<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 LOGO]
100 WEST PUTNAM AVENUE
GREENWICH, CONNECTICUT 06830
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 26, 1999
To the Stockholders of UST:
The 1999 Annual Meeting of Stockholders of UST Inc. (the "Company") will be
held at Rich Forum, 307 Atlantic Street, Stamford, Connecticut, on Tuesday, the
4th day of May 1999, 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 1999;
(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 4, 1999 will be
entitled to vote at the meeting. The approximate date of mailing of this Proxy
Statement is March 26, 1999.
YOU ARE URGED TO VOTE YOUR PROXY PROMPTLY 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 OR YOU MAY ALSO VOTE YOUR SHARES
EITHER VIA TELEPHONE OR THE INTERNET. PLEASE READ THE INSTRUCTIONS PRINTED ON
THE TOP PORTION OF YOUR PROXY CARD. THE COMPANY'S TRANSFER AGENT, WHICH IS
TABULATING VOTES CAST FOR THE MEETING, WILL COUNT THE LAST VOTE RECEIVED FROM A
STOCKHOLDER, WHETHER BY TELEPHONE, PROXY OR BALLOT OR ELECTRONICALLY THROUGH THE
INTERNET. PLEASE NOTE ALL VOTES CAST VIA TELEPHONE OR THE INTERNET MUST BE CAST
PRIOR TO 5:00 P.M., EASTERN DAYLIGHT SAVING TIME, ON MONDAY, MAY 3, 1999.
DEBRA A. BAKER,
Senior Vice President
and Secretary
<PAGE> 3
[UST LOGO]
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 4, 1999, 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 either sign,
date and return the enclosed proxy or vote your shares via telephone or the
Internet. 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. The Company's transfer
agent, which is tabulating votes cast for the Annual Meeting, will count the
last vote received from a stockholder, whether by telephone, proxy or ballot or
electronically through the Internet.
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. IF YOU WISH TO ATTEND THE ANNUAL MEETING BUT
YOUR SHARES ARE HELD IN THE NAME OF A BROKER, BANK OR OTHER NOMINEE, YOU SHOULD
BRING WITH YOU A PROXY OR LETTER FROM THE BROKER, BANK OR NOMINEE AS EVIDENCE OF
YOUR BENEFICIAL OWNERSHIP OF THE SHARES. Management requires 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 1999.
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 stockholder 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
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 2002. 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, 1999.
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,
PHOTO] Age 69 1994 and is Of Counsel to the Com-
Shares beneficially owned: pany. He served as Executive Vice
Outstanding shares -- 350,953 President and General Counsel from
Shares subject to options -- 296,000 September 25, 1991 until the date
Present term expires 2001 of his retirement. Mr. Chapin
Director since 1994 joined the Company as General
Counsel in 1975.
[JOHN P. CLANCEY *JOHN P. CLANCEY Mr. Clancey has served as President
PHOTO] Age 53 and Chief Executive Officer of Sea-
Shares beneficially owned: Land Service, Inc., a subsidiary of
Outstanding shares -- 500 CSX Corporation, since July, 1991.
Shares subject to options -- 1,500 Mr. Clancey is a member of the
Nominated for term to expire 2002 International Advisory Council of
Present term expires 1999 PSA Corp. Ltd., Singapore.
Director since 1997
</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 68 public accountant and attorney. He
Shares beneficially owned: was employed by Ernst & Young LLP
Outstanding shares -- 2,751 from 1958 to 1988. He served as the
Shares subject to options -- 6,000 firm's National Partner in charge
Present term expires 2000 of Client Relations from 1972 to
Director since 1990 1978 and the managing partner of
the Stamford, Connecticut office
from 1978 to 1987.
[EISENMAN PHOTO] ELAINE J. EISENMAN, PH.D. Dr. Eisenman has served as Execu-
Age 50 tive Vice President -- Human Re-
Shares beneficially owned: sources and Administration of
Outstanding shares -- 860 Enhance Financial Services Group,
Shares subject to options -- 3,000 Inc. since January 12, 1998. From
Present term expires 2000 January, 1997 to January 11, 1998,
Director since 1996 she was a Principal of 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
PHOTO) Age 62 the Board, Chief Executive Officer
Shares beneficially owned: and President of Tambrands Inc.
Oustanding shares -- 2,267 from October, 1996 to July, 1997
Shares subject to options -- 0 and as President and Chief
Present term expires 2001 Executive Officer of Tambrands Inc.
Director since 1997 from May, 1994 to October, 1996. He
served as Presi-
dent -- 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
Age 51 of the Board and Chief Executive
Shares beneficially owned: Officer since December 1, 1993 and
Outstanding shares -- 490,770 has served as President since Sep-
Shares subject to options -- 810,400 tember 27, 1990. He also served as
Nominated for term to expire 2002 Chief Operating Officer from
Present term expires 1999 September 27, 1990 to November 30,
Director since 1986 1993. Mr. Gierer has been employed
by the Company since 1978.
(P.X KELLEY PHOTO) *P.X. KELLEY General Kelley has served as a
Age 70 Partner with J.F. Lehman & Company,
Shares beneficially owned: a private investment firm since
Outstanding shares -- 3,500 March 1, 1998. He served as Vice
Shares subject to options -- 6,000 Chairman of Cassidy & Associates, a
Nominated for term to expire 2002 government relations firm, from
Present term expires 1999 January 1989 to February 1998. He
Director since 1992 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., Saul Centers
Inc., Sturm, Ruger & Company, Inc.
and Wackenhut Corporation.
(PETER J. NEFF PHOTO) PETER J. NEFF Mr. Neff is as an international
Age 60 business management consultant. He
Shares beneficially owned: served as Chairman of the Board and
Outstanding shares -- 500 Chief Executive Officer of Genovo,
Shares subject to options -- 1,500 Inc., a gene therapy company, from
Present term expires 2000 January 1997 to December 1997. From
Director since 1997 1991 to December 1996, he served as
President and Chief Executive
Officer of Rhone-Poulenc, Inc., the
North American subsidiary of
Rhone-Poulenc, S.A., the French
pharmaceutical and chemical com-
pany. Mr. Neff also serves as a
director of Homestake Mining
Company and 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
Age 67 at the University of Virginia. He
Shares beneficially owned: served as a U.S. Senator from 1970
Outstanding shares -- 792 to 1988 and as Governor of
Shares subject to options -- 4,500 Connecticut from January 9, 1991
Present term expires 2001 through January 3, 1995. Mr.
Director since 1995 Weicker also serves as a director
of Compuware, Phoenix Home Life
Mutual Funds and HPSC, Inc.
</TABLE>
Messrs. Clancey, Gierer and Kelley 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, 1999, all directors and executive officers as a group
beneficially owned 1,123,963 shares and had exercisable options to acquire
2,219,500 shares, which together represented approximately 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 1998.
COMMITTEES OF THE BOARD
The Company has an Audit Committee and a Nominating and Compensation
Committee.
The Audit Committee is currently comprised of the following members: Edward
H. DeHority, Jr. -- Chairman, James W. Chapin, Edward T. Fogarty, Peter J. Neff
and Lowell P. Weicker, Jr. The Audit Committee, which met five times during
1998, reviews and acts upon and reports to the Board with respect to accounting,
reporting, financial practices and controls of the Company. Its responsibilities
include oversight of the Company's financial reporting process and review of the
adequacy of the Company's systems of internal control. The Audit Committee
annually reviews the qualifications and independence of the Company's
independent public accountant, the scope and fees of its audit and also reviews
its non-audit services and related fees. Upon completion of its review, the
Audit Committee makes its recommendation to the Board for the selection of the
independent public accountant. The Audit Committee is also responsible for
reviewing procedures employed by management to monitor compliance with the
Company's Code of Corporate Responsibility.
The Nominating and Compensation Committee, which met six times during 1998,
is currently comprised of the following members: P.X. Kelley -- Chairman, John
P. Clancey, Edward H. DeHority, Jr., Elaine J. Eisenman and Lowell P. Weicker,
Jr. This committee's responsibilities are to cover nominating matters, including
the recommendation of nominees to the Board and the size and
5
<PAGE> 8
composition of the Board and its committees, in addition to officers'
compensation and management succession matters. It also administers the
Company's stock option plans and reviews and approves stock option grants
thereunder. 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.
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. In addition, nonemployee
directors receive a supplemental fee of $1,500 per day for the performance of
any special assignment as requested from time to time by the Chief Executive
Officer. Employee directors receive no additional compensation for their
services as directors.
Effective January 1, 1999, the Company maintains the UST Nonemployee
Directors' Restricted Stock Award Plan (the "Restricted Stock Plan"). The
Restricted Stock Plan provides for the automatic award to each nonemployee
director of 50 shares of restricted stock for each meeting of the Board of
Directors attended and 40 shares of restricted stock for each Board Committee
meeting attended. The shares of restricted stock vest on the third anniversary
date of the award. Dividends on restricted shares are paid to the nonemployee
director and all restricted shares may be voted. Ownership may not be
transferred until service on the Board terminates. Unvested shares will be
forfeited in the event of a voluntary resignation or refusal to stand for
re-election, but vesting will be accelerated in the event of change in control,
death, disability or age-related forced retirement from service, pursuant to the
Board's retirement policy.
The Company also maintains the UST Nonemployee Directors' Stock Option Plan
(the "Stock Option Plan"). The Stock Option 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 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, 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.
6
<PAGE> 9
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 makes available to its nonemployee directors up to $12,500
annually in tax and financial planning services. In addition, nonemployee
directors are covered under the Company's group life insurance, accidental death
and dismemberment and business travel accident policies.
7
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
The tables, graph and descriptive information which follow are intended to
comply with the Securities and Exchange Commission regulations for executive
compensation requirements applicable to, among other reports and filings, annual
proxy statements. This information is being furnished with respect to the
Company's Chief Executive Officer ("CEO") and its four most highly compensated
current executive officers as of December 31, 1998 and a current officer who,
prior to September 24, 1998, was one of the Company's four most highly
compensated executive officers other than the CEO (collectively, the "Named
Executive Officers").
TABLE II
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ------------
AWARDS
------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
- ------------------ ---- --------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Vincent A. Gierer, Jr. 1998 773,654 1,928,000 90,000 9,600
Chairman of the Board, 1997 615,000 1,960,000 160,000 9,600
Chief Executive Officer and 1996 615,000 2,106,533 125,000 9,000
President
Robert E. Barrett 1998 413,077 917,000 50,000 9,162
Executive Vice President 1997 340,000 926,000 120,000 8,000
and President -- 1996 340,000 726,522 80,000 7,500
UST Enterprises Inc.
Richard H. Verheij 1998 311,539 1,086,000 70,000 9,600
Executive Vice President 1997 300,000 1,086,000 130,000 9,600
and General Counsel 1996 275,000 738,379 70,000 9,000
Allen C. Shoup 1998 259,616 605,000 50,000 9,600
President -- 1997 250,000 605,000 50,000 9,600
International Wine & 1996 248,077 542,925 20,000 9,000
Spirits Ltd.
A. Gary Smith 1998 309,616 740,000 50,000 9,600
President -- 1997 250,000 750,000 70,000 9,600
United States Tobacco 1996 248,654 459,011 25,000 9,000
Company
Robert H. Lawrence, Jr.(2) 1998 295,962 751,000 40,000 9,600
Senior Vice President and 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
</TABLE>
- ---------------
(1) Amounts represent Company matching contributions to the Employees' Savings
Plan.
(2) Designated as an Executive Officer through September 23, 1998.
8
<PAGE> 11
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 6.7 30.66 09/23/08 487,800
Robert E. Barrett.......... 50,000 3.7 30.66 09/23/08 271,000
Richard H. Verheij......... 70,000 5.2 30.66 09/23/08 379,400
Allen C. Shoup............. 50,000 3.7 30.66 09/23/08 271,000
A. Gary Smith.............. 50,000 3.7 30.66 09/23/08 271,000
Robert H. Lawrence, Jr..... 40,000 3.0 30.66 09/23/08 216,800
</TABLE>
- ---------------
(1) Options granted in 1998 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 4.6 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. ................. 75,000 410,156 572,100 238,300 4,693,838 762,875
Robert E. Barrett...... 13,000 11,063 400,400 156,600 2,469,450 479,175
Richard H. Verheij..... 10,000 20,625 325,100 179,900 1,333,950 569,550
Allen C. Shoup......... -0- -0- 200,000 90,000 1,260,675 326,825
A. Gary Smith.......... 40,000 748,750 215,100 104,900 1,390,263 349,738
Robert H. Lawrence,
Jr................... 46,000 1,168,125 361,300 96,700 3,303,675 309,013
</TABLE>
9
<PAGE> 12
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............ $ 20,993 $ 41,986 $ 62,978 $ 83,971 $104,964 $125,957 $146,949
300,000........... 31,993 63,986 95,978 127,971 159,964 191,957 223,949
400,000........... 42,993 85,986 128,978 171,971 214,964 257,957 300,949
500,000........... 53,993 107,986 161,978 215,971 269,964 323,957 377,949
600,000........... 64,993 129,986 194,978 259,971 324,964 389,957 454,949
700,000........... 75,993 151,986 227,978 303,971 379,964 455,957 531,949
800,000........... 86,993 173,986 260,978 347,971 434,964 521,957 608,949
900,000........... 97,993 195,986 293,978 391,971 489,964 587,957 685,949
1,000,000........... 108,993 217,986 326,978 435,971 544,964 653,957 762,949
1,100,000........... 119,993 239,986 359,978 479,971 599,964 719,957 839,949
1,200,000........... 130,993 261,986 392,978 523,971 654,964 785,957 916,949
</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 1996-1998 and bonus for the 1996-1998 years actually
paid in 1997-1999. For 1998, the three year average compensation covered by the
Retirement Plans for each of the Named Executive Officers was as follows: Mr.
Gierer, $1,171,551; Mr. Barrett, $557,299; Mr. Verheij, $496,062; Mr. Shoup,
$389,412; Mr. Smith, $404,088; and Dr. Lawrence, $431,940. As of December 31,
1998, the credited years of service under the Retirement Plans were
approximately as follows: Mr. Gierer, 21 years; Mr. Barrett, 8 years; Mr.
Verheij, 12 years; Mr. Shoup, 18 years; Mr. Smith, 26 years; and Dr. Lawrence,
12 years. Pension Table calculations assume retirement on December 31, 1998 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, 1998) 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, $83,308; Mr. Barrett, $219,326;
Mr. Verheij, $157,355; Mr. Shoup, $49,912; Mr. Smith, $22,542; and Dr. Lawrence,
$124,717.
10
<PAGE> 13
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 agreement). 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, 1998
following a change in control would be $3.9 million.
In addition, the Company is party to severance agreements with Messrs.
Barrett, Verheij, Shoup, Smith and Lawrence 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, 1998 following a change in control would be as follows: Mr.
Barrett, $2.1 million; Mr. Verheij, $2.4 million; Mr. Shoup, $1.8 million; Mr.
Smith, $2.2 million; and Dr. Lawrence, $1.6 million.
11
<PAGE> 14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Nominating and Compensation Committee (the "Committee") is comprised of
five independent, nonemployee directors. The role of the Committee, among other
things, is to (i) review and approve, as appropriate, (a) the broad compensation
program of the Company with respect to its officers, including all executive
officers ("Executive Officers"), and (b) the various components of the total
compensation of the Executive Officers, and (ii) administer the Company's stock
option plans and consider and approve stock option grants thereunder.
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 strong 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 but
only if warranted by Company performance. Return on equity and earnings per
share ("EPS") growth are the two principal measures of Company performance
established by the Committee. The Committee continues to believe 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 a challenging and controversial
environment. The Committee's only established target level is the aforementioned
goal for total compensation.
SPECIFIC COMPONENTS OF COMPENSATION PROGRAM
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.
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 27% of their 1998 cash
compensation and 22% of their total 1998 compensation. Base salaries of
Executive Officers are generally reviewed every three years and are based upon
fixed percentages of the Chief Executive Officer's ("CEO") salary depending on
the level of officer.
12
<PAGE> 15
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 ICP fund may be allocated by the ICP Committee among the
Company's officers, including all Executive Officers ("Fund A"). 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.
The 1998 ICP fund represents 4.98% of total earnings before income taxes
and provision for incentive compensation and was distributed to approximately
1800 employees, including all Executive Officers. In 1998, the Company's net
earnings were $455 million, an increase of 4% over the prior year. As a result,
the aggregate ICP fund for 1998 increased by 4% over the prior year. The 1998
ICP allocation to Fund A was 39% (41% for 1997) with 61% of the ICP fund being
allocated to all other employees ("Fund B"). It was the ICP Committee's
intention that the decrease in Fund A would primarily affect those participants
in Fund A who are Executive Officers.
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. The extent to which an Executive Officer's bonus increases or
decreases is generally designed to achieve an overall percentage change in the
Executive Officer's total cash compensation for the year which is commensurate
with the percentage changes for such year in the Company's net earnings or EPS.
For 1998, the Committee, in considering awards to each individual Executive
Officer, first took into account the Company's increase in net earnings and
reviewed with the CEO his assessment of the performance of each other Executive
Officer (see discussion below on CEO's compensation). The Committee also took
note of the reduced percentage of the ICP Fund that the ICP Committee allocated
to Fund A for 1998 (see paragraph immedietely above). Accordingly, for those
Executive Officers who received a salary increase in 1998, bonuses were
decreased from the prior year in order not to exceed a 4% increase in total cash
compensation. For those Executive Officers who did not receive salary increases
in 1998, the Committee granted the same awards as in the prior year. As a
result, 1998 aggregate ICP awards to the Executive Officers decreased 1% from
the prior year and 1998 aggregate cash compensation of the Executive Officers
increased 2.5% from the prior year. No Executive Officer's (other than the
CEO's) ICP award exceeded 7.3% of Fund A. The aggregate 1998 ICP awards made to
the Executive Officers constituted 15% of the aggregate ICP fund and 39% of Fund
A. In addition, the aggregate ICP awards made to the Executive Officers
constituted 73% of their aggregate cash compensation for 1998 and 59% of their
aggregate total compensation for 1998 (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 employees of the
Company) under the Option Plan. Stock options are granted with
13
<PAGE> 16
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 1998 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 Committee
generally 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. In its consideration of the size of option grants, the Committee also
takes into account the number of shares available under the Option Plan which
remain to be granted. It does not consider the size, in the aggregate, of all
previous option grants made to an Executive Officer.
In 1998, the Committee reduced aggregate option awards in an effort to
conserve shares of stock available for issuance under the Option Plan, which
expires in 2002. As a result, aggregate long-term incentive compensation to
Executive Officers decreased 59% from the prior year and constituted 19% of 1998
total compensation. Executive Officers received 26% of the total option shares
granted in 1998.
As a result of decreases in aggregate ICP awards and long-term incentive
compensation, 1998 aggregate total compensation for Executive Officers decreased
20% from the prior year. In addition, each Executive Officer's total
compensation falls below the 75th percentile of the Comparator Group.
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 Company's 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.
1998 COMPENSATION OF CHIEF EXECUTIVE OFFICER
The CEO's performance is reviewed annually by the Committee and each
component of his compensation (base salary, bonus and stock options) is
determined by the Committee consistent with its compensation policy as
previously discussed. The Committee's evaluation of the CEO's
14
<PAGE> 17
performance 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 1998, the Committee recognized his
leadership and commitment to the future growth of the Company. Under Mr.
Gierer's direction, the Company entered into the Smokeless Tobacco Master
Settlement Agreement with attorneys general of various states and U.S.
territories, which is intended to help resolve much of the legal and financial
uncertainty surrounding the Company.
As noted in Table II, Mr. Gierer's base salary was increased in 1998. The
Committee last considered and increased his salary in 1994 for fiscal year 1995.
Mr. Gierer's 1998 ICP award decreased approximately 2% from the prior year and
represented 13% of Fund A. As a result of his salary increase, Mr. Gierer's
total cash compensation increased commensurately with the Company's increase in
net earnings (4%). Mr. Gierer's 1998 long-term incentive compensation decreased
60% as a result of fewer stock options granted during the year, and his 1998
total compensation decreased 17% from the prior year. His total compensation
falls significantly below the 75th percentile of total 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.
NOMINATING AND COMPENSATION COMMITTEE
P.X. Kelley, Chairman
John P. Clancey
Edward H. DeHority, Jr.
Elaine J. Eisenman
Lowell P. Weicker, Jr.
15
<PAGE> 18
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
FOR THE YEAR ENDED DECEMBER 31, 1998
AMONG UST INC., S&P TOBACCO INDEX & S&P 500 INDEX
<TABLE>
<CAPTION>
S&P TOBACCO
UST INC. S&P 500 INDEX INDEX
<S> <C> <C> <C>
DEC-93 100 100 100
DEC-94 105 101 110
DEC-95 131 139 172
DEC-96 133 171 181
DEC-97 160 229 225
DEC-98 159 294 273
</TABLE>
- ---------------
(1) Assumes $100 invested on 12/31/93 and held through 12/31/98. Total return
assumes reinvestment of dividends.
16
<PAGE> 19
INDEBTEDNESS OF MANAGEMENT
Since January 1, 1998, 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 1998(1) FEBRUARY 12, 1999(1)
--------------------------- --------------------
<S> <C> <C>
Vincent A. Gierer, Jr........................ $2,639,988 $2,447,363
Chairman of the Board, Chief Executive
Officer and President
Robert E. Barrett............................ 1,166,110 1,124,863
Executive Vice President and President --
UST Enterprises Inc.
Richard H. Verheij........................... 699,067 656,180
Executive Vice President and General
Counsel
Allen C. Shoup............................... 316,931 291,931
President
-- International Wine & Spirits Ltd.
Robert T. D'Alessandro....................... 239,125 239,125
Senior Vice President and Controller
Robert H. Lawrence, Jr....................... 336,727 260,505
Senior Vice President and Executive Vice
President -- United States Tobacco Company
</TABLE>
- ---------------
(1) Interest rates on loans range from approximately 4% to approximately 8%.
17
<PAGE> 20
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 1999.
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 1999. 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 1998 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 1999
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.
18
<PAGE> 21
STOCKHOLDER PROPOSALS
The following Proposal Nos. 3 and 4, which are both printed verbatim, have
been submitted by stockholders. The names, addresses and shareholdings of the
proponents will be furnished upon oral or written request to the Secretary of
the Company. For the reasons set forth following each proposal, the Board
recommends a vote AGAINST Proposal Nos. 3 and 4.
PROPOSAL NO. 3
"ENSURING THAT TOBACCO ADS ARE NOT YOUTH-FRIENDLY
WHEREAS: Our company insists its tobacco ad campaigns are not geared to
underage youth and has even taken some actions that would indicate it is serious
about ensuring that youth do not use our tobacco products;
-- As concerned shareholders, aware that the future viability of our
company's tobacco division is based on ensuring new users, most of whom will
continue to use our brands because they began as underage youth;
-- A 1996 University of British Columbia study found that teenagers are
three times as likely as adults to respond to tobacco ads and, on average,
whenever a tobacco brand increased its advertising budget by 10%, its share of
the adult smoking market grew only 3%, but its share of teen smokers grew 9%.
-- Tobacco products are the most heavily advertised product in the USA.
However, unlike adults, whose consumption patterns do not reflect advertising
dollars, the three most advertised tobacco brands in the US are the three used
most by underage youth.
-- Further evidence presented in the New England Journal of Medicine,
American Journal of Public Health, and the Journal of Pediatrics had
demonstrated that tobacco advertising plays a significant role in stimulating
illegal consumption of tobacco by minors.
-- Such data seems to undermine the stated concern of our company that it
is not advertising its tobacco product in any way to influence young people to
use our products verses those of our competitors.
RESOLVED: Shareholders request the Board to implement the following, or its
equivalent, as policy for our Company: That, before any promotional, marketing,
an/or advertising campaign presently running is allowed to continue or is
inaugurated in the future, it must be submitted to independent and certifiable
testing to ensure that it is not equally or more appealing to the 14-to-18 age
group than groups over 18.
SUPPORTING STATEMENT
We suggest that, in creating this approach to testing, that the testing
entity be independent of the company and the tobacco industry, with no possible
conflict of interest. Its task will be to determine the effectiveness of the
campaign in making a positive impression on two age groups: those 18 and under
and those spread evenly between 18 and 45. If the test results on the young
focus group show the campaign is equal to or exceeds the effectiveness of the
older group the (proposed) campaign shall be terminated.
19
<PAGE> 22
If you agree that the independent data showing our company does not
advertise in ways that impact underage minors more than adults should be
gathered to ensure shareholders we do not target young people, please vote "yes"
for this resolution."
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 proposal contains certain assertions which the Company believes are
false and misleading. For example, the proponents assert that the Company has
only taken "some actions that would indicate that it is serious about ensuring
that youth do not use our tobacco products", that "the future viability of our
company's tobacco division is based on ensuring new users" who "began as
underage youth," and that the data the proponents present "undermine the stated
concern of our company that it is not advertising its tobacco products in any
way to influence young people to use our products."
Each of the proponents' statements outlined above creates an extremely
false and misleading overall impression of the Company and its advertising
activities by alleging and insinuating that the Company targets its advertising
activities toward "underage youth" and unjustifiably accusing the Company of
illegal activity. The Company has a long-standing policy against the sale of
tobacco products to minors and in favor of responsible marketing.
While sharing the proponents' desire to prevent the use of tobacco products
by minors, we disagree with the approach set out in their proposal. The Company
already has policies in place whereby it evaluates each of its promotional,
marketing, and/or advertising campaigns as to whether they comply with relevant
legal requirements, including any prohibitions on the advertising of tobacco
products directed toward minors. In addition, the Smokeless Tobacco Master
Settlement Agreement recently entered into with attorneys general for various
states and U.S. territories contains significant restrictions on the marketing
and promotion of the Company's products which specifically address the concerns
raised by the proponent in the proposal. Specifically, provisions of consent
decrees, entered in virtually every state and subject to continuing judicial
oversight, specifically prohibit the Company from targeting youth in the
advertising, promotion or marketing of its tobacco products. Furthermore, the
Company does not believe that the suggestions of the proponents are practical
from a commercial point of view.
Accordingly, 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.
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.
20
<PAGE> 23
PROPOSAL NO. 4
"TOBACCO EXECUTIVES' COMPENSATION AND REDUCTION OF TEEN TOBACCO
UST
WHEREAS our Company's executives consistently state they adamantly oppose
tobacco use by minors. To this end they gave initial agreement to a set of goals
to achieve that end as outlined in the now-abandoned National Tobacco Settlement
Proposal ("settlement").
Despite the non-agreement, in the negotiations our company agreed to link
economic penalties for the company if teen tobacco use did not decrease. In
acceding to this dimension of the "settlement" our Company agreed to the payment
of fines if tobacco use by teenagers would not drop drastically by specific
dates. Under the penalty section of the proposed "settlement," tobacco use by
people 18 or younger must fall 25% by the fifth year, 35% by the seventh year
and 45% by the tenth year. For each percentage point representing failure to
meet these targets, tobacco companies agreed as a group to pay an $80 million
fine, up to a maximum of $2 billion annually.
Our Company's management agreed to the now defunct proposed "settlement",
including these penalties, knowing the evidence that has shown that the majority
of those addicted to the nicotine in tobacco began tobacco use as minors. This
would mean any consequent decline in youth consumption could, in the long term,
have serious economic implications on future domestic sales of our company's
tobacco products. Consequently, such an agreement could adversely affect
shareholder returns.
While fines may adversely affect stock price and stockholder dividends the
agreement in the now-defunct settlement seemingly did not negatively affect
executive compensation.
We believe that the managers, as those responsible for developing
strategies to achieve these goals, should share in the success or failure of
their strategies.
We also believe that, even though the "settlement" failed, the penalties
agreed-upon should be voluntarily embraced by our Company for itself at all
levels, including the executives, if our stated goal of reducing consumption by
minors is not met.
RESOLVED: shareholders request that the Board voluntarily create a formula
linking future executive compensation packages with achievement of specific
decreases in teen consumption of our company's brands, using the terms of the
now-defunct "settlement" as a guide. Included in the formula should be penalties
for executives when the company is not in compliance with the goals determined
as well as rewards for meeting these goals.
SUPPORTING STATEMENT
Since our company has already indicated agreement with youth reduction
goals as outlined in the National Settlement, this request is not contingent on
approval of the "settlement". If you agree that all parties should bear
responsibility for reducing teen tobacco use, including the executives who agree
to and must oversee implementation of plans geared to insure such reductions,
please vote "yes" for this resolution."
21
<PAGE> 24
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 others, each of which has been overwhelmingly
defeated.
This proposal contains certain assertions with which the Company strongly
disagrees. For example, the proposal gives the impression that the Company
encourages the use of its smokeless tobacco products by minors. To the contrary,
the Company has a long-standing policy against the sale of tobacco products to
minors.
Furthermore, the proponent's implication that the use of smokeless tobacco
products by minors is increasing is false and misleading. In fact, 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' 1995 report entitled Healthy
People 2000 Midcourse Review and 1995 Revisions reported that "[f]or males
12-17, smokeless tobacco use has declined from 6.6 percent in 1988 to 3.9
percent in 1993." 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 1996 National Household Drug Survey. HHS' reports confirm that smokeless
tobacco use in 1997 by both males 12-17 and all 12-17 year olds continued to be
below the Federal government's goal for the year 2000, and other surveys report
a continuing downward trend.
The Company also believes, as a substantive matter, that the proposal is
not in the best interest of the Company or its stockholders. In particular, in
contrast to the point of view presented in the proposal, there are numerous
factors which must be considered in determining compensation for officers and
employees. As described more fully in the Compensation Committee Report on
Executive Compensation, less than 30% of an executive's compensation is fixed in
the way of salary, while the remainder is based on the performance of the
Company and its stock. The Board of Directors believes that tying in excess of
70% of an executive's anticipated compensation to performance is the best way of
aligning executive compensation and stockholder interests and ensuring that
executive compensation reflects all relevant factors.
In addition, the Board of Directors does not believe that tying
compensation specifically to the level of underage consumption of smokeless
tobacco products, especially if the prior proposed settlement is to be used as a
guide, would be appropriate for a number of reasons. First, the prior proposed
settlement, as the proponent acknowledges, was rejected by anti-tobacco
activists and others and has been abandoned. Second, the Company recently
entered into the Smokeless Tobacco Master Settlement Agreement with attorneys
general for various states and U.S. territories which specifically addresses the
concerns regarding access to smokeless tobacco products by minors. Third, usage
of the Company's products by minors is subject to a number of factors which are
beyond the control of the Company and its management. As a result, management's
efforts may or may not be reflected in decreases in usage by minors. Fourth,
such a test, in and of itself, may not be a direct measure of stockholder value.
Fifth, to the extent that it is a measure of stockholder value, it will be
reflected in an executive's compensation, as described above, in that in excess
of 70% of compensation is based on the performance of the Company and its stock.
Sixth, in any event, usage of smokeless tobacco products by minors is already
low and on a downward trend overall.
22
<PAGE> 25
Accordingly, 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.
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.
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 1998 all Section
16(a) filing requirements applicable to such individuals were complied with
except for John P. Clancey, who inadvertently failed to file a Form 4 reflecting
a purchase of 500 shares of Company stock. The purchase of such shares has been
reflected on the Form 5 filed by Mr. Clancey with respect to 1998.
INFORMATION RESPECTING PROXIES
Your shares are registered in the name and manner shown on the enclosed
form of proxy. Please sign the proxy in the same manner. It is not necessary for
you to indicate the number of shares you hold.
Expenses incurred in connection with the solicitation of proxies for the
meeting will be borne by the Company. In addition to solicitation by mail,
arrangements may be made pursuant to which brokers, bank nominees and other
institutional holders of record will distribute at the Company's expense proxies
and proxy material to the appropriate beneficial owners, and assistance in the
solicitation of proxies from such holders of record will be rendered by
Georgeson & Company, Inc., Wall Street Plaza, New York, New York, for a fee of
approximately $20,000.
23
<PAGE> 26
STOCKHOLDER PROPOSALS
If a stockholder wishes to submit a proposal for inclusion in the Proxy
Statement prepared for the 2000 Annual Meeting of Stockholders, such proposal
must be received by the Secretary at the Company's office no later than November
26, 1999.
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 not less than
90 days prior to the anniversary date of the immediately preceding Annual
Meeting and such notice must provide certain requisite information. Accordingly,
if a stockholder intends to present a matter at the 2000 Annual Meeting, notice
of such must be received by the Secretary at the Company's office no later than
February 4, 2000. Notice must be received by such date if the matter is to be
considered "timely" under Rule 14a-4(c) of the Securities Exchange Act of 1934.
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 4, 1999, the record date for the 1999 Annual Meeting, the
outstanding stock of the Company entitled to vote consisted of 178,186,946
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 89,093,474 votes is required for a quorum.
By Order of the Board of Directors,
DEBRA A. BAKER
Senior Vice President and Secretary
24
<PAGE> 27
DETACH HERE
- -------------------------------------------------------------------------------
PROXY
UST
ANNUAL MEETING OF STOCKHOLDERS -- MAY 4, 1999
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 4th day of May 1999, 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 CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ---------------- ----------------
<PAGE> 28
INSTRUCTIONS FOR VOTING YOUR PROXY
Record holders have three alternative ways of voting their proxies.
1. By Telephone (using a touch-tone telephone)
2. Through the Internet (using a browser)
3. By Mail (traditional method)
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed, and returned your proxy
card. Please note all votes cast via the telephone or the Internet must be cast
prior to 5 P.M. E.S.T., May 3, 1999.
TELEPHONE VOTING:
- - THERE IS NO CHARGE FOR THIS TOLL-FREE CALL.
- - On a Touch Tone Telephone call TOLL FREE 1-877-PRX-VOTE (1-877-779-8683) 24
hours per day - 7 days a week.
- - You will be asked to enter the Control Number which is located above your
name and address below.
- - Have your proxy card ready, then follow these instructions:
OPTION #1:
To vote AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS, press 1.
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL.
OPTION #2:
If you choose to vote ON EACH PROPOSAL SEPARATELY, press 2.
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL.
INTERNET VOTING:
- - As with all Internet access, usage or server fees must be paid by the user
(stockholder).
- - Visit our Internet voting site at http://www.eproxyvote.com/ust and follow
the instructions on your screen. These instructions are similar to those
above for telephone voting.
VOTING BY MAIL:
- - Please mark, sign and date your proxy card and return it in the postage-paid
envelope provided.
If you vote via telephone or the Internet, it is not necessary to return your
proxy by mail. Please note that the last vote received whether by telephone,
Internet or mail, regardless of the date executed, will be the vote counted.
THANK YOU FOR VOTING.
DETACH HERE
PLEASE MARK
VOTES AS IN
/X/ 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: (01) J.P. Clancey, (02) V.A. Gierer, Jr., (03) P.X. Kelley
FOR WITHHELD
ALL FROM ALL
NOMINEES 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 1999.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOLLOWING STOCKHOLDER
PROPOSALS 3 AND 4.
FOR AGAINST ABSTAIN
3. Stockholder Proposal. / / / / / /
4. Stockholder Proposal. / / / / / /
And in their discretion, upon such other business as may properly come before
the meeting.
MARK HERE MARK HERE
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT / / 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> 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 to be held on May 4, 1999. The Trustee
cannot vote your shares without instructions from you. Your instructions to the
Trustee will be confidential. Accordingly, a Notice of the 1999 Annual Meeting
and Proxy Statement, confidential instruction card, and 1998 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.
DETACH HERE
- --------------------------------------------------------------------------------
UST
ANNUAL MEETING OF STOCKHOLDERS -- MAY 4, 1999
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
of Stockholders to be held at Rich Forum, 307 Atlantic Street, Stamford,
Connecticut, on Tuesday, the 4th day of May 1999, 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 CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ---------------- ----------------
<PAGE> 30
INSTRUCTIONS FOR VOTING YOUR INSTRUCTION CARD
There are three alternative ways of voting your Instruction Card.
1. By Telephone (using a touch-tone telephone)
2. Through the Internet (using a browser)
3. By Mail (traditional method)
Your telephone or Internet vote authorizes the Trustee proxies to vote your
shares in the same manner as if you marked, signed, and returned a proxy card.
Please note all votes cast via the telephone or the Internet must be cast prior
to 5 P.M. E.S.T., April 29, 1999.
TELEPHONE VOTING:
- - THERE IS NO CHARGE FOR THIS TOLL-FREE CALL.
- - On a Touch Tone Telephone call TOLL FREE 1-877-PRX-VOTE 24 hours per day - 7
days a week.
- - You will be asked to enter the Control Number which is located above your
name and address below.
- - Have your instruction card ready, then follow these instructions:
- --------------------------------------------------------------------------------
OPTION #1: To vote AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS,
press 1.
- --------------------------------------------------------------------------------
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL.
- --------------------------------------------------------------------------------
OPTION #2: If you choose to vote ON EACH PROPOSAL SEPARATELY, press 2.
- --------------------------------------------------------------------------------
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL.
INTERNET VOTING:
- - As with all Internet access, usage or server fees must be paid by the user.
- - Visit our Internet voting site at http://www.eproxyvote.com/ust and follow
the instructions on your screen. These instructions are similar to those
above for telephone voting.
VOTING BY MAIL:
- - Please mark, sign and date your instruction card and return it in the
postage-paid envelope provided.
- --------------------------------------------------------------------------------
If you vote via telephone or the Internet, it is not necessary to return your
instruction card by mail. Please note that the last vote received whether by
telephone, Internet or mail, regardless of the date executed, will be the vote
counted. THANK YOU FOR VOTING.
- --------------------------------------------------------------------------------
DETACH HERE
================================================================================
PLEASE MARK
/ X / 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.
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST THE FOLLOWING STOCKHOLDER
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2: PROPOSALS 3 AND 4.
- ------------------------------------------------------------------ ----------------------------------------------------
<S> <C> <C>
FOR AGAINST ABSTAIN
1. Election of Directors 2. To ratify and approve Ernst 3. Stockholder Proposal. / / / / / /
NOMINEES: (01) J.P. Clancey, & Young LLP as independent
(02) V.A. Gierer, Jr., auditors of the Company for 4. Stockholder Proposal. / / / / / /
(03) P.X. Kelley the year 1999.
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES 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
</TABLE>
Please sign exactly as name appears hereon. If signing for trusts,
estates or corporations, capacity or title should be stated.
Signature: Date:
---------------------------------- ------------------
