<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
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 Rule 14a-11(c) or Rule 14a-12
UST INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
UST INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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 transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / 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 registrations 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:
- --------------------------------------------------------------------------------
- ---------------
(1)Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
NOTICE OF 1994 ANNUAL MEETING
AND PROXY STATEMENT
<PAGE> 3
UST
100 West Putnam Avenue
Greenwich, Connecticut 06830
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 25, 1994
To the Stockholders of UST:
The 1994 Annual Meeting of Stockholders of UST Inc. (the "Company") will be held
at the Cole Auditorium of the Greenwich Library, 101 West Putnam Avenue,
Greenwich, Connecticut, on Tuesday, the 3rd day of May 1994, at 10:00 a.m.,
Eastern Daylight Saving Time, for the following purposes:
(1) to elect three directors for terms of three years each;
(2) to ratify and approve the selection of independent auditors of the
accounts of the Company for the year 1994;
(3) to consider and act upon two stockholder proposals, if presented by the
proponents; and
(4) to consider and act upon such other business as may properly come
before the meeting.
Stockholders of record at the close of business on March 10, 1994 will be
entitled to vote at the meeting. The approximate date of mailing of this Proxy
Statement is March 25, 1994.
JONATHAN P. NELSON,
Secretary
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
<PAGE> 4
UST
100 WEST PUTNAM AVENUE
GREENWICH, CONNECTICUT 06830
PROXY STATEMENT
SOLICITATION OF PROXY
The enclosed proxy is solicited by the Board of Directors (the "Board") of UST
Inc. (the "Company") for use at the Annual Meeting of Stockholders to be held
May 3, 1994, including any adjournment thereof (the "Annual Meeting"). Whether
or not you plan to attend the Annual Meeting, the Board respectfully requests
the privilege of voting on your behalf and urges you to sign, date and return
the enclosed proxy. By doing so you will, unless such proxy is subsequently
revoked by you, authorize the persons named therein, or any of them, to act on
your behalf at the Annual Meeting.
Any stockholder who submits a proxy may revoke it by giving a written notice of
revocation to the Secretary or, before the proxy is voted, by submitting a duly
executed proxy bearing a later date.
ATTENDANCE AND PROCEDURES AT ANNUAL MEETING
Attendance at the annual meeting will be limited to stockholders of record,
beneficial owners of Company common stock entitled to vote at the meeting having
evidence of ownership, the authorized representative (one only) of an absent
stockholder, and invited guests of the Company. Any person claiming to be an
authorized representative of a stockholder must, upon request, produce written
evidence of such authorization. In addition, management will require all signs,
banners and placards to be left outside the meeting room.
ACTION TO BE TAKEN AT MEETING
1. Three directors will be elected to serve for terms of three years each and
until their respective successors are elected and qualified.
2. A resolution will be offered to ratify and approve the selection of
independent auditors of the accounts of the Company for the year 1994.
3. The Company has been advised that two resolutions will be offered by
stockholders.
Your authorized proxies will vote FOR the election of the individuals herein
nominated for directors and the resolution regarding the auditors, and AGAINST
the stockholders' resolutions, unless you designate otherwise. A proxy
designating how it should be voted will be voted accordingly.
1
<PAGE> 5
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Certificate of Incorporation provides for the election of one-third (as
nearly as may be) of the Board annually. The Board currently consists of ten
members.
The Board, at a meeting held on December 16, 1993, upon recommendation of the
Nominating and Compensation Committee, nominated three directors to be elected
at the Annual Meeting for terms expiring at the Annual Meeting of Stockholders
to be held in 1997.
Directors are elected by a plurality of the votes cast. "Plurality" means that
the nominees who receive the largest number of votes cast "For" are elected as
directors, up to the maximum number of directors to be chosen at the Annual
Meeting. Consequently, any shares not voted "For" a particular nominee as a
result of a direction to withhold or a broker nonvote will not affect the
outcome of the vote.
Set forth in Table I below is certain information with respect to each person
nominated by the Board and each person whose term of office as a director will
continue after the Annual Meeting, including the number of shares of Company
Common Stock beneficially owned by such person as of January 31, 1994.
Pursuant to a reorganization approved by stockholders at the 1987 Annual
Meeting, United States Tobacco Company became a wholly owned subsidiary of the
Company. For periods prior to May 5, 1987, all titles of officers stated in
Table I below relate to offices held in United States Tobacco Company.
TABLE I
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
<S> <C> <C>
LOUIS F. BANTLE Mr. Bantle has served as Chairman Emeritus since
December 1, 1993, the date of his retirement as
(PHOTO) Age 65 Chairman of the Board and Chief Executive Officer.
He served as Chairman of the Board since April 4,
Shares beneficially owned: 1973 and was elected Chief Executive Officer on
Outstanding shares -- 2,508,913 June 18, 1985. Mr. Bantle served in the capacity of
Shares subject to options chief executive officer since April 4, 1973. He
-- 240,000 also served as President from January 1, 1973 to
June 17, 1985 and from December 11, 1989 to Septem-
Present term expires 1996 ber 26, 1990.
Director since 1967
------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
<S> <C> <C>
JOHN J. BUCCHIGNANO Mr. Bucchignano has served as Executive Vice
President and Chief Financial Officer since October
(PHOTO) Age 46 7, 1991. Mr. Bucchignano served as Senior Vice
President and Controller from September 27, 1990 to
Shares beneficially owned: October 6, 1991, and as Controller from August 1,
Outstanding shares -- 122,450 1987 to September 26, 1990.
Shares subject to options
-- 290,000
Present term expires 1995
Director since 1993
------------------------------------------------------------------------------------------------------------------
*EDWARD H. DEHORITY, JR. Mr. DeHority is a retired certified public
accountant and attorney. He was employed by Ernst &
(PHOTO) Age 63 Young from 1958 to 1988. He served as the firm's
National Partner in charge of Client Relations from
Shares beneficially owned: 1972 to 1978 and the managing partner of the
Outstanding shares -- 2,185 Stamford, Connecticut office from 1978 to 1987.
Shares subject to options
-0-
Nominated for term to expire 1997
Present term expires 1994
Director since 1990
------------------------------------------------------------------------------------------------------------------
*VINCENT A. GIERER, JR. Mr. Gierer has served as Chairman of the Board and
Chief Executive Officer since December 1, 1993 and
(PHOTO) Age 46 has served as President since September 27, 1990.
Mr. Gierer also served as Chief Operating Officer
Shares beneficially owned: from September 27, 1990 to November 30, 1993 and as
Outstanding shares -- 512,147 Executive Vice President and Chief Financial
Shares subject to options Officer from February 17, 1988 to September 26,
-- 611,400 1990.
Nominated for term to expire 1997
Present term expires 1994
Director since 1986
------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
<S> <C> <C>
P.X. KELLEY General Kelley has served as Vice Chairman of
Cassidy & Associates, a Washington D.C. government
(PHOTO) Age 65 relations firm, since January 1989. He served as
General, United States Marine Corps from 1981 to
Shares beneficially owned: 1987 and retired as Commandant of the Marine Corps
Outstanding shares -- 2,500 in 1987. He also served as a member of the Joint
Shares subject to options Chiefs of Staff from 1983 until his retirement in
-0- 1987. General Kelley also serves as a director of
Allied-Signal, Inc., GenCorp Inc., PHH Corporation,
Present term expires 1996 Saul Centers, Inc., Sturm, Ruger & Company, Inc.
and Wackenhut Corporation.
Director since 1992
------------------------------------------------------------------------------------------------------------------
ALBERT H. LEADER Mr. Leader is a business consultant. He served as
President and Chief Operating Officer of
(PHOTO) Age 68 Anaconda-Ericsson Inc. from July 25, 1980 to
December 31, 1983, the date of his retirement.
Shares beneficially owned:
Outstanding shares -- 10,264
Shares subject to options
-0-
Present term expires 1995
Director since 1983
------------------------------------------------------------------------------------------------------------------
RALPH L. ROSSI Mr. Rossi retired on July 1, 1993. He served as
Vice Chairman from August 29, 1984 until the date
(PHOTO) Age 65 of his retirement.
Shares beneficially owned:
Outstanding shares -- 955,639
Shares subject to options
-- 475,000
Present term expires 1995
Director since 1973
------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
<S> <C> <C>
*SPENCER R. STUART Mr. Stuart has been an independent management
consultant since 1974 when he retired as Chairman
(PHOTO) Age 71 of the Board and Chief Executive Officer of Spencer
Stuart and Associates. He continues as Honorary
Shares beneficially owned: Chairman of that firm. From June 1990 through April
Outstanding shares -- 44,933 1992, Mr. Stuart served as a management consultant
Shares subject to options to the investment banking division of Dean Witter
-0- Financial Services Group and as Chairman of the
Dean Witter Council of Management Advisors. Mr.
Nominated for term to expire 1997 Stuart is a director of Enhance Financial Services
Group, Asset Guaranty Inc. and Asset Guaranty
Present term expires 1994 Reinsurance Company. Mr. Stuart also serves as an
Advisory Director of Keystone America Group Funds
Director since 1977 and Keystone Custodian Funds.
------------------------------------------------------------------------------------------------------------------
JOSEPH R. TADDEO Mr. Taddeo has served as Executive Vice President
and President of United States Tobacco Company
(PHOTO) Age 49 since September 27, 1990. Mr. Taddeo also served as
Senior Vice President of United States Tobacco
Shares beneficially owned: Company from June 23, 1988 to September 26, 1990.
Outstanding shares -- 184,389
Shares subject to options
-- 330,000
Present term expires 1996
Director since 1990
------------------------------------------------------------------------------------------------------------------
JOHN P. WARWICK Mr. Warwick is a marketing consultant to Warwick,
Baker & Fiore Inc. ("WBF"), a New York based
(PHOTO) Age 68 advertising agency. Mr. Warwick served WBF as
Chairman of the Board from 1965 through March 20,
Shares beneficially owned: 1991, the date of his retirement, and as Chief
Outstanding shares -- 10,140 Executive Officer from 1964 through 1986.
Shares subject to options
-0-
Present term expires 1995
Director since 1991
------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 9
Messrs. DeHority, Gierer and Stuart are now directors and will serve for the
terms indicated, subject, with respect to Mr. Gierer, to the provisions of his
Employment Agreement (see "Other Compensation," below), unless waived by the
Company. Your proxy, unless otherwise marked, will be voted for the above
nominees for such terms. In the event that any nominee is not available for
election at the time of the meeting or any adjournment thereof, an event which
is not anticipated, your proxy may be voted for a substitute nominee and will be
voted for the other nominees named above.
As of January 31, 1994, all directors and reporting officers as a group
beneficially owned 5,636,259 shares and had options to acquire 4,598,600 shares,
which together represented approximately 4.9% of the aggregate of the
outstanding Company Common Stock including options held by all such persons. No
officer or director beneficially owned more than 1% of the aggregate amount of
the outstanding Company Common Stock including options held by the respective
person, except for Mr. Bantle, who owns approximately 1.3%.
The Board held nine meetings during 1993.
COMMITTEES OF THE BOARD
The Company has an Audit Committee and a Nominating and Compensation Committee.
The Audit Committee is currently comprised of the following members, each
independent of management: Spencer R. Stuart -- Chairman, Edward H. DeHority,
Jr. and P.X. Kelley. The Audit Committee, which met four times during 1993,
reviews and acts upon or reports to the Board with respect to various auditing
and accounting matters, including the selection of the Company's independent
auditors, the accounting and financial practices and controls of the Company,
audit procedures and findings, and the nature of services to be performed for
the Company by, and the fees to be paid to, the independent auditors. The
Nominating and Compensation Committee, which met eight times during 1993, is
currently comprised of the following members, each independent of management:
Albert H. Leader -- Chairman, Edward H. DeHority, Jr., P.X. Kelley, Spencer R.
Stuart and John P. Warwick. In 1991, the Board expanded the responsibilities of
this committee to cover nominating matters, including the recommendation of
nominees to the Board and the size and composition of the Board and its
committees, in addition to officers' compensation and management succession
matters. The Nominating and Compensation Committee considers recommendations
from stockholders for Board of Director candidates. The recommendations should
be submitted in writing to the Secretary at the Company's office.
6
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
The tables, graph and descriptive information set forth below are intended to
comply with the amendments recently adopted by the Securities and Exchange
Commission to the executive compensation requirements applicable to, among other
reports and filings, annual proxy statements. This information is being
furnished with respect to the Company's former and current Chief Executive
Officers ("CEOs"), its four most highly compensated current executive officers
other than the CEOs, and a former executive officer who, prior to his
retirement, was one of the Company's four most highly compensated executive
officers, each of whose salary and bonus exceeded $100,000 for the most recent
fiscal year (collectively, the "Executive Officers").
TABLE II
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------------
------------------------ SECURITIES
NAME AND SALARY BONUS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR ($) ($) OPTIONS (#) COMPENSATION ($)(1)
- ----------------------------------------- ------ ---------- --------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
LOUIS F. BANTLE(2) 1993 744,616 2,294,894 40,000 14,150
Chairman of the Board and 1992 800,000 1,901,222 150,000 13,732
Chief Executive Officer 1991 750,000 1,690,737 50,000 13,333
VINCENT A. GIERER, JR.(3) 1993 560,000 1,536,091 50,000 14,150
Chairman of the Board, 1992 560,000 1,300,827 100,000 13,732
Chief Executive Officer 1991 461,539 919,643 100,000 13,333
and President, formerly President
and Chief Operating Officer
JOHN J. BUCCHIGNANO 1993 274,039 580,254 40,000 14,150
Executive Vice President 1992 250,000 505,426 100,000 13,732
and Chief Financial Officer 1991 194,231 263,545 80,000 10,615
JAMES W. CHAPIN 1993 330,000 700,797 30,000 13,921
Executive Vice President 1992 330,000 599,768 50,000 13,732
and General Counsel 1991 300,000 491,996 40,000 13,333
HARRY W. PETER, III 1993 275,000 512,870 30,000 14,150
Executive Vice President 1992 275,000 425,291 100,000 13,097
1991 230,769 288,467 100,000 13,333
RALPH L. ROSSI(4) 1993 255,769 699,839 25,000 14,150
Vice Chairman 1992 500,000 1,200,814 100,000 13,732
1991 450,000 1,019,250 50,000 13,333
JOSEPH R. TADDEO 1993 400,000 1,067,259 50,000 14,150
Executive Vice President 1992 400,000 900,411 130,000 13,732
and President -- United States 1991 273,077 447,551 100,000 13,333
Tobacco Company
</TABLE>
(1) Amounts represent Company matching contributions to the Employees' Savings
Plan.
(2) Mr. Bantle retired on December 1, 1993 and was appointed Chairman Emeritus.
(3) Mr. Gierer was elected Chairman of the Board and Chief Executive Officer in
addition to his duties as President on December 1, 1993.
(4) Mr. Rossi retired on July 1, 1993.
7
<PAGE> 11
TABLE III
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------- GRANT DATE
NUMBER OF VALUE
SECURITIES % OF TOTAL -----------
UNDERLYING OPTIONS GRANTED EXERCISE OR GRANT DATE
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED (#)(1) FISCAL YEAR $/SHARE DATE VALUE $ (2)
- --------------------------------- -------------- --------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Louis F. Bantle.................. 40,000 3.3 25.50 2/22/03 294,800
Vincent A. Gierer, Jr............ 50,000 4.2 25.50 2/22/03 368,500
John J. Bucchignano.............. 40,000 3.3 25.50 2/22/03 294,800
James W. Chapin.................. 30,000 2.5 25.50 2/22/03 221,100
Harry W. Peter, III.............. 30,000 2.5 25.50 2/22/03 221,100
Ralph L. Rossi................... 25,000 2.1 25.50 2/22/03 184,250
Joseph R. Taddeo................. 50,000 4.2 25.50 2/22/03 368,500
</TABLE>
(1) Options granted in 1993 expire in ten years and generally become exercisable
ratably over a three year period following the date of grant subject to
acceleration of exercisability upon a change in control of the Company.
(2) Amounts based on the modified Black-Scholes option pricing model, using the
following material assumptions and adjustments: exercise price equal to the
fair market value of the underlying stock on the date of grant, ten year
option term, interest rate representing the interest rate on a U.S. Treasury
security with a maturity date corresponding to that of the option term,
volatility calculated using daily stock prices for a one year period prior
to grant date, and dividends at a rate of $.96 per share, representing
annualized dividends paid with respect to a share of common stock as of the
date of grant. There is no assurance the value realized by an optionee will
be at or near the value estimated by the modified Black-Scholes option
pricing model. Should the stock price not rise over the option price,
optionees will realize no gain.
TABLE IV
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR-END IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE (#) AT FISCAL YEAR-END ($)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Louis F. Bantle.................. 200,000 3,000,000 240,000 -0- 268,125 -0-
Vincent A. Gierer, Jr............ 25,600 249,725 562,400 50,000 6,681,175 112,500
John J. Bucchignano.............. 49,600 873,425 250,000 40,000 1,209,688 90,000
James W. Chapin.................. 100,000 1,975,000 410,000 30,000 5,906,250 67,500
Harry W. Peter, III.............. 11,000 130,969 270,000 30,000 1,259,688 67,500
Ralph L. Rossi................... -0- -0- 475,000 -0- 5,193,125 -0-
Joseph R. Taddeo................. -0- -0- 280,000 50,000 1,001,563 112,500
</TABLE>
8
<PAGE> 12
TABLE V
PENSION TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
- --------------------------------------- ---------- ---------- ---------- ---------- ------------ ------------
10
----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 200,000.............................. $ 39,864 $ 59,797 $ 79,729 $ 99,661 $ 119,593 $ 139,525 $ 159,458
300,000.............................. 60,643 90,964 121,285 151,607 181,928 212,249 242,571
400,000.............................. 81,421 122,131 162,842 203,552 244,263 284,973 325,683
500,000.............................. 102,199 153,299 204,398 255,498 306,597 357,697 408,796
600,000.............................. 122,977 184,466 245,955 307,443 368,932 430,420 491,909
700,000.............................. 143,755 215,633 287,511 359,389 431,266 503,144 575,022
800,000.............................. 164,534 246,801 329,067 411,334 493,601 575,868 658,135
900,000.............................. 185,312 277,968 370,624 463,280 555,936 648,592 741,248
1,000,000............................. 206,090 309,135 412,180 515,225 618,270 721,315 824,360
1,100,000............................. 226,868 340,303 453,737 567,171 680,605 794,039 907,473
1,200,000............................. 247,647 371,470 495,293 619,116 742,940 866,763 990,586
1,300,000............................. 268,425 402,637 536,850 671,062 805,274 939,487 1,073,699
1,400,000............................. 289,203 433,804 578,406 723,007 867,609 1,012,210 1,156,812
</TABLE>
The Pension Table sets forth information for determining the estimated annual
retirement benefits payable as a life annuity to the Executive Officers under
the Company's defined benefit plans pursuant to which benefits are determined by
final compensation and years of service (the "Retirement Plans"). Compensation
for purposes of the Retirement Plans means the highest three year average
compensation (salary and 25% of bonus) in the prior ten year period. For 1993,
the three year average compensation covered by the Retirement Plans for each of
the Executive Officers was as follows: Mr. Bantle, $1,207,475; Mr. Gierer,
$834,484; Mr. Bucchignano, $350,145; Mr. Chapin, $466,614, Mr. Peter, $360,611;
Mr. Rossi, $725,855 and Mr. Taddeo, $555,389. As of December 31, 1993, the
credited years of service under the Retirement Plans were approximately as
follows: Mr. Bantle, 31 years; Mr. Gierer, 16 years; Mr. Bucchignano, 9 years;
Mr. Chapin, 19 years; Mr. Peter, 6 years; Mr. Rossi, 37 years and Mr. Taddeo, 12
years. Pension Table calculations assume retirement on December 31, 1993, and
salary increases of approximately 6% per year for the prior three years and take
into account offsets for social security benefits.
The Executive Officers also participate in a supplemental retirement plan (the
"Supplemental Plan"). The formula by which benefits are determined under the
Supplemental Plan is as follows: the greater of 100% of the accrued benefit
under the Retirement Plans or 40% of the executive's highest compensation
(salary plus 25% of bonus) paid during any of the three consecutive twelve month
periods within the thirty-six months
9
<PAGE> 13
immediately preceding retirement (for retirement at age 50), increasing in
constant whole percentage increments to the greater of 110% of such accrued
benefit or 50% of such compensation (for retirement at age 60 or thereafter),
less amounts payable under the Retirement Plans. The estimated annual benefits
(or, in the case of Mr. Bantle and Mr. Rossi, the actual annual benefits)
payable as a life annuity at normal retirement age (assuming compensation and
service as of December 31, 1993) under the Supplemental Plan for each of the
Executive Officers (after taking into account reductions for benefits under the
Retirement Plans) are approximately as follows: Mr. Bantle, $81,825, Mr. Gierer,
$176,665, Mr. Bucchignano, $138,923, Mr. Chapin, $58,239, Mr. Peter, $152,708,
Mr. Rossi, $59,512 and Mr. Taddeo, $185,643.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Nominating and Compensation Committee of the Company's Board (the
"Committee") consists of five independent, nonemployee directors. The role of
the Committee, among other things, is to review or approve, as appropriate, (i)
the broad compensation policy of the Company with respect to its executives,
including Executive Officers (as defined above), and (ii) the various components
of the total compensation of the Executive Officers.
COMPENSATION POLICY
The Committee believes that strong leadership combined with the continuing
development of its highly qualified management team have been key elements in
the Company's superior financial performance over the years. In the Committee's
view, the Company's compensation programs, which provide appropriate incentives
and rewards to Executive Officers for outstanding performance, have been and
will continue to be essential to the Company's ability to attract, retain and
motivate the most highly qualified executives, thereby enhancing the ability of
the Board of Directors to meet its primary obligation to stockholders of the
Company -- maximizing stockholder value through consistent growth and
profitability. The Committee also believes that meaningful participation in the
Company's success is the most effective means of compensating its Executive
Officers. Accordingly, it has been the Committee's longstanding policy to link a
substantial portion of overall compensation to the Company's performance. Less
than half of total compensation is fixed in the form of base salary while the
remainder of total compensation (bonus and stock options) is variable and
dependent upon the earnings and operating results of the Company and the market
price of the Company's stock.
In order to ensure that the Company's compensation programs provide proper
incentives for outstanding performance, while at the same time ensuring that the
major portion of aggregate compensation is dependent on Company performance, the
Committee has adopted an objective for the Company's compensation programs.
Under this objective, aggregate compensation for the Company's officers should
fall approximately in the 75th percentile of a comparator group composed of a
cross section of other high performance companies but only if warranted by
Company performance. The Committee believes that the objective established for
the Company's total compensation programs reflects the unique nature of the
Company's products and the need to attract talented executives who can direct
growth in a challenging environment. The Committee directed an independent
consultant to construct a group of comparator companies from their database,
which resulted in the identification
10
<PAGE> 14
of 23 companies who, like the Company, meet the following criteria: (i) one year
return on equity greater than 20%; (ii) five year return on equity greater than
20%; and (iii) five year compound growth for earnings per share greater than
10%. For 1993, two of the three companies in the S&P Tobacco Index (see
performance graph, below) met these criteria. The Committee uses the combined
data drawn from this comparator group as a guide in determining the aggregate
compensation to be provided to the Company's Executive Officers. Based upon the
data provided, aggregate 1993 compensation for the Company's Officers fell below
the 75th percentile of the comparator group but was in line with overall
objectives.
Recently enacted tax legislation imposes an annual, individual limit of $1
million on the deductibility of the Company's compensation payments to certain
Executive Officers, commencing in 1994. Specified compensation is excluded for
this purpose, including so-called performance-based compensation. In response to
this legislation, the Committee has determined to preserve, to the maximum
extent practicable, the deductibility of all compensation payments to Executive
Officers. In this regard, the Board adopted certain amendments to the Company's
Incentive Compensation Plan ("ICP") (detailed below under "ICP") which are
designed so that future ICP payments will qualify for the exclusion applicable
to performance-based compensation and will therefore continue to be tax
deductible. This legislation provides for a transitional rule applicable to the
ICP that would not require the Company to submit these amendments for
stockholder approval until the earlier of a material amendment of the ICP or the
first stockholder meeting after December 31, 1996. Accordingly, stockholder
approval of these amendments is not required at this time.
The Company's compensation program has three principal components, each
described more fully below: annual base salaries, short-term incentives
consisting of annual bonuses awarded under the ICP and long-term incentives
consisting of the grant of stock options under the Company's current and former
stock option plans (the "Option Plans"). Both the ICP and the Option Plans have
been approved by stockholders. The short-term incentive plan is directly linked
to Company performance through earnings, while the long-term incentive plan
reflects the Company's performance through changes in the market price of the
Company's Common Stock.
Set forth above in the Summary Compensation Table (Table II) is the compensation
of Executive Officers for the years 1993, 1992 and 1991. The Committee notes
that the Company's performance in each of those years reached record levels for
net earnings, primary earnings per share and dividends. For the past three
years, net earnings increased approximately 12%, 18% and 19%, respectively;
primary earnings per share increased approximately 15%, 19% and 20%,
respectively; and dividends per share increased approximately 20%, 21% and 20%,
respectively.
SPECIFIC COMPONENTS OF COMPENSATION PROGRAM
Salary. Base salaries for the Executive Officers are the component of the total
compensation package that is least related to Company performance. In keeping
with the Company's emphasis on performance-related compensation, base salaries
of the Executive Officers as a group constituted approximately 28% of their 1993
cash compensation and only approximately 23% of their total 1993 compensation
(including the long-term component discussed below), leaving 77% of such
compensation "at risk." Base sala-
11
<PAGE> 15
ries of Executive Officers have not been increased since January 1, 1992, except
in the case of one current Executive Officer who received an increase in 1993 in
connection with his promotion to an Executive Officer position.
ICP. The ICP formula, which was approved by stockholders, provides each year for
an aggregate fund based upon fixed percentages of consolidated earnings (before
income taxes and incentive compensation), as specified in the ICP, so long as
earnings exceed a threshold percentage of stockholders' equity and cash
dividends have been declared and paid for the year. Up to 50% of the fund may be
allocated by the ICP Committee among a group of approximately 33 officers,
including the seven Executive Officers ("Fund A"). Allocations to each of the
Executive Officers must be approved by the Committee. Effective for 1994, the
ICP has been amended to provide that the Chief Executive Officer will not be
permitted to receive more than 15% of Fund A and no other Executive Officer will
be permitted to receive more than 12% of Fund A. These percentages govern the
maximum amounts that may be allocated to each Executive Officer and are not
subject to increase. The Committee has, however, the authority to make awards of
any amount provided that they are equal to or less than the indicated maximum
percentages.
In considering the specific awards to the Executive Officers, the Committee
noted that overall Company performance was superior in 1993. Specifically, the
Company's net earnings were $349 million, an increase of approximately 12% over
the prior year; the Company's primary earnings per share were $1.62, an increase
of approximately 15% over the prior year; and the Company's return on average
stockholders' equity for 1993 was approximately 71%. In determining 1993 ICP
awards, the Committee was aware that the percentage increase in ICP
distributions to Executive Officers from 1992 to 1993 (19%) was greater than the
increase in earnings per share (15%). The Committee noted, however, that in view
of the fact that the salaries of Executive Officers in general had not been
increased since January 1, 1992 (see "Salary," above), the increase in aggregate
cash compensation paid to Executive Officers for 1993 (13%) was less than the
increase in earnings per share (15%). The Committee further noted that after
taking into account the increase in 1993 ICP distributions, aggregate
compensation was in line with the Committee's compensation objective (see
"Compensation Philosophy," above). In determining the increase in ICP
distributions and aggregate cash compensation from 1992 to 1993 discussed above,
Mr. Bantle's 1993 salary and Mr. Rossi's 1992 ICP distribution and salary were
adjusted for purposes of comparison (see Table II, footnotes 2 and 4).
Based on the Company's performance for 1993, the aggregate ICP fund for 1993
increased by approximately 10% over the prior year. The 1993 ICP fund represents
4.97% of total earnings before taxes and provision for incentive compensation
and was distributed to approximately 682 employees, including the Executive
Officers. The ICP awards made to the Executive Officers as a group constituted
approximately 72% of their cash compensation for 1993 and 60% of their total
compensation for 1993 (including the long-term component discussed below).
Option Plans. The long-term incentive component of executive compensation, as
noted above, is equity-based and consists of the award of stock options to the
Executive Officers (as well as many other employees of the Company) under the
Option Plans. Stock options represent compensation that is tied to the Company's
stock
12
<PAGE> 16
price for periods of up to 10 years (the period during which such options may be
exercised). Stock options are granted with an exercise price equal to the fair
market value of shares of Company Common Stock on the date of grant, and the
optionee will realize value from grant only if the market value of such shares
increases.
In 1993, the Stock Option Committee, consisting of three independent,
nonemployee members of the Board each of whom is a current member of the
Committee, granted options to approximately 1,181 employees, including the
Executive Officers. Stock option grants to the Executive Officers as a group
constituted approximately 16% of their total 1993 compensation package,
utilizing (for illustrative purposes only) the valuation method used in Table
III set forth above. In determining awards to Executive Officers, the Stock
Option Committee considers the importance of long-term equity-based compensation
as part of the Committee's overall executive compensation policy, as well as the
position and relative responsibility within the Company of the individual, but
does not consider the size of previous option grants made to that individual.
Further, in 1993, the Stock Option Committee awarded fewer shares in the
aggregate because of its desire to conserve shares under the 1992 Stock Option
Plan.
1993 COMPENSATION OF CHIEF EXECUTIVE OFFICERS
Louis F. Bantle -- Mr. Bantle retired as Chairman of the Board and Chief
Executive Officer on December 1, 1993. He served the Company in the roles of
Chairman of the Board and chief executive officer for over 20 years. While Mr.
Bantle's annual rate of base salary did not increase over the prior year, as
discussed above, his incentive compensation increased approximately 21%,
resulting in an increase in his aggregate cash compensation of approximately 15%
on an annualized basis (see Table II, footnote 2). In February of 1993, Mr.
Bantle was granted stock options for 40,000 shares.
In determining the amount of Mr. Bantle's ICP award for 1993, the Committee
first reviewed and evaluated the individual contributions Mr. Bantle made as
Chief Executive Officer of the Company. His role in the achievement of the
Company's financial results was determined to be pivotal. Mr. Bantle's
successful planning and implementation of the management succession program was
taken into account, as was his historical performance in his long-standing role
as Chairman and Chief Executive Officer. Having determined that Mr. Bantle's
impact upon the Company's financial results had been both significant and
favorable, the Committee then reviewed the Company's performance for 1993, which
was another record year, elsewhere reported to stockholders on page 12. The
Committee also reviewed Mr. Bantle's overall 1993 compensation package,
including his base salary and stock option grant, and awarded Mr. Bantle the ICP
amount set forth in Table II above. For 1993, 22% of Mr. Bantle's total actual
compensation was attributable to base salary, 69% to ICP and 9% to his stock
option grant. Mr. Bantle's aggregate compensation fell slightly below the 75th
percentile of the comparator group.
Vincent A. Gierer, Jr. -- Mr. Gierer was elected Chairman of the Board and Chief
Executive Officer in addition to his duties as President, effective December 1,
1993. The Committee also noted the additional responsibilities assumed by Mr.
Gierer in preparation for his election to Chairman of the Board and Chief
Executive Officer on December 1, 1993. While Mr. Gierer's base salary did not
increase over the prior year, his incentive
13
<PAGE> 17
compensation increased approximately 18%, resulting in an increase in aggregate
cash compensation of approximately 13%. In February of 1993, he was granted
stock options for 50,000 shares.
In determining the amount of Mr. Gierer's ICP award for 1993, the Committee
reviewed and evaluated the individual contributions Mr. Gierer made as President
and Chief Operating Officer in 1993 as well as his expanded responsibilities in
light of his recent promotion. Having determined that Mr. Gierer's impact upon
the Company's financial results has also been significant and favorable, the
Committee then reviewed Mr. Gierer's 1993 compensation, including base salary
and stock option grant, and awarded Mr. Gierer the ICP amount set forth in Table
II above. For 1993, 23% of Mr. Gierer's total compensation was attributable to
base salary, 62% to ICP and 15% to his stock option grant. Mr. Gierer's
aggregate compensation fell slightly below the 75th percentile of the comparator
group.
NOMINATING AND COMPENSATION STOCK OPTION COMMITTEE
COMMITTEE
Albert H. Leader, Chairman John P. Warwick, Chairman
Edward H. DeHority, Jr. Edward H. DeHority, Jr.
P. X. Kelley Albert H. Leader
Spencer R. Stuart
John P. Warwick
14
<PAGE> 18
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
FOR THE YEAR ENDED DECEMBER 31, 1993
Among UST Inc., S&P Tobacco Index & S&P 500 Index
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) UST Inc. S&P Tobacco S&P 500
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 155.00 160.00 132.00
1990 192.00 203.00 128.00
1991 353.00 309.00 166.00
1992 355.00 308.00 179.00
1993 318.00 241.00 197.00
</TABLE>
(1) Assumes $100 invested on 12/31/88 and held through 12/31/93. Total return
assumes reinvestment of dividends.
15
<PAGE> 19
OTHER COMPENSATION
The Company is party to employment agreements with Messrs. Gierer (4 years),
Bucchignano (3 years) and Taddeo (3 years) which set forth the terms and
conditions of such officers' employment and termination of employment with the
Company. The stated initial terms of the agreements are generally automatically
extended, subject to expiration at age 65. In particular, the agreements provide
that such officers will be entitled to certain severance benefits if the Company
terminates their employment for any reason other than death, disability or
"cause" or if the officer terminates his employment for "good reason," including
termination following a "change in control of the Company" (as such terms are
defined in the agreements). The benefits consist principally of the continuation
over the term remaining in the officer's employment agreement or, if greater,
three years, of an annual amount equal to the sum of the officer's base salary
and the highest ICP payment made to the officer in any of the preceding three
years. In the event of a termination based on a change in control, the ICP taken
into account for this purpose would be limited to an amount equal to 75% of base
salary, the multiple would in all cases be three and the benefits would be paid
in a lump sum. The Company would also maintain all welfare benefit plans in
effect for the officer's continued benefit or provide substantially equivalent
benefits for three years (or, if greater, the number of years remaining in the
term of the agreement). In addition, the Company would pay certain other damages
resulting from the termination. In the event that any payments made pursuant to
the agreement in connection with a change in control are subjected to the excise
tax imposed under the federal tax laws, the Company would increase each such
officers' severance payment as necessary to restore the officer to the same
after-tax position he would have had if the excise tax had not been imposed. In
addition, such agreements provide that any such officer shall resign as Director
upon his termination of employment for any reason. Based upon current salary
levels, the approximate lump-sum value of the benefit, exclusive of the effect
of state and local taxes, that would have been payable to the Executive Officers
if their employment had terminated on December 31,1993 following a change in
control would be as follows: Mr. Gierer, $3.2 million; Mr. Bucchignano, $1.6
million and Mr. Taddeo, $2.2 million.
COMPENSATION OF DIRECTORS
The Board of Directors increased the monthly retainer for all nonemployee
directors from $4,600 to $5,000 effective January 1, 1993, for their services as
directors, including committee assignments. Nonemployee directors are reimbursed
for reasonable expenses incurred by them in connection with performance of their
services to the Company as members of the Board of Directors or such committees.
Employee directors receive no additional compensation for their services as
directors.
The Company has adopted the UST Nonemployee Directors' Retirement Plan (the
"Directors' Plan"), a nonqualified, nonfunded plan that generally applies to
nonemployee members of the Board whose service as such includes periods
beginning on or after January 1, 1988, and whose service equals or exceeds 36
months. Under the terms of the Directors' Plan, an eligible director will
receive one-twelfth of 75% of his highest annual compensation (excluding
consulting fees) each month, beginning at age 65 (or such later date upon which
occurs his termination of service) and continuing over a period equal to his
period of service. Payments cease upon the member's death.
16
<PAGE> 20
INDEBTEDNESS
Since January 1, 1993, none of the Company's directors, Executive Officers,
nominees for election as directors or certain relatives or associates of such
persons have been indebted to the Company in an aggregate amount in excess of
$60,000 except as noted below in Table VI, which represents unpaid balances on
stock option exercises under the terms of the 1977 Non-Qualified Stock Option
Plan, which has expired with respect to the grant and exercise of options, and
the UST Inc. 1982 Stock Option Plan (the "1982 Plan"), which has expired with
respect to the grant of options, both as previously approved by stockholders.
Unpaid balances on stock option purchases are secured by the pledging of the
shares with the Company and by the optionee's personal installment promissory
note bearing interest at a rate not to exceed 9% per annum. With respect to
options granted after August 29, 1984, the 1982 Plan, as amended, requires that
installment notes bear interest at the minimum rate required to be stated under
the Internal Revenue Code, as amended.
TABLE VI
<TABLE>
<CAPTION>
INDEBTEDNESS
LARGEST AGGREGATE AS OF
INDEBTEDNESS DURING 1993(1) FEBRUARY 11, 1994(1)
----------------------------------------- --------------------
UNDER UNDER UNDER
1977 PLAN 1982 PLAN TOTAL 1982 PLAN
--------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
Louis F. Bantle.................................... $ -0- $ 2,662,500 $ 2,662,500 $ 2,529,375
Chairman Emeritus, formerly
Chairman of the Board and
Chief Executive Officer
Vincent A. Gierer, Jr.............................. -0- 1,577,428 1,577,428 1,518,631
Chairman of the Board,
Chief Executive Officer
and President,
formerly President and
Chief Operating Officer
John J. Bucchignano................................ -0- 572,464 572,464 565,033
Director, Executive Vice
President and Chief
Financial Officer
James W. Chapin.................................... -0- 1,233,491 1,233,491 1,223,355
Executive Vice President and
General Counsel
Harry W. Peter, III................................ -0- 515,510 515,510 492,788
Executive Vice
President
Ralph L. Rossi..................................... 52,057 407,500 459,557 -0-
Director, formerly
Vice Chairman
Joseph R. Taddeo................................... -0- 475,723 475,723 414,353
Director, Executive
Vice President
</TABLE>
(1) Interest rates on loans range from approximately 5% to approximately 9%.
17
<PAGE> 21
PROPOSAL NO. 2
A Proposal to Ratify and Approve the Selection of Independent Auditors of the
Accounts of the Company and its Consolidated Subsidiaries for the Year 1994.
The Board has selected the firm of Ernst & Young, Certified Public Accountants,
as independent auditors of the accounts of the Company and its consolidated
subsidiaries for the year 1994. Ernst & Young has been serving the Company and
its subsidiaries in this capacity for many years. The Board's selection was made
upon the unanimous recommendation of its Audit Committee.
In connection with its audit of the Company's 1993 financial statements, Ernst &
Young read the Company's periodic reports which were filed with the Securities
and Exchange Commission, discussed quarterly financial information included in
the Company's quarterly financial statements and met with the Audit Committee.
Ratification of the selection of the Company's independent auditors is not
required by any statute or regulation to which the Company is subject or by the
Company's By-Laws. If the stockholders do not ratify the selection of Ernst &
Young, the selection of independent auditors will be reconsidered by the Board.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if so desired and will be
available to respond to appropriate questions.
The following resolution will be offered at the meeting:
"RESOLVED, that the Board of Directors' selection of Ernst & Young as
independent auditors of the accounts of the Company and its consolidated
subsidiaries for the year 1994 be, and it hereby is, ratified, confirmed and
approved by the stockholders of the Company."
The Board recommends that stockholders vote FOR the foregoing resolution
(Proposal No. 2). Your appointed proxies will vote your shares FOR Proposal No.
2 unless you instruct otherwise in the proxy form.
The affirmative vote of a majority of the shares of Company Common Stock present
in person or by proxy is required to adopt this proposal. In accordance with
Delaware law, abstentions will, while broker nonvotes will not, be treated as
present for purposes of the preceding sentence.
PROPOSAL NO. 3
The Company has been advised that John Slade, M.D., a record holder of 64
shares, whose address is 166 Montgomery Road, Skillman, New Jersey 08558-2005,
initial filer with the Sisters of Mercy of the Americas, a beneficial holder of
180 shares, whose address is 29000 Eleven Mile Road, Farmington Hills, Michigan
48336, and Mercy Health Services, a beneficial holder of 5,769 shares, whose
address is 34605 Twelve Mile Road, Farmington Hills, Michigan 48331-3221, intend
to introduce at the Annual Meeting the following resolution and supporting
statement, which are printed verbatim:
WHEREAS
Skoal Bandit, Skoal Classic and Copenhagen brands of moist snuff are being
advertised without accompanying warning labels on caps, t-shirts and other
utilitarian objects in apparent violation of federal regulations;
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<PAGE> 22
A licensee of the Company sells t-shirts, caps, insulated can holders, and other
items to the public with the slogan "Skoal Bandit Racing" but with no warning
label;
"Skoal Bandit Racing" is a service mark owned by United States Tobacco Sales and
Marketing Company, Inc. The phrase refers to the NASCAR Winston Cup stock car
racing team the Company sponsors for Skoal Bandit brand moist snuff. The major
purpose of this sponsorship is to promote Skoal Bandit brand moist snuff to the
public;
The same licensee of the Company sells t-shirts, caps, post cards, bumper
stickers, license plates, and other items to the public which bear images of the
Skoal Bandit NASCAR Winston Cup stock car clearly depicting the brand name and
the bandit symbol yet these items carry no warning label;
The same licensee of the Company also sells similar items to the public which
bear images of the Skoal Classic NASCAR Winston Cup stock car clearing depicting
the brand name, yet none of these items carry a warning label;
Regulations of the Federal Trade Commission require that mentions of brands of
chewing tobacco and moist snuff on items such as caps and t-shirts, insulated
can holders, bumper stickers and license plates be accompanied by prominent
warning labels;
Moist snuff use among pre-adolescent and adolescent boys has increased markedly
in recent years to the alarm of public health, medical and dental officials.
Children find promotional items for tobacco products attractive. For instance,
39% of tenth graders in Perth Amboy, New Jersey reported owning promotional
items connected to tobacco products in 1992, and 30% of 12-17 year olds in a
national survey conducted by Gallup International in 1992 reported owning at
least one such item.
RESOLVED
That shareholders request that the Board adopt the following policy to be put
into effect as soon as possible but not later than January 1, 1995: All
advertising and promotion for our Company's moist snuff brands, including all
uses of the Company's brand names and associated symbols for moist snuff
products used in connection with sponsorships of all sorts, shall include clear,
effective and prominent warnings of the hazards caused by these products.
SUPPORTING STATEMENT
Federal regulations require that promotional items for moist snuff brands such
as t-shirts, caps, insulated can holders, license plates and bumper stickers
carry warning labels. The Company has licensed the use of its moist snuff brand
names and associated symbols for use on items which do not carry a warning of
any sort. These apparent violations of federal regulations are especially
worrisome because adolescents, among whom moist snuff use is epidemic, find
items such as these attractive.
If you believe that promotional items for the Company's moist snuff brands
should carry warning labels, please vote "yes" for this resolution.
COMPANY'S RESPONSE
The Board recommends that stockholders vote AGAINST the foregoing resolution
(Proposal No. 3).
The initial filer of this proposal has submitted other proposals to the Company
in the past either
19
<PAGE> 23
alone or with an anti-tobacco activist, which have been overwhelmingly defeated.
The Board believes that this proposal is not in the best interests of the
Company or its stockholders and urges stockholders to vote AGAINST it.
Advertising of the Company's products is extensively regulated on the federal,
state and local levels and the Company complies with those regulations. In
particular, since 1986, all Company advertising for smokeless tobacco brands has
been regulated by the Federal Trade Commission (the "FTC") pursuant to the
Comprehensive Smokeless Tobacco Health Education Act of 1986, 15 U.S.C. 4001
(the "Act"). In addition, in 1987 and 1991, the FTC adopted regulations to
implement the warning requirements of the Act which provide for warning
requirements in advertisements and warning requirements for utilitarian objects
for "personal use" that "display the brand name, logo, or selling message of any
smokeless tobacco product." The FTC regulations specify in minute detail how the
required warning must appear "in a conspicuous and prominent location," in
"conspicuous and legible type," and be "clearly visible."
Furthermore, more recently, on November 4, 1993, the FTC proposed to amend the
current regulations to expressly provide that sponsored racing vehicles and
other event-related objects that display the brand-name, logo, or selling
message of smokeless products are advertising subject to the health warning
requirements of the Smokeless Tobacco Act and the regulations.
The Company has and will continue to comply with the requirements of the
comprehensive regulatory scheme promulgated by Congress and the Federal Trade
Commission, as well as the requirements of state and local regulatory
authorities.
Accordingly, the Company believes that the adoption of the policy referred to in
the foregoing resolution is neither necessary nor appropriate and, if
implemented as contemplated by the proposal, could require the Company to adopt
policies governing product warnings which conflict with the existing regulatory
framework mandated by federal law.
Your appointed proxies will vote your shares AGAINST Proposal No. 3 unless you
instruct otherwise in the proxy form.
The affirmative vote of a majority of shares of the Company Common Stock present
in person or by proxy is required to adopt this proposal. In accordance with
Delaware law, abstentions will, while broker nonvotes will not, be treated as
present for purposes of the preceding sentence.
PROPOSAL NO. 4
The Company has been advised that the National Benevolent Association of the
Christian Church (Disciples of Christ), a record holder of 9,300 shares, whose
address is 222 S. Downey Avenue, P.O. Box 1986, Indianapolis, Indiana 48206,
intends to introduce at the Annual Meeting the following resolution, which is
printed verbatim:
WHEREAS
- -- Except for last year, domestic tobacco consumption rates declined 1 to 2
percent a year since the mid-1960s, falling from 42% of adult Americans in 1965
to 25.7% of adults in 1991. This decline in tobacco consumption adversely
impacted domestic tobacco growers;
20
<PAGE> 24
- -- As tobacco prices rose in the 1980s, U.S. companies started looking to
foreign markets and, according to farm leaders, subsidized growers in places
like Malawi, Argentina, and Brazil to grow tobacco of comparable quality to the
American leaf for the domestic market. In 1969 less than 1 percent of the
tobacco used in U.S. cigarettes was imported. by 1992, 28 percent of burley and
23 percent of the flue cured was foreign. Burley Imports alone increased 40
percent between 1990 and 1992 (Washington Post, 5/10/93);
- -- The New York Times noted: "Farmers' profit margins have declined while the
major manufacturers' profits has risen . . .
(add to Philip Morris: [without the elision marks]: with Philip
Morris' operating Income for domestic tobacco doubling since 1986,
to nearly $5.2 billion last year.)
Farmers have been squeezed by a combination of rising costs for labor,
fertilizers and chemicals, and the relatively stagnant prices of tobacco leaves,
depressed by an influx of cheap foreign imports"(06/06/93);
- -- After being challenged about unilateral price increases for domestic
cigarettes even as domestic tobacco purchases and income decreased because of
the foreign tobacco purchases, the major U.S. cigarette companies have agreed to
support floors for content percentages of domestic tobacco for cigarettes;
- -- Given past actions which indicate the tobacco companies have created
practices which have enhanced their own profits from tobacco as the income to
tobacco farmers has decreased;
- -- It has been recognized that the agricultural economy in tobacco-growing
states must be diversified and that funds to achieve this must come, in part,
from a portion of federal cigarette excise tax revenues, as well as other
funding sources;
- -- Various recommendations have been developed from within the tobacco-growing
community to ease the transition of tobacco farmers from dependency on
production for cigarette sales to alternative uses of their land, including:
(1) reducing or eliminating tobacco acreage by diversification into other crops
or land usage;
(2) dedicating a portion of any cigarette excise tax increase for the government
to purchase tobacco growing allotments and retire them. Inclusion of tax
benefits forfeiting the allotments would also be effective, particularly to
farmers re-investing into the growth of alternative crops.
(3) providing grants and low-interest loans to tobacco farmers who change to new
crops, to be used for equipment, seeds, nursery stocks, new farm equipment,
and irrigation systems.
RESOLVED that the shareholders request that (name of Company) establish a
Committee of the Board to review the Company's connections to its farm-suppliers
and to determine how they can be helped in efforts at economic conversion from
dependency on tobacco-for-cigarettes (for UST: smokeless use) to use of farmland
for other purposes. Furthermore that the Company support legislation to help
ease this economic conversion for tobacco-growers at federal and state levels.
21
<PAGE> 25
COMPANY'S RESPONSE
The Board recommends that stockholders vote AGAINST the foregoing resolution
(Proposal No. 4).
The Board believes that this proposal is not in the best interests of the
Company or its stockholders and urges stockholders to vote AGAINST it.
The proposal requests the Company to review steps it can take to assist tobacco
growers in ceasing the production of the types of tobacco critical to the
manufacture of its smokeless products. The proposal also requests the Company to
support legislation in this regard.
The Board believes that conducting such a review or devoting legislative
activities as requested by this proposal would be inappropriate and not
constitute a proper use of the Company's resources.
The boilerplate language of the proposal, which speaks primarily in terms of
"tobacco-for-cigarettes", creates the impression that all the factors cited are
equally applicable to the Company and the tobacco used in the manufacture of its
smoke-
less products. The facts paint a different picture, particularly in light of the
types of tobacco used in smokeless products which are substantially different
from that used in cigarettes.
Tobacco products account for over 95% of the Company's operating profit. The
Company's strategy is to expand the market for its smokeless tobacco products.
Since 1989 unit volume for the Company's smokeless tobacco products has
increased consistently, on average approximately 4% per year. In keeping with
the increased demand, the Company's domestic tobacco purchases have also
increased during that period. In order to ensure a sufficient supply of high
quality tobacco, it is important for the farmers to increase their tobacco crop
yields. Since the Company requires additional amounts of tobacco each year to
meet its increasing unit volume, it would be counterproductive for the Company
to support this proposal.
The future of the independent growers who make up the tobacco farming community
is important to the Company, which is why the Company supports various research
and other programs at major universities such as the University of Kentucky and
the University of Tennessee. These ongoing programs update farmers year round,
educating and helping them find new and better ways to grow, harvest and cure
dark tobaccos. This provides an important financial benefit for the tobacco
farmer, as advanced farming methods help to ensure a successful and more
profitable crop. Other projects and educational programs are continually being
explored by the Company, providing tobacco growers an extra edge in farming the
finest tobacco available while ensuring strong relations between the tobacco
farming community and the Company.
Accordingly, supporting this proposal might result in the reduction or
elimination of the supply of tobacco for the Company's core business and in the
opinion of the Board would violate its fiduciary obligation to maximize
stockholder value. In addition, the Board also believes that this and similar
proposals which are designated to encourage farmers to cease growing tobacco,
all couched in terms of helping farmers, would in reality adversely affect farm
communities throughout the United States.
Your appointed proxies will vote your shares AGAINST Proposal No. 4 unless you
instruct otherwise in the proxy form.
The affirmative vote of a majority of shares of the Company Common Stock present
in person or by proxy is required to adopt this proposal. In accordance with
Delaware law, abstentions will, while broker nonvotes will not, be treated as
present for purposes of the preceding sentence.
22
<PAGE> 26
INFORMATION RESPECTING PROXIES
Your shares are registered in the name and manner shown on the enclosed form of
proxy. Please sign the proxy in the same manner. It is not necessary for you to
indicate the number of shares you hold.
Expenses incurred in connection with the solicitation of proxies for the meeting
will be borne by the Company. In addition to solicitation by mail, arrangements
may be made pursuant to which brokers, bank nominees and other institutional
holders of record will distribute at the Company's expense proxies and proxy
material to the appropriate beneficial owners, and assistance in the
solicitation of proxies from such holders of record will be rendered by
Georgeson & Company, Inc., Wall Street Plaza, New York, New York, for a fee of
approximately $20,000.
STOCKHOLDER PROPOSALS
If a stockholder wishes to submit a proposal for inclusion in the Proxy
Statement prepared for the 1995 Annual Meeting of Stockholders, such proposal
must be received by the Secretary at the Company's office no later than November
25, 1994.
In addition, the By-Laws provide that only such business as is properly brought
before the Annual Meeting will be conducted. For business to be properly brought
before the meeting or nominations to be properly made at the Annual Meeting by a
stockholder, notice must be received by the Secretary at least 50, but not more
than 75, days prior to the Annual Meeting and such notice must provide certain
requisite information. A copy of the By-Laws may be obtained by writing to the
Secretary.
OTHER BUSINESS
The Board knows of no other business which will come before the meeting. If any
other business shall properly come before the meeting, including any proposal
submitted by a stockholder which was omitted from this Proxy Statement in
accordance with the applicable provisions of the federal securities laws, your
authorized proxies will vote thereon in accordance with their best judgment.
VOTING STOCK
As of March 10, 1994, the record date for the 1994 Annual Meeting, the
outstanding stock of the Company entitled to vote consisted of 204,023,536
shares of Company Common Stock (each entitled to one vote).
Appearance at the meeting in person or by proxy of the holders of Company Common
Stock entitled to cast 102,011,769 votes is required for a quorum.
By Order of the Board of Directors,
JONATHAN P. NELSON
Secretary
23
<PAGE> 27
UST
ANNUAL MEETING OF STOCKHOLDERS - MAY 3, 1994
PROXY
The undersigned hereby appoints JOHN J. BUCCHIGNANO, JAMES W.
CHAPIN and JONATHAN P. NELSON, or any of them, with full power of
substitution, attorneys and proxies to vote all shares of Common Stock of
UST Inc. which the undersigned is entitled to vote at the Annual Meeting
of Stockholders to be held at the Cole Auditorium of the Greenwich
Library, 101 West Putnam Avenue, Greenwich, Connecticut, on Tuesday, the
3rd day of May 1994, at 10:00 a.m., and at any and all adjournments
thereof, on the matters listed on the reverse side which are set forth in
the accompanying Proxy Statement.
This Proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made,
this Proxy will be voted FOR Proposals 1 and 2 and AGAINST Proposals 3
and 4.
SEE REVERSE SIDE
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
If no direction is given, this proxy will be voted FOR proposals 1 and 2
and AGAINST proposals 3 and 4.
The Board of Directors recommends a vote FOR proposals 1 and 2:
1. Election of Directors. FOR WITHHELD
Nominees: E.H. DeHority, V.A. Gierer, ALL FROM ALL
S.R. Stuart NOMINEES NOMINEES
[ ] [ ]
2. To ratify and FOR AGAINST ABSTAIN
approve Ernst & [ ] [ ] [ ]
Young as indepen-
dent auditors of the
Company for the
year 1994.
FOR all nominees except vote withheld from the following:
-------------------------
The Board of Directors recommends a vote AGAINST the following
stockholder proposals 3 and 4:
FOR AGAINST ABSTAIN
3. Stockholder Proposal [ ] [ ] [ ]
4. Stockholder Proposal [ ] [ ] [ ]
And in their discretion, upon such other business as may properly come
before the meeting.
MARK HERE FOR MARK HERE IF
ADDRESS CHANGE [ ] YOU PLAN TO [ ]
AND NOTE AT LEFT ATTEND THE MEETING
Please sign exactly as name appears hereon. If signing for trusts,
estates or corporations, capacity or title should be stated. If
shares are owned jointly, both owners must sign. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Signature: Date:
------------------------ ----------
Signature: Date:
------------------------ ----------
<PAGE> 28
(UST LETTERHEAD)
UST EMPLOYEES' SAVINGS PLAN
The Annual Meeting of the Stockholders of UST will be held on May 3, 1994, and
the Company is soliciting your vote.
As a participating employee in the UST Employees' Savings Plan, YOU MUST GIVE
THE TRUSTEE UNDER THE PLAN VOTING INSTRUCTIONS on the enclosed proxy card if
you wish to vote the shares of the Company's common stock in your Savings Plan.
The Trustee cannot vote your shares without instructions from you.
Accordingly, a Notice of the 1994 Annual Meeting and Proxy Statement, proxy
card, and 1993 Annual Report are enclosed.
Please note that, as described in the Proxy Statement, the Board of Directors
recommends a vote FOR Proposals 1 and 2 and AGAINST Proposals 3 and 4. Your
vote is very important to the Company.
Please complete, sign, and date the proxy card and return it in the envelope
provided as soon as possible. Please be sure to complete, sign, date, and
return any other proxy cards that you receive in the separate envelopes
provided.
