<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [ ] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
UST CORP.
(Name of Registrant as Specified In Its Charter)
UST CORP.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
[UST CORP. LOGO]
UST CORP.
40 COURT STREET
BOSTON, MASSACHUSETTS
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1998
Notice is hereby given that the Annual Meeting of Stockholders of UST Corp.
(the "Company") will be held in the Auditorium located on the twelfth floor at
40 Court Street, Boston, Massachusetts, on Tuesday, the 19th day of May, 1998 at
10:00 o'clock in the morning for the following purposes:
1. To elect six Directors of the Company, each of whom will serve for
a three-year term, leaving two vacancies which may be filled later by the
Board of Directors;
2. To approve, upon the recommendation of the Board of Directors, the
Company's new Annual Incentive Plan; and
3. To transact any other business which may properly come before the
meeting, or any adjournment thereof.
The close of business on March 27, 1998 has been fixed as the record date
for determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting of Stockholders. The books for the transfer of stock will not be
closed. This Notice and Proxy Statement will first be mailed to stockholders on
or about April 15, 1998.
If you do not expect to be present personally at the Annual Meeting of
Stockholders, please sign, date and return the enclosed Proxy in the enclosed
addressed envelope.
By order of the Board of Directors
/s/ Eric R. Fischer
-----------------------------
Eric R. Fischer, Clerk
April 15, 1998
<PAGE> 3
[UST CORP. LOGO]
UST CORP.
40 COURT STREET
BOSTON, MASSACHUSETTS
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1998
April 15, 1998
This Proxy Statement is furnished in connection with the solicitation of
Proxies to be used at the Annual Meeting of Stockholders of UST Corp. (the
"Company") to be held on May 19, 1998, and at any adjournments thereof, for the
purposes set forth in the foregoing Notice of Annual Meeting.
The close of business on March 27, 1998 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting, and at any adjournment thereof.
The financial statements for the Company for the fiscal year ended December
31, 1997, together with corresponding financial information for the previous
fiscal year, are contained in the Annual Report to UST Corp. Stockholders for
the year ended December 31, 1997 (the "Annual Report"), which includes the
Company's Annual Report to the Securities and Exchange Commission ("SEC") on
Form 10-K for the year ended December 31, 1997 (the "10-K Report"). A copy of
the Company's Annual Report and 10-K Report has been previously mailed or will
be mailed simultaneously herewith to all stockholders.
Proxies in the form enclosed are solicited by the Board of Directors of the
Company. Any stockholder giving a Proxy in the enclosed form has the power to
revoke it at any time before it is exercised. A stockholder's right to revoke
his or her Proxy is not limited by, or subject to, compliance with any specified
formal procedure. Each stockholder may revoke his or her Proxy by attending the
meeting and voting in person. Proxies in such form, if received in time for
voting and not revoked, will be voted at the Annual Meeting in accordance with
the directions of the stockholders. Where a choice is not so specified, the
shares represented by a properly executed Proxy will be voted "for" the election
of the six nominees for Director positions listed therein and "for" the approval
of the Company's new Annual Incentive Plan. The enclosed Proxy confers
discretionary authority on William Schwartz, Eric R. Fischer and James K. Hunt
(or their substitutes), acting singly, to act on any other business which may
properly come before the meeting. The Board of Directors does not know of any
matters which will be brought before the meeting other than those specifically
set forth in the Notice of Annual Meeting. Should another matter, however,
properly come before the meeting, it is intended that the persons named in the
enclosed form of Proxy, or their substitutes acting thereunder, will vote on
such matter or matters in accordance with their best judgment.
The Company will bear all expenses in connection with the solicitation of
Proxies, including the preparation, assembly and mailing of the Proxy Statement.
Solicitation will be initially by mail, but employees and Directors of the
Company as well as representatives of Morrow & Co., professional proxy
solicitors, may solicit Proxies by personal interview, by telephone, by
facsimile or by telecopy. Employees and Directors of the Company will not
receive additional compensation for such efforts, and Morrow & Co. is expected
to receive approximately $6,000, plus out-of-pocket expenses, for such
solicitation. The Company will also provide persons, firms, banks and
corporations holding shares in their names, or in the names of their nominees,
which in either case are beneficially owned by others, with proxy material for
transmittal to such beneficial owners and reimburse such record holders for
their reasonable expenses in so doing. Confidential voting procedures will not
be used in connection with the Annual Meeting, except that votes cast by
employees of the Company and/or its subsidiaries shall be held confidential.
<PAGE> 4
As of March 31, 1998, the Company had outstanding 29,817,577 shares of
common stock, $0.625 par value per share ("Common Stock"), each entitled to one
vote. A majority, or 14,908,789 of such shares, constitutes a quorum for the
Annual Meeting. There are no outstanding shares of Preferred Stock of the
Company.
PERSONS TO BE NOMINATED BY MANAGEMENT
FOR ELECTION AS DIRECTORS
(NOTICE ITEM 1)
Section 50A of Chapter 156B of the Massachusetts General Laws provides for
a Board of Directors of such number as is fixed by the Directors, divided into
three classes as nearly equal in number as possible, serving staggered
three-year terms. The Board of Directors has fixed the number of Directors at
twenty-four (24). The Board of Directors has the power to fill vacancies and to
change the size of the Board at any time. The Board of Directors, following the
recommendation of the Nominating Committee, has recommended the following six
nominees (all of whom are currently Directors) to fill the six positions, each
of whom, if elected, will hold office for a three-year term until the 2001
Annual Meeting of Stockholders and until his or her successor is chosen and
qualified. In addition, this recommendation contemplates that two positions on
the Board of Directors expiring in 1998 will remain vacant and may be filled
later by the Board of Directors. Subject to receipt of the requisite regulatory
approvals, it is expected that upon the consummation of the proposed
acquisitions by the Company of Affiliated Community Bancorp, Inc. and Somerset
Savings Bank, some or all of these vacancies are likely to be filled by
individuals who currently serve on the respective Boards of Directors of
Affiliated Community Bancorp, Inc. and Somerset Savings Bank. Unless otherwise
specified, Proxies will be voted in favor of the six nominees' election as
Directors. Pursuant to the By-Laws of the Company, Directors will be elected by
a plurality of the votes cast at the Annual Meeting. Thus, shares for which
authority to vote for one or more nominees is withheld will have no effect on
the election of those one or more individuals.
On March 17, 1998, the Board of Directors, upon the recommendation of the
Nominating Committee, established a mandatory retirement age of seventy (70)
years for members of the Board of Directors. This mandatory retirement age
policy for the Board of Directors does not affect senior officers of the Company
or USTrust, its lead banking subsidiary, who serve on the Board of Directors of
the Company. Each Director who is currently 70 or more years of age will remain
a Director until his or her term of office expires, at which time he or she will
not be eligible to be nominated for re-election. Pursuant to the new policy,
Directors who are currently less than 70 years old and who are re-elected to the
Board will retire on the date of their 70th birthday if they attain age 70
during the course of their term. One of the nominees for election at this
Meeting is Mr. Sydney L. Miller who will attain age 70 during the course of his
term and accordingly will retire on the date of his 70th birthday, December 8,
1999. Mr. Wallace M. Haselton, who has served for almost 27 years as
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<PAGE> 5
a Director of the Company, will retire as a Director when his term expires on
the date of the Annual Meeting of Stockholders, currently scheduled for May 19,
1998.
<TABLE>
<CAPTION>
DIRECTOR OF THE POSITIONS (IN ADDITION TO DIRECTOR OF THE
COMPANY COMPANY), COMMITTEE MEMBERSHIPS AND
NAME (AGE) SINCE OFFICES WITH THE COMPANY AND ITS SUBSIDIARIES
- ---------- --------------- ---------------------------------------------
<S> <C> <C>
Chester G. Atkins (50)........ 1997 Member, Audit Committee; Director, USTrust
Robert L. Culver (49)......... 1993 Chairman, Audit Committee and Member,
Executive and Compensation Committees;
Director, USTrust
Neal F. Finnegan (60)......... 1993 President and Chief Executive Officer of the
Company and Chairman, President and Chief
Executive Officer of USTrust; Chairman of
the Executive Committee of United States
Trust Company; Member, Executive and
Nominating Committees; Director, USTrust
and United States Trust Company
Sydney L. Miller (68)......... 1995 Chairman, Community Reinvestment Committee;
Member, Executive and Audit Committees;
Director, USTrust and United States Trust
Company
Barbara C. Sidell (64)........ 1995 Member, Asset Quality Committee; Director,
USTrust and United States Trust Company
Paul D. Slater (63)........... 1980 Chairman, Asset Quality Committee; Vice
Chairman, Compensation Committee; Member,
Executive Committee; Director, USTrust
</TABLE>
Mr. Atkins is a Director of ADS Ventures, Inc. of Concord, Massachusetts
(strategic marketing and related advisory services). Mr. Atkins is also the
former United States Congressman from the 5th Congressional District of
Massachusetts. Mr. Culver is Executive Vice President and Chief Financial
Officer of Cabot Corporation (manufacturer of carbon black and related
products). From 1991 to March 1997, Mr. Culver served as Senior Vice President
and Treasurer of Northeastern University in Boston, Massachusetts. Mr. Finnegan
is President and Chief Executive Officer of UST Corp. Mr. Finnegan is also
Chairman, President and Chief Executive Officer of USTrust and Chairman of the
Executive Committee of United States Trust Company. Prior to joining the
Company, Mr. Finnegan served as Executive Vice President in charge of Private
Banking at Bankers Trust Company, New York, New York. During the period from
1986 to 1988, he was President and Chief Operating Officer of the Bowery Savings
Bank, based in New York, New York. From 1983 to 1986, Mr. Finnegan was Vice
Chairman of Shawmut Corporation. Mr. Finnegan also serves as Vice Chairman of
the Board of Trustees of Northeastern University. Mr. Sydney L. Miller is
President of Harry Miller Co., Inc. and W.E. Palmer Company (manufacturers of
industrial canvas products) and serves as trustee for two real estate trusts.
Ms. Sidell is an attorney who has served as a Director of various subsidiaries
of the Company since 1969. Mr. Slater is a private investor who previously
served as the Chairman and Chief Executive Officer of The Slater Company, a real
estate and finance firm based in Boston, Massachusetts. Mr. Slater now serves as
President of Naples Downtown Corp. in Naples, Florida.
3
<PAGE> 6
The following table sets forth certain information about those Directors of
the Company whose terms of office do not expire at the Annual Meeting and who
consequently are not nominees for re-election at the Annual Meeting.
<TABLE>
<CAPTION>
DIRECTOR
OF THE POSITIONS (IN ADDITION TO DIRECTOR OF THE COMPANY), TERM OF
COMPANY COMMITTEE MEMBERSHIPS AND OFFICES WITH THE OFFICE
NAME (AGE) SINCE COMPANY AND ITS SUBSIDIARIES WILL EXPIRE
- ---------- --------- --------------------------------------------------- -----------
<S> <C> <C> <C>
David E. Bradbury (51)....... 1997 Member, Executive and Asset Quality Committees; 2000
Director, USTrust
Robert M. Coard (71)......... 1995 Member, Community Reinvestment and Public Affairs 2000
Committees; Director, USTrust
Alan K. DerKazarian (64)..... 1995 Member, Nominating and Public Affairs Committees; 2000
Director, USTrust
Donald C. Dolben (61)........ 1995 Chairman, Compensation Committee; Member, Asset 2000
Quality and Executive Committees; Director, USTrust
Edward Guzovsky (71)......... 1995 Member, Audit Committee; Director, USTrust 1999
Brian W. Hotarek (51)........ 1994 Member, Asset Quality and Nominating Committees; 1999
Director, USTrust
Francis X. Messina (72)...... 1988 Member, Compensation and Community Reinvestment 2000
Committees; Director, USTrust
Vikki L. Pryor (44).......... 1995 Vice Chairman, Audit Committee; Member, Community 1999
Reinvestment Committee; Director, USTrust
Gerald M. Ridge (69)......... 1982 Chairman, Public Affairs Committee; Member, 1999
Executive, Asset Quality, and Nominating
Committees; Vice Chairman and Director, USTrust
William Schwartz (65)........ 1981 Chairman of the Board of Directors of the Company; 1999
Chairman, Executive Committee; Director, USTrust
James V. Sidell (67)......... 1967 Member, Public Affairs Committee 2000
Edward J. Sullivan (77)...... 1995 Member, Asset Quality and Public Affairs 1999
Committees; Director, USTrust
G. Robert Tod (58)........... 1997 Member, Nominating Committee; Director, USTrust 2000
Michael J. Verrochi, Jr. 1974 Chairman, Nominating Committee; Member, Executive 1999
(58)....................... Committee; Director, USTrust
Gordon M. Weiner (74)........ 1995 Member, Audit, Community Reinvestment and 1999
Compensation Committees; Director, USTrust
</TABLE>
Mr. Bradbury is the President of Walden Partners, Inc. (a private
investment company). Mr. Bradbury was formerly the Chairman of the Board,
President, and Chief Executive Officer of Walden Bancorp, Inc. which was
acquired by the Company on January 3, 1997. Mr. Coard is President and Chief
Executive Officer of the Action for Boston Community Development, Inc. Dr.
DerKazarian is a practicing periodontist. Dr. DerKazarian also serves as Vice
President of Dental Management Inc. and Dental Services P.C. of Cambridge,
Massachusetts. Mr. Dolben is a Realtor and serves as Chairman of The Dolben
Company, Inc., President of William H. Dolben & Sons, Inc. and President of
Dolben Equities, Inc. Mr. Guzovsky is a consulting electrical engineer whose
office is located in Norwood, Massachusetts. Mr. Guzovsky is a former Director
of Wolf Construction Company in Norwood, Massachusetts and former Chairman of
JWP New England (electrical and mechanical contractors). Mr. Hotarek has been
Executive Vice President and Chief Financial Officer of the Stop & Shop
Supermarket Company since March, 1997. Prior to March, 1997, he served as Senior
Vice President, Real Estate and Development for the Stop & Shop Supermarket
Company. Mr. Messina serves as President of Wildwood Estates of Braintree, Inc.
(real estate development, management and leasing) and as President of F.X.
Messina Construction Corp. (general contracting and construc-
4
<PAGE> 7
tion). Ms. Pryor has been an independent business consultant since mid-1997.
Prior to that time, she served as Senior Vice President, Customer Operations and
Service for Blue Cross Blue Shield of Massachusetts in Boston, Massachusetts.
Mr. Ridge is a Vice Chairman of USTrust and President of Blue Hill Cemetery and
G. M. Ridge Corporation (athletic club). Mr. Schwartz is Vice President/Academic
Affairs (Chief Academic Officer) of Yeshiva University in New York City. He also
serves as Chairman of the Board of Directors of the Company. Mr. Schwartz is of
counsel to the New York, New York law firm of Cadwalader, Wickersham & Taft. Mr.
Schwartz is also a Director of Viacom, Inc. and Viacom International, Inc.,
(diversified media, publishing and entertainment holding companies) and a Member
of the Advisory Council of W.C.I. Steel, Inc. (steel manufacturer). Mr. Sidell
is Managing Director, Corporate Finance for Fector Detwiler & Company, Inc.
(investment banker/broker-dealer). Prior to April 1, 1993, Mr. Sidell was
President and Chief Executive Officer of the Company. Mr. Sullivan has been the
Clerk of Courts for Middlesex County, Massachusetts since 1959. Mr. Sullivan
also owns an insurance agency and a trucking and snow removal business all based
in Cambridge, Massachusetts. Mr. Tod is the President and Chief Operating
Officer of the CML Group, Inc. (a retailer of specialty items, including Nordic
Track products) located in Acton, Massachusetts. He is also a Director of SCI
Systems, Inc. of Huntsville, Alabama (electronic equipment manufacturer), and
EG&G, Inc. of Wellesley, Massachusetts (scientific instruments manufacturer).
Mr. Verrochi serves as Executive Vice President of Browning-Ferris Industries,
Inc. (waste management); Director of American Ref-Fuel, Inc. (refuse to energy);
President and Director of Monadnock Mountain Spring Water Inc., Abita Water Co.
and EVC Corp. (producers of bottled water); Director, Vice President and
Treasurer of VRT Corp. (real estate development and construction); Director of
Marshfield Insurance Co., Inc.; Director of Universal Construction Inc.; and as
a trustee of several real estate trusts. Mr. Weiner has his own practice as an
Attorney-at-Law in Gloucester, Massachusetts and prior to 1991 was associated
with the law firm of Cahill, Weiner & Conant of Gloucester, Massachusetts.
Except as indicated above, each Director has been employed during the past
five years in his or her respective positions.
In case any person or persons named herein for election as a Director is or
are not available for election at the Annual Meeting, Proxies in the
accompanying form may be voted for a substitute nominee or nominees, as well as
(in the absence of contrary instructions) for the balance of those named herein.
Other than as noted in the following sentence, the Board of Directors has no
reason to believe that any of the nominees for election as Directors will be
unavailable. Pursuant to the new policy, Directors who are currently less than
70 years old and who are re-elected to the Board will retire on the date of
their 70th birthday if they attain age 70 during the course of their term. One
of the nominees for election at this meeting is Mr. Sydney L. Miller who will
attain age 70 during the course of his term and accordingly will retire on the
date at his 70th birthday, December 8, 1999.
OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The Company's Board of Directors has an Executive Committee, Audit
Committee, Compensation Committee, Nominating Committee, Community Reinvestment
Committee, Asset Quality Committee and Public Affairs Committee. Members of each
committee consist of Directors of the Company except that the Audit Committee
includes Directors of banking subsidiaries of the Company and the Community
Reinvestment Committee includes Directors of banking subsidiaries of the Company
as well as Executive Officers of banking subsidiaries of the Company.
The Executive Committee is authorized to act on behalf of the Board and to
exercise all of the powers of the full Board of Directors when the Board is not
in session, except as limited by Massachusetts law. The Committee met once in
1997. The current members of the Executive Committee are Mr. Schwartz
(Chairman), Mr. Bradbury, Mr. Culver, Mr. Dolben, Mr. Finnegan, Mr. Miller (also
a Director of United States Trust Company), Mr. Ridge, Mr. Slater and Mr.
Verrochi.
The Audit Committee reviews examinations of the Company and its
subsidiaries that are conducted by regulatory agencies, reviews the results of
audits of the Company and its subsidiaries by internal audit staff and
independent auditors, and monitors implementation of recommendations with
respect to internal controls and
5
<PAGE> 8
compliance that may be made from time to time. It also reviews risks related to
litigation against the Company and the activities and reports of the internal
Loan Review Department of the Company and its subsidiaries. There were nine
meetings of the Audit Committee during 1997. Mr. Culver serves as Chairman and
Ms. Pryor serves as Vice Chairman of the Committee. Mr. Atkins, Mr. Guzovsky,
Mr. Miller (also a Director of United States Trust Company) and Mr. Weiner also
currently serve on the Audit Committee.
The Compensation Committee has five members. Mr. Dolben serves as Chairman
and Mr. Slater serves as Vice Chairman of the Committee. Mr. Culver, Mr. Messina
and Mr. Weiner also currently serve on the Committee. The Committee considers
and, when appropriate, makes determinations or recommendations to the Board
regarding employee and Director compensation (including employee and Director
stock compensation) matters. The Committee met eight times in 1997.
The Nominating Committee recommends candidates to fill vacancies on the
Boards of Directors of the Company and its subsidiaries, as well as a slate of
Directors of the Company for election by stockholders at the Annual Meeting. Its
activities also include evaluation of the size and composition of the Boards of
Directors of the Company and its subsidiaries. There were two meetings of the
Nominating Committee during 1997. Mr. Verrochi (Chairman), Dr. DerKazarian, Mr.
Finnegan, Mr. Hotarek, Mr. Ridge and Mr. Tod currently serve on the Nominating
Committee.
The Nominating Committee considers candidates for Director of the Company
recommended by Directors, officers and stockholders of the Company. Persons
desiring to suggest candidates for the 1999 Annual Meeting should advise Eric R.
Fischer, Executive Vice President, General Counsel and Clerk of the Company in
writing at 40 Court Street, Boston, MA 02108 on or before December 16, 1998 and
include sufficient biographical material to permit an appropriate evaluation.
The Company's Community Reinvestment Committee's current members are Mr.
Miller (Chairman and also a Director of United States Trust Company), Mr. Coard,
Mr. Domenic Colasacco (Director of United States Trust Company), Mr. Walter E.
Huskins, Jr. (an Executive Officer of USTrust), Mr. Messina, Ms. Pryor, Mr.
Arthur F.F. Snyder (Director of United States Trust Company) and Mr. Weiner. The
Committee held four meetings in 1997. The Community Reinvestment Committee
reviews the Company's activities to ascertain whether the Company's banking
subsidiaries are taking appropriate actions to assess and to help to meet the
credit-related needs of the local communities served by the Company's banking
subsidiaries.
The Board also has an Asset Quality Committee which oversees management's
efforts to keep the Company's non-performing assets at a low level. The
Committee met eleven times in 1997. It is chaired by Mr. Slater and its members
include Mr. Bradbury, Mr. Dolben, Mr. Hotarek, Mr. Ridge, Ms. Sidell, and Mr.
Sullivan.
In 1996, the Company organized a Public Affairs Committee which reviews the
public relations activities of the Company as well as positions, if any, taken
by the Company with regard to public policy issues. The Committee met once in
1997. It is chaired by Mr. Ridge and its members include Mr. Coard, Dr.
DerKazarian, Mr. Sidell and Mr. Sullivan.
During 1997, there were fifteen meetings of the Board of Directors of the
Company. No Director attended fewer than 75% of the aggregate number of meetings
of the Board of Directors and of the committees of the Board of Directors on
which he or she served.
DIRECTORS' FEES AND OTHER COMPENSATION
Directors of the Company who are not otherwise full-time Officers or
employees of the Company or any of its subsidiaries are paid a fee of $250 for
each meeting of the Company's Board and of the USTrust and United States Trust
Company Boards they attend, plus an annual stipend which in 1997 was $15,000. In
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<PAGE> 9
addition, in 1997, Directors (other than full-time employees of the Company)
received the following additional committee fees:
<TABLE>
<S> <C> <C>
i) Executive Committee................ $250 per meeting (except Chairman who receives
$500 per meeting)
ii) Nominating Committee............... $500 per meeting
iii) Audit Committee.................... $250 per meeting (except Chairman who receives
$500 per meeting and $500 per diem for work on
committee matters when a meeting is not held)
iv) Compensation Committee............. $250 per meeting (except Chairman who receives
$500 per meeting and $500 per diem for work on
committee matters when a meeting is not held)
v) Asset Quality Committee............ $250 per meeting (except Chairman who receives
$500 per meeting)
vi) Community Reinvestment Committee... $250 per meeting (except Chairman who receives
$500 per meeting)
vii) Public Affairs Committee........... $250 per meeting (except Chairman who receives
$500 per meeting)
</TABLE>
Instead of receiving a retainer or meeting fees, Mr. Schwartz received a
stipend of $60,000 in 1997 for his services as Chairman of the Board of
Directors. In 1997, Mr. Ridge received a stipend of $55,000 for services
performed in his capacity as Vice Chairman of USTrust, also in lieu of a
retainer or meeting fees.
At the Annual Meeting of Stockholders in 1995, the 1995 Directors' Stock
Option Plan was approved by the Company's stockholders. Pursuant to that Plan,
outside Directors of the Company and USTrust received options to acquire shares
at the market price ($12.875) on the date of the meeting, May 16, 1995. Options
were granted as follows: individuals who were Directors of both the Company and
USTrust received 7,500 options; individuals who were solely Directors of the
Company received 5,100 options; individuals who were solely honorary Directors
of the Company received 4,500 options; and individuals who were solely Directors
of USTrust received 3,000 options. These options vested during 1997. In addition
to the foregoing, in May 1996, at the Annual Meeting of Stockholders, the
Company's stockholders approved the 1996 Directors' Stock Option Plan which
granted outside Directors of the Company 5,000 immediately exercisable options
at $13.438, the market price on May 21, 1996, the date of the Annual Meeting of
Stockholders.
The Company also maintains a deferred compensation program which covers
Directors of the Company and Directors of any subsidiary of the Company whose
Board of Directors elects to participate. Under this program, Directors may
elect to defer all or any portion of their Directors' meeting fees and annual
stipend. Each participant is treated as a general, unsecured creditor of the
Company and has the right to receipt of his other deferred compensation upon
termination of Director status. Payments of the deferred amounts are made in
shares of Common Stock of the Company.
COMPENSATION OF EXECUTIVE OFFICERS
The tables that appear below, together with the accompanying text and
footnotes, provide information on compensation and benefits for the named
Executive Officers, as determined by requirements of the Securities and Exchange
Commission (the "Named Executive Officers"). Except for the information
regarding individual stock option exercises, all the data regarding values for
stock options and grants of Restricted Common Stock are hypothetical in terms of
the amounts that an individual may or may not receive because such amounts are
contingent on continued employment with the Company and the price of the Common
Stock. All 1997 year-end values shown in these tables for outstanding Common
Stock options and Restricted Common Stock shares reflect a $27.750 price, which
was the closing price of the Common Stock for December 31, 1997, as reported in
the Nasdaq section of the Eastern Edition of The Wall Street Journal.
7
<PAGE> 10
The following table displays compensation information for the past three
fiscal years for each of the Named Executive Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL ------------------------
COMPENSATION RESTRICTED SECURITIES
---------------------------- STOCK UNDERLYING ALL OTHER
SALARY BONUS AWARD(S) OPTIONS/ COMPENSATION
YEAR $ $ ($)(A) SARS(#) ($)(B)
---- -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Neal F. Finnegan(C)........ 1997 $494,128 $380,000 $219,375 50,000 $11,659
President and Chief
Executive Officer of 1996 $374,358 $360,000 -- -- $ 5,049
the Company 1995 $314,851 $150,000 $604,688 150,000 $ 3,669
Domenic Colasacco(D)....... 1997 $236,769 $600,000 -- -- $11,659
Executive Vice President/ 1996 $236,769 $575,000 -- -- $ 5,049
Trust and Investment 1995 $236,735 $575,000 -- -- $ 3,669
Management of the Company;
Chairman and President,
United States Trust Company
James K. Hunt(E)........... 1997 $237,302 $ 80,000 $188,906 10,000 $ 6,859
Executive Vice President
and Chief Financial 1996 $211,476 $ 80,000 $ 66,300 37,500 $ 2,049
Officer of the Company 1995 $186,104 $ 25,000 -- -- $ 1,728
Robert T. McAlear(F)....... 1997 $217,071 $ 40,000 -- 10,000 $11,659
Executive Vice 1996 $214,486 $ 65,000 -- 32,500 $ 5,049
President/Banking 1995 $212,460 $ 40,000 -- -- $ 3,669
Operations and Acquisition
Integration of the Company
Kathie S. Stevens(G)....... 1997 $211,162 $ 30,000 -- 10,000 $11,659
Executive Vice 1996 $202,579 $ 50,000 -- 12,500 $ 5,049
President/Credit and 1995 $202,551 $ 15,000 -- -- $ 3,669
Controlled Loans and Senior
Lending Officer of the
Company
</TABLE>
- ---------------
(A) With respect to Mr. Finnegan's 1995 and 1997 awards see footnote C below. As
of December 31, 1997 each of the Named Executive Officers held the following
number of shares of Restricted Common Stock having the corresponding
year-end market value:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------
TOTAL
NUMBER AGGREGATE
OF RESTRICTED MARKET
NAME SHARES HELD VALUE
- ---- ------------- ----------
<S> <C> <C>
Neal F. Finnegan............................ 40,800 $1,132,200
Domenic Colasacco........................... 0 0
James K. Hunt............................... 7,800 $ 216,450
Robert T. McAlear........................... 0 0
Kathie S. Stevens........................... 0 0
</TABLE>
These shares are forfeitable to the Company and subject to restrictions on
transfer. Upon grant the recipient has full voting and dividend rights with
respect to all shares granted. Other than the January, 1995 grant to Mr.
Finnegan described in footnote C below, the shares of Restricted Common
Stock vest over periods which vary from two to five years, subject to
acceleration in the event of a "change of control" of the Company. The
grants to Mr. Hunt vest over a period of two years. To reflect the one year
8
<PAGE> 11
extension of his Employment Agreement, Mr. Finnegan also received a 10,800 share
Restricted Common Stock award in early 1997 which provides him with Restricted
Common Stock for the additional year of his contract on a basis consistent with
the prior years of his contract period.
(B) The amounts reported for 1997 for each of the Named Executive Officers
consist of allocations under the Company's Employee Stock Ownership Plan and
the Company's Employee Savings Plan (including a distribution of forfeitures
in 1997 under the Employee Savings Plan) as indicated below:
<TABLE>
<CAPTION>
EMPLOYEE STOCK EMPLOYEE
NAME OWNERSHIP PLAN SAVINGS PLAN
---- -------------- ------------
<S> <C> <C>
Neal F. Finnegan.......................... $3,084 $8,575
Domenic Colasacco......................... $3,084 $8,575
James K. Hunt............................. $3,084 $3,775
Robert T. McAlear......................... $3,084 $8,575
Kathie S. Stevens......................... $3,084 $8,575
</TABLE>
As of December 31, 1997, the Company's Employee Stock Ownership Plan was
merged into the Company's Employee Savings Plan.
(C) The Company entered into an Employment Agreement with Mr. Finnegan effective
November 21, 1995 and (after a one year extension agreed to by the Company
and Mr. Finnegan in 1996) ending January 4, 2000, and thereafter continuing
to run year-to-year unless terminated in writing by either party upon 60-day
notice. Pursuant to this Agreement, Mr. Finnegan receives a base salary
(which, as of January 1, 1998, was increased from $480,000 to $520,000) and
receives stock compensation described herein. The award was based on a price
per share of Common Stock of $9.625 per share which reflects the closing
price of the Company's Common Stock on December 20, 1994. The 1995
Restricted Common Stock award of $604,688 granted to Mr. Finnegan was
calculated at $13.4375 per share while the 150,000 options were granted at
an exercise price of $14.4375 per share. In addition, on January 2, 1997,
Mr. Finnegan was granted a total of 50,000 stock options, with a per share
exercise price of $20.3125, the fair market value at the close of trading on
January 2, 1997, as reported by The Wall Street Journal. The options became
fully vested in 1997. As part of the Amendment to his Employment Agreement
and to reflect the one year extension of said Agreement, Mr. Finnegan was
granted a total of 10,800 shares of Restricted Common Stock which shall vest
on January 2, 1999, providing him with Restricted Common Stock for the
additional year of his contract on a basis consistent with the prior years
of his contract period. See "Employment Agreements."
(D) As of January 1, 1995, the Company and USTC entered into an Employment
Agreement with Mr. Colasacco. This Employment Agreement contains information
related to, among other matters, Mr. Colasacco's incentive compensation. Mr.
Colasacco's Employment Agreement is described under "Employment Agreements."
(E) Mr. Hunt entered into a restated and amended two-year Employment Agreement
dated February 1, 1996 and thereafter continuing to run year-to-year unless
terminated in writing by either party upon 60-day notice. See "Employment
Agreements."
(F) Mr. McAlear entered into a two-year Employment Agreement dated February 1,
1996 and thereafter continuing to run year-to-year unless terminated in
writing by either party upon 60-day notice. See "Employment Agreements."
(G) Ms. Stevens entered into a two-year Employment Agreement dated February 1,
1996 and thereafter continuing to run year-to-year unless terminated in
writing by either party upon 60-day notice. See "Employment Agreements."
STOCK-BASED COMPENSATION
The Stock Compensation Plan originally adopted in 1992, as amended to date,
provides for granting of Incentive Stock Options, Nonqualified Stock Options and
Restricted Common Stock Awards or a combina-
9
<PAGE> 12
tion of the foregoing as a means by which the Company seeks to attract and
retain highly qualified Officers and attract and encourage able persons to enter
into and remain in the Company's and its subsidiaries' employ. The Plan is
designed to encourage key employees of the Company and its subsidiaries to
acquire and maintain stock ownership, thereby strengthening their commitment to
the welfare of the Company and promoting the identity of interests between
stockholders and key employees.
The following table provides details regarding stock options granted to the
Named Executive Officers in 1997 under the Stock Compensation Plan. In addition,
in accordance with SEC rules, this table shows hypothetical gains on a pre-tax
basis or "option spreads" that would exist for the respective options granted in
1997 for the Named Executive Officers. These gains are based on assumed rates of
annual compound stock price appreciation of 0%, 5% and 10% from the date the
options were granted over the full option term.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------
NUMBER OF % OF POTENTIAL REALIZABLE VALUE
SECURITIES TOTAL MARKET AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS VALUE ON OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE GRANT FOR OPTION TERM(C)
GRANTED EMPLOYEES PRICE DATE EXPIRATION ---------------------------
(#)(A) IN 1997 ($/SH.) ($/SH.)(B) DATE 0% 5% 10%
---------- ---------- -------- ---------- ---------- --- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Neal F. Finnegan..... 50,000 25.87% $20.3125 $20.3125 1/2/07 -- $638,721 $1,618,645
Domenic Colasacco.... -- -- -- -- -- -- -- --
James K. Hunt........ 10,000 5.17% $20.3125 $20.3125 1/2/07 -- $127,744 $ 323,729
Robert T. McAlear.... 10,000 5.17% $20.3125 $20.3125 1/2/07 -- $127,744 $ 323,729
Kathie S. Stevens.... 10,000 5.17% $20.3125 $20.3125 1/2/07 -- $127,744 $ 323,729
</TABLE>
- ---------------
(A) Options vested immediately as of the date of the grant.
(B) Closing price of Common Stock of the Company on the date of the grant.
(C) Realizable value represents the difference between the assumed stock price
at the expiration date and the exercise price.
The following table shows stock option exercises by the Named Executive
Officers during 1997, including the aggregate value realized upon exercise.
"Value realized upon exercise" represents the excess of the closing price of the
Common Stock on the date of exercise over the exercise price. In addition, this
table includes the number of shares remaining unexercised underlying both
"exercisable" (i.e. vested) and "unexercisable" (i.e. unvested) stock options as
of December 31, 1997. Also reported are the values of "in-the-money" options,
which represent the positive spread between the exercise price of any such
existing stock options and the year-end price of the Common Stock of $27.750.
AGGREGATED OPTION EXERCISES IN 1997 AND
YEAR-END 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED,
UNDERLYING UNEXERCISED IN-THE-MONEY, OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Neal F. Finnegan....... 9,000 $175,217 402,667 33,333 $6,601,836 $247,914
Domenic Colasacco...... -- -- -- -- -- --
James K. Hunt.......... 10,000 $157,103 55,500 -- $ 749,554 --
Robert T. McAlear...... 11,100 $192,169 61,700 -- $ 865,444 --
Kathie S. Stevens...... 4,000 $ 68,000 80,200 -- $1,279,694 --
</TABLE>
10
<PAGE> 13
RETIREMENT BENEFITS
The following table presents the years of service to the Company and the
1997 remuneration covered by the Company's Pension Plan and Supplemental
Retirement Benefit Plan for the five Executive Officers with regard to whom
information is provided in the Executive Compensation Table.
<TABLE>
<CAPTION>
CURRENT COVERED
YEARS OF SERVICE REMUNERATION
---------------- ------------
<S> <C> <C>
Neal F. Finnegan........................... 5 $480,000
Domenic Colasacco.......................... 24 $225,375
James K. Hunt.............................. 4 $225,000
Robert T. McAlear.......................... 7 $203,900
Kathie S. Stevens.......................... 12 $200,000
</TABLE>
The following table reflects annual single life annuity retirement benefits
payable (before deduction for Social Security benefits) to persons in specified
"final average" base salary and years of service classifications.
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------
BASE SALARY 15 20 25 AND OVER
----------- -------- -------- -----------
<S> <C> <C> <C>
$100,000....................................... $ 30,000 $ 40,000 $ 50,000
125,000....................................... 37,500 50,000 62,500
150,000....................................... 45,000 60,000 75,000
175,000....................................... 52,500 70,000 87,500
200,000....................................... 60,000 80,000 100,000
225,000....................................... 67,500 90,000 112,500
250,000....................................... 75,000 100,000 125,000
300,000....................................... 90,000 120,000 150,000
400,000....................................... 120,000 160,000 200,000
450,000....................................... 135,000 180,000 225,000
500,000....................................... 150,000 200,000 250,000
</TABLE>
To the extent that benefits cannot be provided under the Pension Plan or
certain other retirement plans of the Company because of the limitations imposed
by Sections 415 and 401(a)(17) of the Internal Revenue Code on the amount of
such benefits payable, any balance of benefits otherwise payable under such
plans will be provided by the Company to eligible Officers pursuant to a
Supplemental Retirement Benefits Plan adopted by the Board of Directors. As of
December 31, 1997, all individuals named in the Summary Compensation Table were
covered by the Supplemental Retirement Benefits Plan. In addition, as of January
1, 1997, all individuals named in the Summary Compensation Table except Mr.
Colasacco were covered by the Executive Policy Committee Supplemental Plan. This
plan is a supplemental retirement plan which provides a maximum benefit equal to
50% of five year average compensation. For purposes of this plan, compensation
includes bonus.
COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY
This Report reflects the Company's compensation philosophy and resulting
actions taken by the Company for 1997, as shown in the various compensation
tables above. The Compensation Committee either approves or recommends to the
Board of Directors salary and bonus amounts and stock award levels for Executive
Officers of the Company and its affiliates. Directors who were also Executive
Officers did not participate in votes concerning their own remuneration or plans
under which they were eligible to receive any benefits.
Compensation of Executive Officers of the Company has been designed
generally to: (i) compensate Executive Officers based upon corporate, business
unit and individual performance; (ii) motivate Executive
11
<PAGE> 14
Officers to achieve strategic business initiatives and reward them for their
achievement; (iii) provide salary arrangements which are comparable (and in the
aggregate at approximately the 60th percentile when compared to those of the
Company's peer group competitors) as described below under "Salary"; and (iv)
align the interests of executives with the long-term interests of stockholders
through award opportunities that can result in the ownership of Common Stock.
The Committee does not at present, however, have any specific target level of
Common Stock ownership.
In 1997, executive compensation was composed of base salary, discretionary
annual incentive awards, long-term incentive opportunities in the form of stock
options and Restricted Common Stock, and benefits typically offered to
executives by the Company's peer group competitors. Generally, (except as noted
below with respect to the key executives of USTC's Asset Management Division) as
an executive's level of responsibility increases, a greater portion of potential
total compensation tends to be based upon performance incentives and less on
salary and employee benefits, often causing greater variability in the
individual's absolute compensation level from year to year. Generally, the
higher one rises in the organization, the greater the mix of compensation shifts
to reliance on the Common Stock through stock-based awards. Specific
compensation and award levels are determined by the Compensation Committee,
using its discretion and considering both objective and subjective criteria.
In 1996, the Compensation Committee adopted a written "UST Corp. Executive
Compensation Philosophy" (the "Compensation Philosophy"). The Compensation
Philosophy utilizes comparable peer company data surveys conducted by Watson
Wyatt Worldwide, the Company's independent employee benefit and compensation
consultants, and calls for procedures under which: (i) base salary shall be set
so that the targeted positioning is the 60th percentile for each position, based
on asset size or such other scope criteria. Actual base salary for an individual
relative to the target pay shall be determined based on the individual's unique
background, experiences, personal skills and abilities as well as the business
challenges facing the Company which require the use of such attributes or
skills; (ii) annual incentive targets shall be set at levels which approximate
the 60th percentile of total compensation, so as to drive and reward consistent
improvement in performance. The same surveys and peer company data used to
establish salary ranges are to be used to calibrate incentive earning potential.
Performance goals may be set at levels which approximate the 75th percentile of
total compensation; and (iii) the annualized value of long-term incentive
targets shall be set at levels which approximate the 60th percentile of the
competitive total compensation, so as to drive and reward consistent improvement
in performance and shareholder value. Peer company data will be used to
calibrate long-term incentive earning potential. Performance goals may be set at
levels which approximate the 75th percentile of competitive total direct
compensation values.
Mr. Colasacco and the other key executives of USTC's Asset Management
Division are compensated primarily through a cash-based, revenue sharing
arrangement which is generally based upon gross revenues earned by the Division.
See "Employment Agreements" below with respect to Mr. Colasacco's Employment
Agreement.
Over the five years since Mr. Finnegan joined the Company in April, 1993,
he has selected a senior management team composed of newly-hired and previously
employed members of the Executive Policy Committee to direct the activities of
the Company. See "Executive Officers of the Company" below for a full listing of
the current Executive Policy Committee members' names, principal
responsibilities and backgrounds. The Compensation Committee has granted
substantial stock compensation to Mr. Finnegan and the other members of the
Executive Policy Committee of the Company in order to align more closely the
economic interests of these Officers with those of the Company's stockholders.
GENERAL BACKGROUND
As indicated in the Five-Year Stockholder Return comparison, which is found
at the end of the discussion of Compensation of Executive Officers, the
five-year performance (including reinvestment of dividends) of the Company's
Common Stock has lagged behind the Keefe, Bruyette & Woods ("KBW") New England
Bank Index. Over much of the same period, the Company's Common Stock has
out-performed the Standard & Poor's 500 Index.
12
<PAGE> 15
The following is a discussion of the Compensation Committee's bases for Mr.
Finnegan's compensation reported for 1997, and its general policies with respect
to the other Named Executive Officers in the Summary Compensation Table. Mr.
Finnegan served as Chief Executive Officer throughout 1997.
SALARY
The Employment Agreement between Mr. Finnegan and the Company dated as of
November 21, 1995 was amended as of January 2, 1997 (the "Amendment"). The
Compensation Committee increased Mr. Finnegan's base salary from $480,000 to
$520,000 effective January 1, 1998. Based upon salary surveys of approximately
35 similarly-sized regional and national bank holding companies provided to the
Compensation Committee, and advice provided by Watson Wyatt Worldwide, this base
salary was and continues to be competitive with the base salaries of Chief
Executive Officers of the banks and bank holding companies surveyed.
1997 CASH BONUS AWARDS
Mr. Finnegan received a $380,000 cash bonus in late 1997 and early 1998 to
reflect his performance during 1997 (which is reflected in the Summary
Compensation Table), based upon a subjective determination of the Compensation
Committee, considering in particular the excellent financial performance of the
Company in 1997, the increase in the share price of the Company's Common Stock
and the significant increase in the asset size and the complexity of the Company
as a result of acquisitions and the integration of a significant branch purchase
transaction completed at the end of 1996. Under the matching contribution
feature of UST Corp.'s Employee Savings Plan, Mr. Finnegan received an aggregate
contribution of $4,800 for 1997. Mr. Finnegan also received an aggregate of
$3,775 in 1997 as a result of forfeitures.
1997 STOCK AWARDS
The Company's Stock Compensation Plan, approved by stockholders in 1992,
permits the granting of several different types of stock-based awards. The
Company's 1989 Restricted Common Stock Bonus Award Program permits the granting
of awards of Restricted Common Stock. Prior to 1995, stock options were granted
to certain Executive Officers and key employees under the 1992 Stock
Compensation Plan and all awards of Restricted Common Stock were made under the
1989 Restricted Common Stock Bonus Award Program. Mr. Finnegan was granted an
aggregate of 150,000 options exercisable within five years and 60 days to
acquire Common Stock and 60,000 shares of Restricted Common Stock during 1993.
In January 1994, the Company also granted Mr. Finnegan options for 200,000
shares of Common Stock. In 1995, the Company granted Mr. Finnegan an additional
5,195 shares of Restricted Common Stock under the 1989 Bonus Award Program and a
$150,000 cash bonus. Also in 1995, Mr. Finnegan was granted an aggregate of
150,000 options to acquire Common Stock and 45,000 shares of Restricted Common
Stock under the 1992 Stock Compensation Plan. On January 2, 1997 Mr. Finnegan
was granted a total of 50,000 stock options, priced at $20.3125, the fair market
value at the close of trading on January 2, 1997, as reported by The Wall Street
Journal. The options vested in 1997. As part of the Amendment and to reflect the
one year extension of his employment agreement, Mr. Finnegan also received a
10,800 share Restricted Common Stock bonus in early 1997 which provides him with
Restricted Common Stock for the additional year of his contract on a basis
consistent with the prior years of his contract period. Under the Company's
Employee Stock Ownership Plan, Mr. Finnegan received a contribution of $1,313
for 1997. Mr. Finnegan also received an aggregate of $1,770 in 1997 as a result
of forfeitures. See "Employment Agreements."
LIMITATION ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Internal Revenue Code was amended in 1993 to disallow deductions on
annual compensation in excess of $1,000,000 for certain executives of public
companies, beginning in 1994. The Compensation Committee accordingly amended the
Stock Compensation Plan, imposing a per-employee limit on annual grants, which
was approved by the Company's stockholders at the 1994 Annual Meeting. The
Compensation Committee has monitored the impact of this law over the past
several years and has taken into consideration both the benefits of favorable
tax treatment for the Company, and the necessity for the Compensation
13
<PAGE> 16
Committee to have the discretion to take appropriate steps to further its
executive compensation philosophy and honor existing contractual obligations. As
a result of the foregoing, the Compensation Committee recommended to the Board
of Directors that the Company adopt the new Annual Incentive Plan which
addresses the foregoing tax considerations. The Board of Directors approved the
new Annual Incentive Plan and has recommended that the stockholders approve the
new Annual Incentive Plan at the Annual Meeting scheduled to be held on May 19,
1998. See Notice Item 2 for further discussion of the new Annual Incentive Plan
and Exhibit A attached hereto for the text of the Annual Incentive Plan.
This Report was submitted by the Compensation Committee which is comprised
of the following Directors, none of whom are full-time employees of the Company
or any of its subsidiaries:
Donald C. Dolben, Chairman
Paul D. Slater, Vice Chairman
Robert L. Culver
Francis X. Messina
Gordon M. Weiner
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, the following persons served for a portion or all of the year
on the Compensation Committee: Robert L. Culver, Donald C. Dolben, Wallace M.
Haselton, Francis X. Messina, Paul D. Slater and Gordon M. Weiner.
Officers and Directors of the Company, and their associates, are customers
of the Company and its subsidiaries and, as such, may have obtained loans and
loan commitments in excess of $60,000. All such loans and loan commitments
outstanding since the beginning of the last fiscal year were made in the
ordinary course of business by the Company's banking subsidiaries and on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectability or present other
unfavorable terms.
The members of the Compensation Committee, and their respective associates,
may have had an interest in certain transactions involving the Company or its
subsidiaries during 1997. In addition to loan transactions and other customer
transactions, during the past fiscal year the Company and its subsidiaries have
used products or services of, and have had other transactions with, various
organizations with which Officers and Directors of the Company are affiliated.
The amounts involved have in no case been material in relation to the business
of the Company and its subsidiaries and it is believed that they have not been
material in relation to the business of such other organizations or to the
individuals concerned. It is expected that in the future the Company and its
subsidiaries will continue to have transactions similar to those described in
this paragraph.
FIVE-YEAR STOCKHOLDER RETURN COMPARISON
The following table compares the total return on the Company's Common Stock
over the last five years to the Keefe, Bruyette & Woods ("KBW") New England Bank
Index and the Standard & Poor's 500 Index ("S&P 500"). The KBW New England Bank
Index is comprised of approximately 18 commercial and savings banks located
within the five New England states and ranging in asset size from approximately
$400 million to $3 billion. The Company has decided to include comparisons to
this index, which only first became available in 1994, because it provides a
closer comparison to the Company as it is entirely an index of smaller New
England banks and bank holding companies with similar geographical, size and
market characteristics. Most banks that use the KBW New England Bank Index also
compare themselves to the S&P 500. Total return values for these indices were
calculated based on cumulative total return values, assuming reinvestment of
dividends.
14
<PAGE> 17
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
AMONG UST CORP., STANDARD POOR'S 500 INDEX
AND KBW NEW ENGLAND BANK INDEX
FISCAL YEAR ENDING DECEMBER 31
<TABLE>
<CAPTION>
KBW NEW
MEASUREMENT PERIOD STANDARD AND ENGLAND BANK
(FISCAL YEAR COVERED) UST CORP. POORS 500 INDEX INDEX
<S> <C> <C> <C>
1992 100 100 100
1993 111.84 110.02 133.51
1994 107.89 111.51 134.4
1995 153.16 153.26 209.77
1996 221.63 188.36 289.74
1997 303.74 251.12 498.12
</TABLE>
15
<PAGE> 18
EMPLOYMENT AGREEMENTS
Mr. Finnegan joined the Company in 1993 as President and Chief Executive
Officer of the Company. He has an Employment Agreement with the Company dated as
of November 21, 1995 and amended on January 2, 1997. The Employment Agreement,
as amended, was effective November 21, 1995 and ends on January 4, 2000, and
provides that Mr. Finnegan will serve as President and Chief Executive Officer
of the Company. Mr. Finnegan is paid a base salary of $520,000 per annum, is
eligible for discretionary bonuses and is entitled to those fringe benefits made
available to other senior executives. Mr. Finnegan has received under the
Employment Agreement, as amended, an aggregate of 55,800 shares of Restricted
Common Stock which vest over a three-year period and an aggregate of 200,000
options to acquire the Company's Common Stock at the exercise prices shown in
the tables above. In addition, Mr. Finnegan received under his prior Employment
Agreement, as amended, 60,000 shares of Restricted Common Stock, all of which
have vested and an aggregate of 350,000 options to acquire the Company's Common
Stock. Mr. Finnegan has agreed to a non-competition provision in the Agreement.
In the event of a Change-in-Control (as defined in Mr. Finnegan's Employment
Agreement) of the Company during the term of the Employment Agreement, Mr.
Finnegan may elect: (i) to terminate this Agreement and receive a payment equal
to 2.99 times his "base amount" as defined under Section 280G(b)(3) of the
Internal Revenue Code; or (ii) should his termination be involuntary, to sue for
damages. Should Mr. Finnegan have any unvested shares of Restricted Common Stock
or stock options at the time of a Change-in-Control, vesting of all such shares
shall be accelerated and he will have the right if other employees can have
their options or Restricted Common Stock cashed out, to likewise cash out on the
same basis and at the same time as such other employees. As an example, assuming
a hypothetical Change-in-Control had occurred on March 1, 1998, Mr. Finnegan
would have received, under option (i) above, $2,435,100; however, in any case,
the total amounts payable to Mr. Finnegan upon a Change-in-Control shall be
limited to the maximum amount that is deductible to the Company under Section
280G of the Internal Revenue Code.
Mr. Colasacco, Executive Vice President of the Company and Chairman and
President of USTC, has entered into an Employment Agreement with USTC and joined
in by the Company, dated as of January 1, 1995. The Employment Agreement had a
two and one-half year original term and (unless terminated by Mr. Colasacco by
giving the Company and USTC six months prior notice) successive six month
renewal terms thereafter. In the event, however, that a change in control of
USTC or the Company or other Triggering Event (as defined in the Employment
Agreement) occurs during a renewal term, a new, approximately three-year term
will be triggered and Mr. Colasacco will receive in exchange for an extension of
his employment period and a related noncompetition agreement, the portion
allocated to him of a Formula Payment, as defined in the Employment Agreement,
based upon USTC's Asset Management Division's (the "Division") gross revenues
during the four consecutive calendar quarters preceding the Triggering Event.
During the term of his Employment Agreement, unlike other Executive Officers of
the Company, Mr. Colasacco has not been granted any options to acquire Common
Stock of the Company and Mr. Colasacco's part of the Formula Payment is intended
to substitute for remuneration through the grant of stock options.
Mr. Colasacco's current base salary is $225,375 per annum. Under the
Employment Agreement, and similar agreements with the other, currently four, key
managers of the Division (the "Key Division Managers") the Key Division Managers
receive an aggregate share of the Division's net revenues. Each year, the
Division's gross revenues are compared against a predetermined target, which was
negotiated at the time of the commencement of the Employment Agreement term and
which is adjusted annually for inflation. The aggregate share of the Division's
revenues is a product of approximately 60% of this target. Such share of the
Division's revenue is adjusted for the actual annual revenue performance of the
Division relative to the target. The operating expenses of the Division are
deducted from the aggregate share of the Division's revenues to determine the
amount of incentive balance available to the Key Division Managers. Under the
Employment Agreement, the Key Division Managers determine, as a group, the share
of revenues to be currently allocated to individual managers, including Mr.
Colasacco, after the adjustments due to performance and operating expenses. In
1998, Mr. Colasacco received $600,000 as a result of this revenue sharing
agreement, largely related to his performance in 1997. Under this revenue
sharing arrangement, Mr. Colasacco may also become entitled to receive
substantial, additional amounts from the unpaid incentive balances which would
be
16
<PAGE> 19
allocated among the Key Division Managers. For Mr. Colasacco, the additional
amount allocated from unpaid incentive balances which existed at December 31,
1997 could be in excess of $1 million. The Key Division Managers, subject to
generation of adequate revenues, are also empowered to change Mr. Colasacco's
base annual salary.
Under the Employment Agreement, in the event there is a change in control
of USTC or the Company or other Triggering Event (as defined in the Employment
Agreement), Mr. Colasacco would be entitled to payment equal to the percentage
currently allocated to him under the Division's agreement among the Key Division
Managers multiplied by the product of 3.33 times the Division's after tax
revenues for the previous four consecutive calendar quarters. As an example,
assuming a hypothetical change-in-control had occurred on March 1, 1998, Mr.
Colasacco would have received approximately $2.7 million ($3.35 million
multiplied by 3.33 and further multiplied by 25%, the share currently allocated
to Mr. Colasacco under the Division's agreement among the Key Division
Managers). As discussed above, Mr. Colasacco may also become entitled to receive
additional amounts from the unpaid incentive balances which existed at December
31, 1997.
Mr. Hunt, Executive Vice President, Treasurer and Chief Financial Officer
of the Company, entered into a restated and amended two-year Employment
Agreement with the Company, dated February 1, 1996, which thereafter continues
to run year-to-year unless terminated in writing by either party upon 60-day
notice. Under the terms of the Employment Agreement, Mr. Hunt is paid a base
salary of $250,000 per annum, is eligible for discretionary bonuses and has been
entitled to fringe benefits available to senior executives. Through December 31,
1997, Mr. Hunt has also received an aggregate of 26,100 shares of Restricted
Common Stock and aggregate options to purchase 72,500 shares of the Company's
Common Stock at an average purchase price of $13.41 per share. On January 13,
1998, Mr. Hunt was granted a total of 15,000 stock options, priced at $24.6875,
the fair market value at the close of trading on January 13, 1998. On January
13, 1998, Mr. Hunt was also granted 4,500 shares of Restricted Common Stock,
1,500 shares of which constituted part of the payment of his annual bonus award
for 1997. Under the terms of the Employment Agreement, Mr. Hunt has also agreed
to certain non-solicitation and confidentiality provisions. In addition, under
the Employment Agreement, as amended on December 17, 1996, in the event there is
a Change-in-Control of the Company (as defined in the Employment Agreement) and
Mr. Hunt is not offered continued employment in a similar position with the
successor entity, Mr. Hunt will be entitled to a severance payment equal to two
times the sum of (i) his then current annual base salary for the then most
recent year plus (ii) the bonus which Mr. Hunt earned for performance during the
previous calendar year. As an example, assuming a hypothetical Change-in-Control
had occurred on March 1, 1998, and Mr. Hunt was not offered continued employment
in a similar position with the successor entity, Mr. Hunt would have received
$734,100 ($250,000 base salary plus $117,000 bonus times 2); however, in any
case, the total amounts payable to Mr. Hunt upon a Change-in-Control shall be
limited to the maximum amount that is deductible to the Company under Section
280G of the Internal Revenue Code.
Mr. McAlear, Executive Vice President/Banking Operations and Acquisition
Integration of the Company and Vice Chairman of USTrust, entered into a two-year
Employment Agreement with the Company, dated February 1, 1996, which thereafter
continues year-to-year unless terminated in writing by either party upon 60-day
notice. Under the terms of the Employment Agreement, Mr. McAlear is paid a base
salary of $230,000 per annum subject to discretionary increases, has been
eligible for discretionary bonuses and is entitled to fringe benefits available
to senior executives. Through December 31, 1997, Mr. McAlear has also received
an aggregate of 9,000 shares of Restricted Common Stock and aggregate options to
purchase 88,550 shares of the Company's Common Stock at an average purchase
price of $11.86 per share. On January 13, 1998, Mr. McAlear was granted a total
of 10,000 stock options, priced at $24.6875, the fair market value at the close
of trading on January 13, 1998. On January 13, 1998, Mr. McAlear was also
granted 3,000 shares of Restricted Common Stock, 1,000 shares of which
constituted part of the payment of his annual bonus award for 1997. Under the
terms of the Employment Agreement, Mr. McAlear has also agreed to certain non-
solicitation and confidentiality provisions. In addition, under the Employment
Agreement, as amended on December 17, 1996, in the event there is a
Change-in-Control of the Company (as defined in the Employment Agreement) and
Mr. McAlear is not offered continued employment in a similar position with the
successor entity, Mr. McAlear will be entitled to a severance payment equal to
two times the sum of (i) his then current
17
<PAGE> 20
annual base salary for the then most recent year plus (ii) an amount equal to
the bonus which Mr. McAlear earned for performance during the previous calendar
year. As an example, assuming a Change-in-Control had occurred on March 1, 1998
and Mr. McAlear was not offered continued employment in a similar position with
the successor entity, Mr. McAlear would have received $589,100 ($230,000 base
salary plus $64,700 bonus times 2); however, in any case, the total amounts
payable to Mr. McAlear upon a Change-in-Control shall be limited to the maximum
amount that is deductible to the Company under Section 280G of the Internal
Revenue Code.
Ms. Stevens, Executive Vice President/Credit and Controlled Loans and
Senior Lending Officer of the Company and Vice Chairman of USTrust, entered into
a two-year Employment Agreement with the Company, dated February 1, 1996, which
thereafter continues year-to-year unless terminated in writing by either party
upon 60-day notice. Under the terms of the Employment Agreement, Ms. Stevens is
paid a base salary of $200,000 per annum subject to discretionary increases, has
been eligible for discretionary bonuses and is entitled to fringe benefits
available to senior executives. Through December 31, 1997, Ms. Stevens has also
received an aggregate of 12,000 shares of Restricted Common Stock and aggregate
options to purchase 107,050 shares of the Company's Common Stock at an average
purchase price of $10.78 per share. On January 13, 1998, Ms. Stevens was granted
a total of 10,000 stock options, priced at $24.6875, the fair market value at
the close of trading on January 13, 1998. On January 13, 1998, Ms. Stevens was
also granted 3,000 shares of Restricted Common Stock 1,000 shares of which
constituted part of the payment of her annual bonus award for 1997. Under the
terms of the Employment Agreement, Ms. Stevens has also agreed to certain
non-solicitation and confidentiality provisions. In addition, under the
Employment Agreement, as amended on December 17, 1996, in the event there is a
Change-in-Control of the Company (as defined in the Employment Agreement) and
Ms. Stevens is not offered continued employment in a similar position with the
successor entity, Ms. Stevens will be entitled to a severance payment equal to
two times the sum of (i) her then current annual base salary for the then most
recent year plus (ii) an amount equal to the bonus which Ms. Stevens earned for
performance during the previous calendar year. As an example, assuming a
Change-in-Control had occurred on March 1, 1998 and Ms. Stevens was not offered
continued employment in a similar position with the successor entity, Ms.
Stevens would have received $509,400 ($200,000 base salary plus $54,700 bonus
times 2); however, in any case, the total amounts payable to Ms. Stevens upon a
Change-in-Control shall be limited to the maximum amount that is deductible to
the Company under Section 280G of the Internal Revenue Code.
CERTAIN TRANSACTIONS AND INDEBTEDNESS
As described above under "Compensation Committee Interlocks and Insider
Participation," the Company and its subsidiaries had certain lending and other
transactions and relationships with Directors, Officers and 5% stockholders of
the Company, and their associates, during 1997.
18
<PAGE> 21
EXECUTIVE OFFICERS OF THE COMPANY
In 1987, the Board of Directors of the Company created an Executive Policy
Committee which is the primary management forum of the Company for all strategic
and policy decisions. All decisions of the Executive Policy Committee are
subject to the review and approval of the Board of Directors of the Company. The
Executive Policy Committee has been directed by the Board of Directors to make
recommendations to the Board concerning adoption of policies, strategies and
programs concerning the following, among other matters: (a) acquisitions and
dispositions of corporate entities, assets and/or investments; (b) the issuance
of equity and/or debt; (c) engaging in new business activities; (d) the hiring,
termination, training and motivation of senior management; (e) the development
of marketing programs concerning financial services; (f) improvements to
operations, service delivery and implementation of procedures for cost control;
(g) improvements to the financial reporting and financial control systems; (h)
improvements to the business information systems; and (i) improvements
concerning risk management and legal and regulatory compliance programs. As of
March 31, 1998, there were nine (9) members of the Executive Policy Committee.
The members of the Committee are identified and the background of each Committee
member is set forth below under "Executive Officers".
EXECUTIVE OFFICERS
The names and ages of the executive officers of the Company and each
executive officer's position with the Company and its principal subsidiaries are
listed below. Each such executive officer is elected annually by the Directors
of the Company (or the Directors of the applicable subsidiary of the Company)
and serves until his or her successor is duly chosen and qualified or until his
or her earlier death, removal or disqualification.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH THE COMPANY (AND/OR WHERE
NAME (AGE) APPROPRIATE, POSITION WITH ONE OF THE COMPANY'S SUBSIDIARIES)
---------- -------------------------------------------------------------
<S> <C>
* Neal F. Finnegan (60)........... President, Chief Executive Officer and Director of the
Company and Chairman, President and Chief Executive Officer
of USTrust
* James K. Hunt (54).............. Executive Vice President, Chief Financial Officer and
Treasurer of the Company; Executive Vice President and Chief
Financial Officer of USTrust and Treasurer of UST Leasing
Corporation
* Eric R. Fischer (52)............ Executive Vice President, General Counsel and Clerk of the
Company; Executive Vice President, General Counsel and
Secretary of USTrust and USTC and Clerk of UST Capital Corp.
and UST Leasing Corporation
* Kathie S. Stevens (47).......... Executive Vice President/Credit and Controlled Loans and
Senior Lending Officer of the Company; Vice Chairman and
Senior Lending Officer of USTrust and President of UST
Capital Corp.
* Katharine C. Armstrong (53)..... Executive Vice President/Commercial Lending of the Company
and USTrust
* Robert T. McAlear (55).......... Executive Vice President/Banking Operations and Acquisition
Integration of the Company; Vice Chairman of USTrust
* Walter E. Huskins, Jr.(58)...... Executive Vice President/Administration of the Company and
USTrust and President of UST Leasing Corporation
* Linda J. Lerner (53)............ Senior Vice President/Human Resources of the Company, USTrust
and USTC
* Kenneth L. Sullivan (61)........ Senior Vice President/Operations of the Company and Senior
Vice President of USTrust
George T. Clarke (51)........... Senior Vice President and Controller of the Company and
USTrust and Treasurer of UST Capital Corp.
</TABLE>
- ---------------
* Member, Executive Policy Committee
The following sets forth the principal occupation and background during at
least the past five years of each of the Executive Officers of the Company.
19
<PAGE> 22
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. 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 Boston Corporation
and its principal subsidiary, The First National Bank of Boston. Mr. Fischer is,
and has been since 1984, a member of the faculty of the Morin Center for Banking
and Financial Law Studies of Boston University School of Law. He also serves as
Executive Vice President, General Counsel and Secretary of USTC and USTrust and
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 and Senior Lending Officer of USTrust and Chairman of the Senior Credit
Committee of the Company and USTrust in 1995 and was elected Executive Vice
President/Credit and Controlled Loans of the Company in 1998. 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 serves as Executive Vice President/Commercial Lending of the
Company and USTrust. 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/Banking Operations and
Acquisition Integration of the Company in 1998. Previously, Mr. McAlear served
as Executive Vice President/Controlled Loans and Credit of the Company. He has
served as Vice Chairman of USTrust since he joined the Company in 1990. His
primary responsibilities involve supervision of banking operations and the
integration of banks and branches acquired by the Company. Prior to 1990, Mr.
McAlear served as an Executive Vice President in the lending area of the Bank of
New England.
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 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, USTrust and USTC. 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
20
<PAGE> 23
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.
Mr. Clarke was promoted to Senior Vice President and Controller of the
Company in 1994 and of USTrust in 1996. From 1988 to 1994 he served as Vice
President and Controller of the Company. 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.
Other than as disclosed in this Proxy Statement, 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.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
selected the firm of Arthur Andersen LLP, independent public accountants, as
auditors of the Company for 1998. The Company has been advised by such firm that
neither it nor any member or associate of such firm has any relationship with
the Company or with any of its affiliates other than as independent accountants
and auditors. Arthur Andersen LLP has served as the Company's independent
auditor since the Company's organization in 1967.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting, will have an opportunity to make any statement they may desire to make,
and will be available to answer appropriate questions from stockholders.
TO APPROVE, UPON THE RECOMMENDATION OF THE BOARD, THE COMPANY'S
NEW ANNUAL INCENTIVE PLAN
(NOTICE ITEM 2)
The Company's Annual Incentive Plan (the "Incentive Plan") was adopted by
the Board of Directors of the Company on March 17, 1998, subject to approval by
the stockholders of the Company. The Incentive Plan is intended to advance the
Company's interest by enhancing its ability to attract and retain key executives
of the Company through the grant of performance-based incentive awards.
Under Section 162(m) of the Internal Revenue Code (the "Code"), the
deductibility of compensation to any of a corporation's "covered employees"
(generally, the Chief Executive Officer and the other four top officers by pay)
is limited to $1,000,000 in any year. Certain performance-based compensation
under shareholder approved plans may qualify for an exception to this deduction
limitation. The Incentive Plan permits the grant of awards to eligible
executives who are or are likely to be "covered employees" as so defined and
whose award compensation (if not exempted) would likely be subject in whole or
in part to the deduction limitation ("Section 162(m) officers"), as well as
awards to other key employees. Awards under the plan to Section 162(m) officers
are intended to qualify for the performance-based exemption under Section 162(m)
of the Code.
The Incentive Plan contemplates that amounts earned under awards may be
paid in the form of cash or Restricted Common Stock. Any shares of Restricted
Common Stock delivered in satisfaction of amounts earned under an Incentive Plan
award would be issued under, and would be subject to the additional terms of,
the Company's Stock Compensation Plan.
Stockholders of the Company are requested to approve the Incentive Plan at
the Annual Meeting. Any awards made under the Incentive Plan prior to the Annual
Meeting will be subject to such approval. The following summary of the Incentive
Plan is qualified in its entirety by the full text of the Incentive Plan that
appears as Exhibit A attached to this Proxy Statement.
ADMINISTRATION
The Incentive Plan is administered by the Compensation Committee. Except
for matters pertaining to awards to Section 162(m) officers or matters requiring
action by the Compensation Committee under the
21
<PAGE> 24
Stock Compensation Plan, the Compensation Committee may delegate its functions
under the Incentive Plan to the Chief Executive Officer of the Company.
ELIGIBILITY
Participation in the Incentive Plan is limited to those executives and
other key employees of the Company who are from time to time selected by the
Compensation Committee. Eligible persons selected to participate in the
Incentive Plan for a particular year may, but need not, be selected for
participation in any subsequent year.
GRANT OF AWARDS; ESTABLISHMENT OF PERFORMANCE GOALS
Each year the Compensation Committee may grant awards to those eligible
employees who have been selected to participate in the Incentive Plan for the
year. Each award will specify the performance goals (including, if the
Compensation Committee so determines, minimum, target, maximum or other measures
of achievement) that must be met in order for payment or specified levels of
payment to be made under the award. Except in the case of awards to Section
162(m) officers, award payments may be based in whole or in part on subjective
performance measures. The maximum payment that may be made to any participant
under the Incentive Plan for any year is $1,750,000. If any portion of an award
is paid in the form of shares of Common Stock, the limitation described in the
preceding sentence will be applied by valuing such shares at their closing price
on the trading date immediately preceding the date payments under the award are
made.
Special additional rules apply in the case of awards to Section 162(m)
officers. In general, payments under an award to a Section 162(m) officer must
be contingent on satisfaction of one or more qualifying performance goals that
have been preestablished by the Compensation Committee not later than 90 days
after the commencement of the fiscal year to which the award relates (although
the Compensation Committee may retain and exercise the discretion to lower or
eliminate payments under an award, including on the basis of subjective
performances considerations, even if the preestablished performance goals have
been satisfied), and no payment will be made until the Compensation Committee
certifies to the extent required under Section 162(m) of the Code that the
preestablished goals have been met. For purposes of the Incentive Plan, a
qualifying performance goal is one that states an objective performance formula
or standard based on any one or more of the following determined by reference to
the Company on a consolidated basis in accordance with generally accepted
accounting principles consistently applied: (i) adjusted net income before
securities transactions and before any extraordinary, unusual or non-recurring
items of gain or loss that are identified and quantified separately in the
audited financial statements, net of tax effect and after preferred dividends;
(ii) return on average assets, determined by dividing adjusted net income (as
defined) by average total assets for the year; (iii) return on average equity,
determined by dividing adjusted net income (as defined) by average adjusted
stockholders' investment for the year excluding any adjustment for SFAS No. 115;
(iv) earnings per share, determined by dividing adjusted net income (as defined)
by the weighted average number of fully diluted shares during the measurement
period; (v) asset quality, defined as the ratio of substandard and nonperforming
assets to the sum of total loans and the balance in the reserve for possible
loan losses; (vi) efficiency ratio, defined as noninterest expense, excluding
expenses related to other real estate owned and any extraordinary, unusual or
non-recurring items, divided by the total revenue from net interest income plus
noninterest income, excluding the effect of gains and losses from the sale of
assets and any extraordinary or nonrecurring items of gain or loss that are
identified and quantified separately in the audited financial statements; and
(vii) asset growth, defined as the difference between average total assets for
the year and the prior year divided by average assets as reported for the prior
year.
PAYMENT OF AWARDS
In general, amounts (if any) payable under an award will be determined and
paid only after the close of the fiscal year to which the award relates (and, in
the case of awards to Section 162(m) officers, only after certification by the
Compensation Committee that the performance goals to which the award was subject
have been met), and a participant must be employed by the Company on the date of
payment in order to receive the payment. However, the Incentive Plan provides
for possible earlier payment in certain circumstances. If a
22
<PAGE> 25
participant suffers a termination of employment by reason of death or disability
(as determined under the Incentive Plan), the Company will pay to the
participant or, in the case of death, to the participant's designated
beneficiary or estate a prorated portion of the estimated benefit that in the
Compensation Committee's judgment would have been earned had the participant
continued in employment. If a change in control of the Company occurs, the
Company will promptly pay to each participant for the year in which the change
in control occurs the greater of his or her target award for the year (based on
the participant's base salary rate in effect at time of payment or the rate in
effect immediately prior to the change in control, if higher) or, if the change
in control occurs after at least six months of the fiscal year have elapsed, the
payment the participant would have received under his or her award (assuming no
reduction for factors other than qualified performance factors as described
above) assuming fiscal year performance equal to the annualized equivalent of
performance measured through the most recent practicable measuring date
coinciding with or preceding the date of the change in control. If award
payments for the preceding fiscal year have not yet been determined or paid, the
Company will also pay those award payments based on performance for the year
(and assuming no reduction for subjective performance factors).
AMENDMENT AND TERMINATION
The Incentive Plan has no fixed expiration date. Under the regulations
under Section 162(m) of the Code, however, if the Incentive Plan is approved at
the Annual Meeting, the continued exemption of awards under the Incentive Plan
would require that the material terms of the performance goals applicable to
Section 162(m) officers be again disclosed to and approved by the shareholders
of the Company not later than the first shareholder meeting occurring in 2003.
The Board of Directors and the Compensation Committee reserve the right to amend
or terminate the Incentive Plan at any time, including as to awards already
granted but not paid. No amendment or termination would affect a participant's
rights to any Restricted Common Stock that had been issued under the Stock
Compensation Plan except to the extent, if any, provided in that plan.
RECOMMENDATION OF YOUR BOARD OF DIRECTORS TO VOTE "FOR" THIS PROPOSAL
The Board of Directors believes that the adoption of the Annual Incentive
Plan will promote the interests of the Company and the stockholders and help the
Company and its subsidiaries to attract and retain qualified senior executives.
Accordingly, the Board of Directors has approved the adoption of the Annual
Incentive Plan and recommends that the stockholders vote "for" the proposal to
adopt the Annual Incentive Plan. Proxies solicited by the Board of Directors
will be so voted unless stockholders specify otherwise.
To approve the Annual Incentive Plan, the vote holders of a majority of the
shares present or represented and entitled to vote on the proposal at the
meeting is required. An abstention will have the effect of a vote against the
proposal, while a broker non-vote (i.e., shares held by brokers or nominees as
to which (i) instructions have not been received from the beneficial owners and
(ii) the broker or nominee does not have the discretionary authority to vote on
a particular matter) will have no effect on the outcome.
ACTION TO BE TAKEN -- OTHER BUSINESS
(NOTICE ITEM 3)
As of the date of this Proxy Statement, the Board of Directors does not
intend to present at the Meeting any business other than the two specific items
listed in the notice, and it has not been informed of any business intended to
be presented by others. Should any other matters, however, properly come before
the meeting, the persons named in the enclosed Proxy will take action, and vote
Proxies, in accordance with their judgment on such matters.
Action may be taken on the business to be transacted at the meeting on the
date specified in the Notice of Annual Meeting or on any date or dates to which
such meeting may be adjourned.
23
<PAGE> 26
SECURITY OWNERSHIP OF MANAGEMENT
As of March 31, 1998, the Company was unaware of any stockholder or related
group of stockholders which beneficially owned more than five percent of the
Company's Common Stock.
The following table shows the number of shares and percentage of the
Company's Common Stock beneficially owned or owned through the Company's
Deferred Compensation Plan by each Director and nominee for Director, each Named
Executive Officer in the Summary Compensation Table above and by all Directors
and Officers of the Company as a group, as of March 31, 1998. Units in the
Deferred Compensation Plan have no voting rights and the underlying shares of
the Company's Common Stock associated with such units may not be sold until the
individual holder retires from the Company or dies:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL DEFERRED PERCENT OF
NAME OWNERSHIP(1) PLAN(2) TOTAL CLASS
---- ------------ -------- ------- ----------
<S> <C> <C> <C> <C>
Chester G. Atkins........................ 9,679(3) 9,679 *
David E. Bradbury........................ 321,525(4) 321,525 1.08%
Robert M. Coard.......................... 8,253(5) 2,039 10,292 *
Domenic Colasacco........................ 40,779(6) 40,779 *
Robert L. Culver......................... 12,665(7) 12,665 *
Alan K. DerKazarian...................... 18,703(8) 1,395 20,098 *
Donald C. Dolben......................... 9,050(9) 9,050 *
Neal F. Finnegan......................... 643,687(10) 643,687 2.16%
Edward Guzovsky.......................... 31,091(11) 3,322 34,413 *
Wallace M. Haselton...................... 94,176(12) 9,845 104,021 *
Brian W. Hotarek......................... 12,400(13) 3,762 16,162 *
James K. Hunt............................ 127,299(14) 127,299 *
Robert T. McAlear........................ 111,798(15) 111,798 *
Francis X. Messina....................... 421,092(16) 24,005 445,097 1.50%
Michael A. Miller........................ 531,000(17) 531,000 1.78%
Sydney L. Miller......................... 125,331(18) 4,242 129,573 *
Vikki L. Pryor........................... 5,097(19) 5,097 *
Gerald M. Ridge.......................... 56,767(20) 56,767 *
William Schwartz......................... 16,925(21) 37,889 54,814 *
Barbara C. Sidell........................ 521,029(22) 521,029 1.75%
James V. Sidell.......................... 361,098(23) 361,098 1.21%
Paul D. Slater........................... 132,877(24) 16,444 149,321 *
Kathie S. Stevens........................ 121,760(25) 121,760 *
Edward J. Sullivan....................... 19,450(26) 19,450 *
G. Robert Tod............................ 475 475 *
Michael J. Verrochi...................... 195,054(27) 1,330 196,384 *
Gordon M. Weiner......................... 8,119(28) 8,119 *
ALL DIRECTORS AND OFFICERS AS A GROUP (33
persons)............................... 4,397,237(29) 104,273 4,501,510 15.10%
</TABLE>
- ---------------
* Less than 1%.
(1) Information as to the interests of the respective Executive Officers,
Directors and nominees has been furnished in part by them. As of March 31,
1998, all such shares are held of record unless otherwise indicated. The
inclusion of information concerning shares held by or for their spouses,
children or by trusts or corporations in which they have an interest does
not constitute an admission by such persons of beneficial ownership
thereof. Unless otherwise indicated, all persons have sole voting and
dispositive power as to all shares they are shown as owning.
24
<PAGE> 27
(2) Denotes units representing share equivalents held in deferred compensation
accounts as of December 31, 1997. Units in the Deferred Compensation Plan
have no voting rights and the underlying shares of the Company's Common
Stock associated with such units may not be sold until the individual
holder retires from the Company or dies.
(3) Includes options to acquire 3,800 shares which are fully vested, but not
yet exercised.
(4) Includes options to acquire 48,188 shares which are fully vested, but not
yet exercised.
(5) Includes options to acquire 8,000 shares which are fully vested, but not
yet exercised.
(6) Includes 3,150 shares beneficially owned by Mr. Colasacco's wife and 700
shares owned by each of his three daughters of the Company's Common Stock
as to which Mr. Colasacco disclaims any beneficial interest. Also includes
8,500 shares held for Mr. Colasacco's benefit under the Company's Employee
Stock Ownership Plan.
(7) Includes options to acquire 12,500 shares which are fully vested, but not
yet exercised.
(8) Includes options to acquire 8,000 shares which are fully vested, but not
yet exercised.
(9) Mr. Dolben's wife beneficially owns an additional 1,604 shares to which Mr.
Dolben disclaims any beneficial interest. Includes options to acquire 8,000
shares which are fully vested, but not yet exercised.
(10) Includes 25,800 shares of Common Stock which remain subject to forfeiture
as Restricted Common Stock pursuant to the Company's Stock Compensation
Plan and an aggregate of 420,000 shares which Mr. Finnegan has the present
right to acquire through the exercise of stock options. Also includes 544
shares held for Mr. Finnegan's benefit under the Company's Employee Stock
Ownership Plan.
(11) Includes 22,293 shares held in Mr. Guzovsky's wife's name. Includes options
to acquire 8,000 shares which are fully vested, but not yet exercised.
(12) Includes options to acquire 12,500 shares which are fully vested, but not
yet exercised.
(13) Includes 400 shares owned by Mr. Hotarek's minor daughter and 200 shares
owned by Mr. Hotarek's minor son to which Mr. Hotarek disclaims any
beneficial interest. Includes options to acquire 11,500 shares which are
fully vested, but not yet exercised.
(14) Includes options to acquire 70,500 shares which are fully vested, but not
yet exercised, and 7,700 shares which remain subject to forfeiture as
Restricted Common Stock pursuant to the Company's Stock Compensation Plan.
(15) Includes an aggregate of 71,700 shares which Mr. McAlear has the present
right to acquire through the exercise of stock options, and 1,043 shares
held for Mr. McAlear's benefit under the Company's Employee Stock Ownership
Plan.
(16) Includes options to acquire 12,500 shares which are fully vested, but not
yet exercised.
(17) Includes 236,000 shares owned by MAM Family Limited Partnership of which
Mr. Michael A. Miller is General Partner.
(18) Includes 14,853 shares beneficially owned by Mr. Sydney L. Miller's wife
and 1,023 shares owned by each of his three children in trust. Does not
include an aggregate of 148,033 shares held by Mr. Sydney L. Miller's adult
children, sister and sister-in-law as to which Mr. Sydney L. Miller
disclaims beneficial ownership. Includes options to acquire 12,500 shares
which are fully vested, but not yet exercised.
(19) Includes options to acquire 5,000 shares which are fully vested, but not
yet exercised.
(20) Includes 3,242 shares owned by G. M. Ridge Corp. of which Mr. Ridge is
President. Includes options to acquire 12,500 shares which are fully
vested, but not yet exercised.
(21) All 6,825 shares are held jointly with Mr. Schwartz's wife. Includes
options to acquire 10,100 shares which are fully vested, but not yet
exercised.
(22) Includes options to acquire 12,500 shares which are fully vested, but not
yet exercised.
(23) Includes 348,598 shares held directly. Does not include any shares of
Common Stock beneficially owned by Mr. Sidell's former spouse, Barbara C.
Sidell, as to which Mr. Sidell disclaims any beneficial
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ownership. Also does not include 34,814 shares owned by the daughters and
grandchildren of James V. Sidell and Barbara C. Sidell, as to which shares
Mr. Sidell disclaims any beneficial ownership. Furthermore, does not
include an aggregate of 5,963 shares of Common Stock held by Mr. Sidell's
wife Louisa Kasdon-Sidell and Mr. Sidell's stepchildren, one of whom is a
minor, as to all of which Mr. Sidell disclaims any beneficial ownership.
Includes options to acquire 12,500 shares which are fully vested, but not
yet exercised.
(24) Does not include 74,369 shares owned by Mr. Slater's sister as to which
shares Mr. Slater disclaims beneficial ownership. The number of shares
reported are held by Mr. Slater and his wife as tenants by the entirety.
Includes options to acquire 12,500 shares which are fully vested, but not
yet exercised.
(25) Includes an aggregate of 90,200 shares which Ms. Stevens has the present
right to acquire through the exercise of Stock Options and 1,723 shares
held for Ms. Stevens' benefit under the Company's Employee Stock Ownership
Plan.
(26) Includes 9,521 shares held jointly with Mr. Sullivan's spouse and 506
shares held in Mr. Sullivan's spouse's IRA. Includes options to acquire
8,000 shares which are fully vested, but not yet exercised.
(27) Includes an aggregate of 164,074 shares held by Mr. Verrochi indirectly
through an affiliated realty trust and a corporation of which he is
President. Includes options to acquire 12,500 shares which are fully
vested, but not yet exercised.
(28) Does not include 1,050 shares owned by Mr. Weiner's wife of which he
disclaims beneficial ownership. Includes options to acquire 8,000 shares
which are fully vested, but not yet exercised
(29) The amount includes 1,203,022 shares of Common Stock subject to exercisable
outstanding stock options and also includes 19,268 shares held by the
Company's subsidiary, United States Trust Company, as trustee under the
Company's Employee Stock Ownership Plan and allocated to such Directors and
Officers. The total number of shares held in the Company's Employee Stock
Ownership Plan and allocated to all employees with United States Trust
Company as record owner is 314,658.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's Executive Officers and Directors to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Executive Officers and Directors are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely upon its
review of the copies of such forms and certain certifications received from the
Directors and Executive Officers, the Company believes that, during 1997, all
such filing requirements applicable to its Executive Officers and Directors were
complied with by such individuals.
STOCKHOLDER PROPOSALS
Any stockholder of the Company may present a proposal for consideration at
future meetings of the stockholders of the Company. Any proposal for
consideration at next year's meeting of stockholders must be received by the
Company at its principal executive offices, 40 Court Street, Boston,
Massachusetts 02108, Attention: Eric R. Fischer, Executive Vice President,
General Counsel and Clerk, no later than December 16, 1998, except that if the
next year's annual meeting date is changed by more than 30 calendar days from
the regularly scheduled date, May 18, 1999, the Company must receive such a
proposal within a reasonable time before the Board of Directors makes its proxy
solicitation.
ADDITIONAL FINANCIAL INFORMATION
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1997, which includes financial statements, has been previously
mailed or mailed simultaneously herewith to all stockholders. The Annual Report
is not to be regarded as proxy soliciting material.
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10-K REPORT
A copy of the Company's Annual Report to the SEC on Form 10-K for the year
ended December 31, 1997 has been previously mailed or mailed simultaneously
herewith to all stockholders as part of the Company's Annual Report to
Stockholders.
By Order of the Board of Directors
/s/ Eric R. Fischer
Eric R. Fischer
Clerk
Dated: April 15, 1998
Boston, Massachusetts
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<PAGE> 30
EXHIBIT A
UST CORP.
ANNUAL INCENTIVE PLAN
(EFFECTIVE JANUARY 1, 1998)
1. Purpose. The Annual Incentive Plan set forth herein has been adopted
to assist UST Corp. in attracting and retaining key employees by providing
performance-based incentive compensation opportunities to such employees. The
Annual Incentive Plan is intended to provide for performance compensation that
is exempt from the limitations of Section 162(m) of the Code.
2. Definitions. Capitalized terms shall have the following meanings when
used in the Plan:
- "Award": A grant, satisfying the requirements of Section 5 below, that
gives to an Eligible Employee the opportunity to earn incentive
compensation under the Plan based on the terms of the Award.
- "Award Payment": Payment under an Award made in accordance with Section
7 below.
- "Board": The Board of Directors of the Corporation.
- "Change in Control": A change in control of the Corporation described in
Section 9 below.
- "Committee": The Compensation Committee of the Board.
- "Corporation": UST Corp., a Massachusetts corporation, or (except where
used in the definition of Change in Control) any successor to the
business or assets of UST Corp. that assumes the Plan.
- "Disability": Disability as defined under the Corporation's long term
disability plan or, if no such plan is in force at the time, as
determined by the Committee.
- "Eligible Employee": An executive officer of the Corporation or a key
employee (other than an executive officer of the Corporation) who is
designated as eligible by the Committee.
- "Fiscal Year": The fiscal year of the Corporation.
- "Participant": For any Fiscal Year, an Eligible Employee who is selected
to receive an Award under the Plan for such year.
- "Plan": the UST Corp. Annual Incentive Plan set forth herein, as the
same may from time to time be amended.
- "Qualified Performance Criteria": Any of the following determined by
reference to the Corporation on a consolidated basis in accordance with
generally accepted accounting principles consistently applied:
(i) adjusted net income, defined as net income before securities
transactions and before any extraordinary, unusual or non-recurring items
of gain or loss that are identified and quantified separately in the
audited financial statements, net of tax effect and after preferred
dividends;
(ii) return on average assets, determined by dividing adjusted net
income (as defined in clause (i)) by average total assets for the year;
(iii) return on average equity, determined by dividing adjusted net
income (as defined in clause (i)) by average adjusted stockholders'
investment for the year excluding any adjustment for SFAS No. 115;
(iv) earnings per share, determined by dividing net income (as defined
in clause (i)) by the weighted average number of fully diluted shares
during the measurement period;
(v) asset quality, defined as the ratio of substandard and
nonperforming assets to the sum of total loans and the balance in the
reserve for possible loan losses;
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(vi) efficiency ratio, defined as noninterest expense, excluding
expenses related to other real estate owned and any extraordinary, unusual
or non-recurring items, divided by the total revenue from net interest
income plus noninterest income, excluding the effect of gains and losses
from the sale of assets and any extraordinary or nonrecurring items of gain
or loss that are identified and quantified separately in the audited
financial statements; and
(vii) asset growth, defined as the difference between average total
assets for the year and the prior year divided by average assets as
reported for the prior year.
- "Section 162(m) officer": An Eligible Employee who is or is likely to be
a "covered employee" as defined in Section 162(m) of the Code with
respect to an Award under the Plan and whose Award Payment, if any, if
not exempt under Section 162(m) of the Code would likely be subject in
whole or in part to the deduction limitation of Section 162(m) of the
Code all determined by the Committee.
- "Stock Plan": The Corporation's Stock Compensation Plan.
3. Administration of the Plan. The Plan shall be administered by the
Committee, which shall have the authority in its discretion to determine
eligibility for and grant Awards, to determine the terms and conditions of any
Award, to prescribe such forms and documents as it deems appropriate in
connection with the administration of the Plan, to construe the terms of the
Plan and resolve all questions arising under the Plan, to determine and certify
as to whether the conditions for payment under any Award have been met, and
generally to do all such things as it deems necessary or appropriate to
administer the Plan. The Committee may delegate to the Chief Executive Officer
the authority to exercise the authority described in the preceding sentence with
respect to Awards to Participants other than Section 162(m) officers, and may
delegate ministerial responsibilities to such employees of the Corporation as it
deems appropriate. If the Committee so delegates its authority to the Chief
Executive Officer, references herein to the Committee (other than in Section 15)
shall be deemed to include the Chief Executive Officer to the extent of such
delegation. No determination by the Chief Executive Officer under the Plan shall
affect the grant, determination, or construction of (or the determination or
payment of any amounts under) any Award involving a Section 162(m) officer.
4. Participation. The Committee shall select which Eligible Employees are
to participate in the Plan for any Fiscal Year. The fact that an Eligible
Employee has been selected to participate in the Plan for a Fiscal Year shall
not entitle such Eligible Employee to participate in the Plan, or if a
Participant to receive a comparable Award, for any subsequent Fiscal Year.
5. Grants of Awards. The Committee shall grant Awards under the Plan for
each Fiscal Year at such time or times as it deems appropriate; provided, that
in the case of a Section 162(m) officer, any Award for a Fiscal Year shall be
made not later than 90 days after the commencement of the Fiscal Year. In
connection with each Award (and, in the case of Awards to Section 162(m)
officers, not later than 90 days after the commencement of the Fiscal Year), the
Committee shall establish the performance goals required to be met, in whole or
in part, in order for an Award Payment to be made with respect to the Award and
the target, maximum or other amount or amounts, expressed as a percentage of
base salary, that may be paid if such performance goals are so met. In the case
of Awards to Section 162(m) officers, such performance goals shall be
susceptible of objective measurement and shall be based solely on one or more
Qualified Performance Criteria. The Committee shall notify each Participant of
the terms of his or her Award.
6. Determination of Performance Achievements. As soon as practicable
after the close of each Fiscal Year, the Committee shall determine the extent,
if any, to which the performance goals preestablished with respect to Awards for
such Fiscal Year have been met, and in the case of Awards to Section 162(m)
officers shall certify (in such form as may be required under the regulations
under Section 162(m) of the Code) as to the results of its determination.
7. Award Payments.
(a) As soon as practicable after the close of each Fiscal Year, but
not earlier than the determinations and, to the extent applicable,
certification described in Section 6 above, the Committee shall pay to each
Participant for the Fiscal Year the amount determined by the Committee to
have been earned by
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the Participant under his or her Award for the Fiscal Year. In determining
the amount, if any, to be paid under an Award, the Committee may take into
account such factors (including, without limitation, individual job
performance or other subjective criteria) as it deems appropriate;
provided, that the maximum payment under Awards to any Participant for any
Fiscal Year shall be $1,750,000; and further provided, that in the case of
an Award to a Section 162(m) officer, payments shall be limited by
paragraph (b) below. Except as provided at Sections 8 and 9 below, no Award
Payment shall be made to any Participant who is not employed by the
Corporation or its subsidiaries at the time of payment.
(b) In the case of an Award to a Section 162(m) officer, Award
Payments, if any, shall be conditioned on certification by the Committee as
described in Section 6 above that the objective performance goals (based on
one or more Qualified Performance Criteria) established by the Committee
under Section 5 above have been met to the extent required for payment at
the time such goals were so established. In the absence of such a
certification no payment shall be made under an Award to a Section 162(m)
officer. The Committee in its sole discretion may reduce, but not increase,
the objectively determinable amount that would otherwise be payable to a
Section 162(m) officer (based on attainment of preestablished performance
goals), including a reduction to zero, if the Committee determines such
reduction to be appropriate based on such personal, corporate or other
factors as the Committee deems appropriate.
(c) Award Payments shall be made in cash or, if so determined by the
Committee, in shares of restricted common stock of the Corporation issued
under the Stock Plan or a combination of cash and such restricted common
stock. Any restricted common stock issued under the Stock Plan shall be
valued for purposes of applying the $1,750,000 limit described at paragraph
(a) above at the closing price of the common stock of the Corporation on
the trading day that immediately precedes the date Award Payments are made
for the Fiscal Year.
8. Death or Disability of a Participant. In the event a Participant dies
or suffers a termination of employment by reason of death or disability after an
Award has been granted to the Participant but before the Award Payment has been
determined and paid, there shall be paid to the Participant (or, in the event of
death, to the Participant's beneficiary or estate) a prorated amount equal to
the Award Payment that the Committee estimates would have been paid to the
Participant had his or her employment continued multiplied by a fraction, the
numerator of which is the number of completed calendar months of employment
during the Fiscal Year and the denominator of which is twelve.
9. Change in Control.
(a) In the event of a Change in Control, the Corporation shall pay to
each Eligible Employee who is a Participant with respect to the Fiscal Year
in which the Change in Control occurs and who is employed by the
Corporation or its subsidiaries immediately prior to the Change in Control
an amount equal to the greater of (a) 100% of the Participant's target
Award Payment for the Fiscal Year in which the Change in Control occurs,
based on the Participant's base salary as in effect at time of payment or,
if higher, the Participant's base salary as in effect immediately prior to
the Change in Control, and (b) if the Change in Control occurs after at
least six months of the Fiscal Year have elapsed, the amount the
Participant would have earned under his or her Award for the Fiscal Year
assuming annualized performance based on performance through the date of
the Change in Control and assuming no reduction in Award Payments for
factors other than objective performance factors. In addition, if at the
time of a Change in Control there has been no determination or payment of
Award Payments for the preceding Fiscal Year, the Corporation shall pay to
each individual who was a Participant with respect to such prior Fiscal
Year the full amount to which he or she would have been paid assuming
certification by the Committee of the performance for such Fiscal Year and
assuming no reduction in Award Payments for factors other than objective
performance factors. Payments under this Section 9 shall be made not later
than ten (10) days following the Change in Control.
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(b) For purposes of the Plan, a Change in Control shall be deemed to
have occurred if:
(i) any "person," as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"), (other than
the Corporation, any trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, or securities of
the Corporation representing 25% or more of the combined voting power of
the Corporation's then outstanding securities;
(ii) during any period of two consecutive years (not including any
period prior to the execution of the Plan), individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Corporation to effect a transaction described in
clause (i), (iii) or (iv) of this Section 9(b)) whose election by the
Board or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds ( 2/3) of the directors then
still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved
(hereinafter referred to as "Continuing Directors"), cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than
a merger or consolidation which would result in the voting securities of
the Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after such merger of
consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Corporation (or similar
transaction) in which no "person" (as hereinabove defined) acquires more
than 25% of the combined voting power of the Corporation's then
outstanding securities shall not constitute a Change in Control of the
Corporation; or
(iv) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets.
10. Designation of beneficiary. Each Participant may designate a
beneficiary or beneficiaries to receive any amounts payable to the Participant
under the Plan. Each such designation and any change in such designation shall
be made in writing on a form and in a manner prescribed or approved by the
Committee. In the absence of an effective beneficiary designation, amounts, if
any, that are payable under an Award with respect to a deceased Participant
shall be paid to his or her estate. Notwithstanding the foregoing, the delivery
of any shares of common stock under the Stock Plan shall be limited to and
subject to the terms of the Stock Plan.
11. Plan not exclusive; effect on employment agreements. The
establishment of the Plan and the granting of Awards hereunder shall not affect
the right of the Corporation to establish other plans or pay other compensation
or benefits to or for the benefit of Eligible Employees hereunder, subject only
to the proviso that any such other compensation or benefits shall be awarded and
paid in a manner that is consistent with the continued qualification under
Section 162(m) of the Code of Awards hereunder made to Section 162(m) officers.
The Plan shall not be construed as reducing or otherwise adversely affecting any
rights that an Eligible Employee may have to incentive compensation under an
employment agreement with the Corporation.
12. No employment rights. Nothing in the Plan or in any Award granted
hereunder shall be construed as conferring on any individual any right to
employment or continued employment with the Corporation or any of its
subsidiaries or as restricting in any way the right of the Corporation to
terminate such individual's
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employment, nor shall the loss or potential of benefits under any Award be an
element of damages in any claim against the Corporation or its subsidiaries.
13. Taxes. All payments under the Plan or any Award shall be reduced by
all taxes and other required withholdings.
14. Shareholder approval. The Plan has been established effective as of
January 1, 1998 subject to the approval of the stockholders of the Corporation
at the 1998 Annual Meeting. Awards may be made under the Plan prior to such
approval but shall be subject to such approval.
15. Amendment and termination. The Committee or the Board may suspend or
terminate the Plan at any time and may amend the Plan from time to time. No such
action shall affect a Participant's rights to shares of common stock issued
under the Stock Plan except to the extent consistent with the terms of the Stock
Plan.
16. Construction. The Plan and Awards under the Plan shall be construed
in accordance with the laws of the Commonwealth of Massachusetts.
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