<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 /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
UST Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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 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:
<PAGE> 2
UST
100 WEST PUTNAM AVENUE
GREENWICH, CONNECTICUT 06830
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 22, 1996
To the Stockholders of UST:
The 1996 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 7th day of May 1996, 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 1996;
(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 7, 1996 will be
entitled to vote at the meeting. The approximate date of mailing of this Proxy
Statement is March 22, 1996.
DEBRA A. BAKER,
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> 3
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 7, 1996, 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 ("Common Stock") entitled to vote at
the meeting having evidence of ownership, a duly appointed proxy holder with the
right to vote of an absent stockholder (one proxy holder per absent
stockholder), and invited guests of the Company. Any person claiming to be the
proxy holder of an absent stockholder must, upon request, produce written
evidence of such authorization. In addition, management will require all signs,
banners, placards, cameras and recording equipment 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 1996.
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> 4
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, upon recommendation of the Nominating and Compensation
Committee, nominated the three directors standing for election at the Annual
Meeting for terms expiring at the Annual Meeting of Stockholders to be held in
1999. The Board currently consists of nine members.
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 the following Table I 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 Common Stock beneficially owned by such person as of January 31, 1996.
TABLE I
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
------------------------------- -------------------------------------
<C> <S> <C>
JOHN J. BUCCHIGNANO Mr. Bucchignano has served as
Executive Vice President and Chief
[PHOTO] Age 48 Financial Officer since October 7,
1991. Mr. Bucchignano served as
Shares beneficially owned: Senior Vice President and Controller
Outstanding shares -- 111,878 from September 27, 1990 to October 6,
Shares subject to options 1991.
-- 385,000
Present term expires 1998
Director since 1993
*JAMES W. CHAPIN Mr. Chapin retired on December 1,
1994 and is Of Counsel to the
[PHOTO] Age 66 Company. Mr. Chapin had served as
Executive Vice President and General
Shares beneficially owned: Counsel since September 25, 1991, and
Outstanding shares -- 299,953 as Senior Vice President and General
Shares subject to options Counsel from January 1, 1981 to
-- 491,500 September 24, 1991.
Nominated for term to expire
1999
Present term expires 1996
Director since 1994
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
------------------------------- -------------------------------------
<C> <S> <C>
EDWARD H. DEHORITY, JR. Mr. DeHority is a retired certified
public accountant and attorney. He
[PHOTO] Age 65 was employed by Ernst & Young LLP
from 1958 to 1988. He served as the
Shares beneficially owned: firm's National Partner in charge of
Outstanding shares -- 2,371 Client Relations from 1972 to 1978
Shares subject to options and the managing partner of the
-- 1,500 Stamford, Connecticut office from
1978 to 1987.
Present term expires 1997
Director since 1990
VINCENT A. GIERER, JR. Mr. Gierer has served as Chairman of
the Board and Chief Executive Officer
[PHOTO] Age 48 since December 1, 1993 and has served
as President since September 27,
Shares beneficially owned: 1990. Mr. Gierer also served as Chief
Outstanding shares -- 347,846 Operating Officer from September 27,
Shares subject to options 1990 to November 30, 1993.
-- 773,400
Present term expires 1997
Director since 1986
*P.X. KELLEY General Kelley has served as Vice
Chairman of Cassidy & Associates, a
[PHOTO] Age 67 Washington D.C. government relations
firm, since January 1989. He served
Shares beneficially owned: as General, United States Marine
Outstanding shares -- 3,500 Corps from 1981 to 1987 and retired
Shares subject to options as Commandant of the Marine Corps in
-- 1,500 1987. He also served as a member of
the Joint Chiefs of Staff from 1983
Nominated for term to expire until his retirement in 1987. General
1999 Kelley also serves as a director of
AlliedSignal Inc., GenCorp Inc.,
Present term expires 1996 London Insurance Group, PHH
Corporation, Saul Centers, Inc.,
Director since 1992 Sturm, Ruger & Company, Inc. and
Wackenhut Corporation.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
------------------------------- -------------------------------------
<C> <S> <C>
RALPH L. ROSSI Mr. Rossi retired on July 1, 1993. He
served as Vice Chairman from August
[PHOTO] Age 67 29, 1984 until the date of his
retirement.
Shares beneficially owned:
Outstanding shares -- 682,400
Shares subject to options
-- 476,500
Present term expires 1998
Director since 1973
SPENCER R. STUART Mr. Stuart has been an independent
management consultant since 1974 when
[PHOTO] Age 73 he retired as Chairman of the Board
and Chief Executive Officer of
Shares beneficially owned: Spencer Stuart and Associates. He
Outstanding shares -- 48,754 continues as Honorary Chairman of
Shares subject to options that firm. From June 1990 through
-- 1,500 April 1992, Mr. Stuart served as a
management consultant to the
Present term expires 1997 investment banking division of Dean
Witter Financial Services Group and
Director since 1977 as Chairman of the Dean Witter
Council of Management Advisors. Mr.
Stuart is a director of Enhance
Financial Services Group, Inc.,
Enhance Reinsurance Company and Asset
Guaranty Inc.
JOHN P. WARWICK Mr. Warwick served as Chairman of the
Board of Warwick, Baker & Fiore Inc.
[PHOTO] Age 70 ("WBF"), a New York based advertising
agency, from 1965 through March 20,
Shares beneficially owned: 1991, the date of his retirement. He
Outstanding shares -- 10,140 presently serves on the Board of WBF.
Shares subject to options
-- 1,500
Present term expires 1998
Director since 1991
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
------------------------------- -------------------------------------
<C> <S> <C>
*LOWELL P. WEICKER, JR. Mr. Weicker has served as Chairman of
Dresing Lierman Weicker, a consulting
[PHOTO] Age 64 firm, since January 4, 1995. He
served as Governor of Connecticut
Shares beneficially owned: from January 9, 1991 through January
Outstanding shares -- 468 3, 1995. Mr. Weicker also serves on
Shares subject to options the Boards of Phoenix Home Life
-0- Mutual Funds and HPSC, Inc.
Nominated for term to expire
1999
Present term expires 1996
Director since 1995
</TABLE>
Messrs. Chapin, Kelley and Weicker are now directors and will serve for the
terms indicated. Your proxy, unless otherwise marked, will be voted for the
aforesaid 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, 1996, all directors and reporting officers as a group
beneficially owned 2,332,940 shares and had options to acquire 4,818,400 shares,
which together represented approximately 4% of the aggregate of the outstanding
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
Common Stock including options held by the respective person.
The Board held eight meetings during 1995.
COMMITTEES OF THE BOARD
The Company has an Audit Committee, a Nominating and Compensation Committee
and a Stock Option Committee. The Audit Committee is currently comprised of the
following members, each independent of management: Edward H. DeHority, Jr. --
Chairman, P.X. Kelley, Spencer R. Stuart and Lowell P. Weicker, Jr. The Audit
Committee, which met four times during 1995, 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 1995, is currently comprised of the following members,
each independent of management: P.X. Kelley -- Chairman, Edward H. DeHority,
Jr., Spencer R. Stuart and John P. Warwick. This committee's responsibilities
are 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. Any recommendations should be submitted in writing to the
Secretary at the Company's office. In addition, the Stock Option Committee,
which met twice during 1995, is comprised of the same four independent directors
who serve on the Nominating and Compensation Committee, with John P. Warwick as
Chairman. This committee's responsibilities are to administer the Company's
stock option plans and review and approve stock option grants thereunder.
5
<PAGE> 8
COMPENSATION OF DIRECTORS
The monthly retainer for all nonemployee directors has been $5,000 since
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 committees. Employee directors receive
no additional compensation for their services as directors.
The Company maintains the UST Nonemployee Directors' Retirement Plan (the
"Directors' Plan"), a nonqualified, nonfunded plan that applies to nonemployee
members of the Board who are not former employees, 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 death.
In addition, the Company maintains the UST Directors' Supplemental Medical
Plan (the "Directors' Medical Plan"), a self-insured medical reimbursement plan
that applies to nonemployee members of the Board who are not former employees.
The Directors' Medical Plan provides for an additional $7,500 of annual coverage
for each participant for reasonable, medically related expenses above the
participant's basic medical plan coverage. Coverage continues upon a
participant's retirement from the Board for a period equal to the participant's
period of service on the Board.
The Company also maintains the UST Nonemployee Directors' Stock Option Plan
(the "Plan"). The Plan, which was approved by stockholders at the 1995 Annual
Meeting, provides for an annual, automatic grant of an option to purchase 1,500
shares of Common Stock on the first business day following each annual meeting,
beginning in 1995, to each member of the Board who is not then an employee of
the Company. Options will be granted with an exercise price per share equal to
the fair market value per share of Common Stock on the date the option is
granted and will first become exercisable six months after the date of grant.
The option exercise period will expire ten years after the date of grant and
will not be affected by a participant's cessation of membership on the Board.
The Company also makes available to its nonemployee directors up to $12,500
annually in tax and financial planning services. In addition, nonemployee
directors are generally covered under the Company's group life insurance,
accidental death and dismemberment and business travel accident policies.
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The tables, graph and descriptive information which follow are intended to
comply with the Securities and Exchange Commission regulations for executive
compensation requirements applicable to, among other reports and filings, annual
proxy statements. This information is being furnished with respect to the
Company's Chief Executive Officer and all of its other current executive
officers (collectively, the "Executive Officers").
TABLE II
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- ------------
AWARDS
------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS(#) COMPENSATION ($)(1)
- ---------------------------------- ---- ---------- --------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Vincent A. Gierer, Jr. 1995 612,885 2,072,074 70,000 9,000
Chairman of the Board, 1994 560,000 1,850,046 120,000 9,000
Chief Executive Officer 1993 560,000 1,536,091 50,000 14,150
and President
Robert E. Barrett 1995 337,500 715,069 50,000 7,500
Executive Vice President and 1994 275,000 650,012 80,000 7,500
President -- UST Enterprises 1993 275,000 490,408 30,000 11,949
Inc.
John J. Bucchignano 1995 275,000 960,171 55,000 9,000
Executive Vice President 1994 275,000 800,015 50,000 9,000
and Chief Financial Officer 1993 274,039 580,254 40,000 14,150
Harry W. Peter III 1995 337,500 660,063 50,000 9,000
Executive Vice President and 1994 275,000 600,011 50,000 9,000
President -- UST International 1993 275,000 512,870 30,000 14,150
Inc.
Robert D. Rothenberg 1995 280,000 645,031 100,000 9,000
President -- United States 1994 240,577 460,008 30,000 9,000
Tobacco Company 1993 215,000 354,142 20,000 12,900
Richard H. Verheij 1995 235,000 615,026 95,000 9,000
Senior Vice President and 1994 193,269 440,022 70,000 9,000
General Counsel 1993 169,231 171,250 20,000 10,154
</TABLE>
- ---------------
(1) Amounts represent Company matching contributions to the Employees' Savings
Plan.
7
<PAGE> 10
TABLE III
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------------------- -----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL YEAR $/SHARE DATE VALUE($)(2)
- ----------------------------- ------------- ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Vincent A. Gierer, Jr. ...... 70,000 4.7 29.38 9/26/05 445,200
Robert E. Barrett............ 50,000 3.3 29.38 9/26/05 318,000
John J. Bucchignano.......... 55,000 3.7 29.38 9/26/05 349,800
Harry W. Peter III........... 50,000 3.3 29.38 9/26/05 318,000
Robert D. Rothenberg......... 50,000 3.3 29.38 9/26/05 318,000
50,000 3.3 35.25 12/13/05 417,000
Richard H. Verheij........... 45,000 3.0 29.38 9/26/05 286,200
50,000 3.3 35.25 12/13/05 417,000
</TABLE>
- ---------------
(1) Options granted in 1995 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 $1.30 per share, representing
annualized dividends paid with respect to a share of common stock as of the
date of grant. There is no assurance the value realized by an optionee will
be at or near the value estimated by the modified Black-Scholes option
pricing model. Should the stock price not rise over the option price,
optionees will realize no gain.
TABLE IV
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Vincent A. Gierer, Jr. ..... 18,000 -0- 617,300 166,100 9,917,300 849,938
Robert E. Barrett........... -0- -0- 227,100 112,900 1,352,794 570,831
John J. Bucchignano......... -0- -0- 283,700 101,300 2,419,269 507,606
Harry W. Peter III.......... -0- -0- 307,100 92,900 2,725,731 460,831
Robert D. Rothenberg........ 35,000 435,625 213,800 126,200 2,433,675 360,075
Richard H. Verheij.......... -0- -0- 120,200 147,800 777,400 486,788
</TABLE>
8
<PAGE> 11
TABLE V
PENSION TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
- ------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000............... $ 21,101 $ 42,202 $ 63,302 $ 84,403 $ 105,504 $ 126,605 $ 147,705
300,000............... 32,101 64,202 96,302 128,403 160,504 192,605 224,705
400,000............... 43,101 86,202 129,302 172,403 215,504 258,605 301,705
500,000............... 54,101 108,202 162,302 216,403 270,504 324,605 378,705
600,000............... 65,101 130,202 195,302 260,403 325,504 390,605 455,705
700,000............... 76,101 152,202 228,302 304,403 380,504 456,605 532,705
800,000............... 87,101 174,202 261,302 348,403 435,504 522,605 609,705
900,000............... 98,101 196,202 294,302 392,403 490,504 588,605 686,705
1,000,000............... 109,101 218,202 327,302 436,403 545,504 654,605 763,705
1,100,000............... 120,101 240,202 360,302 480,403 600,504 720,605 840,705
1,200,000............... 131,101 262,202 393,302 524,403 655,504 786,605 917,705
</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 actually paid in the applicable
year) in the ten year period immediately preceding retirement. Table II shows
salary paid in 1993-1995 and bonus for the 1993-1995 years actually paid in
1993-1996. For 1995, the three year average compensation covered by the
Retirement Plans for each of the Executive Officers was as follows: Mr. Gierer,
$967,386; Mr. Barrett, $423,248; Mr. Bucchignano, $431,447; Mr. Peter, $423,042;
Mr. Rothenberg, $333,988; and Mr. Verheij, $258,786. As of December 31, 1995,
the credited years of service under the Retirement Plans were approximately as
follows: Mr. Gierer, 18 years; Mr. Barrett, 5 years; Mr. Bucchignano, 11 years;
Mr. Peter, 8 years; Mr. Rothenberg, 26 years; and Mr. Verheij, 9 years. Pension
Table calculations assume retirement on December 31, 1995 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 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 payable as a life annuity at normal
retirement age (assuming compensation and service as of December 31, 1995) 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. Gierer, $155,671; Mr. Barrett, $204,694; Mr. Bucchignano, $133,092;
Mr. Peter, $170,546; Mr. Rothenberg, $19,104; and Mr. Verheij, $121,263.
9
<PAGE> 12
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company is party to employment agreements with Messrs. Gierer (4 years)
and Bucchignano (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 severance payments, exclusive of
the effect of state and local taxes, that would have been payable to the
aforementioned executive officers if their employment had terminated on December
31, 1995 following a change in control would be as follows: Mr. Gierer, $3.2
million and Mr. Bucchignano, $1.4 million.
In addition, the Company is party to severance agreements with Messrs.
Barrett, Peter, Rothenberg and Verheij, which set forth the benefits to be paid
upon certain terminations of employment following a change in control of the
Company. Each of the agreements has a three-year term that is generally
automatically extended. Each agreement provides that the officer will be
entitled to the severance benefits described below if the Company terminates his
employment following a change in control for any reason other than death,
disability or "cause" or if the officer terminates his employment for "good
reason" (as such terms are defined in the agreement). The benefits consist of a
lump-sum payment equal to three times the sum of the officer's base salary and
the highest ICP payment made to the officer in any of the preceding three years,
provided that such ICP amount does not exceed 75% of base salary. 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.
Based upon current salary levels, the approximate lump-sum value of the
severance payments, exclusive of any reductions attributable to any change in
control benefits payable under other of the Company's employee benefit plans or
arrangements and exclusive of the effect of state and local taxes, that would
have been payable to the aforementioned executive officers if their employment
had terminated on December 31, 1995 following a change in control would be as
follows: Mr. Barrett, $1.8 million; Mr. Peter, $1.8 million; Mr. Rothenberg,
$1.6 million; and Mr. Verheij, $1.2 million.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Nominating and Compensation Committee (the "Committee") is comprised of
four independent, nonemployee directors. The role of the Committee, among other
things, is to review and approve, as appropriate, (i) the broad compensation
program of the Company with respect to its officers, including all
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<PAGE> 13
executive officers ("Executive Officers"), and (ii) the various components of
the total compensation of the Executive Officers. The Stock Option Committee is
comprised of the same four independent, nonemployee directors. Its role is
generally to administer the Company's stock option plans and review and approve
stock option grants thereunder subject, with respect to Executive Officers, to
the approval of the Committee.
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 earnings 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 long-standing policy to link
a substantial portion of overall compensation to the Company's performance. Less
than half of total compensation is to be fixed in the form of base salary while
the remainder of total compensation (bonus and stock options) is to be variable
and dependent upon the earnings and operating results of the Company and the
market price of Common 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 total compensation is dependent on Company performance, the
Committee has adopted an objective for the Company's compensation programs that
total compensation for the Company's officers should fall approximately within
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 this objective is reflective of the increasing legal and
regulatory challenges which continue to face the tobacco industry and the
Company and the need to attract and retain talented executives who can direct
growth in such a challenging environment. The Committee directed an independent
consultant to construct a group of comparative companies from its database,
which resulted in the identification of eighteen companies who, like the
Company, met the following criteria as of the end of 1994: (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%. The
comparator group companies for executive compensation purposes are not the same
as the peer group index used for comparing investment performance in the graph
included in this Proxy Statement except for one company which is also included
in the S&P Tobacco Index.
Relevant data to be included in the independent consultant's report for any
year does not become fully available until after the close of that year.
Accordingly, the Committee uses compensation data drawn from this report only as
a guide in determining the total compensation to be provided to the Executive
Officers for the year following the year to which the report relates. Thus, for
example, in determining total 1995 compensation for Executive Officers, the
Committee was aware that, based upon the data provided in the independent
consultant's 1995 report, total 1994 compensation for each of the Executive
Officers generally fell below the 75th percentile of compensation for comparable
executives in the comparator group. Implementation of the Committee's objective
is thus subject to review and adjustment each year in light of information set
forth in the latest consultant's report. In reviewing its objective, the
Committee also takes into account circumstances which may have affected the
results of the report (i.e., the shift in comparator group companies from year
to year due to the financial performance criteria, as well as changes from time
to time in comparable executives at the comparator group companies).
11
<PAGE> 14
It should be noted that there were substantial changes in the Executive
Officer group from 1994 through 1995. Robert D. Rothenberg was elected President
of United States Tobacco Company and became an Executive Offficer during 1995
following the resignation of Joseph R. Taddeo. Richard H. Verheij, Senior Vice
President and General Counsel, became an Executive Officer in December 1994
following the retirement of James W. Chapin. However, Mr. Chapin's 1994
compensation was included in the Executive Officer group for that year.
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 Company's Incentive Compensation
Plan ("ICP") and long-term incentives consisting of the grant of stock options
under the Company's stock option plan (the "Option Plan"). Both the ICP and the
Option Plan have been approved by stockholders. The ICP is directly linked to
Company performance through earnings, while the Option Plan reflects the
Company's performance through changes in the market price of Common Stock.
Although the Committee's only established target level is the 75th
percentile as the goal for each officer's total compensation, in analyzing where
such total compensation falls in relation to the comparator group, the Committee
is cognizant of where each component of compensation falls in relation to the
same component of compensation for comparable executives in the comparator
group. In this connection, the Committee noted that 1994 salaries for each
current Executive Officer fell below the 75th percentile, long-term incentive
compensation for the majority of current Executive Officers fell below the 75th
percentile and 1994 short-term incentive compensation for each was above the
75th percentile of the analogous 1994 compensation for comparable executives in
the comparator group.
Over the last few years, the Committee has recognized that short-term
incentive compensation constituted a significantly higher percentage of total
compensation for the Company's officers than did long-term incentive
compensation. In 1994, the Committee determined that it was appropriate to
change this distribution of incentives, and that it would attempt to do so
gradually over time, while recognizing, however, that the need to conserve
shares of Common Stock available for future issuance under the Option Plan might
limit to some extent the Company's ability to achieve this objective. As one
means of furthering this goal, the Committee determined that it would slightly
increase the allocation to officers of the aggregate option awards made each
year to all employees and would slightly decrease the allocation to officers of
the aggregate ICP fund made each year to all employees. This resulted in 70% in
1995 (65% in 1994) of the total options awarded being granted to officers,
rather than the 50% of option awards historically granted to officers.
(Conversely, only 42% of ICP awards was made to officers for 1995 (44% in 1994),
as opposed to the 50% of ICP awards historically made to officers.)
Nevertheless, fewer options were granted to Executive Officers as a group in
1995 than 1994 because, in 1995, (i) as previously noted, two Executive Officers
(the "new Executive Officers") were generally serving as such for the first
time, having replaced two former long-term Executive Officers, and (ii) the
Committee reduced aggregate option awards in order to conserve shares of Common
Stock available for issuance under the Option Plan. However, 1995 stock option
awards of the current Executive Officers as a group increased slightly (5%) over
the awards this same group of executives received in 1994. With respect to ICP,
the 1995 awards to Executive Officers as a group decreased slightly over that in
1994 as did total cash compensation, primarily due to the change in the
Executive Officer group. However, the 1995 ICP awards to the current Executive
Officers as a group increased by approximately 18% over the awards this same
group of executives received in 1994 and their total cash compensation increased
17%.
Set forth in the Summary Compensation Table (Table II) included in this
Proxy Statement is the compensation of current Executive Officers for the years
1995, 1994 and 1993. 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 1995, 1994 and 1993, net earnings increased 11%, 11%
and 12%, respectively;
12
<PAGE> 15
primary earnings per share increased 16%, 15% and 15%, respectively; and
dividends per share increased 16%, 17% and 20%, respectively.
SPECIFIC COMPONENTS OF COMPENSATION PROGRAM
Salary. Base salary 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 current Executive Officers as a group constituted approximately
27% of their 1995 cash compensation and approximately 20% of their total 1995
compensation (including the stock option component discussed below), leaving 80%
of such compensation "at risk." Officers' base salaries are generally reviewed
every two to three years and are based upon fixed percentages of the Chief
Executive Officer's salary depending on the level of officer. Messrs. Barrett,
Gierer and Peter, each of whom received salary increases in 1995, had not
received increases since December 30, 1991. Mr. Rothenberg also received an
increase in 1995 in connection with his promotion to President of United States
Tobacco Company and his increased responsibilities.
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 in the year. Up to 50% of the fund may be
allocated by the ICP Committee among the Company's officers, including all
Executive Officers ("Fund A"). However, as previously discussed, the ICP
Committee in 1995 allocated 42% of the fund to Fund A with the remaining 58%
allocated to all other employees. This allocation to Fund A compares with the
1994 allocation of 44%. Allocations to each of the Executive Officers must be
approved by the Committee which decides whether to accept or alter such
recommendations. Since January 1, 1994, the ICP has provided 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 without stockholder approval.
The Committee has, however, the authority to determine that an award to an
Executive Officer will be less than the indicated maximum percentage for such
Executive Officer.
The Committee's policy in this regard has generally been to approve an ICP
award for each Executive Officer, expressed as a percentage of Fund A and
subject to the percentage limits described above, that corresponds to a dollar
amount determined as follows: with respect to any year in which the Company's
net earnings equal or exceed the prior year's results, the Committee generally
awards an executive a bonus that is at least equal to the executive's bonus for
the immediately preceding year. If the executive has been promoted to a position
of greater responsibility with an increase in salary, the bonus is generally
increased commensurately. The extent to which an Executive Officer's bonus
increases or decreases is designed to achieve an overall percentage change in
the Executive Officer's total cash compensation (salary and bonus) for the year
which is commensurate with the percentage changes for such year in the Company's
net earnings or earnings per share. For 1995, this correlation generally existed
for continuing Executive Officers, but not for the new Executive Officers, whose
percentage increases in cash compensation were significantly higher than the
targeted increase because of their promotion to positions of greater
responsibility. Where applicable, the Committee also takes into account (i) the
relationship between the executive's total cash compensation and that of the
Chief Executive Officer and (ii) the performance of the segment of the Company
for which the executive is responsible.
In considering the specific awards to the Executive Officers, the Committee
noted that overall Company performance was superior in 1995. Specifically, the
Company's net earnings were $429.8 million, an increase
13
<PAGE> 16
of 11% over the prior year; the Company's primary earnings per share were $2.16,
an increase of 16% over the prior year; and the Company's return on average
stockholders' equity for 1995 was approximately 131%.
Based on the Company's performance for 1995, the aggregate ICP fund for
1995 increased by approximately 10% over the prior year. The 1995 ICP fund
represents 4.98% of total earnings before income taxes and provision for
incentive compensation and was distributed to 1,725 employees, including all
current Executive Officers. The ICP awards made to the current Executive
Officers as a group constituted 15% of the aggregate ICP fund and 37% of Fund A.
In addition, the ICP awards made to the current Executive Officers as a group
constituted approximately 73% of their cash compensation for 1995 and
approximately 53% of their total compensation for 1995 (including the long-term
component discussed below).
Option Plan. 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 Plan. Stock options represent compensation that is tied to the
Company's stock 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 Common Stock on the date of grant,
and the optionee will realize value from grant only if the market value of such
shares increases.
Long-term equity-based compensation serves the Committee's overall
compensation policy as follows: it is variable (not fixed); its value is
performance-related, based upon the market price of Common Stock; and it
provides an additional incentive to executives to take into account the
Company's long-term goals and plans. In addition to providing incentive
compensation, stock options are a means to encourage equity ownership. Because
salary is generally fixed and changes in ICP awards will generally correlate
with changes in net earnings or earnings per share of the Company, stock options
are the component of overall compensation that provides the Committee with the
greatest degree of flexibility in attempting to attain its targeted compensation
objective with respect to Executive Officers.
As previously discussed, the Committee found that total 1994 compensation
of its Executive Officers was generally below the targeted 75th percentile of
1994 compensation for comparable executives in the comparator group and was
cognizant that the long-term component of executive compensation, in particular,
was generally below the 75th percentile. Because of the importance of the
long-term component of compensation and because long-term compensation
represented 34% of overall 1994 compensation for Executive Officers, the
Committee believes that gradual increases in this component is the most
appropriate means of achieving the targeted level for overall compensation.
Individual grants to the current Executive Officers for 1995 are set forth
in Table III (Option Grants in Last Fiscal Year) included in this Proxy
Statement. The Committee's practice in the grant of stock options is generally
based upon a subjective evaluation of performance and not subject to a specific
formula. In determining the size of regular option grants to Executive Officers,
the Stock Option Committee considers the following factors, without assigning
any particular weight to any factor: (i) the position and performance of the
executive, (ii) the grant date present value (Black-Scholes) of the award
compared with the value of awards to executives in the comparator group, (iii)
attaining the Committee's targeted goal for total compensation, and (iv) the
importance of long-term compensation, as discussed above. It does not consider
the size, in the aggregate, of all previous option grants made to an Executive
Officer.
A special option grant was made in 1995, subsequent to the regular 1995
grant, to a number of employees, including the new Executive Officers. Of the
total shares granted, 100,000 shares were awarded to the new Executive Officers.
In this regard, the Stock Option Committee and the Committee determined that a
special grant was appropriate for the new Executive Officers to reflect their
promotion to positions of greater responsibility.
14
<PAGE> 17
1995 COMPENSATION OF CHIEF EXECUTIVE OFFICER
Each component of Mr. Gierer's 1995 compensation (i.e., salary, ICP award
and stock options) was determined by the Committee and was based upon the
Committee's compensation policy as previously discussed. The CEO's performance
is reviewed annually by the Committee and is based upon such quantitative
factors as the Company's financial performance (net earnings, earnings per share
and return on average stockholders' equity) as well as qualitative factors which
include the implementation of the Company's strategic plan and the achievement
of those business goals which contributed to the Company's earnings growth and
profitability and increase in shareholder returns. A subjective determination is
made by the Committee in considering these factors as no particular weight is
assigned to each.
In reviewing Mr. Gierer's 1995 performance, the Committee noted his strong
leadership and direction in confronting the many legal and regulatory challenges
which the Company and the tobacco industry continued to face during the year.
Despite these external challenges, the Company achieved another record year of
sales and earnings growth.
For 1995, Mr. Gierer's salary increased 9% and his ICP award increased 12%
(which represented 13.4% of Fund A). As a result, Mr. Gierer's 1995 cash
compensation increased 11.4% which was consistent with the Company's increases
in net earnings and earnings per share (11% and 16%, respectively). During 1994,
Mr. Gierer was awarded stock options pursuant to two separate option grants. He
was awarded 70,000 shares in June pursuant to the regular option grant and
50,000 shares in November pursuant to the special option grant in which 115,000
shares were awarded to Executive Officers as a group. For 1995, Mr. Gierer was
awarded 70,000 shares pursuant to the regular option grant but did not
participate in the special grant in which 100,000 shares were awarded to
Executive Officers as a group, all of which were allocated to the two new
Executive Officers who had assumed new responsibilities.
Mr. Gierer's total compensation for both 1994 and 1995 fell below the 75th
percentile of 1994 compensation of comparable executives in the comparator
group. Mr. Gierer's total 1995 compensation decreased slightly from that of 1994
as a result of the reallocation of stock options awarded to Executive Officers
pursuant to the 1995 special grant. Over time, the Committee expects to use a
gradual increase in the size of option grants as the most appropriate means of
increasing the total compensation of Executive Officers (including Mr. Gierer)
to the targeted level.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE
The current tax law imposes an annual, individual limit of $1 million on
the deductibility of the Company's compensation payments to the chief executive
officer and to the four most highly compensated executive officers other than
the chief executive officer. Specified compensation is excluded for this
purpose, including performance-based compensation provided certain conditions
are satisfied. The Committee has determined to preserve, to the maximum extent
practicable, the deductibility of all compensation payments to the Company's
Executive Officers.
<TABLE>
<CAPTION>
NOMINATING AND COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
<S> <C>
P.X. Kelley, Chairman John P. Warwick, Chairman
Edward H. DeHority, Jr. Edward H. DeHority, Jr.
Spencer R. Stuart P.X. Kelley
John P. Warwick Spencer R. Stuart
</TABLE>
15
<PAGE> 18
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
FOR THE YEAR ENDED DECEMBER 31, 1995
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>
12/90 100 100 100
12/91 185 153 130
12/92 185 152 140
12/93 166 119 155
12/94 174 130 157
12/95 217 204 215
</TABLE>
(1) Assumes $100 invested on 12/31/90 and held through 12/31/95. Total return
assumes reinvestment of dividends.
16
<PAGE> 19
INDEBTEDNESS OF MANAGEMENT
Since January 1, 1995, none of the Company's directors, Executive Officers,
nominees for election as directors or certain relatives or associates of such
persons has 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
loans made pursuant to stock option exercises under the terms of the UST Inc.
1982 Stock Option Plan which has expired with respect to the grant of options,
and of the UST Inc. 1992 Stock Option Plan, both as previously approved by
stockholders. Unpaid balances on such loans are secured by the pledging of the
shares with the Company and by the optionee's personal installment promissory
note bearing interest at the federal rate in effect under the Internal Revenue
Code on the date the loan is made.
TABLE VI
<TABLE>
<CAPTION>
INDEBTEDNESS
LARGEST AGGREGATE AS OF
INDEBTEDNESS DURING 1995(1) FEBRUARY 9, 1996(1)
--------------------------- -------------------
<S> <C> <C>
Vincent A. Gierer, Jr................................ $ 1,364,497 $ 1,404,655
Chairman of the Board,
Chief Executive Officer and President
Robert E. Barrett.................................... 517,356 455,331
Executive Vice President
John J. Bucchignano.................................. 672,040 503,414
Director, Executive Vice President and
Chief Financial Officer
James W. Chapin...................................... 1,135,326 246,723
Director
Harry W. Peter III................................... 471,486 411,840
Executive Vice President
Robert D. Rothenberg................................. 1,114,750 1,135,361
President -- United States Tobacco Company
Richard H. Verheij................................... 67,031 57,376
Senior Vice President and General Counsel
</TABLE>
- ---------------
(1) Interest rates on loans range from approximately 5% to approximately 9%.
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 1996.
The Board has selected the firm of Ernst & Young LLP, Certified Public
Accountants, as independent auditors of the accounts of the Company and its
consolidated subsidiaries for the year 1996. Ernst & Young LLP 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 1995 financial statements,
Ernst & Young LLP 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
17
<PAGE> 20
not ratify the selection of Ernst & Young LLP, the selection of independent
auditors will be reconsidered by the Board.
Representatives of Ernst & Young LLP 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 LLP as
independent auditors of the accounts of the Company and its consolidated
subsidiaries for the year 1996 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 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.
The following Proposal Nos. 3 and 4, which are printed verbatim, were
submitted by various stockholders whom the Company believes are anti-tobacco
activists. The name, address and shareholdings of each proponent will be
furnished upon any oral or written request to the Secretary of the Company. For
the reasons following each proposal, the Board recommends a vote AGAINST.
PROPOSAL NO. 3
"NAMING AND CURBING NICOTINE IN TOBACCO PRODUCTS
WHEREAS the federal Food and Drug Administration has proposed regulating
cigarettes and smokeless tobacco products as drugs;
-- Virtually every major health organization in the United States of
America as well as throughout the world has concluded that cigarette smoking and
smokeless tobacco-use are addictive;
-- An estimated 6 million people use smokeless tobacco in the United
States; a vast majority of these are addicted to tobacco use;
-- It has been recognized by the medical profession as well as many in the
tobacco industry that the addictive ingredient in tobacco is nicotine;
-- The FDA reported that nicotine content in cigarettes has increased for
all brand categories including regular, low nicotine and ultra low brands from
1982 to 1992;
-- Our company is being sued in a class action suit alleging that we
intentionally addict consumers through the design, manufacture and marketing of
our brands and that our tobacco products have caused serious health problems to
the class members;
-- A successful lawsuit may affect adversely and seriously the price of our
stock;
-- Certain tobacco companies have developed new nicotine analogs that
reduce certain adverse health effects of nicotine while maintaining
pharmacological effects which could be beneficial to tobacco users who want to
quit;
-- Scientists have recommended that nicotine levels in tobacco products be
slowly reduced to a level that cannot induce addiction among young non-smokers;
-- The technology is available to our company for it to reduce nicotine
content in its tobacco products;
-- Experts recently recommended that a rating system for nicotine in
smokeless tobacco is needed to inform consumers about how much nicotine they
actually receive from using smokeless tobacco.
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<PAGE> 21
RESOLVED that shareholders request the Board to take steps to preserve the
health of its tobacco-using customers. We suggest the following steps:
1. Develop and publicize nicotine and pH ratings for each of our snuff
brands and to make this available in accurate information to our
customers about how much nicotine they consume when using our snuff.
2. Determine the nicotine level in snuff at which nicotine addiction cannot
be induced or maintained. With this information, the Company shall
implement a program that would gradually reduce levels of nicotine in
our brands over an appropriate time period to a level that is not
addictive. This effort to reduce nicotine availability would be
undertaken in collaboration with independent health experts.
3. Develop and market new nicotine or nicotine-like products that have
minimal toxic agents that can be used by our consumers in lieu of snuff
use, and market these products as drugs or medical devices to help adult
usersquit smokeless tobacco use."
COMPANY'S RESPONSE
The Board recommends that stockholders vote AGAINST the foregoing
resolution (Proposal No. 3).
This proposal is part of a continuing personal crusade against the Company
and the smokeless tobacco industry by an anti-tobacco activist who has submitted
other proposals to the Company in the past, all of 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.
This proposal contains certain assertions with which the Company strongly
disagrees. The Company has, for example, stated its belief that neither nicotine
nor smokeless tobacco is addictive. Moreover, the Food and Drug Administration's
proposal ("FDA proposal") to regulate smokeless tobacco as a "drug" and a
"medical device" is not only inherently ridiculous as a matter of common sense,
but has compelled FDA to invent "facts" and grossly distort the law. In response
to FDA's proposal, the Company (together with other smokeless tobacco
manufacturers) has filed a lawsuit in the Federal District Court in Greensboro,
North Carolina, seeking judicial confirmation that FDA and its Commissioner lack
jurisdiction to regulate smokeless tobacco products. The Company (together with
other smokeless tobacco manufacturers) has also submitted comments to FDA
demonstrating the myriad of legal, administrative and scientific defects in the
FDA proposal, and setting forth the reasons why the FDA proposal should not be
adopted. The Company also notes that the class action lawsuit mentioned in the
stockholder proposal has been dismissed.
As to the proposal's suggestion that the Company "develop and publicize
nicotine and pH ratings for each of our snuff brands and to make this available
in accurate information to our customers," such "nicotine and pH ratings" are
unnecessary or irrelevant.
With respect to the suggested "nicotine rating," the Company and other
smokeless tobacco manufacturers are currently working, in cooperation with the
Department of Health and Human Services ("HHS"), to develop a uniform analytical
method for measuring and reporting to HHS, pursuant to federal law, the nicotine
content of smokeless tobacco products. When those reports have been made, HHS
may advise Congress as to any additional action it believes is warranted with
respect to nicotine content information.
As to the proposal's suggestion that the Company disseminate information
regarding the "pH" of its smokeless tobacco products, such information is
irrelevant. Published scientific literature, and a scientific analysis
undertaken at the request of the Company by a noted expert in the field of human
pharmacology, demonstrate that the "pH of smokeless tobacco" is irrelevant to
the absorption of nicotine by smokeless tobacco consumers. Furthermore, studies
carried out in FDA's own laboratories demonstrate the scientific
19
<PAGE> 22
invalidity of any theory that the Company can manipulate the pH of its smokeless
tobacco products so as to control the absorption of nicotine by smokeless
tobacco consumers. Indeed, FDA's own scientists acknowledge that a wide variety
of behavioral and other factors unique to each smokeless tobacco consumer affect
the amount of nicotine that will be absorbed by a consumer from a smokeless
tobacco product.
As to the suggestion that the Company "implement a program that would
gradually reduce levels of nicotine in our brands over an appropriate time
period to a level that is not addictive," that suggestion is premised on a
number of false assumptions, including that smokeless tobacco is addictive.
Furthermore, the type of product manipulation recommended by the proposal,
assuming it were achievable, would be totally at odds with the manner in which
the Company conducts its business. The Company offers smokeless tobacco products
suited to the taste and form preferences of those consumers who choose to make
tobacco a part of their lifestyle. The key to the Company's product development
process is developing products which respond to the taste and form preferences
of its consumers. The Company's various product lines of smokeless tobacco are
based on an appreciation that the Company cannot make any consumer like and use
any one of its products if that product does not respond to the consumer's taste
and form preferences.
Lastly, the suggestion that the Company "develop and market new nicotine or
nicotine-like products . . . and market these products as drugs or medical
devices," is also in sharp conflict with the Company's commitment to offering
smokeless tobacco products suited to the taste and form preferences of those
adult consumers who choose to make tobacco a part of their lifestyle. The
Company is in the smokeless tobacco business, not in the "drugs or medical
devices" business.
Accordingly, the Board believes that the adoption of this proposal is
neither appropriate nor in the best interests of the Company or its
stockholders.
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 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
"UST
Warning Labels on Promotional Items
WHEREAS Skoal 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;
-- 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 stock car racing team
the Company sponsors to promote Skoal Bandit brand moist snuff;
-- 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 stock car clearly depicting the brand name and the bandit
symbol, yet these items carry no warning label;
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<PAGE> 23
-- The Company also permits the use of the Skoal and Copenhagen brand
names, colors, and other brand identifying devices in association with rodeo,
music and other sponsorships without the use of required warning labels;
-- Regulations of the Federal Trade Commission require that mentions of
brands of moist snuff on items such as caps and t-shirts, insulated can holders,
bumper stickers and license plates be accompanied by prominent warning labels;
-- Several national surveys have demonstrated that young people find
promotional items for tobacco products attractive: one such survey found that
30% of 12-17 year olds owned at least one such item;
-- Nothing in federal law or regulation prevents UST from voluntarily
placing warnings about addiction and disease risks on packaging, advertising or
promotions for its moist snuff brands, and
-- Because UST has said it will voluntarily include a warning about not
selling its tobacco products to minors in advertising for these products,
RESOLVED shareholders request that the Board adopt the following policy, to
be put into effect no later than January 1, 1997: 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 addiction and disease 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 sanctions the use of its logos 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 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. 4).
The proponent of this proposal has submitted other proposals to the Company
in the past either alone or with another anti-tobacco activist, each of which
has been overwhelmingly defeated. In addition, the Proponent presented a
virtually identical proposal at the last two annual meetings, which received the
affirmative vote of less than 4% and less than 7%, respectively, of the shares
voting.
The proposal contains certain assertions with which the Company disagrees.
For example, the icon message carried on the Company's smokeless tobacco
marketing communications materials -- "U.S. Tobacco Reminds You: Smokeless
Tobacco/Not For Sale To Minors" -- is not a "voluntary warning" as suggested in
the proposal, but rather a reminder to the Company's retailers and consumers
that all 50 states prohibit the sale of tobacco to minors.
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<PAGE> 24
The proposal also is misleading in suggesting that, among adolescents,
"moist snuff is epidemic." The Proponent's use of the word "epidemic" is not
surprising. A New York Times article quotes a UCLA Professor of Medicine as
stating that the advantage of a word like "epidemic" is that "it certainly gets
the attention of politicians and lay people" and noted that "the people who make
the most noise get the most publicity. Interest groups do count as opposed to
data and rationality."
As for the "data" with respect to youth usage of smokeless tobacco, the
government's own statistics confirm that the reported underage use of smokeless
tobacco is down, not up, and the target goal of the Department of Health and
Human Services ("HHS") Healthy People 2000 program for smokeless tobacco use by
teenage males -- 4 percent by the year 2000 -- has been surpassed. Specifically,
HHS's Midcourse Review of Healthy People 2000 goals determined that "[f]or males
age 12-17, smokeless tobacco use has declined from 6.6 percent in 1988 to 3.9
percent in 1993." The Board believes that the Company's continuing efforts to
discourage the sale of smokeless tobacco to minors are working.
Furthermore, 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 how the
required warning must appear "in a conspicuous and prominent location," in
"conspicuous and legible type," and be "clearly visible."
The Company has and will continue to comply with the requirements of the
comprehensive regulatory scheme governing advertising for smokeless tobacco
products promulgated by Congress and the FTC, 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 which conflict with the existing
regulatory framework mandated by federal law.
The Board continues to believe that this proposal is not in the best
interests of the Company or its stockholders and urges stockholders to vote
AGAINST it.
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 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.
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
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<PAGE> 25
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 1997 Annual Meeting of Stockholders, such proposal
must be received by the Secretary at the Company's office no later than November
23, 1996.
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 7, 1996, the record date for the 1996 Annual Meeting, the
outstanding stock of the Company entitled to vote consisted of 189,530,536
shares of Common Stock (each entitled to one vote).
Appearance at the meeting in person or by proxy of the holders of Common
Stock entitled to cast 94,765,269 votes is required for a quorum.
By Order of the Board of Directors,
DEBRA A. BAKER
Secretary
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<PAGE> 26
P UST
ANNUAL MEETING OF STOCKHOLDERS -- MAY 7, 1996
R
O The undersigned hereby appoints JOHN J. BUCCHIGNANO and RICHARD
H. VERHEIJ, or either of them, with full power of substitution,
X 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
Y Stockholders to be held at the Cole Auditorium of the Greenwich
Library, 101 West Putnam Avenue, Greenwich, Connecticut, on Tuesday, the
7th day of May 1996, 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
Nominees: J.W. Chapin, P.X. Kelley, L.P. Weicker, Jr.
/ / FOR ALL NOMINEES / / WITHHELD FROM ALL NOMINEES
/ / FOR ALL NOMINEES EXCEPT VOTE WITHHELD FROM THE FOLLOWING
--------------------------------------------------------
2. To ratify and approve Ernst & Young LLP as independent auditors of the
Company for the year 1996.
/ / FOR / / AGAINST / / ABSTAIN
The Board of Directors recommends a vote AGAINST the following stockholder
proposals 3 and 4:
3. Stockholder Proposal
/ / FOR / / AGAINST / / ABSTAIN
4. Stockholder Proposal
/ / FOR / / AGAINST / / ABSTAIN
And in their discretion, upon such other business as may properly come before
the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE IF YOU PLAN TO 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> 27
UST EMPLOYEES' SAVINGS PLAN
The Annual Meeting of the Stockholders of UST will be held on May 7, 1996, 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 instruction card attached
below if you wish to vote the shares of the Company's common stock held on your
behalf in the Savings Plan. The Trustee cannot vote your shares without
instructions from you. Accordingly, a Notice of the 1996 Annual Meeting and
Proxy Statement, instruction card, and 1995 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
instructions are very important to the Company.
Please complete, sign and date the instruction card below 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.
DETACH HERE
<PAGE> 28
UST
ANNUAL MEETING OF STOCKHOLDERS -- MAY 7, 1996
EMPLOYEES' SAVINGS PLAN
The undersigned hereby directs Wachovia Bank of North Carolina, N.A. as
Trustee of the UST Employees' Savings Plan to vote in person or by proxy all
shares of Common Stock of UST Inc. allocated to the undersigned's account 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 7th day of May 1996, 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.
The shares reflected on this Instruction Card will be voted in the
manner directed herein by the undersigned. If no direction is made, the shares
reflected on this Instruction Card will be voted FOR Proposals 1 and 2 and
AGAINST Proposals 3 and 4.
----------------
SEE REVERSE
SIDE
----------------
- --------------------------------------------------------------------------------
/ / Please mark votes as in this example.
If no direction is given, the shares reflected on this Instruction Card 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
Nominees: J.W. Chapin, P.X. Kelley, L.P. Weicker, Jr.
/ / FOR ALL NOMINEES / / WITHHELD FROM ALL NOMINEES
2. To ratify and approve Ernst & Young LLP as independent auditors of the
Company for the year 1996.
/ / FOR / / AGAINST / / ABSTAIN
The Board of Directors recommends a vote AGAINST the following stockholder
proposals 3 and 4.
3. Stockholder Proposal
/ / FOR / / AGAINST / / ABSTAIN
4. Stockholder Proposal
/ / FOR / / AGAINST / / ABSTAIN
And in their discretion, upon such other business as may properly come before
the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as name appears hereon. If signing for trusts of estates,
capacity or title should be stated.
Signature: Date:
------------------------------ -------------------------
