-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, tQZ+X02+skALBHHvs9a51Gy4RGey/uH3RWByxhiD/fJupO6rsPsOj3SFb1y3UxNp TtN0QrSWa9B8o/DM4tEIjQ== 0000093751-94-000002.txt : 19940315 0000093751-94-000002.hdr.sgml : 19940315 ACCESSION NUMBER: 0000093751-94-000002 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STATE STREET BOSTON CORP CENTRAL INDEX KEY: 0000093751 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 042456637 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 34 SEC FILE NUMBER: 000-05108 FILM NUMBER: 94515898 BUSINESS ADDRESS: STREET 1: 225 FRANKLIN ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6177863000 FORMER COMPANY: FORMER CONFORMED NAME: STATE STREET BOSTON FINANCIAL CORP DATE OF NAME CHANGE: 19780525 DEF 14A 1 SCHEDULE 14A INFORMATION SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by Registrant [X] Filed by a Party other than Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 STATE STREET BOSTON CORPORATION _________________________________________________ (Name of Registrant as Specified in its Charter) ___________________________________________ (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (check the appropriate box): [X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2). [ ] $500 per each party to the controversy pursuant to Exchange act Rule 14a-6(i)(3). [ ] 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: 2) Aggregate number of securities which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:* 4) Proposed maximum aggregate value of transaction: * Set forth the amount on which the filing is calculated and state how it was determined. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount previously paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: Notes: The fee was wired to Mellon Bank account on 3/10/94. EX-1 2 1994 PROXY STATEMENT March 15, 1994 DEAR STOCKHOLDER: You are cordially invited to attend the 1994 Annual Meeting of Stockholders of State Street Boston Corporation. The meeting will be held in the Enterprise Room at 225 Franklin Street, Boston, Massachusetts on Wednesday, April 20, 1994, at 10:00 a.m. Your Board of Directors and management look forward to greeting those stockholders able to attend. The notice of meeting and proxy statement which follow describe the business to be conducted at the meeting. In addition to a proposal to elect directors, you will be asked to approve the new 1994 Stock Option and Performance Unit Plan, which will replace the two existing plans, and to approve the performance goals under the Senior Executives Annual Incentive Plan. State Street's goal is to be the leading global servicer of financial assets. To help achieve this goal in competitive global markets, State Street's executive compensation program is designed to link executive compensation directly to the Corporation's performance, growth in stockholder value and the contribution of the executives to those results. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THESE PROPOSALS. 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 NOTICE OF 1994 ANNUAL MEETING OF STOCKHOLDERS To the Stockholders of STATE STREET BOSTON CORPORATION: The 1994 Annual Meeting of Stockholders of State Street Boston Corporation will be held on Wednesday, April 20, 1994, at 10:00 a.m., Eastern Time, at 225 Franklin Street, Fifth Floor, Boston, Massachusetts, for the following purposes: 1. To elect five directors, each for a three-year term; 2. To approve the 1994 Stock Option and Performance Unit Plan; 3. To approve the performance goals under the Senior Executives Annual Incentive Plan; and 4. To act upon such other business as may properly come before the meeting. Stockholders of record at the close of business on February 28, 1994 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. By Order of the Board of Directors, Robert J. Malley Secretary March 15, 1994 STATE STREET BOSTON CORPORATION 225 Franklin Street, Boston, Massachusetts 02110 PROXY STATEMENT This Proxy Statement, which is scheduled to be sent to stockholders beginning on March 15, 1994, is furnished in connection with the solicitation by the Board of Directors of State Street Boston Corporation (the "Corporation") of proxies for the 1994 Annual Meeting of Stockholders of the Corporation to be held on April 20, 1994 and at any adjournments thereof. The Board of Directors has fixed the close of business on February 28, 1994 as the record date for determining the stockholders entitled to notice of and to vote at the meeting. On the record date 76,111,410 shares of Common Stock of the Corporation were outstanding and entitled to be voted at the meeting. 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. Each share of Common Stock is entitled to one vote. Any proxy may be revoked at any time before it is voted by notifying the Secretary in writing, by executing a later dated proxy or by notifying the Secretary at the meeting and voting in person. 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 and by telephone 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 Board of Directors intends to request banks, brokerage houses, custodians, 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 D.F. King and Co. to aid in the solicitation of proxies. The cost of such services is $9,000, plus expenses. ELECTION OF DIRECTORS The By-laws of the Corporation provide that there shall be a Board of not less than 3 nor more than 30 directors, the exact number to be determined by vote of the Board of Directors, and, in accordance with Massachusetts law, 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. Pursuant to the By-laws, at a meeting on December 16, 1993, the Board of Directors fixed the number of directors at 16, effective with the 1994 Annual Meeting. There are currently 17 directors of the Corporation. Tenley E. Albright, M.D., was elected a Class III director and Charles R. LaMantia was elected a Class II director on September 16, 1993. In accordance with the Corporation's retirement policy for directors, George H. Kidder, a Class I Director, is not standing for reelection. Nannerl O. Keohane, a Class II Director, resigned on September 16, 1993, upon her appointment as president of Duke University. It is intended that shares represented by proxies solicited by the Board of Directors will, unless contrary instructions are given, be voted for the election of the five nominees listed below as directors. 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 such 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. DIRECTORS TO BE ELECTED AT THE 1994 ANNUAL MEETING Class I I. MACALLISTER BOOTH DIRECTOR SINCE 1990 Chairman, President and Chief Executive Officer of Polaroid Corporation, a manufacturer of instant image recording products. Mr. Booth, age 62, joined Polaroid in 1958 as a supervisor in the Film Division. He is also a director of Western Digital Corporation, Jobs for Massachusetts and The Conference Board, chairman of the board of INROADS/Boston, Inc., a member of the board of trustees of Eye Research Institute and a corporator of Emerson Hospital of Concord, Massachusetts. He received B.S. and M.B.A. degrees from Cornell University. JAMES I. CASH, JR. DIRECTOR SINCE 1991 The James E. Robison Professor of Business Administration and Chairman of the MBA program at the Harvard University Graduate School of Business Administration. Mr. Cash, age 46, has been a faculty member of the Harvard Business School since 1976. He is a director of Tandy Corporation. He received a B.S. degree 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 60, received a B.A. 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 an overseer of the Museum of Science, Boston, chairman of the corporation and past president of Belmont Hill School and a member of the corporation of Woods Hole Oceanographic Institution and Sea Education Association. He is a member of the American Law Institute and a fellow of The American Bar Foundation. DAVID B. PERINI DIRECTOR SINCE 1980 Chairman and President of Perini Corporation, a construction and real estate development company. Mr. Perini, age 56, is also a director of New England Telephone Company. He holds a B.S. degree from the College of the Holy Cross and received a J.D. degree from Boston College Law School in 1962. He joined Perini Corporation in 1962. He has received merit awards from the National Conference of Christians and Jews and the Italian American Charitable Society. Mr. Perini is a trustee of the College of the Holy Cross and St. John's Preparatory School. DENNIS J. PICARD DIRECTOR SINCE 1991 Chairman and Chief Executive Officer of Raytheon Company, a diversified, technology-based international company, since 1991. Mr. Picard, age 61, joined Raytheon in 1955 and held engineering and management assignments leading to his election as president and director in 1989. He is a member of the National Academy of Engineering and its Industry Advisory Board, a fellow of the American Institute of Aeronautics and Astronautics and a fellow of 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, a member of the National and Massachusetts Business Roundtables, the Defense Policy Advisory Committee on Trade (DPACT), the advisory committee of the Armed Services YMCA of the United States and the Armed Forces Communications and Electronics Association. He is a member of the Algonquin Club of Boston and the Commercial Club of Boston. He is a graduate of Northeastern University and holds honorary doctorates from Northeastern University, Merrimack College and Bentley College. DIRECTORS SERVING UNTIL THE 1995 ANNUAL MEETING Class II JOSEPH A. BAUTE DIRECTOR SINCE 1990 Consultant to Markem Corporation, which provides systems and services to mark customer products, since June 1993. Mr. Baute, age 66, was for many years the Chairman and Chief Executive Officer of Markem Corporation. He joined Markem in 1954 and held engineering, sales and marketing positions until 1968 when he became vice president and chief operating officer for Markem-USA, Markem U.K. and Markem Europa. He was elected president and director of Markem Corporation in 1973, chief executive officer in 1977 and chairman in 1979. He is a director of Nashua Corporation, Houghton Mifflin Company, Dead River Company and The Keene Clinic. He is an overseer of the Boston Museum of Science and past director and chairman of the Federal Reserve Bank of Boston. Mr. Baute received B.A. and M.S. degrees from Dartmouth College. LOIS D. JULIBER DIRECTOR SINCE 1991 Chief Technological Officer of Colgate-Palmolive Company, a consumer product company, since 1992. She was President of Colgate-Palmolive, Far East Division, from 1988 through 1991. From 1973 to 1988, she was employed by General Foods Corporation as a vice president. Ms. Juliber, age 45, holds a B.A. degree from Wellesley College and received an M.B.A. degree from Harvard University in 1973. She is a trustee of Brookdale Foundation and a member of the Committee of 200. CHARLES R. LAMANTIA DIRECTOR SINCE 1993 President and Chief Executive Officer of Arthur D. Little, Inc., which provides management, technology and environmental consulting services. Dr. LaMantia, age 54, was president and chief operating officer of Arthur D. Little, Inc. from 1986 to 1988. Prior to rejoining Arthur D. Little in 1986, he was president of Koch Process Systems, Inc. From 1977 to 1981, Dr. LaMantia was vice president in charge of Arthur D. Little's services to the chemical, metals and energy industries, having assumed that position after 10 years on the firm's consulting staff. He is a member of the board of governors of the New England Medical Center, a member of The Conference Board and the Massachusetts Business Roundtable and an overseer of WGBH and the Boston Museum of Science. 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. DAVID A. SPINA DIRECTOR SINCE 1989 Vice Chairman of the Corporation. Mr. Spina, age 51, joined State Street in 1969 as a credit analyst. He served as State Street's Chief Financial Officer and Treasurer from 1977 through 1992. Mr. Spina was elected Executive Vice President in 1982 and Vice Chairman in 1992. Mr. Spina is responsible for the development of corporate management functions and oversees the integration of major support functions with the Corporation's business units. He is chairman of Massachusetts Housing Investment Corporation, a director of the Metropolitan Boston Housing Partnership, Inc. and treasurer and trustee of the Dana Hall School. Mr. Spina holds a B.S. degree from the College of the Holy Cross and an M.B.A. degree from Harvard University. ROBERT E. WEISSMAN DIRECTOR SINCE 1989 President, Chief Executive Officer and Director of The Dun & Bradstreet Corporation, provider of information services. Mr. Weissman, age 53, joined Dun & Bradstreet in 1979. He became Chief Executive Officer on January 1, 1994. 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 a trustee of Babson College. Mr. Weissman received a degree in Business Administration from Babson College in 1964. DIRECTORS SERVING UNTIL THE 1996 ANNUAL MEETING Class III TENLEY E. ALBRIGHT, M.D. DIRECTOR SINCE 1993 Chairman, Vital Sciences, Inc., which was founded to provide diagnostic testing for cancer and cardiovascular diseases. Before founding Vital Sciences, Inc., Dr. Albright, age 58, practiced as a general surgeon. She is a member of the board of The West Company, a member of Harvard Medical School Visiting Committee of the Board of Overseers, a member of the board of directors of the Whitehead Institute for Biomedical Research, a member of the corporation of Woods Hole Oceanographic Institution and New England Baptist Hospital and chairman of the selection panel of the President's Commission on White House Fellows - northeast region. She graduated from Harvard Medical School after attending Radcliffe College and has received honorary degrees from Williams College, Hobart and William Smith Colleges, Russell Sage College, New England School of Law, Chatham College and State University of New York at Cortland. Dr. Albright won the Gold Medal in figure skating at the 1956 Olympics in Cortina, Italy. MARSHALL N. CARTER DIRECTOR SINCE 1991 Chairman, President and Chief Executive Officer of the Corporation. Prior to joining State Street in 1991, Mr. Carter, age 53, was with Chase Manhattan Bank for 15 years, the last three years as head of global securities services. 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 the National Securities Clearing Corporation and Euroclear in Brussels, the co-chairman of the U.S. Working Group for the Group of Thirty and a member of the Federal Advisory Council of the Board of Governors of the Federal Reserve System. 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, since 1990. Mr. Darehshori, age 57, served as college division vice president and manager of Houghton Mifflin's midwestern sales region 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. 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 Commercial Union Corporation, the Boston Public Library Foundation, the Rabbi Marc H. Tanenbaum Foundation and the Massachusetts Business Roundtable and is chairman of the Business Roundtable's education task force. He is a trustee of Wellesley College, the New England Aquarium and the WGBH Foundation. He is a member of the comparative and world literature committee of the National Council of Teachers of English, the Conference Board, the national corporate committee of the United Negro Fund, the Dana Farber national advisory council and the national executive board of the National Conference of Christians and Jews. Mr. Darehshori also serves on the boards of overseers of the Wien International Scholarship Program at Brandeis University, the New England Conservatory of Music, the Boston Symphony Orchestra and the Museum of Science. CHARLES F. KAYE DIRECTOR SINCE 1979 President, Transportation Investments, Incorporated, a lessor and asset manager of intermodel transportation equipment, since 1990. Mr. Kaye, age 66, is a graduate of St. Thomas University and received a J.D. degree from Boston College Law School. He was senior partner of the firm of Kaye, Sheldon and Barton and special counsel to the Massachusetts Institute of Technology before joining XTRA Corporation in 1967 as a director and general counsel. Mr. Kaye became vice chairman in 1970 and served as chairman, president and chief executive officer of XTRA from 1973 to 1990. Mr. Kaye is a trustee of Bentley College and Lawrence Academy, a member of the Visiting Committee of the Massachusetts General Hospital, chairman of the Alpha Omega Foundation and town moderator of Littleton, Massachusetts. He has been the recipient of the Association of American Railroads annual Intermodel Man of the Year Award and the Air Force Association Distinguished Service Award. JOHN M. KUCHARSKI DIRECTOR SINCE 1991 Chairman of the Board, President and Chief Executive Officer of EG&G, Inc., which provides scientific and technological products and services worldwide. Mr. Kucharski, age 57, joined EG&G in 1972 and was elected president and director in 1986. He is a director of Nashua Corporation, New England Electric System, Eagle Industry Co. Ltd. and the Massachusetts High Technology Council, Inc. He serves on the boards of trustees of Marquette University, George Washington University and the National Security Industrial Association. 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 Chairman and Chief Executive Officer of Boston Edison Company, a utility company. From 1987 to 1990, Mr. Reznicek, age 57, was president and chief operating officer of Boston Edison. In 1990, he became Chief Executive Officer, and in 1992, he was elected Chairman. 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 Guarantee Mutual Life Company, Father Flanagan's Boys' Home and the John F. Kennedy Library Foundation and is chairman of the New England Power Pool (NEPOOL) executive committee, a director of the New England Council, Inc., the Electric Transportation Coalition, the Association of Edison Illuminating Companies, the American Nuclear Energy Council and the Edison Electric Institute. Mr. Reznicek also serves on the Board of Overseers of the Museum of Fine Arts, Boston, the Boston Museum of Science and the Wang Center and is a trustee of the New England Aquarium. GENERAL INFORMATION The Board of Directors has the overall responsibility for the conduct of the business of the Corporation. Of the present 17 directors, 15 are outside directors and 2 are executive officers of the Corporation. The Board of Directors held 5 meetings during 1993, 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, except Lois D. Juliber and David B. Perini, each of whom attended 71% of the meetings. Each member of the Board of the Corporation is also a member of the Board of Directors of the Bank, except Ms. Juliber and Mr. Weissman. The Board of Directors of the Bank held 12 meetings during 1993. Each member of the Executive Committee and of 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 reviews and approves policies for the extension of credit, investment of the Corporation's assets and financial management; monitors activities under these policies and reports to the Board, and acts on behalf of the Board on recurring matters and between meetings under specific delegations. Its members are George H. Kidder, Chair, Marshall N. Carter, Nader F. Darehshori, Charles F. Kaye, Bernard W. Reznicek and David A. Spina. During 1993, the Committee held 13 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 and monitors communication with external auditors and bank regulatory authorities. The Committee is composed of Joseph A. Baute, Chair, James I. Cash, Jr., Truman S. Casner and John M. Kucharski. During 1993, the Committee held 8 meetings. The EXECUTIVE COMPENSATION COMMITTEE oversees the compensation system for the Corporation's executive officers and non-management directors. The Committee consists of Dennis J. Picard, Chair, I. MacAllister Booth, Charles F. Kaye and Robert E. Weissman. During 1993, the Committee held 7 meetings. The NOMINATING COMMITTEE, which held 2 meetings during 1993, is composed of I. MacAllister Booth, Chair, Marshall N. Carter, Lois D. Juliber and David B. Perini. The Committee recommends nominees for directors 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. COMPENSATION OF DIRECTORS Directors who are also officers of the Corporation 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 $22,000, payable in shares of the Common Stock of the Corporation or in cash, plus a fee of $1,250 for each meeting of the Board of Directors and each committee meeting attended, as well as travel accident insurance and reimbursement for travel expenses, for the period April 1993 through March 1994. In 1993, all outside directors received their annual retainer in Common Stock. BENEFICIAL OWNERSHIP OF SHARES The table below sets forth the number of shares of Common Stock of the Corporation beneficially owned by each nominee for Class I Director, the Class II and Class III Directors, 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, 1994. None of the nominees, directors or executive officers owned beneficially as much as 1% of the outstanding shares of Common Stock. The nominees, directors and executive officers in the aggregate beneficially owned 1.6% of the Corporation's Common Stock. Amount and Nature of Beneficial Name Ownership ---- ----------------- Tenley E. Albright, M.D. 4,012(1) A. Edward Allinson 61,000(2) Joseph A. Baute 4,190(3) I. MacAllister Booth 2,815 Marshall N. Carter 46,200(2) James I. Cash, Jr. 2,099 Truman S. Casner 4,421(4) Nader F. Darehshori 2,421 Lois D. Juliber 2,099 Charles F. Kaye 21,149 George H. Kidder 42,349(5) John M. Kucharski 1,713 Charles R. LaMantia 979(6) Nicholas A. Lopardo 65,280(2) David B. Perini 15,671 Dennis J. Picard 1,561 Bernard W. Reznicek 2,213 Norton Q. Sloan 35,000 David A. Spina 429,572(2)(7) Robert E. Weissman 4,099 All of the above and other executive officers as a group (33 persons) 1,208,601(2)(6) ___________________ (1) Includes 2,533 shares held in trust for a family member pursuant to a trust of which Dr. Albright is a co-trustee with respect to which she disclaims beneficial ownership. (2) Includes shares which may be acquired within 60 days through the exercise of stock options as follows: Mr. Allinson, 56,000; Mr. Carter, 44,800; Mr. Lopardo, 65,180; Mr. Spina, 229,600, and the group, 606,960. (3) Includes 200 shares owned by a member of Mr. Baute's family with respect to which he disclaims beneficial ownership. (4) Includes 2,000 shares with respect to which Mr. Casner shares voting and investment power. (5) Includes 6,000 shares with respect to which Mr. Kidder shares voting power with a co-trustee under an indenture of trust. (6) Includes shares in which voting power is shared as follows: Dr. LaMantia, 500 and the group, 1,930. (7) Includes 20,000 shares owned by a family member with respect to which Mr. Spina disclaims beneficial ownership. The Corporation does not know of any persons who may be deemed to own more than 5 percent of the Corporation's Common Stock. 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 ("SEC"). Executive officers and directors are required by SEC 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 1993 all Section 16(a) filing requirements applicable to its executive officers and directors were met, except that the initial report on Form 3 of Dr. Tenley E. Albright did not timely report shares held in trust for an adult family member with respect to which she disclaims beneficial ownership. CERTAIN TRANSACTIONS During 1993 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. 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. The Bank and other subsidiaries of the Corporation have used products or services of Dun & Bradstreet with which Mr. Weissman, a director, is associated. Additional transactions of this 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 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 is allowed to borrow from the Bank other than through the use of a reserve account with limits of up to $20,000 as allowed by Massachusetts law and at the same interest rate paid by the public. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Corporation's Executive Compensation Committee are Dennis J. Picard, Chair, I. MacAllister Booth, Charles F. Kaye and Robert E. Weissman. No present or former officer of the Corporation or the Bank served as a member of the Committee. Furthermore, no executive officer of the Corporation served as a director of any entity, one of whose directors or executive officers served on the Corporation's Board or the Committee. EXECUTIVE COMPENSATION Shown below is information concerning the annual and long term compensation paid by the Corporation and its subsidiaries, including the Bank, with respect to 1993, 1992 and 1991 to the chief executive officer and the four other most highly compensated executive officers of the Corporation (the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ANNUAL COMPENSATION AWARDS(1) PAYOUTS OTHER SECURITIES ALL NAME ANNUAL UNDERLYING OTHER AND COMPEN- OPTIONS/ LTIP COMPEN- PRINCIPAL SALARY BONUS SATION SARS PAYOUTS SATION POSITION YEAR ($) ($) ($) (#) ($)(2) ($)(3) - --------- ---- ------ ----- ------- ---------- ------- ------ Marshall N. Carter(4) 1993 643,753 450,000 0 None 0 23,497 Chairman, President 1992 625,003 375,000 0 None 650,906 20,364 and Chief Executive 1991 232,886 230,000(5) 0 112,000 0 12,238 Officer David A. Spina 1993 493,752 300,000 0 None 0 74,497 Vice Chairman 1992 475,003 250,000 0 None 1,156,791 71,364 1991 400,002 225,000 0 None 0 60,238 Nicholas A. Lopardo(6)1993 347,919 470,000 0 None 0 15,497 Executive Vice 1992 316,252 503,000 0 None 0 14,364 President 1991 282,501 386,100 0 None 0 13,238 A. Edward Allinson(7) 1993 450,002 280,000 0 None 0 17,497 Executive Vice 1992 406,002 303,000 0 None 1,154,274 17,364 President 1991 376,252 300,000 0 None 0 15,238 Norton Q. Sloan 1993 321,252 160,000 0 None 0 17,497 Executive Vice 1992 304,999 153,000 0 None 798,271 16,364 President 1991 283,749 145,000 0 None 0 15,238 __________________________________ (1) Reflects a two-for-one stock split effective April 1992. (2) Long term compensation payouts reflect performance shares earned in accordance with the attainment of maximum performance targets for the three year period, 1990-1992, and paid in cash equal to the fair market value of the Corporation's Common Stock at the end of the performance period. (3) Includes the Corporation's contributions to the Salary Savings Program of $4,497 in 1993, $4,364 in 1992 and $4,238 in 1991, plus accruals under the Supplemental Executive Retirement Plan: Mr. Carter $19,000 in 1993, $16,000 in 1992 and $8,000 in 1991; Mr. Spina $70,000 in 1993, $67,000 in 1992 and $56,000 in 1991; Mr. Lopardo $11,000 in 1993, $10,000 in 1992 and $9,000 in 1991; Mr. Allinson $13,000 in 1993, $13,000 in 1992 and $11,000 in 1991, and Mr. Sloan, $13,000 in 1993, $12,000 in 1992 and $11,000 in 1991. (4) Mr. Carter became Chairman on January 1, 1993. He joined the Corporation in July 1991 as President and became Chief Executive Officer on January 1, 1992. (5) Includes a special sign-on cash bonus received by Mr. Carter in the amount of $100,000 when he joined the Corporation. (6) Includes bonuses from the Corporation's Annual Incentive Plan and from the State Street Global Advisor's Incentive Plan. (7) Includes a cash bonus received by Mr. Allinson of $100,000 in each of the years 1991-1993 as chief executive officer of Boston Financial Data Services, Inc. which is 50% owned by the Corporation.
Shown below is information with respect to the exercise of stock options to purchase the Corporation's Common Stock by the Named Executive Officers during 1993 and the fiscal year-end value of unexercised options held by the Named Executive Officers granted in prior years under the 1984 Stock Option Plan which expired in 1989, the 1985 Stock Option and Performance Share Plan which expired in 1992, the 1989 Stock Option Plan and the 1990 Stock Option and Performance Share Plan. AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF VALUE OF SECURITIES UNDER- UNEXERCISED LYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS AT OPTIONS/SARS AT DECEMBER 31, 1993 DECEMBER 31, 1993 SHARES (#)(1) ($)(2) ACQUIRED VALUE ----------------- ----------------- ON EXER- REALIZED EXER- UNEXER- EXER- UNEXER- NAME CISE (#) ($)(3) CISABLE CISABLE CISABLE CISABLE - ---- -------- -------- ------- ------- ------- ------- Marshall N. Carter None 0 44,800 67,200 473,200 709,800 David A. Spina None 0 229,600 46,400 5,834,396 794,600 Nicholas A. Lopardo 100 2,716 57,982 47,020 1,386,426 1,087,191 A. Edward Allinson 4,000 83,750 56,000 40,000 1,078,000 770,000 Norton Q. Sloan 45,200 1,112,550 15,600 31,200 267,150 534,300 ___________________________ (1) Reflects a two-for-one stock split effective April 1992. (2) Represents the difference between the exercise price of the stock options and the market value of the stock on December 31, 1993 ($37.50). (3) Represents the difference between the exercise price of the stock options and the market value of the stock at the time of the exercise.
Shown below is information with respect to a grant of performance units to the Named Executive Officers subject to stockholder approval. LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR NUMBER OF PERFORMANCE OR SHARES, UNITS OTHER PERIOD OR OTHER UNTIL MATURA- NAME RIGHTS (#) TION OR PAYOUT --------------- -------------- Marshall N. Carter (1) 30,000 1995-1996 David A. Spina (1) 20,000 1995-1996 Nicholas A. Lopardo (1) 10,000 1995-1996 A. Edward Allinson (1) 15,000 1995-1996 Norton Q. Sloan (1) 15,000 1995-1996 ________________________ (1) The performance units were granted in December 1993 under the 1994 Stock Option and Performance Unit Plan, which is discussed later in this Proxy Statement, subject to stockholder approval of the plan. The performance units are earned based on the Corporation's performance during the performance period. The performance period is two fiscal years, and the last day of the second fiscal year of the performance period is the maturity date. Performance units, to the extent earned, are payable at maturity in cash equal to the fair market value of the Corporation's Common Stock at the end of the performance period. REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE The Executive Compensation Committee of the Board of Directors furnishes the following report on Executive Compensation. POLICY State Street combines information technology with banking, trust, investment and securities processing capabilities to support the investment strategies of our customers worldwide. The Corporation's goal is to be the leading global servicer of financial assets. The Corporation's executive compensation program is designed to attract and retain superior executives, to focus these individuals on achieving the Corporation's goals and objectives and to reward executives for meeting specific short- and long-term performance goals. It has been the practice of the Corporation to tie significant amounts of the executive compensation to achievement of specific financial targets. The compensation program places emphasis on challenging performance goals, business growth and sustainable real growth in earnings per share. The Executive Compensation Committee is comprised entirely of independent, non-employee directors. The Committee develops and reviews and, with respect to officer-directors, recommends to the Board of Directors for approval, strategic compensation plans for executive officers of the Corporation. The plans are designed to align executive compensation with the Corporation's business strategy and to attract and retain high caliber executives. The program provides for significant compensation opportunities which are directly related to achievement of challenging long-term goals and growth in the Corporation's stock price. By including stock-based compensation plans within the compensation strategy, State Street links closely the goals of stockholders and executives. The principles of this compensation strategy are applied throughout the Corporation. Since senior 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. Individuals who manage business units or have corporate functional or staff responsibility have a significant opportunity to influence the Corporation's results, and a sizable portion of their total compensation is related to the achievement of financial goals of both the unit and the Corporation. Many of these individuals have also participated in the Corporation's stock option plan. State Street also offers specific bonus opportunities to individuals who have specialized sales, trading or investment responsibilities. Outstanding performance by these specialists is rewarded with bonuses linked directly to the attainment of challenging measurable business goals. The Committee met seven times during the year and reported its activities to the Board of Directors. In 1993, in conjunction with its annual comprehensive review of the executive compensation program, the Committee engaged an independent compensation consultant. The consultant worked directly with the Committee in reviewing the executive compensation program, selecting a peer group of public companies to which to compare the Corporation's executive compensation, financial performance and total return to stockholders and recommending modifications to existing plans. As part of this review, the Committee, with assistance from the independent consultant, selected a group of companies as a reference group to which to compare compensation practices. This reference group included large U.S. bank holding companies, selected other technology-based companies engaged in servicing businesses believed to be competing with the Corporation for the same caliber of executive talent, and New England bank holding 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." As a result of its reviews, the Committee determined that the fundamental elements of the compensation plan, salary, bonus, stock options and performance shares/units are well balanced in a program that supports the Corporation's business strategy, provides competitive compensation and creates value for stockholders. The Committee determined that some modifications to the compensation plans were desirable to increase the bonus opportunity for the chief executive officer as indicated by competitive information and to expand the number of performance measures under the Senior Executives Annual Incentive Plan. In addition, the Committee recommended that the performance measures for the Corporation's performance shares/units program be expanded and that the cycles for issuance of performance units and stock options be changed. The details of the recommendations, which were approved by the Board of Directors, are described in the following sections of this report, in the Senior Executives Annual Incentive Plan and the 1994 Stock Option and Performance Unit Plan which State Street's stockholders are being asked to approve at this year's annual meeting. The elements of the Corporation's executive compensation consist of base salary, annual bonus, performance shares/units and stock options. These are complementary components where salary and bonus reflect one-year results, performance shares/units reflect multi-year results and stock options reflect long-term stock price appreciation. The Executive Compensation Committee's policies with respect to each of these elements, including the bases for the compensation awarded in 1993 to the Corporation's Chief Executive Officer, Mr. Carter, are discussed below. BASE SALARIES Executive officers are defined as individuals with policy making responsibility. At the end of 1993, 13 individuals were designated as executive officers of the Corporation. Base salaries for executive officers are determined by evaluating the responsibilities of the position and the experience of the individual. No specific formula is used to set base salaries. The Committee determined that it is appropriate for executive officer salary levels to be near the median of the reference group. Annual salary adjustments are determined by evaluating the performance of the Corporation and of each executive officer and by taking into account any new responsibilities. The Committee also considers the range of salary increases which are awarded to all employees in the Corporation. In reviewing individual performance, the Committee considers the views of Mr. Carter with the respect to other executive officers. With respect to the base salary granted to Mr. Carter for 1993, the Committee reviewed a comparison of base salaries of chief executive officers of other companies, using a group of reference companies, the range of increases granted to individuals at all levels in the Corporation, and the assessment by the Committee and the Board of Mr. Carter's individual performance in 1992. No particular weight was applied to any single factor in making the Committee's determination. When compared to salaries paid to chairman of the board and chief executive officer positions in the reference group, Mr. Carter's salary was below the median. ANNUAL BONUSES The Corporation's executive officers are eligible for annual cash bonuses. For the 1993 Annual Incentive Plan, the minimum earnings threshold for the grant of any bonus awards was $1.57 per share, equal to a 12% return on stockholders' equity. The earnings threshold for the grant of maximum bonus awards was set at $2.41 per share equal to an 18% return on stockholders' equity. Given the Corporation's recent financial performance and business mix, the Committee concluded that it is appropriate to expect that a 12% ROE be achieved before any bonus is paid. The Committee also believes that an 18% ROE is an appropriate level for maximum bonus attainment. It places State Street's performance among the top performers of comparable companies, provides a very competitive return for stockholders and leaves management with the flexibility to make long-term expenditures and investments that will foster continued growth in the business. The most recent competitive survey reviewed by the Committee reflected year end 1992 performance of the reference companies. The average one-year return on equity for these companies was 17.4% and the median was 16.3%. The average one- year return on equity for the bank holding companies in the reference group was 16.2% and the median was 15.8%. Among the bank holding companies in the reference group, 33.3% achieved a one-year return on equity of 18% or higher and 10.0% generated a one-year return on equity of less than 12%. The bonus pool for executive officers other than the chief executive officer in 1993 was allocated among the individual executive officers based on individual performance. The bonus pool for these executive officers was 50% of their aggregate base salaries. This level was designed to place the bonus pool near the median of the cash bonus opportunities for the reference companies. The Committee increased the bonus opportunity for Mr. Carter in 1993 from 60% to 75% to bring it closer to the median of the reference companies. In 1993, the Corporation earned $2.33 per share equal to 17.4% return on equity, or 91% of the maximum bonus target. The Committee recommended a bonus for Mr. Carter equal to 69% of his salary. Payment of the recommended amount was approved by the Board of Directors. The Committee determined that the performance measures used for the annual bonus for executive officers should be expanded to include an earnings per share target as well as a return on equity target for 1994. These changes are reflected in the Senior Executives Annual Incentive Plan, which is described elsewhere in this Proxy Statement. PERFORMANCE SHARES/PERFORMANCE UNITS Performance shares have been granted to the Corporation's executive officers once every two years or at the time an officer joined the executive group. The size of the grants are determined based on a target level of long-term incentive opportunity near the median for companies in the reference group. The performance shares represent a contingent right to a cash payment in the event the Corporation meets specified performance goals over a specified time period following the grant. Historically, payments have been made with respect to all the performance shares in a given grant (i.e., all the shares in the grant were "earned") if the Corporation achieved an 18% return on equity over the three-year period following the grant. The number of shares in a grant that were earned declined to no shares at 12% return on equity. In calculating the shares earned, a simple average of the return on equity for each of the three years of the performance period has been used. At the end of the three years, a cash payment is calculated based on the number of performance shares earned times the market value of the Corporation's common stock at the end of the performance period. In this way, the potential value of the performance shares relates directly to both corporate financial performance in determining how many shares are earned and stock price appreciation in determining the cash value of the shares earned. In December 1991, executive officers were granted performance shares having a nominal value at the time of the grant equal to between 96% and 109% of annual salary and bonus. This is equivalent to 48% to 54.5% on an annual basis. The December 1991 grant included 35,692 performance shares granted to Mr. Carter. These performance shares will be earned in full if the maximum average annual return on equity target (18%) for 1992 through 1994 is met, declining proportionately to no shares earned if the average annual return on equity is 12% or less. Because performance shares are granted only once every two years, performance share payouts (if earned) are also made only once every two years. The Committee has recommended a number of revisions to the performance share program starting in 1994. The new plan, which was approved by the Board of Directors of the Corporation, is named the 1994 Stock Option and Performance Unit Plan and is described in detail in this Proxy Statement. Stockholders are being asked to approve this plan. Under the new plan, performance shares will be renamed performance units to describe more accurately this compensation vehicle. Performance units granted every two years will have a measurement period of two years rather than three years. The purpose of this change is to simplify the plan. The number of performance measures used for determining the number of shares earned will be expanded to include an earnings per share target and a total return to stockholder target in addition to a target for return on equity. This revision is intended to link more effectively the payment of performance units to multiple factors which may build stockholder value. In December 1993, executive officers were granted performance units by the Board of Directors having a nominal value at the time of grant equal to between 46% and 166% of annual salary and bonus. This is equivalent to 23% to 84% on an annual basis. The December 1993 grant included 30,000 performance units granted to Mr. Carter. The grants were made under the 1994 Stock Option and Performance Unit Plan and are subject to stockholder approval of the Plan at this year's annual meeting. These performance units will be earned in full if the maximum earnings per share, return on equity and total return to stockholder targets for 1995 and 1996 are met. STOCK OPTIONS Stock options are granted to the Corporation's executive officers based on annual salary and bonus. Stock option grants to executive officers were made once every five years, most recently in June 1990 or at the time an officer joined the executive group. Because the grants were made for a five-year period, the 1990 stock options were granted on a number of shares having a market price at the time of grant equal to 400% to 500% of each executive's annual salary plus bonus. Stock option grants were determined based upon a target level of long-term incentive opportunity which is near the median for companies in the reference group. The exercise price of the stock options is equal to the market price of the shares at the time of the grant and the options become exercisable at the rate of 20% per year over the five-year period. Because Mr. Carter joined the Corporation subsequent to the June 1990 grant, his grant of options was prorated to options on 112,000 shares of stock having a market price at the time of grant equal to 360% of his annual salary plus bonus. Since the stock options are granted at market price, the value of the stock options is wholly dependent upon an increase in the Corporation's stock price. It is the policy of the Committee not to reset option exercise prices once they have been established. Because the Committee views stock option grants as a part of the executive officer's total compensation package for the period covered by the grant, 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. The Committee is recommending that beginning in 1995, stock options be issued to executive officers every two years. This will allow for performance to be recognized more frequently. The 1994 Stock Option and Performance Unit Plan set forth in this Proxy Statement, which stockholders are being requested to approve, permits this change. RECENT TAX CHANGES The Omnibus Budget and Reconciliation Act of 1993 resulted in the addition of Section 162(m) of the Internal Revenue Code. Beginning in 1994, Section 162(m) limits the Corporation's federal income tax deduction to $1,000,000 per year for compensation to any of its five highest paid executive officers. Performance-based compensation is not, however, generally subject to the deduction limit, provided certain requirements of Section 162(m) are satisfied. The Committee reviewed all elements of the program against the standards for qualifying for the tax deduction and determined that awards under the 1994 Stock Option and Performance Unit Plan and the Senior Executives Annual Incentive Plan should be designed to qualify for the performance- based deduction. CONCLUSION Through the programs 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 efforts to expand globally, 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 consistent with stockholder interest and closely tied to continuing growth in stockholder value. Submitted by, I. MacAllister Booth Charles F. Kaye Dennis J. Picard, Chair Robert E. Weissman 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 total return of the S&P 500 Index and the S&P Financial Index for the period of five fiscal years commencing December 31, 1988 and ended December 31, 1993, assuming $100 invested in the Corporation's Common Stock and in each index and assuming reinvestment of dividends. The S&P Financial Index is a publicly available measure of 56 of the Standard & Poor's 500 companies, representing 29 banking companies, 15 insurance companies and 12 financial services companies. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN YEAR ENDED DECEMBER 31 1988 1989 1990 1991 1992 1993 State Street Boston Corporation Total Return 100 151 137 255 352 306 S&P 500 Index Total Return 100 132 128 166 179 197 S&P Financial Index Total Return 100 132 104 156 193 214
RETIREMENT BENEFITS As of January 1, 1990, the benefit formula under the Corporation's retirement plan (the "Retirement Plan") was changed to an account based formula. An account balance was established for each participant equal to the 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 percents 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 the participant retires from the plan. The grandfathered formula is the participant's accrued benefit at June 30, 1989 adjusted for future salary increases, plus 1.5% of final average pay times years of service since June 30, 1989. No more than 30 years of service are taken into account. 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 balance or annuity equivalent if they leave the employ of the Corporation or the Bank before retirement. Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended, limit the annual benefits which may be paid from a tax-qualified retirement plan. As permitted by the Employee Retirement Income Security Act of 1974, the Corporation has adopted a supplemental plan which provides for the payment out of general funds of the Corporation of any benefits calculated under provisions of the Retirement Plan which may be above the limits under applicable sections of the Internal Revenue Code. Each of the Named Executive Officers is included in the supplemental plan. The supplemental plan provides for the funding through a trust of retirement benefits following a change of control. The trust is currently unfunded. The following table sets forth the estimated annual benefits (which are not subject to a deduction for Social Security), assuming a single life annuity, payable upon retirement under the final average pay formula to participants who retire during 1993 in the following remuneration and years-of-service classifications: PENSION PLAN TABLE Final Average Years of Service Annual -------------------------------------------------- Salary 15 20 25 30 35 - ------------- -- -- -- -- -- $100,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 45,000 300,000 67,500 90,000 112,500 135,000 135,000 500,000 112,500 150,000 187,500 225,000 225,000 700,000 157,500 210,000 262,500 315,000 315,000 900,000 202,500 270,000 337,500 405,000 405,000 Final average annual salary includes base salary only. Mr. Carter is not eligible for the final average pay formula. His retirement benefit is discussed below. The other Named Executive Officers have been credited with years of service under the Retirement Plan as of December 31, 1993 as follows: Mr. Spina, 20; Mr. Lopardo, 5; Mr. Allinson, 9, and Mr. Sloan, 7. Current compensation covered by the Retirement Plan as of December 31, 1993 for each of the Named Executive Officers, except Mr. Carter, was as follows: Mr. Spina, $500,000; Mr. Lopardo, $350,000; Mr. Allinson, $450,000, and Mr. Sloan, $325,000. Mr. Carter's age 65 estimated benefit at current compensation under the account based formula of the Retirement Plan (including benefits under the supplemental plan) is $76,500. He has been credited with one year of service under the Retirement Plan as of December 31, 1993. Under an agreement dated March 5, 1992, Mr. Carter will receive an additional pension contribution as a percent 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. His additional age 65 estimated benefit resulting from the agreement at current compensation is $65,900. Under an agreement dated September 14, 1990, Mr. Allinson will receive an aggregate benefit (including benefits under the Retirement Plan and the supplemental plan) which, when expressed as a single life annuity, equals $100,000 per year for benefits commencing at age 65, reduced for earlier commencement down to $67,000 per year for a benefit commencing at age 60. His age 65 estimated benefit resulting from the agreement is $55,000. Under an agreement dated March 1, 1987, Mr Sloan may receive supplemental pension payments which will bring total pension payments received by him, including regular pension payments from the Corporation and payments from his former employer, up to the amount he would have received had he commenced employment with the Corporation in 1964, such payments to also include amounts he would have received but for legislative limits on qualified pension plans. TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS The Corporation has termination agreements with Messrs. Carter, Spina, Lopardo, Allinson and Sloan which obligate them to remain in the employ of the Corporation during the pendency of any change of control proposal in consideration for the payment by the Corporation to such officers of two years annual salary and certain other benefits (including the acceleration of outstanding stock options and performance shares) if the employment of such officers with the Corporation terminates for any reason other than death, disability or normal retirement of the officer during a period of two years following a change of control of the Corporation. If the Named Executive Officers had been terminated on December 31, 1993, they would have been entitled to receive the following amounts as severance pay: Mr. Carter, $1,300,000; Mr. Spina, $1,000,000; Mr. Lopardo, $700,000; Mr. Allinson, $900,000, and Mr. Sloan, $650,000, and the acceleration of outstanding stock options and performance shares. Any payments including the value of the acceleration of stock options and performance shares to the Named Executive Officers would have been reduced to the extent they were not deductible by the Corporation for federal income tax purposes under Section 280G of the Internal Revenue Code. A change of control is defined to include the acquisition of 20% 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 a majority of the Corporation's assets. The Corporation also has an agreement with Mr. Carter that provides for severance pay equal to eighteen months' salary if his employment is terminated for reasons other than voluntary resignation, death or malfeasance before July 22, 1996. RELATIONSHIP WITH INDEPENDENT AUDITORS The Board of Directors, upon the recommendation of the Examining and Audit Committee, has selected Ernst & Young as independent auditors for the Corporation for the year ending December 31, 1994. It is expected that representatives of Ernst & Young will be present at the Annual Meeting to answer questions and will have the opportunity to make a statement if they so desire. APPROVAL OF 1994 STOCK OPTION AND PERFORMANCE UNIT PLAN BACKGROUND On December 16, 1993, the Board of Directors of the Corporation adopted the 1994 Stock Option and Performance Unit Plan (the "1994 Plan") and recommended its approval by the stockholders. The 1994 Plan is designed to advance the interests of the Corporation and its stockholders by granting stock options, stock appreciation rights ("SARs") and performance units to certain officers of the Corporation, thereby providing them with an incentive to devote their full abilities and industry to the success of the Corporation's businesses. The 1994 Plan combines and replaces both the 1989 Stock Option Plan and the 1990 Stock Option and Performance Share Plan, and upon approval of the 1994 Plan, it is intended that no additional grants will be made under the 1989 and 1990 Plans. Options, SARs and performance units awarded under the 1994 Plan are, in general, intended to qualify for the performance-based exception to Section 162(m) of the Internal Revenue Code of 1986, as amended, (the "Code"), which beginning in 1994 limits the deduction the Corporation may claim for compensation paid to certain executive officers to $1 million per year, subject to certain exceptions. See "Certain Federal Income Tax Aspects," below. The following is a summary of the principal features of the 1994 Plan. This summary is qualified in its entirety by the complete text of the 1994 Plan as set forth in Exhibit A of this Proxy Statement. SUMMARY OF THE PLAN Administration; The Committee. The 1994 Plan is administered by the Executive Compensation Committee (the "Committee") of the Board of Directors. The 1994 Plan requires that the Committee be composed solely of three or more members of the Board of Directors who are both "outside directors" under Section 162(m) of the Code and who are disinterested persons within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The current members of the Committee are Messrs. Booth, Kaye, Picard and Weissman, none of whom are eligible for awards under the 1994 Plan. The 1994 Plan authorizes the Committee to designate the officers to whom and the times at which stock options, SARs and performance units will be granted, the number of shares subject to each grant, and to determine the terms of the grants. The Board of Directors, upon the recommendation of the Committee, approves all grants to officers who are also directors of the Corporation. Shares Subject to the 1994 Plan; "Per-Executive" Limitation. The maximum number of shares of the Common Stock of the Corporation which may be issued under the 1994 Plan is 3,500,000 shares, subject to adjustment in the event of stock dividends, stock splits, recapitalizations, mergers or similar transactions. The maximum number of performance units that may be issued under the 1994 Plan is 1,000,000. To the extent consistent with the provisions of the Code, shares subject to an option that terminates without exercise (other than an option that terminates by reason of the exercise of an accompanying SAR) shall again be available for the purposes of the 1994 Plan, and if payment is not made with respect to performance units issued under the 1994 Plan, the shares subject to the performance units shall again be available for the purposes of the 1994 Plan. No participant shall be entitled to grants of options or options/SARs covering more than an aggregate of 500,000 shares over the term of the 1994 Plan. No participant shall be entitled to grants of performance units covering more than 250,000 units over the term of the 1994 Plan, unless the Committee determines that such units are not intended to qualify for the performance- based exception to Section 162(m). Each of the foregoing limitations is subject to adjustment in the event of stock dividends, stock splits, recapitalizations and similar corporate transactions. Participants. Any salaried officer who, in the determination of the Committee, is in a position to contribute importantly to the success of the Corporation may participate in the 1994 Plan. The Corporation has approximately 500 salaried officers eligible to participate. Options. The 1994 Plan authorizes the grant of stock options, which may be either options intended to qualify as incentive stock options, as defined in Section 422(b) of the Code, or options not intended to so qualify ("non-qualified options"). The Committee will determine the option price, term and manner of exercise of each option granted, but the option price may not be less than the fair market value of the Common Stock on the date of grant. No option may have a term greater than ten years, and, in general, an option may not first become exercisable earlier than one year after the date of grant. The Committee may provide that options be exercisable in installments and may also accelerate the exercise date of options that have been outstanding for more than 6 months. Certain other restrictions apply in connection with the award of options intended to qualify as incentive stock options. Unless otherwise determined by the Committee, an option may in general be exercised by the payment of the option price in cash, by the surrender of shares of Common Stock having a fair market value equal to the option price, or by a combination of cash and stock, or by irrevocable instructions to a broker to pay the purchase price to the Corporation. SARs. The Committee may also grant non-transferable SARs in conjunction with the grant of options. Upon exercise of a SAR and the surrender of the related option, the holder will receive an amount in any combination of cash or shares of Common Stock (as determined by the Committee) equal to the excess of the fair market value of a share of Common Stock on the date the SAR is exercised over the option price specified in the related stock option, multiplied by the number of shares covered by the option. A SAR will terminate upon the exercise or termination of the related option unless earlier terminated by the Board. The Committee may authorize the acceleration of SARs that have been outstanding for at least six months. Performance Units. A performance unit entitles the recipient to receive in cash an amount equal to the fair market value of a share of Common Stock at the end of a specified performance period, provided that established performance targets have been achieved. The 1994 Plan provides for certain limits on the award and terms of performance units, in order that a performance unit may qualify for the performance-based exception to Code Section 162(m). In particular, the Committee must establish in writing "performance goals." Under the terms of the 1994 Plan, performance goals may be established with respect to any or all of the following three performance measures: return on equity, earnings per share, and total stockholder return as compared to a standard market reference. The Committee will also establish in writing the period over which targeted performance will be measured (a "performance period"), which may be of any duration between one and five fiscal years. In any given performance period, no participant may have the opportunity to earn performance units in excess of 250,000 units (subject to adjustment in the event of certain stock or corporate transactions). Prior to payment in respect of any performance unit, the Committee must certify that targeted performance has been achieved. The Committee, however, retains the discretion to reduce or eliminate any payment in respect of performance units, even after targeted performance has been achieved. Termination of Employment. In general, if an optionee's employment with the Corporation terminates by reason of normal or early retirement, death or disability, an option or SAR remains exercisable in accordance with its terms and may be exercised by the optionee or his or her legal representative until the later of one year after the last installment becomes exercisable, or one year after the optionee's employment with the Corporation terminates. If an optionee's employment terminates for any other reason, the optionee may exercise outstanding options or SARs within three months from the date of such termination to the same extent, if any, that they were exercisable immediately prior to such termination. In no event, however, may any option or SAR be exercised after ten years from the date of grant. In the event a participant who has been awarded performance units terminates employment for any reason prior to the end of a performance period, such participant's performance units will be forfeited unless the Committee approves payment, to the extent consistent with Code Section 162(m), of such performance units in whole or in part. Change of Control. The 1994 Plan provides for certain changes in the terms of awards in the event of a change of control, as defined on page A-9 of the 1994 Plan. In general, in the event of a change of control, (1) options and SARs held by optionees who are subject to Section 16 of the Exchange Act or have termination agreements with the Corporation will become immediately exercisable, (2) options may be settled for cash based on the increase in the value of the shares of Common Stock covered by the option from the option grant date to the change of control, (3) SARs may be settled only in cash, (4) options and SARs shall remain exercisable for seven months following termination of employment, (5) restrictions are imposed on the rights of the Committee to amend the terms of certain awards, and (6) payments under awards are based on a "change of control" price, which may differ from the actual fair market value of a share of Common Stock on the date an award is exercised. See Fair Market Value; Spread page A-10 of the 1994 Plan. Payment of performance units following a change of control held by participants who are subject to Section 16 of the Exchange Act or have termination agreements with the Corporation would be made on a pro rata basis with respect to designated performance periods. Amendment and Termination. The Board of Directors may at any time amend, suspend or terminate the 1994 Plan, except that without stockholder approval no amendment may (1) effect any change inconsistent with the qualification of performance-based compensation under the Code (unless the Committee determines that awards are not intended to qualify), (2) effect any change that would cause the Plan to fail to qualify for the award of incentive stock options under the Code, (3) effect any change inconsistent with Section 16 of the Exchange Act, or (4) adversely affect the rights or obligations under any option theretofore granted without the optionee's consent. Unless the 1994 Plan is earlier terminated, no awards may be made under the 1994 Plan after April 30, 1999. Accounting Treatment. Ordinarily, under present accounting rules which are presently being reconsidered, neither the grant nor the exercise of stock options awarded under the 1994 Plan will result in a charge against the Corporation's earnings. The grant of SARs will result in interim charges against the Corporation's earnings over the period during which those rights become exercisable and thereafter until such rights are exercised to the extent that the current market value of such rights exceeds the fair market value of such rights on the date of grant, with a final computation being made at the time of exercise. Payment for performance units will result in a charge against the Corporation's earnings. CERTAIN FEDERAL INCOME TAX ASPECTS THE FOLLOWING IS ONLY A GENERAL SUMMARY OF THE FEDERAL INCOME TAX EFFECTS TO THE PARTICIPANT AND THE CORPORATION OF OPTIONS, SARS AND PERFORMANCE UNITS GRANTED UNDER THE 1994 PLAN. THERE ARE A NUMBER OF SPECIAL TAX RULES WHICH MAY BE APPLICABLE UNDER CERTAIN CIRCUMSTANCES. THE DISCUSSION IS BASED ON THE PROVISIONS OF THE CODE, REGULATIONS, PROPOSED REGULATIONS AND RULINGS THEREUNDER, AS IN EFFECT ON THE DATE OF THIS PROXY STATEMENT, ALL OF WHICH ARE SUBJECT TO CHANGE AT ANY TIME. THIS SUMMARY DOES NOT ADDRESS STATE, LOCAL OR NON-U.S. TAXATION OF AWARDS UNDER THE 1994 PLAN, WHICH MAY DIFFER SIGNIFICANTLY FROM FEDERAL INCOME TAX RULES AND REGULATIONS. Incentive Options. The grant of an incentive option does not produce taxable income to the optionee. If an optionee exercises an incentive option while the optionee is employed or within three months following termination of employment (twelve months in the case of employment termination because of permanent disability), or after the optionee's death if the optionee dies during such periods, exercise of the option will also not produce taxable income to the optionee. The exercise of an incentive option, however, may result in the imposition of the alternative minimum tax ("AMT"), as described in more detail below. The following description assumes that the employment requirements described above have been met. If an optionee acquires shares under an incentive option and sells such shares more than two years from the date of grant of the option and more than one year after the date of exercise, any gain or loss on sale will be a long-term capital gain or loss. If the stock is disposed of before the end of the two- and one-year statutory holding periods, then, in general, the optionee will have ordinary income at time of disposition equal to the difference between the exercise price and the fair market value of the stock on the date of exercise, with any additional gain recognized upon disposition treated as a capital gain (short-term or long-term depending on how long the shares have been held). If the optionee sells the stock within these holding periods for less than the fair market value of the stock at time of exercise, then, in general, the ordinary income realized by the optionee at time of sale will be limited to the gain realized on the sale. Incentive options granted after December 31, 1986 will be treated for tax purposes as non-qualified options to the extent that the aggregate fair market value of the stock with respect to which such options, in the aggregate, are exercisable for the first time by an individual during any calendar year exceeds $100,000. For purposes of the preceding sentence, fair market value is determined as of the time of grant of the option. Exercise of an incentive option increases the optionee's alternative minimum taxable income ("AMTI") by an amount equal, in general, to the excess of the fair market value of the shares acquired under the option over the option price. This increase may result in an AMT liability to the optionee. Non-qualified options. The grant of a non-qualified stock option will not result in any taxable income to the optionee. Upon exercise of such an option, the excess of the fair market value of the acquired stock on the date of exercise over the option price is taxable to the optionee as ordinary income and is subject to tax withholding. When an optionee sells shares acquired pursuant to the exercise of a non-qualified option, the optionee will realize a capital gain or loss, long-term or short- term, depending on how long the shares have been held. SARs. An optionee will realize no income upon the grant of a SAR. When the optionee exercises the SAR, the optionee will generally recognize ordinary income, subject to withholding, in an amount equal to the amount of cash received plus the fair market value of any stock received. Performance Units. The grant of a performance unit will not be taxable to the officer in the year of grant nor at any time prior to payment for the unit. The receipt of cash by an officer in payment for a performance unit will be taxable as ordinary income, subject to withholding, in the year of receipt. Tax Consequences to the Corporation. In general and subject to the limitations described below, the Corporation is entitled to a deduction in respect of awards under the 1994 Plan at the time and to the extent that a Plan participant has ordinary income. However, if an optionee satisfies the requisite one- and two-year holding periods applicable in the case of incentive stock options and thereby recognizes only capital gain or loss upon sale of stock, the Corporation will not be entitled to any deduction (even if the optionee has alternate minimum tax liability). Under Section 162(m) of the Code, starting in 1994 a publicly traded corporation may not deduct more than $1 million for remuneration paid to any of its five highest paid executive officers. Some types of remuneration are not subject to this limit, including certain performance-based pay. In order to qualify for the performance-based pay exemption, remuneration must, among other things, be paid pursuant to a plan the material terms of which, including the performance goals, are disclosed to stockholders and approved by a majority vote of the stockholders. It is intended, in general, that compensation income attributable to stock options, SARs and performance units granted under the 1994 Plan qualify for exemption from the $1 million deduction limitation. The IRS has issued proposed rules under Code Section 162(m) (the "Proposed Rules") interpreting the statutory requirements applicable to exempt performance-based remuneration. The Proposed Rules, which are subject to change, would require among other things that the performance targets applicable to performance-based awards under the 1994 Plan be preestablished by the Committee based on the performance measures set forth in the 1994 Plan and described above, and that the Committee certify that the preestablished targets have been satisfied before payment is made. Under the so-called "golden parachute" provisions of the Code, certain awards vested or paid in connection with a change of control may also be non-deductible to the Corporation and may be subject to an additional 20% federal excise tax. Non- deductible "parachute payments" will in general reduce the $1 million limit on deductible compensation described above. GRANTS UNDER THE PLAN In December 1993, performance units aggregating 197,500 units under the 1994 Plan were granted to thirteen officers, subject to stockholder approval of the 1994 Plan. The performance period for these grants is the two-year period 1995 and 1996 and the specific performance targets will be determined by the Committee prior to January 1, 1995 (or at such later date as may be permitted consistent with the rules applicable to performance-based compensation under Code Section 162(m)). Grants were made as follows: NEW PLAN BENEFITS UNDER 1994 PLAN DOLLAR VALUE NUMBER OF NAME ($)(1) UNITS - ---- ------------ --------- Marshall N. Carter 1,140,000 30,000 Chairman, President and Chief Executive Officer David A. Spina 760,000 20,000 Vice Chairman Nicholas A. Lopardo 380,000 10,000 Executive Vice President A. Edward Allinson 570,000 15,000 Executive Vice President Norton Q. Sloan 570,000 15,000 Executive Vice President Executive Group 7,505,000 197,500 (13 including the above) Non-Executive Officers Employee Group (2) 0 0 __________________________ (1) Based on the market value of the Corporation's Common Stock at the time of the grant ($38). Any payments will be based upon attainment of performance targets at the then current stock price as described above. (2) No stock options have been awarded under the 1994 Plan. During 1993, options for 145,030 shares of Common Stock were awarded to participants in the 1989 Stock Option Plan at an exercise price of $45.3125. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE 1994 STOCK OPTION AND PERFORMANCE UNIT PLAN (ITEM 2 ON PROXY CARD). APPROVAL OF THE PERFORMANCE GOALS UNDER THE SENIOR EXECUTIVES ANNUAL INCENTIVE PLAN The Senior Executives Annual Incentive Plan (the "Annual Incentive Plan") provides additional incentive to Senior Executives to achieve targeted levels of earnings per share and return on equity. Stockholders are being asked to approve the performance goals with respect to compensation payable under the Annual Incentive Plan in order that such compensation may be deductible by the Corporation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") as qualified performance- based compensation. For a more complete discussion of Section 162(m) of the Code, see the Report of the Executive Compensation Committee at page 17 and the discussion under Certain Federal Income Tax Aspects of the 1994 Plan at page 24. Approval by stockholders and certification by the Committee that targeted performance has been attained shall be a condition to the rights of senior executives to receive any benefits under the Annual Incentive Plan. ELIGIBLE PARTICIPANTS The Chief Executive Officer and Senior Executives designated by the Executive Compensation Committee participate in the Plan. To receive an award, a participant must be an employee of the Corporation, or one of its subsidiaries, at the time awards are approved by the Executive Compensation Committee. PERFORMANCE GOALS Corporate achievement of two targets determines whether, and the extent to which, a participant earns his or her bonus award. The targets are based on earnings per share and return on equity. Each target is specified as a range. No bonus will be paid under the Annual Incentive Plan for performance below the minimum targets. Performance at or above the maximum targets will result in 100% of the bonus being paid, and performance between the minimum and maximum targets will result in a prorated bonus being paid, subject in each case to reduction by the Executive Compensation Committee. BONUS AWARDS If maximum targets are achieved, the award to the Chief Executive Officer will be a maximum of 75% of 1994 salary and the award to other participants will be a maximum of 50% of 1994 salary. Awards will be reduced pro rata if performance is between the minimum and maximum performance targets, with performance in respect of the earnings-per-share target and performance in respect of the return-on-equity target each weighted 50% in determining the overall bonus to be paid. For example, if the earnings-per-share maximum were achieved, but the return-on- equity minimum were not achieved, each participant would receive a maximum of 50% of his or her bonus award under the Plan. Similarly, if earnings-per-share performance and return-on-equity performance were each midway between the respective minimum and maximum targets, each participant would receive a maximum of 50% of his or her bonus award under the Plan. The Executive Compensation Committee may, however, reduce or eliminate the compensation otherwise payable upon the attainment of targeted performance for any one or more of the participants. All awards will be made in cash after certification by the Executive Compensation Committee that the proposed awards conform to the performance targets. NEW PLAN BENEFITS UNDER THE SENIOR EXECUTIVES ANNUAL INCENTIVE PLAN NAME AND POSITION MAXIMUM BENEFIT ($) - ----------------- ------------------- Marshall N. Carter 536,250 Chairman, President and Chief Executive Officer David A. Spina 275,000 Vice Chairman Nicholas A. Lopardo 192,500 Executive Vice President A. Edward Allinson 247,500 Executive Vice President Norton Q. Sloan 178,750 Executive Vice President Executive Group 2,571,250 THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE PERFORMANCE GOALS UNDER THE SENIOR EXECUTIVES ANNUAL INCENTIVE PLAN (ITEM 3 ON PROXY CARD). VOTE REQUIRED Consistent with state law and under the Corporation's By- laws, a majority of the shares entitled to be cast on a particular matter, present in person or represented by proxy, constitutes a quorum as to such matter. Votes cast by proxy or in person at the 1994 Annual Meeting will be counted by persons appointed by the Corporation to act as tellers for the meeting. The five nominees for election as directors at the 1994 Annual Meeting who receive the greatest number of votes properly cast for the election of directors shall be elected directors. The affirmative vote of the holders 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 necessary to approve the action proposed in Items 2 and 3 of the accompanying Notice of 1994 Annual Meeting of Stockholders. The tellers will count the total number of votes cast "for" approval of Items 2 and 3 for purposes of determining whether sufficient affirmative votes have been cast. The tellers will count shares represented by proxies that withhold authority to vote for a nominee for election as a director or that reflect abstentions and "broker non-votes" (i.e., shares represented at the meeting held by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote and (ii) the broker or nominee does not have the discretionary voting power on a particular matter) only as shares that are present and entitled to vote on the matter for purposes of determining the presence of a quorum. Neither abstentions nor broker non-votes have any effect in the election of directors. With respect to Items 2 and 3, abstentions will have the effect of a vote against the matter while broker non- votes will have no effect on the matter. In the event that sufficient votes in favor of the proposals set forth in Items 2 and 3 of the Notice of 1994 Annual Meeting of Stockholders are not received by the time of the meeting or any adjournment thereof, the persons named as proxies may propose one or more adjournments of the meeting to permit further solicitation of proxies with respect to either or both proposals. Any such adjournment will require the affirmative vote of the majority of the shares voted on the question in person or by proxy at the session of the meeting to be adjourned. The persons named as proxies will vote in favor of such adjournment those proxies which they are entitled to vote in favor of the proposal or proposals in the event that such persons believe that further solicitation of proxies will result in approval of the proposal or proposals. They will vote against any such adjournment those proxies required to be voted against the proposal or proposals and will not vote any proxies that direct them to abstain from voting on such proposal or proposals. PROPOSALS AND NOMINATIONS BY STOCKHOLDERS Stockholders who wish to present proposals at the 1995 Annual Meeting of Stockholders for inclusion in the Corporation's proxy material for that meeting must submit such proposals to the Secretary of the Corporation on or before November 15, 1994 for inclusion in the proxy materials circulated by the Board of Directors relating to the 1995 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 1995 Annual Meeting must be delivered to the Secretary of the Corporation no earlier than January 19, 1995 and no later than February 20, 1995 unless the date of the 1994 Annual Meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from the anniversary date of the 1995 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) 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) 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 Boston Corporation, 225 Franklin Street, Boston, Massachusetts 02110. OTHER MATTERS The Board of Directors does not know of any other matters which may be presented for action at the meeting. 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 Board of Directors would like to have you attend the meeting in person. Please, however, 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, 1994 EX-2 3 1994 STOCK OPTION AND PERFORMANCE UNIT PLAN EXHIBIT A STATE STREET BOSTON CORPORATION 1994 STOCK OPTION AND PERFORMANCE UNIT PLAN 1. Purpose The purpose of the 1994 Stock Option and Performance Unit Plan (the "Plan") is to advance the interests of State Street Boston Corporation and its Subsidiaries (the "Company") and its stockholders by authorizing the grant of Stock Options, Stock Appreciation Rights ("SARs") and Performance Units to certain Officers of the Company, thereby providing them with an incentive to devote their full abilities and industry to the success of the Company's business. Both Options intended to qualify as incentive stock options (as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code")) ("Incentive Stock Options"), and Options not intended to so qualify ("Nonqualified Options") may be granted under the Plan. 2. Units Subject to the Plan The number of shares of the Company's common stock, par value $1.00 per share (the "Common Stock"), that may be issued under the Plan shall not exceed three million five hundred thousand (3,500,000) shares, which is the number of shares to be reserved for issuance under the Plan. The number of Performance Units that may be issued under the Plan shall not exceed one million (1,000,000). To the extent consistent with continued qualification of the Plan under Section 422 of the Code and the performance-based remuneration provisions of Section 162(m) of the Code and the regulations thereunder, if any Option granted under the Plan shall terminate for any reason without having been exercised in full, the balance of the shares theretofore subject thereto shall again be available for the purposes of the Plan, except that such shares shall not be so available whenever such Option has been surrendered as a result of the exercise of a related SAR. To the extent consistent with qualification of the Plan under the performance based remuneration provisions of Section 162(m) of the Code and the regulations thereunder, if payment is not made for any reason with respect to any Performance Units, the shares theretofore subject to the performance shall again be available for the purposes of the Plan. The number of shares of Common Stock and Performance Units is subject to adjustment in accordance with Paragraph 10. 3. Administration A. The Committee. The Plan shall be administered by the Executive Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee shall be composed solely of three or more members of the Board of Directors who are "outside directors" under Section 162(m)(4)(C)(i) of the Code, and who are disinterested persons within the meaning of Rule 16b-3 of the Exchange Act. B. Committee Authority. Subject to the express provisions of the Plan, the Committee shall have the authority, in its discretion, to grant Options and SARs to Officers of the Company, to determine the number of shares covered by each such Option, to identify whether such Option is intended to qualify as an Incentive Stock Option, to determine the number of SARs and Performance Units to be granted, and to determine the terms of each such grant. In making such determinations, the Committee shall take into account the nature of the services rendered by the respective Officers, their present and potential contributions to the Company's success and such other factors as the Committee in its discretion shall deem relevant. Subject to the express provisions of the Plan, the Committee shall also have authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to its administration, to determine the terms and provisions of the respective granting agreements or other documents (which need not be identical in respect of each Officer) and to make all other determinations necessary or advisable for the administration of the Plan. The "non-Officer Directors" of the Board of Directors shall approve all grants (and the terms thereof) to Officers who are directors of the Company upon recommendation of the Committee. For purposes of the Plan, a Director is a non-Officer Director if he or she is both an "outside director" within the meaning of Code Section 162(m)(4)(C)(i) and a "disinterested person" within the meaning of Rule 16b-3 of the Exchange Act. 4. Eligibility and Limitations Individuals eligible to receive awards under this Plan shall be such salaried officers as the Committee shall determine are in positions to contribute importantly to the success of the Company ("Officers"). No Officer shall be entitled to grants of (a) Options (including related SARs), whether or not exercised, in excess of an aggregate of five hundred thousand (500,000) shares over the term of the Plan, or (b) Performance Units intended to qualify for the performance-based exception to Section 162(m) of the Code in excess of an aggregate of two hundred fifty thousand (250,000) units over the term of the Plan, subject in each case to the provisions of Paragraph 10. 5. Stock Options A. Option Price. The purchase price of the Common Stock under each Option shall be determined by the Committee, but shall be not less than the Fair Market Value as of the date of the grant of the Option. B. Exercise of Option. Subject to Paragraphs 8 and 14 hereof, an Option granted under the Plan shall become exercisable in whole or in part not less than one year after the date of grant and thereafter may be exercised in whole or in part at any time before it terminates according to the terms of the Option or under the provisions of the Plan. The Committee may, in its discretion, provide in the Option agreement for exercise in specific installments after the end of one year from the date of grant. In no case may an Option be exercised as to less than 50 shares at any one time, except when the number of remaining shares it covers is less than 50. The Committee shall be authorized to establish the manner and the effective date of the exercise of an Option. During an Optionee's lifetime, an Option may be exercised only by the Optionee or the Optionee's guardian or legal representative. C. Forms of Payment. In lieu of a cash payment to exercise an Option in whole or in part, an Optionee may tender shares of the Common Stock of the Company held for at least six months (or such other period as the Committee may approve) with a Fair Market Value equal to the exercise price of the Option being exercised. Unless the Committee determines otherwise, payment for any shares subject to an Option may also be made by delivering a properly executed exercise notice to the Company, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the purchase price, and, if required, the amount of any federal, state, local or foreign withholding taxes. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. D. Termination of Option. No Option may be exercised to any extent after the Option terminates in any of the following ways: 1. Each Option shall terminate upon exercise of such Option or related SAR in the manner provided in the Plan. 2. Each Option shall terminate on the date to be determined by the Committee, which shall in no event be later than 10 years from the date of the Option grant. 3. Unless otherwise provided by the Committee, if an Officer's employment terminates by reason of death, disability (as determined by the Company), or 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 prior to exercise, expiration, surrender or cancellation of the Option or any related SAR, the Option and the related SAR shall remain exercisable after the date of such termination of employment in accordance with the applicable Option agreement whether or not such Option was exercisable at the time of such termination, and the Option or the related SAR may be exercised by the Officer or the person or persons to whom the Officer's rights shall pass by will or by the applicable laws of descent or distribution at such time and to the same extent that the Option or related SAR would have been exercisable had the Officer's employment not terminated; provided, however, that, unless otherwise provided, the Option shall terminate on the later of (i) one (1) year after the Option first becomes exercisable (if the Option is exercisable in one installment) and one (1) year after the last installment first becomes exercisable (if the Option is exercisable in more than one installment), and (ii) one (1) year after the termination of employment. Unless otherwise determined by the Committee, if an Officer's employment terminates for any reason other than death, disability (as determined by the Company) or retirement prior to exercise, expiration, surrender or cancellation of the Option or the related SAR, (i) each such Option and related SAR not then exercisable shall terminate, (ii) each Option and the related SAR that is exercisable on the date of termination of employment shall terminate three (3) months from the date of such termination of employment, and (iii) if the Officer dies within the three-month period described in (ii), the Option and the related SAR shall expire one (1) year after the date of the Officer's termination, during which period the Option or the SAR may be exercised at any time by the person or persons to whom the Officer's rights shall pass by will or by the applicable laws of descent or distribution, but only to the extent it was exercisable on the date of such termination. In no event, however, may the provisions of this Paragraph 5D(3) cause an Option or related SAR to be exercised after the expiration date set out in the applicable Option or SAR agreement. 6. Stock Appreciation Rights A. Grant of SARs. SARs may be granted under the Plan upon such terms and conditions as the Committee may prescribe, provided that a SAR may be granted only in connection with an Option granted under the Plan. The holder of a SAR shall have a right to receive the Spread on the date on which the SAR is exercised. B. Exercise of SARs. 1. SARs shall be exercisable at such time or times as may be determined by the Committee and, in each case, at such time as the related Option is exercisable, provided that a SAR shall not be exercisable prior to the time the related Option could be exercised. 2. During an Officer's lifetime, a SAR may be exercised only by the Officer or the Officer's guardian or legal representative and only upon surrender of the related Option. Shares covered by such surrendered Options shall not be available for granting further Options under the Plan. 3. The Committee may impose other conditions upon the exercise of a SAR, including but not limited to a condition that the SAR may be exercised only in accordance with the rules and regulations adopted by the Committee from time to time. Such rules and regulations may govern the right to exercise SARs granted prior to the adoption or amendment of such rules and regulations as well as SARs granted thereafter. Without limiting the foregoing, the Committee may specify that SARs may be exercised by the holder or may be exercised automatically by the occurrence of an event, by the passage of time, or in any other way. C. Forms of Payment for SARs. Upon the exercise of a SAR and the surrender of the related Option, the Company shall give to the person exercising such SAR an amount equivalent to the Spread in cash, in shares of the Company's Common Stock, or in a combination thereof, as the Committee shall determine. Determination as to form of payment may be made at the time of granting the SAR, or any time thereafter, and may be changed from time to time. D. Limitation on Payments for SARs. Subject to Paragraph 6C above, the Committee may from time to time recommend, subject to Board approval, the maximum amount of cash or stock which may be given upon exercise of SARs in any year. Any such limitation on payments may be changed by the Committee from time to time with the approval of the non-Officer Directors of the Board provided that no such change shall require the holder to return to the Company any amount theretofore received upon the exercise of SARs. E. Termination of SARs. Unless otherwise terminated by the Committee, a SAR will terminate upon the termination of the related Option. F. Amendment, Suspension or Termination of SARs by the Board. Prior to or other than directly in connection with a Change of Control, the non-Officer Directors of the Board may at any time amend, suspend or terminate any SARs theretofore granted under the Plan, provided that the terms of any SAR after any amendment shall conform to the provisions of the Plan. 7. Performance Units A. Grant of Performance Units. Performance Units may be granted by the Company under the Plan to Officers upon such terms and conditions as the Committee may determine consistent with this Paragraph 7. With respect to each grant of Performance Units, the Committee shall establish in accordance with Code Section 162(m), if applicable, the following: 1. The total number of Performance Units an Officer shall have the right to earn during the Performance Period. The maximum number of Performance Units that may be granted to any Officer in any grant intended to qualify for the performance-based exception to Section 162(m) with respect to any Performance Period shall, subject to the provisions of Paragraph 10, not exceed two hundred fifty thousand (250,000), which is the total number of Performance Units available to him or her over the term of the Plan, and in no event shall the total number of Performance Units awarded to all Officers exceed the aggregate number of Performance Units available under Paragraph 2. 2. The commencement date and the duration of a Performance Period. Except as otherwise provided by the Committee, the Performance Period shall be two fiscal years, and the last day of the second fiscal year of any Performance Period shall be the Maturity Date. In no case, however, shall a Performance Period be shorter than one fiscal year or longer than five fiscal years. 3. Performance Factors and Targets. An Officer will earn Performance Units based on the Company's performance during the Performance Period. Performance shall be measured based on one or more of the following Factors: (a) return on equity, (b) earnings per share, and (c) the Company's total shareholder return during the Performance Period compared to the total shareholder return of a market reference (e.g., the Standard & Poors 500, the Standard & Poors Financial Index). In connection with the grant of Performance Units, the Committee shall establish in writing specific Performance Targets in respect of each Factor; the relative weight to be accorded achievement of each Performance Target, and the market reference that will be used for purposes of (c) above. To the extent consistent with Section 162(m), the Committee may provide in the terms of an award that return on equity and earnings per share be adjusted in order to eliminate the effect of extraordinary items. Extraordinary items are those items treated as extraordinary in accordance with generally accepted accounting principles. B. Value of Performance Units. The value of one Performance Unit at Maturity Date shall be equal in value to the Fair Market Value of one share of Common Stock at said time, subject to any maximum value specified at the time of the grant. C. Form of Payment for Performance Units. Payment for Performance Units shall be made in cash equal to the Fair Market Value of a share of Common Stock after certification by the Committee consistent with Section 162(m) of the Code that the payment conforms to the Performance Targets and any other material terms of the grant. At the discretion of the Committee, payment for Performance Units may be made in a lump sum or in installments. Upon the election of the Officer, made prior to January 1 of the year in which the Maturity Date occurs, payment for Performance Units may be deferred upon such terms and conditions as the Committee may prescribe. Amounts deferred at the discretion of the Committee or in accordance with an election by an Officer shall earn interest annually at a rate equal to the effective yield to maturity on the 360-day Treasury bills with an issue date initially closest to the March 31st following the Maturity Date and with issue dates closest to March 31 of each succeeding year. In no event, however, shall the interest payable with respect to deferred Performance Unit payments be greater than the maximum interest rate, if any, permitted by Section 162(m) of the Code, the regulations thereunder or interpretations thereof. D. Termination of Performance Units. Except as provided in Paragraph 7C or in Paragraph 14, in the event that, prior to the end of the relevant Performance Period, the employment of an Officer holding Performance Units terminates for any reason, the Performance Units held by him or her shall be forfeited in their entirety, except that such Performance Units may be paid in whole or in part to such former employee or the person or persons to whom his or her rights under the Performance Units shall pass by will or by the applicable laws of descent and distribution, but only when, if and to the extent that the Committee shall so determine, consistent with Section 162(m) of the Code, if applicable; provided, however, that any payment for such Performance Units, as so determined, may be adjusted to take into account the time between the date the Officer's employment so terminated and the end of the Performance Period. 8. Acceleration and Cancellation With respect to any Option or SAR that has been outstanding for at least six months, the Committee may, subject to the approval of the non-Officer Directors of the Board, but not without the consent of the Officer, (a) authorize the acceleration of any Option or SAR, and (b) authorize the cancellation of all or any portion of an Officer's Option (whether or not the Option is then exercisable) and the payment to such Officer of the Spread determined on the date of cancellation, such payment to be made in shares of the Company's Common Stock valued at the Fair Market Value. 9. Use of Proceeds Proceeds from the sale of stock pursuant to Options granted under the Plan shall constitute general funds of the Company. 10. Adjustments Upon Changes in Stock In the event the outstanding shares of Common Stock shall be changed into or exchanged for any other class or series of capital stock or cash, securities or other property pursuant to a recapitalization, reclassification, merger, consolidation, combination or similar transaction, then each Option shall thereafter become exercisable and each Performance Unit adjusted for the number and/or kind of capital stock and/or the amount of cash, securities or other property so distributed, into which the shares of Common Stock subject to the Option would have been changed or exchanged had the Option been exercised, or the payment for the Performance Unit would have been made, in full prior to such transaction, provided that, if the kind or amount of capital stock or cash, securities or other property received in such transaction is not the same for each outstanding share of Common Stock, then the kind or amount of capital stock or cash, securities or other property for which the Option shall thereafter become exercisable shall be the kind and amount so receivable per share by a plurality of the shares of Common Stock, and provided further that if necessary, the provisions of the Option or Performance Unit shall be appropriately adjusted so as to be applicable, as nearly as may be, to any shares of capital stock, cash, securities or other property thereafter issuable or deliverable upon exercise of the Option or payment of the Performance Unit. Appropriate adjustments shall also be made in the terms of SARs to reflect such changes and to modify any other terms of outstanding Performance Units on an equitable basis, including modifications of Performance Targets and changes in the length of Performance Periods. 11. Non-transferability Unless otherwise provided by the Committee, Options, SARs or Performance Units granted under the Plan may not be transferred except by will or the laws of descent and distribution. 12. Conditions of Grants In the event that the employment of an employee holding any unexercised Option or SAR or any unearned Performance Units shall terminate, the rights of such employee to such Options, SARs or Performance Units shall be subject to the conditions that until any such Option or SAR is exercised or any such Performance Unit is earned, he or she shall (a) not engage, either directly or indirectly, in any manner or capacity as advisor, principal, agent, partner, officer, director, employee, member of any association, or otherwise, in any business or activity which is at the time competitive with any business or activity conducted by the Company or any of its direct or indirect subsidiaries, and (b) be available, unless the participant shall have died, at reasonable times for consultations at the request of the Company's management with respect to phases of the business with which the participant was actively connected during his or her employment. In the event that either of the above conditions is not fulfilled, the individual shall forfeit all rights to any unexercised Option or SAR or any unearned Performance Unit held as of the date of the breach of condition. Any determination by the Board of Directors that an individual is, or has, engaged in a competitive business or activity as aforesaid or has not been available for consultations as aforesaid shall be conclusive. Notwithstanding anything herein to the contrary, this Paragraph 12 shall be inapplicable following a Change of Control. 13. No Loans to Holders of Options The Company may not directly or indirectly lend money to any individual for the purpose of assisting such individual to acquire or carry shares of Common Stock issued upon the exercise of Options granted under the Plan. 14. 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. Any Options and SARs outstanding as of the date such Change of Control is determined to have occurred, held by Optionees subject to Section 16 of the Exchange Act and Optionees who are parties to termination agreements with the Company, and which are not then exercisable shall become exercisable to the full extent of the original grant. Holders of Performance Units 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 who are subject to Section 16 of the Exchange Act and holders who are parties to termination agreements with the Company shall be entitled at the time of such Change of Control to receive a cash payment per Performance Unit equal to the Fair Market Value of a share of the Company's Common Stock in the manner provided herein, on a pro rata basis, as measured by (a) the Company's performance against the Performance Target(s) in effect with respect to such Performance Unit awards as are outstanding at the time of the Change of Control and (b) the time elapsed over the Performance Period. 2. Optional Cash-Out. During the 60-day period from and after a Change of Control, with respect to an Option that is unaccompanied by a SAR, an Optionee subject to Section 16 of the Exchange Act shall, unless the Committee shall determine otherwise at the time of grant, have the right, in lieu of the payment of the full Option price of the shares of Common Stock being purchased under the Option and by giving written notice to the Company in form satisfactory to the Committee, to elect (within such 60-day period) to surrender all or part of the Option to the Company and to receive in cash an amount equal to the Spread on the date of exercise multiplied by the number of shares of Common Stock granted under the Option as to which the right granted by this Paragraph 14A(2) shall have been exercised; provided, however, that if the Change of Control is within six months of the date of grant of a particular Option to an Optionee who is subject to Section 16 of the Exchange Act no such election shall be made by such Optionee with respect to such Option prior to six months from the date of grant. However, if the end of such 60-day period from and after a Change in Control is within six months of the date of grant of an Option held by an Optionee who is subject to Section 16 of the Exchange Act and the Optionee so elects, such Option shall be cancelled in exchange for a cash payment to the Optionee, effected on the day which is six months and one day after the date of grant of such Option, as the case may be, equal to the Spread multiplied by the number of shares of Common Stock granted under the Option. 3. Requirement of Cash Settlement. A SAR related to an Option that does not qualify as an Incentive Stock Option which is exercised during the 60-day period from and after a Change of Control (i) held by an Optionee subject to Section 16 of the Exchange Act and which was granted at least six months prior to the date of exercise pursuant hereto, or (ii) held by an Optionee who is not subject to Section 16 of the Exchange Act shall be settled solely for cash at the Spread. 4. Restriction on Application of Plan Provisions Applicable in the Event of Termination of Employment. After a Change of Control, Options and SARs shall remain exercisable following a termination of employment other than 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. 5. Restriction on Amendment. In connection with or following a Change of Control, neither the Committee nor the Board may impose additional conditions upon exercise or otherwise amend or restrict an Option, SAR or Performance Unit, 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 Paragraph 14A would make a Change of Control transaction ineligible for pooling of interests accounting under applicable accounting principles that but for this Paragraph 14A 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 Paragraph 14A 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 20% 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 Paragraph 14B; 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 or indirectly, more than 60% 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, 20% 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. C. Fair Market Value; Spread. Notwithstanding any provision herein to the contrary, during the 60-day period from and after a Change of Control, "Fair Market Value" for purposes of (i) a SAR which is related to an Option that does not qualify as an Incentive Stock Option, (ii) a Performance Unit, or (iii) determinations under Paragraph 14A shall mean the higher of (A) the highest average of the reported daily high and low prices (as quoted in The Wall Street Journal or if The Wall Street Journal shall no longer publish such quotes, a newspaper having a national circulation) per share of the Common Stock during the 60-day period prior to the first date of actual knowledge by the Board of Directors of the Company of a Change of Control and (B) if the Change of Control is the result of a transaction or series of transactions described in Paragraph 14B(1) or (3), the highest price per share of the Common Stock paid in such transaction or series of transactions (which in the case of Paragraph 14B(1) shall be the highest price per share of the Common Stock as reflected in a Schedule 13D filed by the person having made the acquisition); provided, however, that with respect to an Optionee who is subject to Section 16 of the Exchange Act, if the Change in Control is within 240 days of the date of grant of an Option or SAR, then the Fair Market Value shall be in all cases the Fair Market Value of the Common Stock determined on the date such Option or SAR is exercised without regard to this Paragraph 14C. For purposes of the Plan during the 60-day period from and after a Change of Control, "Spread" means, with respect to a share of Common Stock, the excess of the Fair Market Value as defined in this Paragraph 14C over the Option exercise price. 15. Amendment, Suspension and Termination of Plan The Board of Directors may at any time suspend or terminate the Plan and may amend it from time to time in such respects as the Board may deem advisable in order that Options, SARs and Performance Units granted thereunder shall conform to any change in, or interpretation of, applicable laws or regulations, or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that no such amendment shall, without stockholder approval either before or after Board action (i) effectuate any change inconsistent with the qualification of awards as performance-based under Code Section 162(m) (unless the Committee determines that awards affected by such changes are not intended to qualify for the performance-based exception to Section 162(m) of the Code) or (ii) effectuate any other change for which stockholder approval is required in order for the Plan to continue to qualify for the award of Incentive Stock Options under Section 422 of the Code and to continue to qualify under Rule 16b-3 promulgated under Section 16 of the Exchange Act. Unless the Plan shall theretofore have been terminated by the Board of Directors, no awards may be granted under the Plan after April 30, 1999 and provided, further, that in connection with or following a Change of Control the Board of Directors may not suspend or terminate the Plan or amend the Plan in any manner adverse to the holder of an Option, SAR or Performance Unit hereunder without the written consent of such holder. Awards granted prior to that time may extend beyond that date according to Plan provisions and award terms. No Option, SAR or Performance Unit may be granted during any suspension or after termination of the Plan. No amendment, suspension or termination of the Plan shall, without the Optionee's consent, adversely affect the rights or obligations under any Option theretofore granted to him or her under the Plan. Except as provided above in Paragraph 14 and this Paragraph 15, any rights or obligations with respect to SARs or to Performance Units may be suspended or terminated, and rights or obligations with respect to SARs may be altered, without the consent of the holder. 16. Definitions and Other General Provisions A. Board of Directors. The term "Board of Directors" or "Board" means the Board of Directors of State Street Boston Corporation. B. Exchange Act. The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. C. Fair Market Value. For all periods other than during the 60-day period from and after a Change of Control, the term "Fair Market Value", when used in connection with Options and related SARs, means the value of a share of Common Stock equal to the average of the high and low prices on the date of the grant or the date of the exercise (whichever date is applicable), and when used in connection with Performance Units, means the value of a share of Common Stock equal to the average of the high and low prices on the ten trading days preceding the commencement of the Performance Period or the Maturity Date of the Performance Unit, or the value as determined by any other valuation method the Committee may establish. During the 60-day period from or after a Change of Control, "Fair Market Value" shall have the meaning specified in Paragraph 14. D. Option. The term "Option" means the right to purchase a share of the Company's Common Stock under the Plan. E. Person. "Person" shall mean any individual, group, corporation, partnership, company or other entity. F. Spread. For all periods other than during the 60-day period from and after a Change of Control, the term "Spread" means the excess of the Fair Market Value of a share of the Company's Common Stock over the option exercise price specified in the related Option. During the 60-day period from or after a Change of Control, "Spread" shall have the meaning specified in Paragraph 14. G. Subsidiary. The term "Subsidiary" shall mean any corporation, domestic or foreign other than the Company, of which 50% or more of the total combined voting power of all classes of stock is held by the Company or a subsidiary or subsidiaries thereof. H. Shares to be Delivered. The Common Stock issued under the Plan may consist either in whole or in part of shares of the Company's authorized but unissued Common Stock or shares of the Company's authorized and issued Common Stock reacquired by the Company and held in its treasury. No fractional shares of Common Stock shall be issued, and the Committee shall determine whether cash shall be given in lieu of such fractional shares or whether and how such fractional shares shall be eliminated. I. Employment. Options granted under the Plan shall not be affected by any change of employment so long as the holder continues to be an eligible employee of the Company. The Option agreements may contain such provisions as the Committee shall approve with reference to the effect of approved leaves of absence. Nothing in the Plan or in any grant pursuant to the Plan shall confer on any individual any right to continue in the employ of the Company or interfere in any way with the right of the Company to terminate the holder's employment at any time. J. Grants. Nothing contained in the Plan or in any resolution adopted by the Board of Directors, the Committee, or any other committee of the Board, or the holders of Common Stock of the Company or any action, except the specific granting of Options, SARs or Performance Units, shall constitute the granting of any award under the Plan. The granting of an award pursuant to the Plan shall take place as recommended by the Committee and approved by the non-Officer Directors of the Board with respect to Officers who are directors and by the Committee with respect to other Officers. Awards will be evidenced by written instruments. Such instruments may be in the form of agreements to be executed by both the Officer and the Company, or certificates, letters or similar instruments, which need not be executed by the Officer but acceptance of which will evidence agreement to the terms thereof. K. Rights as a Stockholder. The holder of an Option or a SAR or a person granted Performance Units shall have none of the rights of a stockholder with respect to the related stock until such stock has been issued to the holder. L. 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. In the case of an award pursuant to which Common Stock may be delivered, the Committee will have the right to require that the Officer 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 Common Stock. If and to the extent that such withholding is required, the Committee may permit the Officer 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, Common Stock having a value, taken at Fair Market Value, calculated to satisfy the withholding requirement. If at any time an Incentive Stock Option is exercised the Committee determines that the Company could be liable for withholding requirements with respect to a disposition of the Common Stock received upon exercise, the Committee may require as a condition of exercise that the person exercising the Incentive Stock Option agree (i) to inform the Company promptly of any disposition (within the meaning of Section 424(c) of the Code) of Common Stock received upon exercise, and (ii) 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. M. Other Plans. The adoption of the Plan shall not preclude the adoption by appropriate means of any other stock option or other incentive plan for employees. 17. Employees Abroad Options granted hereunder to Officers of the Company, or a Subsidiary, who reside outside the United States shall, at the discretion of the Committee, be subject to such additional terms and conditions as may be necessary or appropriate to qualify as an approved share option under the applicable laws and regulations of the country of residence. 18. Effectiveness of the Plan The effective date of the Plan is December 16, 1993, the date of its adoption by the full Board subject to stockholder approval within 12 months after approval by the Board. Options, SARs and Performance Units may be granted prior to stockholder approval of the Plan but subject to such approval. If stockholder approval of the Plan is not obtained within said period the Plan shall terminate and any Options, SARs and Performance Units granted shall be null and void. EX-3 4 1994 PROXY CARD PROXY STATE STREET BOSTON CORPORATION ANNUAL MEETING OF STOCKHOLDERS - APRIL 20, 1994 SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned stockholder of State Street Boston Corporation (the "Corporation") hereby appoints Marsha Hanson, Susanne G. Clark and Evalyn Lipton Fishbein (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 20, 1994 and at any adjournments thereof, with all 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 OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPER. Please sign this proxy exactly as your name appears 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. Have your address changed? Do you have any czomments? ______________________________ _______________________________ ______________________________ _______________________________ ______________________________ _______________________________ ______________________________ _______________________________ PAGE 1. Election of Five Directors: [X] PLEASE MARK VOTES AS IN FOR ALL THIS EXAMPLE FOR WITHHOLD EXCEPT [ ] [ ] [ ] Each of these matters is fully I. BOOTH J. CASH T. CASNER described in the Notice of and D. PERINI D. PICARD Proxy Statement for the Meeting, If you do not wish your receipt of which is hereby shares voted "FOR" one or acknowledged. THE BOARD OF more nominees, mark the DIRECTORS RECOMMENDS THAT YOU "FOR ALL EXCEPT" box and GRANT AUTHORITY FOR THE ELECTION strike a line through the OF DIRECTORS AND THAT YOU VOTE FOR nominee(s) name. Your ITEMS 2 AND 3. THE SHARES REPRE- shares will be voted for SENTED BY THIS PROXY WILL BE VOTED the remaining nominee(s). IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO 2. Proposal to approve the SPECIFICATION IS MADE, THE PROXY 1994 Stock Option and WILL BE VOTED IN ACCORDANCE Performance Plan. WITH THE BOARD OF DIRECTORS' FOR AGAINST ABSTAIN RECOMMENDATIONS. [ ] [ ] [ ] 3. Proposal to approve the RECORD DATE SHARES: performance goals under the Senior Executives Annual Incentive Plan. FOR AGAINST ABSTAIN REGISTRATION [ ] [ ] [ ] 4. In their discretion, the Proxies are authorized to vote upon such other Please be sure to sign and business as may properly date this Proxy. come before the meeting or any adjournments thereof. ____________________ Date:______ (Stockholder) Mark box at right if comments or address change ____________________ Date:______ have been noted on the [ ] (Co-owner) reverse side of this card. - ---------------------------------------------------------------- DETACH CARD STATE STREET BOSTON CORPORATION DEAR STOCKHOLDER: You are cordially invited to attend the 1994 Annual Meeting of Stockholders of State Street Boston Corporation. The meeting will be held in the Enterprise Room at 225 Franklin Street, Boston, Massachusetts on Wednesday, April 20, 1994, at 10:00 a.m. Your Board of Directors and management look forward to greeting those stockholders able to attend. The notice of meeting and proxy statement which follow describe the business to be conducted at the meeting. In addition to a proposal to elect directors, you will be asked to approve the new 1994 Stock Option and Performance Unit Plan, which will replace the two existing plans, and to approve the performance goals under the Senior Executives Annual Incentive Plan. State Street's goal is to be the leading global servicer of financial assets. To help achieve this goal in competitive global markets, State Street's executive compensation program is designed to link executive compensation directly to the Corporation's performance, growth in stockholder value and the contribution of the executives to those results. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THESE PROPOSALS. 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 -----END PRIVACY-ENHANCED MESSAGE-----