<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended: MARCH 31, 1997
Commission file number: 0-20469
U.S. TRUST CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-3818952
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
114 West 47th Street, New York, New York 10036
(Address of principal executive offices) (Zip Code)
(212) 852-1000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
19,559,127 shares, Common Stock, $1 par value, as of April 30, 1997
Page 1 of 21
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
An index of the financial statements included in this Form 10-Q filing
follows. All page numbers refer to pages within this Form 10-Q.
Title of Financial Statement Page #
- ---------------------------- ------
Condensed Consolidated Statement of Income For the Three
Month Periods Ended March 31, 1997 and 1996 3
Condensed Consolidated Statement of Condition as of March 31, 1997
and December 31, 1996 4
Condensed Consolidated Statement of Changes in Stockholders' Equity
for the Three Month Periods Ended March 31, 1997 and 1996 5
Condensed Consolidated Statement of Cash Flows for the Three Month
Periods Ended March 31, 1997 and 1996 6
Notes to the Condensed Consolidated Financial Statements 7
Condensed Consolidated Net Interest Revenue and Average Balances
For the Three Month Periods Ended March 31, 1997 and 1996 18
2
<PAGE> 3
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIODS ENDED MARCH 31,
--------------------------------------------------------------------
BETTER (WORSE)
-------------------------------
1997 1996 $ %
--------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Fee Revenue $ 66,696 $ 57,999 $ 8,697 15.0 %
Net Interest Revenue 21,748 19,216 2,532 13.2
Securities Gains, Net 9 208 (199) -
--------------- --------------- --------------- -----------
TOTAL REVENUE 88,453 77,423 11,030 14.2
--------------- --------------- --------------- -----------
OPERATING EXPENSES
Salaries 23,586 21,903 (1,683) (7.7)
Employee Benefits and Performance
Compensation 16,920 12,285 (4,635) (37.7)
--------------- --------------- --------------- -----------
Total Salaries and Benefits 40,506 34,188 (6,318) (18.5)
Net Occupancy 9,204 8,239 (965) (11.7)
Other 19,200 18,449 (751) (4.1)
--------------- --------------- --------------- -----------
TOTAL OPERATING EXPENSES 68,910 60,876 (8,034) (13.2)
--------------- --------------- --------------- -----------
Income Before Income Tax Expense 19,543 16,547 2,996 18.1
Income Tax Expense 7,622 6,950 (672) (9.7)
--------------- --------------- --------------- -----------
NET INCOME $ 11,921 $ 9,597 $ 2,324 24.2 %
=============== =============== =============== ===========
NET INCOME PER SHARE $ 0.55 $ 0.46 $ 0.09 19.6 %
=============== =============== =============== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CONDITION
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1997 1996
----------- ------------
<S> <C> <C>
Cash and Due from Banks $ 64,277 $ 78,566
Interest Earning Securities 1,404,831 1,451,869
Loans, Net of Allowance for Credit Losses
($17,268 in 1997 and $16,693 in 1996) 1,649,173 1,671,448
Other Assets 295,591 275,435
----------- -----------
Total Assets $3,413,872 $3,477,318
=========== ===========
LIABILITIES
Deposits:
Non-Interest Bearing $ 468,376 $ 687,942
Interest Bearing 2,198,886 2,075,847
----------- -----------
Total Deposits 2,667,262 2,763,789
Short-Term Credit Facilities 222,326 240,283
Accounts Payable and Accrued Liabilities 229,199 232,680
Long-Term Debt 23,254 26,468
----------- -----------
3,142,041 3,263,220
Trust Preferred Capital Securities 50,000 -
----------- -----------
Total Liabilities 3,192,041 3,263,220
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $1.00 Par Value; 40,000,000 Shares
Authorized; 19,871,009 Shares Issued in 1997
and 19,629,562 Shares Issued in 1996 19,871 19,630
Capital Surplus 9,637 3,575
Retained Earnings 215,651 205,384
Treasury Stock, at Cost (279,657 Shares in 1997
and 124,000 Shares in 1996) (12,386) (4,728)
Loan to ESOP (7,254) (10,468)
Unrealized Gain (Loss), Net of Taxes, on
Securities Available for Sale (3,688) 705
----------- -----------
Total Stockholders' Equity 221,831 214,098
----------- -----------
Total Liabilities and Stockholders' Equity $3,413,872 $3,477,318
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Month Periods
Ended March 31,
-----------------------------------
1997 1996
-------------- ----------
COMMON STOCK
<S> <C> <C>
Balance, January 1 $ 19,630 $ 9,739
Effect of Two-For-One Stock Split - 9,739
Acquisition 204 -
Issuance of Shares Under Employee Benefit Plans 37 78
---------- ----------
Balance, March 31 $ 19,871 $ 19,556
========== ==========
CAPITAL SURPLUS
Balance, January 1 $ 3,575 $ 125
Effect of Two-For-One Stock Split - (125)
Acquistion 6,943 -
Employee Benefit Plans (881) 945
---------- ----------
Balance, March 31 $ 9,637 $ 945
========== ==========
RETAINED EARNINGS
Balance, January 1 $ 205,384 $ 183,804
Effect of Two-For-One Stock Split - (9,653)
Net Income 11,921 9,597
Cash Dividends Declared ($0.15 Per Share in 1997
and $0.125 Per Share in 1996) (2,954) (2,435)
Tax Benefit on Stock Based Awards 1,300 31
---------- ----------
Balance, March 31 $ 215,651 $ 181,344
========== ==========
TREASURY STOCK
Balance, January 1 $ (4,728) $ -
Purchases (10,314) -
Issuance of Shares Under Employee Benefit Plans, Net 2,656 -
---------- ----------
Balance, March 31 $ (12,386) $ -
========== ==========
LOAN TO ESOP
Balance, January 1 $ (10,468) $ (13,434)
Principal Payment by ESOP 3,214 2,966
---------- ----------
Balance, March 31 $ (7,254) $ (10,468)
========== ==========
UNREALIZED GAIN (LOSS), NET OF TAXES, ON
SECURITIES AVAILABLE FOR SALE
Balance, January 1 $ 705 $ 1,609
Net Change in Fair Value, After Taxes (4,393) (2,584)
---------- ----------
Balance, March 31 $ (3,688) $ (975)
========== ==========
TOTAL STOCKHOLDERS' EQUITY $ 221,831 $ 190,402
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THREE MONTH PERIODS
ENDED MARCH 31,
---------------------------------
1997 1996
--------------- -----------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 13,303 $ 906
----------- -----------
Cash Flows From Investing Activities:
Interest Earning Securities:
Purchases (440,234) (368,616)
Sales 69,481 18,756
Maturities, Calls and Mandatory Redemptions 408,655 289,719
Net Change in Loans 21,682 18,678
Other, Net (8,538) (1,595)
----------- -----------
Net Cash Provided by (Used in) Investing Activities 51,046 (43,058)
----------- -----------
Cash Flows From Financing Activities:
Net Change in Non-Interest Bearing Deposits (219,566) (88,407)
Net Change in Interest Bearing Deposits 123,039 122,882
Net Change in Short-Term Credit Facilities (17,957) (32,530)
Issuance of Trust Preferred Capital Securities 50,000 -
Repayment of Long-Term Debt (3,214) (2,966)
Other, Net (10,940) (1,451)
----------- -----------
Net Cash (Used in) Financing Activities (78,638) (2,472)
----------- -----------
Net Change in Cash and Cash Equivalents (14,289) (44,624)
Cash and Cash Equivalents at January 1 78,566 96,785
----------- -----------
Cash and Cash Equivalents at March 31 $ 64,277 $ 52,161
=========== ===========
- --------------------------------------------------------------------------------------------------------------
Income Taxes Paid $ 391 $ 146
Interest Expense Paid 28,104 20,859
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
U. S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
U.S. Trust Corporation (the "Corporation" or "Parent") and its majority owned
subsidiaries. All material intercompany accounts and transactions have been
eliminated in consolidation.
The accounting and reporting policies of the Corporation and its
subsidiaries conform with generally accepted accounting principles and general
practice within the investment management and banking industries. The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the financial statement
dates and the reported amounts of revenues and expenses during the reported
periods. Since management's judgment involves making estimates concerning the
likelihood of future events, the actual results could differ from those
estimates which will have a positive or negative effect on future period
results.
In the opinion of management, all adjustments necessary for a fair
presentation of the consolidated financial position and results of operations
for the interim periods have been made. Such adjustments, except for certain
items mentioned in these Notes to the Condensed Consolidated Financial
Statements and/or Management's Discussion and Analysis of Financial Condition
and Results of Operations, are of a normal recurring nature.
2. DIVIDENDS
On January 28, 1997, the Corporation announced a two-for-one stock
split of its common shares effected in the form of a 100% stock dividend
distributed on February 21, 1997, to shareholders of record on February 7, 1997.
The impact of the stock split has been reflected in the 1996 Consolidated
Statement of Condition and in all earnings per share calculations.
In January 1997, the Board of Directors of the Corporation (the
"Board") declared a quarterly dividend of $0.15 per share payable on April 25,
1997, to shareholders of record as of the close of business on April 10, 1997.
3. TRUST PREFERRED CAPITAL SECURITIES
On January 28, 1997, U.S. Trust Capital A (the "Trust"), a statutory
business trust which for financial reporting purposes is reflected as a
subsidiary and included in the consolidated financial statements of the
Corporation, issued $50.0 million of 8.414% Capital Securities ("Trust Preferred
Capital Securities") with a stated value and liquidation preference of $1,000
per share. The Corporation has unconditionally guaranteed all of the Trust's
obligations under the Trust Preferred Capital Securities. The proceeds from the
sale of the Trust Preferred Capital Securities were utilized by the Trust to
purchase $51.5 million of 8.414% Junior Subordinated Debt Securities from the
Corporation. The Junior Subordinated Debt Securities are unsecured and
subordinated to all senior debt of the Corporation and are the sole assets of
the Trust. The Trust Preferred Capital Securities qualify as Tier 1 Capital
under Federal Reserve Board guidelines, and have no voting rights. Holders of
the Trust Preferred Capital Securities will be entitled to receive cumulative
cash distributions semi-annually. The Corporation's proceeds from the issuance
of the Junior Subordinated Debt Securities will be used for general corporate
purposes, including the acquisition of common stock of the Corporation.
7
<PAGE> 8
U.S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
3. TRUST PREFERRED CAPITAL SECURITIES (CONT'D)
The Trust Preferred Capital Securities are subject to mandatory
redemption, in whole or in part, upon repayment of the Junior Subordinated Debt
Securities. The Corporation has the right to redeem the Junior Subordinated Debt
Securities prior to their stated maturity of February 1, 2027, on or after
February 1, 2007, upon approval (if then required) of the Federal Reserve Board.
4. ACQUISITIONS
On January 16, 1997, the Corporation acquired the assets and
liabilities of Florence Fearrington, Inc., a New York investment advisory firm
that managed approximately $400 million in assets, for approximately $7.2
million of the Corporation's common stock. The transaction was accounted for as
a purchase.
On December 31, 1996, the Corporation acquired Lilienthal Associates, a
California based investment advisory firm that managed approximately $270
million in assets, for approximately $2.4 million of the Corporation's common
stock. The transaction was accounted for as a purchase.
5. NET INTEREST REVENUE
Net Interest Revenue for financial reporting purposes consists of
interest income less interest expense and the provision for credit losses. The
following is a detailed analysis of the composition of net interest revenue:
<TABLE>
<CAPTION>
Three-Month Periods
Ended March 31,
-------------------------------- %
Better
(In Thousands) 1997 1996 (Worse)
- ---------------------------------------------- ---------- ------------ ------------
Interest Income:
<S> <C> <C> <C>
Loans $31,456 $27,448 14.6
Securities:
Taxable 17,745 7,976 -
Tax Exempt 998 716 39.4
Short-Term Investments 1,073 3,263 (67.1)
Deposits with Banks 330 690 (52.2)
------- ------- ------------
Total Interest Income 51,602 40,093 28.7
------- ------- ------------
Interest Expense:
Deposits 24,587 19,301 (27.4)
Short-Term Credit Facilities 3,844 829 -
Long-Term Debt 431 497 13.3
Trust Preferred Capital Securities 692 - -
------- ------- ------------
Total Interest Expense 29,554 20,627 (43.3)
------- ------- ------------
Net Interest Income 22,048 19,466 13.3
Provision for Credit Losses 300 250 (20.0)
------- ------- ------------
Net Interest Revenue $21,748 $19,216 13.2
======= ======= ============
</TABLE>
8
<PAGE> 9
U.S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
6. PLEDGED ASSETS
Financial instruments carried at $134.5 million on March 31, 1997 and
$154.2 million on December 31, 1996 were pledged to secure public deposits, as
collateral for borrowings, to qualify for fiduciary powers and for other
purposes.
7. CONTINGENCIES
There are various pending and threatened actions and claims against the
Corporation and its subsidiaries in which the Corporation has denied liability
and which it will vigorously contest. Management, after consultation with
counsel, is of the opinion that the ultimate resolution of such matters is
unlikely to have any future material effect on the Corporation's financial
position or results of operations.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL REPORTING MATTERS
On January 28, 1997, the Corporation announced a two-for-one stock
split of its common shares effected in the form of a stock dividend distributed
on February 21, 1997, to shareholders of record on February 7, 1997. The impact
of the stock split has been reflected in the 1996 Condensed Consolidated
Statement of Condition and in all earnings per share calculations.
As of January 1, 1997, the Corporation adopted the required provisions
of Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
("FAS 125"). FAS 125 establishes rules distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. The adoption
of FAS 125 had no impact on the financial condition or results of operations of
the Corporation.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies. Except for the historical
information contained herein, matters discussed in this report may be
forward-looking statements which involve risks and uncertainties and actual
results may differ materially from those set forth in any such forward-looking
statements. Further, such forward-looking statements speak only as of the date
on which such statements are made, and the Corporation undertakes no obligation
to update forward-looking statements to reflect events or circumstances after
the date on which such statements are made or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Net income for the first quarter of 1997 was $11.9 million, compared to
$9.6 million earned in the first quarter of 1996. On a fully diluted per share
basis, net income was $0.55 in the first quarter of 1997, versus $0.46 in the
first quarter of 1996. The Corporation's return on average stockholders' equity
was 21.6% for the first quarter of 1997, compared to 20.8% for the first quarter
of 1996.
FEE REVENUE
<TABLE>
<CAPTION>
Three Month Periods Ended
--------------------------------- %
March 31, March 31, Better
(In Thousands) 1997 1996 (Worse)
--------------- ---------------- ---------------
<S> <C> <C> <C>
Investment Management and
Related Services $61,219 $52,717 16.1
Corporate Trust 5,477 5,282 3.7
--------------- ---------------- ---------------
Total Fee Revenue $66,696 $57,999 15.0
=============== ================ ===============
Market Related Fees $53,372 $44,607 19.6
Transaction Related Fees 13,324 13,392 (0.5)
--------------- ---------------- ---------------
Total Fee Revenue $66,696 $57,999 15.0
=============== ================ ===============
</TABLE>
Total fee revenue for the first quarter of 1997 increased approximately
$8.7 million to $66.7 million from $58.0 million in the first quarter of 1996.
Market-related fee revenue increased by $8.8 million to $53.4 million from $44.6
million in the first quarter of 1996. The increase in fee revenue was
attributable to a combination of net new business and net market appreciation.
10
<PAGE> 11
Market related fee revenue is based primarily on the market value of
the assets in clients' investment management accounts. In general, market
related fee revenue is influenced by a variety of factors, including growth or
decline of stock and bond market levels, new business, acquisitions, fee
increases and revenue from new services, but offset by the outflow of investment
management assets due to terminating trusts, disbursements and lost business.
Most market related fee revenue is determined on a sliding scale so
that as the value of a client's portfolio grows in size, the Corporation
receives a smaller percentage of the increasing value. Therefore, market value
or other incremental changes in a portfolio's size do not typically have a
proportionate impact on the level of market-related fee revenue. Another
important factor in the determination of the level of market related fee revenue
is the composition of assets under management. Depending on how assets under
management are invested, fluctuations in any one market will not necessarily
have a proportionate, if any, impact on the level of fee revenue derived from
the underlying assets. The following is a comparative analysis of the
composition of assets under management.
<TABLE>
<CAPTION>
March 31, Dec. 31, March 31,
1997 1996 1996
-------------- -------------- ---------------
<S> <C> <C> <C>
Equity 52% 46% 49%
Fixed Income 35% 39% 37%
Short-Term and Other 13% 15% 14%
-------------- -------------- ---------------
100% 100% 100%
============== ============== ===============
</TABLE>
The carrying amount of assets under management was $53.3 billion at
March 31, 1997, remaining stable from the December 31, 1996 balance and
reflecting an increase of $4.1 billion from March 31, 1996. Investment
management assets at March 31, 1997, increased approximately $4.1 billion from
March 31, 1996, reflecting net new business and the overall appreciation in the
equity markets.
<TABLE>
<CAPTION>
March March vs.
vs. Dec. March
% %
Assets Under Management and Administration March 31, Dec. 31, March 31, Better Better
(In Billions) 1997 1996 1996 (Worse) (Worse)
- ----------------------------------------------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets Under Management:
Investment Management $ 38.6 $ 38.0 $ 34.4 1.5 12.0
Special Fiduciary 14.7 15.3 14.8 (3.8) (0.2)
------------ ------------ ------------- ------------ ------------
Total Assets Under Management 53.3 53.3 49.2 -- 8.3
------------ ------------ ------------- ------------ ------------
Assets Under Administration:
Personal Custody and Other 15.9 15.7 14.1 1.5 12.3
Corporate and Municipal Trusteeships
and Agency Relationships at Par Value 226.0 216.6 197.2 4.4 14.6
------------ ------------ ------------- ------------ ------------
Total Assets Under Administration 241.9 232.3 211.3 4.2 14.5
------------ ------------ ------------- ------------ ------------
Total Assets Under Management and
Administration $295.2 $285.6 $260.5 3.4 13.3
============ ============ ============= ============ ============
</TABLE>
Approximately $5.1 billion of assets under management were invested in
the Corporation's Excelsior Funds at March 31, 1997. At December 31, 1996 and
March 31, 1996, total assets under management invested in the Excelsior Funds
were $4.8 billion and $4.0 billion, respectively.
11
<PAGE> 12
NET INTEREST REVENUE
<TABLE>
<CAPTION>
Three Month Periods Ended
----------------------------------- %
March 31, March 31, Better
(In Thousands) 1997 1996 (Worse)
- -------------------------------- --------------- -------------- ------------
<S> <C> <C> <C>
Interest Income $51,602 $40,093 28.7
Interest Expense 29,554 20,627 (43.3)
--------------- -------------- ------------
Net Interest Income 22,048 19,466 13.3
Provision for Credit Losses 300 250 (20.0)
--------------- -------------- ------------
Net Interest Revenue $21,748 $19,216 13.2
=============== ============== ============
</TABLE>
Net interest revenue is affected by changes in interest rates, funding
strategies, and the relative proportion and composition of interest bearing and
non-interest bearing financial instruments. Although the net yield on interest
earning assets has declined from 3.48% at March 31, 1996 to 3.03% at March 31,
1997, this has been offset by a greater proportion of interest earning assets
invested in longer-term financial instruments, including mortgage loans and
mortgage investment securities.
OPERATING EXPENSES
<TABLE>
<CAPTION>
Three Month Periods Ended
--------------------------------- %
March 31, March 31, Better
(In Thousands) 1997 1996 (Worse)
- --------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Salaries $23,586 $21,903 (7.7)
Employee Benefits and
Performance Compensation 16,920 12,285 (37.7)
------------- ------------- -------------
Total Salaries and Benefits 40,506 34,188 (18.5)
Net Occupancy 9,204 8,239 (11.7)
Other 19,200 18,449 (4.1)
------------- ------------- -------------
Total Operating Expenses $68,910 $60,876 (13.2)
============= ============= =============
</TABLE>
Operating expenses increased by $8.0 million in the first quarter of
1997, compared to the first quarter of 1996. The Corporation's pre-tax margin
was 22.1% for the first quarter of 1997 and 21.4% for the first quarter of 1996.
In the first quarter of 1997, employee benefits and performance
compensation expense increased $4.6 million from the first quarter of 1996.
Performance compensation is determined based upon the Corporation's financial
performance as measured by the Corporation's earnings per share, adjusted to
offset the impact of extraordinary or nonrecurring events, or other changes,
conditions or circumstances that warrant adjustment. Employee benefit expense is
typically a function of staffing levels. The number of full-time equivalent
employees increased 6.5% to 1,481 at March 31, 1997, compared to 1,391 at March
31, 1996.
The Corporation makes a substantial commitment to sales, marketing and
advertising. As of March 31, 1997, approximately 106 employees were devoted to
these functions. Direct expenses associated with these functions, including
salary, employee benefits and performance compensation (principally sales
commissions) were $7.3 million for the first quarter of 1997, an increase of
30.6% from the $5.6 million incurred during the corresponding 1996 period.
In addition to the aforementioned expenses, occupancy expense directly
allocable to these functions amounted to approximately $542,000 for the first
quarter of 1997 and $453,000 for the first quarter of 1996.
12
<PAGE> 13
INCOME TAXES
The effective tax rate for the 1997 first quarter was 39.0% compared to
42.0% for the 1996 first quarter. The decline in the effective tax rate is due
to a decrease in state and local income taxes, resulting from the increasing
contribution to income from the national expansion of the Corporation's
businesses.
FINANCIAL CONDITION
CAPITAL
The Corporation's ratio of Tier 1 Capital to period end risk-adjusted
assets (as defined by the Federal Reserve Board) was 15.6% at March 31, 1997 and
11.2% at March 31, 1996. The ratio of Total Capital to period end risk-adjusted
assets was 16.7% at March 31, 1997 and 12.5% at March 31, 1996. The Tier 1
Leverage (Tier 1 Capital as of the period end divided by quarterly (3 month)
total average assets) was 7.0% at March 31, 1997 and 5.6% at March 31, 1996. The
increase in the Corporation's capital ratios was primarily the result of the
issuance of $50.0 million of Trust Preferred Capital Securities on January 28,
1997 (see Notes to the Condensed Consolidated Financial Statements No. 3).
LIQUIDITY MANAGEMENT
The objective of liquidity management is to ensure that the Corporation
can meet its cash flow requirements and to capitalize on opportunities for the
Corporation's business expansion. Management monitors the liquidity position of
the Corporation's subsidiaries on an ongoing basis to ensure that funds are
available to meet loan and deposit cash flow requirements. The liquidity profile
is also structured to ensure that the capital needs of the Parent and its
subsidiaries are met on a day to day basis.
The Corporation's liquidity requirements consist mainly of dividend
payments to common stockholders, interest and principal payments to debt holders
and purchases of its common stock. On January 28, 1997, the Corporation
announced a 20% increase in the Corporation's regular quarterly dividend,
indicating an annual dividend rate of $0.60 per share. During the first quarter
of 1997, the Board of Directors declared a dividend of $0.15 per share payable
on April 25, 1997.
As of March 31, 1997, the Board of Directors authorized the repurchase
of up to a total of two million shares of common stock. As of March 31, 1997,
the Corporation had repurchased 345,090 shares at a weighted average purchase
price of $43.59 per share. The repurchased shares will be used to meet the
Parent's obligations under its stock-based benefit plans and for general capital
management purposes.
The Parent's sources of liquidity are primarily derived from dividends
from its subsidiaries, issuances of common stock and issuances of long and
short-term debt instruments. At March 31, 1997, the subsidiaries have the
ability to pay dividends of approximately $37.0 million without prior approval
of the regulatory authorities. The proceeds from the aforementioned issuance of
Trust Preferred Capital Securities (see Notes to the Condensed Consolidated
Financial Statements No. 3) will be used for general corporate purposes,
including the acquisition of the Corporation's common stock.
The Corporation has a $40.0 million unsecured revolving credit facility
maturing in 1999. As of March 31, 1997, the Corporation had no borrowings
outstanding under this facility. Additionally, the Parent may borrow, subject to
certain regulatory restrictions, on a fully collateralized basis from its
subsidiaries.
13
<PAGE> 14
Subsidiaries of the Corporation have established credit facilities with
the Federal Home Loan Bank ("FHLB") totaling approximately $99.4 million. As of
March 31, 1997, the subsidiaries have borrowed $22.0 million on these facilities
from the FHLB.
Liquidity is also generated from the types of financial instruments
that the subsidiaries carry as investments. Approximately $962 million or 81% of
the securities portfolio is invested in U.S. Treasury obligations or securities
backed by the full faith and credit of the U.S. Government. These securities are
readily marketable and may be sold or financed through repurchase agreements, as
appropriate. At March 31, 1997, securities sold under agreements to repurchase
aggregated $47.0 million.
ASSET/LIABILITY MANAGEMENT
The objective of asset and liability management is to maximize net
interest revenue while maintaining a high level of asset quality, acceptable
levels of interest rate sensitivity and adequate liquidity.
The Corporation's asset mix is principally liquid and low-risk.
Approximately 40% of average total assets consist of short-term financial
instruments and readily marketable securities. The securities portfolio is
concentrated in investments in U.S. Government and Government agency securities
and investment securities backed by the full faith and credit of the U.S.
Government.
The loan portfolio is the largest component of average total assets.
For the 1997 first quarter, average loans comprise approximately 48% of average
assets. Average loans increased $269.3 million, or 19.5%, to $1.7 billion in the
first quarter of 1997, from $1.4 billion in the first quarter of 1996. See the
"Asset Quality" section of Management's Discussion and Analysis of Financial
Condition and Results of Operations for a further discussion of the
Corporation's loan portfolio.
Interest Rate Sensitivity
The Corporation is exposed to interest rate risk primarily through its
mortgage lending activities and through its investments in mortgage backed
securities. Net interest revenue may be generated from prudent asset/liability
management activities that may result in timing differences in the maturity
and/or repricing of assets, liabilities and off balance sheet positions. The
results of these timing differences is presented below in the interest
sensitivity gap analysis. Gap analysis has inherent limitations as an analytical
tool because it measures the Corporation's exposure to interest rate risk at a
single point in time. The Corporation also uses simulation analysis to monitor
and control net interest revenue at risk and the economic value of equity at
risk under multiple interest rate scenarios.
To reflect anticipated payments, certain asset and liability categories
(including items with no stated maturity) are included in the table based on
estimated rather than contractual maturity or repricing dates.
14
<PAGE> 15
<TABLE>
<CAPTION>
0 - 3 4 - 6 7 - 12 1 - 5 Over
(In Thousands) Months Months Months Years 5 Years Total
- -------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Securities $ 411,882 $ 92,220 $ 220,922 $ 472,354 $ 207,453 $ 1,404,831
Loans, Net of Allowance
for Credit Losses 657,942 58,351 109,086 531,608 292,186 1,649,173
----------- ----------- ----------- ----------- ----------- -----------
Total Interest Earning Assets 1,069,824 150,571 330,008 1,003,962 499,639 3,054,004
----------- ----------- ----------- ----------- ----------- -----------
INTEREST BEARING LIABILITIES:
Interest Bearing Deposits (2,098,520) (4,898) (17,374) (78,094) -- (2,198,886)
Short-Term Credit Facilities (222,326) -- -- -- -- (222,326)
Trust Preferred Capital Securities -- -- -- -- (50,000) (50,000)
Long-Term Debt -- -- (1,000) (21,254) (1,000) (23,254)
----------- ----------- ----------- ----------- ----------- -----------
Total Interest Bearing Liabilities (2,320,846) (4,898) (18,374) (99,348) (51,000) (2,494,466)
----------- ----------- ----------- ----------- ----------- -----------
Asset/(Liability) Sensitivity Gap (1,251,022) 145,673 311,634 904,614 448,639 559,538
Interest Rate Swaps 618,000* (750) (56,500) (435,750) (125,000) --
----------- ----------- ----------- ----------- ----------- -----------
Interest Rate Sensitivity Gap (633,022) 144,923 255,134 468,864 323,639 559,538
Net Non-Interest Earning Assets,
Non-Interest Bearing Liabilities and
Stockholders' Equity (51,908) -- -- (279,284) (228,346) (559,538)
----------- ----------- ----------- ----------- ----------- -----------
Maturity/Repricing Gap (684,930) 144,923 255,134 189,580 95,293 --
----------- ----------- ----------- ----------- ----------- -----------
Cumulative Gap $ (684,930) $ (540,007) $ (284,873) $ (95,293) $ -- $ --
=========== =========== =========== =========== =========== ===========
</TABLE>
* Includes $628.8 million of total outstanding notional principal net of
maturing and amortizing interest rate swaps ("Swaps").
As part of its overall asset and liability management process, the
Corporation uses Swaps as hedges. Swaps mitigate the interest rate exposure
created by financing the residential real estate mortgage loans with short-term
deposits. The following table provides details, as of March 31, 1997, of the
notional amounts of Swaps by maturity and the related average interest rates
paid and received. The Corporation is a fixed rate payor on all of its Swaps.
<TABLE>
<CAPTION>
Maturing
--------------------------------------------------
Within 1 1 to 5 Over 5
(Dollars In Thousands) Year Years Years Total
- -------------------------------- --------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Fixed Pay Swaps $ 68,000 $ 435,750 $ 125,000 $ 628,750
Average Rate Paid 6.5659 % 6.7191 % 6.1830 % 6.5959 %
Average Rate Received (1) 5.5677 % 5.5688 % 5.6206 % 5.5790 %
</TABLE>
(1) Represents the average variable rate that will be received by the
Corporation based upon the rate in effect at the latest variable rate reset date
of each Swap.
The impact of the Corporation's hedging activities upon net interest
revenue for the quarters ended March 31, 1997 and 1996, are detailed in the
following table.
15
<PAGE> 16
<TABLE>
<CAPTION>
Three Month Periods Ended
---------------------------------------------
(Dollars In Thousands) March 31, 1997 March 31, 1996
------------------- ----------------------
<S> <C> <C>
Net Interest Revenue:
As Reported $21,748 $19,216
Excluding Hedging Activities $23,427 $20,243
Net Yield on Interest Earning Assets:
As Reported 3.03% 3.48%
Excluding Hedging Activities 3.29% 3.67%
</TABLE>
The difference between results "As Reported" and "Excluding Hedging
Activities" in each period reflects the cost of utilizing swaps to hedge
interest rate risk.
Interest Earning Securities
Included in interest earning securities are $31.7 million and $202.0
million of interest bearing deposits with banks, $1.18 billion and $1.17 million
of securities available for sale and $190.0 million and $84.0 million of federal
funds sold at March 31, 1997 and December 31, 1996, respectively.
During the first quarter of 1997, the Corporation purchased
approximately $440.2 million (principally U.S. Government Treasury and Federal
agency) of securities classified as available for sale. Approximately 81% of the
Corporation's portfolio of securities available for sale is comprised of U.S.
Treasury fixed rate obligations, obligations of the Government National Mortgage
Association ("GNMAs") and other securities backed by the full faith and credit
of the U.S. Government. The remaining portfolio is primarily comprised of
variable rate collateralized mortgage obligations ("CMOs") and obligations of
states and municipalities. CMOs principally are collateralized by GNMAs.
The amortized cost of interest earning securities exceeded their market
value by $6.5 million and $1.7 million at March 31, 1997 and March 31, 1996,
respectively. The Corporation classified all of its securities portfolio as
"available for sale". While the Corporation does not trade its securities
portfolio, it needs to have the ability to sell securities as required to meet
its asset/liability objectives.
ASSET QUALITY
The Corporation's loan portfolio is predominantly comprised of loans to
private banking customers. At March 31, 1997, the loan portfolio totaled $1.7
billion of which over 70% were collateralized by residential real estate
mortgages.
An analysis of the allowance for credit losses follows:
<TABLE>
<CAPTION>
Three Month Periods
Ended March 31,
-----------------------------------------
(In Thousands) 1997 1996
- --------------------------------------------- ----------------- -----------------
<S> <C> <C>
Balance, Beginning of Period $16,693 $16,086
Provision for Credit Losses 300 250
Recoveries 275 208
Charge-offs - (384)
----------------- -----------------
Net (Charge-Offs) Recoveries 275 (176)
----------------- -----------------
Balance, End of Period $17,268 $16,160
================= =================
</TABLE>
16
<PAGE> 17
The level of the allowance for credit losses is based upon management's
judgment as to the current condition of the credit portfolio, which includes
loans, commitments to extend credit and standby letters or credit, determined by
a continuous surveillance process. In assessing the adequacy of the allowance
for credit losses, management relies on its ongoing review of specific loans,
past experience, the present loan portfolio composition and general economic and
financial considerations.
As a percentage of average loans, annualized net loan recoveries were
seven basis points for the first quarter of 1997, compared to annualized net
loan charge-offs of five basis points for the first quarter of 1996. The
allowance for credit losses at March 31, 1997, was 1.05% of average loans for
the quarter. This compares with 1.17% of average loans for the quarter ended
March 31, 1996. Given the current market environment, it is anticipated that the
allowance for credit losses as a percentage of loans will continue to decrease.
Nonperforming assets, which include non-accrual ("impaired") loans and
real estate acquired through foreclosure or restructurings, for the most recent
five quarters are as follows:
<TABLE>
<CAPTION>
March 31, Dec. 31, Sept. 30, June 30, March 31,
(In Millions) 1997 1996 1996 1996 1996
- --------------------------------- -------------- ------------ --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans $8.8 $8.9 $10.8 $12.2 $12.5
Real estate owned, net .7 .7 7.0 7.0 9.2
-------------- ------------ --------------- -------------- ---------------
Total Nonperforming Assets $9.5 $9.6 $17.8 $19.2 $21.7
============== ============ =============== ============== ===============
</TABLE>
Other real estate owned is net of a reserve for selling and disposition
costs of $477,000 at March 31, 1997 and December 31, 1996 and $978,000 for the
first, second and third quarters of 1996.
The allowance for credit losses as a percentage of nonperforming loans
was 197.4% at March 31, 1997, compared to 129.2% at March 31, 1996. The ratio of
nonperforming assets to average loans and real estate owned for the quarter was
0.6% at March 31, 1997, compared to 1.6% at March 31, 1996.
ACCOUNTING STANDARDS NOT YET ADOPTED
In February 1997, the Securities and Exchange Commission issued Release
No. 34-38223 which requires (i) quantitative and qualitative disclosures outside
the financial statements about market risk inherent in derivatives and other
financial instruments and (ii) enhanced descriptions of accounting policies for
derivatives in the footnotes to the financial statements. The market risk
disclosure requirements of this release will be applicable commencing with the
Corporation's 1997 Annual Report on Form 10-K. Since this release relates to
disclosure requirements only, adoption will not affect either the Corporation's
financial condition or results of operations.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share," ("FAS 128") was issued, effective for interim and annual
periods ending after December 15, 1997. The objective of FAS 128 is to simplify
the computation of earnings per share. It replaces primary and fully diluted
earnings per share with basic and diluted earnings per share. The Corporation is
currently evaluating the impact of FAS 128.
17
<PAGE> 18
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED NET INTEREST REVENUE AND AVERAGE BALANCES
(DOLLARS IN THOUSANDS; INTEREST AND AVERAGE RATES ON A TAXABLE EQUIVALENT BASIS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIODS ENDED MARCH 31,
--------------------------------------------------------------------------------------
1997 1996
------------------------------------------- ---------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
---------------- ------------ ----------- --------------- ------------- --------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Securities (1)(2) $ 1,382,239 $ 21,065 6.18% $ 919,598 $ 13,263 5.80%
Loans (3) 1,659,282 31,456 7.69 1,393,185 27,448 7.92
---------------- ------------ -------- --------------- ------------- -----
Total Interest Earning Assets 3,041,521 52,521 6.97 2,312,783 40,711 7.07
---------------- ------------ -------- --------------- ------------- -----
Allowance for Credit Losses (16,893) (16,263)
Cash and Due from Banks 68,336 97,680
Other Assets 329,397 297,443
---------------- ---------------
Total Assets $ 3,422,361 $ 2,691,643
================ ===============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Deposits $ 2,094,721 24,587 4.76 $ 1,649,046 19,301 4.71
Short-Term Credit Facilities 289,057 3,844 5.39 71,147 829 4.69
Trust Preferred Capital Securities 35,000 692 7.91 - - -
Long-Term Debt 24,326 431 7.14 27,478 497 7.27
---------------- ------------ -------- --------------- ------------- -----
Total Sources on Which
Interest is Paid 2,443,104 29,554 4.91 1,747,671 20,627 4.75
---------------- ------------ -------- --------------- ------------- -----
Total Non-Interest Bearing
Deposits 484,199 506,789
Other Liabilities 262,559 240,395
Stockholders' Equity (3) 232,499 196,788
---------------- ---------------
Total Liabilities and
Stockholders' Equity $ 3,422,361 $ 2,691,643
================ ===============
Net Interest Revenue -
Tax Equivalent Basis (2) 22,967 20,084
Credit Loss Provision (300) (250)
Tax Equivalent Adjustment (919) (618)
------------ -------------
Net Interest Revenue 21,748 $ 19,216
============ =============
Net Yield on Interest
Earning Assets 3.03% 3.48%
======== =====
Interest Spread 2.06% 2.32%
======== =====
</TABLE>
(1) The average balance and average rate for securities available for sale
have been calculated using their amortized cost.
(2) Yields on state and municipal obligations are stated on a taxable
equivalent basis, employing the Federal statutory income tax rate
adjusted for the effect of state and local taxes, resulting in a
marginal tax rate of 47%.
(3) Loans and Stockholders' Equity include the Loan to ESOP which had an
average balance of $8.3 million in 1997 and $11.5 million in 1996.
18
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) On January 16, 1997, the Corporation exchanged 204,218 of its common
shares for the assets and liabilities of Florence Fearrington, Inc.,
("Fearrington") a New York investment advisory firm that managed approximately
$400 million in assets. This exchange was not registered under the Securities
Act of 1933 by virtue of the exemption contained in Section 4(2) thereof. The
sole shareholder of Fearrington was an accredited investor in accordance with
Regulation D under the Securities Act of 1933.
On January 28, 1997, U.S. Trust Capital A (the "Trust"), a Delaware
statutory business trust which for financial reporting purposes is reflected as
a subsidiary and included in the consolidated financial statements of the
Corporation, issued $50.0 million of 8.414% Capital Securities ("Trust
Preferred Capital Securities") with a stated value and liquidation preference
of $1,000 per share (see Notes to the Condensed Consolidated Financial
Statements No. 3).
The Trust sold to Credit Suisse First Boston Corporation (the "Initial
Purchaser") all of the 50,000 Trust Preferred Capital Securities. The Initial
Purchaser then sold all of such Trust Preferred Capital Securities to qualified
institutional buyers as defined in, and in reliance on, Rule 144A under the
Securities Act of 1933 and, in reliance on Regulation D under the Securities
Act of 1933, to institutional investors that are accredited investors within
the meaning of Rule 501(a)(1),(2),(3) or (7) under the Securities Act of 1933.
The proceeds from the sale of the Trust Preferred Capital Secutities were
utilized by the Trust to purchase $51.5 million of 8.414% Junior Subordinated
Debt Securities from the Corporation. The Corporation paid the Initial
Purchaser as compensation for arranging the placement of the Trust Preferred
Capital Securities, $12.50 per security (or $625,000 in the aggregate).
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
(a) EXHIBITS:
3.1 Restated Certificate of Incorporation of the Corporation, filed as
Exhibit 4(b) to the Corporation's Registration Statement on Form S-8
(Registration No. 33-62371). (1)
3.2 By-Laws of the Corporation, filed as Appendix II to the Corporation's
Registration Statement on Form 10 dated February 9, 1995. (1)
4 Note: The exhibits filed herewith do not include the instruments with
respect to long-term debt of the Corporation and its subsidiaries,
inasmuch as the total amount of debt authorized under any such
instrument does not exceed 10% of the total assets of the Corporation
and its subsidiaries on a consolidated basis. The Corporation agrees,
pursuant to Item 601 (b)(4)(iii) of Regulation S-K, that it will
furnish a copy of any such instrument to the Securities and Exchange
Commission upon request.
10.9 1989 Stock Compensation Plan and Predecessor Plans of the Corporation,
as amended and restated through July 1, 1997.
10.10 Benefit Equalization Plan of the Corporation, as amended and restated
effective as of January 1, 1997.
10.11 Board Members' Retirement Plan of the Corporation, as amended and
restated effective as of January 1, 1997.
10.12 Board Members' Deferred Compensation Plan of the Corporation, as
amended and restated through January 1, 1997.
10.18 Executive Deferred Compensation Plan of the Corporation, as amended and
restated through July 1, 1997.
10.19 Executive Incentive Plan of the Corporation, as adopted effective
January 1, 1997.
10.22 Deferred Restricted Unit Plan of the Corporation, as adopted effective
January 1, 1997.
10.23 Form of Benefits Protection Agreement for Messrs. Schwarz, Maurer and
Taylor.
10.24 Form of Benefits Protection Agreement.
11 Statement re Computation of Net Income Per Share.
27 Financial Data Schedule.
(1) Incorporated herein by reference.
(b) REPORTS ON FORM 8-K:
(1) Current Report dated January 28, 1997, reporting under Item 5. Other
Events, announcement of dividend increase and stock split.
(2) Current Report dated January 28, 1997, reporting under Item 5. Other
Events, announcement of the release of fourth quarter and year end 1996
financial results on January 16, 1997.
(3) Current Report dated February 5, 1997, reporting under Item 5. Other
Events, announcement of the private placement of $50 million of trust
preferred capital securities.
20
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U. S. Trust Corporation
(Registrant)
Date: May 8, 1997 By: Richard E. Brinkmann
----------- ---------------------------------
Richard E. Brinkmann
Comptroller and
Chief Planning Officer
(Principal Accounting Officer)
21
<PAGE> 22
EXHIBIT INDEX
Item No. Description
- -------- -----------
3.1 Restated Certificate of Incorporation of the Corporation, filed as
Exhibit 4(b) to the Corporation's Registration Statement on Form S-8
(Registration No. 33-62371). (1)
3.2 By-Laws of the Corporation, filed as Appendix II to the Corporation's
Registration Statement on Form 10 dated February 9, 1995. (1)
4 Note: The exhibits filed herewith do not include the instruments with
respect to long-term debt of the Corporation and its subsidiaries,
inasmuch as the total amount of debt authorized under any such
instrument does not exceed 10% of the total assets of the Corporation
and its subsidiaries on a consolidated basis. The Corporation agrees,
pursuant to Item 601 (b)(4)(iii) of Regulation S-K, that it will
furnish a copy of any such instrument to the Securities and Exchange
Commission upon request.
10.9 1989 Stock Compensation Plan and Predecessor Plans of the Corporation,
as amended and restated through July 1, 1997.
10.10 Benefit Equalization Plan of the Corporation, as amended and restated
effective as of January 1, 1997.
10.11 Board Members' Retirement Plan of the Corporation, as amended and
restated effective as of January 1, 1997.
10.12 Board Members' Deferred Compensation Plan of the Corporation, as
amended and restated through January 1, 1997.
10.18 Executive Deferred Compensation Plan of the Corporation, as amended and
restated through July 1, 1997.
10.19 Executive Incentive Plan of the Corporation, as adopted effective
January 1, 1997.
10.22 Deferred Restricted Unit Plan of the Corporation, as adopted effective
January 1, 1997.
10.23 Form of Benefits Protection Agreement for Messrs. Schwarz, Maurer and
Taylor.
10.24 Form of Benefits Protection Agreement.
11 Statement re Computation of Net Income Per Share.
27 Financial Data Schedule.
(1) Incorporated herein by reference.
22
<PAGE> 1
Exhibit 10.9
1989 STOCK COMPENSATION PLAN AND PREDECESSOR PLANS
OF U.S. TRUST CORPORATION
AS AMENDED AND RESTATED THROUGH JULY 1, 1997
SECTION 1. INTRODUCTION
1.1 PURPOSE
The Plan hereinafter set forth represents a continuation of certain
stock-based compensation plans maintained by U.S. Trust Corporation before its
merger with The Chase Manhattan Corporation ("Chase") pursuant to the Agreement
and Plan of Merger dated as of November 18, 1994 between Chase and U.S. Trust
Corporation (the "Merger Agreement"). The plans so continued are (i) all
portions of the 1989 Stock Compensation Plan of U.S. Trust Corporation other
than Section 2 thereof and any other provisions of such plan to the extent they
relate to stock options (such continued portions are referred to herein as the
"Prior Plan"), (ii) the 1988 Long-Term Performance Plan of U.S. Trust
Corporation, and (iii) the Long-Term Performance Plan of U.S. Trust Corporation
(the plans described in (ii) and (iii) are referred to herein as the
"Predecessor Plans").
As set forth herein, the Prior Plan and the Predecessor Plans were
amended, restated and renamed effective as of September 1, 1995 (a) to reflect
the transfer of the Prior Plan and the Predecessor Plans to and their adoption
by the Corporation, and the Corporation's assumption of and becoming solely
responsible for all liabilities and obligations of U.S. Trust Corporation under
the Prior Plan and the Predecessor Plans, effective immediately before the "New
Holdings Distribution", as defined in the Merger Agreement, (b) to consolidate
the Prior Plan and the Predecessor Plans, as so transferred and adopted, into a
single plan, and (c) to reflect the "Distribution" and the "Merger", as defined
in the Merger Agreement. The Plan has been further amended to make certain
changes in the Plan's Earnings Crediting Options effective as of July 1, 1996,
and to make certain changes in the provisions of Section 4.6 effective as of
July 1, 1997.
The purpose of this Plan is to set forth the terms under which payment
will be made with respect to Restricted Common Shares, Performance Share Units
and Benefit Equalization Units awarded to Participants under the Prior Plan and
Predecessor Plans. No new Restricted Common Shares, Performance Share Units or
Benefit Equalization Units shall be awarded to any Participant under this Plan.
<PAGE> 2
1.2 DEFINITIONS
As used herein, the following terms shall have the following meanings:
"Adjusted Number" shall mean, with respect to the Phantom Share Units
and Benefit Equalization Units standing to a Participant's credit under the Plan
immediately prior to the Effective Time, an adjusted number of such units
determined by dividing (i) the product of (A) the number of such Phantom Share
Units, or Benefit Equalization Units, as the case may be, multiplied by (B) the
Average Market Value of one Common Share of U.S. Trust Corporation during the
30-day period ending on the day immediately preceding the Chase Merger Closing
Date, by (ii) the Average When-Issued Market Value of one common share of the
Corporation.
"AFFILIATED COMPANIES" shall mean (i) with respect to U.S. Trust
Corporation, each of its direct or indirect subsidiaries, and (ii) with respect
to the Corporation, each of its direct or indirect subsidiaries.
"AVERAGE MARKET VALUE" shall mean, with respect to one Common Share as
of any date or with respect to any period, the mean between the per-share high
and low prices for the Common Shares on such date, or on each trading day during
such period, as quoted on the NASDAQ National Market System, or, if the Common
Shares are not traded on such system, on such other securities market or
securities exchange on which such shares are traded as the Committee shall
determine.
"AVERAGE WHEN-ISSUED MARKET VALUE" shall mean, with respect to one
common share of the Corporation, the amount representing the 10-day average of
the daily average of the high bid and low asked prices for such share in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated on a "when-issued" basis on each of the 10 trading days immediately
preceding the Chase Merger Closing Date.
"AWARD" shall mean the award of Performance Share Units made to a
Participant for an Open Cycle pursuant to Section 4.1 of the Prior Plan.
"BENEFICIARY" shall mean the person or persons designated by a
Participant in accordance with Section 6.9 to receive any amount, or any Common
Shares, payable under the Plan upon the Participant's death.
"BENEFIT EQUALIZATION UNIT," "PERFORMANCE SHARE UNIT" and "PHANTOM
SHARE UNIT" shall mean a unit of measurement equivalent to one Common Share,
with none of the attendant rights of a shareholder of such share, including,
without limitation, the right to vote such share and the right to receive
dividends thereon, except to the extent otherwise specifically provided herein.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the
Corporation.
-2-
<PAGE> 3
"BUSINESS DAY" shall mean any day on which Common Shares are traded on
the Nasdaq National Market System or, if Common Shares are not traded on such
system, on such other securities market or securities exchange on which such
shares are traded as the Committee shall determine.
"CHANGE IN CONTROL" shall mean that any of the following events has
occurred after the Chase Merger Closing Date:
(i) 20% or more of the Common Shares has been acquired by any
person (as defined by Section 3(a)(9) of the Securities Exchange Act of
1934) other than directly from the Corporation;
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving corporation is
held by persons other than former shareholders of the Corporation; or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors are persons who were not nominated by the Board
of Directors or the Executive Committee of the Board of Directors in
the most recent proxy statement of the Corporation;
provided, however, that notwithstanding anything in the Plan to the contrary, no
Change in Control shall be deemed to have occurred, and no rights arising upon a
Change in Control as provided in Sections 3.6, 4.7 and 5.4 shall exist, to the
extent that the Board of Directors so directs by resolution adopted prior to the
Change in Control, or not later than 45 days after the Change in Control if the
percentage of Common Shares acquired or directors elected under clause (i) or
(iii) of the foregoing definition of Change in Control shall be at least 20% but
less than 25%. Any resolution of the Board of Directors adopted in accordance
with the provisions of this definition directing that a Change in Control shall
be deemed not to have occurred for purposes of this Plan and that Sections 3.6,
4.7 and 5.4, or any of such Sections shall not become effective, may be
rescinded or countermanded at any time with or without retroactive effect.
"CHASE MERGER CLOSING DATE" shall mean the "Closing Date", as defined
in Section 1.2 of the Merger Agreement.
"COMMITTEE" shall mean the Compensation and Benefits Committee of the
Board of Directors.
"COMMON SHARES" shall mean (i) prior to the Chase Merger Closing Date,
the common shares ($1.00 par value per share) of U.S. Trust Corporation, and
(ii) after the Chase Merger Closing Date, the common shares ($1.00 par value per
share) of the Corporation.
"CORPORATION" shall mean New USTC Holdings Corporation, which will
assume the name of "U.S. Trust Corporation" as of the time the New Holdings
Distribution is effective.
-3-
<PAGE> 4
"DETERMINED VALUE" shall mean the higher of (i) the highest bid price
per Common Share during the twelve months immediately preceding the date of a
Change in Control, or (ii) the highest price per Common Share actually paid in
connection with any Change in Control (including, without limitation, prices
paid in any subsequent merger or combination with any entity that acquires
control of the Corporation).
"DIVIDEND PAYMENT DATE" shall mean the date on which a dividend is paid
on Common Shares.
"EFFECTIVE TIME" shall mean "Effective Time" as defined in Section 1.3
of the Merger Agreement.
"401(k) PLAN" shall mean the 401(k) Plan and ESOP of United States
Trust Company of New York and Affiliated Companies.
"OPEN CYCLES" shall mean the Performance Cycles (as defined in the
Prior Plan) established under Section 4 of the Prior Plan for the periods
ending, respectively, on December 31, 1995, and on December 31, 1996.
"PARTICIPANT" shall mean any employee or former employee of the
Corporation, U.S. Trust Corporation, or any of their Affiliated Companies who,
immediately prior to the Chase Merger Closing Date, had any unpaid amount,
Phantom Share Unit, Benefit Equalization Unit, or any Performance Share Unit for
any Open Cycle standing to his or her credit under the Prior Plan or any of the
Predecessor Plans.
"PRIME RATE" shall mean, with respect to any calendar month, the prime
rate as quoted by United States Trust Company of New York on the last business
day of such month.
"RESTRICTED COMMON SHARES" shall mean Common Shares which are subject
to Restrictions, and any new, additional or different securities a Participant
may become entitled to receive with respect to such shares by virtue of a stock
split or stock dividend or any other change in corporate or capital structure of
U.S. Trust Corporation or the Corporation.
"RESTRICTED PERIOD" shall mean the period of time during which
Restricted Common Shares are subject to Restrictions as provided in Section 3.
"RESTRICTIONS" shall mean the restrictions applicable to Restricted
Common Shares as provided in Section 3.
1.3 ADMINISTRATION
The Plan shall be administered by the Committee. A majority of the
members of the Committee shall constitute a quorum. The Committee may act at a
meeting, including a telephone
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meeting, by action of a majority of the members present, or without a meeting by
unanimous written consent. The Committee shall have the authority, in its
discretion, to establish from time to time guidelines or regulations for the
administration of the Plan, interpret the Plan, cause appropriate records to be
established, and make all determinations and take all other actions considered
necessary or advisable for the administration of the Plan.
All decisions, actions or interpretations of the Committee under the
Plan shall be final, conclusive and binding upon all parties.
SECTION 2. AUTHORIZED SHARES
2.1 MAXIMUM NUMBER OF COMMON SHARES AVAILABLE FOR AWARDS
Subject to Section 2.2 but notwithstanding any other provision of the
Plan, the number of Common Shares that may be distributed to Participants
pursuant to this Plan shall be limited to (i) 400,000 Common Shares, plus (ii) a
number of Common Shares equal to the total number of additional Phantom Share
Units and Benefit Equalization Units credited to Participants with respect to
dividends paid on Common Shares pursuant to Sections 4.5 and 5.2.
2.2 ADJUSTMENT IN MAXIMUM NUMBER OF SHARES
As of the Effective Time, the number of Common Shares that may be
distributed to Participants pursuant to this Plan, as specified in clause (i) of
Section 2.1, shall be adjusted so as to equal the sum of (w) the aggregate
number of Phantom Share Units to be credited to Participants pursuant to the
first sentence of Section 4.2(d) and the first sentence of Section 4.2(e)(iv),
(x) the aggregate Adjusted Number of Phantom Share Units determined for
Participants under Section 4.3(d), (y) the aggregate Adjusted Number of Benefit
Equalization Units determined for Participants under Section 5.1, and (z) 4,500
Common Shares.
2.3 SOURCE OF SHARES
The Common Shares distributed under the Plan may be authorized and
unissued shares, shares held in the treasury of the Corporation, or shares
purchased on the open market by the Corporation (at such time or times and in
such manner as it may determine); provided, however, that Restricted Common
Shares (other than any such shares that are shares of Chase common stock) shall
be distributed from shares held in the treasury of the Corporation. The
Corporation shall be under no obligation to acquire Common Shares for
distribution to Participants before payment in Common Shares is due.
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SECTION 3. RESTRICTED COMMON SHARES
3.1 AWARDS OF RESTRICTED COMMON SHARES
Restricted Common Shares awarded to a Participant under the Prior Plan
shall remain subject to the same Restrictions, for the same Restricted Period,
as applied with respect to such shares under Section 3.2 of the Prior Plan. Such
Restrictions shall be binding on the Corporation and on the Participants and
their Beneficiaries.
3.2 RESTRICTIONS AND RESTRICTED PERIOD
All Common Shares of the Corporation and all shares of Chase common
stock received with respect to a Participant's Restricted Common Shares pursuant
to the Distribution and the Merger shall be treated as Restricted Common Shares
for purposes of this Plan, and shall be subject to the same Restrictions, for
the same Restricted Period, as applied to the shares with respect to which they
were received.
3.3 RIGHTS AS SHAREHOLDERS
Except for the Restrictions referred to in Sections 3.1 and 3.2, and
subject to the forfeiture provisions described in Section 3.5, each Participant
shall have, with respect to his or her Restricted Common Shares, all rights of a
holder of Common Shares including the right to receive all dividends or other
distributions made or paid in respect of such shares and the right to vote such
shares at regular or special meetings of the shareholders of the Corporation.
3.4 DELIVERY OF SHARES
A Participant's Restricted Common Shares shall be held in the
Participant's name in a book entry account maintained by the Corporation. At the
conclusion of the Restricted Period imposed with respect to a Participant s
Restricted Common Shares, or upon the prior approval of the Committee as
provided in Section 3.5, and subject to the satisfaction of the applicable tax
withholding requirements provided in Section 6.8, certificates representing such
Restricted Common Shares will be delivered to the Participant or, if the
Participant has died, to the Participant's Beneficiary, free of all
Restrictions.
3.5 TERMINATION OF EMPLOYMENT
In the event of any Participant's termination of employment with the
Corporation and its Affiliated Companies, all of the Participant's Restricted
Common Shares which are then still subject to Restrictions will be forfeited by
the Participant and become the property of the Corporation. However, the
Committee may, if the Committee in its sole discretion determines that the
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stances warrant such action, approve the delivery to the Participant of all or
any part of the Restricted Common Shares which would otherwise be forfeited
pursuant to this Section, upon such conditions as it shall determine.
3.6 CHANGE IN CONTROL
Upon the occurrence of a Change in Control, all Restricted Periods
shall end, the Restrictions applicable to all Restricted Common Shares shall
lapse, and in lieu of delivery of such shares to the Participants free from such
Restrictions as provided in Section 3.4, the Corporation's obligation in respect
of such shares shall be discharged by payment to each of the applicable
Participants of a single cash lump sum. The amount of such cash lump sum shall
be determined by multiplying the number of Restricted Common Shares held in the
Participant's name by the Determined Value of one Common Share. The single cash
lump sum amount so determined, reduced by any taxes withheld pursuant to Section
6.8, shall be paid to the Participant as soon as practicable following the
Change in Control.
SECTION 4. PERFORMANCE SHARE UNITS
4.1 PERFORMANCE SHARE UNIT AWARDS FOR OPEN CYCLES
At the Effective Time, all Performance Goals (as defined in the Prior
Plan) determined for each of the Open Cycles pursuant to Section 4.1 of the
Prior Plan shall be deemed to have been fully met, and all Performance Share
Units awarded to each Participant for each of the Open Cycles pursuant to
Section 4.1 of the Prior Plan shall be deemed to have been fully earned.
4.2 PAYMENT OF AWARDS FOR OPEN CYCLES
Payment with respect to a Participant's Award for an Open Cycle shall
be made in accordance with the following provisions:
(a) The total amount payable with respect to a Participant's Award for
an Open Cycle shall be equal to the product of (i) the sum of (A) the number of
Performance Share Units awarded to the Participant for such cycle and (B) the
number of additional Performance Share Units credited to the Participant with
respect to such Award pursuant to Section 4.1 of the Prior Plan on account of
dividends paid on Common Shares after the start of such cycle and before the
Chase Merger Closing Date, multiplied by (ii) the Average Market Value of one
Common Share during the 30-day period ending on the day immediately preceding
the Chase Merger Closing Date.
(b) The portion of the total amount payable with respect to a
Participant's Award for an Open Cycle which the Participant has not elected to
defer pursuant to an election made by the Participant under Section 4.4 of the
Prior Plan (the "Non-Deferred Portion of the Participant's Award") shall be paid
to the Participant as soon as practicable after the close of such cycle. In the
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case of a Participant whose employment with the Corporation and its Affiliated
Companies terminates after the Chase Merger Closing Date but before the end of
the cycle by reason of death, disability or retirement, payment of the
Non-Deferred Portion of the Participant's Award for such cycle shall be made as
of the first day of the month following the date of such termination of the
Participant's employment (the Participant's "Termination Date").
(c) Payment with respect to 50% of the Non-Deferred Portion of a
Participant's Award for an Open Cycle shall be made in the form of a single
lump-sum cash payment. Such payment shall include interest on 50% of the
Non-Deferred Portion of the Participant's Award, which shall be credited at the
Prime Rate for each calendar month or portion thereof in the period from the
Chase Merger Closing Date to the end of the cycle or, if earlier, the last day
of the month in which the Participant's Termination Date occurs.
(d) With respect to the remaining 50% of the Non-Deferred Portion of a
Participant's Award for an Open Cycle, the Participant shall be credited, as of
the Chase Merger Closing Date, with a number of Phantom Share Units ("PSU's")
determined by dividing (i) the dollar value of 50% of the Non-Deferred Portion
of the Participant's Award, by (ii) the Average When-Issued Market Value of one
common share of the Corporation. As of each Dividend Payment Date occurring
after the Chase Merger Closing Date but before the end of such cycle or, if
earlier, the last day of the month in which the Participant's Termination Date
occurs, the Participant shall also be credited hereunder with a number of
additional PSU's determined by first (x) multiplying (A) the number of PSU's
standing to the Participant's credit under this Section 4.2(d) on the date such
dividend was declared, by (B) the per-share dollar amount of the dividend so
paid, and then (y) dividing the resulting amount by the Average Market Value of
one Common Share on the Dividend Payment Date. Payment with respect to such
remaining 50% of the Non-Deferred Portion of the Participant's Award shall be
made in the form of (1) a number of Common Shares equal to the number of whole
PSU's standing to the Participant's credit under this Section 4.2(d) as of the
last day of the month preceding the month in which such payment is made, and (2)
a cash payment in an amount determined by multiplying (A) any fractional part of
a PSU standing to the Participant's credit as of such last day, by (B) the
Average Market Value of one Common Share on the business day immediately
preceding the date on which such payment is made.
(e) The portion of a Participant's Award for an Open Cycle which the
Participant has elected to defer pursuant to an election made by the Participant
under Section 4.4 of the Prior Plan (the "Deferred Portion" of the Participant's
Award) shall be credited to the "Account" established for the Participant under
Section 4.3, in accordance with the following provisions:
(i) The Deferred Portion of a Participant's Award for an Open
Cycle shall be credited to the Participant's Account as of the first
day of the month following the close of such cycle or, if earlier, on
the first day of the month following the Participant's Termination
Date.
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(ii) The Deferred Portion of a Participant's Award shall be
credited to the "Interest Portion" and to the "PSU Portion" (as
defined in Section 4.3) of the Participant's Account in such
percentages as the Participant specified in the deferral election made
by the Participant with respect to such Award pursuant to Section 4.4
of the Prior Plan.
(iii) That part of the Deferred Portion of a Participant's
Award for an Open Cycle which the Participant elected to have credited
to the Interest Portion of his or her Account shall be credited to the
Interest Portion together with interest on the amount to be so
credited, calculated at the Prime Rate, for each calendar month or
portion thereof in the period from the Chase Merger Closing Date to the
end of the cycle or, if earlier, the last day of the month in which the
Participant's Termination Date occurs.
(iv) With respect to that part of the Deferred Portion of a
Participant's Award for an Open Cycle which the Participant elected to
have credited to the PSU Portion of his or her Account, the Participant
shall be credited, as of the Chase Merger Closing Date, with a number
of PSU's determined by dividing (A) the dollar value of that part of
the Deferred Portion by (B) the Average When-Issued Market Value of one
common share of the Corporation. As of each Dividend Payment Date
occurring after the Chase Merger Closing Date but before the end of
such cycle or, if earlier, the last day of the month in which the
Participant's Termination Date occurs, the Participant shall be
credited hereunder with a number of additional PSU's determined by
first (x) multiplying (A) the number of PSU's standing to the
Participant's credit under this Section 4.2(e)(iv) on the date such
dividend was declared, by (B) the per-share dollar amount of the
dividend so paid, and then (y) dividing the resulting amount by the
Average Market Value of one Common Share on the Dividend Payment Date.
That part of the Deferred Portion of a Participant's Award for an Open
Cycle that is to be credited to the PSU Portion of the Participant's
Account shall be credited thereto in the form of a number of PSU s
equal to the total number of PSU's standing to the Participant's credit
under this Section 4.2(e)(iv) as of the time the Deferred Portion of
the Participant's Award is to be credited to the Participant's Account
as provided in clause (i) above.
(f) Notwithstanding any other provisions in Section 4.1 or in this
Section 4.2 to the contrary, a Participant whose employment terminates prior to
the end of any Open Cycle for any reason other than death, disability or
retirement shall not be entitled to receive any payment with respect to the
Participant's Award for such cycle, or to have any portion of such Award
deferred pursuant to any election the Participant may have made under Section
4.4 of the Prior Plan, except to the extent that the Committee, in its sole
discretion, otherwise determines.
4.3 ACCOUNTS FOR DEFERRED AWARDS
As of the time this Plan is adopted by the Corporation, there shall be
established on the books and records of the Corporation, for bookkeeping
purposes only, a separate account ("Account") for each Participant, to reflect
the Participant's interest in the Deferred Portion of the Participant's
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Awards for Open Cycles, and in all amounts which the Participant elected to
defer under the Prior Plan and the Predecessor Plans that remained unpaid or
that had not yet become payable as of the time of the adoption of this Plan. The
Account so established for each Participant shall be maintained in accordance
with the following provisions:
(a) The Account established for each Participant shall consist of two
sub-accounts referred to herein, respectively, as the "Interest Portion" and the
"PSU Portion".
(b) As of the time this Plan is adopted by the Corporation, the
Interest Portion of each Participant's Account shall be credited with an amount
equal to the aggregate amount of the balances, determined as of the close of
business on the day preceding the Chase Merger Closing Date, of the Interest
Portion of the Accounts maintained for the Participant under the Prior Plan and
the Predecessor Plans. For purposes of the foregoing, the balance of the
Interest Portion of a Participant's Account under the Long-Term Performance
Plan of U.S. Trust Corporation, as determined as of the close of business on
such preceding day, shall reflect the crediting of interest to the "R.O.E.
Balance" (as defined in Section 7F of such plan) of the Interest Portion of the
Participant's Account (i) for the fiscal year 1994, based on a deemed "R.O.E."
(as defined in Section 7F of such plan) for U.S. Trust Corporation for such
year of 20%; and (ii) for all periods beginning on January 1, 1995 and ending
at the close of business on the day preceding the Chase Merger Closing Date,
based on the "Earnings Crediting Options" (as defined in Section 7G(iii) of
such plan) in effect for the R.O.E. Balance for such periods pursuant to the
election made by the Participant under such plan.
(c) As of the time this Plan is adopted by the Corporation, the PSU
Portion of each Participant's Account shall be credited with a number of PSU s
equal to the aggregate number of PSU's included in the balances, determined as
of the close of business on the day preceding the Chase Merger Closing Date, of
the PSU Portion of the Participant's Accounts under the Prior Plan and the
Predecessor Plans.
(d) As of the Effective Time, the number of PSU's credited to the PSU
Portion of a Participant's Account hereunder pursuant to (c) above shall be
adjusted so as to equal the Adjusted Number of such PSU s.
(e) The Interest Portion and the PSU Portion of a Participant's Account
shall be credited with amounts in respect of the Deferred Portion of a
Participant's Award for any Open Cycle, at the time and in the manner provided
in Section 4.2(e).
(f) The Interest Portion and the PSU Portion of a Participant's Account
shall be adjusted from time to time to reflect all interest or Earnings (as
defined in Section 4.4), and all additional PSU's, to be credited to such
Portions pursuant to Sections 4.4 and 4.5, and all payments made with respect to
such Portions pursuant to Section 4.6.
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(g) A Participant's interest in his or her Account shall be fully
vested and nonforfeitable at all times.
4.4 CREDITS TO INTEREST PORTION
In the case of any Participant whose employment with U.S. Trust
Corporation and its Affiliated Companies terminated prior to January 1, 1994,
interest shall continue to be credited to the Interest Portion of such
Participant's Account hereunder in accordance with the applicable provisions of
the Prior Plan and the Predecessor Plans as in effect at the time of such
Participant's termination of employment, for all periods ending after the Chase
Merger Closing Date, until payment with respect to the Interest Portion of such
Participant's Account has been made in full; provided, however, that interest on
the R.O.E. Balance of the Interest Portion of any such Participant's Account
under the Long-Term Performance Plan of U.S. Trust Corporation shall be credited
at the Prime Rate for all periods ending after the Chase Merger Closing Date. In
the case of each other Participant, the Interest Portion of the Participant's
Account shall be credited with Earnings for periods beginning on and after July
1, 1996 in accordance with the following provisions:
(a) As of the last day of each calendar month, each part of the balance
of the Interest Portion of a Participant's Account for which a separate Earnings
Crediting Option (as hereinafter defined) is in effect under this Section 4.4
shall be credited with an amount determined by multiplying such part of the
balance by a percentage corresponding to the Applicable Rate of Return (as
hereinafter defined) for such month under such Earnings Crediting Option. The
amount so credited (which may be positive or negative depending on whether the
Applicable Rate of Return for the month is positive or negative) is referred to
herein as "Earnings".
(b) For purposes of this Section 4.4, the term "Earnings Crediting
Option" shall mean, as of any date of reference on or after July 1, 1996, any
one of the following: the S&P 500 Index, the Lehman Bros. Government/Corporate
Bond Index, the IBC's Money Fund Report First Tier Average, and the Prime Rate.
Notwithstanding the foregoing, the Committee may at any time, in its
sole discretion, determine (i) that any option referred to in the preceding
paragraph shall cease to constitute an Earnings Crediting Option for purposes of
this Section 4.4, or (ii) that any other index or hypothetical investment fund
or referenced rate of return shall constitute an Earnings Crediting Option for
purposes of this Plan. Participants shall be notified in writing, at least 45
days in advance, of any change in the Plan's Earnings Crediting Options.
(c) The "Applicable Rate of Return" for any month shall mean (i) in the
case of the S&P 500 Index, the percentage, as determined by the Committee, by
which (A) the value of such Index as of the last business day of such month, as
adjusted to reflect all income earned for such month on the securities included
in such Index, exceeds, or is less than, (B) the value of such Index as of the
last business day of the immediately preceding month, determined without taking
such adjustment into
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account; (ii) in the case of the Lehman Bros. Government/Corporate Bond Index,
the percentage, as determined by the Committee, by which the value of such Index
as of the last business day of such month exceeds, or is less than, the value of
such Index as of the last business day of the immediately preceding month; (iii)
in the case of the IBC's Money Fund Report First Tier Average, the rate of
return corresponding to the 7-day compounded yield for such Average, for the
period ending on, or most recently prior to, the last day of such month; (iv) in
the case of the Prime Rate Option, the rate of return corresponding to the Prime
Rate for such month; and (v) in the case of any other Earnings Crediting Option,
the rate of return applicable for such month, as determined by the Committee in
its sole discretion.
(d) Each Participant for whom an Account was being maintained on May
15, 1996 shall make an initial election as to the Earnings Crediting Options
that are to apply with respect to the Interest Portion of his or her Account on
and after July 1, 1996. Such election shall be made in writing, on a form
provided by the Committee for such purpose, and such form shall be filed with
the Committee by no later than June 14, 1996. In such election form, the
Participant shall specify, by percentages (which must be even multiples of 5%)
the respective parts of the balance of the Interest Portion that are to be
credited with Earnings under each of the Earnings Crediting Options designated
by the Participant in such form. If a Participant fails to make such election
by June 14, 1996, the Participant shall be deemed to have selected the Prime
Rate as the Earnings Crediting Option to apply to the entire balance of the
Interest Portion. The Earnings Crediting Options selected in the initial
election made by a Participant (or deemed to have been selected by a
Participant) pursuant to the preceding sentence shall remain in effect for the
Interest Portion of the Participant's Account until the Participant makes an
election in accordance with (e) below to change such Earnings Crediting
Options.
(e) A Participant may change the Earnings Crediting Options that are to
apply with respect to the Interest Portion of his or her Account by making a new
election hereunder. Such new election shall be made in writing, on a form which
is provided by the Committee for this purpose and which the Participant files
with the Committee. In such form, the Participant shall specify, by percentages
(which must be even multiples of 5%), the respective parts of the balance of the
Interest Portion that are to be credited with Earnings under each of the
Earnings Crediting Options designated by the Participant in such form. The
Participant's new election shall become effective as of the first day of the
calendar month following the date on which such election is filed with the
Committee, provided that it is so filed at least 15 days prior to such first
day. The Earnings Crediting Options selected by the Participant in such new
election shall remain in effect until the Participant again changes his election
with respect to the Interest Portion of his or her Account in accordance with
this Section 4.4(e).
(f) The Interest Portion of a Participant's Account shall continue to
be credited with Earnings in accordance with the provisions of this Section 4.4
until all payments required to be made with respect to the Interest Portion
under Section 4.6 have been made. For this purpose, any payments made under
Section 4.6 with respect to the Interest Portion of the Participant's Account
will be
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deemed to have been made pro rata from the respective parts of the balance of
the Interest Portion that are subject to separate Earnings Crediting Options.
4.5 CREDITS TO PSU PORTION
As of each Dividend Payment Date, the PSU Portion of each Participant's
Account shall be credited with additional PSU's the number of which shall be
determined by first (i) multiplying the number of PSU's standing to the
Participant's credit in the PSU Portion of the Participant's Account on the date
such dividend was declared by the per-share dollar amount of the dividend so
paid, and then (ii) dividing the resulting amount by the Average Market Value of
one Common Share on the Dividend Payment Date.
4.6 PAYMENT OF DEFERRED AWARDS
In the case of any Participant whose employment with U.S. Trust
Corporation and its Affiliated Companies terminated prior to July 1, 1997, any
amounts remaining to be paid with respect to such Participant's Account as of
such date shall be paid in accordance with the applicable provisions of the
Plan, the Prior Plan or the Predecessor Plans in effect at the time of such
Participant's termination of employment. In the case of each other Participant,
payment with respect to the Participant's Account shall be made in accordance
with the following provisions:
(a) The balances of the Interest Portion and the PSU Portion of a
Participant's Account shall become payable upon the Participant's termination of
employment with the Corporation and all of its Affiliated Companies for any
reason. For this purpose, a Participant who ceases active employment by reason
of disability but who becomes entitled to receive benefit payments under the
long-term disability plan maintained by the Corporation or any of its Affiliated
Companies shall be treated as continuing to be employed with the Corporation and
its Affiliated Companies during all periods for which he or she continues to
receive benefit payments under such plan.
(b) Unless at the time a Participant's Account becomes payable there is
in effect for the Participant an election under (c) below, payment with respect
to the Interest Portion and the PSU Portion of the Participant's Account shall
be made in the form of a series of 10 annual installments, payable in accordance
with the following provisions:
(i) the first such installment payment shall be made on the
last Business Day of February of the calendar year following the year
in which the Participant's employment with the Corporation and all of
its Affiliated Companies terminates, and the remaining installment
payments shall be made on the last Business Day of February of each
succeeding year.
(ii) each installment payment to be made with respect to the
Interest Portion of a Participant's Account shall be made in cash, in
an amount determined by dividing (A) the balance of the Interest
Portion determined as of the last day of the calendar year preceding
the year in which such payment is to be made, by (B) the number of
installment payments
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remaining to be made. The last such installment payment shall include
Earnings credited to the Interest Portion for the month preceding the
month in which such payment is made.
(iii) each installment payment to be made with respect to the
PSU Portion of a Participant's Account shall be made partly in Common
Shares, and partly in cash. The number of shares to be included in each
such installment payment shall be equal to the number of whole PSU's
included in the quotient resulting from dividing (A) the total number
of PSU's included in the balance of the PSU Portion of the
Participant's Account as of the last day of the calendar year preceding
the year in which such payment is to be made, by (B) the number of
installment payments remaining to be made; and the amount of cash to be
included in each such installment payment shall be determined by
multiplying (C) the fractional part of a PSU included in the
aforementioned quotient by (D) the Average Market Value of one Common
Share on the Business Day immediately preceding the date on which such
installment payment is to be made. The last such installment payment
shall include a number of Common Shares equal to the whole number of
any additional PSU's that are credited to the PSU Portion of the
Participant's Account under Section 4.5 during the month preceding the
month in which such payment is made, together with cash (in an amount
determined in the same manner as described in the preceding sentence)
for any fractional part of a PSU that is so credited.
(iv) if a Participant should die before receiving all
installment payments required to be made with respect to his or her
Account, any installment payments remaining to be made at the date of
the Participant's death shall be made to the Participant's Beneficiary
in the same form, at the same times and in the same amounts, as such
payments would have been made to the Participant (A) if he or she had
not died, and (B) if the Participant died while still employed, if the
Participant's employment had otherwise terminated on the date of his or
her death.
(c) A Participant may elect to have payment with respect to the
Interest Portion and the PSU Portion of his or her Account made in the form of
a single lump sum payment. Such payment shall consist of (i) a number of Common
Shares equal to the number of whole PSU's included in the balance of the PSU
Portion of the Participant's Account, and (ii) cash in an amount equal to the
sum of (A) the balance of the Interest Portion of the Participant's Account and
(B) an amount determined by multiplying the fractional part, if any, of a PSU
included in the balance of the PSU Portion of the Participant's Account by the
Average Market Value of one Common Share on the Business Day immediately
preceding the date on which such payment is to be made. Such payment shall be
made to the Participant or, if the Participant's Account becomes payable by
reason of his or her death, to the Participant's Beneficiary. Payment shall be
made on the last Business Day of February of the Plan Year following the year
in which the Participant's employment with the Corporation and all of its
Affiliated Companies terminates. An election under this Section 4.7(c) shall be
made in writing, on a form that is provided by the Committee for such purpose
and that is filed by the Participant with the Committee at least one year prior
to the date on which the Participant's employment with the Corporation and all
of its Affiliated Companies terminates. Any election so
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made may be revoked, and a new election may be made hereunder after such
revocation. Any such revocation or new election shall be made in the same
manner, and by the same date, as described in the second preceding sentence. No
election or revocation of an election made hereunder shall be given effect
unless it is made within the time prescribed herein.
(d) Notwithstanding any other provision in this Section 4.6 to the
contrary, payment with respect to any part or all of the Participant's Account
balances may be made to the Participant or, if the Participant has died, to the
Participant's Beneficiary, on any date earlier than the date on which such
payment is to be made pursuant to such other provisions of this Section 4.6 if
(i) the Participant, or his or her Beneficiary, requests such early payment and
(ii) the Committee, in its sole discretion, determines that such early payment
is necessary to help the Participant, or his or her Beneficiary, meet an
"unforeseeable emergency" within the meaning of Section 1.457-2(h)(4) of the
federal Income Tax Regulations. The amount that may be so paid may not exceed
the amount necessary to meet such emergency.
4.7 CHANGE IN CONTROL
In the event of a Change in Control, the provisions of this Section 4.7
shall apply notwithstanding any other provision herein to the contrary (but
subject to the proviso contained in the definition of "Change in Control" in
Section 1.2). Upon the occurrence of a Change in Control, the balance of each
Participant's Account shall become immediately payable in full. Payment with
respect to each Participant's Account balance shall be made to the Participant
or, if the Participant has died, to his or her Beneficiary, in the form of a
single lump sum cash payment. The amount so payable with respect to each
Participant's Account shall be equal to the sum of (i) the balance of the
Interest Portion of the Participant's Account, plus (ii) an amount determined by
multiplying the aggregate number of PSU's then included in the balance of the
PSU Portion of the Participant's Account by the Determined Value of one Common
Share.
All amounts payable to Participants pursuant to this Section 4.7,
reduced by any taxes withheld pursuant to Section 6.8, shall be paid to such
Participants as soon as practicable following the Change in Control.
SECTION 5. BENEFIT EQUALIZATION UNITS
5.1 ACCOUNTS FOR BENEFIT EQUALIZATION UNITS
As of the time this Plan is adopted by the Corporation, there shall be
established on the books and records of the Corporation, for bookkeeping
purposes only, an account ("BEU Account") for each Participant, to reflect the
Participant's interest in the Benefit Equalization Units awarded to the
Participant under the Prior Plan. Upon adoption of the Plan, each Participant's
BEU Account shall be credited with a number of Benefit Equalization Units equal
to the total number of Benefit
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<PAGE> 16
Equalization Units standing to the Participant's credit under Section 5 of the
Prior Plan as of the close of business on the day preceding the Chase Merger
Closing Date.
As of the Effective Time, the number of Benefit Equalization Units so
credited to each Participant's BEU Account shall be adjusted so as to equal the
Adjusted Number of such Benefit Equalization Units.
A Participant's interest in his or her BEU Account shall be fully
vested and nonforfeitable at all times.
5.2 DIVIDEND EQUIVALENTS
As of each Dividend Payment Date, each Participant's BEU Account shall
be credited with additional Benefit Equalization Units, the number of which
shall be determined by first (i) multiplying the number of Benefit Equalization
Units standing to the Participant's credit in the Participant's BEU Account on
the date such dividend was declared by the per-share dollar amount of the
dividend so paid, and then (ii) dividing the resulting amount by the Average
Market Value of one Common Share on the Dividend Payment Date.
5.3 PAYMENT OF BENEFIT EQUALIZATION UNITS
Payment with respect to a Participant's Benefit Equalization Units
shall be made as soon as practicable after the termination of the Participant's
employment with the Corporation and its Affiliated Companies, for any reason.
Payment shall be made in the form of (i) a number of Common Shares equal to the
number of whole Benefit Equalization Units included in the balance of the
Participant's BEU Account as of the last day of the month preceding the month in
which such payment is made, and (ii) a cash payment in an amount determined by
multiplying (A) the fractional part of the Benefit Equalization Unit included in
such balance as of such last day, by (B) the Average Market Value of one Common
Share on the business day immediately preceding the date on which such payment
is made.
5.4 CHANGE IN CONTROL
Notwithstanding any other provision herein to the contrary (but subject
to the proviso contained in the definition of "Change in Control" in Section
1.2), payment with respect to a Participant's Benefit Equalization Units shall
be made in accordance with the provisions of this Section 5.4 in the event of a
Change in Control. Upon the occurrence of a Change in Control, the balance of
each Participant's BEU Account shall become immediately payable in full. Payment
with respect to each Participant's BEU Account balance shall be made in the form
of a single cash lump sum payment. The amount so payable with respect to each
Participant's BEU Account shall be determined by multiplying the number of
Benefit Equalization Units then standing to the Participant's credit in his or
her BEU Account, by the Determined Value of one Common Share. All amounts
payable to Participants pursuant to this Section 5.4, reduced by taxes withheld
pursuant to
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Section 6.8, shall be paid to such Participants as soon as practicable following
the Change in Control.
SECTION 6. GENERAL PROVISIONS
6.1 CERTAIN ADJUSTMENTS TO PLAN SHARES
In the event of any change in the Common Shares occurring after the
Chase Merger Closing Date by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or any rights offering to purchase Common Shares at a price
substantially below fair market value, or any similar change affecting the
Common Shares, the number and kind of shares represented by Phantom Share Units
or Benefit Equalization Units and the number and kind of shares subject to
Restrictions shall be appropriately adjusted consistent with such change in such
manner as the Committee, in its sole discretion, may deem equitable to prevent
substantial dilution or enlargement of the rights granted to, or available for,
the Participants hereunder. The Committee shall give notice to each Participant
of any adjustment made pursuant to this Section and, upon such notice, such
adjustment shall be effective and binding for all purposes.
6.2 SUCCESSOR CORPORATION
The obligations of the Corporation under the Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Corporation, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Corporation. The Corporation agrees that it will make
appropriate provision for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
6.3 NON-ALIENATION OF BENEFITS
A Participant's rights to payments under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Participant or his
or her Beneficiary.
6.4 GENERAL CREDITOR STATUS
Participants shall have no right, title, or interest whatsoever in or
to any investments which the Corporation may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Corporation and any
Participant, Beneficiary, or any other person. To the extent that any person
acquires a right to receive payments from the Corporation under the Plan, such
right shall be no greater than the right of a general unsecured
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<PAGE> 18
creditor of the Corporation. The Plan shall constitute a mere promise by the
Corporation to make payments in the future of the benefits provided for herein.
It is intended that the arrangements reflected in this Plan be treated as
unfunded for tax purposes, as well as for purposes of Title I of ERISA. All
payments to be made hereunder shall be paid from the general funds of the
Corporation and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth in the Plan. In its sole discretion, the Corporation may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Shares or pay cash; provided, however,
that, unless the Committee otherwise determines with the consent of the affected
Participant, the existence of such trusts or other arrangements shall be
consistent with the "unfunded" status of the Plan.
6.5 NO RIGHT TO CONTINUED EMPLOYMENT
Neither the Plan nor any action taken thereunder shall be construed as
giving any employee any right to be retained in the employ of the Corporation or
any of its Affiliated Companies.
6.6 AWARDS NOT TREATED AS COMPENSATION UNDER BENEFIT PLANS
No Award shall be considered as compensation under any employee benefit
plan of U.S. Trust Corporation, the Corporation, or any of their Affiliated
Companies, except as specifically provided in any such plan or as otherwise
determined by the Board of Directors.
6.7 LISTING AND QUALIFICATION OF COMMON SHARES
The Corporation, in its discretion, may postpone the issuance,
delivery, distribution or release of Common Shares pursuant to an Award of
Restricted Stock, Performance Share Units or Benefit Equalization Units until
completion of such stock exchange listing or other qualification of such shares
under any state or federal law, rule or regulation as the Corporation may
consider appropriate, and may require any Participant or Beneficiary to make
such representations and furnish such information as it may consider appropriate
in connection with the issuance or delivery of the shares in compliance with
applicable laws, rules and regulations.
6.8 TAXES
The Corporation or any of its Affiliated Companies may make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of all federal, state and local taxes required by law to be withheld
with respect to amounts payable under the Plan including, but not limited to (i)
deducting the amount so required to be withheld from any other amount then or
thereafter payable to a Participant or Beneficiary, (ii) reducing the amount of
any Award of Performance Share Units otherwise required to be deferred pursuant
to a Participant's election under Section 4.4 of the Prior Plan, by the amount
so required to be withheld with respect to such deferred amount, and/or (iii)
requiring a Participant or Beneficiary to pay to the Corporation or any of its
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<PAGE> 19
Affiliated Companies the amount so required to be withheld as a condition of the
issuance, delivery, distribution or release of any Common Shares.
6.9 DESIGNATION AND CHANGE OF BENEFICIARY
Each Participant shall file with the Committee a written designation of
one or more persons as the Beneficiary who shall be entitled to receive any
amount, or any Common Shares, payable under the Plan upon his or her death. A
Participant may, from time to time, revoke or change his or her Beneficiary
designation without the consent of any previously designated Beneficiary by
filing a new designation with the Committee. The last such designation received
by the Committee shall be controlling; provided, however, that no designation,
or change or revocation thereof, shall be effective unless received by the
Committee prior to the Participant's death, and in no event shall it be
effective as of a date prior to such receipt. If at the date of a Participant's
death, there is no designation of a Beneficiary in effect for the Participant
pursuant to the provisions of this Section 6.9, or if no Beneficiary designated
by the Participant in accordance with the provisions hereof survives to receive
any amount or Common Shares that becomes payable under the Plan by reason of the
Participant's death, the Participant's estate shall be treated as the
Participant's Beneficiary for purposes of the Plan.
6.10 PAYMENTS TO PERSONS OTHER THAN PARTICIPANT
If the Committee shall find that any Participant or Beneficiary to whom
any amount, or any Common Shares, is payable under the Plan is unable to care
for his or her affairs because of illness, accident or legal incapacity, then if
the Committee so directs, such amount, or such Common Shares, may be paid to
such Participant's or Beneficiary's spouse, child or other relative, an
institution maintaining or having custody of such person, or any other person
deemed by the Committee to be a proper recipient on behalf of such Participant
or Beneficiary, unless a prior claim therefor has been made by a duly appointed
legal representative of the Participant or Beneficiary. Any payment made under
this Section 6.10 shall be a complete discharge of the liability of the
Corporation with respect to such payment.
6.11 NO LIABILITY OF COMMITTEE MEMBERS
No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith, and the Corporation shall indemnify and hold harmless each
member of the Committee, and each employee, officer, director or trustee of the
Corporation or any of its Affiliated Companies to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the approval of the Board
of Directors) arising out of any act or omission to act in connection with the
Plan unless arising out of such person's own fraud or bad faith.
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<PAGE> 20
6.12 AMENDMENT OR TERMINATION
Except as to matters that in the opinion of the Corporation's legal
counsel require shareholder approval, any provision of the Plan may be modified
as to a Participant by an individual agreement approved by the Board of
Directors. The Board of Directors may, with prospective or retroactive effect,
amend, suspend or terminate the Plan or any portion thereof at any time;
provided, however, that (i) no amendment that would materially increase the cost
of the Plan to the Corporation may be made by the Board of Directors without the
approval of the shareholders of the Corporation and (ii) no amendment,
suspension or termination of the Plan shall deprive any Participant of any
rights under the Plan without his or her written consent. Any amendment that the
Board of Directors would be permitted to make pursuant to the preceding sentence
may also be made by the Committee where appropriate to facilitate the
administration of the Plan or to comply with applicable law or any applicable
rules and regulations of government authorities.
6.13 GOVERNING LAW
The Plan shall be governed by and construed in accordance with the laws
of the State of New York, without reference to the principles of conflicts of
law thereof.
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<PAGE> 1
Exhibit 10.10
BENEFIT EQUALIZATION PLAN
OF
U.S. TRUST CORPORATION
AS AMENDED AND RESTATED
EFFECTIVE AS OF JANUARY 1, 1997
------
1. PURPOSE
The purpose of the Plan is to provide members of the Employees'
Retirement Plan of United States Trust Company of New York and Affiliated
Companies, and their surviving spouses, with benefits that are intended to
replace benefits that would have been payable to them under such plan but for
the limitations imposed by section 401(a)(17) of the Code and, for periods
ending prior to January 1, 1997, by section 415 of the Code.
The Plan is intended to constitute an "excess benefit plan", as that
term is defined in section 3(36) of ERISA, to the extent that the Plan provides
benefits equal to any reduction in benefits under the Retirement Plan
attributable solely to the limitations imposed by section 415 of the Code. The
Plan is intended to constitute an unfunded plan of deferred compensation for "a
select group of management or highly compensated employees", within the meaning
of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, to the extent that the
Plan provides any other benefits.
2. DEFINITIONS
When used herein, the following terms shall have the following
meanings:
"ACCOUNT" shall mean the Account established for a Participant pursuant
to Section 8.
"AFFILIATED COMPANIES" shall mean United States Trust Company of New
York and each other direct or indirect subsidiary of the Corporation.
"AVERAGE MARKET VALUE" shall mean, with respect to one Common Share as
of any date or with respect to any period, the average of the mean between the
per-share high and low prices for the Common Shares on such date, or on each
trading day during such period, as quoted on the Nasdaq National Market System,
or, if the Common Shares are not traded on such system, on such
<PAGE> 2
other securities market or securities exchange on which such shares are traded
as the Committee shall determine.
"BENEFICIARY" shall mean the person or persons designated by a
Participant in accordance with Section 16 to receive any amount, or any Common
Shares, payable under the Plan by reason of his or her death.
"BENEFIT LIMITATIONS" shall mean (i) the limitation imposed by section
401(a)(17) of the Code on the amount of an Eligible Employee's annual
compensation that may be taken into account in computing the Eligible Employee's
pension benefit under the Retirement Plan and (ii) the limitations imposed by
section 415 of the Code on the amount of the pension benefit payable to an
Eligible Employee under the Retirement Plan.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the
Corporation.
"BUSINESS DAY" shall mean any day on which Common Shares are traded on
the Nasdaq National Market System or, if Common Shares are not traded on such
system, on such other securities market or securities exchange on which such
shares are traded as the Committee shall determine.
"CHANGE IN CONTROL" shall mean that any of the following events has
occurred:
(i) 20% or more of the Corporation's Common Shares has been
acquired by any person (as defined by Section 3(a)(9) of the Securities
Exchange Act of 1934) other than directly from the Corporation;
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving corporation is
held by persons other than former shareholders of the Corporation; or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors are persons who were not nominated by the Board
of Directors or the Executive Committee of the Board of Directors in
the most recent proxy statement of the Corporation;
provided, however, that notwithstanding anything in the Plan to the contrary, no
Change in Control shall be deemed to have occurred, and no rights arising upon a
Change in Control as provided in Section 12 shall exist, to the extent that the
Board of Directors so directs by resolution adopted prior to the Change in
Control, or not later than 45 days after the Change in Control if the percentage
of Common Shares acquired or directors elected under clause (i) or (iii) of the
foregoing definition of Change in Control shall be at least 20% but less than
25%. Any resolution of the Board of Directors adopted in accordance with the
provisions of this definition directing that a Change in Control shall be deemed
not to have occurred for purposes of this Plan and that Section 12 shall not
become effective, may be rescinded or countermanded at any time with or without
retroactive effect.
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<PAGE> 3
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COMMITTEE" shall mean the Compensation and Benefits Committee of the
Board of Directors.
"COMMON SHARES" shall mean the common shares ($1.00 par value per
share) of the Corporation.
"COMPENSATION" shall mean, with respect to any Participant for any Plan
Year beginning on or after January 1, 1997, such Participant's "Compensation"
for such year, as defined in the Retirement Plan.
"COMPENSATION LIMIT" shall mean, with respect to any Plan Year
beginning on or after January 1, 1997, the amount of the limitation on annual
compensation in effect for such Plan Year under section 401(a)(17) of the Code.
"CORPORATION" shall mean U.S. Trust Corporation.
"DETERMINED VALUE" shall mean (i) the highest price per Common Share
paid in connection with any Change in Control (including, without limitation,
prices paid in any subsequent merger or combination with any entity that
acquires control of the Corporation), or (ii) in the case of a Change in Control
occurring as a result of an event described in clause (iii) of the definition of
a Change in Control contained in this Section 2, the Average Market Value of a
Common Share during the 30-day period ending on the day preceding the occurrence
of such Change in Control.
"EARLIEST PAYMENT DATE" shall mean (i) the date as of which payment of
an Eligible Employee's Pension under the Retirement Plan commences, or (ii) if
earlier, the earliest date as of which the Eligible Employee could elect, under
the Retirement Plan, to have payment of his or her Pension commence.
"ELIGIBLE EMPLOYEE" shall mean any Employee who becomes entitled to
receive a Pension pursuant to Article 5 or Article 6 of the Retirement Plan, the
amount of which is less than the amount of the Pension he or she would be
entitled to receive if the Employee's Pension were calculated without regard to
the Benefit Limitations.
"ELIGIBLE SPOUSE" shall mean the surviving spouse of a deceased
Employee who, upon such Employee's death, becomes entitled to receive a Spouse's
Preretirement Survivorship Pension pursuant to Section 8.7 of the Retirement
Plan, the amount of which is less than the amount of the Spouse's Preretirement
Survivorship Pension he or she would be entitled to receive if the Pension that
the deceased Employee would have been entitled to receive had he or she not died
were calculated without regard to the Benefit Limitations. Notwithstanding the
foregoing, the surviving spouse of a deceased Employee shall not be treated as
an Eligible Spouse for purposes of this Plan
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<PAGE> 4
if payment of an Excess Pension Benefit to such deceased Employee had commenced
prior to his or her death.
"EMPLOYEE" shall mean any person employed, or formerly employed, by the
Corporation or any of its Affiliated Companies that participates, or formerly
participated, in the Retirement Plan.
"EQUIVALENT ACTUARIAL VALUE" shall have the same meaning as is assigned
to such term under the Retirement Plan for purposes of converting a life annuity
to a 50% joint and survivor annuity, or, as the context may require, for
purposes of determining the amount of distributions payable in the form of a
lump sum payment under Section 7.6 of the Retirement Plan.
"JOINT AND SURVIVOR PENSION" shall mean a monthly annuity payable to an
Eligible Employee during his or her lifetime, with a monthly survivor's annuity
payable after the death of such Eligible Employee to the person who was the
Eligible Employee's spouse on his or her Payment Starting Date (regardless of
such spouse's remarriage after his death) and who survives the Eligible
Employee. Such survivor's annuity shall be payable for such spouse's life in the
amount of 50% of the monthly annuity paid to the Eligible Employee prior to his
or her death.
"PARTICIPANT" shall mean, on or after January 1, 1997, (i) any Employee
who was a Member of the Retirement Plan on December 31, 1996 and who has made an
election under Section 5 to continue active participation in this Plan for Plan
Years beginning on and after January 1, 1997, and (ii) any other Employee who
becomes a Member of the Retirement Plan on or after January 1, 1997 and who has
Compensation for any Plan Year beginning on or after January 1, 1997 that is in
excess of the Compensation Limit for such year. For purposes of the foregoing,
any Employee who is hired after January 1, 1997 and who has Compensation in
excess of the Compensation Limit for the Plan Year in which his date of hire
occurs shall be treated as a Participant for such Plan Year, if he or she is
expected to become a Member of the Retirement Plan in the next following Plan
Year.
"PAYMENT STARTING DATE" shall mean the first day of the month
coinciding with or next following the later of (i) the date of the Eligible
Employee's Termination of Employment, or (ii) the Eligible Employee's Earliest
Payment Date.
"PHANTOM SHARE UNIT" or "PSU" shall mean a unit of measurement
equivalent to one Common Share, with none of the attendant rights of a holder of
such share, including, without limitation, the right to vote such share and the
right to receive dividends thereon, except to the extent otherwise specifically
provided herein.
"PLAN" shall mean the Benefit Equalization Plan of U.S. Trust
Corporation, as set forth herein and as amended and restated from time to time.
"PLAN YEAR" shall mean the calendar year.
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<PAGE> 5
"RETIREMENT" shall mean a Participant's Termination of Employment for
any reason other than death if, as of the date of the Participant's Termination
of Employment, (i) the Participant has attained age 65 or (ii) the sum of
Participant's age and the number of his or her "Years of Service", as defined in
the Retirement Plan, is at least equal to 80. In addition, in the case of any
Participant who becomes entitled to receive benefit payments under the long-term
disability plan maintained by the Corporation or any of its Affiliated Companies
and who continues to receive payments under such plan throughout the entire
period ending on the date on which the Participant first meets the age, or the
age and service, requirements set forth in clause (i) or (ii) above, such
Participant shall be treated, for purposes of the Plan, as having terminated
employment with the Corporation and all of its Affiliated Companies as a result
of Retirement, on the first day of the month following the date on which the
Participant first meets such requirements. In applying clause (ii) above for
this purpose, the Participant's "Years of Service" shall include the number of
calendar years (or part thereof) during which the Participant has received
benefits payments under such long-term disability plan.
"RETIREMENT PLAN" shall mean the Employees' Retirement Plan of United
States Trust Company of New York and Affiliated Companies, as amended and
restated from time to time.
"TERMINATION OF EMPLOYMENT" shall mean the termination of an Employee's
employment with the Corporation and all of its Affiliated Companies. For this
purpose, a Participant who ceases active employment by reason of disability but
who becomes entitled to receive benefit payments under the long-term disability
plan maintained by the Corporation or any of its Affiliated Companies shall be
treated as continuing to be employed with the Corporation and its Affiliated
Companies until the earlier of (i) the date as of which he or she ceases to
receive benefit payments under such plan, or (ii) the date as of which he or she
is treated as having terminated employment as a result of Retirement.
Each other capitalized term used herein, not otherwise defined, shall
have the meaning given to such term under the Retirement Plan.
3. EXCESS PENSION BENEFIT
Upon an Eligible Employee's Termination of Employment for any reason
other than death, the Eligible Employee shall be entitled to receive an Excess
Pension Benefit under this Plan.
The Excess Pension Benefit shall be a Pension which is equal to the
excess of (i) the Pension that would be payable to the Eligible Employee under
the Retirement Plan in the form of a single life annuity if payment thereof were
to commence on the Eligible Employee's Payment Starting Date, calculated without
regard to the Benefit Limitations, over (ii) the Pension that would be payable
to the Eligible Employee under the Retirement Plan in the form of a single life
annuity if payment thereof were to commence on the Eligible Employee's Payment
Starting Date, calculated by taking into account the Benefit Limitations.
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<PAGE> 6
The Excess Pension Benefit shall be payable on a monthly basis, and
each payment thereof shall be due on the first day of the month. In the case of
an Eligible Employee who is not married on his Payment Starting Date, the Excess
Pension Benefit shall be payable in the form of a single life annuity. In the
case of an Eligible Employee who is married on his Payment Starting Date, the
Excess Pension Benefit shall be payable in the form of a Joint and Survivor
Pension which shall be of Equivalent Actuarial Value to the Excess Pension
Benefit payable in the form of a single life annuity.
Payment of the Excess Pension Benefit to the Eligible Employee shall
commence as of his Payment Starting Date, and shall terminate with the payment
due for the month in which he dies. Payment of a survivor's annuity under the
Excess Pension Benefit to the Eligible Employee's surviving spouse shall
commence on the first day of the month following the date of the Eligible
Employee's death, and shall terminate with the payment due for the month in
which the surviving spouse dies.
4. EXCESS SURVIVORSHIP PENSION BENEFIT
Upon the death of an Employee, the Employee's Eligible Spouse shall be
entitled to receive an Excess Survivorship Pension Benefit under this Plan.
The Excess Survivorship Pension Benefit shall be a Pension which is
equal to the excess of (i) the Spouse's Preretirement Survivorship Pension that
would be payable to the Eligible Spouse under the Retirement Plan if payment
thereof were to commence on the first day of the month following the date of the
Employee's death, calculated without regard to the Benefit Limitations, over
(ii) the Spouse's Preretirement Survivorship Pension that would be payable to
the Eligible Spouse under the Retirement Plan if payment thereof were to
commence on the first day of the month following the date of the Employee's
death, calculated by taking into account the Benefit Limitations.
The Excess Survivorship Pension Benefit shall be payable in the form of
a single life annuity. Payments shall be made on a monthly basis, and shall be
due on the first day of the month. Payment of the Excess Survivorship Pension
Benefit to the Eligible Spouse shall commence as of the first day of the month
following the date of the Employee's death, and shall terminate with the payment
due for the month in which the surviving spouse dies.
5. CONVERSION OF PLAN BENEFITS
Notwithstanding any other provisions in the Plan to the contrary, no
further Excess Pension Benefit or Excess Survivorship Pension Benefit shall
accrue under Section 3 or 4 with respect to any Employee after December 31,
1996.
Each Employee who was a Member of the Retirement Plan on December 31,
1996 shall make an election under this Section 5 as to whether or not to
continue active participation in this
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<PAGE> 7
Plan for Plan Years beginning on or after January 1, 1997. Such election shall
be made in writing, on a form provided by the Committee for such purpose, and
such form shall be filed with the Committee by no later than March 31, 1997.
Any such Employee who so elects to continue participation shall receive
the benefits provided for such Employee under Sections 6 and 7, in lieu of any
benefit otherwise payable with respect to such Employee under Section 3 or 4.
In the case of any Employee who was a Member of the Retirement Plan on
December 31, 1996 and who elects not to continue active participation in this
Plan for Plan Years beginning on or after January 1, 1997, or who fails to make
an election under this Section 5 by March 31, 1997, (i) the Excess Pension
Benefit payable to the Employee under Section 3 commencing on his or her Payment
Starting Date shall be the Excess Pension Benefit that would have been payable
to the Employee commencing on such date under Section 3 if the Employee's
Termination of Employment had occurred on December 31, 1996; (ii) the Excess
Survivorship Pension Benefit payable to the Employee's Eligible Spouse under
Section 4 upon the Employee's death shall be the Excess Survivorship Pension
Benefit that would have been payable to such Eligible Spouse under Section 4 if
the Employee's death had occurred on December 31, 1996 and if such Eligible
Spouse had been married to the Employee at the time of the Employee's death; and
(iii) no benefit shall be payable with respect to the Employee under Section 6
or 7.
6. CONVERTED PLAN BENEFIT
The Account of each Participant who was a Member of the Retirement Plan
on December 31, 1996 and who has elected under Section 5 to continue
participation in the Plan for Plan Years beginning on or after January 1, 1997
shall be credited with a Converted Plan Benefit amount determined for the
Participant in the manner described below. The amount to be so credited to a
Participant's Account shall be credited as of January 1, 1997. Of the total
amount to be so credited, 25% shall be credited to the PSU Portion, and 75%
shall be credited to the Cash Portion, of the Participant's Account.
A Participant's Converted Plan Benefit amount shall be the sum of (i)
the lump sum actuarial present value of the Participant's Accrued Excess Pension
Benefit plus (ii) the lump sum actuarial present value of the amount, if any, by
which (A) the Participant's Projected Account Balance is less than (B) 80% of
the actuarially equivalent lump sum value, determined at age 62, of the
Participant's Projected Excess Pension Benefit. The following provisions shall
apply for purposes of the foregoing:
(a) The lump sum actuarial present values described in clauses (i) and
(ii) above, and the actuarially equivalent lump sum value referred to in clause
(ii)(B) above, shall be determined using an assumed interest rate of 8% per
annum, and the 1983 Group Annuity Mortality Table For Males; provided, however,
that mortality assumptions determined under such Table shall be used only for
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purposes of determining the period for which an annuity would be payable after
payments thereunder are deemed to have commenced.
(b) The Participant's Accrued Excess Pension Benefit shall mean the
Excess Pension Benefit that would have been payable to the Participant under
Section 3 if the Participant's Termination of Employment had occurred on
December 31, 1996, and if payment of his or her Excess Pension Benefit were to
commence on January 1, 1997. The amount of the Excess Pension Benefit deemed to
be payable to the Participant commencing on such date shall be determined (i) by
taking into account the actuarial reduction provided in Section 5.2 of the
Retirement Plan, if the Participant was not eligible for Retirement on December
31, 1996; (ii) by using the early retirement reduction factors provided under
Section 7.2(b) of the Retirement Plan, if the Participant was eligible for
Retirement but had not attained age 60 as of that date; and (iii) without any
reduction, if the Participant was eligible for Retirement and had attained age
60 as of that date.
(c) The Participant's Projected Account Balance shall mean the amount
of the balance of the Participant's Account as of the last day of the month in
which the Participant will attain age 62, assuming that the Participant
continues in employment with the Corporation or any of its Affiliated Companies
until he or she attains age 62, that his or her base salary as of January 1,
1997 will increase at the rate of 4.5% per annum, that the amount of the
Compensation Limit in effect for the Plan Year 1997 will increase at the rate
of 3% per annum (but such increases shall be taken into account only to the
extent permitted under the "rounding" rules of section 401(a)(17) of the Code),
and that Dividend Equivalents and Earnings will be credited to the balance of
the Participant's Account pursuant to Section 10 at the rate of 8% per annum.
(d) The Participant's Projected Excess Pension Benefit shall mean the
Excess Pension Benefit that would have been payable to the Participant under
Section 3 commencing at age 62 without regard to Section 5 if the Participant
continued to be employed with the Corporation or any of its Affiliated Companies
until he or she attained age 62, assuming that the Participant's base salary at
January 1, 1997 will increase at the rate of 4-1/2% per annum, and that the
amount of the Compensation Limit in effect for 1997 will increase at the rate of
3% per annum (but such increases shall be taken into account only to the extent
permitted under the "rounding" rules of section 401(a)(17) of the Code).
7. COMPENSATION LIMIT BENEFIT
For each Plan Year in which a Participant has Compensation in excess of
the Compensation Limit for such year, such Participant shall be credited with an
amount determined by multiplying (i) the amount by which the Participant's
Compensation exceeds the Compensation Limit for such year, by (ii) the
percentage applicable to the Participant for such year, determined under the
following table based on his or her attained age as of the close of such year.
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ATTAINED AGE PERCENT
Under 30 0%
30-34 2.5%
35-39 5.0%
40-44 7.5%
45-49 10.0%
50-54 15.0%
55-59 17.5%
60-62 20.0%
Over 62 10.0%
Notwithstanding the foregoing, no amount shall be credited to a
Participant's Account pursuant to this Section 7 for the Plan Year in which the
Participant's Termination of Employment occurs unless it occurs either (i) on
the last day of such year, or (ii) as a result of the Participant's Retirement,
or as a result of the Participant's death after he or she has met the age, or
the age and service, requirements for eligibility for Retirement. The amount to
be credited to a Participant for the Plan Year in which his or her Termination
of Employment occurs as a result of his or her Retirement or death as described
in clause (ii) of the preceding sentence shall be a pro-rated amount, based on
the number of months of service completed by the Participant during such year.
In the case of any Employee who is treated, pursuant to the last sentence of the
definition of the term Participant in Section 2, as a Participant for the Plan
Year in which he or she is hired, the amount to be credited to such Participant
for such Plan Year pursuant to this Section 7 shall be a prorated amount, based
on the number of months of service completed by the Participants during such
year.
The amount to be credited to a Participant's Account for any Plan Year
pursuant to this Section 7 shall be credited as of December 31 of such year. Of
the total amount to be so credited, 25% shall be credited to the PSU Portion,
and 75% shall be credited to the Cash Portion, of the Participant's Account.
8. ACCOUNTS
For each Participant, there shall be established on the books and
records of the Corporation, for bookkeeping purposes only, a separate Account to
reflect such Participant's interest under the Plan. The Account so established
shall be maintained in accordance with the following provisions:
(a) The Account established for each Participant shall consist of two
sub-accounts referred to herein, respectively, as the "PSU Portion" and the
"Cash Portion".
(b) The PSU Portion and the Cash Portion of each Participant's Account
shall be credited with such amounts, as of such dates, as required pursuant to
the provisions of Sections 6 and 7.
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(c) The PSU Portion and the Cash Portion of a Participant's Account
shall be adjusted to reflect all additional PSU's and Earnings (as defined in
paragraph (c) of Section 10) to be credited to such Portions pursuant to Section
10, and all payments made with respect to such Portions pursuant to Section 11.
(d) A Participant's interest in his or her Account shall become fully
vested and nonforfeitable upon the Participant's completion of five Years of
Service as defined in the Retirement Plan.
9. CONVERSION TO PSU'S
Each amount credited to the PSU Portion of a Participant's Account
pursuant to Section 6 or 7 shall be converted into (and after such conversion
shall be reflected in such Portion as) a number of Phantom Share Units
("PSU's"). The conversion shall be made as of the same date as the date as of
which such amount is so credited. The number of PSU's into which any amount so
credited is to be converted shall be determined by dividing (i) the dollar value
of such amount by (ii) the Average Market Value of one Common Share on the date
as of which such amount is to be converted or, if such conversion date is not a
Business Day, on the Business Day next preceding such conversion date.
10. CREDITING OF DIVIDEND EQUIVALENTS AND EARNINGS
Until payment with respect to a Participant's Account has been made in
full in accordance with Section 11, the PSU Portion of a Participant's Account
shall be credited with additional PSU's, and the Cash Portion of the
Participant's Account shall be credited with interest or Earnings in accordance
with the following provisions:
(a) As of each date on which the Corporation pays a dividend on its
Common Shares ("Dividend Payment Date") the PSU Portion of each Participant's
Account shall be credited with additional PSU's, the number of which shall be
determined by first (i) multiplying the number of PSU's standing to the
Participant's credit on the date such dividend was declared by the per-share
dollar amount of the dividend so paid, and then (ii) dividing the resulting
amount by the Average Market Value of one Common Share on the Dividend Payment
Date.
(b) As of the last day of January, February and March of 1997, the
balance of the Cash Portion of the Account of each Participant whose Account is
to be credited with a Converted Plan Benefit amount pursuant to Section 6 shall
be credited with interest computed at the rate of 8% per annum.
(c) As of April 30, 1997 and as of the last day of each calendar month
thereafter, each part of the balance of the Cash Portion of a Participant's
Account for which a separate Earnings Crediting Option (as hereinafter defined)
is in effect pursuant to the Participant's election hereunder shall be credited
with an amount determined by multiplying such part of the balance by a
percentage corresponding to the Applicable Rate of Return (as hereinafter
defined) for such month under such
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<PAGE> 11
Earnings Crediting Option. The amount so credited (which may be positive or
negative depending on whether the Applicable Rate of Return for the month is
positive or negative) is referred to herein as "Earnings".
(d) For purposes of this Section 10, the term"Earnings Crediting
Option" shall mean, as of any date of reference any one of the following: the
S&P 500 Index, the Lehman Bros. Government/Corporate Bond Index, and the IBC's
Money Fund Report First Tier Average. Notwithstanding the foregoing, the
Committee may at any time, in its sole discretion, determine (i) that any option
referred to in the preceding paragraph shall cease to constitute an Earnings
Crediting Option for purposes of the Plan, or (ii) that any other index or
hypothetical investment fund or referenced rate of return shall constitute an
Earnings Crediting Option for purposes of the Plan. Participants shall be
notified in writing, at least 45 days in advance, of any change in the Plan's
Earnings Crediting Options.
(e) The "Applicable Rate of Return" for any month shall mean (i) in the
case of the S&P 500 Index, the percentage, as determined by the Committee, by
which (A) the value of such Index as of the last business day of such month, as
adjusted to reflect all income earned for such month on the securities included
in such Index, exceeds, or is less than, (B) the value of such Index as of the
last business day of the immediately preceding month, determined without taking
such adjustment into account; (ii) in the case of the Lehman Bros.
Government/Corporate Bond Index, the percentage, as determined by the Committee,
by which the value of such Index as of the last Business Day of such month,
exceeds, or is less than, the value of such Index as of the last Business Day of
the immediately preceding month; (iii) in the case of the IBC's Money Fund
Report First Tier Average, the rate of return corresponding to the 7-day
compounded yield for such Average, for the period ending on, or most recently
prior to, the last day of such month; and (iv) in the case of any other Earnings
Crediting Option, the rate of return applicable for such month, as determined by
the Committee in its sole discretion.
(f) A Participant may make elections with respect to the Earnings
Crediting Options that are to apply with respect to the Cash Portion of his or
her Account, in accordance with the following rules:
(i) A Participant may elect to have any part or all of the
balance of the Cash Portion credited with Earnings under any Earnings
Crediting Option available under the Plan at the time of his or her
election.
(ii) Each Participant whose Account is credited with a
Converted Plan Benefit amount pursuant to Section 6 shall make an
initial election as to the Earnings Crediting Options that are to apply
with respect to the Cash Portion of his or her Account on and after
April 1, 1997. Such election shall be made in writing, on a form
provided by the Committee for such purpose, and such form shall be
filed with the Committee by no later than March 31, 1997. In such
election form, the Participant shall specify, by percentages (which
must be even multiples of 5%) the respective parts of the balance of
the Cash Portion that are to be
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<PAGE> 12
credited with Earnings under each of the Earnings Crediting Options
designated by the Participant in such form. If any such Participant
fails to make such election by March 31, 1997, such Participant shall
be deemed to have selected the IBC's Money Fund Report First Tier
Average as the Earnings Crediting Option to apply to the entire balance
of the Cash Portion.
(iii) Each Employee who becomes a Participant solely by virtue
of having Compensation in excess of the Compensation Limit for any Plan
Year beginning on or after January 1, 1997, shall make an initial
election as to the Earnings Crediting Options that are to apply with
respect to the Cash Portion of his or her Account by no later than
December 31 of the first Plan Year for which an amount is to be
credited to his or her Account pursuant to Section 7. Such election
shall be made in the same manner as described in clause (ii) above. If
any such Participant fails to make such election by such date, such
Participant shall be deemed to have selected the IBC's Money Fund
Report First Tier Average as the Earnings Crediting Option to apply to
the entire balance of the Cash Portion.
(iv) The Earnings Crediting Options selected in the initial
election made by a Participant under clause (ii) or (iii) above (or
deemed to have been selected by a Participant under clause (ii) or
(iii) above) shall remain in effect (and shall apply to all additional
amounts credited to the Cash Portion pursuant to Section 7 with respect
to any subsequent Plan Years) until the Participant changes his or her
election in accordance with clause (v) below.
(v) A Participant may change the Earnings Crediting Options
that are to apply with respect to the Cash Portion of his or her
Account by making a new election hereunder. Such new election shall be
made by telephonic communication in accordance with such rules and
procedures as the Committee shall prescribe. In such communication, the
Participant shall specify, by percentages (which must be even multiples
of 5%), the respective parts of the balance of the Cash Portion that
are to be credited with Earnings under each of the Earnings Crediting
Options designated by the Participant in such communication. The
Participant's new election shall become effective as of the first day
of the calendar month following the date on which such election is so
communicated, provided that it is so communicated at least 15 days
prior to such first day. The Earnings Crediting Options selected by the
Participant in such new election shall remain in effect until the
Participant again changes his election with respect to the Cash Portion
of his or her Account in accordance with this clause (v).
(g) The Cash Portion of a Participant's Account shall continue to be
credited with Earnings in accordance with the provisions of this Section 10
until all payments required to be made with respect to the Cash Portion under
Section 11 have been made. For this purpose, any payments made under Section 11
with respect to the Cash Portion of the Participant's Account will be deemed to
have been made pro rata from the respective parts of the balance of the Cash
Portion that are subject to separate Earnings Crediting Options.
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<PAGE> 13
11. PAYMENT OF ACCOUNT BALANCES
Payment with respect to a Participant's Account shall be made in
accordance with the following provisions:
(a) The balances of the PSU Portion and the Cash Portion of a
Participant's Account shall become payable upon the Participant's Termination of
Employment for any reason, if the Participant's interest in his or her Account
had become vested prior to the date of the Participant's Termination of
Employment. If the Participant's interest in his or her Account had not become
vested prior to such date, his or her entire interest in such Account shall be
forfeited on such date.
(b) Unless at the time a Participant's Account becomes payable there is
in effect for the Participant an election under (c) below, payment with respect
to the PSU Portion and the Cash Portion of the Participant's Account shall be
made in the form of a single lump sum payment. Such payment shall consist of (i)
a number of Common Shares equal to the number of whole PSU's included in the
balance of the PSU Portion of the Participant's Account, and (ii) cash in an
amount equal to the sum of (A) the balance of the Cash Portion of the
Participant's Account and (B) an amount determined by multiplying the fractional
part, if any, of a PSU included in the balance of the PSU Portion of the
Participant's Account by the Average Market Value of one Common Share on the
Business Day immediately preceding the date on which such payment is to be made.
Such payment shall be made to the Participant or, if the Participant's Account
becomes payable by reason of his or her death, to the Participant's Beneficiary.
Payment shall be made on the last Business Day of February of the Plan Year
following the year in which the Participant's Termination of Employment occurs.
(c) A Participant may elect to have payment with respect to the PSU
Portion and the Cash Portion of his or her Account made to the Participant, or
in the event of the Participant's death, to his or her Beneficiary, in the form
of a series of 10 annual installments, payable in the manner described in
Section 11(d), if the Participant's Account becomes payable as a result of the
Participant's Retirement, or as a result of the Participant's death while he or
she is still employed with the Corporation or any of its Affiliated Companies
but after the Participant has met the age, or the age and service, requirements
for eligibility for Retirement. An election under this Section 11(c) shall be
made in writing, on a form that is provided by the Committee for such purpose
and that is filed by the Participant with the Committee at least one year prior
to the date on which the Participant's Termination of Employment occurs. Any
election so made may be revoked, and a new election may be made hereunder after
such revocation. Any such revocation or new election shall be made in the same
manner, and by the same date, as described in the second preceding sentence. No
election or revocation of an election made hereunder shall be given effect
unless it is made within the time prescribed herein.
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<PAGE> 14
(d) If a Participant's Account becomes payable in the form of a series
of 10 annual installments pursuant to the Participant's election under Section
11(c), such payments shall be made in accordance with the following provisions:
(i) The first such installment payment shall be made on the
last Business Day of February of the Plan Year following the year in
which the Participant's Termination of Employment occurs, and the
remaining installment payments shall be made on the last Business Day
of February of each succeeding Plan Year.
(ii) Each installment payment to be made with respect to the
Cash Portion of a Participant's Account shall be made in cash, in an
amount determined by dividing (A) the balance of the Cash Portion
determined as of the last day of the Plan Year preceding the year in
which such payment is to be made, by (B) the number of installment
payments remaining to be made. The last such installment payment shall
include Earnings credited to the Cash Portion for the month preceding
the month in which such payment is made.
(iii) Each installment payment to be made with respect to the
PSU Portion of a Participant's Account shall be made partly in Common
Shares, and partly in cash. The number of shares to be included in each
such installment payment shall be equal to the number of whole PSU's
included in the quotient resulting from dividing (A) the total number
of PSU's included in the balance of the PSU Portion of the
Participant's Account as of the last day of the Plan Year preceding the
year in which such payment is to be made, by (B) the number of
installment payments remaining to be made; and the amount of cash to be
included in each such installment payment shall be determined by
multiplying (C) the fractional part of a PSU included in the
aforementioned quotient by (D) the Average Market Value of one Common
Share on the Business Day immediately preceding the date on which such
installment payment is to be made. The last such installment payment
shall include a number of Common Shares equal to the whole number of
any additional PSU's that are credited to the PSU Portion of the
Participant's Account under Section 10(a) during the month preceding
the month in which such payment is made, together with cash (in an
amount determined in the same manner as described in the preceding
sentence) for any fractional part of a PSU that is so credited.
(iv) If a Participant should die before receiving all
installment payments required to be made hereunder with respect to the
Participant's Account, any installment payments remaining to be made at
the date of the Participant's death shall be made to the Participant's
Beneficiary in the same form, at the same times and in the same
amounts, as such payments would have been made to the Participant (A)
if he or she had not died, and (B), in the case of installment payments
required to be made to a Beneficiary due to the death of a Participant
occurring before the Participant had received any such payments, if the
Participant's employment had terminated as a result of Retirement on
the date of his or her death.
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(e) Notwithstanding any other provision in this Section 11 to the
contrary, payment with respect to any part or all of the Participant's Account
balances may be made to the Participant on any date earlier than the date on
which such payment is to be made pursuant to such other provisions of this
Section 11 if (i) the Participant requests such early payment and (ii) the
Committee, in its sole discretion, determines that such early payment is
necessary to help the Participant meet an "unforeseeable emergency" within the
meaning of Section 1.457-2(h)(4) of the federal income tax regulations. The
amount that may be so paid shall not exceed the amount necessary to meet such
emergency.
12. CHANGE IN CONTROL
Notwithstanding any other provision in the Plan to the contrary (but
subject to the proviso contained in the definition of "Change in Control" in
Section 2, upon the occurrence of a Change in Control, the following provisions
shall apply.
(a) Upon the occurrence of a Change in Control, the balance of each
Participant's Account shall become immediately payable in full. Payment with
respect to each Participant's Account balance shall be made to the Participant
or, if the Participant has died, to his or her Beneficiary, in the form of a
single lump sum cash payment. The amount so payable with respect to each
Participant's Account shall be equal to the sum of (i) the balance of the Cash
Portion of the Participant's Account, plus (ii) an amount determined by
multiplying the aggregate number of PSU's then included in the balance of the
PSU Portion of the Participant's Account by the Determined Value of one Common
Share.
(b) Each Eligible Employee and each Eligible Spouse for whom an Excess
Pension Benefit or an Excess Survivorship Pension Benefit had become payable
prior to a Change in Control shall be entitled, upon the occurrence of such
Change in Control, to receive, in full discharge of the Corporation's
obligations hereunder to such Eligible Employee or Eligible Spouse, an immediate
lump-sum cash payment, in an amount that is of Equivalent Actuarial Value to the
Excess Pension Benefit or the Excess Survivorship Pension Benefit so payable.
(c) In the event of an Eligible Employee's Involuntary Termination
after a Change in Control, as defined in the 1990 Change in Control and
Severance Policy for Top Tier Officers of United States Trust Company of New
York and Affiliated Companies (or, in the case of any Eligible Employee who is
not a participant in such Plan, as defined in the 1990 Change in Control and
Severance Policy for Officers and Employees of United States Trust Company of
New York and Affiliated Companies), such Eligible Employee shall be entitled,
upon such Involuntary Termination, to receive, in full discharge of the
Corporation's obligations hereunder to such Eligible Employee, a single
lump-sum cash payment, in an amount that is of Equivalent Actuarial Value to
the Excess Pension Benefit that otherwise would have been payable to the
Eligible Employee under Sections 4 and 5 as a result of such Termination of
Employment.
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(d) All amounts payable under this Section 12, reduced by any taxes
withheld pursuant to Section 13, shall be paid as soon as practicable following
the Change in Control, or following the Employee's Involuntary Termination after
a Change in Control, as the case may be.
13. TAXES
The Corporation or any of its Affiliated Companies may make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of all federal, state and local taxes required by law to be withheld
with respect to any Common Shares or any amounts payable under the Plan
including, but not limited to (i) deducting the amount so required to be
withheld from any other amount then or thereafter payable to a Participant or
Beneficiary, and/or (ii) requiring a Participant or Beneficiary to pay to the
Corporation or any of its Affiliated Companies the amount so required to be
withheld as a condition of the issuance, delivery, or distribution of any Common
Shares. The Committee may permit such amount to be paid in Common Shares
previously owned by the Participant, or a portion of the Common Shares that
otherwise would be distributed to such Participant with respect to his or her
PSU's, or a combination of cash and such Common Shares.
14. ADJUSTMENT OF PSU'S
In the event of any change in the Common Shares by reason of any stock
dividend, recapitalization, reorganization, merger, consolidation, split-up,
combination or exchange of shares, or any rights offering to purchase such
shares at a price substantially below fair market value, or any similar change
affecting the Common Shares, the number and kind of shares represented by
Phantom Share Units shall be appropriately adjusted consistent with such change
in such manner as the Committee, in its sole discretion, may deem equitable to
prevent substantial dilution or enlargement of the rights granted to, or
available for, the Participants hereunder. The Committee shall give notice to
each Participant of any adjustment made pursuant to this Section 14 and, upon
such notice, such adjustment shall be effective and binding for all purposes of
the Plan.
15. SOURCE, LISTING AND QUALIFICATION OF COMMON SHARES
The Common Shares distributed under the Plan may be shares held in the
treasury of the Corporation, or shares purchased on the open market by the
Corporation at such time or times and in such manner as it may determined. The
Corporation shall be under no obligation to acquire Common Shares for
distribution to Participants before payment in Common Shares is due.
The Corporation, in its discretion, may postpone the issuance,
delivery, or distribution of Common Shares with respect to any PSU's until
completion of such stock exchange listing or other qualification of such shares
under any state or federal law, rule or regulation as the Corporation may
consider appropriate, and may require any Participant or Beneficiary to make
such representations and furnish such information as it may consider appropriate
in connection with the issuance or delivery of the shares in compliance with
applicable laws, rules and regulations.
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16. DESIGNATION AND CHANGE OF BENEFICIARY
Each Participant shall file with the Committee a written designation of
one or more persons as the Beneficiary who shall be entitled to receive any
amount, or any Common Shares, payable under the Plan by reason of his or her
death. A Participant may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any previously designated
Beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Participant's death, and in no event
shall it be effective as of a date prior to such receipt. If at the date of a
Participant's death, there is no designation of a Beneficiary in effect for the
Participant pursuant to the provisions of this Section 16, or if no Beneficiary
designated by the Participant in accordance with the provisions hereof survives
to receive any amount payable under the Plan by reason of the Participant's
death, the Participant's estate shall be treated as the Participant's
Beneficiary for purposes of the Plan.
17. PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS
If the Committee shall find that any person to whom any amount, or any
Common Shares, is payable under the Plan is unable to care for his or her
affairs because of illness, accident or legal incapacity, then, if the Committee
so directs, such amount, or such Common Shares, may be paid to such person's
spouse, child or other relative, an institution maintaining or having custody of
such person, or any other person deemed by the Committee to be a proper
recipient on behalf of such person, unless a prior claim therefor has been made
by a duly appointed legal representative of such person.
Any payment made under this Section 17 shall be a complete discharge of
the liability of the Corporation with respect to such payment.
18. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. A majority of the
members of the Committee shall constitute a quorum. The Committee may act at a
meeting, including a telephone meeting, by action of a majority of the members
present, or without a meeting by unanimous written consent. In addition to the
responsibilities and powers assigned to the Committee elsewhere in the Plan, the
Committee shall have the authority, in its discretion, to establish from time to
time guidelines or regulations for the administration of the Plan, interpret the
Plan, and make all determinations considered necessary or advisable for the
administration of the Plan. The Committee may delegate any ministerial or
nondiscretionary function pertaining to the administration of the Plan to any
one or more officers of the Corporation.
All decisions, actions or interpretations of the Committee under the
Plan shall be final, conclusive and binding upon all parties.
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<PAGE> 18
No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith, and the Corporation shall indemnify and hold harmless each
member of the Committee, and each employee, officer, director or trustee of the
Corporation or any of its Affiliated Companies to whom any duty or power
relating to the administration or interpretation of the Plan may be delegated,
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with the approval of the Board of Directors)
arising out of any act or omission to act in connection with the Plan unless
arising out of such person's own fraud or bad faith.
19. AMENDMENT AND TERMINATION
The Plan may be amended, suspended or terminated, with prospective or
retroactive effect, in whole or in part, by the Board of Directors without the
consent of any Employee or any other person. The Committee may adopt any
amendment that may be necessary or appropriate to facilitate the administration,
management or interpretation of the Plan or to conform the Plan thereto,
provided any such amendment does not have a material effect on the currently
estimated cost to the Corporation of maintaining the Plan. No such amendment,
suspension or termination shall retroactively impair or otherwise adversely
affect the rights of any Employee or other person to benefits under the Plan
that have accrued prior to the date of such action as determined by the
Committee in its sole discretion.
Notwithstanding the above, and notwithstanding any other provision in
this Plan to the contrary, the Committee may direct that no benefit attributable
to the application under the Retirement Plan of the Benefit Limitation described
in clause (i) of the definition of the term "Benefit Limitations" be paid with
respect to an Eligible Employee, or that no benefit otherwise provided with
respect to a Participant under Section 6 or 7 be paid to such Participant or to
his or her Beneficiary, if the Committee, in its sole discretion, determines
that the payment of such benefit would jeopardize the Plan's status as a plan of
deferred compensation for "a select group of management or highly compensated
employees" within the meaning of the applicable provisions of ERISA with respect
to such benefits.
20. GENERAL PROVISIONS.
The following additional provisions shall be applicable with respect to
the Plan.
(a) The Plan shall be binding upon and inure to the benefit of the
Corporation and its successors and assigns, and Participants, Eligible
Employees, Eligible Spouses, and their estates. The Plan shall also be binding
upon any successor corporation or organization succeeding to substantially all
of the assets and business of the Corporation, but nothing in the Plan shall
preclude the Corporation from merging or consolidating into or with, or
transferring all or substantially all of its assets to, another corporation or
organization that assumes the Plan and all obligations of the Corporation
hereunder. The Corporation agrees that it will make appropriate provision for
the
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preservation of Employees' rights under the Plan in any agreement or plan that
it may enter into to effect any merger, consolidation, reorganization or
transfer of assets. Upon such a merger, consolidation, reorganization, or
transfer of assets and assumption, the term "Corporation" shall refer to such
other corporation or organization and the Plan shall continue in full force and
effect.
(b) Neither the Plan nor any action taken hereunder shall be construed
as giving to any Employee the right to be retained in the employ of the
Corporation or any of its Affiliated Companies or as affecting the right of the
Corporation or any of its Affiliated Companies to dismiss any Employee.
(c) The rights or interests of any Employee under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors or beneficiaries of
such person.
(d) A Participant or any other person shall have the status of a
general unsecured creditor of the Corporation with respect to his or her right
to receive any payment under the Plan. The Plan shall constitute a mere promise
by the Corporation or the applicable Affiliated Company to make payments in the
future of the benefits provided for herein. It is intended that the arrangements
reflected in this Plan be treated as unfunded for tax purposes, as well as for
purposes of any applicable provisions of Title I of ERISA.
(e) The Plan shall be governed by the laws of the State of New York
from time to time in effect.
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EXHIBIT 10.11
BOARD MEMBERS' RETIREMENT PLAN
OF
U. S. TRUST CORPORATION
AS AMENDED AND RESTATED EFFECTIVE AS OF
JANUARY 1, 1997
ARTICLE I
PURPOSE
1.1 The Plan, as hereinafter set forth, represents a continuation of
the Board Members' Retirement Plan of U.S. Trust Corporation, as amended and
restated effective as of September 1, 1995 (a) to reflect the transfer of the
Plan to and the adoption of the Plan by the Corporation, and the Corporation s
assumption of and becoming solely responsible for all liabilities and
obligations of U.S. Trust Corporation under the Plan, effective immediately
before the "New Holdings Distribution", as defined in the Agreement and Plan of
Merger dated as of November 18, 1994 between The Chase Manhattan Corporation and
U.S. Trust Corporation (the "Merger Agreement"), and (b) to reflect the
Distribution and the "Merger" , as defined in the Merger Agreement.
1.2 The purpose of the Plan, as so continued, is to assist in
attracting and retaining individuals of superior talent, ability and
achievement, to serve as Board Members by providing a retirement income for
Board Members.
ARTICLE II
DEFINITIONS
When used herein, the following terms shall have the following
meanings:
2.1 "AFFILIATED COMPANIES" means (i) with respect to U.S. Trust
Corporation, each of its direct or indirect subsidiaries, and (ii) with respect
to the Corporation, each of its direct or indirect subsidiaries.
<PAGE> 2
2.2 "ANNUAL RETAINER" means the sum of (i) cash retainer fees paid for
service to the Board without regard to the number of meetings attended and (ii)
the Fair Market Value on the date of grant of the Common Shares issued to each
Board Member pursuant to the terms of the U.S. Trust Corporation Stock Plan for
Non-Employee Directors.
2.3 "BENEFICIARY" means the person or persons designated in accordance
with Article VI of the Plan to receive the amount, if any, payable upon the
death of an Eligible Board Member.
2.4 "BOARD" means (i) the Board of Directors, (ii) with respect to
periods prior to the Chase Merger Closing Date, the Board of Trustees of United
States Trust Company of New York, and with respect to periods after the Chase
Merger Closing Date, the Board of Trustees of New U.S. Trust Company of New
York, which will assume the name of "United States Trust Company of New York" as
of the time the New Holdings Distribution is effective, or (iii) the board of
directors of any other Affiliated Company of the Corporation (or, for periods
prior to the Chase Merger Closing Date, U.S. Trust Corporation), the members of
which board have been designated by the Board of Directors as being eligible for
participation in this Plan.
2.5 "BOARD MEMBER" means any individual who is a member of any Board.
2.6 "BOARD OF DIRECTORS" means (i) with respect to periods prior to the
Chase Merger Closing Date, the Board of Directors of U.S. Trust Corporation, and
(ii) with respect to periods after the Chase Merger Closing Date, the Board of
Directors of the Corporation.
2.7 "CHASE MERGER CLOSING DATE" shall mean the "Closing Date" as
defined in Section 1.2 of the Merger Agreement.
2.8 "COMMITTEE" means the persons appointed by the Board of Directors
to administer the Plan in accordance with Section 7.2.
2.9 "COMMON SHARES" shall mean (i) prior to the Chase Merger Closing
Date, the common shares ($1.00 par value per share) of U.S. Trust Corporation,
and (ii) after the Chase Merger Closing Date, the common shares ($1.00 par value
per share) of the Corporation.
2.10 "CORPORATION" means New USTC Holdings Corporation, which will
assume the name of "U.S. Trust Corporation" as of the time the New Holdings
Distribution is effective.
2.11 "ELIGIBLE BOARD MEMBER" means a Board Member who retires from
active service as such and meets both of the following conditions: (i)
retirement takes place on reaching age 72 or after completing fifteen years of
such service and (ii) at no time has he or she been an officer or an employee of
the Corporation, or any of their Affiliated Companies.
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<PAGE> 3
2.12 "FAIR MARKET VALUE" means, with respect to Common Shares on any
date of grant, the Average Market Value of one Common Share on such date or, if
such date is not a business day, on the business day next preceding such date.
For this purpose, the "Average Market Value" of one Common Share on any business
day shall mean the average of the mean between the per-share high and low prices
for the Common Shares during such day, as quoted on the NASDAQ National Market
System, or, if the Common Shares are not traded on such system, on such other
securities market or securities exchange on which such shares are traded as the
Committee shall determine.
2.13 "PLAN" means the Board Members' Retirement Plan of U.S. Trust
Corporation as set forth herein and as amended and restated from time to time.
2.14 "RETIREMENT BENEFIT" means the benefit described in Article III of
the Plan.
ARTICLE III
RETIREMENT BENEFITS
3.1 An Eligible Board Member upon retirement from active service as a
Board Member shall receive an annual Retirement Benefit equal to the amount of
the Annual Retainer payable to such Board Member during the last full year of
such active service, which shall be payable for the period set forth in Article
IV.
3.2 The Retirement Benefit shall be payable in four quarterly
installments on the first business day of the month following the end of each
calendar quarter, with the first and last such payment adjusted where
appropriate to reflect the number of full months for which such benefit has been
earned.
ARTICLE IV
DURATION OF RETIREMENT BENEFITS
4.1 If an Eligible Board Member retires at age 72 having served as such
for a minimum of 10 years, the Retirement Benefit shall be payable for life.
4.2 If an Eligible Board Member retires at age 72 having served as such
for less than 10 years, the Retirement Benefit shall be payable for a period
equal to the number of whole years and whole months of such service or for life,
whichever is shorter.
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<PAGE> 4
4.3 If an Eligible Board Member retires prior to reaching age 72 having
served a minimum of 15 years, the Retirement Benefit shall be payable for a
period equal to the number of whole years and whole months of such service or
for life, whichever is shorter.
ARTICLE V
SOURCE OF PAYMENT
5.1 All payments of Retirement Benefits hereunder shall be paid from
the general funds of the Corporation, and no special or separate fund shall be
established or other segregation of assets made to assure such payments;
provided, however, that the Corporation may establish a bookkeeping reserve to
meet its obligations hereunder. Nothing contained in the Plan, and no action
taken pursuant to the provisions of the Plan, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Corporation
or the Committee, and any Board Member or other person. An Eligible Board Member
shall have the status of a general unsecured creditor of the Corporation with
respect to his or her right to receive any payment under the Plan.
ARTICLE VI
DESIGNATION OF BENEFICIARIES
6.1 Each Board Member who participates in the Plan shall file with the
Committee a written designation of one or more persons as the Beneficiary who
shall be entitled to receive the amount, if any, payable under the Plan upon his
or her death. A Board Member may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any previously designated
Beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Board Member's death, and in no event
shall it be effective as of the date prior to such receipt.
6.2 If no such Beneficiary designation is in effect at the time of a
Board Member's death, or if no designated Beneficiary survives the Board Member,
or if such designation conflicts with law, the Board Member's estate shall be
deemed to have been designated as his or her Beneficiary and shall receive the
payment of the amount, if any, payable under the Plan upon his or her death. If
the Committee is in doubt as to the right of any person to receive such amount,
the Committee may retain such amount, without liability for any interest
thereon, until the rights thereto are determined, or the Committee may pay such
amount into any court of
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<PAGE> 5
appropriate jurisdiction and such payment shall be a complete discharge of the
liability of the Corporation therefor.
ARTICLE VII
ADMINISTRATION OF THE PLAN
7.1 The Plan shall be administered by the Committee which shall have
full power and authority to interpret and construe the Plan, to make all
determinations considered necessary or advisable for the administration of the
Plan and the calculation of the amount of benefits payable thereunder, and to
review claims for benefits under the Plan. The Committee's interpretations and
constructions of the Plan and its decisions or actions thereunder shall be
binding and conclusive on all persons for all purposes.
7.2 The Committee shall be composed of at least three Board Members who
shall be appointed by the Board of Directors from among Board Members who are
disqualified from becoming Eligible Board Members because of their failure to
meet the condition set forth in Section 2.11(ii). If at any time there are less
than three such Board Members, additional members of the Committee shall be
appointed from among those Board Members who have never participated in the Plan
or, in the absence of any such Board Members, from among any senior officers of
the Corporation or any of its Affiliated Companies.
7.3 No member of the Committee shall be personally liable by reason of
any contract or other instrument executed by such member or on his or her behalf
in his or her capacity as a member of the Committee nor for any mistake of
judgment made in good faith, and the Corporation shall indemnify and hold
harmless, each member of the Committee and each other employee, officer,
director or trustee of the Corporation or any of its Affiliated Companies to
whom any duty or power relating to the administration or interpretation of the
Plan may be allocated or delegated, against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement of a claim with
the approval of the Board of Directors) arising out of any act or omission to
act in connection with the Plan unless arising out of such person's own fraud or
bad faith.
ARTICLE VIII
AMENDMENT AND TERMINATION
8.1 The Plan may be amended, suspended or terminated, with prospective
or retroactive effect, in whole or in part, by the Board of Directors without
the consent of any Board Member or Beneficiary. The Committee may adopt any
amendment which may be
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<PAGE> 6
necessary or appropriate to facilitate the administration, management and
interpretation of the Plan or to conform the Plan thereto, provided any such
amendment does not have a material effect on the currently estimated cost to the
Corporation of maintaining the Plan. No such amendment, suspension or
termination shall retroactively impair or otherwise adversely affect the rights
of any Eligible Board Member to benefits under the Plan which have arisen prior
to the date of such action, as determined by the Committee in its sole
discretion.
ARTICLE IX
GENERAL PROVISIONS
9.1 The Plan shall be binding upon and inure to the benefit of the
Corporation and its successors and assigns and the Eligible Board Member, his or
her successors, assigns, designees and estate. The Plan shall also be binding
upon any successor corporation or organization succeeding to substantially all
of the assets and business of the Corporation, but nothing in the Plan shall
preclude the Corporation from merging or consolidating into or with, or
transferring all or substantially all of the assets to, another corporation
which assumes the Plan and all obligations of the Corporation hereunder. The
Corporation agrees to make appropriate provision for the preservation of
Eligible Board Members' rights under the Plan in any agreement or plan which it
may enter into to effect any merger, consolidation, reorganization or transfer
of assets. Upon such a merger, consolidation, reorganization, or transfer of
assets and assumption, the term "Corporation" shall refer to such other
corporation and the Plan shall continue in full force and effect.
9.2 Neither the Plan nor any action taken hereunder shall be construed
as giving to any person the right to be proposed or elected as a director or
trustee of the Corporation or any of its Affiliated Companies.
9.3 The Corporation shall withhold from all amounts payable under the
Plan all federal, state, local or other taxes required pursuant to law to be
withheld with respect to such amounts.
9.4 An Eligible Board Member's rights to payments under the Plan shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Eligible Board Member or his or her Beneficiary.
9.5 If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to care for his or her affairs because of
illness, accident or legal incapacity, then, if the Committee so directs, such
amount may be paid to such person's spouse, child, or other relative, an
institution maintaining or having custody of such person, or any other person
deemed by the Committee to be a proper recipient on behalf of such person,
unless a prior claim
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<PAGE> 7
therefor has been made by a duly appointed legal representative of such person.
Any payment shall be a complete discharge of the liability of the Corporation
with respect to such payment.
9.6 All elections, designations, requests, notices, instructions, and
other communications from an Eligible Board Member, Beneficiary or other person
to the Committee required or permitted under the Plan shall be in such form as
is prescribed from time to time by the Committee, shall be mailed by first class
mail or delivered to such location as shall be specified by the Committee and
shall be deemed to have been given and delivered only upon actual receipt
thereof at such location.
9.7 The captions preceding the sections and articles hereof have been
inserted solely as a matter of convenience and shall not in any manner define or
limit the scope or intent of any provisions of the Plan.
9.8 The Plan shall constitute a mere promise by the Corporation to make
payments in the future of the benefits provided for herein. It is intended that
the arrangements reflected in this Plan be treated as unfunded for tax purposes.
9.9 The Plan shall be governed by the laws of the State of New York
from time to time in effect.
ARTICLE X
TERMINATION OF PLAN
10.1 Notwithstanding any other provision in this Plan to the contrary,
no Retirement Benefits shall be payable after December 31, 1996 to any person
other than to those Eligible Board Members who retired from active service as
Board Members prior to such date.
10.2 This Plan shall automatically terminate when all payments required
to be made hereunder with respect to the retirement benefit payable with respect
to each of the Eligible Board Members referred to in Section 10.1 have been
made.
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<PAGE> 1
EXHIBIT 10.12
BOARD MEMBERS' DEFERRED COMPENSATION PLAN
OF
U.S. TRUST CORPORATION
AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1997
-----
1. PURPOSE
The purpose of the Plan is to provide Eligible Board Members of the
Corporation and its Affiliated Companies with an opportunity to defer payment of
certain portions of their compensation, at their election, in accordance with
the provisions hereof. In addition, the Plan provides for annual amounts of
deferred compensation to be credited to Eligible Board Members for 1997 and
subsequent years, in the form of Phantom Share Units. The Plan also provides for
the payment of benefits to Eligible Board Members on December 31, 1996, in
substitution for their projected benefits under the Retirement Plan determined
as of that date.
2. DEFINITIONS
As used herein, the following terms shall have the following meanings:
"ACCOUNT" shall mean the Account established for a Participant pursuant
to Section 6.
"AVERAGE MARKET VALUE" shall mean, with respect to one Common Share as
of any date or with respect to any period, the average of the mean between the
per-share high and low prices for the Common Shares on such date, or on each
trading day during such period, as quoted on the Nasdaq National Market System,
or, if the Common Shares are not traded on such system, on such other securities
market or securities exchange on which such shares are traded as the Committee
shall determine.
"BENEFICIARY" shall mean the person or persons designated by a
Participant in accordance with Section 9 to receive any amount, or any Common
Shares, payable under the Plan by reason of his or her death.
"BOARD" shall mean (i) the Board of Directors, (ii) the Board of
Directors of United States Trust Company of New York, or (iii) the board of
directors of any other direct or indirect subsidiary of the Corporation, the
members of which board have been designated by the Board of Directors as being
eligible for participation in this Plan.
<PAGE> 2
"BOARD OF DIRECTORS" shall mean the Board of Directors of the
Corporation.
"BUSINESS DAY" shall mean any day on which Common Shares are traded on
the Nasdaq National Market System or, if Common Shares are not traded on such
system, on such other securities market or securities exchange on which such
shares are traded as the Committee shall determine.
"CHASE MERGER AGREEMENT" shall mean the Agreement and Plan of Merger
dated as of November 18, 1994 between The Chase Manhattan Corporation and the
Corporation.
"CHASE MERGER CLOSING DATE" shall mean the "Closing Date", as defined
in Section 1.2 of the Chase Merger Agreement.
"COMMITTEE" shall mean the persons appointed by the Board of Directors
to administer the Plan in accordance with Section 12.
"COMMON SHARES" shall mean the common shares ($1.00 par value per
share) of the Corporation.
"CORPORATION" shall mean U.S. Trust Corporation.
"ELIGIBLE BOARD MEMBER" shall mean, as of any date of reference, any
individual who, on such date, is a member of any Board and is entitled to
receive compensation for services rendered in such capacity.
"ELIGIBLE COMPENSATION" shall mean, with respect to any Eligible Board
Member for any Plan Year, all fees payable to such Board Member during such year
for attendance at meetings of any Board or committees thereof, and all fees
payable to such Board Member during such year by way of retainer for service as
a member or chairman of any Board or committees thereof regardless of the number
of meetings attended ("Retainer Fees"). Notwithstanding the foregoing, the term
"Eligible Compensation" shall not include any compensation payable to an
Eligible Board Member in a form other than cash.
"PARTICIPANT" shall mean any Eligible Board Member or former Eligible
Board Member for whom an Account has been established, and is being maintained,
pursuant to Section 6.
"PHANTOM SHARE UNIT" or "PSU" shall mean a unit of measurement
equivalent to one Common Share, with none of the attendant rights of a holder of
such share, including, without limitation, the right to vote such share and the
right to receive dividends thereon, except to the extent otherwise specifically
provided herein.
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"PLAN" shall mean the Board Members' Deferred Compensation Plan of U.S.
Trust Corporation, as set forth herein and as amended from time to time.
"PLAN YEAR" shall mean the calendar year.
"PRIOR PLAN" shall mean the Board Members' Deferred Compensation Plan
of U.S. Trust Corporation, as in effect from time to time prior to the Chase
Merger Closing Date.
"RETIREMENT PLAN" shall mean the Board Members' Retirement Plan of U.S.
Trust Corporation, as in effect on December 31, 1996.
3. DEFERRAL ELECTIONS
An Eligible Board Member may elect to have payment of any part or all
of his or her Eligible Compensation for any Plan Year deferred, and to have
payment of such portion made under the terms of this Plan. Any such election
shall be made in accordance with the following rules:
(a) A deferral election shall be made in writing, on a form provided by
the Committee for such purpose.
(b) In the election form, the Eligible Board Member (i) shall specify,
by percentage (which must be an even multiple of 5%), the portion of his or her
Eligible Compensation the Eligible Board Member wishes to defer hereunder (the
amounts so deferred are hereinafter referred to as the Eligible Board Member's
"Deferred Amounts"), and (ii) shall specify, by percentage (which must be an
even multiple of 5%), the portions of the Eligible Board Member's Deferred
Amounts that he or she wishes to have allocated, respectively, to the PSU
Portion and to the Interest Portion of the Account established for the Eligible
Board Member pursuant to Section 6. At least 50% of the Eligible Board Member's
Deferred Amounts for each Plan Year must be allocated to the PSU Portion of such
Account.
(c) An Eligible Board Member's election to defer Eligible Compensation
for any Plan Year beginning on or after January 1, 1995 and before January 1,
1998 shall be filed with the Committee by no later than June 30 of the preceding
Plan Year. An Eligible Board Member's election to defer Eligible Compensation
for any Plan Year beginning on or after January 1, 1998 shall be filed with the
Committee by no later than December 15 of the preceding Plan Year.
(d) Notwithstanding the provisions of paragraph (b) above, a newly
elected Eligible Board Member may make an initial deferral election hereunder
with respect to Eligible Compensation for the Plan Year in which he or she is
first elected to serve as a member of any Board (and, if so elected after June
30 of any such year prior to 1997, for the next following Plan Year) by filing
his or her election form with the Committee by no later than 30 days after the
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date on which he or she commences to serve as a member of such Board. Any
deferral election so made shall be effective only with respect to Eligible
Compensation earned for services performed after the date on which the Eligible
Board Member's initial deferral election has been filed with the Committee.
(e) Any deferral election made by an Eligible Board Member with respect
to his or her Eligible Compensation for a Plan Year, and any election made
hereunder as to the allocation of the Deferred Amounts for such year to the PSU
Portion and the Interest Portion of his or her Account, shall be irrevocable.
4. CONVERTED RETIREMENT PLAN BENEFIT
As of January 1, 1997, there shall be credited to the PSU Portion of
the Account maintained for each person who is an Eligible Board Member on that
date, an amount equal to such Eligible Board Member's Converted Retirement Plan
Benefit. An Eligible Board Member's "Converted Retirement Plan Benefit" shall
mean the lump-sum actuarial present value of his or her Accrued Retirement
Benefit under the Retirement Plan, determined as of December 31, 1996, using
an assumed interest rate of 7.5% per annum, compounded annually, and the 1983
Group Annuity Mortality Table For Males to determine post-retirement life
expectancy. A Participant's "Accrued Retirement Benefit" shall mean a single
life annuity payable commencing at age 72 in equal annual amounts, with the
amount of each such annual payment equal to (i) $29,000, multiplied by (ii) a
fraction the numerator of which is the Participant's number of years of service
as an Eligible Board Member as of December 31, 1996, and the denominator of
which is the number of years of service as an Eligible Board Member the
Participant would have at the date he or she attains age 72 if he or she
continued to serve as an Eligible Board Member until that date.
5. ANNUAL SUPPLEMENTAL CREDIT
As of February 28, 1997, and as of the last day of February of each
Plan Year thereafter, an amount equal to $5,000 shall be credited to the PSU
Portion of the Account maintained for each person who on such date is a member
of the Board of Directors and is an Eligible Board Member.
6. ACCOUNTS
For each Eligible Board Member who has made a deferral election under
Section 3 or who is entitled to be credited with any amount under Section 4 or
5, there shall be established on the books and records of the Corporation, for
bookkeeping purposes only, a separate Account to reflect such Eligible Board
Member's interest under the Plan. The Account so established shall be maintained
in accordance with the following provisions:
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<PAGE> 5
(a) The Account established for each Participant shall consist of two
sub-accounts referred to herein, respectively, as the "PSU Portion" and the
"Interest Portion".
(b) As of the Chase Merger Closing Date, the Interest Portion of each
Participant's Account shall be credited with an amount equal to the balance,
determined as of the close of business on the day preceding the Chase Merger
Closing Date, of the Interest Portion of the Account maintained for the
Participant under the Prior Plan, and the PSU Portion of each Participant's
Account shall be credited with a number of PSU's equal to the number of PSU's
included in the balance, determined as of the close of business on the day
preceding the Chase Merger Closing Date, of the PSU Portion of the Account
maintained for the Participant under the Prior Plan.
(c) As of the Effective Time (as defined in Section 1.3 of the Chase
Merger Agreement), the number of PSU's credited to the PSU Portion of a
Participant's Account hereunder pursuant to (b) above shall be adjusted so as to
equal the number of such PSU's determined by dividing (i) the product of (A) the
number of such PSU's multiplied by (B) the Average Market Value of one common
share of U.S. Trust Corporation (as then constituted) during the 30 day period
ending on the day immediately preceding the Chase Merger Closing Date, by (ii)
the amount representing the 10 day average of the daily average of the high bid
and low asked prices for one common share of the Corporation in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated on a "when-issued" basis on each of the 10 trading days immediately
preceding the Chase Merger Closing Date.
(d) The PSU Portion and the Interest Portion of each Participant's
Account shall be credited with amounts equal to the portions of the
Participant's Deferred Amounts for each Plan Year (but only for periods
subsequent to the Chase Merger Closing Date, in the case of Deferred Amounts for
the Plan Year beginning on January 1, 1995) that the Participant has elected
under Section 3 hereof (or under Section 3 of the Prior Plan) to have allocated
to such Portions. Such amounts shall be so credited as of the first day of the
calendar month following the month in which the amounts in question would have
been paid to the Participant had the Participant not elected to have payment of
such amounts deferred.
(e) The PSU Portion of a Participant's Account shall be credited with
such amounts, and as of such dates, as required pursuant to the provisions of
Sections 4 and 5.
(f) The PSU Portion and the Interest Portion of a Participant's Account
shall be adjusted to reflect all additional PSU's, interest and Earnings (as
defined in paragraph (c) of Section 8) to be credited to such Portions pursuant
to Section 8, and all payments made with respect to such Portions pursuant to
Section 9.
(g) A Participant's interest in his or her Account shall be fully
vested and nonforfeitable at all times.
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7. CONVERSION TO PSU'S
Amounts credited to the PSU Portion of a Participant's Account pursuant
to paragraphs (d) and (e) of Section 6 (and any interest credited thereon
pursuant to paragraph (b) of Section 8) shall be converted into (and after such
conversion shall be reflected in such Portion as) a number of Phantom Share
Units ("PSU's"). The conversion shall be made in accordance with the following
rules.
(a) Amounts so credited shall be converted as of the following dates
(the date for the conversion of each such amount is hereinafter referred to as
the "Conversion Date"):
(i) Except as provided in (ii) below, the Conversion Date
for any amount so credited shall be the same date as the date as of
which such amount is so credited.
(ii) In the case of any Eligible Board Member who is first
elected to serve as a Member of any Board during any Plan Year
beginning on or after January 1, 1995 but before January 1, 1997, the
Conversion Date for any amounts so credited with respect to his or her
Deferred Amounts for such Plan Year and, if so elected after June 30 of
such year, for the next following Plan Year, shall be the later of (A)
the date as of which such amount is so credited, or (B) the first day
of the month following the expiration of six months from the date on
which the Eligible Member's initial deferral election was filed with
the Committee pursuant to Section 3(d).
(b) The number of PSU's into which any amount credited to the PSU
Portion of a Participant's Account (and any interest credited thereon under
paragraph (b) of Section 8) is to be converted shall be determined by dividing
(i) the dollar value of such amount by (ii) the Average Market Value of one
Common Share on the Conversion Date for such amount or, if such Conversion Date
is not a Business Day, on the Business Day next preceding such Conversion Date.
8. CREDITING OF DIVIDEND EQUIVALENTS AND EARNINGS
Until payment with respect to a Participant's Account has been made in
full in accordance with Section 9, the PSU Portion of a Participant's Account
shall be credited with additional PSU's or interest, and the Interest Portion of
the Participant's Account shall be credited with Earnings, with respect to
periods beginning on and after July 1, 1996, in accordance with the following
provisions:
(a) As of each date on which the Corporation pays a dividend on its
Common Shares ("Dividend Payment Date") the PSU Portion of each Participant's
Account shall be credited with additional PSU's, the number of which shall be
determined by first (i) multiplying the number
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<PAGE> 7
of PSU's standing to the Participant's credit on the date such dividend was
declared by the per-share dollar amount of the dividend so paid, and then (ii)
dividing the resulting amount by the Average Market Value of one Common Share on
the Dividend Payment Date.
(b) If, as of the last day of any calendar month, any part of the
balance of the PSU Portion of a Participant's Account has not yet been converted
into PSU's in accordance with Section 7, such part of the balance shall be
credited, as of such last day, with interest computed at the Prime Rate (as
hereinafter defined).
(c) As of the last day of each calendar month, each part of the balance
of the Interest Portion of a Participant's Account for which a separate Earnings
Crediting Option (as hereinafter defined) is in effect pursuant to the
Participant's election hereunder shall be credited with an amount determined by
multiplying such part of the balance by a percentage corresponding to the
Applicable Rate of Return (as hereinafter defined) for such month under such
Earnings Crediting Option. The amount so credited (which may be positive or
negative depending on whether the Applicable Rate of Return for the month is
positive or negative) is referred to herein as "Earnings".
(d) For purposes of this Section 8, the term "Earnings Crediting
Option" shall mean, as of any date of reference on or after July 1, 1996, any
one of the following: the S&P 500 Index, the Lehman Bros. Government/Corporate
Bond Index, the IBC's Money Fund Report First Tier Average, and the UST Prime
Rate.
Notwithstanding the foregoing, the Committee may at any time, in its
sole discretion, determine (i) that any option referred to in the preceding
paragraph shall cease to constitute an Earnings Crediting Option for purposes of
the Plan, or (ii) that any other index or hypothetical investment fund or
referenced rate of return shall constitute an Earnings Crediting Option for
purposes of the Plan. Participants shall be notified in writing, at least 45
days in advance, of any change in the Plan's Earnings Crediting Options.
(e) The "Applicable Rate of Return" for any month shall mean (i) in the
case of the S&P 500 Index, the percentage, as determined by the Committee, by
which (A) the value of such Index as of the last business day of such month, as
adjusted to reflect all income earned for such month on the securities included
in such Index, exceeds, or is less than, (B) the value of such Index as of the
last business day of the immediately preceding month, determined without taking
such adjustment into account; (ii) in the case of the Lehman Bros.
Government/Corporate Bond Index, the percentage, as determined by the Committee,
by which the value of such Index as of the last Business Day of such month,
exceeds, or is less than, the value of such Index as of the last Business Day of
the immediately preceding month; (iii) in the case of the IBC's Money Fund
Report First Tier Average, the rate of return corresponding to the 7-day
compounded yield for such Average, for the period ending on, or most recently
prior to, the last day of such month; (iv) in the case of the UST Prime Rate
Option, the rate of return corresponding to the prime rate
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<PAGE> 8
as quoted by United States Trust Company of New York on the last Business Day of
such month; and (v) in the case of any other Earnings Crediting Option, the rate
of return applicable for such month, as determined by the Committee in its sole
discretion.
(f) A Participant may make elections with respect to the Earnings
Crediting Options that are to apply on and after July 1, 1996 with respect to
the Interest Portion of his or her Account, in accordance with the following
rules:
(i) a Participant may elect to have any part or all of the
balance of the Interest Portion credited with Earnings under any
Earnings Crediting Option available under the Plan at the time of his
or her election.
(ii) each Participant for whom an Account was being
maintained on May 15, 1996 shall make an initial election as to the
Earnings Crediting Options that are to apply with respect to the
Interest Portion of his or her Account on and after July 1, 1996. Such
election shall be made in writing, on a form provided by the Committee
for such purpose, and such form shall be filed with the Committee by no
later than June 14, 1996. In such election form, the Participant shall
specify, by percentages (which must be even multiples of 5%) the
respective parts of the balance of the Interest Portion that are to be
credited with Earnings under each of the Earnings Crediting Options
designated by the Participant in such form. If a Participant fails to
make such election by June 14, 1996, the Participant shall be deemed to
have selected the UST Prime Rate as the Earnings Crediting Option to
apply to the entire balance of the Interest Portion.
(iii) each Eligible Board Member who becomes a Participant
after May 15, 1996 shall make an initial election as to the Earnings
Crediting Options that are to apply with respect to the Interest
Portion at the time the Participant first elects under Section 3 to
have any part of the Participant's Deferred Amounts for any Plan Year
allocated to the Interest Portion of his or her Account. Such election
shall be made in the election form in which the Participant makes his
or her election under Section 3 to have such part of the Participant's
Deferred Amounts for such Plan Year allocated to the Interest Portion.
In such election form, the Participant shall specify, by percentages
(which must be even multiples of 5%) the respective parts of the
balance of the Interest Portion of his or her Account that are to be
credited with Earnings under each of the Earnings Crediting Options
designated by the Participant in such form.
(iv) The Earnings Crediting Options selected in the initial
election made by a Participant under clause (ii) or (iii) above (or
deemed to have been selected by a Participant under clause (ii) above)
shall remain in effect (and shall apply to all additional amounts
allocated to the Interest Portion pursuant to any deferral elections
made by the Participant under Section 3 with respect to any subsequent
Plan Years) until the Participant changes his or her election in
accordance with clause (v) below.
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<PAGE> 9
(v) A Participant may change the Earnings Crediting Options
that are to apply with respect to the Interest Portion of his or her
Account by making a new election hereunder. Such new election shall be
made in writing, on a form which is provided by the Committee for this
purpose and which the Participant files with the Committee. In such
form, the Participant shall specify, in the same manner as described in
clause (ii) above, the respective parts of the balance of the Interest
Portion that are to be credited with Earnings under each of the
Earnings Crediting Options designated by the Participant in such form.
The Participant's new election shall become effective as of the first
day of the calendar month following the date on which such election is
filed with the Committee, provided that it is so filed at least 15 days
prior to such first day. The Earnings Crediting Options selected by the
Participant in such new election shall remain in effect until the
Participant again changes his election with respect to the Interest
Portion of his or her Account in accordance with this clause (v).
(g) The Interest Portion of a Participant's Account shall continue to
be credited with Earnings in accordance with the provisions of this Section 8
until all payments required to be made with respect to the Interest Portion
under Section 9 have been made. For this purpose, any payments made under
Section 9 with respect to the Interest Portion of the Participant's Account will
be deemed to have been made pro rata from the respective parts of the balance of
the Interest Portion that are subject to separate Earnings Crediting Options.
9. PAYMENT OF ACCOUNT BALANCES
Payment with respect to a Participant's Account shall be made in
accordance with the following provisions:
(a) The balances of the PSU Portion and the Interest Portion of a
Participant's Account shall become payable upon the Participant's ceasing to be
a member of any Board, for any reason.
(b) Unless at the time a Participant's Account becomes payable there is
in effect for the Participant an election under (c) below, payment with respect
to the PSU Portion and the Interest Portion of the Participant's Account shall
be made in the form of a single lump sum payment. Such payment shall consist of
(i) a number of Common Shares equal to the number of whole PSU's included in the
balance of the PSU Portion of the Participant's Account, and (ii) cash in an
amount equal to the sum of (A) the balance of the Interest Portion of the
Participant's Account and (B) an amount determined by multiplying the fractional
part, if any, of a PSU included in the balance of the PSU Portion of the
Participant's Account by the Average Market Value of one Common Share on the
Business Day immediately preceding the date on which such payment is to be made.
Such payment shall be made to the Participant or, if the Participant's Account
becomes payable by reason of his or her death, to the Participant's Beneficiary.
Payment shall be made on the last Business Day of February of the Plan Year
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<PAGE> 10
following the year in which the Participant's employment with the Corporation
and its Affiliated Companies terminates.
(c) A Participant may elect to have payment with respect to the PSU
Portion and the Interest Portion of his or her Account made to the Participant
in the form of a series of 10 annual installments, payable in the manner
described in Section 9(d). An election under this Section 9(c) shall be made in
writing, on a form that is provided by the Committee for such purpose and that
is filed by the Participant with the Committee at least one year prior to the
date on which the Participant ceases to be a member of the Board. Any election
so made may be revoked, and a new election may be made hereunder after such
revocation. Any such revocation or new election shall be made in the same
manner, and by the same date, as described in the second preceding sentence
ceases. No election or revocation of an election made hereunder shall be given
effect unless it is made within the time prescribed herein.
(d) If a Participant's Account becomes payable in the form of a series
of 10 annual installments pursuant to the Participant's election under Section
9(c), such payments shall be made in accordance with the following provisions:
(i) The first such installment payment shall be made on the
last Business Day of February of the Plan Year following the year in
which the Participant ceases to be a member of any Board, and the
remaining installment payments shall be made on the last Business Day
of February of each succeeding Plan Year.
(ii) Each installment payment to be made with respect to the
Interest Portion of a Participant's Account shall be made in cash, in
an amount determined by dividing (A) the balance of the Interest
Portion determined as of the last day of the Plan Year preceding the
year in which such payment is to be made, by (B) the number of
installment payments remaining to be made. The last such installment
payment shall include Earnings credited to the Interest Portion for the
month preceding the month in which such payment is made.
(iii) Each installment payment to be made with respect to the
PSU Portion of a Participant's Account shall be made partly in Common
Shares, and partly in cash. The number of shares to be included in each
such installment payment shall be equal to the number of whole PSU's
included in the quotient resulting from dividing (A) the total number
of PSU's included in the balance of the PSU Portion of the
Participant's Account as of the last day of the Plan Year preceding the
year in which such payment is to be made, by (B) the number of
installment payments remaining to be made; and the amount of cash to be
included in each such installment payment shall be determined by
multiplying (C) the fractional part of a PSU included in the
aforementioned quotient by (D) the Average Market Value of one Common
Share on the Business Day immediately preceding the date on which such
installment payment is to be made. The last such
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<PAGE> 11
installment payment shall include a number of Common Shares equal to
the whole number of any additional PSU's that are credited to the PSU
Portion of the Participant's Account under Section 8(a) during the
month preceding the month in which such payment is made, together with
cash (in an amount determined in the same manner as described in the
preceding sentence) for any fractional part of a PSU that is so
credited.
(e) If a Participant should die before receiving all payments required
to be made hereunder with respect to the Participant's Account, any payments
remaining to be made at the date of the Participant's death shall be made to the
Participant's Beneficiary as follows:
(i) Payment with resect to the Interest Portion of the
Participant's Account shall be made in the form of a single lump-sum
cash payment, in an amount equal to the balance of the Interest Portion
determined as of the last day of the month preceding the month in which
such payment is made.
(ii) Payment with respect to the PSU Portion of the
Participant's Account shall be made in the form of (A) a number of
Common Shares equal to the number of whole PSU's included in the
balance of the PSU Portion as of the last day of the month preceding
the month in which such payment is made, and (b) a cash payment in an
amount determined by multiplying (x) the fractional part of a PSU
included in such balance as of such last day, by (y) the Average Market
Value of one Common Share on the Business Day immediately preceding the
date on which such payment is made.
(iii) The payments to be made hereunder to the Participant's
Beneficiary shall be made as soon as practicable after the date of the
Participant's death.
(f) Notwithstanding any other provision in this Section 9 to the
contrary, payment with respect to any part or all of the Participant's Account
balances may be made to the Participant on any date earlier than the date on
which such payment is to be made pursuant to such other provisions of this
Section 9 if (i) the Participant requests such early payment and (ii) the
Committee, in its sole discretion, determines that such early payment is
necessary to help the Participant meet an "unforeseeable emergency" within the
meaning of Section 1.457-2(h)(4) of the federal income tax regulations. The
amount that may be so paid may not exceed the amount necessary to meet such
emergency.
(g) There shall be deducted from the amount of any payment otherwise
required to be made under the Plan any Federal, state and local taxes required
by law to be withheld with respect to such payment.
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<PAGE> 12
10. ADJUSTMENT OF PSU'S
In the event of any change in the Common Shares occurring after the
Chase Merger Closing Date by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or any rights offering to purchase such shares at a price substantially
below fair market value, or any similar change affecting the Common Shares, the
number and kind of shares represented by Phantom Share Units shall be
appropriately adjusted consistent with such change in such manner as the
Committee, in its sole discretion, may deem equitable to prevent substantial
dilution or enlargement of the rights granted to, or available for, the
Participants hereunder. The Committee shall give notice to each Participant of
any adjustment made pursuant to this Section 10 and, upon such notice, such
adjustment shall be effective and binding for all purposes of the Plan.
11. SOURCE, LISTING AND QUALIFICATION OF COMMON SHARES
The Common Shares distributed under the Plan may be shares held in the
treasury of the Corporation, or shares purchased on the open market by the
Corporation at such time or times and in such manner as it may determined. The
Corporation shall be under no obligation to acquire Common Shares for
distribution to Participants before payment in Common Shares is due.
The Corporation, in its discretion, may postpone the issuance,
delivery, or distribution of Common Shares with respect to any PSU's until
completion of such stock exchange listing or other qualification of such shares
under any state or federal law, rule or regulation as the Corporation may
consider appropriate, and may require any Participant or Beneficiary to make
such representations and furnish such information as it may consider appropriate
in connection with the issuance or delivery of the shares in compliance with
applicable laws, rules and regulations.
12. DESIGNATION AND CHANGE OF BENEFICIARY
Each Participant shall file with the Committee a written designation of
one or more persons as the Beneficiary who shall be entitled to receive any
amount, or any Common Shares, payable under the Plan by reason of his or her
death. A Participant may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any previously designated
Beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Participant's death, and in no event
shall it be effective as of a date prior to such receipt. If at the date of a
Participant's death, there is no designation of a Beneficiary in effect for the
Participant pursuant to the provisions of this Section 12, or if no Beneficiary
designated by the Participant in accordance with the provisions hereof survives
to receive any amount payable
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<PAGE> 13
under the Plan by reason of the Participant's death, the Participant's estate
shall be treated as the Participant's Beneficiary for purposes of the Plan.
13. PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS
If the Committee shall find that any Participant or Beneficiary to whom
any amount, or any Common Shares, is payable under the Plan is unable to care
for his or her affairs because of illness, accident or legal incapacity, then,
if the Committee so directs, such amount, or such Common Shares, may be paid to
such Participant's or Beneficiary's spouse, child or other relative, an
institution maintaining or having custody of such person, or any person deemed
by the Committee to be a proper recipient on behalf of such Participant or
Beneficiary, unless a prior claim therefor has been made by a duly appointed
legal representative of the Participant or Beneficiary.
Any payment made under this Section 12 shall be a complete discharge of
the liability of the Corporation with respect to such payment.
14. RIGHTS OF PARTICIPANTS
A Participant's rights and interests under the Plan shall be subject to
the following provisions:
(a) A Participant shall have the status of a general unsecured creditor
of the Corporation with respect to his or her right to receive any payment under
the Plan. The Plan shall constitute a mere promise by the Corporation to make
payments in the future of the benefits provided for herein. It is intended that
the arrangements reflected in this Plan be treated as unfunded for tax purposes.
(b) The Corporation may, but shall not be required to, purchase a life
insurance policy or policies, to assist it in funding any of its payment
obligations under the Plan. If any policy is so purchased, it shall, at all
times, remain subject to the claims of the Corporation's creditors. No
Participant or Beneficiary shall have any interest in, or rights with respect
to, such policy.
(c) A Participant's rights to payments under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or his or her Beneficiary.
15. ADMINISTRATION
The Plan shall be administered by a Committee composed of at least
three Board members who shall be appointed by the Board of Directors from among
Board members who are not Eligible Board Members. If at any time there are less
than three such Board members,
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<PAGE> 14
additional members of the Committee shall be appointed from among those Board
members who have never participated in the Plan or, in the absence of any such
Board members, from among any senior officers of the Corporation or any of its
direct or indirect subsidiaries.
All decisions, actions or interpretations of the Committee under the
Plan shall be final, conclusive and binding upon all parties.
No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith, and the Corporation shall indemnify and hold harmless each
member of the Committee, and each employee, officer, director or trustee of the
Corporation or any of its direct or indirect subsidiaries to whom any duty or
power relating to the administration or interpretation of the Plan may be
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the approval of the Board
of Directors) arising out of any act or omission to act in connection with the
Plan unless arising out of such person's own fraud or bad faith.
16. AMENDMENT OR TERMINATION
The Board of Directors may, with prospective or retroactive effect,
amend, suspend or terminate the Plan or any portion thereof at any time;
provided, however, that no amendment of the Plan shall deprive any Participant
of any rights to receive payment of any amounts due him or her under the terms
of the Plan as in effect prior to such amendment without his or her written
consent.
Any amendment that the Board of Directors would be permitted to make
pursuant to the preceding paragraph may also be made by the Committee where
appropriate to facilitate the administration of the Plan or to comply with
applicable law or any applicable rules and regulations of governing authorities
provided that the cost of the Plan to the Corporation is not materially
increased by such amendment.
17. SUCCESSOR CORPORATION
The obligations of the Corporation under the Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Corporation, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Corporation. The Corporation agrees that it will make
appropriate provision for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
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18. GOVERNING LAW
The provisions of the Plan shall be governed by and construed in
accordance with the laws of the State of New York.
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<PAGE> 1
Exhibit 10.18
EXECUTIVE DEFERRED COMPENSATION PLAN
OF
U.S. TRUST CORPORATION
AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1997
-----
1. PURPOSE
This document sets forth the Executive Deferred Compensation Plan of
U.S. Trust Corporation, as amended and restated effective July 1, 1997. The
provisions of the Plan as so amended and restated shall apply only to those
participants whose Termination of Employment (as hereinafter defined) occurs
after June 30, 1997. The rights of all former participants whose Termination of
Employment occurred on or prior to that date shall be governed solely by the
provisions of the Prior Plan (as hereinafter defined).
The purpose of the Plan is to provide Eligible Officers of the
Corporation with an opportunity to defer payment of certain portions of their
compensation, at their election, in accordance with the provisions herein set
forth.
The Plan is intended to constitute an unfunded plan of deferred
compensation for a "select group of management or highly compensated employees"
within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
2. DEFINITIONS
As used herein, the following terms shall have the following meanings:
"ACCOUNT" shall mean the account established and maintained for a
Participant pursuant to Section 6.
"AFFILIATED COMPANIES" shall mean United States Trust Company of New
York and each other direct or indirect subsidiary of the Corporation.
"AWARD" shall mean any award made to a Participant after July 1, 1997
under the Executive Incentive Plan of U.S. Trust Corporation or under the 1995
Annual Incentive Plan of U.S. Trust Corporation.
<PAGE> 2
"BENEFICIARY" shall mean the person or persons designated by a
Participant in accordance with Section 7 to receive any amount payable under the
Plan by reason of his or her death.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the
Corporation.
"CHANGE IN CONTROL" shall mean that any of the following has occurred:
(i) 20% or more of the common shares of the Corporation has
been acquired by any person (as defined by Section
3(a)(9) of the Securities Exchange Act of 1934) other
than directly from the Corporation;
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving
corporation is held by persons other than former
shareholders of the Corporation; or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors are persons who were not
nominated by the Board of Directors or the Executive
Committee of the Board of Directors in the most recent
proxy statement of the Corporation;
provided, however, that notwithstanding anything in the Plan to the contrary no
Change in Control shall be deemed to have occurred, and no right to receive any
amount that becomes payable upon a Change in Control as provided in Section 8
shall exist, to the extent that the Board of Directors so directs by resolution
adopted prior to the Change in Control, or not later than 45 days after the
Change in Control if the percentage of the Corporation's common shares acquired
or directors elected under clauses (i) or (iii) of the foregoing definition of
Change in Control shall be at least 20% but less than 25%. Any resolution of the
Board of Directors adopted in accordance with the provisions of this definition
directing that a Change in Control shall be deemed not to have occurred for
purposes of this Plan may be rescinded or countermanded at any time with or
without retroactive effect.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the Compensation and Benefits Committee of the
Board of Directors.
"CORPORATION" shall mean U.S. Trust Corporation.
"ELIGIBLE COMPENSATION" shall mean, with respect to any Eligible
Officer for any Plan Year beginning on or after January 1, 1998, (i) the portion
of any Award that becomes payable in cash to the Eligible Officer during such
year as reduced by the sum of (A) the amount of any
2
<PAGE> 3
ESOP Contribution to be made to the 401(k) Plan on behalf of the Eligible
Officer with respect to such Award, and (B) any amount that is contributed to
the 401(k) Plan on the Eligible Officer's behalf with respect to such Award
pursuant to the Eligible Officer's election under the applicable provisions of
the 401(k) Plan; (ii) the portion of any commissions (including any "trail"
commissions and any commission "overrides") that is payable in cash to the
Eligible Officer during such year (but, in the case of any amount payable during
such year with respect to commissions that were earned prior to the start of
such year, only to the extent of such of those commissions as were earned after
the date on which the Eligible Officer filed his or her deferral election for
such year under Section 3), exclusive of (A) the amount of any such commissions
that are included in the Eligible Officer's base compensation for any Plan Year
pursuant to the Eligible Officer's election, and (B) the amount by which any
such commissions are reduced with respect to any ESOP Contribution made to the
401(k) Plan on behalf of the Eligible Officer; and (iii) the portion of any
bonus or incentive payments that is payable in cash to the Eligible Officer
pursuant to any employment agreement between the Eligible Officer and the
Corporation or any of its Affiliated Companies, to the extent earned during such
year, regardless of the year in which such bonus or incentive payments are
payable.
"ELIGIBLE OFFICER" shall mean, with respect to any Plan Year beginning
on or after January 1, 1998, any officer of the Corporation or any of its
Affiliated Companies at or above the rank of Vice President, who, for the
immediately preceding Plan Year, had total compensation in excess of $160,000.
For this purpose an officer's "total compensation" for any Plan Year shall mean
the sum of (i) the aggregate amount reported as the officer's compensation from
the Corporation and its Affiliated Companies in Form W-2 filed with respect to
the officer for such year, for Federal income tax purposes; (ii) the aggregate
amount of all 401(k) Contributions and ESOP Contributions made on behalf of the
officer for such year under the 401(k) Plan; (iii) the aggregate amount of all
salary reduction contributions made on behalf of the officer for such year under
the Employees' Flexible Spending Plan of United States Trust Company of New York
and Affiliated Companies; and (iv) any portion of the officer's compensation for
such year that was deferred pursuant to the officer's election under Section 3.
For any Plan Year beginning on or after January 1, 1998, the $160,000 amount
referred to in the second preceding sentence shall be adjusted to the extent
necessary for such amount to equal the amount of the limitation on annual
compensation in effect for such year under section 401(a)(17) of the Code.
"401(K) PLAN" shall mean the 401(k) Plan and ESOP of United States
Trust Company of New York and Affiliated Companies.
"PARTICIPANT" shall mean, on or after July 1, 1997, (i) any person who
was a "Participant", as defined in the Prior Plan, on June 30, 1997, and whose
employment with the Corporation and all of its Affiliated Companies had not
terminated on or prior to that date, and (ii) any other Eligible Officer who
thereafter makes an election under Section 3 to defer any portion of his or her
Eligible Compensation for any Plan Year.
3
<PAGE> 4
"PLAN" shall mean the Executive Deferred Compensation Plan of U.S.
Trust Corporation, as set forth herein and as amended from time to time.
"PLAN YEAR" shall mean the calendar year.
"PRIOR PLAN" shall mean the Executive Deferred Compensation Plan of
U.S. Trust Corporation, as in effect from time to time prior to July 1, 1997.
"RETIREMENT" shall mean a Participant's Termination of Employment for
any reason other than death if, as of the date of the Participant's Termination
of Employment, (i) the Participant has attained age 65 or (ii) the sum of
Participant's age and the number of his or her "Years of Service", as defined in
the 401(k) Plan, is at least equal to 80. In addition, in the case of any
Participant who becomes entitled to receive benefit payments under the long-term
disability plan maintained by the Corporation or any of its Affiliated Companies
and who continues to receive payments under such plan throughout the entire
period ending on the date on which the Participant first meets the age, or the
age and service, requirements set forth in clause (i) or (ii) above, such
Participant shall be treated, for purposes of the Plan, as having terminated
employment with the Corporation and all of its Affiliated Companies as a result
of Retirement, on the first day of the month following the date on which the
Participant first meets such requirements. In applying clause (ii) above for
this purpose, the Participant's "Years of Service" shall include the number of
calendar years (or part thereof) during which the Participant has received
benefits payments under such long-term disability plan.
"TERMINATION OF EMPLOYMENT" shall mean the termination of a
Participant's employment with the Corporation and all of its Affiliated
Companies. For this purpose, a Participant who ceases active employment by
reason of disability but who becomes entitled to receive benefit payments under
the long-term disability plan maintained by the Corporation or any of its
Affiliated Companies shall be treated as continuing to be employed with the
Corporation and its Affiliated Companies until the earlier of (i) the date as of
which he or she ceases to receive benefit payments under such plan, or (ii) the
date as of which he or she is treated as having terminated employment as a
result of Retirement.
3. DEFERRAL OF ELIGIBLE COMPENSATION
With respect to each Plan Year, an Eligible Officer may elect to have
payment of any part or all of his or her Eligible Compensation for such year
deferred, and to have payment of such portion made under the terms of this Plan.
Any such election shall be made in accordance with the following rules:
(a) A deferral election shall be made in writing, on a form provided by
the Committee for such purpose.
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<PAGE> 5
(b) In the election form, the Eligible Officer shall specify, by amount
or percentage (which must be an even multiple of 5%), the portion of his or her
Eligible Compensation the Eligible Officer wishes to defer. The amount so
deferred is hereinafter referred to as the Eligible Officer's "Deferred Amount".
(c) An Eligible Officer's election to defer Eligible Compensation for
any Plan Year shall be filed with the Committee by no later than December 15 of
the preceding Plan Year, or by such other date during the preceding year as the
Committee may determine in its discretion, subject, however, to the limitation
in paragraph (e)(iii) below.
(d) Any deferral election made by an Eligible Officer with respect to
his or her Eligible Compensation for a Plan Year shall be irrevocable.
(e) Notwithstanding any other provision herein to the contrary, a
deferral election otherwise permitted to be made hereunder shall be subject to
the following requirements:
(i) no amount may be deferred pursuant to an Eligible
Officer's election unless such amount equals or exceeds $1,000;
(ii) no portion of an Eligible Officer's Eligible Compensation
may be deferred hereunder to the extent that any tax is required to be
withheld from such portion pursuant to applicable federal, state or
local law;
(iii) no portion of an Eligible Officer's Eligible
Compensation may be deferred hereunder to the extent that such portion
has been earned prior to the date on which the Eligible Officer's
election to defer such portion has been filed with the Committee; and
(iv) no amount may be deferred pursuant to an Eligible
Officer's election hereunder for a period of 12 months following the
Eligible Officer's receipt of a hardship withdrawal under Section 10.1
of the 401(k) Plan.
4. ACCOUNTS
For each Participant, there shall be established and maintained on the
books and records of the Corporation, for bookkeeping purposes only, a separate
Account to reflect the Participant's interest under the Plan. The Account so
established shall be maintained in accordance with the following provisions:
(a) As of July 1, 1997, the Lump Sum Payment Account and the
Installment Payment Account maintained for any Participant pursuant to Section 6
of the Prior Plan shall be combined into, and shall thereafter be maintained as,
a single Account for such Participant. The balance of such combined Account as
of July 1, 1997 shall be equal to the balances of the Lump Sum
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<PAGE> 6
Payment Account and the Installment Payment Account maintained for the
Participant under the Prior Plan, determined as of the close of business on June
30, 1997.
(b) A Participant's Account shall be credited with the Deferred Amount
that the Participant has specified in his or her election under Section 3(b) for
any Plan Year. Such amount shall be so credited to the Participant's Account as
of the first business day of the calendar month following the month in which the
amount in question would have been paid to the Participant had the Participant
not elected under Section 3 to have payment of such amount deferred under this
Plan.
(c) A Participant's Account shall be adjusted to reflect all Earnings
(as defined in paragraph (a) of Section 5) and all payments made with respect to
the Participant's Account pursuant to Section 6.
(d) A Participant's interest in his or her Account shall be fully
vested and nonforfeitable at all times.
5. CREDITING OF EARNINGS
Until payment with respect to a Participant's Account has been made in
full, the Participant's Account shall be credited with Earnings in accordance
with the following provisions:
(a) As of the last day of each calendar month, each part of the balance
of a Participant's Account for which a separate Earnings Crediting Option (as
hereinafter defined) is in effect pursuant to the Participant's election
hereunder shall be credited with an amount determined by multiplying such part
of the balance of the Participant's Account by a percentage corresponding to the
Applicable Rate of Return (as hereinafter defined) for such month under such
Earnings Crediting Option. The amount so credited (which may be positive or
negative depending on whether the Applicable Rate of Return for the month is
positive or negative) is referred to herein as "Earnings".
(b) For purposes of this Section 5, the term "Earnings Crediting
Option" shall mean, as of any date of reference, any one of the following: the
S&P 500 Index, the Lehman Bros. Government/Corporate Bond Index, and the IBC's
Money Fund Report First Tier Average.
Notwithstanding the foregoing, the Committee may at any time, in its
sole discretion, determine (i) that any option referred to in the preceding
paragraph shall cease to constitute an Earnings Crediting Option for purposes of
this Plan, or (ii) that any other index or hypothetical investment fund or
referenced rate of return shall constitute an Earnings Crediting Option for
purposes of this Plan. Participants shall be notified in writing, at least 45
days in advance, of any change in the Plan's Earnings Crediting Options.
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<PAGE> 7
(c) The "Applicable Rate of Return" for any month shall mean (i) in the
case of the S&P 500 Index, the percentage, as determined by the Committee, by
which (A) the value of such Index as of the last business day of such month, as
adjusted to reflect all income earned for such month on the securities included
in such Index, exceeds, or is less than, (B) the value of such Index as of the
last business day of the immediately preceding month, determined without taking
such adjustment into account; (ii) in the case of the Lehman Bros.
Government/Corporate Bond Index, the percentage, as determined by the Committee,
by which the value of such Index as of the last business day of such month,
exceeds, or is less than, the value of such Index as of the last business day of
the immediately preceding month; (iii) in the case of the IBC's Money Fund
Report First Tier Average, the rate of return corresponding to the 7-day
compounded yield for such Average, for the period ending on, or most recently
prior to, the last business day of such month; and (iv) in the case of any other
Earnings Crediting Option, the rate of return applicable for such month, as
determined by the Committee in its sole discretion.
(d) A Participant may make elections with respect to the Earnings
Crediting Options that are to apply with respect to his or her Account in
accordance with the following rules:
(i) a Participant may elect to have any part or all of the
balance of such Account credited with Earnings under any Earnings
Crediting Option available under the Plan at the time of his or her
election.
(ii) in the case of any Participant for whom an Account or
Accounts were being maintained on June 30, 1997 pursuant to the
provisions of the Prior Plan, the Earnings Crediting Options in effect
with respect to the Participant's Account or Accounts on such date
shall continue to apply with respect to the Account maintained for the
Participant hereunder on and after July 1, 1997 (and shall apply to all
additional amounts credited to such Account pursuant to any elections
made by the Participant under Section 3 with respect to any subsequent
Plan Years) until the Participant changes his or her election as to the
Earnings Crediting Options for his or her Account in accordance with
clause (v) below.
(iii) each Eligible Officer who becomes a Participant at any
time after July 1, 1997 shall make an initial election as to the
Earnings Crediting Options that are to apply with respect to his or her
Account at the time the Participant first makes a deferral election
under Section 3. Such election shall be made in the election form in
which the Participant makes his or her deferral election under Section
3. In such election form, the Participant shall specify, by percentages
(which must be even multiples of 5%), the respective parts of the
balance of his or her Account that are to be credited with Earnings
under each of the Earnings Crediting Options designated by the
Participant in such form. If a Participant has failed to make a timely
election as to the Earnings Crediting Options that are to apply to his
or her Account prior to the date as of which an amount is first
credited to such Account, the Participant shall be deemed to have
selected the IBC's
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<PAGE> 8
Money Fund Report First Tier Average as the Earnings Crediting Option
to apply to the entire balance of such Account.
(iv) The Earnings Crediting Options selected (or deemed to have
been selected) by a Participant with respect to his or her Account
under clause (iii) above shall remain in effect for such Account (and
shall apply to all additional amounts credited to such Account pursuant
to any elections made by the Participant under Section 3 with respect
to any subsequent Plan Years) until the Participant changes his or her
election as to the Earnings Crediting Options for his or her Account in
accordance with clause (v) below.
(v) A Participant may change the Earnings Crediting Options
that are to apply with respect to the balance of his or her Account, or
with respect to any Deferred Amount to be credited to such Account for
any Plan Year pursuant to the Participant's election under Section 3,
by making a new election hereunder with respect to the balance of such
Account, or with respect to such Deferred Amount. Any such new election
shall be made in writing, on a form which is provided by the Committee
for such purpose and which the Participant files with the Committee. In
such form, the Participant shall specify, in the same manner as
described in clause (iii) above, the respective parts of the balance of
such Account, or portions of such Deferred Amount, that are to be
credited with Earnings under each of the Earnings Crediting Options
designated by the Participant in such form. Any new election made by a
Participant hereunder with respect to the balance of his or her Account
shall become effective as of the first day of the calendar month
following the date on which such election is filed with the Committee,
provided that it is so filed at least 15 days prior to such first day.
Any new election made by Participant hereunder with respect to a
Deferred Amount to be credited to such Account for any Plan Year shall
be effective as of the date such Deferred Amount is credited to such
Account under Section 4(b). The Earnings Crediting Options selected by
the Participant in such new election shall remain in effect with
respect to the Participant's Account until the Participant again
changes his or her election with respect to such Account in accordance
with this clause (v).
(e) If payment with respect to a Participant's Account is to be made in
form of annual installments, such Account shall continue to be credited with
Earnings in accordance with the provisions of this Section 5 until all payments
required to be made with respect to such Account have been made. For this
purpose, any such payments with respect to a Participant's Account shall be
deemed to have been made pro rata from the respective portions of the balance of
such Account that are subject to separate Earnings Crediting Options.
6. PAYMENT OF ACCOUNT BALANCES
Payment with respect to a Participant's Account shall be made in
accordance with the following provisions:
8
<PAGE> 9
(a) A Participant's Account shall become payable upon the Participant's
Termination of Employment for any reason.
(b) Unless at the time a Participant's Account becomes payable there is
in effect for the Participant an election under (c) below, payment with respect
to such Account shall be made in the form of a single lump sum cash payment.
Such payment shall be made to the Participant or, if the Participant's Account
becomes payable by reason of his or her death, to the Participant's Beneficiary.
Payment shall be made on the last business day of March of the Plan Year
following the year in which the Participant's Termination of Employment occurs.
The amount so payable shall be equal to the balance of the Participant's Account
determined as of the last day of February.
(c) A Participant may elect to have payment with respect to the balance
of his or her Account, or with respect to any percentage of such balance (which
must be an even multiple of 10%) as the Participant specifies in such election,
made to the Participant, or in the event of the Participant's death, to his or
her Beneficiary, in the form of a series of 10 annual installments, payable in
the manner described in Section 6(d), if the Participant's Account becomes
payable as a result of the Participant's Retirement, or as a result of the
Participant's death while he or she is still employed with the Corporation or
any of its Affiliated Companies but after the Participant has met the age, or
the age and service, requirements for eligibility for Retirement stated in the
definition of such term contained in Section 2. An election under this Section
6(c) shall be made in writing, on a form that is provided by the Committee for
such purpose and that is filed by the Participant with the Committee at least
one year prior to the date on which the Participant's Termination of Employment
occurs. Any election so made may be revoked, and a new election may be made
hereunder after such revocation. Any such revocation or new election shall be
made in the same manner, and by the same date, as described in the second
preceding sentence. No election or revocation of an election made hereunder
shall be given effect unless it is made within the time prescribed herein.
(d) If a Participant's Account becomes payable in the form of a series
of 10 annual installments pursuant to the Participant's election under Section
6(c), such payments shall be made in accordance with the following provisions:
(i) the first such installment payment shall be made on the
last business day of March of the Plan Year following the year in which
the Participant's Termination of Employment occurs, and the remaining
installment payments shall be made on the last business day of March of
each succeeding Plan Year.
(ii) the amount of each such installment payment shall be
determined by dividing (A) the balance of the Participant's Account
determined as of the last day of the Plan Year preceding the year in
which such payment is to be made, by (B) the number of installment
payments remaining to be made. The last such installment payment shall
9
<PAGE> 10
include Earnings credited to the Account for the month preceding the
month in which such payment is made.
(iii) if the Participant should die before receiving all
installment payments required to be made with respect to his or her
Account, any installment payments remaining to be made at the date of
the Participant's death shall be made to the Participant's Beneficiary
in the same form, at the same times, and in the same amounts, as such
payments would have been made to the Participant (A) if he or she had
not died, and (B), in the case of installment payments required to be
made to a Beneficiary due to the death of a Participant occurring
before the Participant had received any such payments, if the
Participant's employment had terminated as a result of Retirement on
the date of his or her death.
(e) Notwithstanding any previous provision in this Section 6 to the
contrary, payments with respect to a Participant's Account shall be subject to
the following special rules:
(i) in the case of any Participant for whom an election
under Section 8(e) of the Prior Plan was in effect on June 30, 1997 to
have payment with respect to his or her Account made in the form of 15
annual installments, payment with respect to such Participant's Account
upon his or her Retirement shall be made in the manner provided under
Section 8(e) of the Prior Plan; and interest shall be credited to the
unpaid balance of such Participant's Account in the manner provided
under Section 7(e) of the Prior Plan, in lieu of any Earnings credited
to such balance pursuant to Section 5 hereof.
(ii) in the case of any Participant for whom an Installment
Payment Account was being maintained as of June 30, 1997 pursuant to
Section 6 of the Prior Plan, and whose Termination of Employment occurs
after that date but prior to July 1, 1998 as a result of the
Participant's Retirement, or as a result of the Participant's death
while he or she is still employed with the Corporation or any of its
Affiliated Companies but after the Participant has met the age, or the
age and service, requirements for eligibility for Retirement stated in
the definition of such term contained in Section 2, payment in the form
of 10 annual installments, in the manner described in Section 6(d),
shall be made with respect to the portion of the Participant's Account
balance determined by multiplying the Participant's Account balance by
a fraction the numerator of which is the balance of the Participant's
Installment Payment Account as of June 30, 1997, and the denominator of
which is the sum of such balance and the balance, as of June 30, 1997,
of the Lump Sum Payment Account (if any) maintained for the Participant
under Section 6 of the Prior Plan. Payment with respect to the
remaining portion (if any) of such Participant's Account balance shall
be made in the form of a lump sum cash payment as provided in Section
6(b). Notwithstanding the foregoing, the provisions of this clause (ii)
shall not apply if at the time of such Participant's Termination of
Employment there is in effect for the Participant an election under
Section 6(c).
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<PAGE> 11
(iii) upon the occurrence of a Change in Control, the balance
of each Participant's Account shall become immediately due and payable.
Payment with respect to such balance shall be made to the Participant
or, if the Participant has died, to his or her Beneficiary, in the form
of a single lump sum cash payment. Payment shall be made as soon as
practicable after the occurrence of such Change in Control. The amount
so payable shall be equal to the balance of the Participant's Account
determined as of the last day of the month preceding the month in which
payment is made.
(f) Notwithstanding any other provision in this Section 6 to the
contrary, payment with respect to any part or all of the Participant's Account
balance may be made to the Participant or, if applicable, the Participant's
Beneficiary, on any date earlier than the date on which such payment is to be
made pursuant to such other provisions of this Section 6 if (i) the Participant,
or his or her Beneficiary, requests such early payment and (ii) the Committee,
in its sole discretion, determines that such early payment is necessary to help
the Participant, or his or her Beneficiary, meet an "unforeseeable emergency"
within the meaning of Section 1.457-2(h)(4) of the federal income tax
regulations. The amount that may be so paid may not exceed the amount necessary
to meet such emergency.
(g) There shall be deducted from the amount of any payment otherwise
required to be made under the Plan all Federal, state and local taxes required
by law to be withheld with respect to such payment.
7. DESIGNATION AND CHANGE OF BENEFICIARY
Each Participant shall file with the Committee a written designation of
one or more persons as the Beneficiary who shall be entitled to receive any
amount payable under the Plan by reason of his or her or her death. A
Participant may, from time to time, revoke or change his or her Beneficiary
designation without the consent of any previously designated Beneficiary by
filing a new designation with the Committee. The last such designation received
by the Committee shall be controlling; provided, however, that no designation,
or change or revocation thereof, shall be effective unless received by the
Committee prior to the Participant's death, and in no event shall it be
effective as of a date prior to such receipt. If at the date of a Participant's
death, there is no designation of a Beneficiary in effect for the Participant
pursuant to the provisions of this Section 7, or if no Beneficiary designated by
the Participant in accordance with the provisions hereof survives to receive any
amount payable under the Plan by reason of the Participant's death, the
Participant's estate shall be treated as the Participant's Beneficiary for
purposes of the Plan.
8. PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS
If the Committee shall find that any Participant or Beneficiary to whom
any amount is payable under the Plan is unable to care for his or her affairs
because of illness, accident or legal
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<PAGE> 12
incapacity, then, if the Committee so directs, such amount may be paid to such
Participant's or Beneficiary's spouse, child or other relative, an institution
maintaining or having custody of such person, or any person deemed by the
Committee to be a proper recipient on behalf of such Participant, unless a prior
claim therefor has been made by a duly appointed legal representative of the
Participant or Beneficiary.
Any payment made under this Section 8 shall be a complete discharge of
the liability of the Corporation with respect to such payment.
9. RIGHTS OF PARTICIPANTS
A Participant's rights and interests under the Plan shall be subject to
the following provisions:
(a) A Participant shall have the status of a general unsecured creditor
of the Corporation with respect to his or her right to receive any payment under
the Plan. The Plan shall constitute a mere promise by the Corporation to make
payments in the future of the benefits provided for herein. It is intended that
the arrangements reflected in this Plan be treated as unfunded for tax purposes,
as well as for purposes of Title I of ERISA.
(b) The Corporation may, but shall not be required to, purchase a life
insurance policy or policies, to assist it in funding any of its payment
obligations under the Plan. If any policy is so purchased, it shall, at all
times, remain subject to the claims of the Corporation's creditors. No
Participant or Beneficiary shall have any interest in, or rights with respect
to, such policy.
(c) A Participant's rights to payments under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or his or her Beneficiary.
(d) Neither the Plan nor any action taken hereunder shall be construed
as giving any Participant any right to be retained in the employment of the
Corporation or any of its Affiliated Companies.
10. ADMINISTRATION
The Plan shall be administered by the Committee. A majority of the
members of the Committee shall constitute a quorum. The Committee may act at a
meeting, including a telephone meeting, by action of a majority of the members
present, or without a meeting by unanimous written consent. In addition to the
responsibilities and powers assigned to the Committee elsewhere in the Plan, the
Committee shall have the authority, in its discretion, to establish from time to
time guidelines or regulations for the administration of the Plan, interpret the
Plan, and make all determinations considered necessary or advisable for the
administration of the Plan.
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<PAGE> 13
The Committee may delegate any ministerial or nondiscretionary function
pertaining to the administration of the Plan to any one or more officers of the
Corporation. All decisions, actions or interpretations of the Committee under
the Plan shall be final, conclusive and binding upon all parties.
No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith, and the Corporation shall indemnify and hold harmless each
member of the Committee, and each employee, officer, director or trustee of the
Corporation or any of its Affiliated Companies to whom any duty or power
relating to the administration or interpretation of the Plan may be delegated,
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with the approval of the Board of Directors)
arising out of any act or omission to act in connection with the Plan unless
arising out of such person's own fraud or bad faith.
11. AMENDMENT OR TERMINATION
The Board of Directors may, with prospective or retroactive effect,
amend, suspend or terminate the Plan or any portion thereof at any time;
provided, however, that no amendment of the Plan shall deprive any Participant
of any rights to receive payment of any amounts due him or her under the terms
of the Plan as in effect prior to such amendment without his or her written
consent.
Any amendment that the Board of Directors would be permitted to make
pursuant to the preceding paragraph may also be made by the Committee where
appropriate to facilitate the administration, management or interpretation of
the Plan or to comply with applicable law or any applicable rules and
regulations of governing authorities provided that the cost of the Plan to the
Corporation is not materially increased by such amendment.
Notwithstanding any other provision in this Plan to the contrary, the
Committee may terminate any Participant's participation in the Plan, and direct
that an immediate payment be made with respect to the balance of the
Participant's Account, if the Committee, in its sole discretion, determines that
such termination of participation and payment are necessary in order to preserve
the Plan's status as a plan of deferred compensation "for a select group of
management or highly compensated employees" within the meaning of the applicable
provisions of ERISA.
12. SUCCESSOR CORPORATION
The obligations of the Corporation under the Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of
13
<PAGE> 14
the Corporation, or upon any successor corporation or organization succeeding to
substantially all of the assets and business of the Corporation. The Corporation
agrees that it will make appropriate provision for the preservation of
Participants' rights under the Plan in any agreement or plan which it may enter
into or adopt to effect any such merger, consolidation, reorganization or
transfer of assets.
13. GOVERNING LAW
The provisions of the Plan shall be governed by and construed in
accordance with the laws of the State of New York.
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<PAGE> 1
Exhibit 10.19
EXECUTIVE INCENTIVE PLAN
OF
U. S. TRUST CORPORATION
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997
1. PURPOSE
The purpose of the Executive Incentive Plan of U.S. Trust Corporation
is to (i) encourage greater focus on performance among the key executives of
U.S. Trust Corporation and its Affiliated Companies by relating a significant
portion of their total compensation to the achievement of annual financial and
strategic objectives, and (ii) promote on the part of such executives an
increased level of ownership of the Common Shares of the Corporation by
providing for a significant portion of their awards under the Plan to be paid in
the form of the Corporation's Common Shares.
2. DEFINITIONS
As used herein, the following terms shall have the following meanings:
"AFFILIATED COMPANIES" shall mean United States Trust Company of New
York, and each other direct or indirect subsidiary of the Corporation.
"AVERAGE MARKET VALUE" shall mean, with respect to one Common Share as
of any date or with respect to any period, the mean between the per-share high
and low prices for the Corporation's Common Shares on such date, or the average
of the mean between such prices on each day during such period, as quoted on the
NASDAQ National Market System, or, if the Corporation's Common Shares are not
traded on such system, on such other securities market or securities exchange on
which such shares are traded as the Committee shall determine.
"AWARD" shall mean a payment earned by a Participant in accordance with
the provisions of the Plan.
"BENEFICIARY" shall mean the person or person designated by a
Participant in accordance with Section 11 to receive any amount, or any Common
Shares, payable under the Plan upon the Participant's death.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the
Corporation.
<PAGE> 2
"CHANGE IN CONTROL" shall mean that any of the following events has
occurred:
(i) 20% or more of the Corporation's Common Shares has been
acquired by any person (as defined by Section 3(a)(9) of the Securities
Exchange Act of 1934) other than directly from the Corporation;
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving corporation is
held by persons other than former shareholders of the Corporation; or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors are persons who were not nominated by the Board
of Directors or the Executive Committee of the Board of Directors in
the most recent proxy statement of the Corporation;
provided, however, that notwithstanding anything in the Plan to the contrary, no
Change in Control shall be deemed to have occurred, and no rights arising upon a
Change in Control as provided in Section 9 shall exist, to the extent that the
Board of Directors so directs by resolution adopted prior to the Change in
Control, or not later than 45 days after the Change in Control if the percentage
of Common Shares acquired or directors elected under clause (i) or (iii) of the
foregoing definition of Change in Control shall be at least 20% but less than
25%. Any resolution of the Board of Directors adopted in accordance with the
provisions of this definition directing that a Change in Control shall be deemed
not to have occurred for purposes of the Plan and that Section 9 shall not
become effective may be rescinded or countermanded at any time with or without
retroactive effect.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COMMITTEE" shall mean the Compensation and Benefits Committee of the
Board of Directors.
"COMMON SHARES" shall mean the common shares ($1.00 par value per
share) of the Corporation.
"CORPORATION" shall mean U.S. Trust Corporation.
"DETERMINED VALUE" shall mean (i) the highest price per Common Share
paid in connection with any Change in Control (including, without limitation,
prices paid in any subsequent merger or combination with any entity that
acquires control of the Corporation), or (ii) in the case of a Change in Control
occurring as a result of an event described in clause (iii) of the definition of
Change in Control contained in this Section 2, the Average Market Value of
-2-
<PAGE> 3
a Common Share during the 30-day period ending on the day preceding the
occurrence of such Change in Control.
"ESOP CONTRIBUTION" shall mean the ESOP Contribution as defined under
the 401(k) Plan.
"EXECUTIVE DEFERRED COMPENSATION PLAN" shall mean the Executive
Deferred Compensation Plan of U.S. Trust Corporation.
"401(K) PLAN" shall mean the 401(k) Plan and ESOP of United States
Trust Company of New York and Affiliated Companies.
"PARTICIPANT" shall mean an officer of the Corporation or any of its
Affiliated Companies who is selected to participate in the Plan.
"PLAN" shall mean the Executive Incentive Plan of U.S. Trust
Corporation, as set forth herein and as amended from time to time.
"PLAN YEAR" shall mean, initially, the period beginning on September 1,
1995 and ending on December 31, 1995, and thereafter, each calendar year.
"RESTRICTED UNIT" shall mean a unit of measurement equivalent to one
Common Share, with none of the attendant rights of a shareholder of such share,
including, without limitation, the right to vote such share and the right to
receive dividends thereon, except to the extent otherwise specifically provided
herein.
"VESTING DATE" shall mean, with respect to any Restricted Units granted
to a Participant hereunder, the date on which such Restricted Units become
vested, as provided in Section 6(d) or Section 9(e).
3. MAXIMUM NUMBER OF COMMON SHARES OF STOCK AVAILABLE FOR AWARDS
Notwithstanding any other provision of the Plan, the number of Common
Shares that may be distributed with respect to Restricted Units granted under
the Plan after January 1, 1997 (whether distributed under the Plan or under the
Deferred Restricted Unit Plan of U.S. Trust Corporation) shall be limited to the
sum of (i) 150,000 Common Shares, plus (ii) that number of Common Shares, out of
the total number of Common Shares approved prior to January 1, 1997 by the
Corporation's shareholders for the grant of Restricted Units hereunder that were
not covered by Restricted Units granted hereunder prior to January 1, 1997, plus
(iii) a number of Common Shares equal to the total number of additional
Restricted Units credited to Participants with respect to dividends paid on
Common Shares, as provided in Section 6(d)(ii). If any Restricted Units
initially granted or thereafter credited to a Participant shall be forfeited,
the
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<PAGE> 4
number of Common Shares no longer payable with respect to the Restricted Units
so forfeited shall thereupon be released and shall thereafter be available for
new grants of Restricted Units under the Plan. The limitation provided under
this Section 3 shall be subject to adjustment as provided in Section 7.
The Common Shares distributed under the Plan may be authorized and
unissued shares, shares held in the treasury of the Corporation, or shares
purchased on the open market by the Corporation at such time or times and in
such manner as it may determine. The Corporation shall be under no obligation to
acquire Common Shares for distribution to Participants before payment in Common
Shares is due.
4. PARTICIPATION
Participants in the Plan shall be limited to those officers of the
Corporation and its Affiliated Companies whom the Committee, in its sole
discretion, selects to participate in the Plan.
The Committee may select as a Participant for any Plan Year any officer
who, in the sole judgment of the Committee, is expected to make contributions
that are critical to the success of the Corporation and its Affiliated Companies
and to the growth of their businesses.
Any person who has been selected as a Participant for any Plan Year
shall continue to be a Participant in the Plan for each subsequent Plan Year
during the period of his or her employment, subject, however, to the Committee's
right to terminate such individual's participation in the Plan as of any Plan
Year commencing after the date on which the Committee makes its determination to
terminate such individual's participation.
5. AWARDS
Awards for any Plan Year beginning on or after January 1, 1997 shall be
made in accordance with the following provisions:
(a) Within such period of time after the start of the year as may be
permitted by the regulations issued under section 162(m) of the Code, the
Committee shall establish in writing (i) the corporate performance goal (the
"Performance Goal") that will apply in determining the Awards for the year, (ii)
the aggregate amount that will be available for Awards for the year if the
Performance Goal is achieved (the "Target Awards Pool"), and (iii) the
percentages of the Target Awards Pool that will in fact be available for Awards
for the year based on the level of achievement of the Performance Goal, which
percentages may be greater than 100% if the Performance Goal is exceeded and
less than 100% if the Performance Goal has not been fully achieved (the "Actual
Awards Pool").
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<PAGE> 5
(b) The Performance Goal to be established for the year shall be the
achievement of such level of Adjusted Earnings Per Share of the Corporation as
the Committee shall determine. The Corporation's "Adjusted Earnings Per Share"
for any year shall mean the Corporation's reported earnings per share for the
year as determined on a fully diluted basis, adjusted so as to eliminate the
effects of any (i) charges to earnings for any acquisitions, divestitures,
discontinuance of business operations, restructuring or any other special
charges that are separately disclosed in the Corporation's Annual Report for the
year, (ii) charges to earnings for the cumulative effect of any accounting
changes, and (iii) charges to earnings for any "extraordinary items" as
determined under generally accepted accounting principles.
(c) The Target Awards Pool to be established for the year shall be
determined by the Committee as a percentage or percentages of the aggregate base
salary earned for the year, while a Participant, of all Participants, either
individually or by categories of Participants, provided that the Committee may,
in its discretion, also apply such percentage or percentages to other current or
deferred compensation and determine the year for which such deferred
compensation shall be counted.
(d) As of the end of the Plan Year, the Committee shall determine the
extent to which the Performance Goal for the year has been met and, based
thereon, the amount of the Actual Awards Pool. The Committee shall not have any
discretion to increase the Actual Awards Pool, as so determined; but the
Committee may, in its discretion, reduce the amount of the Actual Awards Pool,
as so determined, to reflect any charges to earnings that were not taken into
account in determining the Corporation's Adjusted Earnings Per Share for the
year pursuant to Section 5(b)(i), (ii) or (iii), or to reflect any other events,
circumstances or factors which the Committee believes to be appropriate in
determining the total amount to be made available for Awards to Participants for
the year.
(e) After determining the Actual Awards Pool in accordance with Section
5(d), the Committee shall determine the amount of the Award, if any, earned for
the year by each Participant, in accordance with the following rules:
(i) In the case of any Participant who, on the last day of the
year, is the Chief Executive Officer of the Corporation or one of the
four highest compensated officers of the Corporation other than its
Chief Executive Officer (each such Participant is referred to
hereinafter as a "Covered Executive"), the Award payable to the Covered
Executive for the year shall be equal to (A) the portion of his or her
base salary taken into account in determining the Target Awards Pool
for the year, multiplied by (B) the percentage determined by dividing
(1) the amount of the Actual Awards Pool for the year as finally
determined under Section 5(d) by (2) the amount of the Target Awards
Pool for the year. The Committee shall not have any discretion to
increase the amount of any Covered Executive's Award, as so determined;
but the Committee may, in its discretion, reduce the amount of any
Covered Executive's Award, as so determined, to reflect the
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<PAGE> 6
Committee's evaluation of the Covered Executive's individual
performance or to reflect any other factors the Committee deems
appropriate in determining the amount of the Covered Executive's Award
for the year.
(ii) In the case of each Participant who is not a Covered
Executive, the amount of the Award, if any, earned by such Participant
for the year shall be determined by the Committee, in its discretion,
based on the level of such Participant's achievement of the goals and
objectives established for the Participant at the start of the year and
on such other factors as the Committee deems appropriate. The
individual goals for each such Participant for each Plan Year shall be
set, and such Participant's performance relative to such goals shall be
measured, by the Committee based upon the recommendations of the Chief
Executive Officer.
(iii) The Committee may, in its discretion, make Awards to
Participants in an aggregate amount less than the amount of the Actual
Awards Pool. The Committee may also, in its discretion, allocate any
portion of the Actual Awards Pool for use in making special additional
Awards to any Participant who is not a Covered Executive or to any
group of such Participants.
(iv) Notwithstanding any other provision herein to the
contrary, the amount of the Award payable to any Participant for any
year shall not exceed $2.5 million, as adjusted annually beginning in
1998 to reflect percentage increases in the Consumer Price Index.
(v) A Participant who terminates employment with the
Corporation and its Affiliated Companies prior to the end of any Plan
Year shall receive such portion of an Award, if any, for that year as
the Committee shall determine.
(f) All actions taken by the Committee hereunder in determining the
Awards payable to Participants for each year shall be reflected in the minutes
of the meetings of the Committee at which such actions were taken.
6. PAYMENT OF AWARDS
The amount payable hereunder to a Participant with respect to an Award
earned for any Plan Year shall be determined in accordance with the following
provisions:
(a) The amount payable with respect to a Participant's Award for any
Plan Year beginning on or after January 1, 1996, shall be the total amount of
the Award earned by the Participant, reduced by the amount of any ESOP
Contribution to be made on behalf of the Participant under the 401(k) Plan for
the "Plan Year" (as defined in the 401(k) Plan)
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corresponding to such Plan Year, with respect to the base salary of such
Participant that was taken into account in determining the Target Awards Pool
for that Plan Year.
(b) The amount payable with respect to a Participant's Award, as
determined under (a) above, shall be payable partly in cash and partly in the
form of Restricted Units (the portions so payable are hereinafter referred to,
respectively, as the "Cash Portion", and the "Restricted Units Portion", of the
Participant's Award), in such percentages as the Committee in its discretion
shall determine; provided, however, that the Restricted Units Portion shall be
equal to at least 25%, and shall not exceed 33-1/3%, of the total amount so
payable with respect to the Participant's Award. Notwithstanding the foregoing,
the aggregate number of Restricted Units granted with respect to Awards made to
Participants hereunder for any Plan Year shall not exceed 80,000 Restricted
Units. The 25% minimum and 33-1/3% maximum for the Restricted Units Portion of a
Participant's Award referred to in the second preceding sentence shall be
reduced in such manner as the Committee shall determine, in its discretion, to
the extent necessary to comply with the foregoing limitation.
(c) The number of Restricted Units to be granted to a Participant with
respect to the Restricted Units Portion of the Participant's Award shall be
determined by dividing the amount of the Restricted Units Portion by the Average
Market Value of one Common Share on the date on which the Committee makes its
determination of the Awards earned by Participants for the Plan Year in
question.
(d) The grant of Restricted Units with respect to the Restricted Units
Portion of a Participant's Award for any Plan Year shall be evidenced by a
written notice to the Participant specifying the number of Restricted Units
granted to the Participant, and the date of grant. In addition to such other
terms and conditions as the Committee may require in such notice, each grant of
Restricted Units to a Participant hereunder shall be subject to the following
terms and conditions:
(i) The Restricted Units covered by such grant shall become
vested on the fifth anniversary of the date of grant, or if earlier, on
the date of the Participant's death, permanent disability, or
retirement on or after the date on which the Participant attains age
65.
(ii) Until the Vesting Date for the Restricted Units covered
by such grant, additional Restricted Units shall be credited to the
Participant, with respect to the Restricted Units so granted, as of
each date on which the Corporation pays a dividend on its Common Shares
("Dividend Payment Date"). The number of additional Restricted Units to
be credited shall be determined by first multiplying (A) the sum of (1)
the number of Restricted Units covered by such grant, plus (2) the
total number of additional Restricted Units credited to the Participant
with respect to such Restricted Units prior to such Dividend Payment
Date, by (B) the per-share dollar amount of the dividend so paid,
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<PAGE> 8
and then, dividing the resulting amount by the Average Market Value of
one Common Share on the Dividend Payment Date. Any additional
Restricted Units credited to the Participant with respect to the
Restricted Units covered by such grant shall become vested on the
Vesting Date for the Restricted Units so granted.
(iii) If the Restricted Units covered by such grant become
vested, payment with respect to such Restricted Units, and with respect
to the additional Restricted Units credited to the Participant under
(ii) above in respect of such Restricted Units, shall be made as soon
as practicable after the Vesting Date for the Restricted Units so
granted, except as otherwise provided in (iv) below. Subject to
provisions of Section 6(f), payment shall be made in the form of a
single lump sum payment consisting of (A) a number of Common Shares
equal to the total number of whole Restricted Units that become vested
on such Vesting Date, and (B) a cash payment in an amount determined by
multiplying (1) the fractional part of a Restricted Unit that becomes
vested on such Vesting Date, by (2) the Average Market Value of one
Common Share on such Vesting Date.
(iv) To the extent that the Participant has elected, under
the applicable provisions of the Deferred Restricted Unit Plan of U.S.
Trust Corporation, to defer payment with respect to any Restricted
Units that become vested, the Corporation's obligation under this Plan
for making payment with respect to such Restricted Units shall be fully
discharged upon the crediting of such Restricted Units to the
Participant's account under the Deferred Restricted Unit Plan in
accordance with the applicable provisions of such plan.
(v) In the event the Participant's employment terminates for
any reason prior to the Vesting Date for the Restricted Units covered
by such grant, the Restricted Units covered by such grant, and any
additional Restricted Units credited to the Participant under (ii)
above with respect to such Restricted Units, shall be forfeited, except
to the extent the Committee in its discretion otherwise determines.
(e) The Cash Portion of a Participant's Award for any Plan Year shall
be paid in the form of a single lump sum cash payment as soon as practicable
after the end of such Plan Year, except to the extent that the Participant (i)
has elected, under the applicable provisions of the 401(k) Plan, to have any
part of such portion of such Award reduced, and to have an amount equal to such
part contributed to the 401(k) Plan on the Participant's behalf and/or (ii) has
elected, under the applicable provisions of the Executive Deferred Compensation
Plan, to defer any part of such portion of such Award.
(f) With respect to that part of the Cash Portion of any Award that is
subject to a Participant's election under the 401(k) Plan, an amount equal to
such part of the Cash Portion shall be contributed to the 401(k) Plan on behalf
of the Participant; and thereupon, the obligation
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<PAGE> 9
of the Corporation and its Affiliated Companies under this Plan with respect to
payment of such part of the Cash Portion of the Award shall be fully discharged.
However, no such contribution shall be made to the extent it would cause any
limitation applicable under the 401(k) Plan to be exceeded.
(g) With respect to that part of the Cash Portion of any Award that is
subject to a Participant's election under the Executive Deferred Compensation
Plan, the obligation of the Corporation and its Affiliated Companies under this
Plan with respect to payment of such part of the Cash Portion of the Award shall
be fully discharged upon the crediting of such part of the Cash Portion of the
Award to the Participant's account under the Executive Deferred Compensation
Plan in accordance with the applicable provisions of such plan.
(h) All liabilities in respect of the Cash Portion of Awards earned by
Participants under the Plan shall be discharged by the respective Affiliated
Companies employing such Participants.
7. CERTAIN ADJUSTMENTS TO PLAN SHARES
In the event of any change in the Common Shares by reason of any stock
dividend, recapitalization, reorganization, merger, consolidation, split-up,
combination or exchange of shares, or any rights offering to purchase Common
Shares at a price substantially below fair market value, or any similar change
affecting the Common Shares, the number and kind of shares represented by
Restricted Units shall be appropriately adjusted consistent with such change in
such manner as the Committee, in its discretion, may deem equitable to prevent
substantial dilution or enlargement of the rights granted to, or available for,
the Participants hereunder. The Committee shall give notice to each Participant
of any adjustment made pursuant to this Section and, upon such notice, such
adjustment shall be effective and binding for all purposes.
8. LISTING AND QUALIFICATION OF COMMON SHARES
The Corporation, in its discretion, may postpone the issuance,
delivery, or distribution of Common Shares pursuant to a grant of Restricted
Units until completion of such stock exchange listing or other qualification of
such shares under any state or federal law, rule or regulation as the
Corporation may consider appropriate, and may require any Participant or
Beneficiary to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the shares
in compliance with applicable laws, rules and regulations.
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9. CHANGE IN CONTROL
Notwithstanding any other provision in the Plan to the contrary (but
subject to the proviso contained in the definition of "Change in Control" in
Section 2), upon the occurrence of a Change in Control, the following provisions
shall apply.
(a) All Performance Goals and individual goals and objectives with
respect to the Plan Year in which the Change in Control occurs (the "Year of
Change") shall be deemed to have been attained to the full and maximum extent,
and the Actual Awards Pool for the Year of Change shall be determined by
multiplying the Target Awards Pool for such year by the highest percentage
thereof established by the Committee under Section 5(a)(iii) for determining the
amount of the Actual Awards Pool for such year.
(b) Unless another formula shall have been designated by the Committee
prior to the Change in Control, each Participant shall be allocated a portion of
the Actual Awards Pool for the Year of Change, as determined under (a) above,
equal to the amount of such Actual Awards Pool, multiplied by a fraction, the
numerator of which is the portion of the anticipated annual compensation of the
Participant which was taken into account by the Committee in determining the
Target Awards Pool for the Year of Change, and the denominator of which is the
sum of such amounts for all Participants.
(c) As soon as practicable following the Change in Control, all Awards
which under (a) above are deemed to have been earned to the full and maximum
extent upon the occurrence of the Change in Control shall be payable in full in
single cash lump sums, reduced by any taxes withheld pursuant to Section 10 and
by the amount of any ESOP Contributions to be made on behalf of Participants
under the 401(k) Plan for the Year of Change.
(d) No Awards payable in accordance with this Section shall be
forfeitable on account of a Participant's termination of employment upon or
following the Change in Control.
(e) All Restricted Units granted or credited to a Participant hereunder
that had not previously become vested shall become vested upon the occurrence of
the Change in Control.
(f) The Corporation shall make payment to each Participant with respect
to all of the Restricted Units standing to his or her credit under the Plan at
the time of the Change in Control. Payment to each Participant shall be made in
the form of a single lump sum payment, in an amount determined by multiplying
the aggregate number of Restricted Units then standing to the Participant's
credit by the Determined Value of one Common Share. All amounts payable to
Participants pursuant to this Section 9(f), reduced by any taxes withheld
pursuant to Section 10, shall be paid to such Participants as soon as
practicable following the Change in Control.
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<PAGE> 11
10. TAXES
The Corporation or any of its Affiliated Companies may make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of all federal, state and local taxes required by law to be withheld
with respect to amounts payable under the Plan including, but not limited to (i)
deducting the amount so required to be withheld from any other amount then or
thereafter payable to a Participant or Beneficiary, and/or (ii) requiring a
Participant or Beneficiary to pay to the Corporation or any of its Affiliated
Companies the amount so required to be withheld as a condition of the issuance,
delivery, or distribution of any Common Shares. The Committee may permit such
amount to be paid in Common Shares previously owned by the Participant, or a
portion of the Common Shares that otherwise would be distributed to such
Participant in respect to his or her vested Restricted Units, or a combination
of cash and such Common Shares.
11. DESIGNATION AND CHANGE OF BENEFICIARY
Each Participant shall file with the Committee a written designation of
one or more persons as the Beneficiary who shall be entitled to receive any
amount, or any Common Shares, payable under the Plan upon his or her death. A
Participant may, from time to time, revoke or change his or her Beneficiary
designation without the consent of any previously designated Beneficiary by
filing a new designation with the Committee. The last such designation received
by the Committee shall be controlling; provided, however, that no designation,
or change or revocation thereof, shall be effective unless received by the
Committee prior to the Participant's death, and in no event shall it be
effective as of a date prior to such receipt. If at the date of a Participant's
death, there is no designation of a Beneficiary in effect for the Participant
pursuant to the provisions of this Section 11, or if no Beneficiary designated
by the Participant in accordance with the provisions hereof survives to receive
any amount, or any Common Shares, payable under the Plan by reason of the
Participant's death, the Participant's estate shall be treated as the
Participant's Beneficiary for purposes of the Plan.
12. PAYMENTS TO PERSONS OTHER THAN PARTICIPANT
If the Committee shall find that any person to whom any amount, or any
Common Shares, is payable under the Plan is unable to care for his or her
affairs because of illness, accident or legal incapacity, then, if the Committee
so directs, any payment due to such person may be paid to such person's spouse,
child or other relative, an institution maintaining or having custody of such
person, or any other person deemed by the Committee to be a proper recipient on
behalf of such person, unless a prior claim for payment of such amount, or
payment of such Common Shares, has been made by a duly appointed legal
representative of such person. Any such payment shall be a complete discharge of
the liability of the Corporation or the applicable Affiliated Company therefor.
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<PAGE> 12
13. RIGHTS OF PARTICIPANTS
A Participant's rights and interests under the Plan shall be subject to
the following provisions:
(a) A Participant shall have the status of a general unsecured creditor
of the Corporation with respect to his or her right to receive any payment under
the Plan. The Plan shall constitute a mere promise by the Corporation or the
applicable Affiliated Company to make payments in the future of the benefits
provided for herein. It is intended that the arrangements reflected in the Plan
be treated as unfunded for tax purposes, as well as for purposes of any
applicable provisions of Title I of ERISA.
(b) A Participant's rights to payments under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or his or her Beneficiary.
(c) Neither the Plan nor any action taken hereunder shall be construed
as giving any Participant any right to be retained in the employment of the
Corporation or any of its Affiliated Companies.
(d) No Participant shall have the right, by virtue of having been
selected as a Participant in the Plan, to be automatically entitled to receive
an Award for any Plan Year.
(e) No Award shall be considered as compensation under any employee
benefit plan of the Corporation or any of its Affiliated Companies, except as
specifically provided in any such plan or as otherwise determined by the Board
of Directors.
14. ADMINISTRATION
The Plan shall be administered by the Committee. A majority of the
members of the Committee shall constitute a quorum. The Committee may act at a
meeting, including a telephone meeting, by action of a majority of the members
present, or without a meeting by unanimous written consent. In addition to the
responsibilities and powers assigned to the Committee elsewhere in the Plan, the
Committee shall have the authority, in its discretion, to establish from time to
time guidelines or regulations for the administration of the Plan, interpret the
Plan, and make all determinations considered necessary or advisable for the
administration of the Plan. The Committee may delegate any ministerial or
nondiscretionary function pertaining to the administration of the Plan to any
one or more officers of the Corporation.
All decisions, actions or interpretations of the Committee under the
Plan shall be final, conclusive and binding upon all parties.
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<PAGE> 13
No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith, and the Corporation shall indemnify and hold harmless each
member of the Committee, and each employee, officer, director or trustee of the
Corporation or any of its Affiliated Companies to whom any duty or power
relating to the administration or interpretation of the Plan may be delegated,
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with the approval of the Board of Directors)
arising out of any act or omission to act in connection with the Plan unless
arising out of such person's own fraud or bad faith.
15. AMENDMENT OR TERMINATION
The Board of Directors may, with prospective or retroactive effect,
amend, suspend or terminate the Plan or any portion thereof at any time,
provided, however, that no amendment, suspension or termination of the Plan
shall deprive any Participant of any rights to Awards previously made under the
Plan without his or her written consent. Any amendment that the Board of
Directors would be permitted to make pursuant to the preceding sentence may also
be made by the Committee where appropriate to facilitate the administration of
the Plan or to comply with applicable law or any applicable rules and
regulations of government authorities, provided that the cost of the Plan to the
Corporation and its Affiliated Companies is not materially increased thereby.
16. SUCCESSOR CORPORATION
The obligations of the Corporation under the Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Corporation, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Corporation. The Corporation agrees that it will make
appropriate provision for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
17. GOVERNING LAW
The Plan shall be governed by and construed in accordance with the laws
of the State of New York.
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18. EFFECTIVE DATE
The Plan was adopted effective as of September 1, 1995. The amendments
reflected in this restatement of the Plan shall be effective as of January 1,
1997, subject, however, in the case of the amendments to Sections 3 and 5, to
approval by the shareholders of the Corporation by a majority of the votes cast
in person or by proxy at the annual meeting of the Corporation's shareholders to
be held on April 22, 1997. The Committee may grant Restricted Units as provided
herein prior to such shareholder approval, subject to such approval being
obtained at such meeting.
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<PAGE> 1
Exhibit 10.22
DEFERRED RESTRICTED UNIT PLAN
OF
U.S. TRUST CORPORATION
AS ADOPTED EFFECTIVE JANUARY 1, 1997
-----
1. PURPOSE
This document sets forth the Deferred Restricted Unit Plan of U.S.
Trust Corporation as adopted January 1, 1997.
The purpose of the Plan is to provide Eligible Officers of the
Corporation who have been granted Restricted Units as part of their compensation
with an opportunity to defer payment with respect to such Restricted Units, at
their election, in accordance with the provisions herein set forth.
The Plan is intended to constitute an unfunded plan of deferred
compensation for "a select group of management or highly compensated employees"
within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
2. DEFINITIONS
As used herein, the following terms shall have the following meanings:
"ACCOUNT" shall mean the account established for a Participant pursuant
to Section 4.
"AFFILIATED COMPANIES" shall mean United States Trust Company and each
other direct or indirect subsidiary of the Corporation.
"AVERAGE MARKET VALUE" shall mean, with respect to one Common Share as
of any date or with respect to any period, the mean between the per-share high
and low prices for the Corporation's Common Shares on such date, or the average
of the mean between such prices on each day during such period, as quoted on the
NASDAQ National Market System, or, if the Corporation's Common Shares are not
traded on such system, on such other securities market or securities exchange on
which such shares are traded as the Committee shall determine.
<PAGE> 2
"BENEFICIARY" shall mean the person or person designated by a
Participant in accordance with Section 11 to receive any amount, or any Common
Shares, payable under the Plan upon the Participant's death.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the
Corporation.
"BUSINESS DAY" shall mean any day on which Common Shares are traded on
the NASDAQ National Market System or, if Common Shares are not traded on such
system, on such other securities market or securities exchange on which such
shares are traded as the Committee shall determine.
"CHANGE IN CONTROL" shall mean that any of the following events has
occurred:
(i) 20% or more of the Corporation's Common Shares has been
acquired by any person (as defined by Section 3(a)(9) of the Securities
Exchange Act of 1934) other than directly from the Corporation;
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving corporation is
held by persons other than former shareholders of the Corporation; or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors are persons who were not nominated by the Board
of Directors or the Executive Committee of the Board of Directors in
the most recent proxy statement of the Corporation;
provided, however, that notwithstanding anything in the Plan to the contrary, no
Change in Control shall be deemed to have occurred, and no rights arising upon a
Change in Control as provided in Section 7 shall exist, to the extent that the
Board of Directors so directs by resolution adopted prior to the Change in
Control, or not later than 45 days after the Change in Control if the percentage
of Common Shares acquired or directors elected under clause (i) or (iii) of the
foregoing definition of Change in Control shall be at least 20% but less than
25%. Any resolution of the Board of Directors adopted in accordance with the
provisions of this definition directing that a Change in Control shall be deemed
not to have occurred for purposes of this Plan and that Section 7 shall not
become effective, may be rescinded or countermanded at any time with or without
retroactive effect.
"COMMITTEE" shall mean the Compensation and Benefits Committee of the
Board of Directors.
2
<PAGE> 3
"COMMON SHARES" shall mean the common shares ($1.00 par value per
share) of the Corporation.
"CORPORATION" shall mean U.S. Trust Corporation.
"DETERMINED VALUE" shall mean (i) the highest price per Common Share
paid in connection with any Change in Control (including, without limitation,
prices paid in any subsequent merger or combination with any entity that
acquires control of the Corporation), or (ii) in the case of a Change in Control
occurring as a result of an event described in clause (iii) of the definition of
a Change in Control contained in this Section 2, the Average Market Value of a
Common Share during the 30-day period ending on the day preceding the occurrence
of such Change in Control.
"EIP" shall mean the Executive Incentive Plan of U.S. Trust
Corporation.
"ELIGIBLE OFFICER" shall mean, with respect to any deferral election to
be made under Section 3, any officer of the Corporation or any of its Affiliated
Companies at or above the rank of Vice President who, for the calendar year
immediately preceding the year in which such deferral election is to be made,
had total compensation in excess of the amount of the limitation on annual
compensation in effect for such preceding year under Section 401(a)(17) of the
Internal Revenue Code of 1986, as amended. For this purpose an officer's "total
compensation" for any calendar year shall mean the sum of (i) the aggregate
amount reported as the officer's compensation from the Corporation and its
Affiliated Companies in Form W-2 filed with respect to the officer for such
year, for Federal income tax purposes; (ii) the aggregate amount of all 401(k)
Contributions and ESOP Contributions made on behalf of the officer for such year
under the 401(k) Plan; (iii) the aggregate amount of all salary reduction
contributions made on behalf of the officer for such year under the Employees'
Flexible Spending Plan of United States Trust Company of New York and Affiliated
Companies; and (iv) any portion of the officer's compensation for such year that
was deferred pursuant to the officer's election under the Executive Deferred
Compensation Plan of U.S. Trust Corporation.
"401(k) PLAN" shall mean the 401(k) Plan and ESOP of United States
Trust Company of New York and Affiliated Companies.
"PARTICIPANT" shall mean any Eligible Officer who has made an election
under Section 3 to defer any of his or her Vested Restricted Units.
"PLAN" shall mean the Deferred Restricted Unit Plan of U.S. Trust
Corporation, as set forth herein and as amended from time to time.
"RESTRICTED UNIT" shall mean a unit of measurement equivalent to one
Common Share, with none of the attendant rights of a shareholder of such share,
including, without limitation,
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the right to vote such share and the right to receive dividends thereon, except
to the extent otherwise specifically provided herein.
"RETIREMENT" shall mean a Participant's termination of employment with
the Corporation and its Affiliated Companies for any reason other than death if,
as of the date of the Participant's termination of employment, (i) the
Participant has attained age 65 or (ii) the sum of Participant's age and the
number of his or her "Years of Service", as defined in the 401(k) Plan, is at
least equal to 80. In addition, in the case of any Participant who becomes
entitled to receive benefit payments under the long-term disability plan
maintained by the Corporation or any of its Affiliated Companies and who
continues to receive payments under such plan throughout the entire period
ending on the date on which the Participant first meets the age, or the age and
service, requirements set forth in clause (i) or (ii) above, such Participant
shall be treated, for purposes of the Plan, as having terminated employment with
the Corporation and its Affiliated Companies as a result of Retirement, on the
first day of the month following the date on which the Participant first meets
such requirements. In applying clause (ii) above for this purpose, the
Participant's "Years of Service" shall include the number of calendar years (or
part thereof) during which the Participant has received benefits payments under
such long-term disability plan.
"VESTED RESTRICTED UNITS" shall mean, with respect to any Eligible
Officer, Restricted Units (i) that were granted to the Eligible Officer (and any
additional Restricted Units credited with respect to Restricted Units that were
so granted) under the EIP, or pursuant to any arrangement for the payment of
commissions earned by the Eligible Officer, or pursuant to any individual
employment contract between the Eligible Officer and the Corporation or any of
its Affiliated Companies, and (ii) that have become vested under the terms of
the EIP, such commission arrangement, or such employment contract, as the case
may be.
"VESTING DATE" shall mean, with respect to any Vested Restricted Units,
the date as of which such units become vested under the terms of the EIP, the
applicable commission arrangement, or the applicable employment contract, as the
case may be.
3. DEFERRAL ELECTIONS
An Eligible Officer may elect to have payment with respect to any or
all of his or her Vested Restricted Units deferred, and to have payment with
respect to such Vested Restricted Units made under the terms of this Plan. Any
such election shall be made in accordance with the following provisions:
(a) A deferral election shall be made in writing, on a form provided by
the Committee for such purpose.
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(b) In the election form, the Eligible Officer shall specify,
separately for the Vested Restricted Units covered under each grant of
Restricted Units made to the Eligible Officer, the number or percentage (which
must be an even multiple of 5%) of such Vested Restricted Units payment with
respect to which the Eligible Officer wishes to defer hereunder.
(c) An Eligible Officer's election to defer payment with respect to any
Vested Restricted Units shall be filed with the Committee at least one year
prior to the Vesting Date for such Vested Restricted Units.
(d) Any deferral election made hereunder by an Eligible Officer with
respect to any of his or her Vested Restricted Units shall be irrevocable.
(e) Notwithstanding any other provision herein to the contrary, a
deferral election otherwise permitted to be made hereunder shall be subject to
the following requirements:
(i) no amount may be deferred with respect to an Eligible
Officer's Vested Restricted Units pursuant to the Eligible Officer's
election hereunder to the extent that any tax is required to be
withheld with respect to such amount pursuant to applicable federal,
state or local law; and
(ii) an Eligible Officer's deferral election with respect to
any Vested Restricted Units shall not be effective if at any time
during the 12-month period ending on the Vesting Date for such Vested
Restricted Units the Eligible Officer made a hardship withdrawal under
Section 10.1 of the 401(k) Plan.
4. ACCOUNTS
There shall be established on the books and records of the Corporation,
for bookkeeping purposes only, a separate Account for each Participant, to
reflect the Participant's interest under the Plan. The Account so established
for each Participant shall be maintained in accordance with the following
provisions:
(a) A Participant's Account shall be credited with a number of
Restricted Units equal to the number of Vested Restricted Units with respect to
which the Participant has made a deferral election under Section 3. Such
Restricted Units shall be credited to the Participant's Account as of the
Vesting Date for the Vested Restricted Units with respect to which the
Participant's deferral election was made.
(b) A Participant's Account shall be adjusted to reflect all additional
Restricted Units to be credited to such Account pursuant to Section 5, and all
payments made with respect to the Participant's Account pursuant to Section 6.
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<PAGE> 6
(c) A Participant's interest in his or her Account shall be fully
vested and nonforfeitable at all times.
5. CREDITING OF DIVIDEND EQUIVALENTS
Unit payment with respect to a Participant's Account has been made in
full in accordance with Section 6, a Participant's Account shall be credited, as
of each date on which the Corporation pays a dividend on its Common Shares
("Dividend Payment Date"), with additional Restricted Units, the number of which
shall be determined by first (i) multiplying the number of Restricted Units
standing to the Participant's credit on the date such dividend was declared by
the per-share dollar amount of the dividend so paid, and then (ii) dividing the
resulting amount by the Average Market Value of one Common Share on the Dividend
Payment Date.
6. PAYMENT OF ACCOUNT BALANCES
Payment with respect to a Participant's Account shall be made in
accordance with the following provisions:
(a) A Participant's Account shall become payable upon the Participant's
termination of employment with the Corporation and its Affiliated Companies for
any reason. For this purpose, a Participant who ceases active employment by
reason of disability but who becomes entitled to receive benefit payments under
the long-term disability plan maintained by the Corporation or any of its
Affiliated Companies shall be treated as continuing to be employed with the
Corporation and its Affiliated Companies until the earlier of (i) the date as of
which he or she ceases to receive benefit payments under such plan, or (ii) the
date as of which he or she is treated as having terminated employment as a
result of Retirement.
(b) Unless a Participant otherwise elects as provided in (c) below,
payment with respect to a Participant's Account shall be made in the form of a
single lump sum payment consisting of (i) a number of Common Shares equal to the
number of whole Restricted Units included in the balance of the Participant's
Account, and (ii) cash in an amount determined by multiplying (A) the fractional
part, if any, of a Restricted Unit included in the balance of the Participant's
Account by (B) the Average Market Value of one Common Share on the Business Day
immediately preceding the date on which such payment is to be made. Such payment
shall be made to the Participant or, if the Participant's Account becomes
payable by reason of his or her death, to the Participant's Beneficiary. Payment
shall be made on the last Business Day of February of the calendar year
following the year in which the Participant's employment with the Corporation
and its Affiliated Companies terminates.
(c) A Participant may elect to have payment with respect to his or her
Account made to the Participant, or in the event of the Participant's death, to
his or her Beneficiary, in the form of a series of 10 annual installments,
payable in the manner described in Section 6(d), if the
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<PAGE> 7
Participant's Account becomes payable as a result of the Participant's
Retirement, or as a result of the Participant's death while he or she is still
employed with the Corporation or any of its Affiliated Companies but after the
Participant has met the age, or the age and service, requirements for
eligibility for Retirement stated in the definition of such term contained in
Section 2. An election under this Section 6(c) shall be made in writing, on a
form that is provided by the Committee for such purpose and that is filed by the
Participant with the Committee at least one year prior to the date of the
Participant's Retirement or death. Any election so made may be revoked, and a
new election may be made hereunder after such revocation. Any such revocation or
new election shall be made in the same manner, and by the same date, as
described in the second preceding sentence.
(d) If a Participant's Account becomes payable in the form of a series
of 10 annual installments pursuant to the Participant's election under Section
6(c), such payments shall be made in accordance with the following provisions:
(i) The first such installment payment shall be made on the
last Business Day of February of the calendar year following the year
in which the Participant's Retirement or death occurs, and the
remaining installment payments shall be made on the last Business Day
of February of each succeeding year.
(ii) Each installment payment to be made with respect to the
Participant's Account shall be made partly in Common Shares, and partly
in cash. The number of shares to be included in each such installment
payment shall be equal to the number of whole Restricted Units included
in the quotient resulting from dividing (A) the total number of
Restricted Units included in the balance of the Participant's Account
as of the last day of the calendar year preceding the year in which
such payment is to be made, by (B) the number of installment payments
remaining to be made; and the amount of cash to be included in each
such installment payment shall be determined by multiplying (C) the
fractional part of a Restricted Unit included in the aforementioned
quotient by (D) the Average Market Value of one Common Share on the
Business Day immediately preceding the date on which such installment
payment is to be made. The last such installment payment shall include
a number of Common Shares equal to the whole number of any additional
Restricted Units that are credited to the Participant's Account under
Section 5 during the month preceding the month in which such payment is
made, together with cash (in an amount determined in the same manner as
described in clause (D) of the preceding sentence) for any fractional
part of a Restricted Unit that is so credited.
(iii) If the Participant should die before receiving all
installment payments required to be made hereunder with respect to the
Participant's Account, any installment payments remaining to be made at
the date of the Participant's death shall be made to the Participant's
Beneficiary in the same form, at the same times and in the same
amounts,
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<PAGE> 8
as such payments would have been made to the Participant (A) if he or
she had not died, and (B), in the case of installment payments required
to be made to a Beneficiary due to the death of a Participant occurring
before the Participant had received any such payments, if the
Participant's employment had terminated as a result of Retirement on
the date of his or her death.
(e) Notwithstanding any other provision in this Section 6 to the
contrary, payment with respect to any part or all of the Participant's Account
may be made to the Participant or, if the Participant has died, to the
Participant's Beneficiary, on any date earlier than the date on which such
payment is to be made pursuant to such other provisions of this Section 6 if (i)
the Participant, or his or her Beneficiary, requests such early payment and (ii)
the Committee, in its sole discretion, determines that such early payment is
necessary to help the Participant, or his or her Beneficiary, meet an
"unforeseeable emergency" within the meaning of Section 1.457-2(h)(4) of the
federal Income Tax Regulations. The amount that may be so paid may not exceed
the amount necessary to meet such emergency.
7. CHANGE IN CONTROL
In the event of a Change in Control, the provisions of this Section 7
shall apply notwithstanding any other provision herein to the contrary (but
subject to the proviso contained in the definition of "Change in Control" in
Section 2). Upon the occurrence of a Change in Control, the balance of each
Participant's Account shall become immediately payable in full. Payment with
respect to each Participant's Account balance shall be made to the Participant
or, if the Participant has died, to his or her Beneficiary, in the form of a
single lump sum cash payment. The amount so payable with respect to each
Participant's Account shall be determined by multiplying the aggregate number of
Restricted Units then included in the balance of the Participant's Account by
the Determined Value of one Common Share.
Amounts payable to Participants or Beneficiaries pursuant to this
Section 7, reduced by any taxes withheld pursuant to Section 8, shall be paid to
such Participants or Beneficiaries as soon as practicable following the Change
in Control.
8. TAXES
The Corporation or any of its Affiliated Companies may make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of all federal, state and local taxes required by law to be withheld
with respect to Common Shares or amounts payable under the Plan including, but
not limited to (i) deducting the amount so required to be withheld from any
other amount then or thereafter payable to a Participant or Beneficiary, and/or
(ii) requiring a Participant or Beneficiary to pay to the Corporation or any of
its Affiliated Companies the amount so required to be withheld as a condition of
the issuance, delivery, or
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<PAGE> 9
distribution of any Common Shares. The Committee may permit such amount to be
paid in Common Shares previously owned by the Participant, or a portion of the
Common Shares that otherwise would be distributed to such Participant in respect
to his or her Restricted Units, or a combination of cash and such Common Shares.
9. CERTAIN ADJUSTMENTS TO PLAN SHARES
In the event of any change in the Common Shares by reason of any stock
dividend, recapitalization, reorganization, merger, consolidation, split-up,
combination or exchange of shares, or any rights offering to purchase Common
Shares at a price substantially below fair market value, or any similar change
affecting the Common Shares, the number and kind of shares represented by
Restricted Units shall be appropriately adjusted consistent with such change in
such manner as the Committee, in its sole discretion, may deem equitable to
prevent substantial dilution or enlargement of the rights granted to, or
available for, the Participants hereunder. The Committee shall give notice to
each Participant of any adjustment made pursuant to this Section and, upon such
notice, such adjustment shall be effective and binding for all purposes.
10. SOURCE, LISTING AND QUALIFICATION OF COMMON SHARES
The Common Shares distributed under the Plan may be authorized and
unissued shares, (including shares authorized for distribution with respect to
Restricted Units granted under the EIP), shares held in the treasury of the
Corporation, or shares purchased on the open market by the Corporation at such
time or times and in such manner as it may determined. The Corporation shall be
under no obligation to acquire Common Shares for distribution to Participants
before payment in Common Shares is due.
The Corporation, in its discretion, may postpone the issuance,
delivery, or distribution of Common Shares with respect to any Restricted Units
until completion of such stock exchange listing or other qualification of such
shares under any state or federal law, rule or regulation as the Corporation may
consider appropriate, and may require any Participant or Beneficiary to make
such representations and furnish such information as it may consider appropriate
in connection with the issuance or delivery of the shares in compliance with
applicable laws, rules and regulations.
11. DESIGNATION AND CHANGE OF BENEFICIARY
Each Participant shall file with the Committee a written designation of
one or more persons as the Beneficiary who shall be entitled to receive any
amount, or any Common Shares, payable under the Plan upon his or her death. A
Participant may, from time to time, revoke or change his or her Beneficiary
designation without the consent of any previously designated Beneficiary by
filing a new designation with the Committee. The last such designation received
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<PAGE> 10
by the Committee shall be controlling; provided, however, that no designation,
or change or revocation thereof, shall be effective unless received by the
Committee prior to the Participant's death, and in no event shall it be
effective as of a date prior to such receipt. If at the date of a Participant's
death, there is no designation of a Beneficiary in effect for the Participant
pursuant to the provisions of this Section 11, or if no Beneficiary designated
by the Participant in accordance with the provisions hereof survives to receive
any amount, or any Common Shares, payable under the Plan by reason of the
Participant's death, the Participant's estate shall be treated as the
Participant's Beneficiary for purposes of the Plan.
12. PAYMENTS TO PERSONS OTHER THAN PARTICIPANT
If the Committee shall find that any person to whom any amount, or any
Common Shares, is payable under the Plan is unable to care for his or her
affairs because of illness, accident or legal incapacity, then, if the Committee
so directs, any payment due to such person may be paid to such person's spouse,
child or other relative, an institution maintaining or having custody of such
person, or any other person deemed by the Committee to be a proper recipient on
behalf of such person, unless a prior claim for payment of such amount, or
payment of such Common Shares, has been made by a duly appointed legal
representative of such person. Any such payment shall be a complete discharge of
the liability of the Corporation or the applicable Affiliated Company therefor.
13. RIGHTS OF PARTICIPANTS
A Participant's rights and interests under the Plan shall be subject to
the following provisions:
(a) A Participant shall have the status of a general unsecured creditor
of the Corporation with respect to his or her right to receive any payment under
the Plan. The Plan shall constitute a mere promise by the Corporation or the
applicable Affiliated Company to make payments in the future of the benefits
provided for herein. It is intended that the arrangements reflected in this Plan
be treated as unfunded for tax purposes, as well as for purposes of any
applicable provisions of Title I of ERISA.
(b) A Participant's rights to payments under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or his or her Beneficiary.
(c) Neither the Plan nor any action taken hereunder shall be construed
as giving any Participant any right to be retained in the employment of the
Corporation or any of its Affiliated Companies.
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<PAGE> 11
14. ADMINISTRATION
The Plan shall be administered by the Committee. A majority of the
members of the Committee shall constitute a quorum. The Committee may act at a
meeting, including a telephone meeting, by action of a majority of the members
present, or without a meeting by unanimous written consent. In addition to the
responsibilities and powers assigned to the Committee elsewhere in the Plan, the
Committee shall have the authority, in its discretion, to establish from time to
time guidelines or regulations for the administration of the Plan, interpret the
Plan, and make all determinations considered necessary or advisable for the
administration of the Plan. The Committee may delegate any ministerial or
nondiscretionary function pertaining to the administration of the Plan to any
one or more officers of the Corporation.
All decisions, actions or interpretations of the Committee under the
Plan shall be final, conclusive and binding upon all parties.
No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith, and the Corporation shall indemnify and hold harmless each
member of the Committee, and each employee, officer, director or trustee of the
Corporation or any of its Affiliated Companies to whom any duty or power
relating to the administration or interpretation of the Plan may be delegated,
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with the approval of the Board of Directors)
arising out of any act or omission to act in connection with the Plan unless
arising out of such person's own fraud or bad faith.
15. AMENDMENT OR TERMINATION
The Board of Directors may, with prospective or retroactive effect,
amend, suspend or terminate the Plan or any portion thereof at any time,
provided, however, that no amendment, suspension or termination of the Plan
shall deprive any Participant of any rights with respect to Restricted Units
previously credited to his or her Account under the Plan without his or her
written consent. Any amendment that the Board of Directors would be permitted to
make pursuant to the preceding sentence may also be made by the Committee where
appropriate to facilitate the administration of the Plan or to comply with
applicable law or any applicable rules and regulations of government
authorities, provided that the cost of the Plan to the Corporation and its
Affiliated Companies is not materially increased thereby.
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16. SUCCESSOR CORPORATION
The obligations of the Corporation under the Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Corporation, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Corporation. The Corporation agrees that it will make
appropriate provision for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
17. GOVERNING LAW
The Plan shall be governed by and construed in accordance with the laws
of the State of New York.
18. EFFECTIVE DATE
The Plan shall be effective as of January 1, 1997.
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Exhibit 10.23
BENEFITS PROTECTION AGREEMENT
THIS AGREEMENT made as of the 22nd day of October, 1996, by and between
U.S. Trust Corporation (the "Corporation"), United States Trust Company of New
York (the "Company") and (the "Executive").
WHEREAS, the Board of Directors of the Company and the Board of
Directors of the Corporation (the "Boards") recognize that the possibility of a
Change in Control (as hereinafter defined) exists and that the threat or the
occurrence of a Change in Control can result in significant distraction of the
key management personnel of the Company and its affiliates because of the
uncertainties inherent in such a situation;
WHEREAS, the Boards have determined that it is essential and in the
best interests of the Company, and the Corporation and its stockholders, for the
Company and its affiliates to retain the services of the Executive in the event
of a threat or occurrence of a Change in Control and to ensure the Executive's
continued dedication and efforts in such event without undue concern for the
Executive's personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company or its affiliates, particularly in the event of a threat or the
occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide assurances to the Executive as to the
payment of certain benefits to the Executive if a Change in Control should
occur, and as to the payment of certain other benefits if the Executive's
employment is terminated following a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of October 22,
1996, and shall continue in effect until October 31, 1998 (the "Term");
provided, however, that on November 1, 1997, and on each November 1 thereafter,
the Term shall automatically be extended for one (1) year unless the Company
shall have given written notice to the Executive at least ninety (90) days prior
thereto that the Term shall not be so extended; provided, further, however, that
following the occurrence of a Change in Control, the Term shall not expire prior
to the expiration of four (4) years after such occurrence.
2. BENEFITS PAYABLE ON CHANGE IN CONTROL. If (i) a Change in Control
(as defined in Section 11(a) hereof) occurs during the Term, (ii) the
Executive's employment with the Company and all of its affiliates has not
terminated prior to the date on which such Change in Control occurs, and (iii)
such Change in Control is not treated as a "Change in Control" for purposes of
any Change in Control Plan (as defined in Section 11(b) hereof) maintained by
the Corporation or the Company,
<PAGE> 2
the Corporation or the Company, as applicable, shall pay to the Executive
pursuant to this Agreement each benefit that would have been payable to the
Executive under each such Change in Control Plan if the Change in Control (as
defined in Section 11(a) hereof) had been treated as a "Change in Control" for
purposes of such plan.
3. BENEFITS PAYABLE ON INVOLUNTARY TERMINATION AFTER CHANGE IN CONTROL.
If (i) a Change in Control (as defined in Section 11(a) hereof) occurs during
the Term, (ii) the Executive's employment with the Company and all of its
affiliates terminates as a result of an Involuntary Termination (as defined in
Section 11(c) hereof) within two (2) years following such Change in Control, and
(iii) for purposes of any Change in Control Plan (as defined in Section 11(b)
hereof) maintained by the Corporation or the Company, the Boards have directed
by resolution that no payments or benefits shall be made or provided under such
plan as a result of the occurrence of such Change in Control, then the
Corporation or the Company, as applicable, shall pay or provide to the Executive
pursuant to this Agreement each benefit that would have been payable or provided
to the Executive upon such termination of the Executive's employment under each
such Change in Control Plan if the Boards did not so direct.
4. BENEFITS PAYABLE ON TERMINATION OF RETIREMENT PLAN AFTER CHANGE IN
CONTROL. If (i) a Change in Control (as defined in Section 11(a) hereof) occurs
during the Term, (ii) the Employees' Retirement Plan of United States Trust
Company of New York and Affiliated Companies (the "Retirement Plan") is
terminated within four (4) years following such Change in Control, (iii) the
Executive's employment with the Company and all of its affiliates had not
terminated prior to such Change in Control, and (iv) such Change in Control is
not treated as a "Change in Control" for purposes of Section 13.2 of the
Retirement Plan, the Company shall pay to the Executive pursuant to this
Agreement the increased benefit that would have been payable to the Executive
under Section 13.2 of the Retirement Plan as a result of such termination of the
Retirement Plan if the Change in Control (as defined in Section 11(a) hereof)
had been treated as a "Change in Control" for purposes of Section 13.2 of the
Retirement Plan.
5. TERMINATION BEFORE CHANGE IN CONTROL. If the Executive's employment
with the Company and all of its affiliates is terminated by the Company or any
affiliate at any time prior to a Change in Control (as defined in Section 11(a)
hereof) and the Executive reasonably demonstrates that such termination was at
the request of a third party who had indicated an intention or had taken steps
reasonably calculated to effect such Change in Control and who effectuated such
Change in Control, such termination of the Executive's employment shall be
treated, for purposes of this Agreement, as an Involuntary Termination (as
defined in Section 11(c) hereof) of the Executive's employment occurring
immediately after the Change in Control, and as an "Involuntary Termination" of
the Executive's employment occurring immediately after a "Change in Control" as
those terms are defined in the applicable Change in Control Plans.
6. TIME AND MANNER OF PAYMENT. Each benefit payable to the Executive
hereunder shall be paid or provided in the same amount, in the same form, and at
the same time or for the same period, as such benefit would have been paid or
provided to the Executive under the terms of the
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<PAGE> 3
applicable Change in Control Plan if the Change in Control (as defined in
Section 11(a) hereof) had been treated as a "Change in Control" for purposes of
such plan.
If any payment to be made to the Executive under this Agreement is or
will be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon such payment. The amount of the Gross-Up Payment shall be
determined in the same manner, and shall be paid in the same form and at the
same time, as provided in the 1990 Change in Control and Severance Policy for
Top Tier Officers of United States Trust Company of New York and Affiliated
Companies (as it may hereafter be amended to the extent provided in Section
11(b) hereof).
The Corporation or the Company shall deduct from any payment otherwise
required to be made to the Executive hereunder all federal, state, local and
other taxes required by law to be withheld with respect to such payment.
7. CORPORATION'S OBLIGATION. The Corporation agrees that it will take
such steps as may be necessary to cause the Company to meet each of its
obligations to the Executive under this Agreement.
8. NON-DUPLICATION OF BENEFITS. If the Executive receives a payment
under Section 2 hereof with respect to any option held by the Executive under
the 1995 Stock Option Plan of U.S. Trust Corporation, the option so held by the
Executive shall be treated as cancelled, for purposes of such plan, effective
immediately after the Change in Control resulting in such payment. The
obligations of the Corporation or the Company to make any other payment under
any other Change in Control Plan shall be offset to the extent such payment is
made under this Agreement.
9. SUCCESSORS. This Agreement shall be binding upon the Corporation,
the Company, and any assignee or successor corporation or organization resulting
from the merger, consolidation or other reorganization thereof or succeeding to
substantially all of the assets and business of the Corporation or the Company.
The Corporation and the Company agree that they will make appropriate provision
for the preservation of the Executive's rights under this Agreement in any
agreement or plan that they may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
10. NON-ASSIGNABILITY. Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, his
beneficiaries or legal representatives, except by will or by the laws of descent
and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive s legal personal representative.
-3-
<PAGE> 4
11. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "CHANGE IN CONTROL" shall mean that any of the following events has
occurred:
(i) 20% or more of the common shares of the Corporation has
been acquired by any person (as defined by Section 3(a)(9) of the
Securities Exchange Act of 1934) other than directly from the
Corporation,
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving corporation is
held by persons other than former shareholders of the Corporation, or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors of the Corporation are persons who were not
nominated in the most recent proxy statement of the Corporation.
(b) "CHANGE IN CONTROL PLAN" shall mean (i) in the case of the Company,
the 1990 Change in Control and Severance Policy for Top Tier Officers of United
States Trust Company of New York and Affiliated Companies; and (ii) in the case
of the Corporation, the following: the Benefit Equalization Plan of U.S. Trust
Corporation, the 1989 Stock Compensation Plan and Predecessor Plans of U.S.
Trust Corporation, the 1995 Stock Option Plan of U.S. Trust Corporation, the
Executive Incentive Plan of U.S. Trust Corporation, and the Executive Deferred
Compensation Plan of U.S. Trust Corporation. Each plan referred to in (i) and
(ii) of the preceding sentence shall mean the plan as in effect on the date of
this Agreement, and as amended from time to time thereafter; provided, however,
that any such amendment shall be taken into account for purposes of this
Agreement only to the extent it would not result in any reduction of the
benefits payable hereunder to the Executive with respect to such plan as in
effect prior to such amendment.
(c) "INVOLUNTARY TERMINATION" shall mean the termination of an
Executive's employment with the Company and all of its affiliates
(i) by the Company or an affiliate, or
(ii) by the Executive following
(A) any reduction in the Executive's base salary,
or in the Executive's opportunity to earn an annual bonus
in an amount at least equal to the percentage of the
Executive's annual base salary that was used to determine
the Executive's target bonus award for the year
immediately preceding the year in which a Change in
Control occurs,
-4-
<PAGE> 5
(B) any change, without the Executive's consent, in
the location of the Executive's place of employment to a
borough other than Manhattan or, if such place of
employment is not in Manhattan, to a city other than the
city in which the Executive's place of employment is
located,
(C) any material diminishment of the Executive's
responsibilities with respect to the business of the
Company or an affiliate, or
(D) any other material adverse change in the
conditions of the Executive's employment with the Company
or an affiliate.
An Involuntary Termination pursuant to clause (ii) above shall be
deemed to occur within two (2) years of a Change in Control if the event
described in subclause (A), (B), (C) or (D) that gives rise to such termination
occurs within two (2) years of a Change in Control and such termination occurs
within six (6) months after such event.
IN WITNESS WHEREOF, the Corporation and the Company have caused this
Agreement to be executed by their duly authorized officers and the Executive has
executed this Agreement as of the day and year first above written.
U.S. TRUST CORPORATION
ATTEST: By:
-------------------------------
Philip L. Smith, Chairman
Compensation and Benefits Committee
- ---------------------------------
Secretary
UNITES STATES TRUST COMPANY
OF NEW YORK
ATTEST: By:
-------------------------------
Philip L. Smith, Chairman
Compensation and Benefits Committee
- ---------------------------------
Secretary
-------------------------------
[Name of Executive]
-5-
<PAGE> 1
Exhibit 10.24
BENEFITS PROTECTION AGREEMENT
THIS AGREEMENT made as of the 22nd day of October, 1996, by and between
U.S. Trust Corporation (the "Corporation"), United States Trust Company of New
York (the "Company") and (the "Executive").
WHEREAS, the Board of Directors of the Company and the Board of
Directors of the Corporation (the "Boards") recognize that the possibility of a
Change in Control (as hereinafter defined) exists and that the threat or the
occurrence of a Change in Control can result in significant distraction of the
key management personnel of the Company and its affiliates because of the
uncertainties inherent in such a situation;
WHEREAS, the Boards have determined that it is essential and in the
best interests of the Company, and the Corporation and its stockholders, for the
Company and its affiliates to retain the services of the Executive in the event
of a threat or occurrence of a Change in Control and to ensure the Executive's
continued dedication and efforts in such event without undue concern for the
Executive's personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company or its affiliates, particularly in the event of a threat or the
occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide assurances to the Executive as to the
payment of certain benefits to the Executive if a Change in Control should
occur, and as to the payment of certain other benefits if the Executive's
employment is terminated following a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of October 22,
1996, and shall continue in effect until October 31, 1998 (the "Term");
provided, however, that on November 1, 1997, and on each November 1 thereafter,
the Term shall automatically be extended for one (1) year unless the Company
shall have given written notice to the Executive at least ninety (90) days prior
thereto that the Term shall not be so extended; provided, further, however, that
following the occurrence of a Change in Control, the Term shall not expire prior
to the expiration of four (4) years after such occurrence.
2. BENEFITS PAYABLE ON CHANGE IN CONTROL. If (i) a Change in Control
(as defined in Section 11(a) hereof) occurs during the Term, (ii) the
Executive's employment with the Company and all of its affiliates has not
terminated prior to the date on which such Change in Control occurs, and (iii)
such Change in Control is not treated as a "Change in Control" for purposes of
any Change in Control Plan (as defined in Section 11(b) hereof) maintained by
the Corporation or the Company,
<PAGE> 2
the Corporation or the Company, as applicable, shall pay to the Executive
pursuant to this Agreement each benefit that would have been payable to the
Executive under each such Change in Control Plan if the Change in Control (as
defined in Section 11(a) hereof) had been treated as a "Change in Control" for
purposes of such plan.
3. BENEFITS PAYABLE ON INVOLUNTARY TERMINATION AFTER CHANGE IN CONTROL.
If (i) a Change in Control (as defined in Section 11(a) hereof) occurs during
the Term, (ii) the Executive's employment with the Company and all of its
affiliates terminates as a result of an Involuntary Termination (as defined in
Section 11(c) hereof) within two (2) years following such Change in Control, and
(iii) for purposes of any Change in Control Plan (as defined in Section 11(b)
hereof) maintained by the Corporation or the Company, the Boards have directed
by resolution that no payments or benefits shall be made or provided under such
plan as a result of the occurrence of such Change in Control, then the
Corporation or the Company, as applicable, shall pay or provide to the Executive
pursuant to this Agreement each benefit that would have been payable or provided
to the Executive upon such termination of the Executive's employment under each
such Change in Control Plan if the Boards did not so direct.
4. BENEFITS PAYABLE ON TERMINATION OF RETIREMENT PLAN AFTER CHANGE IN
CONTROL. If (i) a Change in Control (as defined in Section 11(a) hereof) occurs
during the Term, (ii) the Employees Retirement Plan of United States Trust
Company of New York and Affiliated Companies (the "Retirement Plan") is
terminated within four (4) years following such Change in Control, (iii) the
Executive's employment with the Company and all of its affiliates had not
terminated prior to such Change in Control, and (iv) such Change in Control is
not treated as a "Change in Control" for purposes of Section 13.2 of the
Retirement Plan, the Company shall pay to the Executive pursuant to this
Agreement the increased benefit that would have been payable to the Executive
under Section 13.2 of the Retirement Plan as a result of such termination of the
Retirement Plan if the Change in Control (as defined in Section 11(a) hereof)
had been treated as a "Change in Control" for purposes of Section 13.2 of the
Retirement Plan.
5. TERMINATION BEFORE CHANGE IN CONTROL. If the Executive's employment
with the Company and all of its affiliates is terminated by the Company or any
affiliate at any time prior to a Change in Control (as defined in Section 11(a)
hereof) and the Executive reasonably demonstrates that such termination was at
the request of a third party who had indicated an intention or had taken steps
reasonably calculated to effect such Change in Control and who effectuated such
Change in Control, such termination of the Executive's employment shall be
treated, for purposes of this Agreement, as an Involuntary Termination (as
defined in Section 11(c) hereof) of the Executive's employment occurring
immediately after the Change in Control, and as an "Involuntary Termination" of
the Executive's employment occurring immediately after a "Change in Control" as
those terms are defined in the applicable Change in Control Plans.
6. TIME AND MANNER OF PAYMENT. Each benefit payable to the Executive
hereunder shall be paid or provided in the same amount, in the same form, and at
the same time or for the same period, as such benefit would have been paid or
provided to the Executive under the terms of the
-2-
<PAGE> 3
applicable Change in Control Plan if the Change in Control (as defined in
Section 11(a) hereof) had been treated as a "Change in Control" for purposes of
such plan.
If any payment to be made to the Executive under this Agreement is or
will be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon such payment. The amount of the Gross-Up Payment shall be
determined in the same manner, and shall be paid in the same form and at the
same time, as provided in the 1990 Change in Control and Severance Policy for
Top Tier Officers of United States Trust Company of New York and Affiliated
Companies (as it may hereafter be amended to the extent provided in Section
11(b) hereof).
The Corporation or the Company shall deduct from any payment otherwise
required to be made to the Executive hereunder all federal, state, local and
other taxes required by law to be withheld with respect to such payment.
7. CORPORATION'S OBLIGATION. The Corporation agrees that it will take
such steps as may be necessary to cause the Company to meet each of its
obligations to the Executive under this Agreement.
8. NON-DUPLICATION OF BENEFITS. If the Executive receives a payment
under Section 2 hereof with respect to any option held by the Executive under
the 1995 Stock Option Plan of U.S. Trust Corporation, the option so held by the
Executive shall be treated as cancelled, for purposes of such plan, effective
immediately after the Change in Control resulting in such payment. The
obligations of the Corporation or the Company to make any other payment under
any other Change in Control Plan shall be offset to the extent such payment is
made under this Agreement.
9. SUCCESSORS. This Agreement shall be binding upon the Corporation,
the Company, and any assignee or successor corporation or organization resulting
from the merger, consolidation or other reorganization thereof or succeeding to
substantially all of the assets and business of the Corporation or the Company.
The Corporation and the Company agree that they will make appropriate provision
for the preservation of the Executive's rights under this Agreement in any
agreement or plan that they may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
10. NON-ASSIGNABILITY. Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, his
beneficiaries or legal representatives, except by will or by the laws of descent
and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal personal representative.
-3-
<PAGE> 4
11. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "CHANGE IN CONTROL" shall mean that any of the following events has
occurred:
(i) 20% or more of the common shares of the Corporation has
been acquired by any person (as defined by Section 3(a)(9) of the
Securities Exchange Act of 1934) other than directly from the
Corporation,
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving corporation is
held by persons other than former shareholders of the Corporation, or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors of the Corporation are persons who were not
nominated in the most recent proxy statement of the Corporation.
(b) "CHANGE IN CONTROL PLAN" shall mean (i) in the case of the Company,
the 1990 Change in Control and Severance Policy for Top Tier Officers of United
States Trust Company of New York and Affiliated Companies; and (ii) in the case
of the Corporation, the following: the Benefit Equalization Plan of U.S. Trust
Corporation, the 1989 Stock Compensation Plan and Predecessor Plans of U.S.
Trust Corporation, the 1995 Stock Option Plan of U.S. Trust Corporation, the
Executive Incentive Plan of U.S. Trust Corporation, and the Executive Deferred
Compensation Plan of U.S. Trust Corporation. Each plan referred to in (i) and
(ii) of the preceding sentence shall mean the plan as in effect on the date of
this Agreement, and as amended from time to time thereafter; provided, however,
that any such amendment shall be taken into account for purposes of this
Agreement only to the extent it would not result in any reduction of the
benefits payable hereunder to the Executive with respect to such plan as in
effect prior to such amendment.
(c) "INVOLUNTARY TERMINATION" shall mean the termination of an
Executive's employment with the Company and all of its affiliates
(i) by the Company or an affiliate, or
(ii) by the Executive following
(A) any reduction in the Executive's base salary,
or in the Executive's opportunity to earn an annual bonus
in an amount at least equal to the percentage of the
Executive's annual base salary that was used to determine
the Executive's target bonus award for the year
immediately preceding the year in which a Change in
Control occurs,
-4-
<PAGE> 5
(B) any change, without the Executive's consent, in
the location of the Executive's place of employment to a
borough other than Manhattan or, if such place of
employment is not in Manhattan, to a city other than the
city in which the Executive's place of employment is
located,
(C) any material diminishment of the Executive's
responsibilities with respect to the business of the
Company or an affiliate, or
(D) any other material adverse change in the
conditions of the Executive's employment with the Company
or an affiliate.
An Involuntary Termination pursuant to clause (ii) above shall be
deemed to occur within two (2) years of a Change in Control if the event
described in subclause (A), (B), (C) or (D) that gives rise to such termination
occurs within two (2) years of a Change in Control and such termination occurs
within six (6) months after such event.
IN WITNESS WHEREOF, the Corporation and the Company have caused this
Agreement to be executed by their duly authorized officers and the Executive has
executed this Agreement as of the day and year first above written.
U.S. TRUST CORPORATION
ATTEST: By:
-------------------------------
H. Marshall Schwarz
Chairman and Chief Executive Officer
- ---------------------------------
Secretary
UNITES STATES TRUST COMPANY
OF NEW YORK
ATTEST: By:
-------------------------------
H. Marshall Schwarz
Chairman and Chief Executive Officer
- ---------------------------------
Secretary
-------------------------------
[Name of Executive]
-5-
<PAGE> 1
U.S. TRUST CORPORATION
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Month Periods Ended March 31,
-----------------------------------
1997 1996 (1)
----------- -----------
<S> <C> <C>
PRIMARY NET INCOME PER SHARE:
Net Income $11,921,000 $ 9,597,000
Plus Dividend Equivalent on Deferred
Employee Benefit Plan Awards
(After-Tax) 116,723 101,250
----------- -----------
Adjusted Net Income $12,037,723 $ 9,698,250
=========== ===========
Weighted average number of common
shares outstanding 19,663,539 19,507,578
Add average shares issuable under stock
option and stock award plans 2,239,870 1,530,976
----------- -----------
Total Common and Common
Equivalent Shares 21,903,409 21,038,554
=========== ===========
Primary Net Income Per Share $ 0.55 $ 0.46
=========== ===========
FULLY DILUTED NET INCOME PER SHARE:
Net Income $11,921,000 $ 9,597,000
Plus Dividend Equivalent on Deferred
Employee Benefit Plan Awards
(After-Tax) 116,723 101,250
----------- -----------
Adjusted Net Income $12,037,723 $ 9,698,250
=========== ===========
Weighted average number of common
shares outstanding 19,663,539 19,507,578
Add maximum dilutive impact of average
shares issuable under stock option
and stock award plans (2) 2,240,245 1,618,016
----------- -----------
Total Dilutive Shares 21,903,784 21,125,594
=========== ===========
Fully Diluted Net Income Per Share $ 0.55 $ 0.46
=========== ===========
</TABLE>
(1) The computation of net income per share has been adjusted to reflect the
effect of the two-for-one stock split in the form of a 100% stock dividend.
(2) Computed using the period-end market price of the Corporation's common
stock, if it is higher than the average market price used in calculating
primary net income per share.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 64,277
<INT-BEARING-DEPOSITS> 31,684
<FED-FUNDS-SOLD> 190,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,183,147
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,666,441
<ALLOWANCE> 17,268
<TOTAL-ASSETS> 3,413,872
<DEPOSITS> 2,667,262
<SHORT-TERM> 222,326
<LIABILITIES-OTHER> 229,199
<LONG-TERM> 73,254
0
0
<COMMON> 19,871
<OTHER-SE> 201,960
<TOTAL-LIABILITIES-AND-EQUITY> 3,413,872
<INTEREST-LOAN> 31,456
<INTEREST-INVEST> 18,743
<INTEREST-OTHER> 1,403
<INTEREST-TOTAL> 51,602
<INTEREST-DEPOSIT> 24,587
<INTEREST-EXPENSE> 29,554
<INTEREST-INCOME-NET> 22,048
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 68,910
<INCOME-PRETAX> 19,543
<INCOME-PRE-EXTRAORDINARY> 11,921
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,921
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
<YIELD-ACTUAL> 3.03
<LOANS-NON> 8,749
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 16,693
<CHARGE-OFFS> 0
<RECOVERIES> 275
<ALLOWANCE-CLOSE> 17,268
<ALLOWANCE-DOMESTIC> 17,268
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 17,268
</TABLE>
