Company may terminate
the Employee's employment other than for Cause upon notice to the Employee under
this subsection d or under subsection g below, whichever is applicable. 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:
i. shall 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. at the Employee's election, (A) shall continue to
pay, for the period of twelve (12) months following
termination of the Employee's employment or, if earlier, until
the date the Employee is covered under another employer's
health plan that is comparable to that of the Company (the
"Post-Employment Health Coverage Period"), 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) shall 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 the Employee and his/her eligible
dependents may exercise any rights they have under COBRA to
continue participation in the group health plan at their cost,
effective as of the date the Employee's employment terminates.
Should the Employee elect option (A) above, the period of any
continued health coverage to which the Employee and his/her
eligible dependents may be entitled under Sections 601-607 of
ERISA and Section 4980B of the Internal Revenue Code
(collectively referred to as "COBRA") as a result of the
Employee's termination of employment will commence at the end
of the above-defined Post-Employment Health Coverage Period.
Notwithstanding anything to the contrary contained herein, the
Employee may only elect option (A) directly above if the
Employee elects to receive payment under subparagraph d.i.,
directly above, in the form of salary continuation.
3
<PAGE>
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 his/her executive position; (ii) a change adverse to
the Employee in the Employee's primary reporting relationship; (iii) material
diminution in the nature or scope of the Employee's responsibilities, duties or
authority; (iv) 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
(v) 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. 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 (as defined in subsection g.ii
below) 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 following
the effective date of the Employee Release, but retroactive to the date of
termination, and
(2) at the Employee's election, (A) shall
continue to pay, for the period of twenty-four months following termination
of the Employee's employment or, if earlier, until the date the Employee is
covered under another employer's health plan that is comparable to that of
the Company (the "Post-Employment Health Coverage Period"), 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)
shall pay the Employee a single lump sum payment equal to the amount that
the Company would have expended if
4
<PAGE>
participation had been elected and continued for a period of twenty-four
(24) months, which lump sum shall be payable within thirty (30) days
following the effective date of the Employee Release, and the Employee and
his/her eligible dependents may exercise their rights under COBRA to
continue participation in the group health plan at their cost effective as
of the date his/her employment terminates. Should the Employee elect option
(A) above, the period of any continued health coverage to which the
Employee and his/her eligible dependents may be entitled under COBRA as a
result of the Employee's termination of employment will commence at the end
of the above-defined Post-Employment Health Coverage Period.
Notwithstanding anything to the contrary contained herein, the Employee may
only elect option (A) directly above if the employee elects to receive
payment under subparagraph g.i.(1) in the form of salary continuation.
(3) Upon a Change of Control as defined in the
Company's Stock Compensation Plan as amended by the Company from time to
time (the "Plan"), the vesting of any UST Restricted Common Stock
("Restricted Stock") or stock options to purchase UST Common Stock granted
to the Employee and not yet exercised, expired, surrendered or canceled
shall be in accordance with the Plan.
(4) If in connection with a Change of Control as
defined in the Plan any other employees who hold stock options under the
Plan or Restricted Stock will have their options or Restricted Stock or
both cashed out, whether under the Plan or otherwise, the Employee shall
have the right to have all or any of such options or Restricted Stock or
both cashed out on the same basis and at the same time the options and
Restricted Stock of such other employees are cashed out.
ii. Except as otherwise provided with respect to
subparagraphs g.i.(3) and g.i. (4) directly above, 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
5
<PAGE>
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. Notice by the Company
pursuant to Section 2 hereof that this Agreement shall not renew shall be
treated as termination by the Company other than for Cause pursuant to Section
6.d. Notice by the Employee pursuant to Section 2 hereof that this Agreement
shall not renew shall be treated as a termination by the Employee of his/her
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; provided, however, that the obligations contained
in this Section 7 shall not apply to any Confidential Information that becomes
publicly known through no fault of the Employee or that the Employee is
otherwise required by law or regulation to disclose.
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
6
<PAGE>
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 (a)
for a period of two years following the termination of his/her employment
pursuant to Section 6.b or 6.c or 6.f hereof or (b) in the event of termination
pursuant to Section 6.d or 6.e or 6.g hereof, for a period equal to the months
of severance pay provided the Employee thereunder:
(i) 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 substantially its relationship with the Company or any
of its subsidiaries or affiliates and
(ii) the Employee shall not, directly or indirectly, hire or
attempt to hire any executive personnel of the Company or any of its
subsidiaries or affiliates or solicit or encourage any executive personnel of
the Company or any of its subsidiaries or affiliates to discontinue employment
with the Company or any of its subsidiaries or affiliates.
For purposes of this Section 8, the term "months of severance pay" shall mean
the quotient of the total sum of payments to be made to the Employee under the
applicable termination provision divided by the Employee's base salary at the
monthly rate in effect on the date of termination.
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.
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)
7
<PAGE>
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. Indemnification. The Company shall, and the Company shall use its best
efforts to cause its subsidiaries and affiliates to, indemnify the Employee to
the maximum extent permitted by law and regulation in connection with any
liability, expense or damage which the Employee incurs or to which the Employee
is exposed as a result of the Employee's employment and positions with the
Company and its subsidiaries and affiliates as contemplated by this Agreement,
provided that the Employee shall not be indemnified with respect to any matter
as to which he/she shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his/her action was in the best
interest of the Company and its subsidiaries and affiliates. The Company, on
behalf of itself and its subsidiaries and affiliates, hereby confirms that the
occupancy of all offices and positions which in the future are or were occupied
or held by the Employee have been so occupied or held at the request of and for
the benefit of the Company and its subsidiaries and affiliates for purposes of
the Employee's entitlement to indemnification under applicable provisions of the
respective articles of organization and/or other similar documents of the
Company and its subsidiaries and affiliates.
14. 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; provided, however, that this Agreement shall not terminate or
supersede any additional obligations of the Employee pursuant to any other
agreement with respect to the Confidential Information or the like or with
respect to any restrictions on the activities of the Employee or the like or
with respect to the securities of the Company. The headings and captions
contained herein are for convenience of reference only and are not part of this
8
<PAGE>
Agreement. This Agreement may not be modified or amended, 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.
15. 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.
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/ Kathie S. Stevens By: /s/ Wallace M. Haselton
- --------------------- -----------------------
Kathie S. Stevens Wallace M. Haselton
Executive Vice President Chairman, Compensation Committee
and Senior Lending Officer and authorized signer
9
<PAGE>
"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 asserted 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 abridgment 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
abridgment 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,
10
<PAGE>
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 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: _______________________________
EXHIBIT 21
SUBSIDIARIES OF UST CORP.(*)
USTrust
United States Trust Company
UST Bank/Connecticut
JSA Financial Corporation
UST Leasing Corporation(**)
UST Securities 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
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 29, 1996. It should be noted that we
have not audited any financial statements of the Company subsequent to December
31, 1995 or performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 20, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UST CORP. AT OR FOR THE YEAR ENDED DECEMBER 31, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF FORM
10-K.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.00
<CASH> 89,745
<INT-BEARING-DEPOSITS> 54
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 575,673
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,272,077
<ALLOWANCE> 56,029
<TOTAL-ASSETS> 1,969,088
<DEPOSITS> 1,512,737
<SHORT-TERM> 242,962
<LIABILITIES-OTHER> 39,578
<LONG-TERM> 143
0
0
<COMMON> 11,152
<OTHER-SE> 162,516
<TOTAL-LIABILITIES-AND-EQUITY> 1,969,088
<INTEREST-LOAN> 118,666
<INTEREST-INVEST> 26,256
<INTEREST-OTHER> 3,047
<INTEREST-TOTAL> 147,969
<INTEREST-DEPOSIT> 42,683
<INTEREST-EXPENSE> 52,535
<INTEREST-INCOME-NET> 95,434
<LOAN-LOSSES> 13,090
<SECURITIES-GAINS> 1,802
<EXPENSE-OTHER> 88,187
<INCOME-PRETAX> 24,127
<INCOME-PRE-EXTRAORDINARY> 24,127
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,958
<EPS-PRIMARY> .83
<EPS-DILUTED> .83
<YIELD-ACTUAL> 8.56
<LOANS-NON> 19,930
<LOANS-PAST> 257
<LOANS-TROUBLED> 5,783
<LOANS-PROBLEM> 26,100
<ALLOWANCE-OPEN> 64,088
<CHARGE-OFFS> 29,074
<RECOVERIES> 7,925
<ALLOWANCE-CLOSE> 56,029
<ALLOWANCE-DOMESTIC> 56,029
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 21,806
</TABLE>
