<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 22, 2000
To the Stockholders of UST:
The 2000 Annual Meeting of Stockholders of UST Inc. (the "Company") will be
held at Rich Forum, 307 Atlantic Street, Stamford, Connecticut, on Tuesday, the
2nd day of May 2000, 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 consider and act upon a proposal to approve the amendment and
restatement of the UST Inc. 1992 Stock Option Plan (the "1992 Plan")
which includes an increase in the number of shares of common stock
for issuance and certain provisions in order to comply with
technical conditions of federal income tax law;
(3) to ratify and approve the selection of independent auditors of the
accounts of the Company for the year 2000;
(4) to consider and act upon three stockholder proposals, if presented
by the proponents; and
(5) 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 3, 2000 will be
entitled to vote at the meeting. The approximate date of mailing of this Proxy
Statement is March 22, 2000.
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 1, 2000.
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 2, 2000, 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 approve the amendment and restatement of
the UST Inc. 1992 Stock Option Plan (the "1992 Plan") which includes an increase
in the number of shares of Common Stock for issuance and certain provisions in
order to comply with technical conditions of federal income tax law.
3. A resolution will be offered to ratify and approve the selection of
independent auditors of the accounts of the Company for the year 2000.
4. The Company has been advised that three resolutions will be offered by
stockholders.
Your authorized proxies will vote FOR the election of the individuals
herein nominated for directors, the resolution regarding the 1992 Plan, 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 2003. 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, 2000.
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 70 1994 and is Of Counsel to the Com-
Shares beneficially owned: pany. He served as Executive Vice
Outstanding shares -- 351,503 President and General Counsel from
Shares subject to options -- 237,500 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 Chairman
PHOTO] Age 54 of Maersk Sealand since December
Shares beneficially owned: 11, 1999. He served as President
Outstanding shares -- 1,924 and Chief Executive Officer of Sea-
Shares subject to options -- 3,000 Land Service, Inc., from July, 1991
Present term expires 2002 to December 10, 1999. Mr. Clancey
Director since 1997 also serves as a director of Foster
Wheeler Corp. and is a member of
the International Advisory Council
of PSA 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 69 public accountant and attorney. He
Shares beneficially owned: was employed by Ernst & Young LLP
Outstanding shares -- 3,731 from 1958 to 1988. He served as the
Shares subject to options -- 7,500 firm's National Partner in charge
Nominated for term to expire 2003 of Client Relations from 1972 to
Present term expires 2000 1978 and the managing partner of
Director since 1990 the Stamford, Connecticut office
from 1978 to 1987.
[EISENMAN PHOTO] *ELAINE J. EISENMAN, PH.D. Dr. Eisenman has served as Execu-
Age 51 tive Vice President and Chief
Shares beneficially owned: Administrative Officer of Enhance
Outstanding shares -- 1,374 Financial Services Group, Inc.
Shares subject to options -- 4,500 since December 8, 1999. She served
Nominated for term to expire 2003 as Executive Vice
Present term expires 2000 President -- Human Resources and
Director since 1996 Administration from January 12,
1998 to December 7, 1999. From Jan-
uary 1997 to January 11, 1998, 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.
(EDWARD T. FOGARTY EDWARD T. FOGARTY Mr. Fogarty served as Chairman of
PHOTO) Age 63 the Board, Chief Executive Officer
Shares beneficially owned: and President of Tambrands Inc.
Outstanding shares -- 4,239 from October 1996 to July 1997 and
Shares subject to options -- 1,500 as President and Chief Executive
Present term expires 2001 Officer of Tambrands Inc. from May
Director since 1997 1994 to October, 1996. He served as
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
Age 52 of the Board and Chief Executive
Shares beneficially owned: Officer since December 1, 1993 and
Outstanding shares -- 577,295 has served as President since
Shares subject to options -- 806,400 September 27, 1990. Mr. Gierer has
Present term expires 2002 been employed by the Company since
Director since 1986 1978.
(P.X KELLEY PHOTO) P.X. KELLEY General Kelley has served as a
Age 71 Partner with J.F. Lehman & Company,
Shares beneficially owned: a private investment firm since
Outstanding shares -- 4,107 March 1, 1998. He served as Vice
Shares subject to options -- 7,500 Chairman of Cassidy & Associates, a
Present term expires 2002 government relations firm, from
Director since 1992 January 1989 to February 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 Extant,
Inc., London Life Reinsurance
Company, Park Place Entertainment
Corporation, Saul Centers Inc.,
Sturm, Ruger & Company, Inc. and
Wackenhut Corporation.
(PETER J. NEFF PHOTO) *PETER J. NEFF Mr. Neff has served as an interna-
Age 61 tional business management consult-
Shares beneficially owned: ant since January 1998. Prior to
Outstanding shares -- 3,064 that he served as Chairman of the
Shares subject to options -- 3,000 Board and Chief Executive Officer
Nominated for term to expire 2003 of Genovo, Inc., a gene therapy
Present term expires 2000 company, from January 1997 to
Director since 1997 December 1997. From 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. 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 served as Governor of
Age 68 Connecticut from January 9, 1991
Shares beneficially owned: through January 3, 1995. He served
Outstanding shares -- 8,438 as a U.S. Senator from 1970 to
Shares subject to options -- 6,000 1988. Mr. Weicker also serves as a
Present term expires 2001 director of Compuware, HPSC, Inc.,
Director since 1995 Phoenix Home Life Mutual Funds and
World Wrestling Federation
Entertainment.
</TABLE>
Messrs. DeHority and Neff and Dr. Eisenman 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, 2000, all directors and executive officers as a group
beneficially owned 1,250,884 shares and had exercisable options to acquire
2,495,200 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 seven meetings during 1999.
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 five
independent, nonemployee directors: 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 1999, 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 to review 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 their audit and also reviews their 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 1999,
is comprised of the following five independent, nonemployee directors: P.X.
Kelley -- Chairman, John P. Clancey, Edward H. DeHority, Jr., Elaine J. Eisenman
and Lowell P. Weicker, Jr. Its 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, its role is to (i)
review and approve, as appropriate, (a) the broad compensation program of the
Company with respect to its officers,
5
<PAGE> 8
including all executive officers, and (b) the various components of total
compensation of the executive officers, and (ii) administer the Company's stock
option plans and consider and approve stock option grants thereunder.
The Nominating and Compensation Committee considers recommendations from
stockholders for Board 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 shares may be voted; however, 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 $12,500
annually in tax and financial planning services. In addition, nonemployee
directors are covered under the Company's group life insurance, accidental death
and dismemberment and business travel accident policies.
7
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
The tables, graph and descriptive information which follow are intended to
comply with the Securities and Exchange Commission regulations for executive
compensation requirements applicable to, among other reports and filings, annual
proxy statements. This information is being furnished with respect to the
Company's Chief Executive Officer ("CEO") and its four other most highly
compensated executive officers as of December 31, 1999 (collectively, the "Named
Executive Officers").
TABLE II
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ------------
AWARDS
------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
------------------ ---- --------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Vincent A. Gierer, Jr. 1999 750,000 2,005,000 80,000 9,600
Chairman of the Board, 1998 773,654 1,928,000 90,000 9,600
Chief Executive Officer and 1997 615,000 1,960,000 160,000 9,600
President
Robert E. Barrett 1999 400,000 954,000 40,000 9,600
Executive Vice President 1998 413,077 917,000 50,000 9,162
and President -- 1997 340,000 926,000 120,000 8,000
UST Enterprises Inc.
Richard H. Verheij 1999 450,000 1,000,000 60,000 9,600
Executive Vice President 1998 311,539 1,086,000 70,000 9,600
and General Counsel 1997 300,000 1,086,000 130,000 9,600
Robert T. D'Alessandro 1999 300,000 670,000 40,000 9,600
Senior Vice President and 1998 223,269 611,000 35,000 9,600
Chief Financial Officer 1997 215,000 611,000 70,000 9,600
A. Gary Smith 1999 425,000 995,000 60,000 9,600
President -- 1998 309,616 740,000 50,000 9,600
United States Tobacco 1997 250,000 750,000 70,000 9,600
Company
</TABLE>
- ---------------
(1) Amounts represent Company matching contributions to the Employees' Savings
Plan.
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...... 80,000 4.5 28.34 05/02/09 437,600
Robert E. Barrett.......... 40,000 2.3 28.34 05/02/09 218,800
Richard H. Verheij......... 60,000 3.4 28.34 05/02/09 328,200
Robert T. D'Alessandro..... 40,000 2.3 28.34 05/02/09 218,800
A. Gary Smith.............. 60,000 3.4 28.34 05/02/09 328,200
</TABLE>
- ---------------
(1) Options granted in 1999 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 7.5 years and
expected dividend yield of 5.0 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. ................ 84,000 463,094 613,000 193,400 755,744 -0-
Robert E. Barrett..... -0- -0- 483,600 113,400 88,000 -0-
Richard H. Verheij.... -0- -0- 414,900 150,100 6,000 -0-
Robert T.
D'Alessandro........ 10,000 34,375 220,200 86,800 18,000 -0-
A. Gary Smith......... 10,000 4,750 253,200 116,800 58,000 -0-
</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............ $ 20,970 $ 41,941 $ 62,911 $ 83,881 $104,851 $125,822 $146,792
300,000........... 31,970 63,941 95,911 127,881 159,851 191,822 223,792
400,000........... 42,970 85,941 128,911 171,881 214,851 257,822 300,792
500,000........... 53,970 107,941 161,911 215,881 269,851 323,822 377,792
600,000........... 64,970 129,941 194,911 259,881 324,851 389,822 454,792
700,000........... 75,970 151,941 227,911 303,881 379,851 455,822 531,792
800,000........... 86,970 173,941 260,911 347,881 434,851 521,822 608,792
900,000........... 97,970 195,941 293,911 391,881 489,851 587,822 685,792
1,000,000........... 108,970 217,941 326,911 435,881 544,851 653,822 762,792
1,100,000........... 119,970 239,941 359,911 479,881 599,851 719,822 839,792
1,200,000........... 130,970 261,941 392,911 523,881 654,851 785,822 916,792
1,300,000........... 141,970 283,941 425,911 567,881 709,851 851,822 993,792
</TABLE>
The above 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 1997-1999 and bonus for the 1997-1999 years
actually paid in 1998-2000. For 1999, the three year average compensation
covered by the Retirement Plans for each of the Named Executive Officers was as
follows: Mr. Gierer, $1,204,544; Mr. Barrett, $594,127; Mr. Verheij, $592,532;
Mr. D'Alessandro, $379,717; and Mr. Smith, $487,418. As of December 31, 1999,
the credited years of service under the Retirement Plans were approximately as
follows: Mr. Gierer, 22 years; Mr. Barrett, 9 years; Mr. Verheij, 13 years; Mr.
D'Alessandro, 19 years; and Mr. Smith, 27 years. Pension Table calculations
assume retirement on December 31, 1999 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 generally at age 55 (age 50 in the case of any
participant with respect to whom the age condition for becoming a participant is
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, 1999) 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, $57,794; Mr. Barrett, $200,105; Mr. Verheij, $194,224; Mr.
D'Alessandro, $72,125; and Mr. Smith, $28,325.
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, 1999
following a change in control would be $3.9 million.
In addition, the Company is party to severance agreements with Messrs.
Barrett, Verheij, D'Alessandro 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, 1999 following a change in control would be as follows: Mr.
Barrett, $2.1 million; Mr. Verheij, $2.4 million; Mr. D'Alessandro, $1.6
million; and Mr. Smith, $2.2 million.
11
<PAGE> 14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
The Nominating and Compensation Committee (the "Committee") believes that
the Company's compensation programs, which provide appropriate incentives and
rewards to its executive officers ("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 annually 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 its objective is reflective of the need to attract and retain talented
executives who can direct growth in the challenging and controversial
environment in which the Company and the tobacco industry operate. The
Committee's only established target level is the aforementioned goal for total
compensation.
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 smallest portion of total compensation. Base
salaries of the Executive Officers as a group constituted 30% of their 1999 cash
compensation and 25% of their total 1999 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.
INCENTIVE COMPENSATION PLAN ("ICP"). Annual bonuses are awarded under the
ICP, which is directly linked to Company performance through earnings. 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").
The 1999 ICP fund represented 4.98% of total earnings before income taxes
and provision for incentive compensation and was distributed to approximately
1900 employees, including all Executive Officers. In 1999, the Company's net
earnings were $469.3 million, an increase of 3% over the prior year. The
aggregate ICP fund for 1999 increased approximately 4% over the prior year. The
1999 ICP allocation to Fund A was 39% with 61% of the ICP 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
12
<PAGE> 15
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.
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. For
1999, 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). As a result, 1999 aggregate ICP awards
to the Executive Officers increased 4% from the prior year and 1999 aggregate
cash compensation of the Executive Officers increased 9% from the prior year. No
Executive Officer's (other than the CEO's) ICP award exceeded 6.4% of Fund A.
The aggregate 1999 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 70% of their aggregate cash
compensation for 1999 and 58% of their aggregate total compensation for 1999
(including the long-term component discussed below).
STOCK OPTIONS. The long-term incentive component of executive compensation
is equity-based and consists of the grant of stock options to the Executive
Officers (as well as many other employees of the Company) under the Company's
stock option plan (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 is designed to provide 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 1999 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.
13
<PAGE> 16
In 1999, the Committee reduced aggregate option awards as a result of fewer
shares of stock available for issuance under the Option Plan. Accordingly,
Executive Officers received 19% of the total option shares granted in 1999 and
aggregate long-term incentive compensation to Executive Officers constituted 17%
of 1999 total compensation.
1999 aggregate total compensation for Executive Officers increased 7% from
the prior year. Each named 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.
1999 COMPENSATION OF CHIEF EXECUTIVE OFFICER
The CEO's performance is reviewed annually by the Committee and each
component of his compensation (base salary, ICP and stock options) is determined
by the Committee consistent with its compensation policy as previously
discussed. The Committee's evaluation of the CEO's 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.
As noted in Table II, Mr. Gierer's base salary was last increased in 1998.
Mr. Gierer's 1999 ICP award increased 4% from the prior year (and represented
12.8% of Fund A) thereby providing for his total cash compensation to increase
commensurately with the Company's increase in net earnings. In its consideration
of Mr. Gierer's ICP award, the Committee noted the Company's significant
improvement in operating results over the last two years. In addition, the
Committee recognized that although the Company's 1999 net sales, net earnings
and earnings per share all reached record levels, its stock price declined
significantly during the year apparently due to investor concerns over
litigation issues affecting the tobacco industry generally. While the Committee
noted Mr. Gierer's commitment to and plans for addressing the concerns of the
investment community, it agreed that his future cash compensation will not be
increased until such time as the Company's valuations significantly improve. Mr.
Gierer's 1999 long-term incentive compensation decreased 10% as a result of
fewer stock options granted during the year. Accordingly, his 1999 total
compensation increased 1% 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.
14
<PAGE> 17
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 and stock option awards made through
1996). Upon the recommendation of the Committee, the Board has proposed that
stockholders approve the amendment and restatement of the UST Inc. 1992 Stock
Option Plan (see Proposal No. 2, page 18) so that stock option awards made
thereunder may satisfy the conditions of Section 162(m) for performance-based
compensation. 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, 1999
AMONG UST INC., S&P TOBACCO INDEX & S&P 500 INDEX
<TABLE>
<CAPTION>
UST INC. S&P TOBACCO S&P 500
-------- ----------- -------
<S> <C> <C> <C>
12/94 100.00 100.00 100.00
12/95 125.00 157.00 138.00
12/96 127.00 165.00 169.00
12/97 153.00 205.00 226.00
12/98 152.00 249.00 290.00
12/99 116.00 121.00 351.00
</TABLE>
- ---------------
(1) Assumes $100 invested on 12/31/94 and held through 12/31/99. Total return
assumes reinvestment of dividends.
16
<PAGE> 19
INDEBTEDNESS OF MANAGEMENT
Since January 1, 1999, 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 applicable 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 1999(1) FEBRUARY 11, 2000(1)
--------------------------- --------------------
<S> <C> <C>
Vincent A. Gierer, Jr........................ $3,577,207 $3,435,422
Chairman of the Board, Chief Executive
Officer and President
Robert E. Barrett............................ 1,124,863 957,026
Executive Vice President and President --
UST Enterprises Inc.
Richard H. Verheij........................... 656,180 569,663
Executive Vice President and General
Counsel
Robert T. D'Alessandro....................... 471,000 471,000
Senior Vice President and Chief Financial
Officer
Allen C. Shoup............................... 291,931 205,346
President -- International Wine & Spirits
Ltd.
A. Gary Smith................................ 260,875 231,889
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 Approve Amendment and Restatement of the UST Inc. 1992 Stock
Option Plan
The UST Inc. 1992 Stock Option Plan (the "1992 Plan") was adopted by the
Board on December 19, 1991 and was approved by stockholders on May 5, 1992. On
December 9, 1999, the Board adopted, subject to stockholder approval, an
amendment to increase the number of shares available for grant of options
thereunder by 5 million shares.
In addition, the 1992 Plan is intended to qualify for the performance-based
exclusion from the deduction limitation of Section 162(m) (see "Compensation
Committee Report on Executive Compensation" for description of Section 162(m)).
One requirement of such exclusion is that an option plan contain, and
stockholders approve, a maximum number of shares with respect to which options
may be granted to any employee. The 1992 Plan was previously amended, subject to
stockholder approval, to provide that no employee may be granted stock options
during any fiscal year covering more than 250,000 (as adjusted) shares. As
indicated below under "Description of Principal Features of the 1992 Plan," the
Board has amended the 1992 Plan in several other respects and has incorporated
all amendments into a restated plan.
The Board believes that stockholder approval of the amended and restated
1992 Plan is necessary in order for the Company to meet its objective of
securing, motivating and retaining officers and other employees of the Company
and its subsidiaries and to permit the qualification of the 1992 Plan for the
performance-based exclusion under Section 162(m). The principal features of the
1992 Plan are described below. The full text of the 1992 Plan is attached to
this Proxy Statement as Exhibit A.
DESCRIPTION OF PRINCIPAL FEATURES OF THE 1992 PLAN
GENERAL
Both "incentive stock options" ("ISOs"), as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and options that do not
qualify as ISOs ("nonstatutory stock options") may be granted under the 1992
Plan.
EFFECTIVE DATE AND TERM OF PLAN
The 1992 Plan became effective on May 5, 1992 and will terminate on May 4,
2002. Options granted prior to May 4, 2002 may extend beyond that date in
accordance with their terms.
ELIGIBILITY
Any employee of the Company or its subsidiaries who is determined by the
Nominating and Compensation Committee (the "Committee") to be making or to be
expected to make a contribution to the success of the Company ("Employee") is
eligible to receive grants of stock options under the 1992 Plan. Directors of
the Company who are not employees are not eligible to participate. The Board
currently estimates the number of such Employees at approximately 1,400 persons
(including 40 current officers). As amended and restated, the 1992 Plan
provides, subject
18
<PAGE> 21
to stockholder approval, that no Employee may be granted options covering more
than 250,000 shares (as adjusted in accordance with the share adjustment
provisions of the 1992 Plan) during any fiscal year of the Company, commencing
with the Company's 1997 fiscal year.
STOCK AVAILABLE FOR OPTIONS
The number of shares reserved for issuance under the 1992 Plan for grant,
as adjusted, is 10.4 million, of which approximately 22,000 remain available for
grant as of February 1, 2000.
The number and kind of shares available for grant under the 1992 Plan, the
number and kind of shares subject to outstanding options and the option price
thereof, as appropriate, may be adjusted to reflect any change in the Company's
outstanding shares by reason of any future stock or other dividend or
distribution, stock split, recapitalization or similar event. Shares subject to
any option that is surrendered, expires, lapses or for any other reason ceases
to become exercisable will become available for subsequent option grants during
the term of the 1992 Plan.
GRANT OF OPTIONS
The option price per share is determined by the Committee, but such option
price will not be less than the fair market value of the Company's shares on the
date of grant. For purposes of the 1992 Plan, such fair market value is defined
as the average of the high and low sales prices of the Company's common stock on
the date of grant as reported on the New York Stock Exchange Composite Tape.
The number of shares granted to particular Employees is also determined by
the Committee, subject to certain limitations on the maximum value of shares
subject to ISOs that may be granted. (See "Special Rule Applicable to ISOs,"
below).
EXERCISE OF OPTIONS
Each option granted under the 1992 Plan will be exercisable for a period of
ten years from the date of grant, or such lesser period as the Committee may
determine. All outstanding options heretofore granted under the 1992 Plan have a
ten-year term. Options may not be transferred other than by will or the laws of
descent and distribution and may be exercised during an Employee's lifetime only
by him or by his guardian or personal representative.
Options generally first become exercisable over a period of one to five
years following a grant, in ratable installments or otherwise, as determined by
the Committee. (The right of exercise will be suspended for the one year period
following certain withdrawals of funds by an optionee from the UST Inc.
Employees' Savings Plan.) Options may be exercised in whole or in part,
generally in amounts of 100 shares or more, by any one of the following three
methods: (i) payment in cash of the full option price of the shares purchased;
(ii) if authorized by the Committee, by tendering to the Company shares of the
Company's common stock with a fair market value equal to the option price of the
shares purchased; or (iii) if the purchaser is an employee of the Company or a
subsidiary, by payment in cash of at least $1.00 per share, with the remainder
of the option price being borrowed from the Company as set forth in the 1992
Plan. In such latter case, the balance of the purchase price would be payable in
installments over a period not to exceed ten years, and the shares issued upon
exercise would be pledged with the Company to secure the Employee's personal
promissory note for the balance, generally bearing interest at the "applicable
federal rate" then in effect under the Code.
19
<PAGE> 22
EFFECT OF TERMINATION OF EMPLOYMENT
If, at the time of an optionee's death, disability or retirement or, if the
Committee so determines, termination of employment for any other reason, the
optionee holds any outstanding options that had not theretofore become
exercisable, such options will immediately become exercisable. If an optionee's
employment is terminated for any other reason, any such unexercisable options
will be forfeited unless otherwise determined by the Committee. As amended, the
1992 Plan also provides, with respect to any option granted on or after December
12, 1996, (i) the forfeiture of all outstanding options, in the event of the
occurrence of an act constituting "cause" and (ii) for the rescission of any
option exercises occurring during the preceding six months and the recapture of
gain related to the disposition of shares acquired thereby if such act consists
of willful and injurious misconduct or a breach of noncompetition or
confidentiality covenants made by the option holder.
SPECIAL RULE APPLICABLE TO ISOS
In accordance with the Code, if the aggregate fair market value (determined
as of the date of grant) of shares of the Company's common stock with respect to
which options otherwise qualifying as ISOs first become exercisable by any
individual during any calendar year (whether granted under the 1992 Plan or any
other stock option plan of the Company under which ISOs are granted to such
individual) exceeds $100,000, options granted for shares in excess of such value
will be treated as nonstatutory stock options.
EFFECT OF CERTAIN CHANGES IN CONTROL
In order to protect the 1992 Plan's intended benefits to optionees in the
event of certain corporate transactions, the 1992 Plan provides that if (a) the
stockholders of the Company approve a merger or consolidation of the Company
with another company (with specified exceptions) or an agreement to liquidate or
to dispose of substantially all of its assets, (b) more than 20% of the
Company's outstanding voting stock is acquired by any person or group (with
specified exceptions), or (c) during any period of two consecutive years a
majority of the persons who were directors at the beginning of the period cease
to be directors, unless each new director is approved by two-thirds of the
remaining directors who were directors at the beginning of the period, (i) any
then outstanding and unexercisable options will immediately become exercisable,
and (ii) the Committee will cancel all outstanding options. In the case of any
such cancellation, the optionee will receive in exchange therefor a cash payment
per share equal to the excess of the fair market value of the Company's common
stock over the exercise price of such option, such fair market value, in case of
a nonstatutory stock option, to be the highest such value during the 60 day
period preceding the cancellation.
ADMINISTRATION
The 1992 Plan is administered by a Committee consisting of not less than
two members as appointed from time to time by the Board of Directors. Members of
the Committee must be members of the Board. As amended and restated, the 1992
Plan provides that, unless otherwise determined by the Board, the Committee will
consist solely of members who are "nonemployee directors" within the meaning of
Rule 16b-3, as from time to time amended, promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and who are
"outside directors" within the meaning of Section 162(m) of the Code.
20
<PAGE> 23
AMENDMENT AND TERMINATION
As amended and restated, the 1992 Plan provides that the Board may at any
time, and from time to time, terminate, modify, amend or interpret the Plan in
any respect, except that any such amendment shall be effective only upon
stockholder approval if (unless the Board determines otherwise) such approval is
necessary or appropriate to comply with applicable law. In addition, the Board
may terminate the 1992 Plan at any time. No amendment or termination may,
however, adversely affect the rights of an optionee with respect to an
outstanding option without such optionee's consent.
ADDITIONAL INFORMATION
Inasmuch as the Committee determines, in its discretion (subject to the
limitation described above), the Employees to whom future options will be
granted and the number of shares subject to such options, future grants to be
made under the 1992 Plan are not determinable. During the three-year period
ended December 31, 1999, individual Executive Officers received option grants
under the 1992 Plan as set forth under "Compensation of Executive
Officers -- Table II." The number of stock options granted under the 1992 Plan
in the aggregate during the 1999 year were as follows: all executive officers as
a group (consisting of 6 persons) 330,000 shares; all other officers as a group
(consisting of 32 persons), 680,500 shares; all nonemployee directors as a
group, none; and all other Employees as a group (consisting of approximately
1,400 persons), 752,000 shares.
On February 1, 2000, the fair market value of a share of the Company's
common stock was $23.125.
FEDERAL INCOME TAX CONSEQUENCES --
INCENTIVE STOCK OPTIONS
The Company understands the federal income tax consequences of incentive
stock options under the present law to be generally as follows: An Employee
receiving an ISO will not be in receipt of taxable income upon the grant of the
ISO or upon its timely exercise. Exercise of an ISO will be timely if made
during its term and if the Employee remains an employee of the Company (or of
any subsidiary of the Company) at all times during the period beginning on the
date of grant of the ISO and ending on the date three months before the date of
exercise (or one year before the date of exercise in the case of termination of
an employee by reason of disability). The excess of the fair market value of the
shares purchased over the option price will, however, be treated as an item of
adjustment in determining the amount of the Employee's "alternative minimum
taxable income" under the Code. Upon ultimate sale of the stock received upon
such exercise, except as noted below, the Employee will recognize long-term
capital gain or loss (if the stock is a capital asset in the hands of the
Employee) equal to the difference between the amount realized and the option
price. The Company, under these circumstances, will not be entitled to any
federal income tax deduction in connection with either the issuance or the
exercise of the ISO or the sale of such stock by the Employee. If, however, the
stock acquired pursuant to such exercise of an ISO is disposed of by the
Employee prior to the expiration of two years from the date of grant of the ISO
or within one year from the date such stock is transferred to him upon exercise
(a "disqualifying disposition"), any gain realized by the Employee generally
will be taxable at the time of such disqualifying disposition as follows: (i) at
ordinary income rates to the extent of the difference between the option price
and the lesser of the fair market value of the stock on the date the ISO is
exercised or the amount realized on such disqualifying disposition, and (ii) if
the stock is a capital asset in the hands
21
<PAGE> 24
of the Employee, as short-term or long-term capital gain to the extent of any
excess of the amount realized on such disqualifying disposition over the fair
market value of the stock on the date the ISO is exercised. In such case, the
Company may claim a tax deduction at the time of such disqualifying disposition
for the amount taxable to the Employee as ordinary income. Any capital gain
recognized by the Employee will be long-term capital gain if the Employee's
holding period for the stock at the time disposition is sufficient to meet the
holding period requirement in effect for this purpose under the Code at the time
of the exercise of the option (the "Requisite Period"); otherwise it will be
short-term.
FEDERAL INCOME TAX CONSEQUENCES --
NONSTATUTORY STOCK OPTIONS
In the case of nonstatutory stock options, the Company understands that
generally the Employee will not be taxed upon grant of the option. Rather, at
the time of exercise of such option (and in case of an untimely exercise of an
ISO), the Employee, except as noted below, will recognize ordinary income for
federal income tax purposes in an amount equal to the excess of the fair market
value of the shares purchased over the option price. In addition, except as
noted below, if an Employee receives cash in lieu of exercise of an option, he
will recognize ordinary income in an amount equal to the cash received. The
Company will generally be entitled to a tax deduction at such time and in the
same amount that the Employee recognizes ordinary income. If stock acquired upon
the exercise of a nonstatutory option is later sold or exchanged, then the
difference between the sales price and the fair market value of such stock on
the date of exercise is taxable as long-term or short-term capital gain or loss
(if the stock is a capital asset in the hands of the Employee) depending upon
whether the stock has been held for the Requisite Period after such date. The
Company will be entitled to a tax deduction at the time and to the extent income
is recognized by such Employee.
FEDERAL INCOME TAX CONSEQUENCES --
EXERCISE WITH SHARES
Based upon a published ruling of the Internal Revenue Service, an Employee
who pays the option price upon exercise of a nonstatutory stock option, in whole
or in part, by delivering shares of the Company's common stock already owned by
him will recognize no gain or loss for federal income tax purposes on the shares
surrendered, but otherwise will be taxed according to the rules described above
for nonstatutory stock options. (See "Federal Income Tax Consequences --
Nonstatutory Stock Options.") With respect to shares acquired upon exercise
equal in number to the shares surrendered, the basis per share will be equal to
the basis per share of the shares surrendered, and the holding period will
include the holding period of the shares surrendered. The basis of additional
shares received upon exercise will be equal to the fair market value of such
shares on the date of exercise, and the holding period for such additional
shares will commence on the date the option is exercised. Special rules apply in
the event of the exercise of an ISO by surrender of previously owned shares of
Company stock.
The following resolution will be offered at the meeting:
"RESOLVED, that the amendment and restatement of the UST Inc.
1992 Stock Option Plan (the "Plan) adopted by the Board of
Directors on December 9, 1999, which includes an increase in the
number of shares reserved for issuance thereunder by 5 million and
certain provisions in order to comply with technical conditions of
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<PAGE> 25
federal income tax law be, and it hereby is, approved by the stockholders
of the Company."
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE FOREGOING RESOLUTION
(PROPOSAL NO. 2). YOUR APPOINTED PROXIES WILL VOTE YOUR SHARES FOR Proposal No.
2 unless you instruct otherwise in the proxy form.
The affirmative vote of a majority of the shares of Company Common Stock
present in person or by proxy is required to adopt this proposal. In accordance
with Delaware law, abstentions will, while broker nonvotes will not, be treated
as present for purposes of the preceding sentence.
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<PAGE> 26
PROPOSAL NO. 3
A Proposal to Ratify and Approve the Selection of Independent Auditors of
the Accounts of the Company and its Consolidated Subsidiaries for the Year 2000.
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 2000. 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 1999 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 2000 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. 3). Your appointed proxies will vote your shares FOR Proposal No.
3 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.
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<PAGE> 27
STOCKHOLDER PROPOSALS
The following Proposal Nos. 4, 5 and 6, which are all 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. 4, 5 and 6.
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.
-- In the now-defunct "settlement" agreed to by the tobacco industry, 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 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 its 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.
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<PAGE> 28
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."
COMPANY'S RESPONSE
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE FOREGOING
RESOLUTION (Proposal No. 4).
The proponent of this proposal submitted substantially the same proposal at
last year's annual meeting and has submitted other proposals to the Company in
the past either alone or with others, all of which have been overwhelmingly
defeated.
This proposal, as did the prior 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." In August 1999, the Department of Health and Human Services
published the results of the latest National Household Drug Survey which
reported that smokeless tobacco use by minors continued to decline in 1998:
reported use by 12-17 year old males declined to 2.1 percent and reported use by
all 12-17 year olds declined to 1.2 percent. This report confirms that smokeless
tobacco use in 1998 by both 12-17 year old males and all 12-17 year olds
continued to be below the federal government's goal for the year 2000. Other
government-funded surveys also report a continuing downward trend in smokeless
tobacco use by minors.
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 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, in late 1998, the Company
entered into the Smokeless
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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 some of which may be 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.
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.
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<PAGE> 30
PROPOSAL NO. 5
"A PROPOSAL TO ENSURE THAT TOBACCO ADS ARE NOT YOUTH-FRIENDLY
UST, Inc.
WHEREAS our Company insists its tobacco ad campaigns are not geared to
underage youth and has even taken some actions that might suggest it may be
serious about ensuring that youth do not use our tobacco products.
-- As concerned shareholders we are 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 tobacco users grew
9%.
-- Tobacco products are the most heavily advertised product in the U.S.A.
However, unlike adults, whose consumption patterns do not reflect advertising
dollars, the three-most advertised tobacco brands in the U.S. are the three used
most by underage youth.
-- Further evidence presented in the New England Journal of Medicine,
American Journal of Public Health, the Journal of Pediatrics, and elsewhere,
demonstrated that tobacco advertising plays a significant role in stimulating
illegal consumption of tobacco by minors.
-- Such data seems to undermine the stated stance of our company that it is
not advertising its tobacco 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 a
similar policy for our Company: That, within six months of this annual meeting,
any promotional, marketing and/or advertising campaign presently running is
allowed to continue or is inaugurated in the future, it must have been/be
submitted to independent and certifiable testing to ensure that it is not
equally or more appealing to the 12-to-17 age group than groups 18 and over.
SUPPORTING STATEMENT
We suggest that, in creating this approach to testing, that the testing entity
be independent of the company and the tobacco industry, eliminating any 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 under 18 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 on the older
group the (proposed) campaign shall be terminated.
If you agree that independent data showing our company does not advertise
in ways that impact underage minors should be gathered to ensure shareholders we
do not target young people, please vote "yes" for this resolution."
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<PAGE> 31
COMPANY'S RESPONSE
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE FOREGOING
RESOLUTION (Proposal No. 5).
The proponent of this proposal co-sponsored substantially the same proposal
at last year's annual meeting which was overwhelmingly defeated.
The proposal contains certain assertions which the Company believes are
false and misleading. For example, the proponent asserts that the Company has
only taken "some actions that might suggest it may be 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 proponent presents "undermine the stated
stance of our company that it is not advertising its tobacco in any way to
influence young people to use our products."
Each of the proponent's 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 proponent's desire to discourage the use of tobacco
products by minors, we disagree with the approach set out in the 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 entered into in late 1998 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 proponent's 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. 5 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.
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<PAGE> 32
PROPOSAL NO. 6
"KEEPING YOUTH FROM HAVING EASY ACCESS TO TOBACCO PRODUCTS
WHEREAS even though our Company insists it's concerned about teen tobacco
use, it sends millions of dollars annually in placement fees and other
incentives to retailers to ensures that its tobacco products are easily
available to consumers at retail outlets such as convenience stores, grocery
stores and even pharmaceutical chains. Consequently these products are easily
accessible to all consumers, including pilferers (who, in high percentage, are
youth).
- According to an investigation of placement fees paid to three retail
chains in Iowa, the Iowa State Attorney General's office states
(11/18/97): "One retailer received more than $500,000 per year in such
payments, and another more than $850,000." The average convenience store
can easily make $10,000 a year in placement fees. (Source: Eye on
America, CBS News, April 12, 1999).
- Because of contractual arrangements our Company makes and oversees with
retailers, our tobacco products are often located where they are easily
pilfered. The Food Marketing Institute (FMI) lists tobacco products as
the most heavily shoplifted item in the nation. In its 1997 Security and
Loss Prevention study (which reported shoplifting data from 11,816
outlets nationwide), the FMI discovered that tobacco products account for
41% of items shoplifted, more than any other item. (Source: 1997 Security
and Loss Prevention Issues Survey in the Super Market Industry, Section 2
under Shoplifting. Published by Loss and Prevention Services Department
of Food Marketing Institute.)
- According to the 1997-1998 Retail Theft Trends Report (RTTR), juveniles
represent a disproportionate percentage of shoplifters as compared to
their representation in the U.S. population. Over one third of the
shoplifters covered in the RTTR were teenagers.
- When tobacco products were moved out of reach of consumers in one
Colorado experiment, "shrinkage" was reduced from an average of 300 packs
of cigarettes monthly to 4 packs a month.
- According to the American Lung Association of Colorado: "In the absence
of changes in the way retailers merchandise tobacco in stores throughout
the country, youth possession ordinances, and even regularly requesting
photo ID for purchase, will fail to reduce use of tobacco by children."
- RESOLVE that the shareholders request a committee of our Board's outside
directors to investigate the policies and procedures used in placement of
our company's tobacco products in retail outlets and to report to
shareholders recommended changes to ensure that, at the retail outlets,
access to our tobacco products be out of reach of consumers.
SUPPORTING STATEMENT
While our Company says that it has no control over what retailers do with
our tobacco products it can decide what it will do if they're not placed out of
reach. According to the American Lung Association of Colorado: "The tobacco
displays/placement fees arrangement is a consumer scam aimed at children. It
facilitates early nicotine addiction and lures unsuspecting youth into becoming
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<PAGE> 33
the next generation of tobacco consumers. Possession laws increase the allure of
tobacco to children, and deflect attention [from] the need for retailers to
assume responsibility for how they handle this product." The proponents of this
resolution believe our Company too bears responsibility. If you agree, please
vote "yes" for this resolution."
COMPANY'S RESPONSE
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE FOREGOING
RESOLUTION (Proposal No. 6).
The Company believes that this proposal is not in the best interests of the
Company or its stockholders. While sharing the proponent's desire to prevent the
use of tobacco products by minors, the Company disagrees with the approach set
forth in the proposal.
As the Company periodically reviews its marketing programs from a number of
perspectives, including compliance with relevant legal requirements, the Company
does not believe that the preparation of a report, such as the one contemplated
by the proposal, is necessary and, as such, an appropriate use of the Company's
resources. The Company is also concerned that the preparation of a report
regarding its marketing programs, such as the one sought by the proposal, could
put the Company at a competitive disadvantage.
The Company also does not believe that such a report is necessary or
appropriate since the Company's products are advertised and marketed for adult
consumers only. In fact, the advertising and marketing of the Company's products
is extensively regulated on the federal, state and local levels, and the Company
complies with those regulations, including those that restrict or prohibit
access to tobacco products by minors. Furthermore, in November 1998, the Company
voluntarily entered into the Smokeless Tobacco Master Settlement Agreement which
requires the Company to adopt various marketing and advertising restrictions
aimed at reducing youth access to tobacco products.
In addition to the foregoing, the proposal contains certain assertions
which the Company believes are false and misleading. For example, certain of the
statistics mentioned in the proposal relate to cigarettes and are, therefore,
irrelevant to the Company's business, which involves the manufacturing and
marketing of smokeless tobacco products and does not involve the manufacture or
distribution of cigarettes.
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. 6 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.
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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 1999 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 Shareholder Communications Inc., New York, New York, for a fee of
approximately $20,000.
STOCKHOLDER PROPOSALS
If a stockholder wishes to submit a proposal for inclusion in the Proxy
Statement prepared for the 2001 Annual Meeting of Stockholders, such proposal
must be received by the Secretary at the Company's office no later than November
22, 2000.
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 2001 Annual Meeting, notice
of such must be received by the Secretary at the Company's office no later than
February 1, 2001. 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.
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<PAGE> 35
VOTING STOCK
As of March 3, 2000, the record date for the 2000 Annual Meeting, the
outstanding stock of the Company entitled to vote consisted of 164,241,156
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 82,120,579 votes is required for a quorum.
By Order of the Board of Directors,
DEBRA A. BAKER
Senior Vice President and Secretary
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<PAGE> 36
EXHIBIT A
UST INC.
1992 STOCK OPTION PLAN
Effective as of May 5, 1992
Restated as of May 5, 1992; December 12, 1996;
January 1, 1999; and December 9, 1999
1. Purpose.
UST Inc. (hereinafter referred to as the "Company") has adopted this UST
Inc. 1992 Stock Option Plan (hereinafter referred to as the "Plan"),
effective as of May 5, 1992, subject to approval by stockholders at the
annual stockholders' meeting held on May 5, 1992. The purposes of the Plan
are to further the long-term growth in earnings of the Company by providing
incentives to those employees of the Company and its Subsidiaries (as
defined below) who are or will be responsible for such growth; to facilitate
the ownership of Company stock by such employees, thereby increasing the
identity of their interest with those of the Company's stockholders; and to
assist the Company in attracting and retaining employees with experience and
ability.
2. Administration.
The Plan shall be administered and interpreted by a Stock Option Committee
or any successor committee (the "Committee") as designated by the Board of
Directors of the Company (the "Board") of not less than two members as
appointed from time to time by the Board. Each member of the Committee shall
be a member of the Board. Unless otherwise determined by the Board, the
Committee shall consist solely of members who are "nonemployee directors"
within the meaning of Rule 16b-3, as from time to time amended, promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and who are "outside directors" within the meaning of
section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Committee shall have full authority to establish guidelines for
the administration of the Plan and to make any other determination it deems
necessary to administer the Plan, which determinations shall be binding and
conclusive on all parties.
3. Eligibility.
Any employee of the Company or a Subsidiary (as defined herein) or an
affiliate (whether or not incorporated) of the Company who is determined by
the Committee to be making or to be expected to make a contribution to the
success of the Company (an "Employee") shall be eligible to receive grants
of stock options under this Plan. For the purposes of this Plan, a
Subsidiary shall be deemed to be any company of which the Company owns,
directly or indirectly, fifty percent (50%) or more of the stock. No
employee may be granted options covering more than 250,000 shares of Common
Stock (as defined in Section 4 hereof) during any fiscal year of the
Company, commencing with the Company's 1997 fiscal year.
<PAGE> 37
4. Stock.
(a) A maximum of 15,400,000 shares of the common stock of the Company, par
value $.50 per share ("Common Stock"), shall be reserved for issuance in
accordance with the terms of the Plan. Such reserved shares may be
authorized but unissued shares or any issued shares which have been
acquired by the Company and are held in its treasury, as the Board may
from time to time determine.
(b) If any change in the outstanding shares of Common Stock occurs or takes
effect on or after December 19, 1991, through declaration of stock or
other dividends or distributions with respect to such shares, through
restructuring, recapitalization or other similar event or through stock
splits, change in par value, combination or exchange of shares, or the
like, then the number and kind of shares reserved for options, the
number and kind of shares subject to outstanding options and the option
price, as appropriate, of such optioned shares shall be adjusted as
necessary to reflect equitably such change; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated.
(c) If an option granted under this Plan is surrendered, expires, lapses or
for any other reason ceases to be exercisable in whole or in part, the
shares which were subject to any such option, but as to which the option
ceases to be exercisable, shall again be available for the purposes of
this Plan; provided, however, that to the extent any option is cancelled
pursuant to the provisions of Section 7 hereof, the shares subject to
such option shall no longer be available for the purposes of this Plan.
5. Granting of Options.
(a) The Committee may grant incentive stock options ("Incentive Stock
Options") (within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")), or options which do not qualify
as Incentive Stock Options ("Nonstatutory Stock Options"), or both, as
follows:
(i) Incentive Stock Options may be granted to any Employee, provided
that the aggregate Fair Market Value (determined as of the
effective date of grant of the Incentive Stock Option) of the
shares of Common Stock with respect to which Incentive Stock
Options (under all plans of the Company and its Subsidiaries)
become exercisable for the first time by an Optionee during any
calendar year may not exceed $100,000. The effective date of a
grant shall be the day on which the Committee adopts a resolution
expressly granting an option, unless such resolution expressly
provides for a specific later effective date. Any options granted
in excess of such limitation shall be treated for all purposes as
Nonstatutory Stock Options.
(ii) Nonstatutory Stock Options may be granted to any Employee without
regard to the limitations stated in subparagraph (i) hereof.
(b) The option price per share for each option granted shall be determined
by the Committee and shall not be less than the Fair Market Value of the
shares on the date the option is granted. For purposes of this Plan, the
Fair Market Value of such shares on any given day shall be the average
of the high and low sales prices per share of Common Stock as reported
on the New York Stock Exchange Composite Tape for such date, or, if
there was
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<PAGE> 38
no trading of Common Stock on such date, for the next preceding date on
which there was such trading.
6. Exercise of Option.
(a) Each option shall be granted for, and by its terms shall not be
exercisable after the expiration of, a period of ten years from the date
the option is granted or such lesser period as the Committee may
determine.
(b) No option shall be transferable other than by will or the laws of
descent and distribution, and each option shall be exercisable during
the Employee's lifetime only by him or by his guardian or legal
representative.
(c) Subject to the provisions of Section 7 hereof and of paragraph (e) of
this Section 6, no option shall be exercisable by its terms prior to the
expiration of the one-year period beginning on the date of its grant. An
option shall become exercisable over a period of one to five years, in
ratable installments or otherwise, such period and method to be
determined by the Committee. Subject to the first sentence of this
Section 6(c), the Committee may accelerate the exercisability of any
option or portion thereof at any time. An option may be exercised either
for the total number of shares stated in the grant or, from time to
time, for less than the total number, in multiples of 100 shares;
provided, however, if an option holder makes a "hardship withdrawal"
pursuant to Section 6.02 (Option V) of the UST Inc. Employees' Savings
Plan, such holder's right of exercise shall be suspended during the 12-
month period beginning on the date of such withdrawal, except that this
proviso shall not apply if for any reason such suspension is not
required under Section 401(k) of the Code or any final regulations
issued thereunder.
(d) Each exercise of an option, in whole or in part, shall be effected by a
notice in writing to the Company, accompanied by one of the following:
(i) by payment in cash of the full option price of the shares
purchased;
(ii) if authorized by the Committee, by tendering to the Company, in
whole or in part, in lieu of cash, shares of Common Stock owned by
such purchaser, accompanied by the certificates therefor
registered in the name of such purchaser and properly endorsed for
transfer, having a Fair Market Value equal to the cash exercise
price applicable to the portion of such option being so exercised;
or
(iii) if the purchaser is an employee of the Company or a Subsidiary or
affiliate at the time of purchase, by payment in cash of at least
$1.00 per share, with the remainder of the option price being
borrowed from the Company as described below. In such case the
Company, unless otherwise determined by the Committee, will lend
to such purchaser an amount up to the excess of the full option
price of the shares purchased over such down payment, but not more
than the excess of such price over the par value of such shares,
such loan to be evidenced by the purchaser's delivery to the
Company of his unconditional promissory note to pay the amount of
the loan within ten years, in such manner as is determined by the
Committee. Any such note shall be dated the date of the notice of
exercise of the option, shall provide for the payment of equal
installments of principal through appropriate payroll deductions
or on an annual, semiannual or quarterly basis, as selected by the
purchaser, shall provide for the quarterly payment
3
<PAGE> 39
of interest on such indebtedness at the applicable federal rate in
effect under Section 1274(d) of the Code on the date on which the
loan was made, compounded semiannually (or the equivalent
thereof), or if no such rate is in effect, 8% or such other rate
as the Committee may determine is necessary to comply with the
requirements of applicable law, and shall be in such form and
contain such other provisions as the Committee may determine from
time to time.
If the employment of the purchaser is terminated by reason of his
death or "disability," as defined in the Company's Long-Term
Disability Plan ("Disability"), or upon his "retirement" from the
Company, as defined in any employee retirement plan of the Company
in which the purchaser participates ("Retirement"), or if the
Committee otherwise consents, any unpaid balance of such
indebtedness shall become due and payable on the earlier to occur
of (A) five years after the date of such termination, or (B) ten
years after the date of purchase, unless otherwise determined by
the Committee. If the employment of the purchaser is terminated
for any other reason, any unpaid balance of such indebtedness
shall become due and payable three months from the date of such
termination, unless otherwise determined by the Committee.
In connection with any such loan, the purchaser shall deposit with
and pledge to the Company the certificate or certificates
evidencing all of the shares so purchased, to be held by the
Company as collateral security for such loan. Cash dividends paid
on shares held by the Company as security shall be paid to the
purchaser. Voting rights and other stockholders' rights with
respect to all shares shall vest in the purchaser although the
shares are held by the Company as security. Upon default in the
payment of principal or interest on a loan provided for in this
subparagraph (iii), the Company, to the extent then permitted by
law and without demand or notice to the debtor, may sell any
pledged shares through the facilities of the New York Stock
Exchange (or other Exchange upon which the Company's shares may
then be listed) for the benefit of the debtor and apply the net
proceeds of such sale to the then unpaid principal and interest on
such loan, and any remainder of such proceeds shall be paid to the
debtor.
(e) Termination of Employment.
(i) Death, Disability and Retirement. If the employment of an option
holder is terminated by reason of his death or Disability, or upon
his Retirement, or for any other reason if the Committee so
determines, all outstanding options then held by such option holder
that have not theretofore become exercisable according to their
terms ("Unexercisable Options") shall become exercisable as of the
date of such termination of employment.
(ii) Cause. With respect to any option granted on or after December 12,
1996 ("New Option"), if (A) the employment of the option holder is
terminated for Cause (as defined in paragraph (iv) of this Section
6(e)), or (B) after the option holder's termination of employment
with the Company other than for Cause, the Company discovers the
occurrence of an act or failure to act by the option holder that
would have enabled the Company to terminate the option holder's
employment for Cause had the Company known of such act or failure
to act at the time of its occurrence, or (C) subsequent to his
termination of employment, the option holder commits a Competitive
Act (as defined in clause (iv)(A) of this Section 6(e)) and, in
each case,
4
<PAGE> 40
if the act constituting Cause is a Competitive Act or Willful
Misconduct (as defined in clause (iv)(C) of this Section 6(e)),
such Act is discovered by the Company within three years of its
occurrence, then, unless otherwise determined by the Committee,
(x) any and all outstanding New Options held by such option holder as
of the date of such termination or discovery shall terminate and
be forfeited;
(y) if the act constituting Cause is a Competitive Act or Willful
Misconduct, the option holder (or, in the event of the option
holder's death following the commission of such act, his
beneficiaries or estate) shall (1) sell back to the Company all
shares that are held, as of the date of such termination or
discovery, by the option holder (or, if applicable, his
beneficiaries or estate) and that were acquired upon exercise of
the New Option on or after the date which is 180 days prior to
the option holder's termination of employment (the "Acquired
Shares"), for a per share price equal to the per share exercise
price of such option, and (2) to the extent such Acquired Shares
have previously been sold or otherwise disposed of by the option
holder (other than by reason of death) or, if applicable, by his
beneficiaries or estate, repay to the Company the excess of the
aggregate Fair Market Value of such Acquired Shares on the date
of such sale or disposition over the aggregate exercise price of
such Acquired Shares.
For purposes of clause (ii)(y)(2) of this subsection (e), (A) the
amount of the repayment described therein shall not be affected
by whether the option holder or, if applicable, his beneficiaries
or estate actually received such Fair Market Value with respect
to such sale or other disposition, and (B) repayment may, without
limitation, be effected, at the discretion of the Company, by
means of offset against any amount owed by the Company to the
option holder or, if applicable, his beneficiaries or estate.
(iii) If the employment of an option holder is terminated for any other
reason and if the Committee does not determine otherwise, all
Unexercisable Options held by such option holder shall be
forfeited and shall lapse.
(iv) For purposes of this Section 6(e), "Cause" shall mean (A) prior to
the expiration of any Employee and Secrecy Agreement or any
agreement containing noncompetition provisions between the option
holder and the Company, the violation of either such agreement
("Competitive Act"); (B) the willful and continued failure by the
option holder to substantially perform his job duties (other than
any such failure resulting from the option holder's incapacity due
to physical or mental illness), after demand for substantial
performance is delivered by the Company that specifically
identifies the manner in which the Company believes the option
holder has not substantially performed his duties; or (C) the
willful engaging by the option holder in misconduct that is
materially injurious to the Company, monetarily or otherwise
("Willful Misconduct").
(f) No optioned shares shall be issued or transferred to an optionee until
purchased as provided in paragraph (d) above, and an optionee shall have
none of the rights of a stockholder with respect to such optioned shares
until the certificates therefor are registered in the name of such
optionee upon exercise of the option.
5
<PAGE> 41
7. Effect of Certain Changes.
If while unexercised options remain outstanding under this Plan (a) any
"Person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), other than the Company, any person who on the date hereof is a
director or officer of the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities; (b) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the Board, and any new director (other than a director designated
by a person who has entered into an agreement with the Company to effect a
transaction described in clause (a) or (c) of this Section 7) whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof; or (c) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 80% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation,
or the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets (an "Acceleration Event"),
then each outstanding option that has not theretofore become exercisable
according to its terms shall become exercisable. Upon the occurrence of an
Acceleration Event, the Committee shall provide for the cancellation of all
options outstanding as of the effective date of such event. Upon such
cancellation, the Company shall make, in exchange therefor, a cash payment
under any such option in an amount per share equal to the difference between
the per share exercise price of such option and (x) in the case of a
Nonstatutory Stock Option, the Fair Market Value of a share of Common Stock
on the date during the prior sixty-day period that produces the highest Fair
Market Value, and (y) in the case of an Incentive Stock Option, such Fair
Market Value on the effective date of the transaction.
8. Laws and Regulations.
No shares of Common Stock shall be issued under this Plan unless and until
all legal requirements applicable to the issuance of such shares have been
complied with to the satisfaction of the Committee. The Committee shall have
the right to condition any issuance of shares to any Employee hereunder on
such Employee's undertaking in writing to comply with such restrictions on
the subsequent disposition of such shares as the Committee shall deem
necessary or advisable as a result of any applicable law or regulation. The
Company or a Subsidiary shall have the right to deduct from all awards
hereunder paid in cash any federal, state or local taxes required by law to
be withheld with respect to such cash awards. In the case of Common Stock
issued upon exercise of options or in the case of any other applicable tax
withholding requirement, the Employee or other person receiving such stock
or otherwise
6
<PAGE> 42
subject to tax shall be required to pay to the Company or a Subsidiary the
amount of any such taxes which the Company or a Subsidiary is required to
withhold with respect to such stock. The provisions of this Plan shall be
interpreted so as to comply with the conditions and requirements of Rule
16b-3, and, if the option is an Incentive Stock Option, with Sections 422
and 425 of the Code, unless the Committee determines otherwise.
9. Other Terms and Conditions.
Options may contain such other terms, conditions or provisions, which shall
not be inconsistent with this Plan, as the Committee shall deem appropriate.
10. Amendment or Termination of the Plan.
The Board may at any time, and from time to time, terminate, modify, amend
or interpret the Plan in any respect; provided, however, that unless
otherwise determined by the Board, an amendment that requires stockholder
approval in order for the Plan to continue to comply with Section 162(m) or
any other law, regulation or stock exchange requirement shall not be
effective unless approved by the requisite vote of stockholders.
The termination or any modification or amendment of the Plan shall not,
without the consent of an Employee, adversely affect his rights under an
option previously granted to him.
11. Effective Date and Term of the Plan.
The adoption of the Plan shall become effective on May 5, 1992, subject to
the approval of stockholders. No option shall be granted pursuant to this
Plan later than May 4, 2002, but options theretofore granted may extend
beyond that date in accordance with their terms.
7
<PAGE> 43
UST288 DETACH HERE
PROXY
UST
ANNUAL MEETING OF STOCKHOLDERS -- MAY 2, 2000
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 2nd day of May 2000, 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, 2 AND 3 AND AGAINST PROPOSALS 4, 5 AND 6.
- -------------------- --------------------
SEE REVERSE CONTINUED AND TO BE SIGNED SEE REVERSE
SIDE ON REVERSE SIDE SIDE
- -------------------- --------------------
<PAGE> 44
<TABLE>
<S> <C>
- ------------------------ ------------------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ------------------------ ------------------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote
Call Toll-Free on a Touch-Tone Phone is immediately confirmed and posted.
1-877-779-8683
- --------------------------------------------------- -------------------------------------------------
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT AND 1. READ THE ACCOMPANYING PROXY STATEMENT AND
PROXY CARD. PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 1-877-779-8683. 2. GO TO THE WEBSITE
STOCKHOLDERS RESIDING OUTSIDE THE UNITED HTTP://WWW.EPROXYVOTE.COM/UST
STATES CAN CALL COLLECT ON A TOUCH-TONE PHONE
1-201-536-8073. 3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME. 4. FOLLOW THE INSTRUCTIONS PROVIDED AND BE
PREPARED TO FURNISH THE SOCIAL SECURITY/TAX
4. FOLLOW THE RECORDED INSTRUCTIONS AND BE PAYER I.D. NUMBER LINKED TO YOUR ACCOUNT.
PREPARED TO FURNISH THE SOCIAL SECURITY/TAX
PAYER I.D. NUMBER LINKED TO YOUR ACCOUNT.
- --------------------------------------------------- -------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-779-8683 anytime! Go to HTTP://WWW.EPROXYVOTE.COM/UST anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
UST26A DETACH HERE
- --- PLEASE MARK
|X| VOTES AS IN |
- --- THIS EXAMPLE.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4, 5 AND 6.
- ------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
- --------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Directors. NOMINEES: 2. To amend and approve [ ] [ ] [ ]
the 1992 Stock Option
(01) E. H. DeHority, Jr., (02) E. J. Eisenman, Plan.
(03) P. J. Neff
FOR WITHHELD
[ ] ALL [ ] FROM ALL
NOMINEES NOMINEES
For all nominees except vote withheld from the following: FOR AGAINST ABSTAIN
[ ] 3. To ratify and approve [ ] [ ] [ ]
----------------------------------------------------- Ernst & Young LLP as
independent auditors
of the Company for the
year 2000.
- ------------------------------------------------------------------- ------------------------------------------
------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST THE FOLLOWING STOCKHOLDER
PROPOSALS 4, 5 AND 6.
----------------------------------------------------------------
FOR AGAINST ABSTAIN
4. Stockholder Proposal. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
5. Stockholder Proposal. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
6. 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:
----------------------------- ---------------- ---------------------------- ----------------
</TABLE>
<PAGE> 45
EMPLOYEES' SAVINGS PLAN
As a participating employee in the UST Inc. Employees' Savings Plan, YOU ARE
ENTITLED TO GIVE AMERICAN EXPRESS TRUST COMPANY, 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 2, 2000. If you do
not elect to vote, the shares reflected on this Instruction Card will be voted
by the Trustee in the same proportion as shares as to which voting instructions
have been received. Your instructions to the Trustee will be confidential. A
Notice of the 2000 Annual Meeting and Proxy Statement and a 1999 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.
US229B DETACH HERE
UST
ANNUAL MEETING OF STOCKHOLDERS -- MAY 2, 2000
EMPLOYEES' SAVINGS PLAN
The undersigned hereby directs American Express Trust Company 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 2nd day of May 2000, 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 INSTRUCTION CARD WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE ON YOUR SIGNED
INSTRUCTION CARD, IT WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST
PROPOSALS 4, 5 AND 6.
- ----------- ---------------
SEE REVERSE CONTINUED AND TO BE SIGNED SEE REVERSE
SIDE ON REVERSE SIDE SIDE
- ----------- ---------------
<PAGE> 46
<TABLE>
<S> <C>
- ------------------------ ------------------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ------------------------ ------------------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote
Call Toll-Free on a Touch-Tone Phone is immediately confirmed and posted.
1-877-779-8683
- --------------------------------------------------- -------------------------------------------------
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT AND 1. READ THE ACCOMPANYING PROXY STATEMENT AND
INSTRUCTION CARD. INSTRUCTION CARD.
2. CALL THE TOLL-FREE NUMBER 1-877-779-8683. 2. GO TO THE WEBSITE
STOCKHOLDERS RESIDING OUTSIDE THE UNITED HTTP://WWW.EPROXYVOTE.COM/UST
STATES CAN COLLECT ON A TOUCH-TONE PHONE
1-201-536-8073. 3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR INSTRUCTION CARD ABOVE YOUR NAME.
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR INSTRUCTION CARD ABOVE YOUR NAME. 4. FOLLOW THE INSTRUCTIONS PROVIDED AND BE
PREPARED TO FURNISH THE SOCIAL SECURITY/TAX
4. FOLLOW THE RECORDED INSTRUCTIONS AND BE PAYER I.D. NUMBER LINKED TO YOUR ACCOUNT.
PREPARED TO FURNISH THE SOCIAL SECURITY/TAX
PAYER I.D. NUMBER LINKED TO YOUR ACCOUNT.
- --------------------------------------------------- -------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT
Call 1-877-779-8683 anytime! Go to HTTP://WWW.EPROXYVOTE.COM/UST anytime!
DO NOT RETURN YOUR INSTRUCTION CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
US229A DETACH HERE
- --- PLEASE MARK ---
|X| VOTES AS IN |
- --- THIS EXAMPLE.
IF NO DIRECTION IS GIVEN, THIS INSTRUCTION CARD WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4, 5 AND 6.
- ------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
- ------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Directors. NOMINEES: 2. To amend and approve [ ] [ ] [ ]
the 1992 Stock Option
(01) E. H. DeHority, Jr., (02) E. J. Eisenman, Plan.
(03) P. J. Neff
FOR WITHHELD
[ ] ALL [ ] FROM ALL
NOMINEES NOMINEES
For all nominees except vote withheld from the following: FOR AGAINST ABSTAIN
[ ] 3. To ratify and approve [ ] [ ] [ ]
----------------------------------------------------- Ernst & Young LLP as
independent auditors
of the Company for the
year 2000.
- ----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST THE FOLLOWING STOCKHOLDER
PROPOSALS 4, 5 AND 6.
----------------------------------------------------------------
FOR AGAINST ABSTAIN
4. Stockholder Proposal. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
5. Stockholder Proposal. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
6. Stockholder Proposal. [ ] [ ] [ ]
----------------------------------------------------------------
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,
ESTATES OR CORPORATIONS, CAPACITY OR TITLE SHOULD BE STATED.
Signature: Date:
---------------------------- ----------------
</TABLE>
