<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 Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
UST INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(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 27, 1998
To the Stockholders of UST:
The 1998 Annual Meeting of Stockholders of UST Inc. (the "Company") will be
held at Rich Forum, 307 Atlantic Street, Stamford, Connecticut, on Tuesday, the
5th day of May 1998, 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 1998;
(3) to consider and act upon a stockholder proposal, 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 5, 1998 will be
entitled to vote at the meeting. The approximate date of mailing of this Proxy
Statement is March 27, 1998.
DEBRA A. BAKER,
Senior Vice President
and 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 5, 1998, 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. Beneficial owners who are not
stockholders of record need to obtain proof of ownership from the bank or
brokerage firm in which their shares are held if they plan to attend the
meeting. 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 1998.
3. The Company has been advised that a resolution 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 stockholder resolution, 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
near as possible) 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
the year 2001. Mr. Ralph L. Rossi, a director of the Company since 1973, and Mr.
John P. Warwick, a director since 1991, will retire from the Board at the
expiration of their current terms of office and, accordingly, are not standing
for re-election at the Annual Meeting. To help ensure that the number of
directors in each class is, as nearly as possible, equal in number, Messrs.
Chapin and Weicker will be standing for election at this Annual Meeting, rather
than the Annual Meeting to be held in 1999. In addition, Mr. Gierer will stand
for election at the Annual Meeting to be held in 1999, rather than the Annual
Meeting to be held in 2000. The Board currently consists of eleven members and,
with the retirements of Messrs. Rossi and Warwick, will be reduced to nine
effective as of the Annual Meeting.
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, 1998.
TABLE I
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
---------------- ----------------
<C> <S> <C>
[JAMES W. CHAPIN *JAMES W. CHAPIN Mr. Chapin retired on December 1, 1994
PHOTO] Age 68 and is Of Counsel to the Company. He
Shares beneficially owned: served as Executive Vice President and
Outstanding shares -- 350,953 General Counsel from September 25,
Shares subject to options -- 394,500 1991 until the date of his retirement.
Nominated for term to expire 2001 Mr. Chapin joined the Company as
Present term expires 1999 General Counsel in 1975.
Director since 1994
[JOHN P. CLANCEY JOHN P. CLANCEY Mr. Clancey has served as President
PHOTO] Age 52 and Chief Executive Officer of
Shares beneficially owned: Sea-Land Service Inc., a subsidiary of
Outstanding shares -- 0 CSX Corporation, since July, 1991. Mr.
Shares subject to options -- 0 Clancey is a member of the
Present term expires 1999 International Advisory Council of PSA
Director since 1997 Corp. Ltd., Singapore.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
---------------- ----------------
<C> <S> <C>
[EDWARD H. DEHORITY EDWARD H. DEHORITY, JR. Mr. DeHority is a retired certified
PHOTO] Age 67 public accountant and attorney. He was
Shares beneficially owned: employed by Ernst & Young LLP from
Outstanding shares -- 2,608 1958 to 1988. He served as the firm's
Shares subject to options -- 4,500 National Partner in charge of Client
Present term expires 2000 Relations from 1972 to 1978 and the
Director since 1990 managing partner of the Stamford,
Connecticut office from 1978 to 1987.
[EISENMAN PHOTO] ELAINE J. EISENMAN, PH.D. Dr. Eisenman has served as Executive
Age 49 Vice President -- Human Resources and
Shares beneficially owned: Administration of Enhance Financial
Outstanding shares -- 860 Shares Services Group, Inc. since January 12,
subject to options -- 1,500 1998. From January, 1997 to January
Present term expires 2000 11, 1998, she was a Principal of
Director since 1996 Global Leadership Associates, a firm
specializing in executive succession
and leadership development. She served
as Senior Vice President -- Worldwide
Staffing, Development and Succession
of American Express Company from
November 1994 to January 1997. She
also served as Vice President and
General Manager of Personnel
Decisions, Inc., a firm specializing
in management development, from March
1990 to November 1994.
(EDWARD T. FOGARTY *EDWARD T. FOGARTY Mr. Fogarty served as Chairman of the
PHOTO) Age 61 Board, Chief Executive Officer and
Shares beneficially owned: President of Tambrands Inc. from
Outstanding shares -- 750 October, 1996 to July, 1997 and as
Shares subject to options -- 0 President and Chief Executive Officer
Nominated for term to expire 2001 of Tambrands Inc. from May, 1994 to
Present term expires 1998 October, 1996. He served as
Director since 1997 President -- USA/Canada/Puerto Rico
for Colgate-Palmolive Company from
1989 to 1994. Mr. Fogarty also serves
as a director of Avon Products, Inc.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
---------------- ----------------
<C> <S> <C>
(GIERER PHOTO) VINCENT A. GIERER, JR. Mr. Gierer has served as Chairman of
Age 50 the Board and Chief Executive Officer
Shares beneficially owned: since December 1, 1993 and has served
Outstanding shares -- 414,716 as President since September 27, 1990.
Shares subject to options -- 795,400 He also served as Chief Operating
Present term expires 2000 Officer from September 27, 1990 to
Director since 1986 November 30, 1993. Mr. Gierer has been
employed with the Company since 1978.
(P.X KELLEY PHOTO) P.X. KELLEY General Kelley has served as a Partner
Age 69 with J.F. Lehman & Company, a private
Shares beneficially owned: investment firm since March 1, 1998.
Outstanding shares -- 3,500 He served as Vice Chairman of Cassidy
Shares subject to options -- 4,500 & Associates, a government relations
Present term expires 1999 firm, from January 1989 to January
Director since 1992 1998. He served as Commandant of the
Marine Corps and Member of the Joint
Chiefs of Staff from July 1983 to June
1987. General Kelley also serves as a
director of AlliedSignal Inc., GenCorp
Inc., Saul Centers, Inc., Sturm, Ruger
& Company, Inc. and Wackenhut
Corporation.
(PETER J. NEFF PHOTO) PETER J. NEFF Mr. Neff served as a Chairman of the
Age 59 Board and Chief Executive Officer of
Shares beneficially owned: Genovo, Inc., a gene therapy company,
Outstanding shares -- 0 from January 1997 to December 1997.
Shares subject to options -- 0 From 1991 to December 1996, he served
Present term expires 2000 as President and Chief Executive
Director since 1997 Officer of Rhone-Poulenc, Inc., the
U.S. subsidiary of Rhone-Poulenc,
S.A., the French pharmaceutical and
chemical company. Mr. Neff also serves
as a director of Envirogen, Inc.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME OF NOMINEE*
OR DIRECTOR BUSINESS HISTORY
---------------- ----------------
<C> <S> <C>
(L.P. WEICKER PHOTO) *LOWELL P. WEICKER, JR. Mr. Weicker is a Visiting Professor at
Age 66 the University of Virginia. He served
Shares beneficially owned: as a U.S. Senator from 1970 to 1988
Outstanding shares -- 675 and as Governor of Connecticut from
Shares subject to options -- 3,000 January 9, 1991 through January 3,
Nominated for term to expire 2001 1995. Mr. Weicker also serves as a
Present term expires 1999 director of Compuware, Phoenix Home
Director since 1995 Life Mutual Funds and HPSC, Inc.
</TABLE>
Messrs. Chapin, Fogarty 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, 1998, all directors and executive officers as a group
beneficially owned 1,283,272 shares and had exercisable options to acquire
2,752,700 shares, which together represented approximately 2.2% of the aggregate
of the outstanding Common Stock including options held by all such persons. No
executive 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 1997.
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 and Lowell P. Weicker, Jr. The Audit Committee,
which met four times during 1997, 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 nine
times during 1997, is currently comprised of the following members, each
independent of management: P.X. Kelley -- Chairman, Edward H. DeHority, Jr.,
Elaine J. Eisenman 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 three times during 1997, 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 the director's 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 the director's period of service, provided, however such
period will not exceed 120 months. In addition, the Directors' Plan also
provides for a lump sum payment to a deceased director's spouse in the event of
a director's death either prior to or subsequent to a director's retirement.
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 $12,500
annually in tax and financial planning services. In addition, nonemployee
directors are covered under the Company's group life insurance, accidental death
and dismemberment and business travel accident policies.
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The tables, graph and descriptive information which follow are intended to
comply with the Securities and Exchange Commission regulations for executive
compensation requirements applicable to, among other reports and filings, annual
proxy statements. This information is being furnished with respect to the
Company's Chief Executive Officer and its four most highly compensated executive
officers as of December 31, 1997 (collectively, the "Named Executive Officers").
TABLE II
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ------------
AWARDS
------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
- ------------------ ---- --------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Vincent A. Gierer, Jr. 1997 615,000 1,960,000 160,000 9,600
Chairman of the Board, 1996 615,000 2,106,533 125,000 9,000
Chief Executive Officer and 1995 612,885 2,072,074 70,000 9,000
President
Robert E. Barrett 1997 340,000 926,000 120,000 8,000
Executive Vice President 1996 340,000 726,522 80,000 7,500
and President -- UST Enterprises 1995 337,500 715,069 50,000 7,500
Inc.
Richard H. Verheij 1997 300,000 1,086,000 130,000 9,600
Executive Vice President 1996 275,000 738,379 70,000 9,000
and General Counsel 1995 235,000 615,026 95,000 9,000
Robert H. Lawrence, Jr. 1997 283,654 751,000 70,000 9,600
Executive Vice President -- 1996 250,000 592,275 30,000 9,000
United States Tobacco Company 1995 250,000 560,002 65,000 9,000
A. Gary Smith 1997 250,000 750,000 70,000 9,600
Executive Vice President -- 1996 248,654 459,011 25,000 9,000
United States Tobacco Company 1995 215,000 440,042 25,000 9,000
</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. ..... 90,000 4.9 30.44 10/22/07 663,300
70,000 3.8 33.25 12/10/07 559,300
Robert E. Barrett........... 60,000 3.2 30.44 10/22/07 442,200
60,000 3.2 33.25 12/10/07 479,400
Richard H. Verheij.......... 60,000 3.2 30.44 10/22/07 442,200
70,000 3.8 33.25 12/10/07 559,300
Robert H. Lawrence, Jr. .... 30,000 1.6 30.44 10/22/07 221,100
40,000 2.2 33.25 12/10/07 319,600
A. Gary Smith............... 30,000 1.6 30.44 10/22/07 221,100
40,000 2.2 33.25 12/10/07 319,600
</TABLE>
- ---------------
(1) Options granted in 1997 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: exercise price equal to the fair market
value of the underlying stock on the date of grant, interest rate
representing the interest rate on a U.S. Treasury security with a maturity
date corresponding to that of the expected life of the option, volatility
calculated using weekly stock prices for a one year period prior to grant
date, estimated period in which option will be exercised of 6.5 years and
expected dividend yield of 4.4 percent. 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. ..... -0- -0- 528,900 266,500 6,322,256 1,272,625
Robert E. Barrett........... 10,000 8,750 330,100 189,900 2,948,100 898,338
Richard H. Verheij.......... 23,000 217,188 236,800 208,200 1,686,450 927,675
Robert H. Lawrence, Jr. .... -0- -0- 352,400 111,600 5,074,775 504,600
A. Gary Smith............... -0- -0- 215,200 94,800 2,517,450 452,238
</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............ $ 21,005 $ 42,010 $ 63,014 $ 84,019 $105,024 $126,029 $147,033
300,000........... 32,005 64,010 96,014 128,019 160,024 192,029 224,033
400,000........... 43,005 86,010 129,014 172,019 215,024 258,029 301,033
500,000........... 54,005 108,010 162,014 216,019 270,024 324,029 378,033
600,000........... 65,005 130,010 195,014 260,019 325,024 390,029 455,033
700,000........... 76,005 152,010 228,014 304,019 380,024 456,029 532,033
800,000........... 87,005 174,010 261,014 348,019 435,024 522,029 609,033
900,000........... 98,005 196,010 294,014 392,019 490,024 588,029 686,033
1,000,000........... 109,005 218,010 327,014 436,019 545,024 654,029 763,033
1,100,000........... 120,005 240,010 360,014 480,019 600,024 720,029 840,033
1,200,000........... 131,005 262,010 393,014 524,019 655,024 786,029 917,033
</TABLE>
The Pension Table sets forth information for determining the estimated
annual retirement benefits payable as a life annuity to the Named 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 1995-1997 and bonus for the 1995-1997 years actually
paid in 1996-1998. For 1997, the three year average compensation covered by the
Retirement Plans for each of the Named Executive Officers was as follows: Mr.
Gierer, $1,117,388; Mr. Barrett, $514,300; Mr. Verheij, $420,563; Dr. Lawrence,
$396,024; and Mr. Smith, $342,173. As of December 31, 1997, the credited years
of service under the Retirement Plans were approximately as follows: Mr. Gierer,
20 years; Mr. Barrett, 7 years; Mr. Verheij, 11 years; Dr. Lawrence, 11 years;
and Mr. Smith, 25 years. Pension Table calculations assume retirement on
December 31, 1997 and take into account offsets for social security benefits.
The Named 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, 1997) under the Supplemental Plan for each of the Named Executive
Officers (after taking into account reductions for benefits under the Retirement
Plans) are approximately as follows: Mr. Gierer, $83,318; Mr. Barrett, $183,054;
Mr. Verheij, $142,768; Dr. Lawrence, $122,932; and Mr. Smith, $18,295.
9
<PAGE> 12
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company is party to an employment agreement with Mr. Gierer (4 years)
which sets forth the terms and conditions of his employment and termination of
employment with the Company. The stated initial term of the agreement is
generally automatically extended, subject to expiration at age 65. In
particular, the agreement provides that Mr. Gierer will be entitled to certain
severance benefits if the Company terminates his employment for any reason other
than death, disability or "cause" or if he 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 Mr. Gierer's employment agreement
or, if greater, three years, of an annual amount equal to the sum of his base
salary and the highest ICP payment made to him 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 specified welfare benefit plans
in effect for Mr. Gierer'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 Mr. Gierer's
severance payment as necessary to restore him to the same after-tax position he
would have had if the excise tax had not been imposed. In addition, the
agreement provides that Mr. Gierer shall resign as Director upon his termination
of employment for any reason. Based upon Mr. Gierer's current salary level, the
approximate before-tax lump-sum value of the severance payment that would have
been payable to him if his employment had terminated on December 31, 1997
following a change in control would be $3.9 million.
In addition, the Company is party to severance agreements with Messrs.
Barrett, Verheij, Lawrence and Smith 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 and, in any event, expires no earlier than two years
following a change in control. Each agreement provides that the officer will be
entitled to the severance benefits described below if the Company terminates his
employment within the two year period 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 specified 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
before-tax 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 that would have been payable to
the aforementioned executive officers if their employment had terminated on
December 31, 1997 following a change in control would be as follows: Mr.
Barrett, $2.1 million; Mr. Verheij, $1.6 million; Dr. Lawrence, $1.5 million;
and Mr. Smith, $1.6 million.
10
<PAGE> 13
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 executive
officers ("Executive Officers"), and (ii) the various components of the total
compensation of the Executive Officers. The Stock Option Committee is currently
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 excellent financial performance over the years. 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. 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 major portion of total compensation to the
Company's performance.
The Committee's objective for the Company's compensation programs is that
total compensation for the Company's officers should fall at approximately the
75th percentile of a Comparator Group selected by an independent consultant
which is composed of a cross section of other high performance companies. The
Committee believes that their objective is reflective of the contentious issues
which continue to confront the Company and the tobacco industry in general and
the need to attract and retain talented executives who can direct growth in such
a challenging and controversial environment. Return on equity and earnings per
share growth are the two principal measures of Company performance established
by the Committee. Accordingly, because of these performance measures, the
Comparator Group for executive compensation purposes includes only one company
from the peer group index used for comparing investment performance in the graph
included in this Proxy Statement. The Committee's only established target level
is the goal described above for total compensation.
The Company's compensation program has three principal components, each
described more fully below: annual base salaries; annual bonuses awarded under
the Company's Incentive Compensation Plan ("ICP"), which is directly linked to
Company performance through earnings; and long-term incentives consisting of the
grant of stock options under the Company's stock option plan (the "Option
Plan"), which reflects the Company's performance through changes in the market
price of its common stock. Both the ICP and the Option Plan have been previously
approved by stockholders.
Set forth in the Summary Compensation Table ("Table II") included in this
Proxy Statement is the compensation of the Named Executive Officers for the
years 1997, 1996 and 1995. The Committee notes that the Company's performance in
two of those years reached record levels for net earnings and earnings per share
("EPS"). For 1996 and 1995, net earnings increased 8% and 11%, respectively, and
EPS increased 12% and 15%, respectively. However, for 1997, both net earnings
and EPS (basic and diluted) declined. Net earnings declined 5% and basic and
diluted EPS declined 4% and 3%, respectively, to $2.39 and $2.37.
11
<PAGE> 14
SPECIFIC COMPONENTS OF COMPENSATION PROGRAM
Base Salary. Base salary for the Executive Officers is the component of
the Company's compensation program that is least related to Company performance
and therefore is intended to be the least portion of total compensation. Base
salaries of the Executive Officers as a group constituted 26% of their 1997 cash
compensation and 16 % of their total 1997 compensation. Base salaries of
Executive Officers are generally reviewed every two to three years and are based
upon fixed percentages of the Chief Executive Officer's ("CEO") salary depending
on the level of officer.
ICP. The ICP formula, which was last approved by stockholders in 1980,
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"). The 1997 ICP allocation
to Fund A was approximately 41% (the same as for 1995 and 1996) with the
remaining 59% of the fund being allocated to all other employees ("Fund B"). ICP
awards to each of the Executive Officers must be approved by the Committee which
decides whether to accept or alter the ICP Committee's recommendations. The ICP
provides that the CEO 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. In addition, the sum of these percentages cannot exceed 100%. 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. In considering the specific awards to the Executive Officers, the
Committee first considers the Company's overall performance. Where applicable,
the Committee also takes into account (i) the relationship between the
executive's total cash compensation and that of the CEO and (ii) the performance
of the segment of the Company for which the executive is responsible.
The 1997 ICP fund represents 4.98% of total earnings before income taxes
and provision for incentive compensation and was distributed to approximately
1,700 employees, including all Executive Officers. In 1997, the Company's net
earnings were $439 million, a decrease of 5% from the prior year. As a result,
the aggregate ICP fund for 1997 decreased by 5% from the prior year. In its
consideration of the specific awards to each individual Executive Officer, the
Committee first took into account the reduced size of the fund and considered an
award that would be commensurately less than that of the prior year. The
Committee then reviewed the 1997 performance of each Executive Officer (other
than the CEO -- see discussion below on CEO's compensation). The Committee noted
in its review the increased responsibilities that these Executive Officers had
assumed as a result of the retirements of three (3) former Executive Officers
and the increased efforts necessary to address the legal and regulatory issues
which confronted the Company during the year and, accordingly, determined to
increase the 1997 ICP awards of each of these Executive Officers. However, as a
result of the aforementioned retirements, the 1997 ICP awards to the Executive
Officers as a group decreased 14% from 1996 (including for this purpose, the
1996 awards to the current members of such group). No Executive Officer's ICP
award (other than the CEO's) exceeded approximately 7% of Fund A. The ICP awards
for 1997 made to the Executive Officers as a group constituted 19% of the
aggregate ICP fund and 47% of Fund A. In addition, the ICP awards made to the
Executive Officers as a group constituted 74% of their cash compensation for
1997 and 47% of their total compensation for 1997 (including the long-term
component discussed below).
Stock Options. 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
12
<PAGE> 15
employees of the Company) under the Option Plan. Stock options are granted with
an exercise price equal to the fair market value of shares of the Company's
stock on the date of grant, and the optionee will realize value from an award
only if the market price of the Company's stock appreciates. 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 the Company's 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.
Individual grants to the Named Executive Officers for 1997 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 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 (using the modified Black-Scholes option pricing
model) 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. Officers and Executive Officers received
72% and 39%, respectively, of the total option shares granted in 1997. Stock
Option awards granted to the Executive Officers as a group constituted 37% of
1997 total compensation.
The Company, in 1996, established guidelines for officers' stock ownership.
Under these guidelines, officers are encouraged and expected to obtain and hold
Company stock (excluding stock obtained through the Employees' Savings Plan) in
an effort to align their interests with those of the stockholders as well as to
demonstrate their long-term commitment to the future growth of the Company. The
guidelines provide that the CEO is expected to own, at a minimum, that number of
shares whose market value represents the sum of five (5) times his base salary
and 30% of the difference between the aggregate exercise price and the aggregate
market value of his exercisable stock options. For all other Executive Officers,
this same formula is applied but is based upon three (3) times or two (2) times
base salary, depending on position. Officer stock ownership may be monitored by
the Committee and such ownership may be taken into account in the granting of
stock option awards.
1997 COMPENSATION OF CHIEF EXECUTIVE OFFICER
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 and EPS) as well as such qualitative factors as the implementation of
the Company's strategic business plan and the achievement of those business
goals established to further the Company's earnings growth and profitability and
enhance shareholder returns. The Committee makes a subjective determination in
considering these factors rather than assigning any factor a specific weight.
In reviewing Mr. Gierer's performance in 1997, the Committee noted his
leadership in guiding the management of the Company through a year of profound
changes -- both internal and external. Under Mr. Gierer's direction, certain
sales and marketing initiatives were implemented in order to help position the
Company to meet the competitive challenges of the marketplace and to improve its
earnings and sales growth. During 1997, the Company undertook to support the
adoption of federal legislation designed to resolve the legal and regulatory
challenges which have continued to confront the Company and the industry and,
thus, to permit the Company to operate in a more stable environment.
13
<PAGE> 16
As noted in Table II, Mr. Gierer's base salary remained unchanged in 1997.
His ICP award and stock option grants were determined by the Committee and were
based upon the Committee's compensation policy as previously discussed. Mr.
Gierer's 1997 ICP award decreased 7% from the prior year and represented 13% of
Fund A. However, his 1997 long-term incentive compensation increased 64% as a
result of the stock option awards he received pursuant to a regular option grant
of 90,000 shares and a special option grant of 70,000 shares. The Committee
noted in its consideration of Mr. Gierer's stock option awards that his efforts
during the year demonstrated his commitment to the future growth of the Company.
For 1997, Mr. Gierer's total cash compensation decreased 5% which is
consistent with the Company's decrease in net earnings. While Mr. Gierer's total
1997 compensation increased 9.5% over 1996 as a result of his stock option
awards, his total compensation continues to fall significantly below the 75th
percentile of 1996 compensation paid to chief executive officers in the
Comparator Group.
LIMIT ON THE DEDUCTIBILITY OF CERTAIN EXECUTIVE COMPENSATION
The current federal 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 the Company's four most highly compensated other executive
officers. Specified compensation is excluded for this purpose, including
performance-based compensation that satisfies the conditions of Section 162(m)
of the Internal Revenue Code (e.g., ICP awards and stock option awards made
through 1996). The Company will continue to review its executive compensation
plans and practices with respect to Section 162(m) and, when it deems
appropriate, will take further action, as necessary, to ensure tax deductibility
of all performance-based compensation paid to its 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.
Elaine J. Eisenman Elaine J. Eisenman
John P. Warwick P.X. Kelley
</TABLE>
14
<PAGE> 17
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
FOR THE YEAR ENDED DECEMBER 31, 1997
AMONG UST INC., S&P TOBACCO INDEX & S&P 500 INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P TOBACCO
(FISCAL YEAR COVERED) UST INC. INDEX S&P 500 INDEX
<S> <C> <C> <C>
DEC-92 100 100 100
DEC-93 90 78 110
DEC-94 94 86 112
DEC-95 117 134 153
DEC-96 119 142 189
DEC-97 144 176 252
</TABLE>
- ---------------
(1) Assumes $100 invested on 12/31/92 and held through 12/31/97. Total return
assumes reinvestment of dividends.
15
<PAGE> 18
INDEBTEDNESS OF MANAGEMENT
Since January 1, 1997, 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 1997(1) FEBRUARY 13, 1998(1)
--------------------------- --------------------
<S> <C> <C>
James W. Chapin.................................. $ 70,736 $ 46,406
Director
Vincent A. Gierer, Jr............................ 1,516,552 1,205,204
Chairman of the Board, Chief Executive Officer
and President
Robert E. Barrett................................ 875,308 875,308
Executive Vice President and President -- UST
Enterprises Inc.
Richard H. Verheij............................... 500,168 497,940
Executive Vice President and General Counsel
Robert T. D'Alessandro........................... 270,838 227,244
Senior Vice President and Controller
Robert H. Lawrence, Jr. ......................... 255,078 196,025
Executive Vice President -- United States
Tobacco Company
Allen C. Shoup................................... 372,724 316,931
President -- International Wine & Spirits Ltd.
</TABLE>
- ---------------
(1) Interest rates on loans range from approximately 5% to approximately 9%.
16
<PAGE> 19
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 1998.
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 1998. 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 1997 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 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 1998
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.
17
<PAGE> 20
The following Proposal No. 3, which is printed verbatim, was submitted by
two stockholders. The name, address and shareholding of each proponent will be
furnished upon any oral or written request to the Secretary of the Company. For
the reasons set forth following the proposal, the Board recommends a vote
AGAINST Proposal No. 3.
PROPOSAL NO. 3
"UST
WHEREAS smokeless tobacco contains many dangerous chemicals; including
cancer producing chemicals such as nitrosamines, polonium 210, formaldehyde and
traces of cadmium and nickel compounds. At least 2,500 chemicals have been
identified in processed tobacco, the effects of many of these chemicals have not
been scientifically determined (American Cancer Society);
-- The average age of first use of smokeless tobacco in the U.S.A. is 10
years old. Those regularly using smokeless tobacco do so by the age of 12.
Roughly one in every five high school males uses smokeless tobacco. More than
half of these started by the eighth grade (Office of the Inspector General);
-- A study of junior and senior high school students regularly using
smokeless tobacco showed that, although 85% thought use was harmful, only 55%
thought it presented a moderate to severe risk, while 25% didn't know smokeless
tobacco contains nicotine and 25% didn't believe smokeless tobacco is addictive
(National Cancer Institute);
-- The U.S. Surgeon General has noted that spit tobacco users are about six
times more likely than nonusers to get cancers of the mouth and throat;
-- Long term smokeless tobacco users begin to develop oral tissue
abnormalities within a year of beginning use. 40% to 60% of users develop grade
2 or higher lesions within 6 months of beginning use (Office of the Surgeon
General);
-- UST has held over 85% of the oral snuff market in the United States and
is the largest advertiser of smokeless tobacco;
-- We believe that UST uses a "graduation" strategy that results in new
users moving up to high nicotine brands over time as new users become dependent
on the drug nicotine;
-- Many minors begin snuff use with low nicotine brands, many of which are
free-sampled. Since UST began using what we believe to be a "graduation"
strategy, snuff use has risen among minors. This has happened despite our
Company's adoption of a voluntary code not to advertise smokeless tobacco
products to persons under 18, not to advertise in publications or programs that
are primarily youth oriented, not to use active professional athletes in
advertisements and not to send free samples in the mail unless it can be
reasonable ascertained that recipient are over age 18;
-- Such a stated commitment seems undermined by data showing increased use
of our Company's smokeless tobacco among minors;
18
<PAGE> 21
-- A possible explanation comes from a former smokeless tobacco user, Joe
Garagiola. He noted in 1996 that smokeless tobacco ads have featured rodeos, car
racing and other "macho events" to lure users; "They target young people with
the word smokeless. Coaches, players and kids [mistakenly] equate that with
harmless;"
RESOLVED that the Shareholders request that the Board create an independent
committee to study possible reasons why, despite our Company's stated efforts to
dissuade minors from using our smokeless tobacco products, their use has been
increasing. We propose this Committee be composed of outside directors who can
enlist the expertise of experts free of any UST ties. This Committee shall
report to the Board and shareholders its findings and recommendations by January
1, 1999."
COMPANY'S RESPONSE
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE FOREGOING
RESOLUTION (Proposal No. 3).
The primary proponent of this proposal has submitted other proposals to the
Company in the past either alone or with others, each of which has been
overwhelmingly defeated. In addition, this proponent presented a virtually
identical proposal at the last annual meeting, which received the affirmative
vote of approximately 4% of the shares voting.
The proposal contains certain assertions which the Company believes are
false and misleading. For example, the proponents assert as their belief that
"UST uses a 'graduation' strategy that results in new users moving up to high
nicotine brands over time as new users become dependent on the drug nicotine."
The fact is that the Company does not use a "graduation strategy" and that any
such allegations create a false and misleading impression of the Company.
Moreover, the overall thrust of the proposal relies on purported "data
showing increased use of our Company's smokeless tobacco among minors." The fact
is that data from recent government reports indicate that use of smokeless
tobacco by minors is low and decreasing.
In a report entitled Healthy People 2000 Review, 1992, the Department of
Health and Human Services ("HHS") established the goal of reducing smokeless
tobacco use by teenage males to 4 percent by the year 2000. HHS' reports
indicate that, for males 12-17, smokeless tobacco use has declined from 6.6
percent in 1988 to 3.5 percent in 1996. On August 6, 1997, Secretary of Health
and Human Services Donna Shalala also highlighted a reduction of smokeless
tobacco use by all 12-17 year olds from 2.8 percent in 1995 to 1.9 percent in
1996, based on data from the National Household Survey on Drug Abuse.
As illustrated below, both the old and new survey methodologies report a
consistent downward trend in the use of smokeless tobacco by underage males,
with the reported usage even using the new methodology below the Healthy People
2000 goal of 4 percent by the year 2000.
19
<PAGE> 22
[Charts indicating Reduction of Smokeless Use Among Youth 12-17]
REDUCTION OF SMOKELESS USE
AMONG YOUTH AGE 12-17
Males Only
(Percentage of Smokeless Use Among Youth 12-17)
[Healthy People 2000 Goal (4%)]
1988* 1990* 1991* 1992* 1993* 1994* 1994+ 1995+ 1996+
6.6% 7.4% 5.4% 4.8% 3.9% 3.8% 5.1% 4.9% 3.5%
Males and Females
(Percentage of Smokeless Use Among Youth 12-17)
[Healthy People 2000 Goal (4%)]
1988* 1990* 1991* 1992* 1993* 1994* 1994+ 1995+ 1996+
3.6% 3.9% 3.0% 2.6% 2.0% 2.5% 2.8% 2.8% 1.9%
*Old Methodology +New Methodology
*+ In 1994, the survey methodology was changed, which the Department of Health
and Human Services acknowledges increases its estimates of underage tobacco
use.
Sources: US Department of HHS, National Household Survey on Drug Abuse
(1988-1996)(No Survey reported in 1989).
In light of the fact that the use of smokeless tobacco products by minors
is decreasing, the Board believes that the Company's efforts to discourage the
sale of our products to minors are already contributing to that trend and
believes that the appointment of the proposed committee is neither necessary nor
appropriate.
The Board believes that the adoption of this proposal is neither
appropriate nor in the best interests of the Company or its stockholders and
urges stockholders to vote AGAINST it.
20
<PAGE> 23
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
common stock, to file with the Securities and Exchange Commission ("SEC") and
the New York Stock Exchange initial reports of beneficial ownership and reports
of changes in beneficial ownership of common stock of the Company. Such persons
are also required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during 1997 all Section
16(a) filing requirements applicable to such individuals were complied with.
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 $22,000.
STOCKHOLDER PROPOSALS
If a stockholder wishes to submit a proposal for inclusion in the Proxy
Statement prepared for the 1999 Annual Meeting of Stockholders, such proposal
must be received by the Secretary at the Company's office no later than November
27, 1998.
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.
21
<PAGE> 24
VOTING STOCK
As of March 5, 1998, the record date for the 1998 Annual Meeting, the
outstanding stock of the Company entitled to vote consisted of 185,534,336
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 92,767,169 votes is required for a quorum.
By Order of the Board of Directors,
DEBRA A. BAKER
Senior Vice President and Secretary
22
<PAGE> 25
890-ps-98
<PAGE> 26
UST
ANNUAL MEETING OF STOCKHOLDERS -- MAY 5, 1998
The undersigned hereby appoints DEBRA A. BAKER and RICHARD H. VERHEIJ, or
either 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 Rich Forum, 307
Atlantic Street, Stamford, Connecticut, on Tuesday, the 5th of May 1998, at
10:00 a.m., and at any and all ajournments 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 Proposal 3.
--------------
| SEE REVERSE |
| SIDE |
--------------
<PAGE> 27
[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 proposal 3.
- ---------------------------------------------- -------------------------------
The Board of Directors recommends a vote FOR
proposals 1 and 2:
- ---------------------------------------------- The Board of Directors recommends
1. Election of Directors. a vote AGAINST the following
Nominees: J.W. Chapin, E.T. Fogarty, L.P. stockholder proposal 3:
Weicker, Jr. --------------------------------
FOR WITHHELD 2. To ratify and approve 3. Stockholder
ALL FROM ALL Ernst & Young LLP as Proposal.
NOMINEES NOMINEES independent auditors
[ ] [ ] of the Company for FOR AGAINST ABSTAIN
the year 1998. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
For all nominees except
vote withheld from the
following:
[ ]___________________
- ---------------------------------------------- --------------------------------
And in their discretion, upon
such other business as may
properly come before the
meeting.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
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
ANNUAL MEETING OF STOCKHOLDERS -- MAY, 1998
EMPLOYEES' SAVINGS PLAN
The undersigned hereby directs Wachovia Bank, N.A. as Trustee of the UST
Inc. 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 Stockholders to be held at Rich Forum, 307 Atlantic Street, Stamford,
Connecticut, on Tuesday, the 5th day of May 1998, 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 Proposal 3.
----------------
[SEE REVERSE SIDE]
----------------
<PAGE> 29
WACHOVIA BANK, N.A.
UST Inc. EMPLOYEES' SAVINGS PLAN
As a participating employee in the UST Inc. Employees' Savings Plan, you are
entitled to give Wachovia Bank, N.A., 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 at
the Annual Meeting of Stockholders be held on May 5, 1998. The Trustee cannot
vote your shares without instructions from you. Your instructions to the
Trustee will be confidential. Accordingly, a Notice of the 1998 Annual Meeting
and Proxy Statement, confidential instruction card, and 1997 Annual Report are
enclosed.
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.
[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 proposal 3.
- ---------------------------------------------- -------------------------------
The Board of Directors recommends a vote FOR
proposals 1 and 2:
- ---------------------------------------------- The Board of Directors recommends
1. Election of Directors. a vote AGAINST the following
Nominees: J.W. Chapin, E.T. Fogarty, L.P. stockholder proposal 3:
Weicker, Jr. --------------------------------
FOR WITHHELD 2. To ratify and approve 3. Stockholder
ALL FROM ALL Ernst & Young LLP as Proposal.
NOMINEES NOMINEES independent auditors
[ ] [ ] of the Company for FOR AGAINST ABSTAIN
the year 1998. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
For all nominees except
vote withheld from the
following:
[ ]___________________
- ---------------------------------------------- --------------------------------
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 or estate, capacity or title should be
stated.
Signature: ________________________ Date: _______________
