SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
STATE STREET CORPORATION
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
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the offsetting fee was paid previously. Identify the previous
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and the date of its filing.
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4) Date Filed:
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<PAGE>
[STATE STREET LOGO]
Marshall N. Carter
Chairman and Chief Executive Officer
March 15, 2000
DEAR STOCKHOLDER:
You are cordially invited to attend the 2000 Annual Meeting
of Stockholders of State Street Corporation. The meeting will be
held in the Enterprise Room at 225 Franklin Street, Boston,
Massachusetts on Wednesday, April 19, 2000, at 10:00 a.m.
Details regarding admission to the meeting and the business
to be conducted are more fully described in the accompanying
Notice of Annual Meeting and Proxy Statement.
Your vote is very important. Whether or not you plan to
attend the meeting, please carefully review the enclosed proxy
statement. Then complete, sign, date and mail promptly the
accompanying proxy in the enclosed return envelope. To be sure
that your vote will be received in time, please return the proxy
at your earliest convenience.
We look forward to seeing you at the Annual Meeting so that
we can update you on our progress. Your continuing interest is
very much appreciated.
Sincerely,
/s/Marshall N. Carter
State Street Corporation
225 Franklin Street
Boston, MA 02110-2804
<PAGE>
[STATE STREET LOGO]
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
STATE STREET CORPORATION:
The 2000 Annual Meeting of Stockholders of State Street
Corporation will be held on Wednesday, April 19, 2000, at 10:00
a.m., Eastern Time, at 225 Franklin Street, Fifth Floor, Boston,
Massachusetts, for the following purposes:
1. To elect six directors, each for a three-year term;
2. To vote on an amendment to the 1997 Equity Incentive
Plan to increase the number of shares available for
issuance under the plan;
3. To vote on a stockholder proposal relative to the
application of the Model Business Corporation Act to the
Corporation; and
4. To act upon such other business as may properly come
before the meeting and any adjournments thereof. The
Corporation has been informed that stockholders intend
to submit to the meeting five additional proposals
outlined under Other Matters in the Proxy Statement,
including a proposal to amend the By-laws to provide
that the chairman of the board may not serve as CEO and
a proposal to amend the By-laws to state that agents and
attorneys of stockholders may inspect and copy certain
corporate records.
Stockholders of record at the close of business on February
28, 2000 are entitled to notice of and to vote at the meeting and
any adjournments thereof.
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED FOR YOUR USE. FURNISHING THIS PROXY WILL NOT
AFFECT YOUR RIGHT TO REVOKE THIS PROXY OR TO VOTE IN PERSON
SHOULD YOU ATTEND THE MEETING. IF YOU PLAN TO ATTEND YOU SHOULD
BRING A FORM OF PERSONAL IDENTIFICATION WITH YOU. IF YOUR STOCK
IS HELD OF RECORD BY A BANK, BROKER OR OTHER NOMINEE, YOU SHOULD
BRING AN ACCOUNT STATEMENT INDICATING THAT YOU OWN THE SHARES AS
OF THE RECORD DATE OR A LETTER FROM THE RECORD HOLDER INDICATING
THAT YOU OWN THE SHARES AS OF THE RECORD DATE, AND IF YOU WISH TO
VOTE AT THE MEETING YOU MUST FIRST OBTAIN FROM THE RECORD HOLDER
A PROXY ISSUED IN YOUR NAME.
If your stock is held in the name of a bank, broker or other
nominee, you may have the choice of instructing the record holder
as to the voting of your shares over the Internet or by
telephone. Follow the instructions on the form you receive from
your bank or broker.
By Order of the Board of Directors,
Maureen Scannell Bateman
Secretary
March 15, 2000
State Street Corporation
225 Franklin Street
Boston, MA 02110-2804
<PAGE>
STATE STREET CORPORATION
225 Franklin Street, Boston, Massachusetts 02110
PROXY STATEMENT
This proxy statement and the accompanying proxy, which are
scheduled to be sent to stockholders beginning on March 15, 2000,
are furnished in connection with the solicitation by the Board of
Directors of State Street Corporation (the "Corporation") of
proxies for the 2000 Annual Meeting of Stockholders of the
Corporation to be held on April 19, 2000 and at any adjournments
thereof. The Board of Directors has fixed the close of business
on February 28, 2000 as the record date for determining the
stockholders entitled to notice of and to vote at the meeting.
On the record date 159,952,162 shares of Common Stock of the
Corporation were outstanding and entitled to be voted at the
meeting.
VOTING INFORMATION
All shares represented by properly executed proxies, if such
proxies are received in time and not revoked, will be voted at
such meeting in accordance with any specifications thereon or, if
no specifications are made, proxies will be voted in accordance
with the recommendations of the Board of Directors.
The Board's recommendation is set forth together with the
description of each item in this proxy statement. In summary,
the Board recommends a vote:
o FOR election of the six directors (page 2)
o FOR approval of the amendment to the 1997 Equity
Incentive Plan (page 20)
o AGAINST approval of the stockholder proposal relative to
the application of the Model Business Corporation Act to
the Corporation (page 26)
Each share of Common Stock is entitled to one vote on each
matter. Any proxy may be revoked at any time before it is voted
by notifying the Secretary in writing, by executing and returning
to the Corporation a later dated proxy or by the record holder
notifying the Secretary at the meeting and voting in person.
Stock held by State Street Bank and Trust Company, as trustee of
the Corporation's Salary Savings Program on account of
participants in such program, will be voted by the trustee in
accordance with written instructions from the participants, and
where no instructions are received, in accordance with the Salary
Savings Program plan and trust documents.
The Corporation will bear the cost of soliciting proxies.
The solicitation of proxies will be made primarily by mail.
Proxies may also be solicited personally, by telephone and other
means of communication by regular employees of the Corporation
and its principal subsidiary, State Street Bank and Trust Company
(the "Bank"), without any additional remuneration and at minimal
cost. The Corporation intends to request banks, brokerage
houses, custodians, other nominees and fiduciaries to forward
soliciting material to their principals and to obtain
authorization for the execution of proxies. In addition, the
Corporation has retained Morrow & Co., Inc. to aid in the
solicitation of proxies. The Corporation has agreed to pay
Morrow & Co., Inc. a fee of $10,000, plus expenses.
VOTE REQUIRED
Consistent with state law and under the Corporation's
By-laws, a majority of the shares entitled to vote at the Annual
Meeting, present in person or represented by proxy, constitutes a
quorum. A quorum being present, the six nominees for election as
directors who receive a plurality of the votes properly cast for
the election of directors at the Annual Meeting, shall be elected
directors, and the affirmative vote of a majority of the
outstanding shares of Common Stock present in person or
represented by proxy at the meeting and entitled to vote is
<PAGE>
necessary to approve the action proposed in Item 2 and Item 3 of
the accompanying Notice of 2000 Annual Meeting of Stockholders,
although in order to list the shares issuable under Item 2 on the
New York Stock Exchange, the total votes cast on Item 2 must
represent over 50% in interest of all shares entitled to vote on
the Item. Votes cast by proxy or in person at the Annual Meeting
will be counted by persons appointed by the Corporation to act as
tellers for the meeting.
The tellers will count shares represented by proxies that
withhold authority to vote for a nominee for election as a
director only as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. None of the
withheld votes will be counted as votes "for" a director. As a
result, none of the withheld votes will have any effect on the
outcome of the voting on the election of directors.
Under applicable stock exchange and NASD rules, if a broker
holds shares in its name for a beneficial holder, it is
permissible to vote the shares in the election of directors and
on a proposal regarding the issuance of stock or options that do
not exceed 5% of the number of outstanding shares (Items 1 and
2), even if it does not receive voting instructions from the
beneficial holder. Under these rules, however, a broker
generally may not vote shares (a "broker non-vote") on Item 3,
absent instructions from the beneficial holder. The tellers will
count shares represented by proxies that reflect abstentions and
"broker non-votes" as shares that are entitled to vote for the
purpose of determining a quorum. The tellers will count shares
represented by proxies that reflect abstentions on a matter as
shares that are entitled to vote on the matter, but are not cast
on the matter. As a result, an abstention on Items 2 and 3 will
be counted as entitled to vote but not cast and therefore will
have the effect as a "no" vote; for their purposes, however, the
New York Stock Exchange counts an abstention as a vote cast and
therefore abstentions will be included in determining whether
sufficient votes for Item 2 have been cast to permit listing of
the shares on the Exchange, but will have the effect as a "no"
vote. However, the tellers will count shares represented by
proxies that reflect "broker non-votes" as shares that are not
entitled to vote on Item 3 and are not cast on that matter. As a
result, without voting instructions from the beneficial holder, a
broker non-vote could occur on Item 3 and this will have no
effect on whether the required vote under the By-laws has been
received.
ELECTION OF DIRECTORS
In accordance with Massachusetts law, the By-laws of the
Corporation provide for the classification of the Board into
three classes of directors as nearly equal in number as possible,
each class serving a three-year term, with one class of directors
to be elected at each annual meeting of stockholders for the term
specified and to continue in office until their successors are
elected and qualified. The exact number of directors is to be
determined by vote of the Board of Directors. Pursuant to the
By-laws, at a meeting on December 16, 1999, the Board of
Directors fixed the number of directors at 17, effective with the
2000 Annual Meeting.
There are currently 18 directors of the Corporation, seven
of whom are Class I directors. Six directors are to be elected
at the meeting as Class I directors. Each of the nominees for
election as a Class I director is currently a director of the
Corporation, Richard P. Sergel having been elected a Class I
director by action of the Board in 1999. David B. Perini, a
Class I director, will be retiring from the Board at the
expiration of his current term.
It is intended that, unless contrary instructions are given,
shares represented by proxies solicited by the Board of Directors
will be voted for the election of the six nominees listed below
as directors, to serve for a three-year term expiring at the
Annual Meeting to be held in 2003. Although the Board of
Directors does not contemplate that any nominee will be
unavailable for election, in the event that vacancies occur
unexpectedly, such shares may be voted for substitute nominees,
if any, as may be designated by the Board of Directors.
Information relating to each nominee for election as director and
for each continuing director, including his or her period of
service as a director of the Corporation, principal occupation
and other biographical material is shown below.
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DIRECTORS TO BE ELECTED AT THE 2000 ANNUAL MEETING
Class I
I. MACALLISTER BOOTH Director since 1990
Retired Chairman, President and Chief Executive Officer of
Polaroid Corporation, a manufacturer of instant image recording
products. Mr. Booth, age 68, joined Polaroid in 1958 as a
supervisor in the Film Division. He is a director of John
Hancock Mutual Life Insurance Company, ThermoLase Corporation and
Western Digital Corporation, past chairman of Inroads National
Board of Directors and a member of the board of trustees of Eye
Research Institute. He received B.S. and M.B.A. degrees from
Cornell University.
JAMES I. CASH, JR. Director since 1991
James E. Robison Professor of Business Administration at
Harvard University. Dr. Cash, age 52, has been a faculty member
of the Harvard Business School since 1976. He is a director of
Cambridge Technology Partners, Inc., The Chubb Corporation,
Knight-Ridder, Inc., General Electric Company and WinStar
Communications. He received a B.S. degree in mathematics from
Texas Christian University and M.S. and Ph.D. degrees in computer
science and management information systems from Purdue
University.
TRUMAN S. CASNER Director since 1990
Partner in the law firm of Ropes & Gray. Mr. Casner, age
66, received an A.B. degree from Princeton University in 1955 and
an LL.B. from Harvard Law School in 1958. He served as law clerk
to Chief Justice Wilkins of the Massachusetts Supreme Judicial
Court and joined Ropes & Gray in 1959, becoming a partner in
1968. He is a trustee of the Museum of Science, Boston, chairman
of the corporation and past president of Belmont Hill School, a
member of the corporation of Woods Hole Oceanographic Institution
and a director of the Massachusetts Business Roundtable. He is a
member of the American Law Institute.
ARTHUR L. GOLDSTEIN Director since 1995
Chairman and Chief Executive Officer of Ionics,
Incorporated, an international company involved in the
purification and treatment of water. Mr. Goldstein, age 64, is a
director of Cabot Corporation. He is a member of the National
Academy of Engineering and its Industry Advisory Board. He is a
trustee of the California Institute of Technology, the
Massachusetts General Physicians' Organization, Inc., the Dana-
Farber/Partners Cancer Care and Co-Chair of the Committee on
Industrial Relations and Ventures of Partners HealthCare, and a
director of Jobs for Massachusetts, Inc. and the Massachusetts
High Technology Council. Mr. Goldstein received a B.S. degree in
chemical engineering from Rensselaer Polytechnic Institute, an
M.S. in chemical engineering from the University of Delaware and
an M.B.A. from Harvard Business School.
DENNIS J. PICARD Director since 1991
Retired Chairman of Raytheon Company, a diversified,
technology-based international company. Mr. Picard, age 67,
continues as a member of the board of directors of Raytheon. He
joined Raytheon in 1955 and retired in 1999. He is a member of
the National Academy of Engineering and its Industry Advisory
Board, and a fellow of the American Institute of Aeronautics and
Astronautics and the Institute of Electrical and Electronic
Engineers. Mr. Picard is a trustee of Northeastern University
and Bentley College, a corporator of Emerson Hospital, a director
of the Discovery Museums and the John F. Kennedy Library
Foundation, a member of the National
3
Business Roundtable, The Business Council, the Defense Policy
Advisory Committee on Trade(DPACT), the President's Export
Council, the President's National Security Telecommunications
Advisory Council and the Armed Forces Communications and
Electronics Association. He is a graduate of Northeastern
University and holds honorary doctorates from Northeastern
University, Merrimack College and Bentley College.
RICHARD P. SERGEL Director since 1999
President, Chief Executive Officer and Director of New
England Electric System (NEES), an electric power provider, since
1998. Mr. Sergel, age 50, joined NEES in 1978. He is a director
of the Edison Electric Institute, Jobs for Massachusetts, the
Greater Boston Chamber of Commerce and is a trustee of the
Worcester Art Museum. Mr. Sergel received a B.S. degree from
Florida State University, an M.S. from North Carolina University
and an MBA from the University of Miami. He served in the United
States Air Force.
DIRECTORS SERVING UNTIL THE 2001 ANNUAL MEETING
Class II
DAVID P. GRUBER Director since 1997
Retired Chairman, Chief Executive Officer and Director of
Wyman-Gordon Company, a manufacturer of forging, investment
casting and composite airframe structures for the commercial
aviation, commercial power and defense industries. Mr. Gruber,
age 58, joined Wyman-Gordon in 1991 and retired in 1999. He
began his career with General Tire and Rubber Company. From 1978
to 1991 he was with Norton Company. He is a member of the board
of trustees of Manufacturers' Alliance for Productivity and
Innovation, chairman of the Worcester Polytechnic Institute
Mechanical Engineering Advisory Committee and a member of the
board of directors of Worcester Municipal Research Bureau. Mr.
Gruber received the American Society of Materials Life
Achievement Award. He has a B.S. degree from Ohio State
University.
CHARLES R. LAMANTIA Director since 1993
Retired Chairman and Chief Executive Officer of Arthur D.
Little, Inc., which provides management, technology and
environmental consulting services worldwide. Dr. LaMantia, age
60, was chief executive officer from 1988 to 1999 and president
and chief operating officer of Arthur D. Little from 1986 to
1988. Prior to rejoining Arthur D. Little in 1986, he was
president and chief executive officer of Koch Process Systems,
Inc., a subsidiary of Koch Industries. From 1977 to 1981, Dr.
LaMantia was vice president in charge of Arthur D. Little's
services to the chemical, metals and energy industries. He is a
member of the advisory board of StoneGate Partners and
IntellectExchange.com and the board or advisory board of several
non-profit research and educational institutions. Dr. LaMantia
received B.A., B.S., M.S. and Sc.D. degrees from Columbia
University and attended the Advanced Management Program at
Harvard Business School.
ALFRED POE Director since 1994
Private Investor pursuing startups in the functional food
business. Mr. Poe, age 51, was formerly chief executive officer
of MenuDirect Corporation, a direct home delivery prepared food
service from 1997 to 1999. From 1991 to 1996 he was a corporate
vice president of Campbell Soup Company and president of the Meal
Enhancement Group. From 1982 to 1991, he was with Mars, Inc. He
is a member of the board of directors of Polaroid Corporation,
B&G Foods, Inc., the LEAD (Leadership, Education and Development)
Program for
4
minority students and the Executive Leadership Council. Mr. Poe
holds a B.S. degree from Polytechnic Institute of Brooklyn and an
M.B.A. from the Harvard Graduate School of Business.
DAVID A. SPINA Director since 1989
President and Chief Operating Officer of the Corporation.
Mr. Spina, age 57, joined State Street in 1969 and has held a
variety of positions within the Corporation, including chief
financial officer and treasurer. Mr. Spina has responsibility
for the Corporation's asset servicing business which provides
custody, recordkeeping and information services for institutional
investors worldwide. He also oversees capital and credit
markets, information technology, research, trading and treasury,
investment banking and securities lending. He is chairman of the
Massachusetts Taxpayers Foundation, Inc., a director of the
United Way of Massachusetts Bay and the Metropolitan Boston
Housing Partnership, Inc. and a corporator of the Dana Hall
School. Mr. Spina is chairman emeritus of the Massachusetts
Housing Investment Corporation. Mr. Spina holds a B.S. degree
from the College of the Holy Cross and an M.B.A. from Harvard
University. He was an officer in the United States Navy from
1964 to 1969, serving a tour of duty in Vietnam.
DIANA CHAPMAN WALSH Director since 1997
President of Wellesley College. Prior to becoming President
of Wellesley College, Dr. Walsh, age 55, was Professor and
Chairman of the Department of Health and Social Behavior at the
Harvard School of Public Health. She serves on the board of
directors of the Consortium on Financing Higher Education and as
chair of the American Council on Education Commission on
International Education. She is a trustee of Amherst College.
Dr. Walsh received a B.A. degree from Wellesley College, M.S. and
Ph.D. degrees from Boston University and Doctor of Humane
Letters, honorus causa, from Boston University and Deree College,
American College of Greece.
ROBERT E. WEISSMAN Director since 1989
Chairman and Director of IMS Health Incorporated, which
provides information to the pharmaceutical and healthcare
industries, since June 1998. IMS Health is a spin-off from
Cognizant Corporation, one of three companies resulting from the
restructuring of The Dun & Bradstreet Corporation. Mr. Weissman,
age 59, joined Dun & Bradstreet in 1979. He became chief
executive officer in 1994 and chairman in 1995. He became
chairman, chief executive officer and director of Cognizant
Corporation in 1996. Mr. Weissman is a director of GartnerGroup,
Inc. and Nielsen Media Research Inc. He is a member of the
Institute of Management Accountants, the Society of Manufacturing
Engineers, the Institute of Electrical and Electronic Engineers,
The Business Roundtable, the Committee for Economic Development
and The U.S.-Japan Business Council and is vice chairman of the
Corporation of Babson College. Mr. Weissman received a degree in
Business Administration from Babson College in 1964.
DIRECTORS SERVING UNTIL THE 2002 ANNUAL MEETING
Class III
TENLEY E. ALBRIGHT, M.D. Director since 1993
Physician and surgeon. Dr. Albright's concentration in
medicine and health sciences stems from her specialty of general
surgery for over 23 years. Dr. Albright, age 64, is Chairman of
Western Resources, Inc., a holding company of varied assets with
plans for a research and development park and a senior care
facility. She
5
is consultant to and formerly chairman of the Board of Regents of
the National Library of Medicine at National Institutes of
Health. She serves on the board of directors of West
Pharmaceutical Services, Inc., the Whitehead Institute for
Biomedical Research and the Massachusetts Society for Medical
Research. She is a member of the corporation of Woods Hole
Oceanographic Institution and New England Baptist Hospital and a
member of the Harvard Medical School Information Technology
Committee and serves on the Board of Visitors of the Harvard
Medical Institute for Research and Education. Dr. Albright
graduated from Harvard Medical School after attending Radcliffe
College and has received honorary degrees from Hobart and William
Smith Colleges, Russell Sage College, New England School of Law,
Chatham College, State University of New York at Cortland,
Springfield College, Lasell College and Williams College.
MARSHALL N. CARTER Director since 1991
Chairman and Chief Executive Officer of the Corporation.
Prior to joining State Street in 1991, Mr. Carter, age 59, was
with Chase Manhattan Bank for 15 years. He served as a Marine
Corps officer in Vietnam for two years where he was awarded the
Navy Cross and Purple Heart and had international affairs
service as a White House Fellow. Mr. Carter is a member of the
board of directors of Honeywell International Inc. and the
American Bankers Association. Mr. Carter holds a degree in civil
engineering from the U.S. Military Academy at West Point and
masters degrees from the Naval Postgraduate School and George
Washington University.
NADER F. DAREHSHORI Director since 1990
Chairman of the Board, President and Chief Executive Officer
of Houghton Mifflin Company, publisher. Mr. Darehshori, age 63,
served as College Division vice president from 1984 until he was
promoted to vice president and director of the College Division
in 1986. In 1987 he was elected senior vice president, College
Division. He was promoted to executive vice president and then
to vice chairman in 1989 and to his present position in 1990.
Mr. Darehshori has served as a director of Houghton Mifflin
Company since 1989 and is chairman of its executive committee.
He is a director of CGU Insurance Group and chairman of the
Massachusetts Business Roundtable. He is a trustee of Wellesley
College, the WGBH Educational Foundation and the Boston Symphony
Orchestra and a trustee of the Dana-Farber Cancer Institute. Mr.
Darehshori also serves on the board of the Boston Public Library
Foundation.
JOHN M. KUCHARSKI Director since 1991
Retired Chairman of the Board and Chief Executive Officer of
EG&G, Inc., which provides scientific and technological products
and services worldwide. Mr. Kucharski, age 64, joined EG&G, Inc.
in 1972 and retired in 1999. He is a director of Nashua
Corporation and New England Electric System. He serves on the
boards of trustees of Marquette University and George Washington
University. He is also a member of the president's council and
the advisory council to the College of Engineering of Marquette
University. Mr. Kucharski holds a B.S. degree from Marquette
University, a J.D. degree from George Washington University and
is a member of the District of Columbia Bar Association.
BERNARD W. REZNICEK Director since 1991
National Director, Utility Marketing, for Central States
Indemnity Co. of Omaha, an insurance company specializing in
credit card and utility payment protection for consumers, since
1997 and President, Premier Enterprises, a construction company.
Mr. Reznicek, age 63, also serves on the board of directors of
Central States. From 1994 to 1996, he was dean of the College of
Business Administration of Creighton University. From
6
1987 to 1990, he was president and chief operating officer of
Boston Edison Company. In 1990, he became chief executive
officer, and in 1992, he was elected chairman of Boston Edison.
Prior to joining Boston Edison, he was president and chief
executive officer of Omaha Public Power District. Mr. Reznicek
holds a B.S. degree from Creighton University and an M.B.A. from
the University of Nebraska. He serves on the boards of Stone &
Webster Incorporated, CSG Systems International, Inc. and TTI
Technologies, Inc.
GENERAL INFORMATION
The Board of Directors has the overall responsibility for
the conduct of the business of the Corporation. Of the 18
directors currently in office, 16 are outside directors and 2 are
executive officers of the Corporation. The Board of Directors
held 4 meetings during 1999 and each of the directors attended
75% or more of the total of all meetings of the Board and of the
committees of the Board on which each director served during the
year. Each member of the Board of the Corporation, except Mr.
Poe, Mr. Reznicek and Mr. Weissman, is also a member of the Board
of Directors of the Bank. The Board of Directors of the Bank
held 11 meetings during 1999. Each member of the Executive
Committee and the Examining and Audit Committee of the
Corporation is also a member of the corresponding committee of
the Bank, and members customarily hold joint meetings of both
committees.
The Board of Directors has the following committees to
assist it in carrying out its responsibilities:
The EXECUTIVE COMMITTEE is authorized to exercise all the
powers of the Board of Directors that may be legally delegated to
it by the Board in the management and direction of the business
and affairs of the Corporation, including without limitation the
review and approval of policies for the extension of credit,
investment of the Corporation's assets and financial management,
and to monitor activities under these policies and report
periodically to the Board. Its members are Truman S. Casner,
Chair; I. MacAllister Booth; James I. Cash; Marshall N. Carter,
and David A. Spina. During 1999, the Committee held 12 meetings.
The EXAMINING AND AUDIT COMMITTEE oversees the operation of
a comprehensive system of internal controls to ensure the
integrity of the Corporation's financial reports and compliance
with laws, regulations and corporate policies; monitors
communication with external auditors and bank regulatory
authorities; and recommends the selection of the Corporation's
independent auditors. Its members are John M. Kucharski, Chair;
Tenley E. Albright; I. MacAllister Booth, and Charles R.
LaMantia. During 1999, the Committee held 8 meetings.
The EXECUTIVE COMPENSATION COMMITTEE sets and administers
policies which relate to the compensation system for the
Corporation's executive officers and other incentive programs of
the Corporation. Its members are Robert E. Weissman, Chair; I.
MacAllister Booth; Nader F. Darehshori; Charles R. LaMantia, and
Bernard W. Reznicek. None of these individuals is or has been an
officer or employee of the Corporation or the Bank. During 1999,
the Committee held 5 meetings.
The NOMINATING COMMITTEE recommends nominees to the boards
of the Corporation and the Bank. In carrying out its
responsibility of finding the best qualified directors, the
Committee will consider proposals from a number of sources,
including recommendations for nominees submitted upon timely
written notice to the Secretary of the Corporation by
stockholders. Its members are I. MacAllister Booth, Chair;
Marshall N. Carter; Arthur L. Goldstein; David B. Perini; Dennis
J. Picard, and Alfred Poe. During 1999, the Committee held 3
meetings.
7
COMPENSATION OF DIRECTORS
Directors who are also employees of the Corporation or the
Bank receive no compensation for serving as directors or as
members of committees. Directors who are not employees of the
Corporation or the Bank received an annual retainer of $37,500,
payable at their election in shares of Common Stock of the
Corporation or in cash, plus a fee of $1,500 for each meeting of
the Board of Directors and each committee meeting attended, as
well as travel accident insurance and reimbursement for travel
expenses, and an award of 468 shares of deferred stock payable
when the director leaves the Board or retires, for the period
April 1999 through March 2000. In 1999, all outside directors
elected to receive their annual retainer in shares of Common
Stock. The directors may elect to defer either 50% or 100% of
all fees and compensation payable during any calendar year
pursuant to the Corporation's Deferred Compensation Plan for
Directors. Three directors have elected to defer compensation.
BENEFICIAL OWNERSHIP OF SHARES
MANAGEMENT
The table below sets forth the number of shares of Common
Stock of the Corporation beneficially owned (as determined under
the rules of the Securities and Exchange Commission) by each
director, the chief executive officer and the four other most
highly compensated executive officers and by those persons
and other executive officers as a group as of the close of
business on February 1, 2000 based on information furnished by
each person. None of the directors or executive officers
individually owned beneficially as much as 1% of the outstanding
shares of Common Stock. The directors and executive officers in
the aggregate beneficially owned 1.94% of the Corporation's
Common Stock.
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNERSHIP
---- -----------------------
Tenley E. Albright, M.D. 21,467(1)(9)
I. MacAllister Booth 13,878(2)(9)
Dale L. Carleton 227,903(3)
Marshall N. Carter 362,721(3)(4)
James I. Cash, Jr. 11,811(9)
Truman S. Casner 17,204(5)(9)
Nader F. Darehshori 10,083(9)
Arthur L. Goldstein 5,518(9)
David P. Gruber 3,326(9)
John M. Kucharski 11,463(9)
Charles R. LaMantia 10,569(6)(9)
Ronald E. Logue 62,794(3)
Nicholas A. Lopardo 401,949(3)(7)(9)
David B. Perini 13,870(9)
Dennis J. Picard 13,523(9)
Alfred Poe 7,074(9)
Bernard W. Reznicek 11,463(9)
Richard P. Sergel 808(9)
David A. Spina 901,915(3)(8)
Diana Chapman Walsh 2,926(9)
Robert E. Weissman 16,719(9)
All of the above and other
executive officers as a group
(32 persons) 3,092,330(3)(6)(9)
8
______________________
(1) Includes 6,398 shares held in trust for a family member
pursuant to a trust of which Dr. Albright is a co-
trustee and 4,200 shares owned by a family member with
respect to which she disclaims beneficial ownership.
(2) Includes 1,600 shares held in trust for the benefit of
family members with respect to which Mr. Booth disclaims
beneficial ownership.
(3) Includes shares which may be acquired within 60 days
through the exercise of stock options as follows: Mr.
Carleton, 165,201; Mr. Carter,146,944; Mr. Logue, 26,534;
Mr. Lopardo, 258,001; Mr. Spina, 396,734, and the group,
1,690,479.
(4) Includes 165,777 shares held jointly and 50,000 shares
owned by a member of Mr. Carter's family with respect to
which he disclaims beneficial ownership.
(5) Includes 4,000 shares as to which Mr. Casner has sole
investment power and shared voting power.
(6) Include shares as to which voting power and investment
power are shared, as follows: Dr. LaMantia, 2,000, and
the group, 5,610.
(7) Includes 127,407 shares held jointly and 14,370 shares
held in a charitable lead trust of which Mr. Lopardo is a
co-trustee and members of Mr. Lopardo's family have a
remainder interest with respect to which he disclaims
beneficial ownership.
(8) Includes 40,000 shares owned by a member of Mr. Spina's
family with respect to which he disclaims beneficial
ownership.
(9) Includes shares held in deferred stock accounts as
follows: Dr. Albright, 2,487; Mr. Booth, 3,124; Dr. Cash,
3,003; Mr. Casner; 3,073; Mr. Darehshori, 3,073; Mr.
Goldstein, 1,976; Mr. Gruber, 1,573; Mr. Kucharski,
2,913; Dr. LaMantia, 2,487; Mr. Lopardo, 2,171; Mr.
Perini, 3,573; Mr. Picard, 2,877; Mr. Poe, 2,252; Mr.
Reznicek, 2,913; Mr. Sergel, 417; Dr. Walsh, 1,155; Mr.
Weissman, 4,233, and the group, 52,468.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's executive officers and directors to
file initial reports of ownership and reports of changes in
ownership of the Common Stock of the Corporation with the
Securities and Exchange Commission and the New York Stock
Exchange. Executive officers and directors are required by
regulations to furnish the Corporation with copies of all Section
16(a) forms which they file.
Based on a review of the copies of such forms furnished to
the Corporation and written representations from the
Corporation's executive officers and directors, the Corporation
believes that in 1999 all Section 16(a) filing requirements
applicable to its executive officers and directors were met.
CERTAIN TRANSACTIONS
During 1999 certain directors and executive officers of the
Corporation and the Bank, and various corporations and other
entities associated with such directors, were customers of the
Bank and its affiliates and had ordinary business transactions
with the Bank and its affiliates. The transactions include loans
and commitments made in the ordinary course of the Bank's
business and on substantially the same terms, including interest
rate and collateral, as those prevailing at the time for
comparable transactions with unrelated persons with no more than
normal risk of collection nor did they present other unfavorable
features. During 1999, the Bank and other subsidiaries of the
Corporation have used products or services of GartnerGroup, Inc.
and a subsidiary of Ionics, Incorporated, with which two of the
directors of the Corporation were associated. Additional
transactions of this
9
nature may be expected to take place in the ordinary course of
business in the future. Ropes & Gray, a law firm of which Mr.
Casner, a director of the Corporation, is a partner, was retained
by the Corporation to handle certain legal matters during the
past year. It is anticipated that the firm will continue to
provide legal services in the current year.
No executive officer of the Corporation was allowed to
borrow from the Bank other than through the use of a reserve
account with limits of up to $20,000 as allowed by Massachusetts
law and at the same interest rate paid by the public.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee of the Board of Directors
(the "Committee") furnishes the following report on Executive
Compensation.
POLICY
State Street combines information technology with financial
expertise to provide institutional investors with an integrated
range of products and services spanning the investment cycle.
The Corporation's goal is to be the leading company serving
institutional investors worldwide. The Corporation's executive
compensation program, by providing competitive pay and aligning
executive compensation with the Corporation's business strategy,
is designed to attract and retain superior executives, to focus
these individuals on achieving the Corporation's objectives, and
to reward executives for meeting specific short- term and
long-term performance targets. The executive compensation program
places emphasis on challenging performance goals, business
growth, and sustainable real growth in earnings per share. By
including stock-based compensation plans as a major part of the
compensation strategy, State Street links closely the goals of
stockholders and executives. Nineteen executives participated in
the executive compensation program in 1999. The chairman and
chief executive officer, the president and chief operating
officer, the vice chairmen, and the executive vice presidents are
considered executives for this purpose.
The principles of State Street's executive compensation
strategy are applied throughout the Corporation. Since
executives of the Corporation have the greatest opportunity to
influence long-term performance, a greater proportion of their
compensation is linked to the achievement of long-term financial
goals and to stock price. Other individuals who manage business
units or have corporate functional or staff responsibilities have
a significant opportunity to influence the Corporation's results,
and a sizable portion of their compensation is related to the
achievement of financial goals of both the respective business
unit and the Corporation. In addition to executives, many
officers and managers who make significant contributions to the
Corporation participate in the Corporation's equity incentive
programs and in a variety of annual incentive plans.
The Executive Compensation Committee is comprised entirely
of independent, non-employee directors, each of whom also
qualifies as an "outside director" for purposes of Section 162(m)
of the Internal Revenue Code. The Committee is responsible for
setting and administering policies which relate to executive
compensation, equity incentive programs and other incentive
programs of the Corporation. The Committee on an annual basis
reviews and evaluates the Corporation's executive compensation
program.
10
The Committee met five times in 1999 and reported its
activities at each of these meetings to the Board of Directors.
In conjunction with its annual review and evaluation of the
executive compensation program, the Committee engaged its own
independent compensation consultant. The consultant worked for
the Committee in reviewing the executive compensation program, in
reviewing a reference group of public companies against which the
Corporation's executive compensation and financial performance
was compared, and in considering modifications to existing plans.
The Committee, with assistance from its independent consultant,
validated this group of companies as a reference group against
which to compare compensation practices and competitive levels of
compensation. This group includes large U.S. bank holding
companies, and U.S. based financial services companies.
The Committee believes that the Corporation's most direct
competitors for executives are not necessarily the same companies
that would be included in a peer group established to compare
stockholder returns. Therefore, the reference companies used for
comparative compensation purposes contain some overlap with, but
are not identical to, the companies in the S&P Financial Index
used for performance comparison under "Stockholder Return
Performance Presentation" in this proxy statement.
The elements of the Corporation's executive compensation
program currently consist of base salary, annual bonus,
performance awards, stock options, deferred stock and restricted
stock awards. These are integrated components where salary and
bonus reflect one-year results, performance awards reflect
two-year results, and stock options, deferred stock, and
restricted stock awards reflect long-term stock price
appreciation. As a result of its 1999 review, the Committee has
determined that the fundamental elements of this compensation
plan are appropriate for a program that is intended to support
the Corporation's business strategy, provide competitive
compensation and create value for stockholders. The Committee's
policies with respect to each of these elements, including the
bases for the compensation reported for 1999 to the Corporation's
chief executive officer, Mr. Carter, and chief operating officer,
Mr. Spina, are discussed below.
BASE SALARIES
The Committee recommends to the Board of Directors the base
salary of Mr. Carter and Mr. Spina, and reviews the salaries of
the other executives. Base salaries for executives are
determined by subjectively evaluating the responsibilities of the
position, the strategic value of the position to State Street,
and the experience and performance of the individual. No
specific formula is used to set base salaries. The Committee has
determined however, that to be competitive it is appropriate for
State Street's executive salary levels to be near the median of
the reference group. Annual adjustments, if any, to base salary
levels are determined by reviewing market compensation data and
subjectively considering the overall scope of each position and
its strategic importance to State Street, the performance of the
Corporation, an evaluation of the individual's performance, and
the length of time since the individual's last salary adjustment.
The Committee also considers the range of salary increases which
are awarded to all employees of the Corporation.
With respect to the base salary granted to Mr. Carter and
Mr. Spina, for 1999, the Committee reviewed all of the factors
noted above including data supplied by the compensation
consultant on market levels of pay for the chief executive
officer and chief operating officer at companies in the reference
group and the recent performance of the Corporation, specifically
earnings per share and return on equity, under the leadership of
Mr. Carter and Mr. Spina. No particular weight was applied to
any single factor in making the Committee's determination. As
compared to salaries paid to chief executive officer and chief
operating officer positions in the reference group, Mr. Carter's
salary and Mr. Spina's salary were slightly above the median.
11
ANNUAL BONUSES
The Corporation's executives are eligible for annual cash
bonuses under the provisions of the Senior Executive Annual
Incentive Plan, which was approved at the 1997 annual meeting of
stockholders. Each year the Committee assigns to each executive
a minimum, target, and maximum bonus award opportunity, stated as
a percent of salary. The levels of bonus opportunity assigned to
each executive are determined by reviewing competitive
compensation data supplied by the compensation consultant, the
level of responsibility of each executive, and the strategic
importance of the executive's position to the Corporation. At
its December 1998 meeting, the Committee assigned a range of
bonus opportunity for Mr. Carter for 1999 at a minimum award of
0% of salary, a target award of 120% of salary, and a maximum
award of 240% of salary. The minimum bonus opportunity for Mr.
Spina was established at 0% of salary, the target award was 110%
of salary, and the maximum award was 220% of salary. The actual
level of bonus earned is based upon achievement by the
Corporation of specific predetermined performance targets
established by the Committee. Annually the Committee reviews the
Corporation's earnings per share growth, return on equity
performance, revenue growth, and total stockholder return for the
one- and five-year period as compared to the S&P Financial Index.
In establishing performance targets for the annual incentive
plan, the Committee considers this data along with the
Corporation's long-term financial goals, the specific financial
goals for the following year, and the business environment in
which the Corporation is operating. The Committee then
establishes the measures that will be used (based on the measures
available under the Senior Executive Annual Incentive Plan), the
weighting of the measures, and the specific performance targets
at which various levels of bonus will be earned.
The 1999 performance targets established by the Committee
were based on earnings per share and return on equity. The
Committee established a performance/payout schedule which
identified various objective earnings per share and return on
equity levels at which specific awards would be earned.
At its meeting in February 2000, the Committee certified
that specific performance goals had been achieved and approved a
total bonus payment for 1999 of $1,197,000 for Mr. Carter and
$741,967 for Mr. Spina. Bonuses for other participants in the
plan receiving bonuses totaled $4,084,050 for the year.
PERFORMANCE AWARDS/EQUITY AWARDS
Longer-term compensation is provided to executives in the
form of both performance awards and equity awards.
Performance Awards - Performance awards represent a
contingent right to a cash payment, based upon the price of the
Corporation's stock, in the event the Corporation meets specified
performance goals over a specified time period following the
grant. Performance awards have been granted to the Corporation's
executives once every two years or at the time an officer joined
the executive group. Performance award payments, if any, are
made every two years.
The Committee granted performance awards under the 1997
Equity Incentive Plan to the executive group in December 1998.
These grants included 127,000 units to Mr. Carter and an award of
67,800 units to Mr. Spina. An additional grant was made to an
executive who joined the group in March 1999. The size of these
grants was determined based upon subjective factors, including
primarily the perceived importance of the executive's
contribution to the success of the Corporation, similar to the
subjective factors considered in setting base salary, and upon a
target level of long-term incentive opportunity based upon data
supplied by the Committee's compensation consultant with respect
to the reference group. These grants have a two-year performance
period covering
12
the years 1999 and 2000. The Committee also established
performance targets for the 1999-2000 performance period for
these grants tied to a combination of financial measures based
upon return on equity, earnings per share and total stockholder
return. As soon as practicable after the two-year performance
period, December 31, 2000, a cash payment will be calculated
based upon the number of performance awards earned, if any, times
the market value of the Corporation's common stock at the end of
the performance period. In this way, the final cash value of the
performance awards relates directly to both corporate financial
performance in determining how many awards are earned and stock
price appreciation in determining the cash value of the units
earned.
Stock Options - Stock options are granted to executives
annually, although the Committee has the authority to grant
options at any time and has in the past made additional grants in
conjunction with new responsibilities assumed by members of the
executive group. The Committee selects the executives to receive
options and sets the size of option awards based upon subjective
factors, including: the perceived importance of the executive's
contribution to the success of the Corporation, similar to the
subjective factors considered in setting base salary; a target
level of long-term incentive opportunity based upon data supplied
by the compensation consultant with respect to the reference
group, and the amount of and annual value of the two-year
performance awards which were granted to the respective executive
in that year or in the prior year. The exercise price of options
is equal to the market price of the shares at the time of the
grant. The options have a ten-year life and become exercisable in
equal installments over a three-year period. Because stock
options are granted at market price, the value of the stock
options is dependent upon an increase in the Corporation's stock
price. The Committee views stock option grants as a part of the
executive's annual total compensation package, and the amount of
stock options outstanding at the time of a new grant or granted
in prior years does not serve to increase or decrease the size of
the new grant.
At its meeting in December 1999, the Committee granted Mr.
Carter options to purchase 125,000 shares and Mr. Spina options
to purchase 100,000 shares, based upon a review of all of the
factors noted above; no particular weight was applied to any
single factor in making the Committee's determination.
Deferred and Restricted Stock - Deferred and restricted
stock awards are used to recruit, motivate, and retain high
potential individuals. Typically, deferred and restricted stock
awards are made to individuals who are not members of the
executive group. However, the Committee may grant deferred and
restricted stock to members of the executive group as part of a
recruitment package or based upon subjective factors, to reward
what is considered to be exceptional performance. Two members of
the executive group received restricted stock awards and one
received deferred stock under the 1997 Equity Incentive Plan in
1999. The awards were made without payment from the recipients.
TAX LAW
Section 162(m) of the Internal Revenue Code generally
precludes the Corporation from taking federal income tax
deductions for compensation in excess of $1,000,000 per year for
the Chief Executive Officer and any of its four other
highest-paid executive officers, if those individuals are
employed on the last day of the tax year. Generally, however,
performance-based compensation that satisfies the requirements of
Section 162(m) is not subject to the deduction limit. The
Committee reviewed all elements of the executive compensation
program against the standards for qualifying for the tax
deduction. Stock option and performance unit awards under the
1997 Equity Incentive Plan and awards under the Senior Executive
Annual Incentive Plan have been designed to qualify as
performance-based compensation, with the intended result that the
deduction of compensation under these plans, including
compensation from the exercise of options or from performance
awards, would not be affected by the Section 162(m) deduction
limits. A portion of a bonus earned in 1999 under the State
Street
13
Global Advisors Incentive Plan did not qualify for the federal
income tax deduction pursuant to Section 162(m).
The restricted stock awards are not intended to qualify for
exemption from the Section 162(m) limits.
In administering the executive compensation program, the
Committee will continue to consider whether the deductibility of
compensation will be limited under Section 162(m) and, in
appropriate cases, will strive to structure such compensation so
that any such limitation will not apply.
CONCLUSION
Through the program described above, the Corporation's
executive compensation is linked directly to the Corporation's
performance, growth in stockholder value, and each executive's
contribution to those results. As the Corporation's business
changes, particularly in light of its global expansion, and with
the increasingly competitive and complex business and regulatory
environment, the continuing assessment of the compensation
structure and goals is required to assure that compensation
incentives remain competitive, consistent with stockholder
interest, and closely tied to continuing growth in stockholder
value.
Submitted by,
I. MacAllister Booth
Nader F. Darehshori
Charles R. LaMantia
Bernard W. Reznicek
Robert E. Weissman, Chair
14
<PAGE>
EXECUTIVE COMPENSATION
Shown below is information concerning the annual and long
term compensation paid by the Corporation and its subsidiaries,
including the Bank, to the chief executive officer and the four
other most highly compensated executive officers of the
Corporation (the "Named Executive Officers") for the periods
shown.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------- ------------------------------
AWARDS PAYOUTS
--------------------- --------
LONG
NAME OTHER RESTRICTED SECURITIES TERM ALL OTHER
AND ANNUAL STOCK UNDERLYING INCENTIVE COMPEN-
PRINCIPAL SALARY BONUS COMPENSA- AWARDS OPTIONS PAYOUTS SATION
POSITION YEAR ($) ($) TION($) ($) (#)(1) ($) ($)(2)
- --------- ---- ------ ------ --------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marshall N. Carter
Chairman and 1999 1,033,758 1,197,000 0 0 125,000 0 18,150
Chief Executive 1998 976,265 895,372 0 1,201,250 137,800 5,680,000 4,800
Executive Officer 1997 937,517 1,372,275 0 0 None 0 4,750
David A. Spina
President and 1999 701,266 741,967 0 0 100,000 0 13,050
Chief Operating 1998 668,758 500,000 0 0 110,200 3,536,250 4,800
Operating Officer 1997 643,767 834,600 0 0 None 0 4,750
Nicholas A. 1999 551,265 1,415,615 0 0 66,600 0 10,800
Lopardo(3) 1998 525,003 664,663 0 0 49,600 1,697,400 4,800
Vice Chairman 1997 500,019 1,576,775 0 0 25,000 0 4,750
Dale L. Carleton(4)1999 551,265 425,612 0 0 66,600 0 10,800
Vice Chairman 1998 525,003 344,663 0 300,313 49,600 1,697,400 4,800
1997 437,504 469,463 0 0 25,000 0 4,750
Ronald E. Logue(5) 1999 545,019 425,612 0 0 66,600 0 4,800
Vice Chairman 1998 493,767 328,261 0 300,313 49,600 1,697,400 4,800
1997 437,522 469,463 0 0 15,000 0 4,750
- -------------------------------
</TABLE>
(1) Reflects a two-for-one stock split effective April 1997.
(2) Reflects the Corporation's contributions of $4,800 to the
Salary Savings Program and contributions to the State Street
Corporation 401(k) Restoration and Voluntary Deferral Plan as
follows: Mr. Carter, $13,350; Mr. Spina; $8,250, Mr.
Lopardo, $6,000, and Mr. Carleton, $6,000.
(3) Includes bonuses from the Corporation's Senior Executives
Annual Incentive Plan and from the State Street Global
Advisors Incentive Plan. Elected Vice Chairman on December
18, 1997; previously was Executive Vice President.
(4) Elected Vice Chairman on December 18, 1997; previously was
Executive Vice President. Mr. Carleton resigned as a Vice
Chairman at the end of 1999.
(5) Elected Vice Chairman on March 18, 1999; previously was
Executive Vice President.
15
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
- ----------------------------------------------------------
Potential Realizable
Percent Value at Assumed
Number of of Total Annual Rates of
Securities Options Stock Price
Underlying Granted to Exercise Appreciation for
Options Employees or Base Option Term(2)
Granted In Fiscal Price Expira- --------------------
Name (#)(1) Year ($/Sh) tion Date 5$($) 10%($)
- ---- ---------- ---------- -------- --------- ------- ---------
<C> <C> <C> <C> <C> <C> <C>
Marshall N. Carter 125,000 5.4 69.2813 12/15/2009 5,446,325 13,802,025
David A. Spina 100,000 4.3 69.2813 12/15/2009 4,357,060 11,041,620
Nicholas A. Lopardo 66,600 2.9 69.2813 12/15/2009 2,901,802 7,353,719
Dale L. Carleton 66,600 2.9 69.2813 12/15/2009 2,901,802 7,353,719
Ronald E. Logue 66,600 2.9 69.2813 12/15/2009 2,901,802 7,353,719
____________________
</TABLE>
(1) Options become exercisable in 33 1/3% installments over a
three-year period commencing December 16, 2000. No SARs
were granted.
(2) Gains are reported net of the option exercise price, but
before taxes associated with exercise. These amounts
represent certain assumed rates of appreciation only, as set
by the Securities and Exchange Commission. The actual
value, if any, that the Named Executive Officer may realize
from these options will depend solely on the gain in stock
price over the exercise price when the options are
exercised.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
OPTIONS AT DECEMBER 31, 1999
DECEMBER 31, 1999(1) ($)(2)
---------------------- ------------------
SHARES VALUE
ACQUIRED ON REALIZED EXER- UNEXER- EXER- UNEXER-
NAME EXERCISE(#) ($)(3) CISABLE CISABLE CISABLE CISABLE
- ---- ----------- -------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C>
Marshall N. Carter 146,010 7,922,180 194,944 216,866 7,243,852 989,396
David A. Spina 0 0 396,734 183,466 18,234,121 1,301,991
Nicholas A. Lopardo 50,000 3,212,189 258,001 107,999 12,700,959 577,923
Dale L. Carleton 40,000 2,462,317 165,201 107,999 6,863,340 577,923
Ronald E. Logue 102,230 4,941,938 70,716 104,666 2,368,456 521,887
- ------------------
</TABLE>
(1) Reflects a two-for-one stock split effective April 1997.
(2) Represents the difference between the closing price of the
stock on December 31, 1999 ($73.0625) and the exercise price
of the stock options.
(3) Represents the difference between the fair market value of
the stock at the time of the exercise and the exercise price
of the stock options.
16
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the cumulative
total stockholder return on the Corporation's Common Stock to the
cumulative total return of the S&P 500 Index and the S&P
Financial Index for the period of five fiscal years which
commenced December 31, 1994 and ended December 31, 1999, assuming
$100 invested in the Corporation's Common Stock and in each index
on December 31, 1994 and assuming reinvestment of dividends. The
S&P Financial Index is a publicly available measure of 71 of the
Standard & Poor's 500 companies, representing 31 banking
companies, 21 insurance companies and 19 financial services
companies.
Comparison of Five-Year Cumulative Total Return
[performance graph]
Year Ended December 31
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
State Street Corporation $100 $160 $233 $423 $514 $540
S&P 500 Index 100 138 169 226 290 351
S&P Financial Index 100 154 208 308 344 357
</TABLE>
<PAGE>
RETIREMENT BENEFITS
As of January 1, 1990, the benefit formula under the
Corporation's defined benefit plan (the "Retirement Plan") was
changed to a cash balance formula. An account balance was
established for each participant equal to the then present value
of the participant's benefit earned to date. Each year this
account balance is increased by interest at a specified rate and
a contribution credit equal to a percentage of the participant's
base salary for the calendar year exclusive of overtime, bonuses
or other extraordinary benefits or allowances. The percentages
of base salary are 4.0% for the first year of participation
increasing to 11.25% for the thirtieth year, and zero thereafter.
Employees who were participants on December 31, 1989 will receive
the greater of their account balance or the benefit derived from
the "grandfathered" formula if they retire from the plan. The
grandfathered formula, based on 30 years of service, is equal to
a benefit of 50% of final average pay minus 50% of the estimated
Social Security benefit. For periods of service of less than 30
years, the benefit is reduced pro rata.
Employees are enrolled in the Retirement Plan following the
completion of one year of service and attainment of the age of
21. The normal retirement age is 65, although earlier retirement
options are available. The Retirement Plan has a five-year
vesting provision, and participants who are vested will receive
their account balances or equivalent annuities if they leave the
employ of the Corporation or the Bank before retirement.
Under federal law, an employee's benefits under a qualified
retirement plan are limited to certain maximum amounts. The
Corporation has adopted a supplemental retirement plan, as
amended (the "1987 Supplemental Plan") to supplement the benefits
under the Retirement Plan by payment of additional retirement
benefits out of general funds of the Corporation. Each of the
Named Executive Officers is included in the 1987 Supplemental
Plan.
Effective as of January 1, 1995 the Corporation adopted a
supplemental defined benefit pension plan (the "1995 Supplemental
Plan") to provide certain key employees with retirement benefits
and encourage the continued employment of such employees with the
Corporation. The 1995 Supplemental Plan provides for the payment
of additional annual benefits upon retirement at age 65 (or a
proportionately reduced amount in the event of retirement on or
after the age of 55 but prior to the age of 65), calculated as a
straight life annuity, equal to 50% of such participant's final
average earnings (highest average of any 5 consecutive years'
earnings, as defined therein, during the last 10 years of
employment) less annual benefits paid to such participant from
the Retirement Plan, the 1987 Supplemental Plan and other
retirement income payable to such participant under other plans
of the Corporation or other of the participant's employers. Such
benefits are subject to forfeiture in the event that the
participant's employment with the Corporation terminates for any
reason prior to reaching age 55 or completing 10 full years of
employment with the Corporation. In addition, such benefits
shall terminate if the participant engages in certain competitive
activities within two years of termination. In June 1998 the
Supplemental Plan was amended primarily to define earnings to
exclude annual incentive payments, except those under the Senior
Executive Annual Incentive Plan, to permit participants to choose
payment in installments over 5, 10 or 15 years and to set out an
administrative review procedure for claims and appeals as
required by ERISA. Each of the Named Executive Officers
participates in the 1995 Supplemental Plan.
Under an agreement dated March 5, 1992, Mr. Carter will
receive an additional pension contribution as a percentage of
base compensation calculated as if a contribution had been made
to the Retirement Plan of 7.50% in the first year and 3.75% in
each of the next 15 years. In addition, the Carter Letter
Agreement (as defined below) provides, among other things, that
the forfeiture and termination provisions relating to the 1995
Supplemental Plan will be deemed inapplicable in the event that
(i) Mr. Carter's employment is terminated for reasons other than
voluntary resignation, death or malfeasance before July 23, 2001
and (ii) he is not eligible for the
18
severance benefits set forth in the change of control
arrangements described below. See - "Termination of Employment
and Change of Control Arrangements".
Final average earnings include annual base salary plus any
annual cash incentive compensation awards only. As of December
31, 1999, the credited years of service for each of the Named
Executive Officers were as follows: Mr. Carter, 7; Mr. Spina,
26; Mr. Lopardo, 11; Mr. Carleton, 20; and Mr. Logue, 8. Current
compensation covered by the Retirement Plan as of December 31,
1999 for each of the Named Executive Officers was as follows:
Mr. Carter, $1,880,380; Mr. Spina, $1,175,000; Mr. Lopardo,
$1,169,663; Mr. Carleton, $869,663, and Mr. Logue, $828,277.
The estimated annual aggregate benefits (which are not
subject to a deduction for Social Security), assuming a single
life annuity, payable upon normal retirement under the final
average pay formula to the Named Executive Officers assuming each
continues to be employed by the Corporation until age 65 at his
annual base salary and cash incentive compensation at December
31, 1999 are as follows: Mr. Carter, $984,381; Mr. Spina,
$618,462; Mr. Lopardo, $584,832; Mr. Carleton, $434,832, and Mr.
Logue, $414,139.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Corporation has employment agreements with Messrs.
Carter, Spina, Lopardo, Carleton and Logue which become
operative following a change of control of the Corporation, as
defined in the employment agreements. The employment agreements
continue in effect while these executive officers are employed by
the Corporation and remain in effect for a period of two years
after a change of control. If the employment of any of these
executive officers is terminated following a change of control,
or if Mr. Carter's or Mr. Spina's employment is terminated
voluntarily within thirty days of the six-month period following
a change of control, or within thirty days of the twelve- month
period following a change of control for the other Named
Executive Officers, such executive officer would become entitled
to various benefits under his employment agreement, including
payment of three times the executive officer's base salary and
bonus, unless the executive officer's employment was terminated
by the Corporation for cause or by the executive officer without
good reason as defined in the agreement. If the executive
officers each had been terminated on December 31, 1999, they
would have been entitled to receive the following amounts as
severance pay: Mr. Carter, $6,741,000; Mr. Spina, $4,355,949;
Mr. Lopardo, $5,926,884; Mr. Carleton, $2,956,884; and Mr. Logue,
$2,956,884. The Corporation will make additional payments in
amounts such that after the payment of income and excise taxes,
the executive officers will be in the same after-tax position as
if no excise tax under Section 4999 of the Internal Revenue Code
had been imposed. Each of the outstanding agreements pursuant to
which stock options and performance units were granted to Messrs.
Carter, Spina, Lopardo, Carleton and Logue by the Corporation
contains provisions for acceleration of vesting of stock options
and payment of performance units following a change of control.
A change of control is defined in the agreements to include the
acquisition of 25% or more of the Corporation's then outstanding
stock or other change of control as determined by regulatory
authorities, a significant change in the composition of the Board
of Directors, merger or consolidation by the Corporation without
certain approvals of the Board of Directors, and the sale of
substantially all of the Corporation's assets.
The Corporation entered into a letter agreement with Mr.
Carter (the "Carter Letter Agreement") that provides for
severance pay equal to two years' salary and bonus if (i) his
employment is terminated for reasons other than voluntary
resignation, death or malfeasance before July 23, 2001, and (ii)
he is not eligible for the severance benefits set forth in the
change of control arrangements described above. In such
circumstances, for purposes of determining the amount payable to
Mr. Carter pursuant to the 1995 Supplemental Plan (i) the
forfeiture and termination provisions described above will be
deemed inapplicable, and (ii) the benefits otherwise
19
payable thereunder will be reduced by multiplying such amounts by
a fraction, the numerator of which is the number of whole
calendar months Mr. Carter was employed by the Corporation and
the denominator of which is 120. Such payments shall terminate
in the event that Mr. Carter becomes employed by one of the top
five master trust or custody banks or one of the top five mutual
fund custodians within two years of termination (the
"Non-Competition Clause"). The Carter Letter Agreement also
provides that in the event of a change of control of the
Corporation and termination of Mr. Carter's employment under
circumstances that entitle him to receive a severance payment
pursuant to the change in control arrangements described above
the 1995 Supplemental Plan will be modified in the manner set
forth above (except that the Non-Competition Clause will be
inapplicable), and Mr. Carter will be provided with a benefit
equivalent in value to that which he would have received had his
employment with the Corporation continued an additional three
years.
The Corporation has an Executive Compensation Trust (the
"Trust") to provide a source for payments required to be made to
participants, including Messrs. Carter, Spina, Lopardo, Carleton,
and Logue, under the 1987 Supplemental Plan and the 1995
Supplemental Plan and to Mr. Carter pursuant to the Carter Letter
Agreement. The Trust has been partially funded in the amount of
$17,529,382. The Trust is revocable until a change of control
occurs, at which time it becomes irrevocable. A change of
control is defined to include the acquisition of 25% or more of
the Corporation's then outstanding stock or other change of
control as determined by regulatory authorities, a significant
change in the composition of the Board of Directors, merger or
consolidation by the Corporation without certain approvals of the
Board of Directors, and the sale of substantially all of the
Corporation's assets.
APPROVAL OF AMENDMENT TO THE 1997 EQUITY INCENTIVE PLAN
On December 16, 1999, the Board of Directors adopted,
subject to stockholder approval, an amendment to the 1997 Equity
Incentive Plan, as amended ("1997 Plan") increasing the number of
shares available under the 1997 Plan by 7,900,000 (less than 5%
of total outstanding shares) to a total of 15,900,000. The Board
approved the increase in the number of shares reserved for
issuance under the 1997 Plan to ensure that the Corporation is
able to continue to make Awards at levels determined to be
appropriate by the Board and to meet the competitive situation
created by the varied compensation programs of other companies.
Under the 1997 Plan, an aggregate of 8,000,000 shares of
Common Stock of the Corporation is currently authorized for
issuance. The maximum number of shares for which any individual
may be granted options or stock appreciation rights under the
1997 Plan during a calendar year is in each case 800,000. The
maximum number of shares (or their equivalent fair market value
in cash) that may be delivered to any individual under
performance awards made under the 1997 Plan is 500,000. (The
8,000,000, 800,000, and 500,000 amounts are subject to adjustment
upon certain occurrences.) The maximum number of shares of
Restricted Stock that may be delivered under the Plan will not
exceed 40% of the total number of shares authorized for issuance.
No Awards may be made under the 1997 Plan after December 18,
2006.
As of February 1, 2000, an aggregate of 7,145,527 shares of
the Corporation's Common Stock had been granted under the 1997
Plan (net of canceled awards), and 854,473 shares (plus any
awards that might in the future be returned to the 1997 Plan as a
result of cancellations of awards or expiration of options)
remained available for future grants under the 1997 Plan.
The 1997 Plan is designed to advance the interests of the
Corporation and its stockholders by granting key employees of the
Corporation and its subsidiaries, non-employee directors and
other key persons, stock and
20
stock-based awards (collectively, the "Awards"), including stock
options; restricted and unrestricted stock; deferred stock;
rights to receive cash or stock in connection with achievement of
performance goals ("Performance Awards"); tax-offset payments, or
rights to receive cash or stock in respect of increases in the
value of the Common Stock ("SARs"). The Board believes that the
Corporation's stock-based plans have contributed to the progress
of the Corporation by providing incentives to persons key to its
success. Intense competition among business firms for executives
and other key persons makes it important for the Corporation to
maintain an effective compensation program in order to continue
to attract, motivate, and retain persons necessary to further the
Corporation's growth. Competing compensation programs of other
companies make it important that the Corporation's program
continues and has maximum flexibility.
o The 1997 Plan is broad-based. Approximately 2,000
persons are eligible to participate in the Plan.
o The increase in the number of shares available under the
1997 Plan for which approval is sought is less than 5% of
the total outstanding shares of the Corporation's Common
Stock.
o The 1997 Plan does not permit repricing of options once
such options are granted.
o The maximum number of shares of restricted stock will not
exceed 40% of the total number of shares authorized for
issuance.
No determination has been made as to which individuals may
in the future receive options or rights under the 1997 Plan; as
to the number of shares, up to the maximum limit provided in the
Plan, to be covered by any such options or rights to a single
individual, or as to the number of individuals to whom such
options or rights will be granted. The proceeds received by the
Corporation from the sale of stock pursuant to the Plan will be
used for the general purposes of the Corporation, or in the case
of the receipt of payment in shares of Common Stock, as the Board
of Directors may determine, including redelivery of the shares
received upon exercise of options.
SUMMARY OF THE 1997 PLAN
The following is a summary of the principal features of the
1997 Plan:
ADMINISTRATION; ELIGIBLE PERSONS. The 1997 Plan is
administered by a Committee of the Board of Directors (which
currently is the Executive Compensation Committee) consisting of
no fewer than two directors. During such times as the Common
Stock is registered under the Securities Exchange Act of 1934
(the "1934 Act") (and except as the Board otherwise determines),
all members of the Committee shall be "non-employee" directors
within the meaning of Rule 16b-3 under the 1934 Act and "outside
directors" as that term is used in Section 162(m) of the Internal
Revenue Code. All members of the Committee serve at the pleasure
of the Board of Directors.
The Committee has full power, subject to the 1997 Plan, to
grant awards at such time or times as it chooses, determine the
size, type, and terms of any award, waive compliance with award
terms, and amend, cancel, and regrant awards. The Committee may
delegate authority to officers of the Corporation to grant Awards
to non-executive officers. Approximately 2,000 persons are
eligible to participate in the 1997 Plan.
STOCK OPTIONS. The 1997 Plan permits the granting of stock
options that qualify as incentive stock options under Section
422(b) of the Internal Revenue Code ("incentive options" or
"ISOs") and stock options that do not so qualify ("nonstatutory
options"). The option exercise price of each option shall be
determined by the Committee in its discretion but may not be less
than the fair market value of the Common Stock on the date the
option is granted. Once granted, an option cannot be repriced.
21
The term of each option is fixed by the Committee but may
not exceed 10 years from the date of grant. On February 28,
2000, the closing price of the Common Stock on the New York Stock
Exchange, as reported in The Wall Street Journal, was $73.6875.
The Committee determines at what time or times each option
may be exercised. Options may be made exercisable in
installments, and the exercisability of options may be
accelerated by the Committee.
The option exercise price of options granted under the 1997
Plan must be paid in cash or, if the Committee so determines, by
delivery of shares of unrestricted Common Stock (including by
attestation of ownership), by delivery of an unconditional
broker's undertaking to deliver the exercise price, or a
combination of such methods of payment.
In the event of termination of employment by reason of
retirement permitted by a retirement plan, disability, or death,
except as the Committee may otherwise determine, an option may
thereafter be exercised in accordance with its terms for a period
ending one year after the last installment of the option becomes
exercisable or one year following retirement, death, or
disability, if later, subject to the stated term of the option.
If an optionee terminates employment for any reason other
than retirement permitted by a retirement plan, disability, or
death, or if a service relationship of a participant other than
an employee terminates for any reason, except as the Committee
may otherwise determine, his or her options will remain
exercisable, to the extent then exercisable, for three months (or
if the participant dies within such 3-month period, for one year)
following termination, subject to the stated term of the option.
STOCK APPRECIATION RIGHTS. The Committee may also grant
stock appreciation rights entitling the holder upon exercise to
receive an amount in any combination of cash or shares of Common
Stock (as determined by the Committee), measured in whole or in
part by reference to the appreciation since the date of grant in
the value of the shares of Common Stock covered by such right.
Stock appreciation rights may be granted separately from or in
tandem with the grant of an option. Each tandem stock
appreciation right terminates upon the termination or exercise of
any accompanying option.
In addition to stock appreciation rights exercisable at the
discretion of the holder, the Committee may also determine in its
sole discretion that, if so requested by an option holder, the
Corporation will pay the optionee, in cancellation of the related
option, any combination of cash or Common Stock, equal to the
difference between the fair market value of the shares covered by
the option and the exercise price.
RESTRICTED STOCK AND UNRESTRICTED STOCK. The Committee may
also award shares of Common Stock subject to such conditions and
restrictions as the Committee may determine ("Restricted Stock").
The Committee may require that recipients of Restricted Stock
enter into a Restricted Stock Award agreement with the
Corporation setting forth the terms and conditions of the Award,
or may establish the terms and conditions of the Award in some
other manner. The Committee may at any time waive the
restrictions and conditions applicable to a Restricted Stock
Award. Shares of Restricted Stock are non-transferable and
except as otherwise provided by the Committee, if a participant
who holds shares of Restricted Stock terminates employment for
any reason other than death or disability prior to the lapse or
waiver of the restrictions, the Corporation will have the right
to require the forfeiture or repurchase of the shares in exchange
for the amount, if any, which the participant paid for them.
Except as determined by the Committee, Restricted Stock will vest
(i.e., become free of restrictions under the 1997 Plan) in the
event of death or disability. Prior to the lapse of restrictions
on shares of Restricted
22
Stock, the participant will have all rights of a stockholder with
respect to the shares, including voting and dividend rights,
subject only to the conditions and restrictions generally
applicable to Restricted Stock.
The Committee may also grant shares (for a purchase price
not less than par value) which are free from any restrictions
under the 1997 Plan ("Unrestricted Stock"). Unrestricted Stock
could be issued in recognition of past services or in other
circumstances where the Committee determines the grant to be in
the best interests of the Corporation.
Restricted Stock or Unrestricted Stock may be issued under
the 1997 Plan in payment of Awards under the Senior Executive
Annual Incentive Plan described in the Report of the Executive
Compensation Committee.
DEFERRED STOCK. The Committee may also make Deferred Stock
awards under the 1997 Plan entitling the recipient to receive
shares of Common Stock in one or more installments at a future
date or dates, as determined by the Committee. Receipt of
Deferred Stock may be conditioned on such matters as the
Committee shall determine, subject to acceleration in the
Committee's discretion. Except as otherwise determined by the
Committee all such rights to which a participant is not
irrevocably entitled will terminate upon the participant's
termination of employment.
PERFORMANCE AWARDS. The Committee may also award
Performance Awards entitling the recipient to receive shares of
Common Stock or cash in such combinations as the Committee may
determine, up to a maximum of 500,000 shares (or their equivalent
value in cash) to any individual over the life of the 1997 Plan.
Payment of the Performance Award may be conditioned on
achievement of individual, corporate, departmental or other
performance goals and will be subject to such other conditions as
the Committee shall determine. Except as otherwise determined by
the Committee, rights under a Performance Award will terminate
upon a participant's termination of employment.
Performance Awards under the 1997 Plan that are intended to
qualify as performance-based compensation under Section
162(m)(4)(C) of the Internal Revenue Code ("exempt awards") must
provide for payment solely upon attainment of one or more
objectively determinable performance goals established by the
Committee (in accordance with the rules under Section 162(m) of
the Internal Revenue Code) based on one or more of the following
performance criteria: (i) return on equity, (ii) earnings per
share, (iii) the Corporation's total stockholder return during
the performance period compared to the total stockholder return
of a generally recognized market reference (e.g., the S&P 500 or
the S&P Financial Index), (iv) revenue growth, (v) operating
leverage, or (vi) market share. To the extent consistent with
the exemption rules under Section 162(m) of the Internal Revenue
Code, the Committee may provide that performance goals will be
adjusted to eliminate the effect of extraordinary items (as
determined in accordance with generally accepted accounting
principles) or changes in the Common Stock by reason of a stock
dividend, stock split, extraordinary dividend or similar event.
SUPPLEMENTAL GRANTS. In connection with Awards under the
1997 Plan, the Committee may at any time grant to a participant
the right to receive a cash payment in up to the amount estimated
to be necessary to cover federal, state, and local income taxes
with respect to such Award and with respect to the cash payment
itself.
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS, ETC. The
Committee is required to make appropriate adjustments in
connection with outstanding Awards to reflect stock dividends,
stock splits, and similar events, including distributions to
stockholders other than normal cash dividends. In the event of a
merger, acquisition, disposition, or similar corporate
transaction or a material change in law or accounting principles
or practices, the
23
Committee in its discretion may also provide for appropriate
adjustments. No adjustments will be made to the extent they
would adversely effect the ISO or Section 162(m) qualification of
Awards.
Except as provided by the Committee at time of grant, in the
event of a consolidation or merger in which the Corporation is
not the surviving corporation or which results in the acquisition
of substantially all of the outstanding Common Stock by a single
person or entity or by a group of persons and/or entities acting
in concert, or in the event of the sale or transfer of
substantially all of the Corporation's assets or a dissolution or
liquidation of the Corporation, unvested Awards and Awards not
yet exercisable will be forfeited unless the Committee makes the
Award vested and free of restrictions (and exercisable, if the
Award requires exercise) or, in the case of a participant who
will be employed by or otherwise providing services to a
surviving or acquiring entity, provide for assumption of the
Award by such entity or for the grant of a substitute Award. In
all events, in the event of a "Change of Control" (as defined in
the 1997 Plan) of the Corporation, options and SARs shall become
exercisable, Restricted Stock shall vest, and holders of
Performance Awards shall be entitled to a cash payment in such
amount as shall be specified in the Award. After such a Change
of Control, options and SARs shall remain exercisable following a
termination of employment or other service relationship (other
than in the event of death, retirement or disability) for seven
months or until the expiration of the original term of the Award
if earlier. Neither the Committee nor the Board may impose
additional conditions on exercise or otherwise amend an Award
without the holder's written consent. Stock may be substituted
for cash in certain circumstances where cash payments would
result in adverse accounting treatment.
Certain tax payments. The Corporation will withhold
applicable taxes from any cash payment made pursuant to an Award.
In the case of Awards involving Common Stock, the Committee may
require the participant to remit an amount equal to the required
tax withholding or make other arrangements satisfactory to the
Committee for the payment of such taxes. The Committee may
permit shares to be withheld from an Award, or may permit the
participant to deliver shares, with a value equal to the required
withholding. In the case of an ISO, the Committee may require
that the participant agree to provide for withholding taxes if a
withholding obligation arises at time of exercise or in the
future.
TRANSFERABILITY OF AWARDS. In general, Awards under the
1997 Plan are nontransferable except in the event of death.
However, the Committee in its discretion may permit transfers to
other persons or entities.
NONCOMPETITION, ETC. The Committee may provide in
connection with any Award that the participant's rights to
enjoyment of the Award or to any cash or Common Stock deliverable
under the Award be conditioned upon the participant's agreeing
(on terms determined by the Committee) not to compete with the
Corporation and its subsidiaries, not to disclose confidential
information, and not to solicit employees, advisors or business
from the Corporation and its subsidiaries.
AMENDMENT AND TERMINATION. The Committee may at any time
amend or discontinue the 1997 Plan or amend Awards for the
purpose of satisfying changes in the law or for any other lawful
purpose. However, no such action shall adversely affect any
rights under outstanding awards without the holder's consent.
Moreover, any amendment requiring stockholder approval for
purposes of satisfying any then-applicable incentive stock option
rules or Section 162(m) rules shall be subject to such
stockholder approval to the extent then required.
24
FEDERAL INCOME TAX CONSEQUENCES
The Corporation is advised that under the federal income tax
laws as now in effect, the income tax consequences associated
with stock options awarded under the 1997 Plan are, in summary,
as follows:
INCENTIVE OPTIONS. No ordinary taxable income is realized
by the optionee upon the grant or exercise of an ISO. If no
disposition of shares issued to an optionee pursuant to the
exercise of an ISO is made by the optionee within two years from
the date of grant or within one year after the transfer of such
shares to the optionee, then (a) upon sale of such shares, any
amount realized in excess of the option price (the amount paid
for the shares) will be taxed to the optionee as a long-term
capital gain and any loss allowed for tax purposes will be
long-term capital loss, and (b) no deduction will be allowed to
the Corporation. The exercise of an ISO will, however, increase
the optionee's alternative minimum taxable income and may result
in alternative minimum tax liability for the optionee.
If shares of Common Stock acquired upon the exercise of an
ISO are disposed of by the optionee prior to the expiration of
the two-year or one-year holding periods described above (a
"disqualifying disposition"), generally (a) the optionee will
realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the
shares at exercise (or, if less, the amount realized on a sale of
such shares) over the option price thereof, and (b) a
corresponding deduction will be available to the Corporation.
Any further gain recognized will be taxed as short-term or
long-term capital gain and will not result in any deduction by
the Corporation Special rules may apply where all or a portion of
the exercise price of the ISO is paid by tendering shares of
Common Stock. A disqualifying disposition will eliminate the
alternative minimum taxable income adjustment associated with the
exercise of the ISO if it occurs in the same calendar year as the
year in which the adjustment occurred.
If an ISO is exercised at a time when it no longer qualifies
for the tax treatment described above, the option is treated as a
nonstatutory option. Generally, an ISO will not be eligible for
the tax treatment described above if it is exercised more than
three months following termination of employment (one year
following termination of employment, in the case of termination
by reason of permanent and total disability), except in certain
cases where the ISO is exercised after the death of the optionee.
Options otherwise qualifying as ISOs will also be treated for
federal income tax purposes as nonstatutory options to the extent
they (together with other ISOs held by the optionee) first become
exercisable in any calendar year for shares having a fair market
value, determined at the time of the option grant, exceeding
$100,000.
NONSTATUTORY OPTIONS. With respect to nonstatutory options
under the 1997 Plan, no income is realized by the optionee at the
time the option is granted. Generally, (a) at exercise, ordinary
income, subject (in the case of options granted to an employee)
to withholding, is realized by the optionee in an amount equal to
the difference between the option price and the fair market value
of the shares on the date of exercise, and a corresponding
deduction will be available to the Corporation, and (b) any gain
or loss recognized upon a later sale is treated as capital gain
or loss, either short-term or long-term depending on the
applicable holding period for the sale.
CERTAIN LIMITATIONS. Section 162(m) of the Internal Revenue
Code limits to $1 million the deduction a public corporation may
claim for remuneration paid to any of its five top officers,
subject to a number of exceptions and special rules. Eligible
performance-based compensation is exempt from this limit. The
Corporation intends that compensation associated with the
exercise of stock options (and stock appreciation rights) awarded
under the 1997 Plan will qualify for this performance-based
exemption.
25
The Internal Revenue Code also limits the amount of
compensation that may be paid without penalty in connection with
a change of control. In general, if the total of an individual's
change-of-control related compensation equals or exceeds three
times his or her average annual taxable compensation (determined,
in general, over the five calendar year period preceding the
calendar year in which the change in control occurs),
change-of-control related payments in excess of that annual
average are nondeductible and subject to an additional 20% tax.
In making this determination, some portion or all of the value of
options and other awards granted or accelerated in connection
with a change of control may be required to be taken into
account.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE AMENDMENT OF THE 1997 EQUITY INCENTIVE PLAN. (ITEM 2 ON
PROXY CARD)
STOCKHOLDER PROPOSAL
The Corporation has been advised that a stockholder of the
Corporation intends to present the proposal set forth below for
consideration at the Annual Meeting. In accordance with
applicable proxy regulations, the Corporation is not responsible
for the contents of the proposed resolution which expresses the
opinion of the proponent only and is included exactly as
submitted by the proponent.
STOCKHOLDER RESOLUTION
"NOTING with alarm that the Corporation has taken steps in
recent years to restrict and limit the free exchange of relevant
information between and among shareholders (here, footnote 1: For
instance, at the 1999 Annual Meeting of Stockholders,
unprecedented restrictions were placed on questions from the
audience, members of the media were prohibited from asking
questions, and the distribution of materials between stockholders
was prohibited. end footnote) regarding their mutual interests in
the Corporation;
BELIEVING that the free exchange of information between and
among shareholders, and between shareholders and the Board of
Directors, is conducive to the most desirable and efficient
corporate governance regime;
COGNIZANT that the Revised Model Business Corporations Act
(as amended) provides best practices for corporate governance of
domestic U.S. stock corporations;
FURTHER COGNIZANT that the Revised Model Business
Corporations Act (hereinafter "RMBCA") secures and guarantees
many shareholder rights and privileges that are in keeping with
the free and unfettered exchange of relevant information of
mutual interest to shareholders;
BE IT HEREBY RESOLVED THAT:
It is the sense of the shareholders of the Corporation that
the Board of Directors should, with all diligent speed, adopt a
standing policy that the Revised Model Business Corporations Act
(as amended) shall govern the conduct of the Corporation in all
such instances where it is not in direct conflict with the
Corporation's By-laws or applicable state or federal laws. It is
the further sense of the shareholders that such a policy, if
adopted, should be incorporated into the By-laws of the
Corporation.
Regardless of the outcome of the vote, this proposal shall
be non-binding on the Corporation's Board of Directors, and shall
be considered only to be advisory of the sense of the
shareholders."
26
BOARD OF DIRECTORS' RESPONSE
The Corporation, a Massachusetts business corporation, is a
bank holding company and was organized in 1970. It conducts its
business principally through its subsidiary, State Street Bank
and Trust Company, which traces its beginnings to the founding of
the Union Bank in Massachusetts in 1792. The charter under which
the Bank now operates was authorized by a special act of the
Massachusetts legislature in 1891. The Corporation is governed
by Chapter 156B of the General Laws of the Commonwealth of
Massachusetts. Chapter 156B, the "Massachusetts Business
Corporation Law", was adopted in 1965.
The Corporation's Articles of Organization have been amended
and restated by action of the stockholders since 1970, most
recently by an amendment in 1997. The Corporation likewise has
an encompassing form of By-laws covering the manner and
procedures for operation of the organization. The Corporation's
By-laws were first adopted by the stockholders in 1970, and have
been amended several times since then, most recently in 1992.
The Corporation has clear rules for the conduct of its
Annual Meetings which are intended to benefit all of the
stockholders present at the meeting.
The Model Business Corporation Act (the "MBCA"), drafted and
since revised by the Committee on Corporate Laws of the Section
of Business Law of the American Bar Association, is designed as a
free-standing general corporate model statute that can be enacted
substantially in its entirety by a state legislature as that
state's general corporation statute. While the MBCA has been
adopted in full or substantial part by several states, others
have adopted only selected provisions or none of its provisions.
The Massachusetts Business Corporation Law is not based upon the
MBCA, but is instead an adaptation of Massachusetts' long
standing general corporation statute.
The stockholder proposal requests a standing policy that the
MBCA is to govern the conduct of the Corporation in all instances
where it is not in "direct conflict" with the Corporation's
By-laws or applicable state or federal law. The concept of
"direct conflict" is subject to varying interpretations, and we
believe the application of the proposal to the functioning of the
Corporation's operations is not understandable or workable.
Even were this not the case, we believe it is not the proper
role or a useful function of the officers and directors of the
Corporation to analyze differences between state law and a model
act to determine perceived conflicts and to attempt to ascertain
whether the law of its state of incorporation or a model act is
to apply to actions with respect to the governance of the
Corporation.
Stockholders of a Massachusetts corporation are entitled to
look to Massachusetts law for the rules governing the
Corporation, which statutory rules could only be changed by the
Massachusetts legislature. We believe that attempting to
superimpose a comprehensive model statutory scheme over a
completely different comprehensive state statute is not in the
best interest of the Corporation or its stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST THIS PROPOSAL. (ITEM 3 ON THE PROXY CARD)
The Corporation will provide the name and address of the
proponent of the stockholder proposal and the number of shares
the stockholder holds upon oral or written request for such
information to the Corporate Secretary.
27
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the
Examining and Audit Committee, has selected Ernst & Young LLP as
independent auditors for the Corporation for the year ending
December 31, 2000. It is expected that representatives of Ernst
& Young LLP will be present at the Annual Meeting to respond to
appropriate questions and will have the opportunity to make a
statement if they so desire.
PROPOSALS AND NOMINATIONS BY STOCKHOLDERS
Stockholders who wish to present proposals at the 2001
Annual Meeting of Stockholders for inclusion in the Corporation's
proxy material for that meeting must submit such proposals, by
following the procedures prescribed in Rule 14a-8 under the
Securities Exchange Act of 1934 and the Corporation's By-laws, to
the Secretary of the Corporation on or before November 14, 2000
for inclusion in the proxy materials circulated by the Board of
Directors relating to the 2001 Annual Meeting.
Pursuant to the By-laws of the Corporation, proposals of
business and nominations for directors other than those to be
included in the Corporation's proxy statement and form of proxy
may be made by stockholders of record entitled to vote at the
meeting if notice is timely given and if the notice contains the
information required by the By-laws. Except as noted below, to
be timely a notice with respect to the 2001 Annual Meeting must
be delivered to the Secretary of the Corporation no earlier than
January 21, 2001 and no later than February 22, 2001 unless the
date of the 2001 Annual Meeting is advanced by more than
thirty(30) days or delayed by more than sixty (60) days from the
anniversary date of the 2001 Annual Meeting in which event the
By-laws provide different notice requirements. In the event the
Board of Directors nominates a New Nominee (as defined in the By-
laws) a stockholder's notice shall be considered timely if
delivered not later than the 10th day following the date on which
public announcement (as defined in the By-Laws) is first made of
the election or nomination of such New Nominee. Any proposal of
business or nomination should be mailed to: Secretary, State
Street Corporation, 225 Franklin Street, Boston, Massachusetts
02110.
OTHER MATTERS
The Board of Directors does not know of any other matters
that may be presented for action at the meeting, except that
management has been informed that stockholders intend to submit
proposals which require that (i) Ropes & Gray be prevented from
providing legal services to the Corporation; (ii) the Board
conduct another investigation into issues involving a senior
officer's involvement in licensing of personnel; (iii) the
Corporation voluntarily comply with provisions of proposed rules
of the Securities and Exchange Commission to prohibit investment
advisers from making certain political contributions; (iv) the
By-laws of the Corporation be amended to provide that the
chairman of the board may not serve as the chief executive
officer, and (v) the By-laws of the Corporation be amended to
provide that articles of organization, by-laws, meeting records,
and stock transfer records which contain the name and address of
all stockholders be available for inspection and copying by
agents or attorneys for any stockholder, for a proper purpose.
If such proposals are properly brought before the meeting by the
stockholders, the proxy holders intend to use their discretionary
authority to vote against such proposals. Should any other
business come before the meeting, the persons named on the
enclosed proxy will, as stated therein, have discretionary
authority to vote the shares represented by such proxies in
accordance with their best judgment.
The Corporation's Annual Report, including financial
statements for the year ended December 31, 1999, is being mailed
to stockholders together with this proxy statement.
Even if you plan to attend the meeting, please mark, date,
sign and return the enclosed proxy as promptly as possible in any
event. If you attend the meeting, you may nonetheless vote in
person by ballot if you desire.
March 15, 2000
28
[STATE STREET LOGO]
State Street Corporation
225 Franklin Street
Boston, MA 02110-2804 SSBCM/PS/00
STATE STREET CORPORATION
1997 EQUITY INCENTIVE PLAN, AS AMENDED
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to
advance the interests of State Street Corporation (the "Company")
and its subsidiaries by enhancing their ability to attract and
retain employees and other persons or entities who are in a
position to make significant contributions to the success of the
Company and its subsidiaries through ownership of shares of the
Company's common stock ("Stock").
The Plan is intended to accomplish these goals by enabling
the Company to grant Awards in the form of Options, Stock
Appreciation Rights, Restricted Stock or Unrestricted Stock
Awards, Deferred Stock Awards, Performance Awards, or
Supplemental Grants, or combinations thereof, all as more fully
described below.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the
Company (the "Board"), the Plan will be administered by a
Committee of the Board designated for such purpose (the
"Committee"). The Committee shall consist of at least two
directors. A majority of the members of the Committee shall
constitute a quorum, and all determinations of the Committee
shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or
meeting of the Committee by a writing signed by a majority of the
Committee members. During such times as the Stock is registered
under the Securities Exchange Act of 1934 (the "1934 Act"),
except as the Board may otherwise determine, all members of the
Committee shall be "non-employee directors" within the meaning of
Rule 16b-3 promulgated under the 1934 Act and "outside directors"
within the meaning of Section 162(m)(4)(C)(i) of the Internal
Revenue Code of 1986, as amended (the "Code").
The Committee will have authority, not inconsistent with the
express provisions of the Plan and in addition to other authority
granted under the Plan, to (a) grant Awards to such eligible
persons and at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock
subject to the Award;(c) determine the type or types of each
Award; (d) determine the terms and conditions of each Award; (e)
waive compliance by a holder of an Award with any obligations to
be performed by such holder under an Award and waive any terms or
conditions of an Award; (f) amend or cancel an existing Award in
whole or in part (and if an Award is canceled, grant another
Award in its place on such terms and conditions as the Committee
shall specify), except that the Committee may not, without the
consent of the holder of an Award, take any action under this
clause with respect to such Award if such action would adversely
affect the rights of such holder; (g) prescribe the form or forms
of instruments
<PAGE>
that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants (as
defined below), and change such forms from time to time; (h)
adopt, amend and rescind rules and regulations for the
administration of the Plan; and (i) interpret the Plan and
decide any questions and settle all controversies and disputes
that may arise in connection with the Plan. Such determinations
and actions of the Committee, and all other determinations and
actions of the Committee made or taken under authority granted by
any provision of the Plan, will be conclusive and will bind all
parties. Nothing in this paragraph shall be construed as
limiting the power of the Committee to make adjustments under
Section 7.3 or Section 8.6.
The Committee may delegate to any officer or officers of the
Corporation the authority to exercise the authority described at
clauses (a) through (g) of the preceding paragraph with respect
to any Award to a person who at the time of the Award is not and
in the reasonable determination of the officer or officers
exercising such authority with respect to such Award is not
expected to be an executive officer of the Company or a person
otherwise described in Section 162(m)(3) of the Code or the
regulations thereunder.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is
approved by the stockholders of the Company. Awards may be made
prior to such stockholder approval if made subject thereto. No
Award may be granted under the Plan after December 18, 2006, but
Awards previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN*
Subject to adjustment as provided in Section 8.6 below, the
aggregate number of shares of Stock that may be delivered under
the Plan will be 15,900,000. If any Award requiring exercise by
the Participant for delivery of Stock terminates without having
been exercised in full, or if any Award payable in Stock or cash
is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash
was substituted will be available for future grants.
Subject to Section 8.6(a), the maximum number of shares of
Stock as to which Options or Stock Appreciation Rights may be
granted to any Participant in any one calendar year is 800,000,
which limitation shall be construed and applied consistently with
the rules under Section 162(m) of the Internal Revenue Code. The
maximum number of shares of Restricted Stock that may be
delivered under the Plan shall not exceed 40% of the total number
of shares authorized for issuance.
Stock delivered under the Plan may be either authorized but
unissued Stock or previously issued Stock acquired by the Company
and held in treasury. No fractional shares of Stock will be
delivered under the Plan.
* Common Stock shares have been adjusted for the 2-for-1 stock
split effective April 30, 1997.
2
5. ELIGIBILITY AND PARTICIPATION
Each key employee of the Company or any of its subsidiaries
(an "Employee") and each other person or entity (including
without limitation non-Employee directors of the Company or a
subsidiary of the Company) who, in the opinion of the Committee,
is in a position to make a significant contribution to the
success of the Company or its subsidiaries will be eligible to
receive Awards under the Plan (each such Employee, person or
entity receiving an Award, "a Participant"). A "subsidiary" for
purposes of the Plan will be a corporation in which the Company
owns, directly or indirectly, stock possessing 50% or more of the
total combined voting power of all classes of stock.
6. TYPES OF AWARDS
6.1. OPTIONS
(a) Nature of Options. An Option is an Award giving the
recipient the right on exercise thereof to purchase Stock.
Both "incentive stock options," as defined in Section 422(b)
of the Internal Revenue Code of 1986, as amended (the "Code")
(any Option intended to qualify as an incentive stock option
being hereinafter referred to as an "ISO"), and Options that are
not ISOs, may be granted under the Plan. ISOs shall be awarded
only to Employees. An Option awarded under the Plan shall be a
non-ISO unless it is expressly designated as an ISO at time of
grant.
(b) Exercise Price. The exercise price of an Option will be
determined by the Committee subject to the following:
(1) The exercise price of an Option shall not be less
than 100% of the fair market value of the Stock subject to
the Option, determined as of the time the Option is granted.
In no event shall the exercise price of an option, once
granted, be lowered through a repricing of the option. For
purposes of the preceding sentence, "repricing" shall include
an amendment to the exercise price of an existing option or
the cancellation of an option followed by a regrant at a
lower exercise price, but shall not include an assumption or
replacement described in Section 7.3(b) or an adjustment to
the exercise price of an option described in the first
sentence of Section 8.6(b).
(2) In no case may the exercise price paid for Stock
which is part of an original issue of authorized Stock be
less than the par value per share of the Stock.
(c) Duration of Options. The latest date on which an
Option may be exercised will be the tenth anniversary of the day
immediately preceding the date the Option was granted, or such
earlier date as may have been specified by the Committee at the
time the Option was granted.
3
(d) Exercise of Options. An Option will become exercisable
at such time or times, and on such conditions, as the Committee
may specify. The Committee may at any time and from time to time
accelerate the time at which all or any part of the Option may be
exercised. Any exercise of an Option must be in writing, signed
by the proper person and delivered or mailed to the Company,
accompanied by (1) any documents required by the Committee and
(2) payment in full in accordance with paragraph (e) below for
the number of shares for which the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an
Option must be paid for as follows: (1) in cash or by check
(acceptable to the Company in accordance with guidelines
established for this purpose), bank draft or money order payable
to the order of the Company or (2) if so permitted by the
Committee at or after the grant of the Option or by the
instrument evidencing the Option, (i) through the delivery
(including by attestation of ownership) of shares of Stock which
have been outstanding for at least six months (unless the
Committee approves a shorter period) and which have a fair market
value equal to the exercise price, (ii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise
price, or (iii) by any combination of the foregoing permissible
forms of payment.
(f) Discretionary Payments. If (i) the market price of
shares of Stock subject to an Option (other than an Option which
is in tandem with a Stock Appreciation Right as described in
Section 6.2 below) exceeds the exercise price of the Option at
the time of its exercise, and (ii) the person exercising the
Option so requests the Committee in writing, the Committee may in
its sole discretion cancel the Option and cause the Company to
pay in cash or in shares of Common Stock (at a price per share
equal to the fair market value per share) to the person
exercising the Option an amount equal to the difference between
the fair market value of the Stock which would have been
purchased pursuant to the exercise (determined on the date the
Option is canceled) and the aggregate exercise price which would
have been paid.
6.2. STOCK APPRECIATION RIGHTS.
(a) Nature of Stock Appreciation Rights. A Stock
Appreciation Right or SAR is an Award entitling the holder on
exercise to receive an amount in cash or Stock or a combination
thereof (such form to be determined by the Committee) determined
in whole or in part by reference to appreciation, from and after
the date of grant, in the fair market value of a share of Stock.
SARs may be based solely on appreciation in the fair market value
of Stock or on a comparison of such appreciation with some other
measure of market growth such as (but not limited to)
appreciation in a recognized market index. The date as of which
such appreciation or other measure is determined shall be the
exercise date unless another date is specified by the Committee.
(b) Grant of Stock Appreciation Rights. Stock Appreciation
Rights may be granted in tandem with, or independently of,
Options granted under the Plan.
(1) Rules Applicable to Tandem Awards. When Stock
Appreciation Rights are granted in tandem with Options, (a)
the Stock Appreciation Right will be exercisable only at such
time or times, and to the extent, that the related Option is
exercisable and will be
4
exercisable in accordance with the procedure required for
exercise of the related Option; (b) the Stock Appreciation
Right will terminate and no longer be exercisable upon the
termination or exercise of the related Option, except that a
Stock Appreciation Right granted with respect to less than
the full number of shares covered by an Option will not be
reduced until the number of shares as to which the related
Option has been exercised or has terminated exceeds the
number of shares not covered by the Stock Appreciation Right;
(c) the Option will terminate and no longer be exercisable
upon the exercise of the related Stock Appreciation Right;
and (d) the Stock Appreciation Right will be transferable
only with the related Option.
(2) Exercise of Independent Stock Appreciation Rights.
A Stock Appreciation Right not granted in tandem with an
Option will become exercisable at such time or times, and on
such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which all or any part
of the Right may be exercised.
Any exercise of a Stock Appreciation Right must be in
writing, signed by the proper person and delivered or mailed to
the Company, accompanied by any other documents required by the
Committee.
6.3. RESTRICTED AND UNRESTRICTED STOCK.
(a) Grant of Restricted Stock. Subject to the terms and
provisions of the Plan, the Committee, at any time and from time
to time, may grant shares of Restricted Stock in such amounts and
upon such terms and conditions as the Committee shall determine
subject to the restrictions described below.
(b) Restricted Stock Agreement. The Committee may require,
as a condition to an Award, that a recipient of a Restricted
Stock Award enter into a Restricted Stock Award Agreement,
setting forth the terms and conditions of the Award. In lieu of
a Restricted Stock Award Agreement, the Committee may provide the
terms and conditions of an Award in a notice to the Participant
of the Award, on the Stock certificate representing the
Restricted Stock, in the resolution approving the Award, or in
such other manner as it deems appropriate.
(c) Transferability and Other Restrictions. Except as
otherwise provided in this Section 6.3, the shares of Restricted
Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of
the applicable period or periods established by the Committee and
the satisfaction of any other conditions or restrictions
established by the Committee (such period during which a share of
Restricted Stock is subject to such restrictions and conditions
is referred to as the "Restricted Period").
Except as the Committee may otherwise determine under
Section 7.1 or Section 7.2 below, if a Participant retires or
suffers a Status Change (as defined at Section 7.2(a) below) for
any reason during the Restricted Period, the Company may purchase
the shares of Restricted Stock subject to such restrictions and
conditions for the amount of cash paid by the Participant for
such shares; provided, that if no cash was paid by the
Participant such shares of Restricted Stock shall
5
be automatically forfeited to the Company without consideration.
During the Restricted Period with respect to any shares of
Restricted Stock, the Company shall have the right to retain in
the Company's possession the certificate or certificates
representing such shares.
(d) Removal of Restrictions. Except as otherwise provided
in this Section 6.3, a share of Restricted Stock covered by a
Restricted Stock grant shall become freely transferable by the
Participant upon completion of the Restricted Period, including
the passage of any applicable period of time and satisfaction of
any conditions to vesting. The Committee, in its sole
discretion, shall have the right at any time to waive all or any
part of the restrictions and conditions with regard to all or any
part of the shares held by any Participant.
(e) Voting Rights, Dividends and Other Distributions.
During the Restricted Period, Participants holding shares of
Restricted Stock granted hereunder may exercise full voting
rights and shall receive all regular cash dividends paid with
respect to such shares. Except as the Committee shall otherwise
determine, any other cash dividends and other distributions paid
to Participants with respect to shares of Restricted Stock
including any dividends and distributions paid in shares shall be
subject to the same restrictions and conditions as the shares of
Restricted Stock with respect to which they were paid.
(f) Unrestricted Stock. The Committee may, in its sole
discretion, sell to any Participant shares of Stock free of
restrictions under the Plan for a price which is not less than
the par value of the Stock.
(g) Notice of Section 83(b) Election. Any Participant
making an election under Section 83(b) of the Code with respect
to Restricted Stock must provide a copy thereof to the Company
within 10 days of filing such election with the Internal Revenue
Service.
(h) Shares delivered under Senior Executive Annual Incentive
Plan. In the case of an award under the Company's Senior
Executive Annual Incentive Plan which is payable in shares of
Stock, the holder of such award shall be deemed a Participant
hereunder and any such Shares shall be treated as having been
sold to the Participant as Unrestricted Stock or Restricted Stock
hereunder (or as Deferred Stock under Section 6.4, if delivery is
deferred) for a price equal to the cash payment under the award
in lieu of which the Stock is being delivered under the Award.
6.4. DEFERRED STOCK.
A Deferred Stock Award entitles the recipient to receive
shares of Stock to be delivered in the future. Delivery of the
Stock will take place at such time or times, and on such
conditions, as the Committee may specify. The Committee may at
any time accelerate the time at which delivery of all or any part
of the Stock will take place. At the time any Award described in
this Section 6 is granted, the Committee may provide that, at the
time Stock would otherwise be delivered pursuant to the Award,
the Participant will instead receive an instrument evidencing the
Participant's right to future delivery of Deferred Stock.
6
6.5. PERFORMANCE AWARDS; PERFORMANCE GOALS.
(a) Nature of Performance Awards. A Performance Award
entitles the recipient to receive, without payment, an amount in
cash or Stock or a combination thereof (such form to be
determined by the Committee) subject to the attainment of
performance goals. Performance goals may be related to personal
performance, corporate performance, departmental performance or
any other category of performance established by the Committee.
The Committee will determine the performance goals, the period or
periods during which performance is to be measured and all other
terms and conditions applicable to the Award.
(b) Other Awards Subject to Performance Condition. The
Committee may, at the time any Award described in this Section 6
is granted, impose the condition (in addition to any conditions
specified or authorized in this Section 6 or any other provision
of the Plan) that performance goals be met prior to the
Participant's realization of any vesting, payment or benefit
under the Award. Any such Award made subject to the achievement
of performance goals (other than an Option or SAR granted with an
exercise price not less than fair market value) shall be treated
as a Performance Award for purposes of Section 6.5(c) below.
However, an Award under the Company's Senior Executive Annual
Incentive Plan shall not be considered a Performance Award for
purposes of this Plan.
(c) Limitations and Special Rules. No more than an
aggregate of 500,000 shares of Stock (or their equivalent fair
market value in cash) may be delivered to any Participant under
Performance Awards made from and after the effective date of the
Plan and prior to December 19, 2006. In the case of any
Performance Award intended to qualify for the performance-based
remuneration exception described at Section 162(m)(4)(C) of the
Code and the regulations thereunder (an "exempt award"), the
Committee shall in writing preestablish one or more specific,
objectively determinable performance goal or goals (based solely
on one or more qualified performance criteria) no later than
ninety (90) days after the commencement of the period of service
to which the performance relates (the "performance period") (or
at such other time as is required to satisfy the conditions of
Section 162(m)(4)(C) of the Code and the regulations thereunder).
For purposes of the preceding sentence, a qualified performance
criterion is any of the following determined (to the extent
relevant) on either a consolidated or business-unit basis: (i)
return on equity, (ii) earnings per share, (iii) the Company's
total shareholder return during the performance period compared
to the total shareholder return of a generally recognized market
reference (e.g., the S & P 500 or the S & P Financial Index);
(iv) revenue growth; (v) operating leverage; or (vi) market
share. To the extent consistent with qualification of an exempt
award under Section 162(m)(4)(C) of the Code and the regulations
thereunder, the Committee may provide that performance goals be
adjusted in order to eliminate the effect of extraordinary items
(as determined in accordance with generally accepted accounting
principles) or changes in the Stock by reason of an event
described in Section 8.6(a).
6.6. SUPPLEMENTAL GRANTS.
In connection with any Award, the Committee may at the time
such Award is made or at a later date, provide for and grant a
cash award to the Participant ("Supplemental Grant") not to
7
exceed an amount equal to (1) the amount of any Federal, state
and local income tax on ordinary income for which the Participant
may be liable with respect to the Award, determined by assuming
taxation at the highest marginal rate, plus (2) an additional
amount on a grossed-up basis intended to make the Participant
whole on an after-tax basis after discharging all the
Participant's income tax liabilities arising from all payments
under this Section 6. Any payments under this subsection (b)
will be made at the time the Participant incurs or is expected to
incur Federal income tax liability with respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. DEATH, RETIREMENT OR DISABILITY.
If the employment of an Employee Participant terminates by
reason of death, retirement at or after the normal or early
retirement age under any retirement plan or supplemental
retirement agreement maintained by the Company or any subsidiary
("retirement"), or disability as determined (subject to such
additional rules as the Committee may prescribe) in accordance
with the long term disability plan of the Company and its
subsidiaries covering the Participant or, if there is no such
plan, in accordance with a determination of disability by the
Social Security Administration ("disability"), the following will
apply except as the Committee may otherwise determine:
(a) All Options and Stock Appreciation Rights held by the
Participant or a transferee immediately prior to such termination
of employment, whether or not then exercisable, may be exercised
by the Participant or such transferee (or if the Option or SAR
was held by the Participant at death, by the Participant's
executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of
descent and distribution), in accordance with the terms of the
Option or SAR or on such accelerated basis as the Committee may
determine, during the period that ends on the later of (1) one
year after death, or (ii) one year after the Option or SAR, or
the last installment of such Option or SAR if there is more than
one, first becomes exercisable. In no event, however, shall an
Option or Stock Appreciation Right remain exercisable beyond the
latest date on which it could have been exercised without regard
to this Section 7.
(b) In the case of termination of employment occurring by
reason of death or disability, all Restricted Stock held by the
Participant immediately prior to such termination of employment
shall be vested. In the case of termination of employment
occurring by reason of retirement, all Restricted Stock held by
the Participant immediately prior to retirement must be
transferred to the Company (and, in the event the certificates
representing such Restricted Stock are held by the Company, such
Restricted Stock will be so transferred without any further
action by the Participant) in accordance with Section 6.3(c)
above.
(c) Any payment or benefit under a Deferred Stock Award,
Performance Award, or Supplemental Grant to which the Participant
was not irrevocably entitled prior to termination of employment
will be forfeited and the Award canceled as of the time of such
termination of employment.
8
7.2. OTHER TERMINATION OF SERVICE.
If a Participant who is an Employee ceases to be an Employee
for any reason other than death, retirement, or disability (as
defined at Section 7.1 above), or if there is a termination of
the consulting, service or similar relationship in respect of
which a non-Employee Participant was granted an Award hereunder
(such termination of the employment or other relationship being
hereinafter referred to as a "Status Change"), the following will
apply except as the Committee may otherwise determine:
(a) All Options and Stock Appreciation Rights held by the
Participant (or if the Option or Right was previously
transferred, by the transferee) that were not exercisable
immediately prior to the Status Change shall terminate at the
time of the Status Change. Any Options or Rights that were
exercisable immediately prior to the Status Change will continue
to be exercisable for a period of three months, and shall
thereupon terminate; provided, that if the Participant should die
within such three-month period, the Option or Right shall be
exercisable (to the extent it was exercisable immediately prior
to death) for a period of one year following the Status Change.
In no event, however, shall an Option or Stock Appreciation Right
remain exercisable beyond the latest date on which it could have
been exercised without regard to this Section 7.
(b) All Restricted Stock held by the Participant at the time
of the Status Change must be transferred to the Company (and, in
the event the certificates representing such Restricted Stock are
held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with
Section 6.3(c) above.
(c) Any payment or benefit under a Deferred Stock Award,
Performance Award, or Supplemental Grant to which the Participant
was not irrevocably entitled prior to the Status Change will be
forfeited and the Award canceled as of the date of such Status
Change.
(d) For purposes of this Section 7.2, in the case of a
Participant who is an Employee, a Status Change shall not be
deemed to have resulted by reason of (i) a sick leave or other
bona fide leave of absence approved for purposes of the Plan by
the Committee, so long as the Employee's right to reemployment is
guaranteed either by statute or by contract, or (ii) a transfer
of employment between the Company and a subsidiary or between
subsidiaries, or to the employment of a corporation (or a parent
or subsidiary corporation of such corporation) issuing or
assuming an Option in a transaction to which Section 424(a) of
the Code applies.
7.3 CERTAIN CORPORATE TRANSACTIONS.
Except as otherwise provided by the Committee at the time of
grant, in the event of a consolidation or merger in which the
Company is not the surviving corporation or which results in the
acquisition of substantially all the Company's outstanding Stock
by a single person or entity or by a group of persons and/or
entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a
dissolution or liquidation of the Company (a "covered
transaction"), the following rules shall apply:
9
(a) Subject to paragraph (b) below, all outstanding Awards
requiring exercise will cease to be exercisable, and all other
Awards to the extent not fully vested (including Awards subject
to conditions not yet satisfied or determined) will be forfeited
except as required under Section 7.4 below, as of the effective
time of the covered transaction, provided that the Committee may
in its sole discretion (but subject to Section 7.4 below in the
case of a covered transaction that constitutes a Change of
Control), on or prior to the effective date of the covered
transaction, (1) make any outstanding Option and Stock
Appreciation Right exercisable in full, (2) remove the
restrictions from any Restricted Stock, (3) cause the Company to
make any payment and provide any benefit under any Deferred Stock
Award, Performance Award or Supplemental Grant, and (4) remove
any performance or other conditions or restrictions on any Award;
or
(b) With respect to an outstanding Award held by a
Participant who, following the covered transaction, will be
employed by or otherwise providing services to an entity which is
a surviving or acquiring entity in the covered transaction or an
affiliate of such an entity, the Committee may at or prior to the
effective time of the covered transaction, in its sole discretion
and in lieu of the action described in paragraph (a) above,
arrange to have such surviving or acquiring entity or affiliate
assume any Award held by such Participant outstanding hereunder
or grant a replacement award which, in the judgment of the
Committee, is substantially equivalent to any Award being
replaced.
7.4. CHANGE OF CONTROL PROVISIONS.
(a) Impact of Event. Notwithstanding any other provision of
the Plan to the contrary, in the event of a Change of Control:
(1) Acceleration of Options and SARs; Effect on Other
Awards. All Options and SARs outstanding as of the date
such Change of Control is determined to have occurred and
which are not then exercisable shall (prior to application of
the provisions of Section 7.3 above, in the case of a Change
of Control that also constitutes a covered transaction)
become exercisable to the full extent of the original grant,
all shares of Restricted Stock which are not otherwise
vested shall vest, and holders of Performance Awards granted
hereunder as to which the relevant performance period has not
ended as of the date such Change of Control is determined to
have occurred shall be entitled at the time of such Change
of Control to receive a cash payment per Performance Award
equal to such amount, if any, as shall be specified in the
Award.
(2) Restriction on Application of Plan Provisions
Applicable in the Event of Termination of Employment. After
a Change of Control (but subject to Section 7.3 above),
Options and SARs shall remain exercisable following a
termination of employment or other service relationship
(other than termination by reason of death, disability (as
determined by the Company) or retirement) for seven (7)
months following such termination or until expiration of the
original terms of the Option or SAR, whichever period is
shorter.
(3) Restriction on Amendment. In connection with or
following a Change of Control, neither the Committee nor the
Board may impose additional conditions upon
10
exercise or otherwise amend or restrict an Option, SAR, share
of Restricted Stock, Deferred Stock Award or Performance
Award, or amend the terms of the Plan in any manner adverse
to the holder thereof, without the written consent of such
holder.
Notwithstanding the foregoing, if any right granted pursuant
to this Section 7.4 would make a Change of Control transaction
ineligible for pooling of interests accounting under applicable
accounting principles that but for this Section 7.4 would
otherwise be eligible for such accounting treatment, the
Committee shall have the authority to substitute Stock for the
cash which would otherwise be payable pursuant to this Section
7.4 having a fair market value equal to such cash.
(b) Definition of Change of Control. For purposes of the
Plan, a "Change of Control" shall mean the happening of any of
the following events:
(1) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 25% or more of either (x) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock") or (y) the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); excluding, however, the
following acquisitions of Outstanding Company Common Stock
and Outstanding Company Voting Securities: (i) any
acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or
(iv) any acquisition by any Person pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection
(3) of this Section 7.4; or
(2) Individuals who, as of the effective date of the
Plan, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual who becomes a member
of the Board subsequent to such effective date, whose
election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority
of directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board shall not be so
considered as a member of the Incumbent Board; or
(3) Consummation by the Company of a reorganization,
merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company ("Business
Combination"); excluding, however, such a Business
Combination pursuant to which (i) all or substantially all
of the individuals and entities who are the beneficial
owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior
to such Business Combination own, directly
11
or indirectly, more than 50% of, respectively, the
outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (other
than any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by
the Company or such corporation resulting from such Business
Combination) will beneficially own, directly or indirectly,
25% or more of, respectively, the outstanding shares of
common stock of the corporation resulting from such Business
Combination or the combined voting power of the outstanding
voting securities of such corporation entitled to vote
generally in the election of directors except to the extent
that such ownership existed with respect to the Company prior
to the Business Combination and (iii) at least a majority of
the members of the board of directors of the corporation
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
(4) The approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF AWARDS.
Awards will be evidenced by such written instruments, if any,
as may be prescribed by the Committee from time to time. Such
instruments may be in the form of agreements to be executed by
both the Participant and the Company, or certificates, letters or
similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to
the terms thereof.
8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of
an Award will not give a Participant rights as a stockholder; the
Participant will obtain such rights, subject to any limitations
imposed by the Plan or the instrument evidencing the Award, only
upon the issuance of Stock. However, the Committee may, on such
conditions as it deems appropriate, provide that a Participant
will receive a benefit in lieu of cash dividends that would have
been payable on any or all Stock subject to the Participant's
Award had such Stock been outstanding. Without limitation, the
Committee may provide for payment to the Participant of amounts
representing such dividends, either currently or in the future,
or for the investment of such amounts on behalf of the
Participant.
12
8.3. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of
Stock pursuant to the Plan or to remove restriction from shares
previously delivered under the Plan (a) until all conditions of
the Award have been satisfied or removed, (b) until, in the
opinion of the Company's counsel, all applicable Federal and
state laws and regulation have been complied with, (c) if the
outstanding Stock is at the time listed on any stock exchange or
The Nasdaq National Market, until the shares to be delivered have
been listed or authorized to be listed on such exchange or market
upon official notice of notice of issuance, and (d) until all
other legal matters in connection with the issuance and delivery
of such shares have been approved by the Company's counsel. If
the sale of Stock has not been registered under the Securities
Act of 1933, as amended, the Company may require, as a condition
to exercise of the Award, such representations or agreements as
counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting
transfer.
If an Award is exercised by the Participant's legal
representative or transferee, the Company will be under no
obligation to deliver Stock pursuant to such exercise until the
Company is satisfied as to the authority of such representative.
8.4. TAX WITHHOLDING.
The Company will withhold from any cash payment made pursuant
to an Award an amount sufficient to satisfy all federal, state
and local withholding tax requirements (the "withholding
requirements").
In the case of an Award pursuant to which Stock may be
delivered, the Committee will have the right to require that the
Participant or other appropriate person remit to the Company an
amount sufficient to satisfy the withholding requirements, or
make other arrangements satisfactory to the Committee with regard
to such requirements, prior to the delivery of any Stock. If and
to the extent that such withholding is required, the Committee
may permit the Participant or such other person to elect at such
time and in such manner as the Committee provides to have the
Company hold back from the shares to be delivered, or to deliver
to the Company, Stock having a value calculated to satisfy the
withholding requirement. The Committee may make such share
withholding mandatory with respect to any Award at the time such
Award is made to a Participant.
If in connection with the exercise of an ISO the Committee
determines that the Company could be liable for withholding
requirements with respect to the exercise or with respect to a
disposition of the Stock received upon exercise, the Committee
may require as a condition of exercise that the person exercising
the ISO agree (a) to provide for withholding under the preceding
paragraph of this Section 8.4, if the Committee determines that a
withholding responsibility may arise in connection with tax
exercise, (b) to inform the Company promptly of any disposition
(within the meaning of Section 424(c) of the Code) of Stock
received upon exercise, and (c) to give such security as the
Committee deems adequate to meet the potential liability of the
Company for the withholding requirements and to augment such
security from time to time in any amount reasonably deemed
necessary by the Committee to preserve the adequacy of such
security.
13
8.5. NONTRANSFERABILITY OF AWARDS.
Unless otherwise permitted by the Committee, no Award (other
than an Award in the form of an outright transfer of cash or
Unrestricted Stock) may be transferred other than by will or by
the laws of descent and distribution, and during a Participant's
lifetime an Award requiring exercise may be exercised only by the
Participant (or in the event of the Participant's incapacity, the
person or persons legally appointed to act on the Participant's
behalf). The Committee may in its discretion permit transfers to
other persons or entities.
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the
Company's capitalization, or other distribution to common
stockholders other than normal cash dividends, after the
effective date of the Plan, the Committee will make any
appropriate adjustments to the maximum number of shares that may
be delivered under the Plan under the first paragraph of Section
4 above and to the limits described in the second paragraph of
Section 4 and in Section 6.5(c).
(b) In any event referred to in paragraph (a), the Committee
will also make any appropriate adjustments to the number and kind
of shares of stock or securities subject to Awards then
outstanding or subsequently granted, any exercise prices relating
to Awards and any other provision of Awards affected by such
change. The Committee may also make such adjustments to take
into account material changes in law or in accounting practices
or principles, mergers, consolidations, acquisitions,
dispositions or similar corporate transactions, or any other
event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan;
provided, that adjustments pursuant to this sentence shall not be
made to the extent it would cause any Award intended to be exempt
under Section 162(m)(4)(C) to fail to be so exempt.
(c) In the case of ISOs or Awards intended to satisfy the
performance-based remuneration exception under Section
162(m)(4)(C) of the Code, the adjustments described in (a) and
(b) will be made only to the extent consistent with continued
qualification of the option under Section 422 of the Code (in the
case of an ISO) or Section 162(m) of the Code.
8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will
confer upon any person any right to continued retention by the
Company or any subsidiary as an Employee or otherwise, or affect
in any way the right of the Company or subsidiary to terminate an
employment, service or similar relationship at any time. Except
as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under
the Plan will not constitute an element of damages in the event
of termination of an employment, service or similar relationship
even if the termination is in violation of an obligation of the
Company to the Participant.
14
8.8. NONCOMPETITION RESTRICTIONS, ETC.
The Committee may provide in connection with any Award that
the Participant's rights to enjoyment of the Award or to any cash
or Stock deliverable under the Award be conditioned upon the
Participant's agreeing not to compete with the Company and its
subsidiaries, not to disclose confidential information, and not
to solicit employees, advisors or business from the Company and
its subsidiaries, the terms of any such agreement or undertaking
to be determined by the Committee.
8.9. DEFERRAL OF PAYMENTS.
The Committee may agree at any time, upon request of the
Participant and subject to such rules as the Committee may
determine, to defer the date on which any future payment under an
Award will be made.
8.10. PAST SERVICES AS CONSIDERATION.
Where a Participant purchases Stock under an Award for a
price equal to the par value of the Stock the Committee may
determine that such price has been satisfied by past services
rendered by the Participant.
9. EFFECT, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a
Participant will affect the Company's right to grant to such
Participant awards that are not subject to the Plan, to issue to
such Participant Stock as a bonus or otherwise, or to adopt other
plans or arrangements under which Stock may be issued to
Employees.
The Committee may at any time or times amend the Plan or any
outstanding Award for any purpose which may at the time be
permitted by law, or may at any time terminate the Plan as to
any further grants of Awards, provided that (except to the extent
expressly required or permitted by the Plan) no such amendment
will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in
order for the Plan to continue to qualify for the award of ISOs
under Section 422 of the Code or for the award of
performance-based compensation under Section 162(m) of the Code,
nor shall any such amendment adversely affect the rights of a
holder of an Award without such holder's consent.
15
<PAGE>
STATE STREET CORPORATION
Annual Meeting of Stockholders - April 19, 2000
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of State Street Corporation (the
"Corporation") hereby appoints Evalyn Lipton Fishbein, Claire A.
Fusco and Karen A. Warren (each with power to act without the
others and with power of substitution) proxies to represent the
undersigned at the Annual Meeting of Stockholders of the
Corporation to be held on April 19, 2000 and at any adjournments
thereof, with the power the undersigned would possess if
personally present, and to vote, as designated, all shares of
Common Stock of the Corporation which the undersigned may be
entitled to vote at said Meeting, hereby revoking any proxy
heretofore given.
To vote in accordance with the Board of Directors'
recommendations just sign and date the other side; no boxes need
to be checked.
================================================================
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE.
================================================================
Please sign this proxy exactly as your name(s) appear(s) on the
books of the Corporation. Joint owners should each sign
personally. Trustees and other fiduciaries should indicate the
capacity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or
her title.
================================================================
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------ --------------------------
- ------------------------ --------------------------
- ------------------------ --------------------------
- ------------------------ --------------------------
<PAGE>
[x] PLEASE MARK VOTES THE BOARD OF DIRECTORS
AS IN THIS EXAMPLE RECOMMENDS THAT YOU GRANT
AUTHORITY FOR THE ELECTION OF
- ------------------------------- DIRECTORS AND THAT YOU VOTE FOR
STATE STREET CORPORATION ITEM 2 AND AGAINST ITEM 3. THE
- ------------------------------- SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH
The matters to come before the THE SPECIFICATIONS MADE. IF NO
meeting are fully described in SPECIFICATION IS MADE, THE PROXY
the Notice of and Proxy State- WILL BE VOTED IN ACCORDANCE WITH
ment for the meeting, receipt THE BOARD OF DIRECTORS'
of which is hereby acknowledged. RECOMMENDATIONS.
1. Election of Six Directors:
FOR ALL FOR ALL
NOMINEES WITHHOLD EXCEPT
[ ] [ ] [ ]
Mark box at right if an (01)I. Booth (02)J. Cash
address change or comment [ ] (03)T. Casner (04)A. Goldstein
has been noted on the (05)D. Picard (06)R. Sergel
reverse side of this card.
INSTRUCTION: If you do not wish
your shares voted "FOR" one or
more nominee(s), mark the "FOR
ALL EXCEPT" box and strike a
line through the name(s) of the
nominee(s). Your shares will be
voted for the remaining
CONTROL NUMBER: nominee(s).
RECORD DATE SHARES:
2. To vote on an amendment to
the 1997 Equity Incentive Plan
to increase the number of shares
available for issuance under the
plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To vote on a stockholder
proposal relative to the
Please be sure to sign and application of the Model
date this Proxy. Business Corporation Act to the
--------------- Corporation.
Date FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- -------------------------------
Stockholder Co-owner 4. In their discretion, the
signs here signs here Proxies are authorized to vote
upon such other business as may
properly come before the meeting
or any adjournments thereof.
DETACH CARD DETACH CARD
- ----------------------------------------------------------------
STATE STREET CORPORATION
DEAR STOCKHOLDER:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of State Street Corporation. The meeting will be
held in the Enterprise Room at 225 Franklin Street, Boston,
Massachusetts on Wednesday, April 19, 2000, at 10:00 a.m.
Details regarding admission to the meeting and the business to be
conducted are more fully described in the accompanying Notice of
Annual Meeting and Proxy Statement.
Your vote is very important. Whether or not you plan to attend
the meeting, please carefully review the enclosed proxy
statement. Then complete, sign, date and mail promptly the
accompanying proxy in the enclosed return envelope. To be sure
that your vote will be received in time, please return the proxy
at your earliest convenience.
We look forward to seeing you at the Annual Meeting so that we
can update you on our progress. Your continuing interest is very
much appreciated.
Sincerely,
Marshall N. Carter
Chairman and Chief Executive Officer
