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................................[STATE STREET LOGO] Marshall N. Carter Chairman and Chief Executive Officer March 15, 2000..................................................................................................................................................[State Street Letterhead]
| March 12, 2001 |
DEAR STOCKHOLDER:
You are
We cordially invitedinvite you to attend the 20002001 Annual Meeting of Stockholders of State Street Corporation. The meeting will be held in the Enterprise Room at 225 Franklin Street, Boston, Massachusetts on Wednesday, April 19, 2000,18, 2001, at 10:00 a.m.
Details regarding admission to the meeting and the business to be conducted are more fully described in the accompanying Notice of Annual Meeting and Proxy Statement.
Your vote is very important. Whether or not you plan to attend the meeting, please carefully review the enclosed proxy statement. Then complete, sign, date and mail promptly the accompanying proxy in the enclosed return envelope. To be sure that your vote will be received in time, please return the proxy at your earliest convenience.
We look forward to seeing you at the Annual Meeting so that we can update you on our progress. Your continuing interest is very much appreciated.
Sincerely,
/s/Marshall N. Carter
| Sincerely, /s/David A. Spina |
[State Street Corporation
225 Franklin Street
Boston, MA 02110-2804
[STATE STREET LOGO]
Letterhead]
NOTICE OF 20002001 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
STATE STREET CORPORATION:
The 2000 Annual Meeting of Stockholders of State Street
Corporation will be held on Wednesday, April 19, 2000, at 10:00
a.m., Eastern Time, at 225 Franklin Street, Fifth Floor, Boston,
Massachusetts, for the following purposes:
1. To elect six directors, each for a three-year term;
2. To vote on an amendment to the 1997 Equity Incentive
Plan to increase the number of shares available for
issuance under the plan;
3. To vote on a stockholder proposal relative to the
application of the Model Business Corporation Act to the
Corporation; and
4. To act upon such other business as may properly come
before the meeting and any adjournments thereof. The
Corporation has been informed that stockholders intend
to submit to the meeting five additional proposals
outlined under Other Matters in the Proxy Statement,
including a proposal to amend the By-laws to provide
that the chairman of the board may not serve as CEO and
a proposal to amend the By-laws to state that agents and
attorneys of stockholders may inspect and copy certain
corporate records.
Stockholders of record at the close of business on February
28, 2000 are entitled to notice of and to vote at the meeting and
any adjournments thereof.
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED FOR YOUR USE. FURNISHING THIS PROXY WILL NOT
AFFECT YOUR RIGHT TO REVOKE THIS PROXY OR TO VOTE IN PERSON
SHOULD YOU ATTEND THE MEETING. IF YOU PLAN TO ATTEND YOU SHOULD
BRING A FORM OF PERSONAL IDENTIFICATION WITH YOU. IF YOUR STOCK
IS HELD OF RECORD BY A BANK, BROKER OR OTHER NOMINEE, YOU SHOULD
BRING AN ACCOUNT STATEMENT INDICATING THAT YOU OWN THE SHARES AS
OF THE RECORD DATE OR A LETTER FROM THE RECORD HOLDER INDICATING
THAT YOU OWN THE SHARES AS OF THE RECORD DATE, AND IF YOU WISH TO
VOTE AT THE MEETING YOU MUST FIRST OBTAIN FROM THE RECORD HOLDER
A PROXY ISSUED IN YOUR NAME.
| Time | 10:00 a.m., Eastern Time | |
| Date | Wednesday, April 18, 2001 | |
| Place | 225 Franklin Street, Fifth Floor, Boston, Massachusetts | |
| Purpose | 1. | To elect 9 directors; |
| 2. | To increase State Street's authorized shares of Common Stock from 250,000,000 to 500,000,000; | |
| 3. | To approve the Senior Executive Annual Incentive Plan; | |
| 4. | To vote on a stockholder proposal on the Model Business Corporation Act; and | |
| 5. | To vote on a stockholder proposal, if properly raised, to amend the By-Laws to provide certain rules on the manner in which stockholder meetings are conducted. | |
| Record Date | You are entitled to vote if you were a stockholder of record at the close of business on February 28, 2001. | |
| Meeting Admission | If your State Street stock is held in a brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker or nominee. Your name does not appear on the list of stockholders. If your stock is held in street name, you should bring a form of personal identification with you and a letter or account statement showing that you were the beneficial owner of the stock on the record date, in order to be admitted to the meeting. | |
| Voting by Proxy | Please submit a proxy as soon as possible so your shares can be voted at the meeting. You may submit your proxy by mail. If your stock is held in the name of a broker, bank | |
| By Order of the Board of Directors, | |
| Maureen Scannell Bateman | |
| March 12, 2001 | Secretary |
STATE STREET CORPORATION
225 Franklin Street, Boston, Massachusetts 02110
PROXY STATEMENT
GENERAL INFORMATION
When was this proxy statement and the accompanying proxy card scheduled to be sent to stockholders?
This proxy statement and accompanying proxy card are scheduled to be sent to stockholders beginning on March 12, 2001.
Who is soliciting my vote?
The Board of Directors of State Street Corporation ("State Street") is soliciting your vote for the 2001 Annual Meeting of Stockholders.
How many votes can be cast by all stockholders?
163,006,883 shares of Common Stock of State Street are outstanding and entitled to be voted at the meeting. Each share of Common Stock is entitled to one vote on each matter.
How do I vote?
You may vote in person at the Annual Meeting or by proxy without attending the meeting. To vote by proxy please mark, date, sign and return the enclosed proxy card in the enclosed envelope. If you vote by the enclosed proxy your shares will be voted at the meeting in accordance with your instructions or as provided in the proxy card. If you do not give any instructions, your shares will be voted by the persons named in the proxy card in accordance with the recommendations of the Board of Directors given below.
If your stock is held in the name of a broker, bank or other nominee, you may have the choice of voting your shares over the Internet or by telephone. Follow the instructions on the form you receive from your broker or bank.
To vote in person bring a form of personal identification with you. If your stock is held by a broker, bank or broker.
By Orderother nominee, bring an account statement indicating that you own the shares as of the Board of Directors,
Maureen Scannell Bateman
Secretary
March 15, 2000
State Street Corporation
225 Franklin Street
Boston, MA 02110-2804
STATE STREET CORPORATION
225 Franklin Street, Boston, Massachusetts 02110
PROXY STATEMENT
This proxy statement and the accompanying proxy, which are
scheduled to be sent to stockholders beginning on March 15, 2000,
are furnished in connection with the solicitation by the Board of
Directors of State Street Corporation (the "Corporation") of
proxies for the 2000 Annual Meeting of Stockholders of the
Corporation to be held on April 19, 2000 and at any adjournments
thereof. The Board of Directors has fixed the close of business
on February 28, 2000 as the record date, for determiningor a letter from the stockholders entitled to noticerecord holder indicating that you owned the shares as of February 28, 2001, and if you wish to vote at the meeting.
Onmeeting you must first obtain from the record date 159,952,162 shares of Common Stock of the
Corporation were outstandingholder a proxy issued in your name.
Participants in State Street’s Salary Savings Program will receive proxy cards separately. State Street Bank and entitled to be voted at the
meeting.
VOTING INFORMATION
All shares represented by properly executed proxies, if such
proxies are received in time and not revoked,Trust Company, as trustee, will be voted at
such meetingvote in accordance with any specifications thereonwritten instructions from the participants or ifas provided in the proxy card, and, where no specificationsinstructions are made, proxiesreceived, the shares will be voted in accordance with the trust documents.
What are the Board’s recommendations of theon how to vote my shares?
The Board of Directors.
The Board's recommendation is set forth together with the
description of each item in this proxy statement. In summary,
the BoardDirectors recommends a vote:
o
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Who pays the meeting and voting in person.
Stock held bycost for soliciting proxies?
State Street Bank and Trust Company, as trustee of
the Corporation's Salary Savings Program on account of
participants in such program, will be voted by the trustee in
accordance with written instructions from the participants, and
where no instructions are received, in accordance with the Salary
Savings Program plan and trust documents.
The Corporation will bearpay the cost of soliciting proxies.our proxy solicitor. The solicitation of proxies will be made primarily by mail. State Street has retained Morrow & Co., Inc.to aid in the solicitation of proxies for a fee of $10,000, plus expenses. Proxies may also be solicited personally, by telephone, fax and other
means of communicatione-mail by regular employees of the CorporationState Street and its principal subsidiary, State Street Bank and Trust Company (the "Bank"), without any additional remuneration and at minimal
cost. The Corporation intends to requestrenumeration. State Street will reimburse brokers, banks, brokerage
houses, custodians, other nominees and fiduciaries to forward
soliciting materialfor forwarding these materials to their principals and to obtainobtaining the authorization for the execution of proxies. In addition,proxies.
Can I change my vote?
You may revoke your signed proxy at any time before it is voted by notifying the Corporation has retained Morrow & Co., Inc.Secretary in writing, by returning a proxy card with a later date or by attending the meeting and voting in person.
What vote is required to aid in the
solicitation of proxies.approve each item?
The Corporation has agreed to pay
Morrow & Co., Inc. a fee of $10,000, plus expenses.
VOTE REQUIRED
Consistent with state law and under the Corporation's
By-laws, a majority of the shares entitled to vote at the Annual
Meeting, present in person or represented by proxy, constitutes a
quorum. A quorum being present, the sixnine nominees for election as directors who receive a plurality of the votes properly castshares voted for
the election of directors at the Annual Meeting, shall be elected directors (Item 1). The affirmative vote of a majority of all shares outstanding and entitled to vote is necessary to approve the increase in the authorized shares (Item 2).
The affirmative vote of a majority of the outstanding shares of Common Stock present in person or represented by proxy at the meeting and entitled to vote is action proposed in Item 2Senior Executive Annual Incentive Plan (Item 3) and Item 3the stockholder proposal regarding the Model Business Corporation Act (Item 4).the accompanying Notice of 2000 Annual Meeting of Stockholders,
although in order to list the shares issuable under Item 2 on the
New York Stock Exchange, the total votes cast on Item 2 must
represent over 50% in interesta majority of all shares outstanding and entitled to vote onis necessary to approve the Item.amendments to the By-laws as provided in the stockholders' proposal regarding amendment of the By-laws (Item 5).
How is the vote counted?
Votes cast by proxy or in person at the Annual Meeting will be counted by the persons appointed by the CorporationState Street to act as tellers for the meeting. A majority of the shares entitled to vote at the Annual Meeting constitutes a quorum. The tellers will count shares represented by proxies that withhold authority to vote for a nominee for election as a director only as shares that are present and entitled to vote for purposes of determining the presence of a quorum. None of the withheld votes will be counted as votes "for" a director. As a result, none of the withheld votes will have any effect on the outcome of the voting on the election of directors. Under applicable stock exchange and NASD rules, if a broker
holds shares in its name for a beneficial holder, it is
permissibleShares properly voted to vote the shares in the election of directors and"abstain" on a proposal regarding the issuance of stock or options that do
not exceed 5% of the number of outstanding shares (Items 1 and
2), even if it does not receive voting instructions from the
beneficial holder. Under these rules, however, a broker
generally may not vote shares (a "broker non-vote") on Item 3,
absent instructions from the beneficial holder. The tellers will
count shares represented by proxies that reflect abstentions and
"broker non-votes"particular matter are considered as shares that are entitled to vote for the purpose of determining a quorum. The tellers will countquorum but are treated as having voted against the matter. If a stockholder holds shares represented by proxiesthrough a broker, stock exchange and NASD rules prohibit a broker from voting shares held in a brokerage account on some proposals (a "broker non-vote") if the broker does not receive voting instructions from the beneficial holder. Under these rules, a broker may not vote in its discretion on Item 4 and Item 5. Shares that reflect abstentions onare subject to a matterbroker non-vote are counted for determining the quorum but as shares that arenot entitled to vote on the particular matter, but are not cast
on the matter. As a result, an abstention on Items 2 and 3 will
be counted as entitled to vote but not cast and therefore will
have the effect as a "no" vote; for their purposes, however, the
New York Stock Exchange counts an abstention as a vote cast and
therefore abstentions will be included in determining whether
sufficient votes for Item 2 have been cast to permit listing of
the shares on the Exchange, but will have the effect as a "no"
vote. However, the tellers will count shares represented by
proxies that reflect "broker non-votes" as shares that are not
entitled to vote on Item 3 and are not cast on that matter. As a
result,so without voting instructions from the beneficial holder, a broker non-vote could occur on Item 34 and thisItem 5. This will have no effect on whether the required vote under the By-laws has been received.
received on Item 4, but will have the effect of the shares being voted against approval of Item 5.
Could other matters be decided at the Annual Meeting?
We do not know of any other matters that may be presented for action at the meeting, Should any other business come before the meeting, the persons named on the enclosed proxy will have discretionary authority to vote the shares represented by such proxies in accordance with their best judgment.
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What happens if the meeting is postponed or adjourned?
Your proxy may be voted at the postponed or adjourned meeting. You will still be able to change your proxy until it is voted.
ELECTION OF DIRECTORS
In accordance with Massachusetts law theand State Street’s By-laws, of the
Corporation provide for the classification of the Board is divided into three classes of directors as nearly equal in number as possible,
eachdirectors. Each class servinghas a three-year term with one class of directors
to be elected at each annual meeting of stockholders for thethree years. Each director serves until his or her term specifiedexpires and to continue in office until their successors arehis or her successor is duly elected and qualified. The exactBoard determines the number of directors is to be
determined by vote ofdirectors. There are currently 19 directors. Marshall N. Carter, former Chairman, retired from the Board of Directors.on December 31, 2000, and David A. Spina, Chief Executive Officer, was elected Chairman, effective with Mr. Carter’s retirement. James E. Cash, Jr., currently a Class I director, is retiring from the Board effective with the 2001 Annual Meeting. Ronald E. Logue and Nicholas A. Lopardo were appointed as Class II directors by the Board on May 18, 2000 and Linda A. Hill was appointed as a Class II director by the Board on December 21, 2000.
Pursuant to the By-laws, at a meeting on December 16, 1999,21, 2000, the Board of Directors fixed the number of directors at 17,18, effective withat the 2000time of the 2001 Annual Meeting. There are currently 18 directors of the Corporation, seven
of whom are Class I directors. SixNine directors are to be elected at the meeting, two as Class III directors to serve until the 2002 Annual Meeting, one as a Class I directors.director to serve until the 2003 Annual Meeting, and six as Class II directors to serve until the 2004 Annual Meeting. Each of the nominees for election as a Class I director is currently a directordirector. The designation of the Corporation, Richard P. Sergel having been elected a Class I
director by actionnominees into different classes is being made in order to make the classes of the Boarddirectors equal in 1999. David B. Perini, a
Class I director, will be retiring from the Board at the
expiration of his current term.number.
It is intended that, unless you give contrary instructions, are given, shares represented by proxies solicited by the Board of Directors will be voted for the election of the sixnine nominees listed below as directors,directors. We have no reason to serve for a three-year term expiring at the
Annual Meeting to be held in 2003. Although the Board of
Directors does not contemplatebelieve that any nominee will be unavailable for election inat the Annual Meeting. In the event that vacancies occurone or more nominees is unexpectedly such sharesnot available to serve, proxies may be voted for substitute nominees,
if any,another person nominated as may be designateda substitute by the Board, or the Board may reduce the number of Directors.directors to be elected at the Annual Meeting. 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,State Street, principal occupation and other biographical material is shown below.
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The Board of Directors unanimously recommends that you vote
FOR
each of these nominees for director. (Item 1 on your proxy card)
DIRECTORS TO BE ELECTED AT THE 20002001 ANNUAL MEETING
Class IIINominees with Terms Expiring in 2002
RONALD E. LOGUE | Director since 2000 |
Vice Chairman and Chief Operating Officer of State Street. He was elected Vice Chairman in 1999 and Chief Operating Officer in May 2000. Prior to that time. Mr. Logue, age 55, headed State Street’s Global Investor Services Group. He is responsible for State Street’s $6 trillion asset-servicing business, which provides custody, accounting, administration, global cash management, credit, risk management and other services to institutional investors worldwide. Mr. Logue joined State Street in 1990 as head of the Mutual Fund Custody Division. Mr. Logue is a director of the Metropolitan Boston Housing Partnership. He received B.S. and M.B.A. degrees from Boston College.
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NICHOLAS A. LOPARDO | Director since 2000 |
Vice Chairman of State Street since 1997 and Chairman and Chief Executive Officer of State Street Global Advisors, State Street’s investment management group. Mr. Lopardo, age 54, joined State Street Global Advisors in January 1987. He is a member of the boards of PerkinElmer, Inc., the Boston Stock Exchange and the Whitehead Institute for Biomedical Research. He is chairman of the board of the Landmark School and Susquehanna University. He is on the American Bankers Association Investment & Trust Services advisory board and the advisory board of the Salvation Army. Mr. Lopardo is a board member of Boston Partners in Education, Massachusetts Sports Partnership, Inc., Team Harmony Foundation and the Hockey Humanitarian Foundation. Mr. Lopardo received a B.S. degree from Susquehanna University.
Class I
I. MACALLISTER BOOTH Nominee with Term Expiring in 2003
DAVID A. SPINA | Director since 1989 |
Chairman and Chief Executive Officer of State Street since January 1, 2001. Prior to that date Mr. Spina, age 58, was President and Chief Executive Officer. He joined State Street in 1969 and has held a variety of positions with State Street, including chief operating officer, chief financial officer and treasurer. He is vice chairman of the Massachusetts Taxpayers Foundation, Inc., director of the United Way of Massachusetts Bay, Jobs for Massachusetts and the Pioneer Institute for Public Policy Research, a member of the Massachusetts Governor’s Board of Economic Advisors, a corporator of the Dana Hall School and chairman emeritus of the Massachusetts Housing Investment Corporation. Mr. Spina holds a B.S. degree from the College of the Holy Cross and an M.B.A. from Harvard University. He was an officer in the United States Navy from 1964 to 1969, serving a tour of duty in Vietnam.
Class IINominees with Terms Expiring in 2004
DAVID P. GRUBER | Director since 1997 |
Retired Chairman, Chief Executive Officer and Director of Wyman-Gordon Company, a manufacturer of forging, investment casting and composite airframe structures for the commercial aviation, commercial power and defense industries. Mr. Gruber, age 59, joined Wyman-Gordon in 1991 and retired in 1999. He is a member of the board of trustees of Manufacturers’ Alliance for Productivity and Innovation, chairman of the Worcester Polytechnic Institute Mechanical Engineering Advisory Committee and a member of the board of directors of Novelos Therapeutics Inc. and Worcester Municipal Research Bureau. He has a B.S. degree from Ohio State University.
LINDA A. HILL | Director since 2000 |
Wallace Brett Donham Professor of Business Administration at Harvard University. Dr. Hill, age 44, is co-faculty chair, Global Leadership Initiative, and faculty chair, Young Presidents’ Organization Presidents’ Seminar. She is a member of the board of directors of Cooper Industries, the boards of trustees of the Rockefeller Foundation, Bryn Mawr College, the Children’s Museum, Boston, and the board of overseers of the Beth Israel Deaconess Medical Center. Dr. Hill received an A.B. degree in psychology from Bryn Mawr College, an M.A. in educational psychology from the University of Chicago and a Ph.D. in behavioral sciences from the University of Chicago.
CHARLES R. LAMANTIA | Directorsince 1993 |
Retired Chairman and Chief Executive Officer of Arthur D. Little, Inc., which provides management, technology and environmental consulting services worldwide. Dr. LaMantia, age 61, is a member of the board
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of Marathon Technologies and the advisory board of StoneGate Partners, IntellectExchange and several non-profit research and educational institutions. Dr. LaMantia received B.A., B.S., M.S. and Sc.D. degrees from Columbia University and attended the Advanced Management Program at Harvard Business School.
ALFRED POE | Director since 1994 |
Private investor pursuing startups in the functional food business. Mr. Poe, age 52, was chief executive officer of MenuDirect Corporation, a direct home delivery prepared food service from 1997 to 1999. From 1991 to 1996 he was a corporate vice president of Campbell Soup Company and president of the Meal Enhancement Group. He is a member of the board of directors of Polaroid Corporation, B&G Foods, Inc., the LEAD (Leadership, Education and Development) Program for minority students and the Executive Leadership Council. Mr. Poe holds a B.S. degree from Polytechnic Institute of Brooklyn and an M.B.A. from the Harvard Graduate School of Business.
DIANA CHAPMAN WALSH | Director since 1997 |
President of Wellesley College. Prior to becoming President of Wellesley College, Dr. Walsh, age 56, was Professor and Chairman, Department of Health and Social Behavior, at the Harvard School of Public Health. She serves on the board of directors of the Consortium on Financing Higher Education and as chair of the American Council on Education Commission on International Education. She is a trustee of Amherst College. Dr. Walsh received a B.A. degree from Wellesley College, M.S. and Ph.D. degrees from Boston University and Doctor of Humane Letters, honorus causa, from Boston University and Deree College, American College of Greece.
ROBERT E. WEISSMAN | Director since 1989 |
Chairman of the Executive Committee of IMS Health Incorporated, which provides information to the pharmaceutical and healthcare industries, since November 2000. Mr. Weissman, age 60, was formerly the Chairman and Chief Executive Officer of IMS Health. He is a director of Cognizant Technology Solutions Corp. He is a member of the Committee for Economic Development and The U.S.-Japan Business Council and is vice chairman of the corporation of Babson College. Mr. Weissman received a degree in Business Administration from Babson College.
CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2002
Class III
TENLEY E. ALBRIGHT, M.D. | Director since 1993 |
Physician and surgeon. Dr. Albright, age 65, is Chairman of Western Resources, Inc., a holding company of varied assets with plans for a research and development park and senior care facility. She is consultant to and formerly chairman of the Board of Regents of the National Library of Medicine at National Institutes of Health. She is a director of West Pharmaceutical Services, Inc., the Whitehead Institute for Biomedical Research and the Massachusetts Society for Medical Research. She is a member of the corporation of Woods Hole Oceanographic Institution and New England Baptist Hospital and a member of the Harvard Medical School Information Technology Committee and serves on the Board of Visitors of the Harvard Medical Institute for Research and Education. Dr. Albright graduated from Harvard Medical School and Radcliffe College.
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NADER F. DAREHSHORI | Director since 1990 |
Chairman of the Board, President and Chief Executive Officer of Houghton Mifflin Company, publisher. Mr. Darehshori, age 64, serves as a director of Houghton Mifflin Company and is chairman of its executive committee. He is a director of CGU Insurance Group and chairman of the Boston Public Library Foundation. He is a trustee of Wellesley College, the WGBH Educational Foundation and the Dana-Farber Cancer Institute. Mr. Darehshori also serves on the board of the Massachusetts Business Roundtable and the Association of American Publishers.
JOHN M. KUCHARSKI | Director since 1991 |
Retired Chairman of the Board and Chief Executive Officer of PerkinElmer, Inc. (formerly EG&G, Inc.), a provider of scientific and technological products and services worldwide. Mr. Kucharski, age 65, is a director of Nashua Corporation. He serves on the boards of trustees of Marquette University and George Washington University. He is also a member of the president's council and the advisory council to the College of Engineering of Marquette University. Mr. Kucharski holds a B.S. degree from Marquette University, a J.D. degree from George Washington University and is a member of the District of Columbia Bar Association.
BERNARD W. REZNICEK | Director since 1991 |
National Director, Special Markets, for Central States Indemnity Co. of Omaha, an insurance company specializing in credit card and utility payment protection for consumers, since 1997, and President, Premier Enterprises, a construction company. Mr. Reznicek, age 64, also serves on the board of directors of Central States. From 1994 to 1996, he was dean of the College of Business Administration of Creighton University. From 1987 to 1990, he was president and chief operating officer of Boston Edison Company. In 1990, he became chief executive officer, and in 1992, he was elected chairman of Boston Edison. Prior to joining Boston Edison, he was president and chief executive officer of Omaha Public Power District. Mr. Reznicek holds a B.S. degree from Creighton University and an M.B.A. from the University of Nebraska. He serves on the boards of CSG Systems, Inc. and TTI Technologies, Inc.
CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2003
Class I
I. MACALLISTER BOOTH | Director since 1990 |
Retired Chairman, President and Chief Executive Officer of Polaroid Corporation, a manufacturer of instant image recording products. Mr. Booth, age 68,69, joined Polaroid in 1958 as a
supervisor in the Film Division.1958. He is a director of John Hancock Mutual Life Insurance Company, ThermoLase Corporation and Western Digital Corporation and past chairman of Inroads National
Board of Directors and a member of the national board of trusteesdirectors of Eye
Research Institute.INROADS. He received B.S. and M.B.A. degrees from Cornell University.
JAMES I. CASH, JR. Director since 1991
James E. Robison Professor of Business Administration at
Harvard University. Dr. Cash, age 52, has been a faculty member
of the Harvard Business School since 1976. He is a director of
Cambridge Technology Partners, Inc., The Chubb Corporation,
Knight-Ridder, Inc., General Electric Company and WinStar
Communications. He received a B.S. degree in mathematics from
Texas Christian University and M.S. and Ph.D. degrees in computer
science and management information systems from Purdue
University.
TRUMAN S. CASNER
TRUMAN S. CASNER | Director since 1990 |
Partner in the law firm of Ropes & Gray. Mr. Casner, age 66,67, received an A.B. degree from Princeton University in 1955 and an LL.B. from Harvard Law School in 1958. He served as law clerk to Chief Justice Wilkins of the Massachusetts Supreme Judicial Court and joined Ropes & Gray in 1959, becoming a partner in 1968. He is a trustee of the Museum of Science, Boston, chairman of the corporation and past president of Belmont Hill School, a member of the corporation of Woods Hole Oceanographic Institution and a director of the Massachusetts Business Roundtable. He is a member of the American Law Institute.
ARTHUR L. GOLDSTEIN
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ARTHUR L. GOLDSTEIN | Director since 1995 |
Chairman and Chief Executive Officer of Ionics, Incorporated, an international company involved in the purification and treatment of water. Mr. Goldstein, age 64,65, is a director of Cabot Corporation. He is a member of the National Academy of Engineering and its Industry Advisory Board. He is a trustee of the California Institute of Technology, the
Massachusetts General Physicians'Physicians’ Organization, Inc., the Dana-
Farber/Dana-Farber/Partners Cancer Care and Co-Chair of the Committee on Industrial Relations and Ventures of Partners HealthCare, and a director of Partners HealthCare System, Inc., Jobs for Massachusetts, Inc. and the Massachusetts High Technology Council. Mr. Goldstein received a B.S. degree in chemical engineering from Rensselaer Polytechnic Institute, an M.S. in chemical engineering from the University of Delaware and an M.B.A. from Harvard Business School.
DENNIS J. PICARD Director since 1991
Retired
DENNIS J. PICARD | Director since 1991 |
ChairmanEmeritus of Raytheon Company, a diversified,
technology-based international company.with products and services in commercial and defense electronics and special mission aircraft. Mr. Picard, age 67,68, continues as a member of the board of directors of Raytheon. He joined Raytheon in 1955 and retired in 1999. He is a member of the National Academy of Engineering and its Industry Advisory Board, president-elect and aan honorary fellow of the American Institute of Aeronautics and Astronautics and a life 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 and the John F. Kennedy Library
Foundation, a member of the National
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Business Roundtable, The Business Council, the Defense Policy
Advisory Committee on Trade(DPACT), the President's Export
Council, the President's National Security Telecommunications
Advisory Council and the Armed Forces Communications and
Electronics Association.Council. He is a graduate of Northeastern University and holds honorary doctorates from Northeastern University, Merrimack College and Bentley College.
RICHARD P. SERGEL
| RICHARD P. SERGEL | Director since 1999 |
President, Chief Executive Officer and Director of National Grid U.S.A. since 1999, the successor to New England Electric System (NEES), an electric power provider, since
1998.provider. Mr. Sergel, age 50,51, joined NEES in 1978. He is a director of the Edison Electric Institute, Jobs for Massachusetts, the Greater Boston Chamber of Commerce and is a trustee of the Worcester Art Museum. Mr. Sergel received a B.S. degree from Florida State University, an M.S. from North Carolina University and an MBAM.B.A. from the University of Miami. He served in the United States Air Force.
DIRECTORS SERVING UNTIL THE 2001 ANNUAL MEETING
Class II
DAVID P. GRUBER Director since 1997
Retired Chairman, Chief Executive Officer and Director of
Wyman-Gordon Company, a manufacturer of forging, investment
casting and composite airframe structures for the commercial
aviation, commercial power and defense industries. Mr. Gruber,
age 58, joined Wyman-Gordon in 1991 and retired in 1999. He
began his career with
General Tire and Rubber Company. From 1978
to 1991 he was with Norton Company. He is a member of the board
of trustees of Manufacturers' Alliance for Productivity and
Innovation, chairman of the Worcester Polytechnic Institute
Mechanical Engineering Advisory Committee and a member of the
board of directors of Worcester Municipal Research Bureau. Mr.
Gruber received the American Society of Materials Life
Achievement Award. He has a B.S. degree from Ohio State
University.
CHARLES R. LAMANTIA Director since 1993
Retired Chairman and Chief Executive Officer of Arthur D.
Little, Inc., which provides management, technology and
environmental consulting services worldwide. Dr. LaMantia, age
60, was chief executive officer from 1988 to 1999 and president
and chief operating officer of Arthur D. Little from 1986 to
1988. Prior to rejoining Arthur D. Little in 1986, he was
president and chief executive officer of Koch Process Systems,
Inc., a subsidiary of Koch Industries. From 1977 to 1981, Dr.
LaMantia was vice president in charge of Arthur D. Little's
services to the chemical, metals and energy industries. He is a
member of the advisory board of StoneGate Partners and
IntellectExchange.com and the board or advisory board of several
non-profit research and educational institutions. Dr. LaMantia
received B.A., B.S., M.S. and Sc.D. degrees from Columbia
University and attended the Advanced Management Program at
Harvard Business School.
ALFRED POE Director since 1994
Private Investor pursuing startups in the functional food
business. Mr. Poe, age 51, was formerly chief executive officer
of MenuDirect Corporation, a direct home delivery prepared food
service from 1997 to 1999. From 1991 to 1996 he was a corporate
vice president of Campbell Soup Company and president of the Meal
Enhancement Group. From 1982 to 1991, he was with Mars, Inc. He
is a member of the board of directors of Polaroid Corporation,
B&G Foods, Inc., the LEAD (Leadership, Education and Development)
Program for
4
minority students and the Executive Leadership Council. Mr. Poe
holds a B.S. degree from Polytechnic Institute of Brooklyn and an
M.B.A. from the Harvard Graduate School of Business.
DAVID A. SPINA Director since 1989
President and Chief Operating Officer of the Corporation.
Mr. Spina, age 57, joined State Street in 1969 and has held a
variety of positions within the Corporation, including chief
financial officer and treasurer. Mr. Spina has responsibility
for the Corporation's asset servicing business which provides
custody, recordkeeping and information services for institutional
investors worldwide. He also oversees capital and credit
markets, information technology, research, trading and treasury,
investment banking and securities lending. He is chairman of the
Massachusetts Taxpayers Foundation, Inc., a director of the
United Way of Massachusetts Bay and the Metropolitan Boston
Housing Partnership, Inc. and a corporator of the Dana Hall
School. Mr. Spina is chairman emeritus of the Massachusetts
Housing Investment Corporation. Mr. Spina holds a B.S. degree
from the College of the Holy Cross and an M.B.A. from Harvard
University. He was an officer in the United States Navy from
1964 to 1969, serving a tour of duty in Vietnam.
DIANA CHAPMAN WALSH Director since 1997
President of Wellesley College. Prior to becoming President
of Wellesley College, Dr. Walsh, age 55, was Professor and
Chairman of the Department of Health and Social Behavior at the
Harvard School of Public Health. She serves on the board of
directors of the Consortium on Financing Higher Education and as
chair of the American Council on Education Commission on
International Education. She is a trustee of Amherst College.
Dr. Walsh received a B.A. degree from Wellesley College, M.S. and
Ph.D. degrees from Boston University and Doctor of Humane
Letters, honorus causa, from Boston University and Deree College,
American College of Greece.
ROBERT E. WEISSMAN Director since 1989
Chairman and Director of IMS Health Incorporated, which
provides information to the pharmaceutical and healthcare
industries, since June 1998. IMS Health is a spin-off from
Cognizant Corporation, one of three companies resulting from the
restructuring of The Dun & Bradstreet Corporation. Mr. Weissman,
age 59, joined Dun & Bradstreet in 1979. He became chief
executive officer in 1994 and chairman in 1995. He became
chairman, chief executive officer and director of Cognizant
Corporation in 1996. Mr. Weissman is a director of GartnerGroup,
Inc. and Nielsen Media Research Inc. He is a member of the
Institute of Management Accountants, the Society of Manufacturing
Engineers, the Institute of Electrical and Electronic Engineers,
The Business Roundtable, the Committee for Economic Development
and The U.S.-Japan Business Council and is vice chairman of the
Corporation of Babson College. Mr. Weissman received a degree in
Business Administration from Babson College in 1964.
DIRECTORS SERVING UNTIL THE 2002 ANNUAL MEETING
Class III
TENLEY E. ALBRIGHT, M.D. Director since 1993
Physician and surgeon. Dr. Albright's concentration in
medicine and health sciences stems from her specialty of general
surgery for over 23 years. Dr. Albright, age 64, is Chairman of
Western Resources, Inc., a holding company of varied assets with
plans for a research and development park and a senior care
facility. She
5
is consultant to and formerly chairman of the Board of Regents of
the National Library of Medicine at National Institutes of
Health. She serves on the board of directors of West
Pharmaceutical Services, Inc., the Whitehead Institute for
Biomedical Research and the Massachusetts Society for Medical
Research. She is a member of the corporation of Woods Hole
Oceanographic Institution and New England Baptist Hospital and a
member of the Harvard Medical School Information Technology
Committee and serves on the Board of Visitors of the Harvard
Medical Institute for Research and Education. Dr. Albright
graduated from Harvard Medical School after attending Radcliffe
College and has received honorary degrees from Hobart and William
Smith Colleges, Russell Sage College, New England School of Law,
Chatham College, State University of New York at Cortland,
Springfield College, Lasell College and Williams College.
MARSHALL N. CARTER Director since 1991
Chairman and Chief Executive Officer of the Corporation.
Prior to joining State Street in 1991, Mr. Carter, age 59, was
with Chase Manhattan Bank for 15 years. He served as a Marine
Corps officer in Vietnam for two years where he was awarded the
Navy Cross and Purple Heart and had international affairs
service as a White House Fellow. Mr. Carter is a member of the
board of directors of Honeywell International Inc. and the
American Bankers Association. Mr. Carter holds a degree in civil
engineering from the U.S. Military Academy at West Point and
masters degrees from the Naval Postgraduate School and George
Washington University.
NADER F. DAREHSHORI Director since 1990
Chairman of the Board, President and Chief Executive Officer
of Houghton Mifflin Company, publisher. Mr. Darehshori, age 63,
served as College Division vice president from 1984 until he was
promoted to vice president and director of the College Division
in 1986. In 1987 he was elected senior vice president, College
Division. He was promoted to executive vice president and then
to vice chairman in 1989 and to his present position in 1990.
Mr. Darehshori has served as a director of Houghton Mifflin
Company since 1989 and is chairman of its executive committee.
He is a director of CGU Insurance Group and chairman of the
Massachusetts Business Roundtable. He is a trustee of Wellesley
College, the WGBH Educational Foundation and the Boston Symphony
Orchestra and a trustee of the Dana-Farber Cancer Institute. Mr.
Darehshori also serves on the board of the Boston Public Library
Foundation.
JOHN M. KUCHARSKI Director since 1991
Retired Chairman of the Board and Chief Executive Officer of
EG&G, Inc., which provides scientific and technological products
and services worldwide. Mr. Kucharski, age 64, joined EG&G, Inc.
in 1972 and retired in 1999. He is a director of Nashua
Corporation and New England Electric System. He serves on the
boards of trustees of Marquette University and George Washington
University. He is also a member of the president's council and
the advisory council to the College of Engineering of Marquette
University. Mr. Kucharski holds a B.S. degree from Marquette
University, a J.D. degree from George Washington University and
is a member of the District of Columbia Bar Association.
BERNARD W. REZNICEK Director since 1991
National Director, Utility Marketing, for Central States
Indemnity Co. of Omaha, an insurance company specializing in
credit card and utility payment protection for consumers, since
1997 and President, Premier Enterprises, a construction company.
Mr. Reznicek, age 63, also serves on the board of directors of
Central States. From 1994 to 1996, he was dean of the College of
Business Administration of Creighton University. From
6
1987 to 1990, he was president and chief operating officer of
Boston Edison Company. In 1990, he became chief executive
officer, and in 1992, he was elected chairman of Boston Edison.
Prior to joining Boston Edison, he was president and chief
executive officer of Omaha Public Power District. Mr. Reznicek
holds a B.S. degree from Creighton University and an M.B.A. from
the University of Nebraska. He serves on the boards of Stone &
Webster Incorporated, CSG Systems International, Inc. and TTI
Technologies, Inc.
GENERAL INFORMATION
The Board of Directors has the overall responsibility for the conduct of the business of the Corporation.our business. Of the 1819 directors currently in office, 16 are outside directors and 23 are executive officers of the Corporation.State Street. The Board of Directors held 4 meetings during 19992000 and each of the directors attended 75% or more of the total of all meetings of the Board and of the committees of the Board on which each director served during the year. Each member of the Board, of the Corporation, except Mr. Poe, Mr. Reznicek and Mr. Weissman, is also a member of the Board of Directors of the Bank. The Board of Directors of the Bank held 11 meetings during 1999.2000. Each member of theState Street’s Executive Committee and the Examining and Audit Committee of the
Corporation is also a member of the corresponding committee of the Bank, and members customarily hold joint meetings of both committees.
The Board of Directors has the following committees to assist it in carrying out its responsibilities:
The EXECUTIVE COMMITTEE is authorized to exercise all the powers of the Board of Directors that may be legally delegated to it by the Board in the management and direction of the business and affairs of the Corporation,State Street, including without limitation the review and approval of policies for the extension of credit, investment of the Corporation's assets and financial management, and to monitormonitoring activities under these policies and reportpolicies. The Committee reports periodically to the Board.
7
Its members are Truman S. Casner, Chair; I. MacAllister Booth; James I. Cash; Marshall N. Carter,David P. Gruber, and David A. Spina. During 1999,2000, the Committee held 12 meetings.
The EXAMINING AND AUDIT COMMITTEE oversees the operation of a comprehensive system of internal controls to ensure the integrity of the Corporation'sState Street's financial reports and compliance with laws, regulations and corporate policies; monitors communication with external auditors and bank regulatory authorities;authorities, and recommends the selection of the Corporation's
independent auditors. Specific functions and responsibilities of the Committee are set forth in the charter adopted by the Board of Directors which is attached as Appendix A to this proxy statement. Its members are John M. Kucharski, Chair; Tenley E. Albright; I. MacAllister Booth, and Charles R. LaMantia. During 1999,2000, the Committee held 8 meetings.
The EXECUTIVE COMPENSATION COMMITTEE sets and administers policies which relate to the compensation system for the
Corporation'sState Street's executive officers and other incentive programs of the Corporation.State Street. Its members are Robert E. Weissman, Chair; I. MacAllister Booth; Nader F. Darehshori; Charles R. LaMantia, and Bernard W. Reznicek. None of these individuals is or has been an officer or employee of the CorporationState Street or the Bank. During 1999,2000, the Committee held 5 meetings.
The NOMINATING COMMITTEE recommends nominees to the boardsfor directors of the CorporationState Street 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 CorporationState Street by stockholders. Its members are I. MacAllister Booth, Chair;
Marshall N. Carter; Arthur L. Goldstein; David B. Perini;Goldstein, Chair; Dennis J. Picard,Picard; Alfred Poe; David A. Spina, and Alfred Poe.Diana C. Walsh. During 1999,2000, the Committee held 32 meetings.
7
COMPENSATION OF DIRECTORS
Compensation of Directors
Directors who are also employees of the CorporationState Street or the Bank do not receive noany compensation for serving as directors or as members of committees. Directors who are not employees of the
CorporationState Street or the Bank received an annual retainer of $37,500,$40,000, payable at their election in shares of Common Stock of the
CorporationState Street or in cash, plus a fee of $1,500 for each meeting of the Board of Directors and each committee meeting attended, as well as travel accident insurance and reimbursement for travel expenses, and an award of 468424 shares of deferred stock payable when the director leaves the Board or retires, for the period April 19992000 through March 2000. In 1999,2001. For this period, all outside directors elected to receive their annual retainer in shares of Common Stock. The directors may elect to defer either 50% or 100% of all fees and compensation payable during any calendar year pursuant to the Corporation'sState Street’s Deferred Compensation Plan for Directors. Three directors have elected to defer compensation.
8
BENEFICIAL OWNERSHIP OF SHARES
MANAGEMENT
Management
The table below sets forth the number of shares of Common Stock of the CorporationState Street beneficially owned (as determined under the rules of the Securities and Exchange Commission) by each director, the former chairman, the current chairman and chief executive officer and the four other most highly compensated executive officers and by the group consisting of those persons and other executive officers as a group as of the close of business on February 1, 20002001 based on information furnished by each person. None of the directors or executive officers
individuallyindividuals owned beneficially as much as 1% of the outstanding shares of Common Stock. The directors and executive officersgroup in the aggregate beneficially owned 1.94%1.40% of the Corporation's
Common Stock.
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNERSHIP
---- -----------------------
Tenley E. Albright, M.D. 21,467(1)(9)
I. MacAllister Booth 13,878(2)(9)
Dale L. Carleton 227,903(3)
Marshall N. Carter 362,721(3)(4)
James I. Cash, Jr. 11,811(9)
Truman S. Casner 17,204(5)(9)
Nader F. Darehshori 10,083(9)
Arthur L. Goldstein 5,518(9)
David P. Gruber 3,326(9)
John M. Kucharski 11,463(9)
Charles R. LaMantia 10,569(6)(9)
Ronald E. Logue 62,794(3)
Nicholas A. Lopardo 401,949(3)(7)(9)
David B. Perini 13,870(9)
Dennis J. Picard 13,523(9)
Alfred Poe 7,074(9)
Bernard W. Reznicek 11,463(9)
Richard P. Sergel 808(9)
David A. Spina 901,915(3)(8)
Diana Chapman Walsh 2,926(9)
Robert E. Weissman 16,719(9)
All of the above and other
executive officers as a group
(32 persons) 3,092,330(3)(6)(9)
8
outstanding shares.
| Name | Amount and Nature |
| Tenley E. Albright, M.D. | 22,318 | (1)(8) |
| Maureen Scannell Bateman | 45,011 | (3) |
| I. MacAllister Booth | 14,729 | (2)(8) |
| Marshall N. Carter | 362,800 | (3) |
| James I. Cash, Jr. | 5,435 | (8) |
| Truman S. Casner | 18,125 | (4)(8) |
| Nader F. Darehshori | 8,422 | (8) |
| Arthur L. Goldstein | 6,369 | (8) |
| David P. Gruber | 4,177 | (8) |
| Linda A. Hill | 231 | (8) |
| John M. Kucharski | 12,314 | (8) |
| Charles R. LaMantia | 11,420 | (5)(8) |
| Ronald E. Logue | 112,257 | (3) |
| Nicholas A. Lopardo | 331,313 | (3)(6)(8) |
| Dennis J. Picard | 14,374 | (8) |
| Alfred Poe | 7,925 | (8) |
| Bernard W. Reznicek | 10,479 | (8) |
| Richard P. Sergel | 1,659 | (8) |
| David A. Spina | 980,983 | (3)(7) |
| John R. Towers | 81,265 | (3)(8) |
| Diana Chapman Walsh | 3,789 | (8) |
| Robert E. Weissman | 17,570 | (8) |
| All of the above and other executive officers as a group (24 persons) | 2,261,964 | (3)(5)(8) |
______________________
(1) Includes 6,398 shares held in trust for a family member
pursuant to a trust of which Dr. Albright is a co-
trustee and 4,200 shares owned by a family member with
respect to which she disclaims beneficial ownership.
(2) Includes 1,600 shares held in trust for the benefit of
family members with respect to which Mr. Booth disclaims
beneficial ownership.
(3) Includes shares which may be acquired within 60 days
through the exercise of stock options as follows: Mr.
Carleton, 165,201; Mr. Carter,146,944; Mr. Logue, 26,534;
Mr. Lopardo, 258,001; Mr. Spina, 396,734, and the group,
1,690,479.
(4) Includes 165,777 shares held jointly and 50,000 shares
owned by a member of Mr. Carter's family with respect to
which he disclaims beneficial ownership.
(5) Includes 4,000 shares as to which Mr. Casner has sole
investment power and shared voting power.
(6) Include shares as to which voting power and investment
power are shared, as follows: Dr. LaMantia, 2,000, and
the group, 5,610.
(7) Includes 127,407 shares held jointly and 14,370 shares
held in a charitable lead trust of which Mr. Lopardo is a
co-trustee and members of Mr. Lopardo's family have a
remainder interest with respect to which he disclaims
beneficial ownership.
(8) Includes 40,000 shares owned by a member of Mr. Spina's
family with respect to which he disclaims beneficial
ownership.
(9) Includes shares held in deferred stock accounts as
follows: Dr. Albright, 2,487; Mr. Booth, 3,124; Dr. Cash,
3,003; Mr. Casner; 3,073; Mr. Darehshori, 3,073; Mr.
Goldstein, 1,976; Mr. Gruber, 1,573; Mr. Kucharski,
2,913; Dr. LaMantia, 2,487; Mr. Lopardo, 2,171; Mr.
Perini, 3,573; Mr. Picard, 2,877; Mr. Poe, 2,252; Mr.
Reznicek, 2,913; Mr. Sergel, 417; Dr. Walsh, 1,155; Mr.
Weissman, 4,233, and the group, 52,468.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
| (1) | Includes 6,398 shares held in trust for a family member pursuant to a trust of which Dr. Albright is a co-trustee and 4,200 shares owned by a family member with respect to all of which shares she disclaims beneficial ownership. |
| (2) | Includes 1,600 shares held in trust for the benefit of family members with respect to which shares Mr. Booth disclaims beneficial ownership. |
| (3) | Includes shares which may be acquired within 60 days through the exercise of stock options as follows: Ms. Bateman, 41,135; Mr. Carter, 259,960; Mr. Logue, 70,268; Mr. Lopardo, 164,268; Mr. Spina, 476,802; Mr. Towers, 73,835, and the group, 1,320,639. |
| (4) | Includes 4,000 shares as to which Mr. Casner has sole investment power and shared voting power. |
| (5) | Include shares as to which voting power and investment power are shared, as follows: Dr. LaMantia, 2,000, and the group, 153,329. 9 |
| (6) | Includes 13,545 shares held in a charitable lead trust of which Mr. Lopardo is a co-trustee and members of Mr. Lopardo’s family have a remainder interest with respect to which shares he disclaims beneficial ownership. |
| (7) | Includes 41,000 shares owned by members of Mr. Spina's family with respect to which shares he disclaims beneficial ownership. |
| (8) | Includes shares held in deferred stock accounts as follows: Dr. Albright, 2,911; Mr. Booth, 3,548; Dr. Cash, 3,427; Mr. Casner; 3,497; Mr. Darehshori, 3,497; Mr. Goldstein, 2,400; Mr. Gruber, 2,001; Dr. Hill, 122; Mr. Kucharski, 3,337; Dr. LaMantia, 2,911; Mr. Lopardo, 2,171; Mr. Picard, 3,301; Mr. Poe, 2,676; Mr. Reznicek, 3,337; Mr. Sergel, 1,268; Mr. Towers, 1,762; Dr. Walsh, 1,579; Mr. Weissman, 4,666, and the group, 50,817. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's executiveState Street's directors and certain of its officers and directors to file initialsend reports of their ownership and reports of changes in ownership of the Common Stock of the Corporation withto the Securities and Exchange Commission and the New York Stock Exchange. Executive officers and directors are required by
regulations to furnish the Corporation with copies of all Section
16(a) forms which they file.
Based on aState Street’s review of the copiesreports it has received, State Street believes all of such forms furnished to
the Corporationits directors and written representations from the
Corporation's executive officers and directors, the Corporation
believes that in 1999complied with all Section 16(a) filingreporting requirements applicable to its executive officers and directors were met.
CERTAIN TRANSACTIONSthem with respect to transactions in 2000.
Certain Transactions
During 19992000 certain directors and executive officers of the
Corporation and the Bank,State Street, and various corporations and other entities associated with such directors, were customers of the Bank and its affiliates and had ordinary business transactions with the Bank and its affiliates. The transactions include loans and commitments made in the ordinary course of the Bank's business and on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with unrelated persons with no more than normal risk of collection nor did they present other unfavorable features. During 1999,2000, the Bank and other subsidiaries of the
CorporationState Street have used products or services of GartnerGroup,Gartner, Inc. and a subsidiary of Ionics, Incorporated, with which two of the directors of the CorporationState Street were associated. Additional transactions of this
9 nature may be expected to take place in the ordinary course of business in the future. Ropes & Gray, a law firm of which Mr. Casner, a director of the Corporation,State Street, is a partner, was retained by the CorporationState Street to handle certain legal matters during the past year. It is anticipated that the firm will continue to provide legal services in the current year.
No executive officer of the Corporation was allowed to
borrow from the Bank other than through the use of a reserve
account with limits of up to $20,000 as allowed by Massachusetts
law and at the same interest rate paid by the public.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee of the Board of Directors (the "Committee") furnishes the following report on Executive Compensation.
POLICY
Policy
State Street combines information technology with financial expertise to provide institutionalsophisticated investors with an integrated range of products and services spanning the investment cycle. The Corporation'sOur goal is to be the leading company serving institutionalsophisticated investors worldwide. The Corporation's executive compensation program, by providing competitive pay and aligning executive compensation with the Corporation'sour business strategy, is designed to attract and retain superior executives, to focus these individuals on achieving the Corporation'sState Street's objectives, and to reward executives for meeting specific short- termshort-term and long-term performance targets. The executive compensation program places
10
emphasis on challenging performance goals, business growth, and sustainable real growth in earnings per share. By including stock-based compensation plans as a major part of the compensation strategy, State Street linkswe link closely the goals of stockholders and executives. NineteenEighteen executives participated in the executive compensation program in 1999.2000. The former chairman, the current chairman and chief executive officer, the president and chief operating officer, the vice chairmen, and the executive vice presidents are considered executives for this purpose. In May 2000, Marshall N. Carter, Chairman and Chief Executive Officer retired as chief executive officer and announced his intention to retire as chairman at the end of 2000. At its meeting on May 18, 2000, the Board of Directors elected David A. Spina, President and Chief Executive Officer of the Corporation and announced that he would become Chairman upon Mr. Carter’s retirement. Mr. Spina became Chairman of the Board of Directors as of January 1, 2001.
The principles of State Street'sthe executive compensation strategy are applied throughout the Corporation. SinceState Street. Because executives of the Corporation have the greatest opportunity to influence long-term performance, a greater proportion of their compensation is linked to the achievement of long-term financial goals and to stock price. Other individuals who manage business units or have corporate functional or staff responsibilities have a significant opportunity to influence the Corporation'sState Street's results, and a sizable portion of their compensation is related to the achievement of financial goals of both the respective business unit and the Corporation.State Street as a whole. In addition to executives, many officers and managers who make significant contributions to the
Corporation participate in the Corporation's equity incentive programs and in a variety of annual incentive plans.
The Executive Compensation Committee is comprised entirely of independent, non-employee directors, each of whom also qualifies as an "outside director" for purposes of Section 162(m) of the Internal Revenue Code. The Committee is responsible for setting and administering policies which relate to executive compensation, equity incentive programs, and other incentive programs of the Corporation.programs. The Committee on an annual basis reviews and evaluates the Corporation's executive compensation program.
10
The Committee met five times in 19992000 and reportedprovided reports to the Board of Directors about its activities at each of these meetings to the Board of Directors.meetings. In conjunction with its annual review and evaluation of the executive compensation program, the Committee engaged its own independent compensation consultant. The consultant worked for the Committee in reviewing the executive compensation program, in reviewing a reference group of public companies against which the
Corporation'sState Street’s executive compensation and financial performance was compared, and in considering modifications to existing plans. The Committee, with assistance from its independent consultant, validated this group of companies as a reference group against which to compare compensation practices and competitive levels of compensation. This group includes large U.S. bank holding companies and U.S. based financial services companies.
The Committee believes that the Corporation'sState Street's most direct competitors for executives are not necessarily the same companies that would be included in a peer group established to compare stockholder returns. Therefore, the reference companies used for comparative compensation purposes contain some overlap with, but are not identical to, the companies in the S&P Financial Index used for performance comparison under "Stockholder Return Performance Presentation" in this proxy statement.
The elements of the Corporation's executive compensation program currently consist of base salary, annual bonus, performance awards, stock options, deferred stock and restricted stock awards. These are integrated components where salary and bonus reflect one-year results, performance awards reflect two-year results, and stock options, deferred stock, and restricted stock awards reflect long-term stock price appreciation. As a result of its 19992000 review, the Committee has determined that the fundamental elements of this compensation plan are appropriate for a program that is intended to support the Corporation'sState Street's business strategy, provide competitive compensation, and create
11
value for stockholders. The Committee's policies with respect to each of these elements, including the bases for the compensation reported for 19992000 to the Corporation's
chief executive officer, Mr. Carter and chief operating officer, Mr. Spina, are discussed below.
BASE SALARIES
Base Salaries
The Committee recommendsrecommended to the Board of Directors the base salary of Mr. Carter, Mr. Spina, Mr. Logue, and Mr. Spina,Lopardo, each of who were members during 2000 of the Board of Directors, and reviewsreviewed the salaries of the other executives. Base salaries for executives are determined by subjectively evaluating the responsibilities of the position, the strategic value of the position to State Street, and the experience and performance of the individual. No specific formula is used to set base salaries. The Committee has determined, however, that to be competitive it is appropriate for State Street'sStreet’s executive salary levels to be near the median of the reference group. Annual adjustments, if any, to base salary levels are determined by reviewing market compensation data and subjectively considering the overall scope of each position and its strategic importance, to State Street, the performance of the
Corporation,State Street, an evaluation of the individual'sindividual’s performance, and the length of time since the individual'sindividual’s last salary adjustment. The Committee also considers the range of salary increases which are awarded to all employees of the Corporation.employees.
With respect to the base salary granted to Mr. Carter and Mr. Spina, for 1999,2000, the Committee reviewed all of the factors noted above including data supplied by the compensation consultant on market levels of pay for the chief executive officer and chief operating officer at companies in the reference group and the recent performance of the Corporation,State Street, specifically earnings per share and return on equity, under the leadership of Mr. Carter and Mr. Spina. No particular weight was applied to any single factor in making the Committee'sCommittee’s determination. As compared to salaries paid to the chief executive officer and chief
operating officer positionsposition in the reference group, Mr. Carter'sCarter’s salary was slightly above median and Mr. Spina'sSpina’s salary were slightly above thewas below median.
11
ANNUAL BONUSES
The Corporation's executives
Annual Bonuses
Executives are eligible for annual cash bonuses under the provisions of the Senior Executive Annual Incentive Plan, which was approved at the 1997 annual meeting of stockholders. Each year the Committee assigns to each executive a minimum, target, and maximum bonus award opportunity, stated as a percent of salary. The levels of bonus opportunity assigned to each executive are determined by reviewing competitive compensation data supplied by the compensation consultant, the level of responsibility of each executive, and the strategic importance of the executive's position to the Corporation.executive’s position. At its December 19981999 meeting, the Committee assigned a range of bonus opportunity for Mr. Carter for 19992000 at a minimum award of 0% of salary, a target award of 120% of salary, and a maximum award of 240% of salary. The minimum bonus opportunity for Mr. Spina was established at 0% of salary, the target award was 110% of salary, and the maximum award was 220% of salary. The actual level of bonus earned is based upon achievement by the
Corporation of specific predetermined performance targets established by the Committee. Annually, the Committee reviews the
Corporation'sState Street’s earnings per share growth, return on equity performance, revenue growth, and total stockholder return for the one- and five-year period as compared to the S&P Financial Index. In establishing performance targets for the annual incentive plan, the Committee considers this data along with the
Corporation'sState Street’s long-term financial goals, the specific financial goals for the following year, and the business environment in which the CorporationState Street is operating. The Committee then establishes the measures that will be used (based on the measures available under the Senior Executive Annual Incentive Plan), the weighting of the measures, and the specific performance targets at which various levels of bonus will be earned.
The 19992000 performance targets established by the Committee were based on earnings per share and return on equity. The Committee established a performance/payout schedule which identified various objective earnings per share and return on equity levels at which specific awards would be earned.
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At its meeting in February 2000,2001, the Committee certified that specific performance goals had been achieved and approved a total bonus payment for 19992000 of $1,197,000$1,557,600 for Mr. Carter and $741,967$1,168,200 for Mr. Spina. Bonuses for other participants in the plan receiving bonuses totaled $4,084,050$5,858,346 for the year.
PERFORMANCE AWARDS/EQUITY AWARDS
Longer-term
Federal law and regulations provide that in order to qualify for a tax deduction (See TaxLaw at the end of this report), compensation in excess of $1 million to a public corporation’s top executive officers must qualify as performance-based compensation. In order to qualify as exempt performance-based compensation, bonuses must be earned under a plan, the material terms of which have been approved by stockholders. In general, the performance measures under such a plan must be reapproved by stockholders every five years. The Senior Executive Annual Incentive Plan was approved by stockholders at the 1997 Annual Meeting. Described elsewhere in this proxy statement is an amended Senior Executive Annual Incentive Plan which stockholders are being asked to approve at the April 2001 meeting. If approved, the new plan will be in effect for the 2002 plan year.
Performance Awards/Equity Awards
Longer term compensation is provided to executives in the form of both performance awards and equity awards.
Performance Awards - Performance awards represent a contingent right to a cash payment, based upon the price of the
Corporation'sState Street’s stock, in the event the CorporationState Street meets specified performance goals over a specified time period following the grant. Performance awards have been granted to the Corporation's executives once every two years or at the time an officer joined the executive group. Performance award payments, if any, are made every two years.
The Committee granted performance awards under the 1997 Equity Incentive Plan to the executive group in December 1998. These grantsThis grant included an award of 127,000 units to Mr. Carter and an award of 67,800 units to Mr. Spina. An additional grant was made to an executive who joined the executive group in March 1999. The sizeAll of these grants was determined based upon subjective factors, including
primarily the perceived importance of the executive's
contribution to the success of the Corporation, similar to the
subjective factors considered in setting base salary, and upon a
target level of long-term incentive opportunity based upon data
supplied by the Committee's compensation consultant with respect
to the reference group. These grants havehad a two-year performance period covering
12 the years 1999 and 2000. The Committee also established performance targets for the 1999-2000 performance period for these grants, tied to a combination of financial measures, based upon return on equity, earnings per share, and total stockholder return. In February 2001, the Committee certified data confirming that 100% of performance awards had been earned for the two-year period. The Committee determined that Mr. Carter and Mr. Spina had earned all of the awards each had been granted. Based on the average high and low prices of State Street’s common stock during the last ten trading days of 2000, the Committee approved a payment of $15,706,471 to Mr. Carter and $8,385,029 to Mr. Spina.
A new group of performance awards was granted under the 1997 Equity Plan to the executive group in December 2000. This grant included an award of 72,600 units to Mr. Spina. The size of these grants was determined based upon subjective factors, including primarily the perceived importance of the executive’s contribution to the success of State Street, similar to the subjective factors considered in setting base salary, and upon a target level of long-term incentive opportunity based upon data supplied by the Committee’s compensation consultant. These grants have a two-year performance period covering the years 2001 and 2002. The Committee also established performance targets for the 2001-2002 performance period, tied to a combination of financial measures, based upon return on equity, earnings per share, and total stockholder return. As soon as practicable after the end of the two-year performance period, ending December 31, 2000,2002, a cash payment will be calculated based upon the number of performance awards earned, if any, times the market value of the Corporation'sState Street’s common stock at the end of the performance period. In this way, the final cash value of the performance awards relates directly to both corporate financial performance in determining how many awards are earned and stock price appreciation in determining the cash value of the units earned.
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Stock Options - Stock options are granted to executives annually, although the Committee has the authority to grant options at any time and has in the past made additional grants in conjunction with new responsibilities assumed by members of the executive group. The Committee selects the executives to receive options and sets the size of option awards based upon subjective factors, including: the perceived importance of the executive'sexecutive’s contribution to the success of the Corporation,State Street, similar to the subjective factors considered in setting base salary; a target level of long-term incentive opportunity with respect to the reference group, based upon data supplied by the compensation consultant with respect to the reference
group,consultant; and the amount of and annual value of the two-year performance awards which were granted to the respective executive in that year or in the prior year. The exercise price of options is equal to the market price of the shares at the time of the grant. The options have a ten-year life and become exercisable in equal installments over a three-year period. Because stock options are granted at market price, the value of the stock options is dependent upon an increase in the Corporation's stock
price.price of State Street stock. The Committee views stock option grants as a part of the executive'sexecutive’s annual total compensation package, and thepackage. The amount of stock options outstanding at the time of a new grant or granted in prior years does not serve to increase or decrease the size of the new grant.
At its meeting in December 1999,2000, the Committee granted Mr.
Carter options to purchase 125,000 shares and Mr. Spina options to purchase 100,000125,400 shares, based upon a review of all of the factors noted above; no particular weight was applied to any single factor in making the Committee'sCommittee’s determination.
Deferred and Restricted Stock - – Deferred and restricted stock awards are used to recruit, motivate, and retain high
potentialhigh-potential individuals. Typically, deferred and restricted stock awards are made to individuals who are not members of the executive group. However, the Committee may grant deferred and restricted stock to members of the executive group as part of a recruitment package or based upon subjective factors to reward what is considered to be exceptional performance. TwoThree members of the executive group received restricted stock awards and one
receivedand/or deferred stock under the 1997 Equity Incentive Plan in 1999.2000. The awards were made without payment from the recipients.
TAX LAW
Special Actions
In 2000, the Committee recommended and the Board of Directors approved a special supplemental bonus of $3,000,000 to be paid to Mr. Carter in recognition of his outstanding performance during his tenure as chief executive officer. This bonus will be paid on March 30, 2001. In addition, in recognition of Mr. Carter’s services to State Street, the Committee also approved the full vesting of Mr. Carter’s Supplemental Defined Benefit Pension Plan benefits as of January 1, 2001 and his eligibility to receive all applicable retirement benefits, and the full vesting of all unexercisable options held by Mr. Carter as of January 1, 2001, while retaining the expiration dates of these options as granted.
Tax Law
Section 162(m) of the Internal Revenue Code generally precludes the CorporationState Street from taking federal income tax deductions for compensation in excess of $1,000,000 per year for the Chief Executive Officerchief executive officer and any of its four other highest-paidhighest paid executive officers, if those individuals are employed on the last day of the tax year. Generally, however, performance-based compensation that satisfies the requirements of Section 162(m) is not subject to the deduction limit. The Committee reviewed all elements of the executive compensation program against the standards for qualifying for the tax deduction. Stock option and performance unit awards under the 1997 Equity Incentive Plan and awards under the Senior Executive Annual Incentive Plan have been designed to qualify as performance-based compensation, with the intended result that the deduction of compensation under
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these plans, including compensation from the exercise of options or from performance awards, would not be affected by the Section 162(m) deduction limits. A portion of a bonus earned in 19992000 under the State Street
13 Global Advisors Incentive Plan did not qualify for the federal income tax deduction pursuant to Section 162(m).
The restricted stock awards are not intended to qualify for exemption from the Section 162(m) limits.
In administering the executive compensation program, the Committee will continue to consider whether the deductibility of compensation will be limited under Section 162(m) and, in appropriate cases, will strive to structure such compensation so that any such limitation will not apply.
CONCLUSION
Conclusion
Through the program described above, the Corporation's executive compensation is linked directly to the Corporation'sState Street's performance, growth in stockholder value, and each executive's contribution to those results. As the Corporation'sour business changes, particularly in light of itsour global expansion, and with the increasingly competitive and complex business and regulatory environment, the continuing assessment of the compensation structure and goals is required to assure that compensation incentives remain competitive, consistent with stockholder interest, and closely tied to continuing growth in stockholder value.
Submitted by,
I. MacAllister Booth
Nader F. Darehshori
Charles R. LaMantia
Bernard W. Reznicek
Robert E. Weissman, Chair
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| Submitted by, | |
| Robert E. Weissman, Chair | |
| I. MacAllister Booth | |
| Nader F. Darehshori | |
| Charles R. LaMantia | |
| Bernard W. Reznicek |
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EXECUTIVE COMPENSATION
Shown
The table below isshows information concerning the annual and long term compensation paid by the CorporationState Street and its subsidiaries, including the Bank, to the former chairman, the current chairman and chief executive officer and the four other most highly compensated executive officers of the
CorporationState Street (the "Named Executive Officers") for the periods shown.
Summary Compensation Table
Long Term Compensation |
Annual Compensation | Awards | Payouts |
| Name and Principal Position | Year | Salary | Bonus | Other | Restricted | Securities | Long Term | All Other |
| Marshall N. Carter (4) Chairman | 2000 | 1,087,518 | 1,557,600 | 0 | 0 | 0 | 15,706,471 | 3,032,626(5) |
| David A. Spina(6) Chairman and Executive Officer | 2000 | 821,276 | 1,168,200 | 0 | 0 | 125,400 | 8,385,029 | 24,638 |
| Nicholas A. Lopardo (7) Vice Chairman | 2000 | 644,196 | 2,102,100 | 0 | 1,301,950 | 78,200 | 3,957,536 | 19,326 |
| Ronald E. Logue (8) Vice Chairman and Chief Operating Officer | 2000 | 644,196 | 702,100 | 0 | 0 | 78,200 | 3,957,536 | 19,326 |
| John R. Towers(9) Vice Chairman and Chief Administrative Officer | 2000 | 491,694 | 486,750 | 0 | 0 | 44,300 | 3,091,825 | 14,751 |
| Maureen Scannell Bateman Executive Vice President and General Counsel | 2000 | 430,010 | 379,960 | 0 | 0 | 28,350 | 1,545,913 | 12,900 |
| (1) | Dividend equivalents are paid in cash on restricted stock awards. Includes awards to Mr. Lopardo of 4,000 shares of restricted stock at a value of $321,875 based on the closing price of State Street’s Common Stock on March 16, 2000 and 7,422 shares of deferred stock at a value of $980,075 based on the closing price of State Street’s Common Stock on October 3, 2000. Based on the fair market value of State Street’s Common Stock on December 31, 2000, the aggregate number and value of all restricted and deferred stock holdings on such date were 99,422 shares and $12,570,918 for Mr. Lopardo. |
| (2) | Long term compensation payouts reflect performance units earned in accordance with the attainment of performance targets for the two-year periods, 1997-1998 and 1999-2000 and paid in cash equal to the fair market value of the Common Stock at the end of each performance period. |
| (3) | Except as otherwise noted, reflects State Street's contributions of $5,100 to the Salary Savings Program and contributions to the State Street Corporation 401(k) Restoration and Voluntary Deferral Plan as follows: Mr. Carter, $27,526; Mr. Spina; $19,538, Mr. Lopardo, $14,226; Mr. Logue, $14,226; Mr. Towers, $9,651, and Ms. Bateman, $7,800. |
| (4) | Retired as Chairman on December 31, 2000. Mr. Carter was Chief Executive Officer during 1998, 1999 and a portion of 2000. |
| (5) | Includes a $3,000,000 supplemental bonus to be paid to Mr. Carter on March 30, 2001 in recognition of his service to State Street. |
| (6) | Became Chairman effective with Mr. Carter's retirement. Elected Chief Executive Officer on May 18, 2000; previously was President and Chief Operating Officer. |
| (7) | Includes bonuses from the Senior Executive Annual Incentive Plan and the State Street Global Advisors Incentive Plan. |
| (8) | Appointed Chief Operating Officer on May 18, 2000. |
| (9) | Appointed Chief Administrative Officer on May 18, 2000. |
| (10) | Represents expenses paid in connection with Ms. Bateman’s relocation to Massachusetts, and tax reimbursement payments relating to expenses paid. |
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These tables provide information with respect to option exercise price, but
before taxes associated with exercise. These amounts
represent certain assumed rates of appreciation only, as setgrants to and option exercises by the Securities and Exchange Commission. The actual
value, if any, that the Named Executive Officer may realize
from these options will depend solely onOfficers in 2000, the gain in stock
price over the exercise price when the options are
exercised.
Option Grants in Last Fiscal Year
Individual Grants |
| Name | Number of Securities Underlying | Percent of Total Options | Exercise or | Expiration | Potential Realizable Value at | |
| Marshall N. Carter | -- | -- | -- | -- | -- | -- |
| David A. Spina | 125,400 | 4.8 | 121.475 | 12/20/2010 | 9,579,930 | 24,277,423 |
| Ronald E. Logue | 78,200 | 3.0 | 121.475 | 12/20/2010 | 5,974,087 | 15,139,509 |
| Nicholas A. Lopardo | 78,200 | 3.0 | 121.475 | 12/20/2010 | 5,974,087 | 15,139,509 |
| John R. Towers | 44,300 | 1.7 | 121.475 | 12/20/2010 | 3,384,297 | 8,576,474 |
| Maureen Scannell Bateman | 6,250 | 0.2 | 106.0938 | 06/14/2010 | 417,011 | 1,056,789 |
| (1) | Options become exercisable in 33 1/3% installments over a three-year period commencing December 20, 2001. No SARs were granted. |
| (2) | Gains are reported net of the option exercise price, but before taxes associated with exercise. These amounts represent certain assumed rates of appreciation only, as set by the Securities and Exchange Commission. The actual value, if any, that the Named Executive Officer may realize from these options will depend on the gain in stock price over the exercise price when the options are exercised. |
Aggregated Option Exercises in Last Fiscal Year and the exercise price
of the stock options.
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Fiscal Year-End Option Values
Number of Securities Underlying Unexercised Options at December 31, 2000 | Value of Unexercised |
| Name | Number of Securities Underlying Options | Value Realized | Exercisable | Unexercisable | Exercisable | Unexercisable |
| Marshall N. Carter(3) | 149,010 | 9,655,026 | 133,535 | 129,265 | 7,504,290 | 7,185,048 |
| David A. Spina | 0 | 0 | 476,802 | 228,798 | 43,464,647 | 6,090,213 |
| Ronald E. Logue | 44,182 | 2,243,998 | 70,268 | 139,132 | 4,116,170 | 3,591,274 |
| Nicholas A. Lopardo | 90,800 | 8,177,549 | 214,268 | 139,132 | 18,308,688 | 3,591,274 |
| John R. Towers | 3,467 | 222,667 | 73,835 | 105,398 | 5,284,159 | 4,182,261 |
| Maureen Scannell Bateman | 0 | 0 | 41,135 | 51,415 | 2,506,845 | 1,452,399 |
| (1) | Represents the difference between the closing price of the stock on December 29, 2000 ($124.21) and the exercise price of the stock options. |
| (2) | Represents the difference between the fair market value of the stock at the time of the exercise and the exercise price of the stock options. |
| (3) | All unexercised options granted to Mr. Carter were vested as of January 1, 2001. |
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Long-Term Incentive Plan Awards in Last Fiscal Year
| Name | Number of Shares, Units or Other Rights (#) | Performance or Other Period Until Maturation or Payout (1) | |
| (a) | (b) | (c) | |
| Marshall N. Carter | -- | -- | |
| David A. Spina | 72,600 | 2001-2002 | |
| Ronald E. Logue | 45,200 | 2001-2002 | |
| Nicholas A. Lopardo | 45,200 | 2001-2002 | |
| John R. Towers | 25,600 | 2001-2002 | |
| Maureen Scannell Bateman | 12,800 | 2001-2002 |
__________________
(1) | The performance units are earned based on State Street'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 Common Stock at the end of the performance period. See Summary Compensation Table, LTIP Payouts, for payments under the plan for the performance period 1999-2000. |
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STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth
The graph presented below is a line graph comparingcompares the cumulative total stockholder return on the Corporation'sState Street's Common Stock to the cumulative total return of the S&P 500 Index and the S&P Financial Index for the period of five fiscal years which commenced December 31, 1994January 1, 1996 and ended December 31, 1999, assuming2000. The cumulative total stockholder return assumes the investment of $100 invested in the Corporation'sState Street's Common Stock and in each index on December 31, 19941995 and assumingassumes reinvestment of dividends. The S&P Financial Index is a publicly available measure of 7174 of the Standard & Poor's 500 companies, representing 3130 banking companies, 21 insurance companies and 1923 diversified financial services companies.
Comparison of Five-Year Cumulative Total Return
[performance graph]
Year Ended December 31
1994 1995 1996 1997 1998 1999
State Street Corporation $100 $160 $233 $423 $514 $540
S&P 500 Index 100 138 169 226 290 351
S&P Financial Index 100 154 208 308 344 357
| 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | |
| State Street Corporation | $100 | $146 | $265 | $321 | $337 | $577 |
| S&P 500 Index | 100 | 123 | 164 | 211 | 255 | 232 |
| S&P Financial Index | 100 | 135 | 200 | 223 | 232 | 292 |
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RETIREMENT BENEFITS
As of
Since January 1, 1990, the principal benefit formula under the
Corporation'sState Street's defined benefit plan (the "Retirement Plan") was
changed tohas been a cash balance formula. An accountUnder the cash balance was
established forformula, each participant equal to the then present value
of the participant's benefit earned to date. Each year thishas an account balancethat is increased annually 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.year. The contribution credit percentages
of base salary are 4.0% for the first year of participation increasing to 11.25% for the thirtieth year, and zero thereafter. EmployeesPrior to 2001 eligible compensation consisted of base salary. Effective January 1, 2001, eligible compensation also includes overtime, bonuses and commissions.In the case of participants with benefits accrued prior to January 1, 1990, the cash balance account included an opening balance equal to the then present value of the participant’s accrued benefit. In general, participants who were participantsemployees on December 31, 1989 will receive the greater of their account balance or the benefit derived from thea "grandfathered" formula if they retire from the plan. The
grandfathered formula, based onFor a participant with 30 years of service, the grandfathered formula is equal to a benefit of 50% of final average pay minus 50% of the estimated Social Security benefit. For periods of service of less than 30 years, the benefit is reduced pro rata.
Employees are enrolled in the Retirement Plan following the completion of one year of service and attainment of the age of 21. The normal retirement age is 65, although earlier retirement options are available. The Retirement Plan has a five-year vesting provision, and participants who are vested will receive their account balances or equivalent annuities if they leave the employ of the CorporationState Street or the Bank before retirement.
Under
In order to comply with federal law, an employee's benefits undertax rules, the Retirement Plan limits the benefit that a qualified
retirement plan are limited to certain maximum amounts. The
Corporationparticipant may receive and the amount of compensation that may be taken into account for any participant in any year. State Street has adopted a supplemental retirement plan, as amended (the "1987 Supplemental Plan") to supplement the benefits under the Retirement Plan by payment of additional retirement benefits out of general funds of the Corporation.State Street. Each of the Named Executive Officers is included in the 1987 Supplemental Plan.
Effective as of January 1, 1995 the Corporation
State Street has also adopted a supplemental defined benefit pension plan (the "1995 Supplemental Plan") to provide certain key employees with retirement benefits and encourage the continued employment of such employees with State Street. In general, the
Corporation. The 1995 Supplemental Plan provides for the payment of additionalan annual benefitsbenefit upon retirement at age 65 (or a proportionately reduced amount in the event of retirement onat or after the age of 55 but prior to the age of 65), calculated as a straight life annuity, equal to 50% of such participant's final average earnings (highest average of any 5 consecutive years' earnings, as defined therein, during the last 10 years of employment) less annual benefits paid to such participant from the Retirement Plan, the 1987 Supplemental Plan and other retirement income payable to such participant under other pension plans of the CorporationState Street or otherformer employers of the participant's employers. Suchparticipant. These benefits are subject to forfeiture in the event that the participant's employment with the CorporationState Street terminates for any reason prior to reaching age 55 or completing 10 full years of employment with the Corporation.State Street. In addition, such benefits
shall terminate if the participant engages in certain competitive activities within two years of termination. In June 1998For certain participants, the 1995 Supplemental Plan was amended primarilyalso contains special benefits provisions that may apply in lieu of or in addition to define earnings to
exclude annual incentive payments, except those under the Senior
Executive Annual Incentive Plan, to permit participants to choose
payment in installments over 5, 10 or 15 years and to set out an
administrative review procedure for claims and appeals as
required by ERISA.general provisions of the 1995 Supplemental Plan. Each of the Named Executive Officers participates in the 1995 Supplemental Plan. Under an agreement dated March 5, 1992, Mr. Carter willDecember 8, 1997, Ms. Bateman is entitled to receive an additional supplementary pension contribution as a percentage of
base compensationbenefits calculated as if a contribution had been made
to the Retirement Plan of 7.50% in the first year and 3.75% in
each of the next 15 years. In addition, the Carter Letter
Agreement (as defined below) provides, among other things, that
the forfeiture and termination provisions relating toconsistent with the 1995 Supplemental Plan willbut with an earnings replacement percentage of 25% after five years of service, with an additional 5% for each additional year of service up to ten, after which Ms. Bateman would be deemed inapplicable incovered by the event that
(i) Mr. Carter's employment is terminated for reasons other than
voluntary resignation, death or malfeasance before July 23, 2001
and (ii) he is not eligible for the
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severance benefits set forth in the change of control
arrangements described below. See - "Termination of Employment
and Change of Control Arrangements".
Final average earnings include annual base salary plus any
annual cash incentive compensation awards only.regular 1995 Supplemental Plan formula.
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As of December 31, 1999,2000, the credited years of service for each of the Named Executive Officers (except Mr. Carter, who has retired) were as follows: Mr. Carter, 7;Spina, 27; Mr. Spina,
26;Logue, 9; Mr. Lopardo, 11;12; Mr. Carleton, 20;Towers, 16, and Mr. Logue, 8.Ms. Bateman, 2. Current compensation covered by the Retirement Planthese retirement arrangements as of December 31, 19992000 for each of thethese Named Executive Officers was as follows: Mr. Carter, $1,880,380;Spina, $1,451,983; Mr. Spina, $1,175,000;Logue, $925,628; Mr. Lopardo, $1,169,663;$1,975,628; Mr. Carleton, $869,663,Towers, $663,013, and Mr. Logue, $828,277.Ms. Bateman, $622,750.
The estimated annual aggregate benefits (which are not subject to a deduction for Social Security), assumingexpressed as a single life annuity, payable upon normal retirement under the final
average pay formula to the Named Executive Officers (except Mr. Carter who has retired) assuming each continues to be employed by the CorporationState Street until age 65 at his annual base salary and cash incentive compensation at December 31, 19992000 are as follows: Mr. Carter, $984,381;Spina, $725,992; Mr. Spina,
$618,462;Logue, $462,814; Mr. Lopardo, $584,832;$987,814; Mr. Carleton, $434,832,Towers, $333,007, and Ms. Bateman, $312,802.
In recognition of Mr. Logue, $414,139.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The CorporationCarter's service to State Street, the Board of Directors authorized the full vesting as of January 1, 2001 of Mr. Carter's benefit under the 1995 Supplemental Plan and deemed him eligible to receive all applicable retirement benefits from plans in which he had been an eligible participant, resulting in a retirement benefit payment to Mr. Carter of $10,196,352, on February 1, 2001.
Termination of Employment and Change of Control Arrangements
State Street has employment agreements with Messrs. Carter, Spina, Logue, Lopardo, CarletonTowers, and LogueMs. Bateman which become operative following a change of control of the Corporation,State Street, as defined in the employment agreements. The employment agreements continue in effect while these executive officers are employed by the CorporationState Street and remain in effect for a period of two years after a change of control. If the employment of any of these executive officers iswere to be terminated involuntarily, other than for cause or by reason of disability, following a change of control, or if Mr. Carter's or Mr. Spina's employment is terminated
voluntarily within thirty days of the six-month period following
a change of control, or within thirty days of the twelve- month
period following a change of control for the other Named Executive Officers such executive officer would become entitled to various benefits under histhe employment agreement, including payment of three times the executive officer's base salary and bonus, unless the executive officer's employment was terminated
by the Corporation for cause orbonus. A termination by the executive officer withoutfor good reason, as defined in the agreement.agreement, following a change of control also results in entitlement to these benefits. The agreements provide that voluntary termination within a thirty-day window period following a specified number of months after a change of control will be treated for these purposes as a termination for good reason. If the executive officers each had been terminated in a qualifying termination on December 31, 1999,2000, they would have been entitled to receive the following amounts as severance pay: Mr. Carter, $6,741,000;Spina, $4,925,973; Mr. Spina, $4,355,949;Logue, $3,376,932; Mr. Lopardo, $5,926,884;$6,346,932; Mr. Carleton, $2,956,884;Towers, $2,448,111, and Mr. Logue,
$2,956,884.Ms. Bateman, $2,093,250. The Corporation will make additional payments in
amounts such that after the payment of income and excise taxes,employment agreements also entitle the executive officers willto additional gross-up payments to make up for taxes that may be inimposed under the same after-tax position as
if nochange-in-control payment excise tax under Section 4999provisions of the Internal Revenue Code
had been imposed.Code. Each of the outstanding agreements pursuant to which stock options and performance units were granted to Messrs. Carter, Spina, Logue, Lopardo, CarletonTowers, and LogueMs. Bateman by the CorporationState Street also contains provisions for acceleration of vesting of stock options and payment of performance units following a change of control. The employment agreement with Mr. Carter terminated as a result of his retirement.
Ms. Bateman’s December 8, 1997 agreement also provides in the event that her employment is terminated by her or by State Street without cause prior to December 2002, she will be entitled to severance benefits equal to one year’s salary plus bonus and to an annual benefit, calculated as a straight life annuity, of 15% of base salary and target bonus if termination occurs in 2001 and 20% if termination occurs in 2002.
State Street has an Executive Compensation Trust (the "Trust") to provide a source for payments required to be made to participants, including Messrs. Spina, Logue, Lopardo, Towers, and Ms. Bateman under the 1987
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Supplemental Plan and the 1995 Supplemental Plan. The Trust has been partially funded in the amount of $29,449,565. The Trust is revocable until a change of control occurs, at which time it becomes irrevocable.
A change of control is defined in the agreements to include the acquisition of 25% or more of the Corporation'sState Street'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, a merger or consolidation by State Street or the Corporationsale of substantially all of State Street's assets without certain approvals of the Board of Directors.
AMENDMENT OF THE RESTATED ARTICLES OF ORGANIZATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
On December 21, 2000, the Board of Directors approved the submission to the stockholders of an amendment to State Street's Restated Articles of Organization to increase the authorized Common Stock of State Street from 250,000,000 shares, $1 par value, to 500,000,000 shares, $1 par value.
As of February 28, 2001, there were outstanding 163,006,883 shares of Common Stock and an additional 4,217,940 shares were held in the treasury. Of the 82,775,177 authorized and unissued shares on that date, 10,528,847 shares were reserved for issuance under State Street's equity incentive plans, and 346,087 shares were reserved for issuance pursuant to the 7 3/4% Convertible Subordinated Debentures due 2008. As of February 28, 2001, there were 71,900,243 unissued shares available for issuance (giving effect to the reservation of shares for issuance).
Subject to the approval of the increase in the authorized shares of Common Stock, the Board of Directors also adopted a resolution approving a stock dividend of one share of Common Stock for each outstanding share of Common Stock, together with one Preferred Share Purchase Right as provided in the Restated Rights Agreement. A stock dividend of one share for each outstanding share of Common Stock will effectuate a two-for-one split of the Common Stock. The Board believes that a split of the Common Stock will tend to broaden the market for the stock, will encourage wider participation in the ownership of State Street and, accordingly, will be in the best interests of State Street and the salestockholders.
The Indenture of substantially allTrust under which State Street's 7 3/4% Debentures were issued contains provisions for the adjustment of the Corporation's assets.
The Corporation entered intonumber of shares of Common Stock to be issued upon conversion of the debentures, and State Street's equity incentive plans contain anti-dilution provisions following the payment of a letter agreement with Mr.
Carter (the "Carter Letter Agreement") that provides for
severance pay equalstock dividend.
If the proposed amendment to two years' salary and bonus if (i) his
employmentthe Restated Articles of Organization is terminated for reasons other than voluntary
resignation, death or malfeasance before July 23,approved by the stockholders, the close of business on April 30, 2001 and (ii)
he is not eligiblewill be the record date for the severance benefits set forthdetermination of stockholders entitled to receive distribution of the stock dividend. On or about May 30, 2001, there will be mailed to each stockholder a new certificate or certificates for one share of Common Stock for each share held of record on April 30, 2001, or a statement with respect to new shares held in book-entry form.
State Street is advised by its counsel that receipt of the changestock dividend will not result in any taxable income to stockholders for either federal or Commonwealth of control arrangements described above. In such
circumstances, forMassachusetts income tax purposes. For purposes of determining gain or loss on subsequent sale, a stockholder's tax basis for each share presently owned will be apportioned one-half to each share now owned and one-half to each share to be received in connection with the amount payableproposed stock dividend.
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The additional shares of Common Stock to Mr. Carter pursuantbe authorized by the amendment will be identical to the 1995 Supplemental Plan (i)shares of Common Stock now authorized and outstanding and will carry Preferred Share Purchase Rights. The increase in authorized shares will not affect the forfeitureterms or the rights of holders of existing shares of Common Stock. Depending on the circumstances, any subsequent issuance of Common Stock could have a dilutive effect on existing stockholders by decreasing the percentage ownership in State Street (for voting, distributions and termination provisions described above will be
deemed inapplicable, and (ii)other purposes) represented by existing shares of Common Stock. Holders of Common Stock have no preemptive rights.
The Board of Directors believes that it is advisable to have authorized shares of Common Stock in excess of those shares outstanding (including, if authorized, the benefits otherwise
19
payable thereunder will be reduced by multiplyingadditional Common Stock provided for in this proposal) available for general corporate purposes, such amounts by
a fraction, the numerator of which is the number of whole
calendar months Mr. Carter was employed by the Corporationas financings, acquisitions, additional stock dividends and the denominatoremployee benefit plans. The continued availability of which is 120. Such payments shall terminate
inshares of Common Stock provides State Street with the event that Mr. Carter becomes employed by oneflexibility to take advantage of various opportunities as they arise.
The additional shares of Common Stock as well as the previously authorized Preferred Stock, the employment and equity incentive plan agreements discussed above, the Rights Agreement and certain provisions of the top
five master trustBy-laws establishing procedures for stockholders to bring proposals or custody banks or onenominations before stockholders' meetings, the classified Board, restrictions on the calling of the top five mutual
fund custodians within two years of termination (the
"Non-Competition Clause"). The Carter Letter Agreement also
provides that in the event ofspecial stockholder meetings and stockholder action by written consent could, under some circumstances, be used to make a change of control of the
Corporation and termination of Mr. Carter's employment under
circumstances that entitle him to receive a severance payment
pursuant to the change in control arrangements described above
the 1995 Supplemental Plan will be modified in the manner set
forth above (except that the Non-Competition Clause will be
inapplicable), and Mr. Carter will be provided with a benefit
equivalent in value to that which he would have received had his
employment with the Corporation continued an additional three
years.
The Corporation has an Executive Compensation Trust (the
"Trust") to provide a source for payments required to be made to
participants, including Messrs. Carter, Spina, Lopardo, Carleton,
and Logue, under the 1987 Supplemental Plan and the 1995
Supplemental Plan and to Mr. Carter pursuant to the Carter Letter
Agreement. The Trust has been partially funded in the amount of
$17,529,382. The Trust is revocable until a change of control
occurs, at which time it becomes irrevocable. A change of
control is defined to include the acquisition of 25% orState Street more of
the Corporation's then outstanding stock or other change of
control as determined by regulatory authorities, a significant
change in the composition ofdifficult. On September 15, 1988, the Board of Directors merger or
consolidation by the Corporation withoutestablished a Rights Agreement (subsequently amended as of September 20, 1990 and amended and restated as of June 18, 1998) and pursuant thereto declared a dividend of one preferred share purchase right for each outstanding share of Common Stock. Under certain approvalsconditions, currently a right may be exercised to purchase one four-hundredth share of a new series of participating preferred stock at an exercise price of $265, subject to adjustment (including as a result of the Boardproposed stock split). The rights become exercisable if a party acquires or obtains the right to acquire 10% or more of Directors, andState Street's Common Stock or after commencement or public announcement of an offer for 10% or more of State Street's Common Stock. When exercisable, under certain conditions, each right also entitles the sale of substantially all of the
Corporation's assets.
APPROVAL OF AMENDMENT TO THE 1997 EQUITY INCENTIVE PLAN
On December 16, 1999, the Board of Directors adopted,
subjectholder thereof to stockholder approval, an amendment to the 1997 Equity
Incentive Plan, as amended ("1997 Plan") increasing the number of
shares available under the 1997 Plan by 7,900,000 (less than 5%
of total outstanding shares) to a total of 15,900,000. The Board
approved the increase in the number of shares reserved for
issuance under the 1997 Plan to ensure that the Corporation is
able to continue to make Awards at levels determined to be
appropriate by the Board and to meet the competitive situation
created by the varied compensation programs of other companies.
Under the 1997 Plan, an aggregate of 8,000,000purchase shares of Common Stock of either State Street or of the Corporation is currently authorized for
issuance. The maximum number of shares for which any individual
may be granted options or stock appreciation rights under the
1997 Plan duringacquiror having a calendar year is in each case 800,000. The
maximum number of shares (or their equivalent fair market value of two times the then current exercise price of the right.
Except for the Common Stock dividend authorized by the Board of Directors, State Street has no immediate plans to issue additional shares of Common Stock or Preferred Stock. The Board of Directors would have sole discretion to issue uncommitted shares of Common Stock from time to time for any corporate purpose, including in cash) that may be deliveredreaction to any individual under
performance awards made underunsolicited acquisition proposal, without further action by the 1997 Plan is 500,000. (The
8,000,000, 800,000, and 500,000 amounts arestockholders, subject to adjustment
upon certain occurrences.)requirements of corporate law and the New York Stock Exchange and other exchanges on which State Street's Common Stock is listed. The maximum Board is also authorized to issue shares of Preferred Stock without stockholder approval and any Preferred Stock issued would be senior to Common Stock with respect to dividends, liquidation rights and/or other attributes.
If the proposed amendment is not approved by the stockholders, the increase in authorized Common Stock will not take effect. In that event, the stock dividend will not be paid.
The Board of Directors unanimously recommends that you vote
FOR
this proposal to amend the Restated Articles of Organization to increase the authorized
number of shares of Restricted Stock that may be delivered under the Plan will not
exceed 40% of the total number of shares authorized for issuance.
No Awards may be made under the 1997 Plan after December 18,
2006.
As of February 1, 2000, an aggregate of 7,145,527 shares of
the Corporation's Common Stock had been granted under the 1997
Plan (net of canceled awards), and 854,473 shares (plus any
awards that might in the future be returned to the 1997 Plan as a
result of cancellations of awards or expiration of options)
remained available for future grants under the 1997 Plan.
The 1997 Plan is designed to advance the interests of the
Corporation and its stockholders by granting key employees of the
Corporation and its subsidiaries, non-employee directors and
other key persons, stock and
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stock-based awards (collectively, the "Awards"), including stock
options; restricted and unrestricted stock; deferred stock;
rights to receive cash or stock in connection with achievement of
performance goals ("Performance Awards"); tax-offset payments, or
rights to receive cash or stock in respect of increases in the
value of the Common Stock ("SARs"). The Board believes that the
Corporation's stock-based plans have contributed to the progress
of the Corporation by providing incentives to persons key to its
success. Intense competition among business firms for executives
and other key persons makes it important for the Corporation to
maintain an effective compensation program in order to continue
to attract, motivate, and retain persons necessary to further the
Corporation's growth. Competing compensation programs of other
companies make it important that the Corporation's program
continues and has maximum flexibility.
o The 1997 Plan is broad-based. Approximately 2,000
persons are eligible to participate in the Plan.
o The increase in the number of shares available under the
1997 Plan for which approval is sought is less than 5% of
the total outstanding shares of the Corporation'sState Street's Common Stock. o(Item 2 on your proxy card)
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APPROVAL OF THE SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN
The 1997 Plan does not permit repricing of options once
such options are granted.
o The maximum number of shares of restricted stock will not
exceed 40% of the total number of shares authorized for
issuance.
No determination has been made as to which individuals may
in the future receive options or rights under the 1997 Plan; as
to the number of shares, up to the maximum limit provided in the
Plan, to be covered by any such options or rights to a single
individual, or as to the number of individuals to whom such
options or rights will be granted. The proceeds received by the
Corporation from the sale of stock pursuant to the Plan will be
used for the general purposes of the Corporation, or in the case
of the receipt of payment in shares of Common Stock, asExecutive Compensation Committee (the "Committee") and the Board of Directors may determine,have approved and recommend for stockholder approval the Senior Executive Annual Incentive Plan (the "Annual Incentive Plan"), including redeliverythe business criteria on which the performance goals are to be based. The Annual Incentive Plan provides additional incentive to senior executives to achieve targeted levels of achievement. The Annual Incentive Plan is intended as a successor plan to the Senior Annual Incentive Plan previously approved by the stockholders in April 1997. If approved, the Annual Incentive Plan would be in effect for the 2002 plan year.
Stockholders are being asked to approve the material terms of the shares
received upon exercise of options.
SUMMARY OF THE 1997 PLAN
The following is a summary ofAnnual Incentive Plan, including the principal features ofbusiness criteria on which the 1997 Plan:
ADMINISTRATION; ELIGIBLE PERSONS. The 1997 Plan is
administered by a Committee of the Board of Directors (which
currently is the Executive Compensation Committee) consisting of
no fewer than two directors. During such times as the Common
Stock is registeredperformance goals are based and maximum awards payable, so that compensation under the Securities Exchange Act of 1934
(the "1934 Act") (and except as the Board otherwise determines),
all members of the Committee shallAnnual Incentive Plan may be "non-employee" directors
within the meaning of Rule 16b-3deductible by State Street under the 1934 Act and "outside
directors" as that term is used in Section 162(m) of the Internal Revenue Code. All membersFor a more complete discussion of the Committee serve at the pleasure
of the Board of Directors.
The Committee has full power, subject to the 1997 Plan, to
grant awards at such time or times as it chooses, determine the
size, type, and terms of any award, waive compliance with award
terms, and amend, cancel, and regrant awards. The Committee may
delegate authority to officers of the Corporation to grant Awards
to non-executive officers. Approximately 2,000 persons are
eligible to participate in the 1997 Plan.
STOCK OPTIONS. The 1997 Plan permits the granting of stock
options that qualify as incentive stock options under Section 422(b) of the Internal Revenue Code ("incentive options" or
"ISOs") and stock options that do not so qualify ("nonstatutory
options"). The option exercise price of each option shall be
determined by the Committee in its discretion but may not be less
than the fair market value of the Common Stock on the date the
option is granted. Once granted, an option cannot be repriced.
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The term of each option is fixed by the Committee but may
not exceed 10 years from the date of grant. On February 28,
2000, the closing price of the Common Stock on the New York Stock
Exchange, as reported in The Wall Street Journal, was $73.6875.
The Committee determines at what time or times each option
may be exercised. Options may be made exercisable in
installments, and the exercisability of options may be
accelerated by the Committee.
The option exercise price of options granted under the 1997
Plan must be paid in cash or, if the Committee so determines, by
delivery of shares of unrestricted Common Stock (including by
attestation of ownership)162(m), by delivery of an unconditional
broker's undertaking to deliver the exercise price, or a
combination of such methods of payment.
In the event of termination of employment by reason of
retirement permitted by a retirement plan, disability, or death,
except as the Committee may otherwise determine, an option may
thereafter be exercised in accordance with its terms for a period
ending one year after the last installment of the option becomes
exercisable or one year following retirement, death, or
disability, if later, subject to the stated term of the option.
If an optionee terminates employment for any reason other
than retirement permitted by a retirement plan, disability, or
death, or if a service relationship of a participant other than
an employee terminates for any reason, except as the Committee
may otherwise determine, his or her options will remain
exercisable, to the extent then exercisable, for three months (or
if the participant dies within such 3-month period, for one year)
following termination, subject to the stated term of the option.
STOCK APPRECIATION RIGHTS. The Committee may also grant
stock appreciation rights entitling the holder upon exercise to
receive an amount in any combination of cash or shares of Common
Stock (as determined by the Committee), measured in whole or in
part by reference to the appreciation since the date of grant in
the value of the shares of Common Stock covered by such right.
Stock appreciation rights may be granted separately from or in
tandem with the grant of an option. Each tandem stock
appreciation right terminates upon the termination or exercise of
any accompanying option.
In addition to stock appreciation rights exercisable at the
discretion of the holder, the Committee may also determine in its
sole discretion that, if so requested by an option holder, the
Corporation will pay the optionee, in cancellation of the related
option, any combination of cash or Common Stock, equal to the
difference between the fair market value of the shares covered by
the option and the exercise price.
RESTRICTED STOCK AND UNRESTRICTED STOCK. The Committee may
also award shares of Common Stock subject to such conditions and
restrictions as the Committee may determine ("Restricted Stock").
The Committee may require that recipients of Restricted Stock
enter into a Restricted Stock Award agreement with the
Corporation setting forth the terms and conditions of the Award,
or may establish the terms and conditions of the Award in some
other manner. The Committee may at any time waive the
restrictions and conditions applicable to a Restricted Stock
Award. Shares of Restricted Stock are non-transferable and
except as otherwise provided by the Committee, if a participant
who holds shares of Restricted Stock terminates employment for
any reason other than death or disability prior to the lapse or
waiver of the restrictions, the Corporation will have the right
to require the forfeiture or repurchase of the shares in exchange
for the amount, if any, which the participant paid for them.
Except as determined by the Committee, Restricted Stock will vest
(i.e., become free of restrictions under the 1997 Plan) in the
event of death or disability. Prior to the lapse of restrictions
on shares of Restricted
22
Stock, the participant will have all rights of a stockholder with
respect to the shares, including voting and dividend rights,
subject only to the conditions and restrictions generally
applicable to Restricted Stock.
The Committee may also grant shares (for a purchase price
not less than par value) which are free from any restrictions
under the 1997 Plan ("Unrestricted Stock"). Unrestricted Stock
could be issued in recognition of past services or in other
circumstances where the Committee determines the grant to be in
the best interests of the Corporation.
Restricted Stock or Unrestricted Stock may be issued under
the 1997 Plan in payment of Awards under the Senior Executive
Annual Incentive Plan described insee the Report of the Executive Compensation Committee.
DEFERRED STOCK. The Committee may also make Deferred Stock
awards underat page 14. Approval by stockholders of the 1997Annual Incentive Plan entitling the recipient to receive
shares of Common Stock in one or more installments at a future
date or dates, as determined by the Committee. Receipt of
Deferred Stock may be conditioned on such matters as the
Committee shall determine, subject to acceleration in the
Committee's discretion. Except as otherwise determinedand certification by the Committee all suchthat targeted performance has been achieved are each a condition to the rights to which a participant is not
irrevocably entitled will terminate upon the participant's
termination of employment.
PERFORMANCE AWARDS. The Committee may also award
Performance Awards entitling the recipientsenior executives to receive sharesany benefits under the Annual Incentive Plan. The following is a description of Common Stock or cash inthe Annual Incentive Plan:
Eligible Participants
The Chief Executive Officer and such combinationsother key executives as the Committee may determine, updesignate participate in the Annual Incentive Plan. To receive an award with respect to a maximum of 500,000 shares (or their equivalent
value in cash) to any individual over the life of the 1997 Plan.
Payment of the Performance Award may be conditioned on
achievement of individual, corporate, departmental or other
performance goals and will be subject to such other conditions ascalendar year, unless the Committee shall determine. Except asdetermines otherwise, determineda participant must be an employee of State Street, or one of its subsidiaries, on December 31 of such year. If, however, an individual is no longer an employee of State Street or one of its subsidiaries at the time awards are approved by the Committee, rights under a Performance Award will terminate
upon a participant's termination of employment.
Performance Awardsthe Committee in its discretion may cause any award otherwise payable under the 1997 Plan that are intended to
qualify as performance-based compensation under Section
162(m)(4)(C)terms of the Internal Revenue Code ("exempt awards") must
provide for payment solely upon attainmentAnnual Incentive Plan to be forfeited. State Street has 6 executives who are eligible to participate.
Performance Goals
Corporate achievement of one or more objectively determinable performance goals established by the Committee (in accordance withdetermines whether, and the rules under Section 162(m)extent to which, a participant earns his or her award. The goals are based on any or any combination of the Internal Revenue Code) basedfollowing determined on a consolidated basis or on the basis of one or more of the following
performance criteria: (i)divisions, subsidiaries or business units: earnings or earnings per share, return on equity, (ii) earnings per
share, (iii) the Corporation's total stockholder return, duringrevenue, market share, quality/service, organizational development, strategic initiatives and risk control. No payments under an award will be made under the Annual Incentive Plan unless the performance period compared to the total stockholder return
of a generally recognized market reference (e.g., the S&P 500goals are met or the S&P Financial Index), (iv) revenue growth, (v) operating
leverage, or (vi) market share. To the extent consistent with
the exemption rules under Section 162(m) of the Internal Revenue
Code, the Committee may provide thatexceeded. Once established for an award period, performance goals willmay not be adjustedmodified except to eliminate the effect ofreflect extraordinary items (as
determined(determined in accordance with generally accepted accounting principles) or changes in the Common Stock by reasonstock of aState Street (such as stock dividend, stock split, extraordinary dividend or similar event.
SUPPLEMENTAL GRANTS. In connection with Awards under the
1997 Plan, the Committee may at any time grant to a participant
the right to receive a cash payment in up to the amount estimated
to be necessary to cover federal, state, and local income taxes
with respect to such Award and with respect to the cash payment
itself.
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS, ETC. The
Committee is required to make appropriate adjustments in
connection with outstanding Awards to reflectsplits, stock dividends stock splits, and similar events, including distributions to
stockholders other than normal cash dividends. In the event of a
merger, acquisition, disposition, or similar corporate
transaction or a material change in law or accounting principles
or practices, the
23
Committee in its discretion may also provide for appropriate
adjustments. No adjustments will be made to the extent they
would adversely effect the ISO or Section 162(m) qualification of
Awards.
Except as provided by the Committee at time of grant, in the
event of a consolidation or merger in which the Corporation is
not the surviving corporation or which results in the acquisition
of substantially all of the outstanding Common Stock by a single
person or entity or by a group of persons and/or entities acting
in concert, or in the event of the sale or transfer of
substantially all of the Corporation's assets or a dissolution or
liquidation of the Corporation, unvestedrecapitalizations).
Awards and Awards not
yet exercisable will be forfeited unless the Committee makes the
Award vested and free of restrictions (and exercisable, if the
Award requires exercise) or, in the case of a participant who
will be employed by or otherwise providing services to a
surviving or acquiring entity, provide for assumption of the
Award by such entity or for the grant of a substitute Award. In
all events, in the event of a "Change of Control" (as defined in
the 1997 Plan) of the Corporation, options and SARs shall become
exercisable, Restricted Stock shall vest, and holders of
Performance Awards shall be entitled to a cash payment in such
amount as shall be specified in the Award. After such a Change
of Control, options and SARs shall remain exercisable following a
termination of employment or other service relationship (other
than in the event of death, retirement or disability) for seven
months or until the expiration of the original term of the Award
if earlier. Neither the Committee nor the Board may impose
additional conditions on exercise or otherwise amend an Award
without the holder's written consent. Stock may be substituted
for cash in certain circumstances where cash payments would
result in adverse accounting treatment.
Certain tax payments. The Corporation will withhold
applicable taxes from any cash payment made pursuant to an Award.
In the case of Awards involving Common Stock, the Committee may
require the participant to remit an amount equal to the required
tax withholding or make other arrangements satisfactory to the
Committee for the payment of such taxes. The Committee may
permit shares to be withheld from an Award, or may permit the
participant to deliver shares, with a value equal to the required
withholding. In the case of an ISO, the Committee may require
that the participant agree to provide for withholding taxes if a
withholding obligation arises at time of exercise or in the
future.
TRANSFERABILITY OF AWARDS. In general, Awards under the
1997 Plan are nontransferable except in the event of death.
However, the Committee in its discretion may permit transfers to
other persons or entities.
NONCOMPETITION, ETC.
The Committee may provide for varying levels of payment under an award depending on whether performance goals have been met or exceeded and may reduce, including to zero, amounts otherwise payable under an award. No more than $7,500,000 shall be payable under an award to any one individual for any award year. All payments will be made in connection with any Awardcash except that the participant's rights to
enjoymentCommittee may provide that a certain portion of the Award or to any cash or Common Stock deliverable
under the Awardpayment be conditioned upon the participant's agreeing
(on terms determined by the Committee) not to compete with the
Corporation and its subsidiaries, not to disclose confidential
information, and not to solicit employees, advisors or business
from the Corporation and its subsidiaries.
AMENDMENT AND TERMINATION. The Committee may at any time
amend or discontinue the 1997 Plan or amend Awards for the
purpose of satisfying changesmade in the law or for any other lawful
purpose. However, no such action shall adversely affect any
rights under outstanding awards without the holder's consent.
Moreover, any amendment requiring stockholder approval for
purposes of satisfying any then-applicable incentiveState Street stock option
rules or Section 162(m) rules shall be subject to such
stockholder approval to the extent then required.
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FEDERAL INCOME TAX CONSEQUENCES
The Corporation is advised that under the federal income tax
laws as now in effect, the income tax consequences associated
with stock options awarded under the 1997 Plan are, in summary,
as follows:
INCENTIVE OPTIONS. No ordinary taxable income is realized
by the optionee upon the grant or exercise of an ISO. If no
disposition of shares issued to an optionee pursuant to the exercise of an ISO is made by the optionee within two years from
the date of grant or within one year after the transfer of such
shares1997 Equity Incentive Plan. A participant may elect to the optionee, then (a) upon sale of such shares, any
amount realized in excess of the option price (the amount paid
for the shares) will be taxed to the optionee as a long-term
capital gain and any loss allowed for tax purposes will be
long-term capital loss, and (b) no deduction will be allowed to
the Corporation. The exercise of an ISO will, however, increase
the optionee's alternative minimum taxable income and may result
in alternative minimum tax liability for the optionee.
If shares of Common Stock acquired upon the exercise of an
ISO are disposed of by the optionee prior to the expiration of
the two-year or one-year holding periods described above (a
"disqualifying disposition"), generally (a) the optionee will
realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the
shares at exercise (or, if less, the amount realized on a sale of
such shares) over the option price thereof, and (b) a
corresponding deduction will be available to the Corporation.
Any further gain recognized will be taxed as short-term or
long-term capital gain and will not result in any deduction by
the Corporation Special rules may apply wherehave all or a portion of an award deferred under deferral rules which may be established by the exercise priceCommittee.
24
All awards will be made only after certification by the Committee that the performance goals have been achieved.
Administration
The Committee has complete discretion to construe and administer the Annual Incentive Plan and to determine eligibility to participate, the performance goals, achievement of the ISOperformance goals, the amount of payment to be made under an award and to do everything else necessary to carry out the Annual Incentive Plan.
Amendment and Termination
The Committee may amend the Annual Incentive Plan or the awards, provided that any amendments must be consistent with qualification under Section 162(m). The Committee may terminate the Annual Incentive Plan at any time.
Messrs. Spina, Logue, Lopardo, Towers, Ms. Bateman and one additional executive have been designated as participants in the Annual Incentive Plan for 2001. The awards which would be payable in the future under the Annual Incentive Plan cannot be determined because the payment of such awards would be contingent upon attainment of the pre-established performance goals and the actual award may reflect exercise of the Committee's discretion to reduce the award otherwise payable upon achievement of the performance goals. For a description of and amounts paid for 2000 under the current Senior Executive Annual Incentive Plan, see the Annual Bonuses section of the Report of the Executive Compensation Committee and the Summary Compensation Table.
If the proposal is paidnot approved, the plan will be reconsidered by tenderingthe Board of Directors.
The Board of Directors unanimously recommends that you vote
FOR
adoption of the Senior Executive Annual Incentive Plan. (Item 3 on your proxy card)
STOCKHOLDER PROPOSAL
STOCKHOLDER PROPOSAL ON MODEL CORPORATION ACT
Patrick Jorstad, of 1851 North Scott Street, #156, Arlington, Virginia, 22209, owner of 108 whole shares of Common Stock. A disqualifying disposition will eliminate the
alternative minimum taxable income adjustment associated with the
exerciseStock as of the ISO if it occurs in the same calendar year as the
year in which the adjustment occurred.
If an ISO is exercised at a time when it no longer qualifies
for the tax treatment described above, the option is treated as a
nonstatutory option. Generally, an ISO will not be eligible for
the tax treatment described above if it is exercised more than
three months following termination of employment (one year
following termination of employment, in the case of termination
by reason of permanent and total disability), except in certain
cases where the ISO is exercised after the death of the optionee.
Options otherwise qualifying as ISOs will also be treated for
federal income tax purposes as nonstatutory options to the extent
they (together with other ISOs held by the optionee) first become
exercisable in any calendar year for shares having a fair market
value, determined at the time of the option grant, exceeding
$100,000.
NONSTATUTORY OPTIONS. With respect to nonstatutory options
under the 1997 Plan, no income is realized by the optionee at the
time the option is granted. Generally, (a) at exercise, ordinary
income, subject (in the case of options granted to an employee)
to withholding, is realized by the optionee in an amount equal to
the difference between the option price and the fair market value
of the shares on the date of exercise, and a corresponding
deduction will be available to the Corporation, and (b) any gain
or loss recognized upon a later sale is treated as capital gain
or loss, either short-term or long-term depending on the
applicable holding period for the sale.
CERTAIN LIMITATIONS. Section 162(m) of the Internal Revenue
Code limits to $1 million the deduction a public corporation may
claim for remuneration paid to any of its five top officers,
subject to a number of exceptions and special rules. Eligible
performance-based compensation is exempt from this limit. The
Corporation intends that compensation associated with the
exercise of stock options (and stock appreciation rights) awarded
under the 1997 Plan will qualify for this performance-based
exemption.
25
The Internal Revenue Code also limits the amount of
compensation that may be paid without penalty in connection with
a change of control. In general, if the total of an individual's
change-of-control related compensation equals or exceeds three
times his or her average annual taxable compensation (determined,
in general, over the five calendar year period preceding the
calendar year in which the change in control occurs),
change-of-control related payments in excess of that annual
average are nondeductible and subject to an additional 20% tax.
In making this determination, some portion or all of the value of
options and other awards granted or accelerated in connection
with a change of control may be required to be taken into
account.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE AMENDMENT OF THE 1997 EQUITY INCENTIVE PLAN. (ITEM 2 ON
PROXY CARD)
STOCKHOLDER PROPOSAL
The CorporationFebruary 28, 2001, has been advised that a stockholder of the
Corporation intends to presentsubmitted the proposal set forth below for consideration atinclusion in the Annual Meeting.proxy statement. In accordance with applicable proxy regulations, the Corporation is not responsible
for the contents of the proposed resolution and supporting statement, for which expresses the opinionBoard of the proponent onlyDirectors and is included exactly as
submitted by the proponent.
STOCKHOLDER RESOLUTION
"NOTING with alarmState Street accept no responsibility, are set forth below.
Stockholder Resolution
Believing that the Corporation has taken alarming steps in recent years to restrict
and limitthe free exchange ofrelevantimportant informationbetween andamong shareholders(here, footnote 1: For instance, at the 1999 Annual Meeting of Stockholders, unprecedented restrictions were placed on questions from the audience, members of the media were prohibited from asking questions, and the distribution of materials between stockholders was prohibited. end footnote)regarding their mutual interests in theCorporation; BELIEVINGCorporation (See Note 1 below);
Believing that the free exchange of information
between andamong shareholders, and between shareholders and the Board of Directors, is conducive to the most desirable and efficient corporate governance regime;COGNIZANTCognizant that the Revised Model Business Corporations Act (as
amended)amended; hereinafter, "the RMBCA") provides best practices for corporate governance of domestic U.S. stock corporations;FURTHER COGNIZANTand25
Realizing that the
Revised Model Business Corporations Act (hereinafter "RMBCA")RMBCA secures and guarantees many shareholder rights and privileges that are in keeping with the free and unfettered exchange of relevant information of mutual interest toshareholders; BE IT HEREBY RESOLVED THAT:shareholders,Be it hereby resolved that:
It is the sense of the shareholders of the Corporation that the Board of Directors should, with all diligent speed, adopt a standing policy that the
Revised Model Business Corporations Act (as amended)RMBCA shall govern the conduct of the Corporation in all such instances where it is not in direct conflict with the Corporation's By-laws or applicable state or federal laws. It is the further sense of the shareholders that such a policy, if adopted, should be incorporated into the By-laws of the Corporation.
Regardless of the outcome of the vote, this proposal shall be non-binding on the Corporation's Board of Directors, and shall be considered only to be advisory of the sense of the shareholders.
" 26
Note 1: The first paragraph of the proposal constitutes an opinion. Shareholders who wish to vote in favor of the recommended course of action espoused by the proposal need not share the opinion expressed in the first paragraph.
Supporting Statement
- In its debut last year, this proposal garnered 11,228,250 shares in its favor. This constituted approximately 9.7% of the eligible votes that were cast. The SEC only requires a proposal to attain 3% of the eligible votes in its first year to be eligible for resubmission the second consecutive year. In effect, the proposal garnered more than triple the minimum threshold of support it needed in its first year.
- Among the institutional investors known to have voted in favor of the proposal is the California Public Employees’ Retirement System (CalPERS), which issued a written explanation last year of its decision to vote 879,100 shares in favor of the proposal.
- In support of the opinion expressed in the first paragraph:
- Beginning at the 1999 Annual Meeting, and once again at the 2000 Annual Meeting, restrictions have been placed on questions and input from shareholders in attendance;
- Members of the media have been prohibited from asking questions at all; and
- The distribution of stockholder handouts has been prohibited.
- Finally, the Chairman of the Corporation, in knowing violation of Rule 14a-8(h), failed to permit this proposal's sponsor to present it during the 2000 Annual Meeting. Rule 14a-8 is the federal regulation under which a duly qualified shareholder of the Corporation is authorized to submit a proposal such as this one.
- For more information: http://www.listen.to/the_shareholders.
BOARD OF DIRECTORS'DIRECTORS’ RESPONSE
The proposal requests a standing policy that the Model Business Corporation Act is to govern the conduct of State Street in all instances where it is not in "direct conflict" with State Street's By-laws or applicable state or federal law. The concept of "direct conflict" is subject to different interpretations, and we believe the application of the proposal to the functioning of State Street is not understandable or workable.
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In addition, we believe it is not the proper role or a useful function of the officers and directors of State Street to analyze differences between state law and a model act to determine whether there are conflicts and to attempt to figure out whether the state law or a model act is to apply to actions with respect to the governance of State Street.
Stockholders of State Street are entitled to look to Massachusetts law for the rules governing State Street, which statutory rules could only be changed by the Massachusetts legislature. We believe that attempting to impose a model statutory scheme over a completely different state statute is not in the best interest of State Street or its stockholders.
State Street, a Massachusetts business corporation, is a bank holding company and was organized in 1970. It conducts its business principally through its subsidiary, State Street Bank and Trust Company, which traces its beginnings to the founding of the Union Bank in Massachusetts in 1792. The charter under which the Bank now operates was authorized by a special act of the Massachusetts legislature in 1891. The Corporation is governed
by Chapter 156B of the General Laws of the Commonwealth of
Massachusetts. Chapter 156B, the "Massachusetts Business
Corporation Law", was adopted in 1965.
The Corporation'sState Street has Articles of Organization have been amended
and restated by action of the stockholders since 1970, most
recently by an amendment in 1997. The Corporation likewise has
an encompassing form of By-laws covering the manner and procedures for operation of the organization. The Corporation's
By-laws were first adopted by the stockholders in 1970,Articles of Organization and have
beenBy-Laws are amended several times since then, most recently in 1992.
The Corporationand updated whenever appropriate.
We believe that State Street has clear rules for the conduct of its Annual Meetings which are intended to benefit all of the stockholders present at the meeting.
The Model Business Corporation Act (the "MBCA"Board of Directors unanimously recommends that you vote
AGAINST
this stockholder proposal. (Item 4 on your proxy card), drafted
STOCKHOLDER PROPOSAL ON CERTAIN RULES ON THE CONDUCT OF STOCKHOLDER MEETINGS
Patrick Jorstad, of 1851 North Scott Street, #156, Arlington, Virginia 22209, owner of 108 whole shares of Common Stock as of February 28, 2001, on his own behalf and since revisedon behalf of Mr. Jim Mulvey of 397 Main Street, #2, Charlestown, Massachusetts 02129, who is stated to be the owner of 75 shares of Common Stock; Mr. David Smith of 1851 North Scott Street, #156, Arlington, Virginia 22209, who is stated to be the owner of 1 share of Common Stock, and Mr. Todd Wesche of 105 Governor Winthrop Road, Somerville, Massachusetts 02145, who is stated to be the owner of 1 share of Common Stock, has submitted the proposal set forth below, for which the Board of Directors and State Street accept no responsibility:
Stockholder Resolution
Resolved by the
Committee on Corporate Lawsshareholders of State Street Corporation, that the Corporation’s By-laws shall be, and hereby are to be, amended to include the following new sections:Article I, Section 9. Date of Meeting. The Board of Directors shall schedule all annual meetings and special meetings of the stockholders to fall on a Monday or a Friday, to accommodate those shareholders who must travel to attend. The power to call annual and special meetings set forth in Article I, Section 1 ("Annual Meeting") and Article I, Section 2 ("Special Meeting") is to be exercised in conformity with this Section 9.
27
Article I, Section 10. Guest Policy. Every shareholder entitled to attend an annual or special meeting of
Business Lawstockholders may bring one guest of his or her choosing. This guest may include the shareholder’s attorney. A shareholder may bring more than one guest to an annual or special meeting if permission to do so is granted, in writing, no later than 30 days prior to said meeting by the Secretary of theAmerican Bar Association,Corporation. Permission to bring more than one guest shall be granted at the sole discretion of the Secretary of the Corporation. No guest of a shareholder isdesignedpermitted to address the assembly, except as provided in Section 11. Nothing in this Section 10 shall be construed to prohibit a guest of the Board of Directors from addressing the assembly.
Article I, Section 11. Addressing the Assembly. Every shareholder of the Corporation, whether holding his or her stock of record or beneficially, is entitled to address the assembly at an annual or special meeting of stockholders, to ask questions about each item of business to be considered at such a meeting, and to participate in the meeting. Any shareholder who is the proponent of a proposal pursuant to Exchange Act Rule 14a-8 (or successor rule), Exchange Act Rule 14a-4 (or successor rule), or Article I, Section 7 of these By-laws shall be permitted to address the assembly from the podium with respect to his or her proposal, for a length of time not to exceed five minutes. In the discretion of the presiding officer, this timeframe may be extended. Following the presentation of his or her proposal, such a proponent may entertain and answer questions for up to five additional minutes concerning his or her proposal. This timeframe, too, may be extended in the discretion of the presiding officer. The presiding officer shall have the discretionary power to interrupt or stop the presentation of the proposal or the question and answer session, if the proponent’s remarks become inappropriate. The presiding officer shall exercise this discretion sparingly, and shall explain in detail why he or she interrupted or stopped the proponent’s remarks, giving the proponent the opportunity to continue if appropriate. A proponent may cede part or all of his or her time to another shareholder or to his or her guest, to address the assembly from the podium with respect to his or her proposal. All persons who address the assembly must give his or her name, and confirm that he or she is a shareholder or otherwise authorized to address the assembly.
Article I, Section 12. Stenographic Record of the Meeting to be Made. For each annual and special meeting of the stockholders, the Corporation shall employ the services of a trained stenographer. This person shall make a stenographic record of the meeting, which shall be incorporated into the minutes of the meeting.
Article I, Section 13. Audiovisual Record of the Meeting to be Made. For each annual and special meeting of the stockholders, the Corporation shall employ the services of a trained audiovisual professional. This person shall make an audiovisual record of the meeting, which shall be incorporated into the minutes of the meeting.
Article I, Section 14. Stenographic Record and Audiovisual Records of Annual and Special Meetings to be Made Available to Shareholders. The stenographic and audiovisual records created pursuant to Article I, Sections 12 and 13 shall be made available to any shareholder of the Corporation upon request. The Corporation shall promptly deliver accurate copies of these records to the requesting shareholder’s address, at his or her prepaid expense, at a cost not to exceed fifty dollars ($50.00), exclusive of shipping charges.
Article I, Section 15. Preliminary Votes to be Announced. At every annual or special meeting of stockholders, the presiding officer shall, before soliciting a final vote and/or changes in votes on each item to be considered at the meeting, call on his or her designee to announce the preliminary vote on that item. With respect to shareholder proposals to be considered pursuant to Exchange Act Rule 14a-8 (or successor rule), Exchange Act Rule 14a-4 (or successor rule), or Article I, Section 7 of these By-laws, the presiding
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officer may not call for the preliminary vote until after the proponent or his or her designee has been given the opportunity to address the assembly from the podium, pursuant to Article I, Section 11.
Article I, Section 16. Controlling Entry to the Meeting. For the purpose of restricting entry to an annual or special meeting of stockholders to those entitled to attend, the Board of Directors shall exercise its right, pursuant to Exchange Act Rule 14a-13 (or successor rule), to obtain all security position listings (the so-called "Cede breakdowns") and non-objecting beneficial owner lists (the so-called "NOBOs") that would serve to establish said right to attend. For an annual meeting of stockholders, these lists must be requested as of the record date for the meeting, and must be available to shareholders of the Corporation for inspection and copying from five days after the record date for the annual meeting until the date of the annual meeting itself. Any beneficial owner whose name appears on these lists shall be admitted to the meeting upon showing photo identification, in lieu of presenting a valid proxy in his or her own name, and shall be treated in all respects during the meeting as if he or she had presented a valid proxy in his or her own name. No shareholder whose name appears on these lists as a
free-standing generalbeneficial owner of the Corporation’s stock shall be required to produce further proof of ownership as a pre-condition to admittance to the meeting, nor shall he or she be prohibited from addressing the assembly or bringing a guest of his or her own choosing.Article I, Section 17. Board of Directors to be Reasonably Available During Meeting and After Adjournment of Meeting. The Board of Directors may not have its first meeting following the annual meeting of stockholders until at least two hours after the final adjournment of said annual meeting. This Section 17 is meant to restore the regular practice outlined at Article II ("Directors"), Section 5 ("Regular Meetings"). The ordinary practice outlined at Article II, Section 5 calls for the first regular meeting of the Board of Directors to take place, without notice, on the day following the annual meeting of stockholders. The Board of Directors shall make themselves reasonably available to the shareholders they represent for at least two hours after the final adjournment of the annual meeting of stockholders, so that shareholders may have a reasonable opportunity to communicate directly with the Board. The Board of Directors shall also be reasonably available to answer questions during an annual or special meeting of stockholders. The power to hold regular meetings of the Board of Directors outlined at Article II, Section 5 shall be exercised in conformity with this Section 17.
Article I, Section 18. Questions to be Answered Forthrightly. At every annual and special meeting of stockholders, the presiding officer shall do his or her best to answer all questions posed to him or her about an item of business forthrightly. To aid the presiding officer in doing so, he or she may confer with a member or members of the Board of Directors, a corporate
model statuteofficer, legal experts, independent auditors, or similar experts before answering. The presiding officer may also yield the floor to any of these persons to answer the question. In extreme cases, the presiding officer may call a short recess or adjournment of the meeting, to consult with his or her advisors before answering. No shareholder shall be ruled out of order for asking a question thatcanis germane to any item of business to beenacted substantiallyconsidered at the meeting. The presiding officer may, inits entirety byhis or her discretion, limit each shareholder to astate legislaturereasonable number of questions on each item of business (said reasonable number not to be set at fewer than three questions, per shareholder, per item of business). Before soliciting a final vote on any item to be considered, the presiding officer shall inquire whether there are questions from the floor, and if so, shall entertain all such questions before soliciting a final vote and/or changes in votes.Article I, Section 19. Candidates for Board of Directors to be Considered as Separate Items of Business. Each candidate nominated for the Board of Directors shall be voted upon as a separate item of business. The presiding officer is prohibited from moving the Corporation’s slate of directors as a single item of business.
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Article I, Section 20. Shareholders Permitted to Hand Out Materials at Meetings. Every shareholder entitled to attend an annual or special meeting of stockholders may hand out materials to other shareholders at the meeting, if said materials are related to an item of business to be considered at that
state's general corporation statute. Whilemeeting, and if said materials do not constitute a solicitation of proxies within theMBCA has been adoptedmeaning of Exchange Act Rule 14a (or successor rule).
BOARD OF DIRECTORS’ RESPONSE
The proposal would impose extensive and detailed requirements about the conduct of State Street’s stockholder meetings and we believe would inappropriately limit the Chairman’s discretion to conduct meetings expeditiously and in full or substantial part by several states, others
have adopted only selected provisions or nonethe interest of its provisions.
The Massachusetts Business Corporation Law is not based upon the
MBCA, but is instead an adaptation of Massachusetts' long
standing general corporation statute.
The stockholder proposal requests a standing policyall stockholders. We believe that the MBCAproposal is to governaimed at redressing personal grievances. Two of the proposal’s co-sponsors (Mr. Jorstad and Mr. Smith) have separately sued State Street in connection with the conduct of the Corporation in all instances
where it is not in "direct conflict" with the Corporation's
By-laws or applicable state or federal law. The concept of
"direct conflict" is subject2000 Annual Meeting.
State Street conducts its meetings under customary guidelines that are intended to varying interpretations,maintain order and we
believe the application of the proposal to the functioning of the
Corporation's operations is not understandable or workable.
Even were this not the case, we believe it is not the proper
role or a useful function of the officers and directors of the
Corporation to analyze differences between state law and a model
act to determine perceived conflicts and to attempt to ascertain
whether the law of its state of incorporation or a model act is
to apply to actions with respect to the governance of the
Corporation.
Stockholders of a Massachusetts corporation are entitled to
look to Massachusetts lawexpeditiously conduct business for the rules governingbenefit of all stockholders present at the Corporation, which statutory rules could only be changed by the
Massachusetts legislature.meeting. We believe that attemptingthe preservation of such discretion is preferable to superimpose a comprehensive model statutory scheme over a
completely different comprehensive state statute is not in the
best interestdetailed rules designed to serve personal interests.
The Board of the Corporation or its stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
Directors unanimously recommends that you vote
AGAINST THIS PROPOSAL. (ITEM 3 ON THE PROXY CARD)
The Corporation will provide the name and address of the
proponent of the
this stockholder proposal and the number of shares
the stockholder holds upon oral or written request for such
information to the Corporate Secretary.
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proposal. (Item 5 on your proxy card)
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Examining and Audit Committee, has selected Ernst & Young LLP as independent auditors for the CorporationState Street for the year ending December 31, 2001. Ernst & Young LLP acted as independent auditors for State Street for the year ended December 31, 2000. It is expectedWe expect that representatives of Ernst & Young LLP will be present at the Annual Meeting to respond to appropriate questions, and they will have the opportunity to make a statement if they so desire.
Fees to State Street and its subsidiaries for professional services rendered by Ernst & Young LLP during 2000 were as follows: Audit Fees: $.7 million; Audit-Related Fees: $1.5 million; Financial Information Systems Design and Implementation Fees: $1.5 million, and All Other Fees: $4.2 million. Financial information systems design and implementation fees consisted entirely of fees billed by the former Ernst & Young consulting group prior to its sale on May 27, 2000, to Cap Gemini, an independent French public company. In connection with the advisory or custodial services State Street provides to mutual funds, exchange traded funds, and other collective investment vehicles, State Street from time to time selects, and in limited circumstances employs, outside accountants to perform audit and other services for the investment vehicles. In such cases, State Street typically uses a request-for-proposal process which has resulted in the selection of various outside auditors, including Ernst & Young LLP. Fees paid to Ernst & Young in such circumstances are not included in the totals provided above.
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REPORT OF THE AUDIT COMMITTEE
The Examining and Audit Committee (the "Audit Committee") of the Board of Directors, which consists entirely of directors who meet the independence and experience requirements of the New York Stock Exchange, has furnished the following report:
On behalf of State Street’s Board of Directors, the Audit Committee oversees a comprehensive system of internal controls to ensure the integrity of the financial reports and compliance with laws, regulations, and corporate policies.
Consistent with this oversight responsibility, the Audit Committee has reviewed and discussed with management the audited financial statements for the year ended December 31, 2000. Ernst & Young LLP, State Street's independent auditors, issued their unqualified report dated January 17, 2001 on State Street's financial statements.
The Audit Committee has also discussed with Ernst & Young LLP the matters required to be discussed by AICPA Statement on Auditing Standards No. 61, "Communication with Audit Committees". The Audit Committee has also received the written disclosures and the letter from Ernst & Young LLP required by Independence Standards Board Standard No. 1, "Independence Discussions with Audit Committees," and has conducted a discussion with Ernst & Young relative to its independence. The Audit Committee has considered whether Ernst & Young LLP’s provision of non-audit services is compatible with its independence.
Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that State Street's audited financial statements for the year ended December 31, 2000 be included in the Annual Report on Form 10-K for the fiscal year then ended.
| Submitted by, | |
| John M. Kucharski, Chair | |
| Tenley E. Albright | |
| I. MacAllister Booth | |
| Charles R. LaMantia | |
PROPOSALS AND NOMINATIONS BY STOCKHOLDERS
Stockholders who wish to present proposals atfor inclusion in State Street's proxy materials for the 20012002 Annual Meeting of Stockholders for inclusion in the Corporation's
proxy material for that meeting must submit such proposals,may do so by following the procedures prescribed in Rule 14a-8 under the Securities Exchange Act of 1934 and State Street's By-laws. To be eligible, the Corporation's By-laws, tostockholder proposals must be received by the Secretary of the CorporationState Street on or before November 14, 2000
for inclusion in the proxy materials circulated by the Board of
Directors relating to the 2001 Annual Meeting.
Pursuant to the12, 2001.
Under State Street's current By-laws, of the Corporation, proposals of business and nominations for directors other than those to be included in State Street's proxy materials following the Corporation's proxy statement and form of proxyprocedures described in Rule 14a-8 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 20012002 Annual Meeting must be delivered to the Secretary of the CorporationState Street no earlier than January 21, 200118, 2002 and no later than February 22, 200119,
31
2002 unless the date of the 20012002 Annual Meeting is advanced by more than thirty(30)thirty (30) days or delayed by more than sixty (60) days from the anniversary date of the 2001 Annual Meeting in which event the By-laws provide different notice requirements. In the event the Board of Directors nominates a New Nominee (as defined in the By-
laws)By-laws) a stockholder's notice shall be considered timely if delivered not later than the 10th day following the date on which public announcement (as defined in the By-Laws) is first made of the election or nomination of such New Nominee. Any proposal of business or nomination should be mailed to: Secretary, State Street Corporation, 225 Franklin Street, Boston, Massachusetts 02110.
OTHER MATTERS
The Board of Directors does not know of any other matters that may be presented for action at the meeting, except that
management has been informed that stockholders intend to submit
proposals which require that (i) Ropes & Gray be prevented from
providing legal services to the Corporation; (ii) the Board
conduct another investigation into issues involving a senior
officer's involvement in licensing of personnel; (iii) the
Corporation voluntarily comply with provisions of proposed rules
of the Securities and Exchange Commission to prohibit investment
advisers from making certain political contributions; (iv) the
By-laws of the Corporation be amended to provide that the
chairman of the board may not serve as the chief executive
officer, and (v) the By-laws of the Corporation be amended to
provide that articles of organization, by-laws, meeting records,
and stock transfer records which contain the name and address of
all stockholders be available for inspection and copying by
agents or attorneys for any stockholder, for a proper purpose.
If such proposals are properly brought before the meeting by the
stockholders, the proxy holders intend to use their discretionary
authority to vote against such proposals.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 Corporation's
State Street's Annual Report, including financial statements for the year ended December 31, 1999,2000, is being mailed to stockholdersyou together with this proxy statement.
Even if you plan to attend the meeting, please mark, date,
sign and return the enclosed proxy as promptly as possible in any
event. If you attend the meeting, you may nonetheless vote in
person by ballot if you desire.
March 15, 2000
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[STATE STREET LOGO]
State Street Corporation
225 Franklin Street
Boston, MA 02110-2804 SSBCM/PS/00
STATE STREET CORPORATION
1997 EQUITY INCENTIVE PLAN, AS AMENDED
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to
advance the interests of State Street Corporation (the "Company")
and its subsidiaries by enhancing their ability to attract and
retain employees and other persons or entities who are in a
position to make significant contributions to the success12, 2001
32
Appendix A
AUDIT COMMITTEE CHARTER
MISSION
On behalf of the Company and its subsidiaries through ownershipCorporation’s Board of sharesDirectors, the Audit Committee (the "Committee") oversees the operation of a comprehensive system of internal controls covering the integrity of the Company's common stock ("Stock").Corporation’s financial reports and compliance with laws, regulations, and corporate policies. The Plan is intended to accomplish these goals by enablingCommittee acts on behalf of the Company to grant AwardsBoard in monitoring and overseeing Corporate Audit and the formoutside auditor and monitoring communication with bank regulatory authorities. The Committee generally meets eight times each year.
COMPOSITION
The Committee will be comprised of Options, Stock
Appreciation Rights, Restricted Stockthree or Unrestricted Stock
Awards, Deferred Stock Awards, Performance Awards, or
Supplemental Grants, or combinations thereof, allmore directors as more fully
described below.
2. ADMINISTRATION
Unless otherwise determined by the Board of DirectorsBoard. The members will meet the independence and experience requirements of the Company (the "Board"),New York Stock Exchange (NYSE). Audit Committee members shall be appointed by the Plan will be administered by a
Committee of the Board designated for such purpose (the
"Committee"). The Committee shall consist of at least two
directors. A majority of the members ofBoard.
RESPONSIBILITIES
In carrying out its oversight responsibility, the Committee shall
constitute a quorum, and all determinations of the Committee
shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or
meeting of the Committee by a writing signed by a majority of the
Committee members. During such times as the Stock is registered
under the Securities Exchange Act of 1934 (the "1934 Act"),
except as the Board may otherwise determine, all members of the
Committee shall be "non-employee directors" within the meaning of
Rule 16b-3 promulgated under the 1934 Act and "outside directors"
within the meaning of Section 162(m)(4)(C)(i) of the Internal
Revenue Code of 1986, as amended (the "Code").will:
| 1. | Review and reassess the adequacy of this Charter annually. |
| 2. | Recommend to the Board of Directors the independent accounting firm to be retained as the Corporation’s outside auditor. The outside auditor is ultimately accountable to the Audit Committee and the Board of Directors. The Audit Committee and the Board of Directors have the ultimate authority to select, evaluate, and, where appropriate, replace the outside auditor. |
| 3. | Ensure that the outside auditor submits on a periodic basis a formal written statement delineating all relationships between the auditor and the Corporation. The Committee actively engages in a dialogue with the outside auditor with respect to any disclosed relationships or services that may impair the objectivity and independence of the outside auditor. The Committee recommends that the Board of Directors take appropriate action in response to the outside auditors’ report to satisfy itself of the outside auditors’ independence. |
| 4. | Review and approve the annual Corporate Audit (internal audit) work program and budget, and monitor its implementation. |
| 5. | Review significant findings and recommendations of regulatory reports of examination, outside auditor management letters and Corporate Audit reports and management's responses thereto. |
| 6. | Review practices designed to assure that the corporate environment provides adequate audit independence and freedom for Corporate Audit to act. |
| 7. | Review with the outside auditor, the General Auditor, and finance and accounting personnel, the accounting policies and financial controls of the Corporation. |
| 8. | Review with management the manner in which quarterly financial information will be reported and the procedures to be performed in connection therewith. |
| 9. | Review the following with appropriate representatives of management:
A-1
|
| 10. | As appropriate, approve the appointment of the General Auditor, and evaluate the performance of the General Auditor each year. |
| 11. | Investigate other matters that are brought to the attention of the Committee within the scope of its mission. |
| 12. | Provide appropriate reports to the Board of Directors. |
OTHER MATTERS
The Committee will have authority, not inconsistentalso prepare a report each year consistent with the express provisionsrequirements of the PlanSecurities and in addition to other authority
granted underExchange Commission. In this report, the Plan, to (a) grant Awards to such eligible
personsCommittee will provide information on its review of the Corporation’s audited financial statements and at such time or times as it may choose; (b) determineits related discussions with management. The report will also provide information on the sizeCommittee's review of each Award, includingdisclosures received from the number of shares of Stock
subjectCorporation’s auditors relative to the Award;(c) determineindependence of the type or types of each
Award; (d) determine the termsauditors, and conditions of each Award; (e)
waive compliance by a holder of an Award with any obligations to
be performed by such holder under an Award and waive any terms or
conditions of an Award; (f) amend or cancel an existing Award in
whole or in part (and if an Award is canceled, grant another
Award in its place on such terms and conditions aswhether the Committee shall specify), exceptrecommends to the Board that the Committee may not, withoutaudited financial statements be included in the consent of the holder of an Award, take any action under this
clause with respect to such Award if such action would adversely
affect the rights of such holder; (g) prescribe the form or forms
of instruments
that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants (as
defined below), and change such forms from time to time; (h)
adopt, amend and rescind rules and regulations for the
administration of the Plan; and (i) interpret the Plan and
decide any questions and settle all controversies and disputes
that may arise in connection with the Plan. Such determinations
and actions ofCorporation’s Annual Report on Form 10-K.
While the Committee has the responsibilities and all other determinations and
actions of the Committee made or taken under authority granted by
any provision of the Plan, will be conclusive and will bind all
parties. Nothingpowers set forth in this paragraph shall be construed as
limitingCharter, it is not the powerduty of the Committee to make adjustments under
Section 7.3plan or Section 8.6.
The Committee may delegateconduct audits or to any officer or officers of the
Corporation the authority to exercise the authority described at
clauses (a) through (g) of the preceding paragraph with respect
to any Award to a person who at the time of the Award is not and
in the reasonable determination of the officer or officers
exercising such authority with respect to such Award is not
expected to be an executive officer of the Company or a person
otherwise described in Section 162(m)(3) of the Code or the
regulations thereunder.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is
approved by the stockholders of the Company. Awards may be made
prior to such stockholder approval if made subject thereto. No
Award may be granted under the Plan after December 18, 2006, but
Awards previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN*
Subject to adjustment as provided in Section 8.6 below, the
aggregate number of shares of Stock that may be delivered under
the Plan will be 15,900,000. If any Award requiring exercise by
the Participant for delivery of Stock terminates without having
been exercised in full, or if any Award payable in Stock or cash
is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash
was substituted will be available for future grants.
Subject to Section 8.6(a), the maximum number of shares of
Stock as to which Options or Stock Appreciation Rights may be
granted to any Participant in any one calendar year is 800,000,
which limitation shall be construed and applied consistently with
the rules under Section 162(m) of the Internal Revenue Code. The
maximum number of shares of Restricted Stock that may be
delivered under the Plan shall not exceed 40% of the total number
of shares authorized for issuance.
Stock delivered under the Plan may be either authorized but
unissued Stock or previously issued Stock acquired by the Company
and held in treasury. No fractional shares of Stock will be
delivered under the Plan.
* Common Stock shares have been adjusted for the 2-for-1 stock
split effective April 30, 1997.
2
5. ELIGIBILITY AND PARTICIPATION
Each key employee of the Company or any of its subsidiaries
(an "Employee") and each other person or entity (including
without limitation non-Employee directors of the Company or a
subsidiary of the Company) who, in the opinion of the Committee,
is in a position to make a significant contribution to the
success of the Company or its subsidiaries will be eligible to
receive Awards under the Plan (each such Employee, person or
entity receiving an Award, "a Participant"). A "subsidiary" for
purposes of the Plan will be a corporation in which the Company
owns, directly or indirectly, stock possessing 50% or more of the
total combined voting power of all classes of stock.
6. TYPES OF AWARDS
6.1. OPTIONS
(a) Nature of Options. An Option is an Award giving the
recipient the right on exercise thereof to purchase Stock.
Both "incentive stock options," as defined in Section 422(b)
of the Internal Revenue Code of 1986, as amended (the "Code")
(any Option intended to qualify as an incentive stock option
being hereinafter referred to as an "ISO"), and Options that are
not ISOs, may be granted under the Plan. ISOs shall be awarded
only to Employees. An Option awarded under the Plan shall be a
non-ISO unless it is expressly designated as an ISO at time of
grant.
(b) Exercise Price. The exercise price of an Option will be
determined by the Committee subject to the following:
(1) The exercise price of an Option shall not be less
than 100% of the fair market value of the Stock subject to
the Option, determined as of the time the Option is granted.
In no event shall the exercise price of an option, once
granted, be lowered through a repricing of the option. For
purposes of the preceding sentence, "repricing" shall include
an amendment to the exercise price of an existing option or
the cancellation of an option followed by a regrant at a
lower exercise price, but shall not include an assumption or
replacement described in Section 7.3(b) or an adjustment to
the exercise price of an option described in the first
sentence of Section 8.6(b).
(2) In no case may the exercise price paid for Stock
which is part of an original issue of authorized Stock be
less than the par value per share of the Stock.
(c) Duration of Options. The latest date on which an
Option may be exercised will be the tenth anniversary of the day
immediately preceding the date the Option was granted, or such
earlier date as may have been specified by the Committee at the
time the Option was granted.
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(d) Exercise of Options. An Option will become exercisable
at such time or times, and on such conditions, as the Committee
may specify. The Committee may at any time and from time to time
accelerate the time at which all or any part of the Option may be
exercised. Any exercise of an Option must be in writing, signed
by the proper person and delivered or mailed to the Company,
accompanied by (1) any documents required by the Committee and
(2) payment in full in accordance with paragraph (e) below for
the number of shares for which the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an
Option must be paid for as follows: (1) in cash or by check
(acceptable to the Company in accordance with guidelines
established for this purpose), bank draft or money order payable
to the order of the Company or (2) if so permitted by the
Committee at or after the grant of the Option or by the
instrument evidencing the Option, (i) through the delivery
(including by attestation of ownership) of shares of Stock which
have been outstanding for at least six months (unless the
Committee approves a shorter period) and which have a fair market
value equal to the exercise price, (ii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise
price, or (iii) by any combination of the foregoing permissible
forms of payment.
(f) Discretionary Payments. If (i) the market price of
shares of Stock subject to an Option (other than an Option which
is in tandem with a Stock Appreciation Right as described in
Section 6.2 below) exceeds the exercise price of the Option at
the time of its exercise, and (ii) the person exercising the
Option so requests the Committee in writing, the Committee may in
its sole discretion cancel the Option and cause the Company to
pay in cash or in shares of Common Stock (at a price per share
equal to the fair market value per share) to the person
exercising the Option an amount equal to the difference between
the fair market value of the Stock which would have been
purchased pursuant to the exercise (determined on the date the
Option is canceled) and the aggregate exercise price which would
have been paid.
6.2. STOCK APPRECIATION RIGHTS.
(a) Nature of Stock Appreciation Rights. A Stock
Appreciation Right or SAR is an Award entitling the holder on
exercise to receive an amount in cash or Stock or a combination
thereof (such form to be determined by the Committee) determined
in whole or in part by reference to appreciation, from and after
the date of grant, in the fair market value of a share of Stock.
SARs may be based solely on appreciation in the fair market value
of Stock or on a comparison of such appreciation with some other
measure of market growth such as (but not limited to)
appreciation in a recognized market index. The date as of which
such appreciation or other measure is determined shall be the
exercise date unless another date is specified by the Committee.
(b) Grant of Stock Appreciation Rights. Stock Appreciation
Rights may be granted in tandem with, or independently of,
Options granted under the Plan.
(1) Rules Applicable to Tandem Awards. When Stock
Appreciation Rights are granted in tandem with Options, (a)
the Stock Appreciation Right will be exercisable only at such
time or times, and to the extent,determine that the related Option is
exercisableCorporation’s financial statements are complete and will be
4
exercisable in accordance with the procedure required for
exercise of the related Option; (b) the Stock Appreciation
Right will terminateaccurate and no longer be exercisable upon the
termination or exercise of the related Option, except that a
Stock Appreciation Right granted with respect to less than
the full number of shares covered by an Option will not be
reduced until the number of shares as to which the related
Option has been exercised or has terminated exceeds the
number of shares not covered by the Stock Appreciation Right;
(c) the Option will terminate and no longer be exercisable
upon the exercise of the related Stock Appreciation Right;
and (d) the Stock Appreciation Right will be transferable
only with the related Option.
(2) Exercise of Independent Stock Appreciation Rights.
A Stock Appreciation Right not granted in tandem with an
Option will become exercisable at such time or times, and on
such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which all or any part
of the Right may be exercised.
Any exercise of a Stock Appreciation Right must be in
writing, signed by the proper person and delivered or mailed to
the Company, accompanied by any other documents required by the
Committee.
6.3. RESTRICTED AND UNRESTRICTED STOCK.
(a) Grant of Restricted Stock. Subject to the terms and
provisions of the Plan, the Committee, at any time and from time
to time, may grant shares of Restricted Stock in such amounts and
upon such terms and conditions as the Committee shall determine
subject to the restrictions described below.
(b) Restricted Stock Agreement. The Committee may require,
as a condition to an Award, that a recipient of a Restricted
Stock Award enter into a Restricted Stock Award Agreement,
setting forth the terms and conditions of the Award. In lieu of
a Restricted Stock Award Agreement, the Committee may provide the
terms and conditions of an Award in a notice to the Participant
of the Award, on the Stock certificate representing the
Restricted Stock, in the resolution approving the Award, or in
such other manner as it deems appropriate.
(c) Transferability and Other Restrictions. Except as
otherwise provided in this Section 6.3, the shares of Restricted
Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of
the applicable period or periods established by the Committee and
the satisfaction of any other conditions or restrictions
established by the Committee (such period during which a share of
Restricted Stock is subject to such restrictions and conditions
is referred to as the "Restricted Period").
Except as the Committee may otherwise determine under
Section 7.1 or Section 7.2 below, if a Participant retires or
suffers a Status Change (as defined at Section 7.2(a) below) for
any reason during the Restricted Period, the Company may purchase
the shares of Restricted Stock subject to such restrictions and
conditions for the amount of cash paid by the Participant for
such shares; provided, that if no cash was paid by the
Participant such shares of Restricted Stock shall
5
be automatically forfeited to the Company without consideration.
During the Restricted Period with respect to any shares of
Restricted Stock, the Company shall have the right to retain in
the Company's possession the certificate or certificates
representing such shares.
(d) Removal of Restrictions. Except as otherwise provided
in this Section 6.3, a share of Restricted Stock covered by a
Restricted Stock grant shall become freely transferable by the
Participant upon completion of the Restricted Period, including
the passage of any applicable period of time and satisfaction of
any conditions to vesting. The Committee, in its sole
discretion, shall have the right at any time to waive all or any
part of the restrictions and conditions with regard to all or any
part of the shares held by any Participant.
(e) Voting Rights, Dividends and Other Distributions.
During the Restricted Period, Participants holding shares of
Restricted Stock granted hereunder may exercise full voting
rights and shall receive all regular cash dividends paid with
respect to such shares. Except as the Committee shall otherwise
determine, any other cash dividends and other distributions paid
to Participants with respect to shares of Restricted Stock
including any dividends and distributions paid in shares shall be
subject to the same restrictions and conditions as the shares of
Restricted Stock with respect to which they were paid.
(f) Unrestricted Stock. The Committee may, in its sole
discretion, sell to any Participant shares of Stock free of
restrictions under the Plan for a price which is not less than
the par value of the Stock.
(g) Notice of Section 83(b) Election. Any Participant
making an election under Section 83(b) of the Code with respect
to Restricted Stock must provide a copy thereof to the Company
within 10 days of filing such election with the Internal Revenue
Service.
(h) Shares delivered under Senior Executive Annual Incentive
Plan. In the case of an award under the Company's Senior
Executive Annual Incentive Plan which is payable in shares of
Stock, the holder of such award shall be deemed a Participant
hereunder and any such Shares shall be treated as having been
sold to the Participant as Unrestricted Stock or Restricted Stock
hereunder (or as Deferred Stock under Section 6.4, if delivery is
deferred) for a price equal to the cash payment under the award
in lieu of which the Stock is being delivered under the Award.
6.4. DEFERRED STOCK.
A Deferred Stock Award entitles the recipient to receive
shares of Stock to be delivered in the future. Delivery of the
Stock will take place at such time or times, and on such
conditions, as the Committee may specify. The Committee may at
any time accelerate the time at which delivery of all or any part
of the Stock will take place. At the time any Award described in
this Section 6 is granted, the Committee may provide that, at the
time Stock would otherwise be delivered pursuant to the Award,
the Participant will instead receive an instrument evidencing the
Participant's right to future delivery of Deferred Stock.
6
6.5. PERFORMANCE AWARDS; PERFORMANCE GOALS.
(a) Nature of Performance Awards. A Performance Award
entitles the recipient to receive, without payment, an amount in
cash or Stock or a combination thereof (such form to be
determined by the Committee) subject to the attainment of
performance goals. Performance goals may be related to personal
performance, corporate performance, departmental performance or
any other category of performance established by the Committee.
The Committee will determine the performance goals, the period or
periods during which performance is to be measured and all other
terms and conditions applicable to the Award.
(b) Other Awards Subject to Performance Condition. The
Committee may, at the time any Award described in this Section 6
is granted, impose the condition (in addition to any conditions
specified or authorized in this Section 6 or any other provision
of the Plan) that performance goals be met prior to the
Participant's realization of any vesting, payment or benefit
under the Award. Any such Award made subject to the achievement
of performance goals (other than an Option or SAR granted with an
exercise price not less than fair market value) shall be treated
as a Performance Award for purposes of Section 6.5(c) below.
However, an Award under the Company's Senior Executive Annual
Incentive Plan shall not be considered a Performance Award for
purposes of this Plan.
(c) Limitations and Special Rules. No more than an
aggregate of 500,000 shares of Stock (or their equivalent fair
market value in cash) may be delivered to any Participant under
Performance Awards made from and after the effective date of the
Plan and prior to December 19, 2006. In the case of any
Performance Award intended to qualify for the performance-based
remuneration exception described at Section 162(m)(4)(C) of the
Code and the regulations thereunder (an "exempt award"), the
Committee shall in writing preestablish one or more specific,
objectively determinable performance goal or goals (based solely
on one or more qualified performance criteria) no later than
ninety (90) days after the commencement of the period of service
to which the performance relates (the "performance period") (or
at such other time as is required to satisfy the conditions of
Section 162(m)(4)(C) of the Code and the regulations thereunder).
For purposes of the preceding sentence, a qualified performance
criterion is any of the following determined (to the extent
relevant) on either a consolidated or business-unit basis: (i)
return on equity, (ii) earnings per share, (iii) the Company's
total shareholder return during the performance period compared
to the total shareholder return of a generally recognized market
reference (e.g., the S & P 500 or the S & P Financial Index);
(iv) revenue growth; (v) operating leverage; or (vi) market
share. To the extent consistent with qualification of an exempt
award under Section 162(m)(4)(C) of the Code and the regulations
thereunder, the Committee may provide that performance goals be
adjusted in order to eliminate the effect of extraordinary items
(as determinedare in accordance with generally accepted accounting principles) or changes inprinciples. This is the Stock by reasonresponsibility of an event
described in Section 8.6(a).
6.6. SUPPLEMENTAL GRANTS.
In connection with any Award, the Committee may at the time
such Award is made or at a later date, provide for and grant a
cash award to the Participant ("Supplemental Grant") not to
7
exceed an amount equal to (1) the amount of any Federal, state
and local income tax on ordinary income for which the Participant
may be liable with respect to the Award, determined by assuming
taxation at the highest marginal rate, plus (2) an additional
amount on a grossed-up basis intended to make the Participant
whole on an after-tax basis after discharging all the
Participant's income tax liabilities arising from all payments
under this Section 6. Any payments under this subsection (b)
will be made at the time the Participant incurs or is expected to
incur Federal income tax liability with respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. DEATH, RETIREMENT OR DISABILITY.
If the employment of an Employee Participant terminates by
reason of death, retirement at or after the normal or early
retirement age under any retirement plan or supplemental
retirement agreement maintained by the Company or any subsidiary
("retirement"), or disability as determined (subject to such
additional rules as the Committee may prescribe) in accordance
with the long term disability plan of the Company and its
subsidiaries covering the Participant or, if there is no such
plan, in accordance with a determination of disability by the
Social Security Administration ("disability"), the following will
apply except as the Committee may otherwise determine:
(a) All Options and Stock Appreciation Rights held by the
Participant or a transferee immediately prior to such termination
of employment, whether or not then exercisable, may be exercised
by the Participant or such transferee (or if the Option or SAR
was held by the Participant at death, by the Participant's
executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of
descent and distribution), in accordance with the terms of the
Option or SAR or on such accelerated basis as the Committee may
determine, during the period that ends on the later of (1) one
year after death, or (ii) one year after the Option or SAR, or
the last installment of such Option or SAR if there is more than
one, first becomes exercisable. In no event, however, shall an
Option or Stock Appreciation Right remain exercisable beyond the
latest date on which it could have been exercised without regard
to this Section 7.
(b) In the case of termination of employment occurring by
reason of death or disability, all Restricted Stock held by the
Participant immediately prior to such termination of employment
shall be vested. In the case of termination of employment
occurring by reason of retirement, all Restricted Stock held by
the Participant immediately prior to retirement must be
transferred to the Company (and, in the event the certificates
representing such Restricted Stock are held by the Company, such
Restricted Stock will be so transferred without any further
action by the Participant) in accordance with Section 6.3(c)
above.
(c) Any payment or benefit under a Deferred Stock Award,
Performance Award, or Supplemental Grant to which the Participant
was not irrevocably entitled prior to termination of employment
will be forfeitedmanagement and the Award canceled as ofindependent auditor. Nor is it the time of such
termination of employment.
8
7.2. OTHER TERMINATION OF SERVICE.
If a Participant who is an Employee ceases to be an Employee
for any reason other than death, retirement, or disability (as
defined at Section 7.1 above), or if there is a termination of
the consulting, service or similar relationship in respect of
which a non-Employee Participant was granted an Award hereunder
(such termination of the employment or other relationship being
hereinafter referred to as a "Status Change"), the following will
apply except as the Committee may otherwise determine:
(a) All Options and Stock Appreciation Rights held by the
Participant (or if the Option or Right was previously
transferred, by the transferee) that were not exercisable
immediately prior to the Status Change shall terminate at the
time of the Status Change. Any Options or Rights that were
exercisable immediately prior to the Status Change will continue
to be exercisable for a period of three months, and shall
thereupon terminate; provided, that if the Participant should die
within such three-month period, the Option or Right shall be
exercisable (to the extent it was exercisable immediately prior
to death) for a period of one year following the Status Change.
In no event, however, shall an Option or Stock Appreciation Right
remain exercisable beyond the latest date on which it could have
been exercised without regard to this Section 7.
(b) All Restricted Stock held by the Participant at the time
of the Status Change must be transferred to the Company (and, in
the event the certificates representing such Restricted Stock are
held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with
Section 6.3(c) above.
(c) Any payment or benefit under a Deferred Stock Award,
Performance Award, or Supplemental Grant to which the Participant
was not irrevocably entitled prior to the Status Change will be
forfeited and the Award canceled as of the date of such Status
Change.
(d) For purposes of this Section 7.2, in the case of a
Participant who is an Employee, a Status Change shall not be
deemed to have resulted by reason of (i) a sick leave or other
bona fide leave of absence approved for purposes of the Plan by
the Committee, so long as the Employee's right to reemployment is
guaranteed either by statute or by contract, or (ii) a transfer
of employment between the Company and a subsidiary or between
subsidiaries, or to the employment of a corporation (or a parent
or subsidiary corporation of such corporation) issuing or
assuming an Option in a transaction to which Section 424(a) of
the Code applies.
7.3 CERTAIN CORPORATE TRANSACTIONS.
Except as otherwise provided by the Committee at the time of
grant, in the event of a consolidation or merger in which the
Company is not the surviving corporation or which results in the
acquisition of substantially all the Company's outstanding Stock
by a single person or entity or by a group of persons and/or
entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a
dissolution or liquidation of the Company (a "covered
transaction"), the following rules shall apply:
9
(a) Subject to paragraph (b) below, all outstanding Awards
requiring exercise will cease to be exercisable, and all other
Awards to the extent not fully vested (including Awards subject
to conditions not yet satisfied or determined) will be forfeited
except as required under Section 7.4 below, as of the effective
time of the covered transaction, provided that the Committee may
in its sole discretion (but subject to Section 7.4 below in the
case of a covered transaction that constitutes a Change of
Control), on or prior to the effective date of the covered
transaction, (1) make any outstanding Option and Stock
Appreciation Right exercisable in full, (2) remove the
restrictions from any Restricted Stock, (3) cause the Company to
make any payment and provide any benefit under any Deferred Stock
Award, Performance Award or Supplemental Grant, and (4) remove
any performance or other conditions or restrictions on any Award;
or
(b) With respect to an outstanding Award held by a
Participant who, following the covered transaction, will be
employed by or otherwise providing services to an entity which is
a surviving or acquiring entity in the covered transaction or an
affiliate of such an entity, the Committee may at or prior to the
effective time of the covered transaction, in its sole discretion
and in lieu of the action described in paragraph (a) above,
arrange to have such surviving or acquiring entity or affiliate
assume any Award held by such Participant outstanding hereunder
or grant a replacement award which, in the judgmentduty of the Committee is substantially equivalent to any Award being
replaced.
7.4. CHANGE OF CONTROL PROVISIONS.
(a) Impact of Event. Notwithstanding any other provision of
the Planconduct investigations, to the contrary, in the event of a Change of Control:
(1) Acceleration of Options and SARs; Effect on Other
Awards. All Options and SARs outstanding as of the date
such Change of Control is determined to have occurred and
which are not then exercisable shall (prior to application of
the provisions of Section 7.3 above, in the case of a Change
of Control that also constitutes a covered transaction)
become exercisable to the full extent of the original grant,
all shares of Restricted Stock which are not otherwise
vested shall vest, and holders of Performance Awards granted
hereunder as to which the relevant performance period has not
ended as of the date such Change of Control is determined to
have occurred shall be entitled at the time of such Change
of Control to receive a cash payment per Performance Award
equal to such amount,resolve disagreements, if any, as shall be specified in the
Award.
(2) Restriction on Application of Plan Provisions
Applicable in the Event of Termination of Employment. After
a Change of Control (but subject to Section 7.3 above),
Options and SARs shall remain exercisable following a
termination of employment or other service relationship
(other than termination by reason of death, disability (as
determined by the Company) or retirement) for seven (7)
months following such termination or until expiration of the
original terms of the Option or SAR, whichever period is
shorter.
(3) Restriction on Amendment. In connection with or
following a Change of Control, neither the Committee nor the
Board may impose additional conditions upon
10
exercise or otherwise amend or restrict an Option, SAR, share
of Restricted Stock, Deferred Stock Award or Performance
Award, or amend the terms of the Plan in any manner adverse
to the holder thereof, without the written consent of such
holder.
Notwithstanding the foregoing, if any right granted pursuant
to this Section 7.4 would make a Change of Control transaction
ineligible for pooling of interests accounting under applicable
accounting principles that but for this Section 7.4 would
otherwise be eligible for such accounting treatment, the
Committee shall have the authority to substitute Stock for the
cash which would otherwise be payable pursuant to this Section
7.4 having a fair market value equal to such cash.
(b) Definition of Change of Control. For purposes of the
Plan, a "Change of Control" shall mean the happening of any of
the following events:
(1) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 25% or more of either (x) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock") or (y) the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); excluding, however, the
following acquisitions of Outstanding Company Common Stock
and Outstanding Company Voting Securities: (i) any
acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or
(iv) any acquisition by any Person pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection
(3) of this Section 7.4; or
(2) Individuals who, as of the effective date of the
Plan, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual who becomes a member
of the Board subsequent to such effective date, whose
election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority
of directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board shall not be so
considered as a member of the Incumbent Board; or
(3) Consummation by the Company of a reorganization,
merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company ("Business
Combination"); excluding, however, such a Business
Combination pursuant to which (i) all or substantially all
of the individuals and entities who are the beneficial
owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior
to such Business Combination own, directly
11
or indirectly, more than 50% of, respectively, the
outstanding shares of common stock,between management and the combined voting
power of the then outstanding voting securities entitledindependent auditor or 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 Stockassure compliance with laws and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (other
than any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by
the Company or such corporation resulting from such Business
Combination) will beneficially own, directly or indirectly,
25% or more of, respectively, the outstanding shares of
common stock of the corporation resulting from such Business
Combination or the combined voting power of the outstanding
voting securities of such corporation entitled to vote
generally in the election of directors except to the extent
that such ownership existed with respect to the Company prior
to the Business Combination and (iii) at least a majority of
the members of the board of directors of the corporation
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
(4) The approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF AWARDS.
Awards will be evidenced by such written instruments, if any,
as may be prescribed by the Committee from time to time. Such
instruments may be in the form of agreements to be executed by
both the Participantregulations and the Company, or certificates, letters or
similar instruments, which need not be executed by the
Participant but acceptanceCorporation’s Standard of which will evidence agreement to
the terms thereof.
8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of
an Award will not give a Participant rights as a stockholder; the
Participant will obtain such rights, subject to any limitations
imposed by the Plan or the instrument evidencing the Award, only
upon the issuance of Stock. However, the Committee may, on such
conditions as it deems appropriate, provide that a Participant
will receive a benefit in lieu of cash dividends that would have
been payable on any or all Stock subject to the Participant's
Award had such Stock been outstanding. Without limitation, the
Committee may provide for payment to the Participant of amounts
representing such dividends, either currently or in the future,
or for the investment of such amounts on behalf of the
Participant.
12
8.3. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of
Stock pursuant to the Plan or to remove restriction from shares
previously delivered under the Plan (a) until all conditions of
the Award have been satisfied or removed, (b) until, in the
opinion of the Company's counsel, all applicable Federal and
state laws and regulation have been complied with, (c) if the
outstanding Stock is at the time listed on any stock exchange or
The Nasdaq National Market, until the shares to be delivered have
been listed or authorized to be listed on such exchange or market
upon official notice of notice of issuance, and (d) until all
other legal matters in connection with the issuance and delivery
of such shares have been approved by the Company's counsel. If
the sale of Stock has not been registered under the Securities
Act of 1933, as amended, the Company may require, as a condition
to exercise of the Award, such representations or agreements as
counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting
transfer.
If an Award is exercised by the Participant's legal
representative or transferee, the Company will be under no
obligation to deliver Stock pursuant to such exercise until the
Company is satisfied as to the authority of such representative.
8.4. TAX WITHHOLDING.
The Company will withhold from any cash payment made pursuant
to an Award an amount sufficient to satisfy all federal, state
and local withholding tax requirements (the "withholding
requirements").
In the case of an Award pursuant to which Stock may be
delivered, the Committee will have the right to require that the
Participant or other appropriate person remit to the Company an
amount sufficient to satisfy the withholding requirements, or
make other arrangements satisfactory to the Committee with regard
to such requirements, prior to the delivery of any Stock. If and
to the extent that such withholding is required, the Committee
may permit the Participant or such other person to elect at such
time and in such manner as the Committee provides to have the
Company hold back from the shares to be delivered, or to deliver
to the Company, Stock having a value calculated to satisfy the
withholding requirement. The Committee may make such share
withholding mandatory with respect to any Award at the time such
Award is made to a Participant.
If in connection with the exercise of an ISO the Committee
determines that the Company could be liable for withholding
requirements with respect to the exercise or with respect to a
disposition of the Stock received upon exercise, the Committee
may require as a condition of exercise that the person exercising
the ISO agree (a) to provide for withholding under the preceding
paragraph of this Section 8.4, if the Committee determines that a
withholding responsibility may arise in connection with tax
exercise, (b) to inform the Company promptly of any disposition
(within the meaning of Section 424(c) of the Code) of Stock
received upon exercise, and (c) to give such security as the
Committee deems adequate to meet the potential liability of the
Company for the withholding requirements and to augment such
security from time to time in any amount reasonably deemed
necessary by the Committee to preserve the adequacy of such
security.
13
8.5. NONTRANSFERABILITY OF AWARDS.
Unless otherwise permitted by the Committee, no Award (other
than an Award in the form of an outright transfer of cash or
Unrestricted Stock) may be transferred other than by will or by
the laws of descent and distribution, and during a Participant's
lifetime an Award requiring exercise may be exercised only by the
Participant (or in the event of the Participant's incapacity, the
person or persons legally appointed to act on the Participant's
behalf). The Committee may in its discretion permit transfers to
other persons or entities.
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the
Company's capitalization, or other distribution to common
stockholders other than normal cash dividends, after the
effective date of the Plan, the Committee will make any
appropriate adjustments to the maximum number of shares that may
be delivered under the Plan under the first paragraph of Section
4 above and to the limits described in the second paragraph of
Section 4 and in Section 6.5(c).
(b) In any event referred to in paragraph (a), the Committee
will also make any appropriate adjustments to the number and kind
of shares of stock or securities subject to Awards then
outstanding or subsequently granted, any exercise prices relating
to Awards and any other provision of Awards affected by such
change. The Committee may also make such adjustments to take
into account material changes in law or in accounting practices
or principles, mergers, consolidations, acquisitions,
dispositions or similar corporate transactions, or any other
event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan;
provided, that adjustments pursuant to this sentence shall not be
made to the extent it would cause any Award intended to be exempt
under Section 162(m)(4)(C) to fail to be so exempt.
(c) In the case of ISOs or Awards intended to satisfy the
performance-based remuneration exception under Section
162(m)(4)(C) of the Code, the adjustments described in (a) and
(b) will be made only to the extent consistent with continued
qualification of the option under Section 422 of the Code (in the
case of an ISO) or Section 162(m) of the Code.
8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will
confer upon any person any right to continued retention by the
Company or any subsidiary as an Employee or otherwise, or affect
in any way the right of the Company or subsidiary to terminate an
employment, service or similar relationship at any time. Except
as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under
the Plan will not constitute an element of damages in the event
of termination of an employment, service or similar relationship
even if the termination is in violation of an obligation of the
Company to the Participant.
14
8.8. NONCOMPETITION RESTRICTIONS, ETC.
The Committee may provide in connection with any Award that
the Participant's rights to enjoyment of the Award or to any cash
or Stock deliverable under the Award be conditioned upon the
Participant's agreeing not to compete with the Company and its
subsidiaries, not to disclose confidential information, and not
to solicit employees, advisors or business from the Company and
its subsidiaries, the terms of any such agreement or undertaking
to be determined by the Committee.
8.9. DEFERRAL OF PAYMENTS.
The Committee may agree at any time, upon request of the
Participant and subject to such rules as the Committee may
determine, to defer the date on which any future payment under an
Award will be made.
8.10. PAST SERVICES AS CONSIDERATION.
Where a Participant purchases Stock under an Award for a
price equal to the par value of the Stock the Committee may
determine that such price has been satisfied by past services
rendered by the Participant.
9. EFFECT, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a
Participant will affect the Company's right to grant to such
Participant awards that are not subject to the Plan, to issue to
such Participant Stock as a bonus or otherwise, or to adopt other
plans or arrangements under which Stock may be issued to
Employees.
The Committee may at any time or times amend the Plan or any
outstanding Award for any purpose which may at the time be
permitted by law, or may at any time terminate the Plan as to
any further grants of Awards, provided that (except to the extent
expressly required or permitted by the Plan) no such amendment
will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in
order for the Plan to continue to qualify for the award of ISOs
under Section 422 of the Code or for the award of
performance-based compensation under Section 162(m) of the Code,
nor shall any such amendment adversely affect the rights of a
holder of an Award without such holder's consent.
15
A-2
| State Street Corporation | ||
| 225 Franklin Street | ||
| Boston, MA 02110-2804 | SSBCM/PS/01 |
| PROXY | PROXY |
STATE STREET CORPORATION
Annual Meeting of Stockholders - April 19, 200018, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholderhereby appoints Elizabeth D. Corse, Evalyn Lipton Fishbein and Claire A. Fusco, or any of them, with full power of substitution, as proxies to vote all shares of Common Stock of State Street Corporation (the
"Corporation") hereby appoints Evalyn Lipton Fishbein, Claire A.
Fusco and Karen A. Warren (each with powerwhich the undersigned is entitled to act without the
others and with power of substitution) proxies to represent the
undersignedvote at the Annual Meeting of Stockholders of theState Street Corporation to be held at 225 Franklin Street, Boston, Massachusetts 02110 on April 19, 2000 and18, 2001 at 10:00 A.M., or at any adjournmentsadjournment thereof, withas indicated on the powerreverse side, and in their discretion on any other matters that may properly come before 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 revokingmeeting or any proxy
heretofore given.
adjournment thereof.
To vote in accordance with the Board of Directors' recommendations just sign and date the other side; no boxes need to be checked.
================================================================
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE.
================================================================
Nominees for Class III Director whose term expires in 2002: R. Logue, N. Lopardo
Nominee for Class I Director whose term expires in 2003: D. Spina
Nominees for Class II Director whose term expires in 2004: D. Gruber, L. Hill, C. LaMantia, A. Poe, D. Walsh, R. Weissman
PLEASE MARK, DATE, AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. |
| Please sign this proxy on the reverse side exactly as your name(s) appear(s) on the books of State Street Corporation. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title. |
| HAS YOUR ADDRESS CHANGED? | DO YOU HAVE ANY COMMENTS? |
____________________________________________ ____________________________________________ ____________________________________________ | ____________________________________________ ____________________________________________ ____________________________________________ |
[x] Please signmark your vote
as in this proxy exactly as your name(s) appear(s) on the
books of the Corporation. Joint owners should each sign
personally. Trustees and other fiduciaries should indicate the
capacity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or
her title.
================================================================
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------ --------------------------
- ------------------------ --------------------------
- ------------------------ --------------------------
- ------------------------ --------------------------
[x] PLEASE MARK VOTES THE BOARD OF DIRECTORS
AS IN THIS EXAMPLE RECOMMENDS THAT YOU GRANT
AUTHORITY FOR THE ELECTION OF
- ------------------------------- DIRECTORS AND THAT YOU VOTEexample.
STATE STREET CORPORATION | The Board of Directors recommends a vote FOR Items 1, 2 and 3. | ||
| This proxy, when properly executed, will be voted in the manner indicated by the undersigned stockholder. If no direction is given, this proxy will be voted FOR Items 1, 2 and 3 and AGAINST Items 4 and 5. | Item 1 - Election of Nine Directors. For All With- For All (See reverse side for a list of nominees) Nominees hold Except [ ] [ ] [ ] | ||
| Mark box at right if an address change or comment [ ] has been noted on the reverse side of this card. | INSTRUCTION: If you do not wish your shares voted "FOR" one or more nominees, mark the "FOR ALL EXCEPT" box and strike a line through the name(s) of the nominee(s) on the reverse side. Your shares will be voted for the remaining nominee(s). | ||
| CONTROL NUMBER: RECORD DATE SHARES: | Item 2 - To increase State Street’s authorized For Against Abstain shares of Common Stock from [ ] [ ] [ ] from 250,000,000 to 500,000,000. | ||
| Item 3 - To approve the Senior Executive For Against Abstain Annual Incentive Plan. [ ] [ ] [ ] | |||
The Board of Directors recommends a vote AGAINST Items 4 and 5. | |||
| Item 4 - Stockholder proposal on the For Against Abstain Model Business Corporation Act. [ ] [ ] [ ] | |||
| Please be sure to sign and date this Proxy. | Date | Item 5 - Stockholders proposal on certain For Against Abstain rules on the conduct of stockholder [ ] [ ] [ ] meetings. | |
Stockholder signs here | Co-owner signs here | In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournments thereof. | |
| DETACH CARD | DETACH CARD |
STATE STREET CORPORATION ITEM 2 AND AGAINST ITEM 3. THE
- ------------------------------- SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH
The matters to come before the THE SPECIFICATIONS MADE. IF NO
meeting are fully described in SPECIFICATION IS MADE, THE PROXY
the Notice of and Proxy State- WILL BE VOTED IN ACCORDANCE WITH
ment for the meeting, receipt THE BOARD OF DIRECTORS'
of which is hereby acknowledged. RECOMMENDATIONS.
1. Election of Six Directors:
FOR ALL FOR ALL
NOMINEES WITHHOLD EXCEPT
[ ] [ ] [ ]
Mark box at right if an (01)I. Booth (02)J. Cash
address change or comment [ ] (03)T. Casner (04)A. Goldstein
has been noted on the (05)D. Picard (06)R. Sergel
reverse side of this card.
INSTRUCTION: If
Dear Stockholder:
We cordially invite you do not wish
your shares voted "FOR" one or
more nominee(s), mark the "FOR
ALL EXCEPT" box and strike a
line through the name(s) of the
nominee(s). Your shares will be
voted for the remaining
CONTROL NUMBER: nominee(s).
RECORD DATE SHARES:
2. To vote on an amendment to
the 1997 Equity Incentive Plan
to increase the number of shares
available for issuance under the
plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To vote on a stockholder
proposal relative to the
Please be sure to sign and application of the Model
date this Proxy. Business Corporation Act to the
--------------- Corporation.
Date FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- -------------------------------
Stockholder Co-owner 4. In their discretion, the
signs here signs here Proxies are authorized to vote
upon such other business as may
properly come before the meeting
or any adjournments thereof.
DETACH CARD DETACH CARD
- ----------------------------------------------------------------
STATE STREET CORPORATION
DEAR STOCKHOLDER:
You are cordially invited to attend the 20002001 Annual Meeting of Stockholders of State Street Corporation. The meeting will be held in the Enterprise Room at 225 Franklin Street, Boston, Massachusetts on Wednesday, April 19, 2000,18, 2001, at 10:00 a.m.
Details regarding admission to the meeting and the business to be conducted are more fully described in the accompanying Notice of Annual Meeting and Proxy Statement.
Your vote is very important. Whether or not you plan to attend the meeting, please carefully review the enclosed proxy statement. Then complete, sign, date and mail promptly the accompanying proxy in the enclosed return envelope. To be sure that your vote will be received in time, please return the proxy at your earliest convenience.
We look forward to seeing you at the Annual Meeting so that we can update you on our progress. Your continuing interest is very much appreciated.
Sincerely,
Marshall N. Carter
David A. Spina
Chairman and Chief Executive Officer
STATE STREET CORPORATION
Annual Meeting of Stockholders -- April 18, 2001
DIRECTION TO THE TRUSTEE
Dear State Street Corporation Salary Savings Program Participant:
The Annual Meeting of Stockholders of State Street Corporation will be held on April 18, 2001. Enclosed is the 2000 Annual Report, Notice of 2001 Annual Meeting of Stockholders and the Proxy Statement containing information about the proposals to be voted on by stockholders at the meeting. Voting on corporate matters is an important benefit you have as a participant in the State Street Corporation Stock Fund of the Salary Savings Program.
As a Plan participant, you may direct the Trustee on how to vote the shares of State Street Corporation allocated to your account. If you do not provide instructions to the Trustee, the Trustee will vote your shares in accordance with the Salary Savings Program Plan and Trust Documents.
Please place an X in the appropriate boxes on the reverse side of this Voting Instruction Form, sign and date the Form, and return it as soon as possible in the enclosed postage paid envelope. The Trustee must receive your Voting Instruction Form no later than Friday, April 13, 2001 for your vote to be counted. You may not provide your voting direction at the Annual Meeting; you must direct your vote in advance to the Trustee. Your vote will be held in confidence by the Trustee.
Because your voice is important, you are strongly encouraged to direct the Trustee on how to vote your shares. Your vote will contribute toward the future of our Corporation. If you have any questions, please call the Benefits Hotline at 617-985-8040, or, internally at ext. 5-8040, or e-mail to "Benefits-Hotline."
Sincerely,
STATE STREET BANK AND TRUST COMPANY, TRUSTEE
To be completed, signed and dated on reverse side.
Please fold completed form and mail it
in its entirety to the Trustee in the envelope provided.
STATE STREET CORPORATION
Annual Meeting of Stockholders -- April 18, 2001
DIRECTION TO THE TRUSTEE
As a participant in the Salary Savings Program, I hereby direct State Street Bank and Trust Company, as Trustee, to vote as follows the shares of State Street Corporation common stock allocated to my account at the Annual Meeting of Stockholders to be held on April 18, 2001, and any adjournments thereof.
Each of the matters to come before the meeting is fullydescribed in the Notice of and Proxy Statement for the meeting, receipt of which is hereby acknowledged. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU GRANT AUTHORITY FOR THE ELECTION OF DIRECTORS AND THAT YOU VOTE FOR ITEMS 2 AND 3 AND AGAINST ITEMS 4 AND 5. THE SHARES REPRESENTED BY THIS DIRECTION WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS. IF NO SPECIFICATION IS MADE, THE TRUSTEE SHALL VOTE THE SHARES ALLOCATED TO YOUR ACCOUNT IN ACCORDANCE WITH THE SALARY SAVINGS PROGRAM AND TRUST DOCUMENTS.
Nominees for Class III Director whose term expires in 2002: R. Logue, N. Lopardo
Nominee for Class I Director whose term expires in 2003: D. Spina
Nominees for Class II Director whose term expires in 2004: D. Gruber, L. Hill, C. LaMantia, A. Poe, D. Walsh, R. Weissman
Please mark your vote as indicated in this example [X]
The Board of Directors recommends a vote FOR Items 1, 2 and 3. | The Board of Directors recommends a vote | |
| Item 1 - Election of Nine Directors. For All For All (See above for a list of nominees) Nominees Withhold Except [ ] [ ] [ ] INSTRUCTION: If you do not wish your shares voted "FOR" one or more of the nominees, mark the "FOR ALL EXCEPT" box and strike a line through the name(s) of the nominee(s) listed above. Your shares will be voted for the remaining nominee(s). Item 2 - To increase State Street’s authorized For Against Abstain Item 3 - To approve the Senior Executive For Against Abstain | For Against Abstain Item 4 - Stockholder proposal on [ ] [ ] [ ] the Model Business Corporation Act. Item 5 - Stockholders proposal on For Against Abstain | |
In its discretion, the Trustee is authorized to vote upon such other business as may properly come before the meeting or any adjournments thereof. | ||
| Dated:_____________________________, 2001 | _______________________________________ |
THIS DIRECTION IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
EXHIBIT A
STATE STREET CORPORATION
STATE STREET BANK AND TRUST COMPANY
SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN
PURPOSE:
The purpose of the Senior Executive Annual Incentive Plan set forth herein (as the same may from time to time be amended, the "Plan") is to provide additional incentive and reward to Senior Executives of State Street Corporation (the "Company") to achieve targeted levels of achievement.
ELIGIBILITY:
Participants in the Plan for any year shall include the Chief Executive Officer of the Company and such other key executives as may be designated as participants for such year by the Executive Compensation Committee (the "Committee") of the Board of Directors of the Company.
AWARDS:
The Committee shall annually award grants to those persons who are participants for the year, and shall establish the goals (which may be specified as ranges) for such awards.
PERFORMANCE GOALS:
No payment under an award granted under the Plan shall be made unless the performance goals specified with respect to the award are met or exceeded. Performance goals with respect to an award must be preestablished by the Committee not later than ninety (90) days after the beginning of the year with respect to which the award is granted (the "award year") or by such other time as may be required in order to qualify the award under Section 162 (m)(4)(C) of the Internal Revenue Code (the "Code"). Once established in accordance with the preceding sentence, performance goals may not be modified except to reflect extraordinary items (determined in accordance with generally accepted accounting principles) or changes in the stock of the Company (such as stock splits, stock dividends or recapitalizations) and then only to the extent, if any, consistent with continued qualification of the award under Section 162(m)(4)(C) of the Code.
For purposes of the Plan, a "performance goal" means an objectively determinable target level of achievement based on any or any combination of the following criteria (determined on a consolidated basis or on the basis of one or more divisions, subsidiaries or business units): earnings or earnings per share; return on equity; total stockholder return; revenue; market share; quality/service; organizational development; strategic initiatives (including acquisitions or dispositions) and risk control.
ADDITIONAL TERMS:
Each award under the Plan shall be subject to the following terms:
| A. | No more than $7,500,000 shall be payable under an award to any participant for any award year. The foregoing limit shall be applied before taking into account any notional earnings on deferrals described in E. below. |
| B. | Subject to A. above, the Committee may provide for varying levels of payment under an award depending on whether performance goals have been met or exceeded. In no event, however, shall any amount be payable under an award if the performance goals with respect to such award, or any of them, fails to be achieved. |
| C. | No payment shall be made with respect to an award until and unless the Committee shall have certified in writing (in such manner as shall be consistent with regulations under Section 162(m) of the Code) that the performance goals with respect to such award have been met. |
| D. | Except as provided in this paragraph and in E. below, all payments, if any, under an award shall be paid in cash as soon as practicable following certification by the Committee as described above. Notwithstanding the foregoing, the Committee may provide that some portion or all of any award payment be made in shares of common stock of the Company ("Stock") in lieu of cash. Any shares of stock delivered pursuant to this paragraph shall be issued under the 1997 Equity Incentive Plan and may include Restricted Stock, Unrestricted Stock or Deferred Stock (as those terms are defined in the 1997 Equity Incentive Plan). The number of shares of Stock delivered in lieu of any cash amount under an award (the "replaced cash portion") shall be that number which equals the replaced cash portion divided by the fair market value of a share of Stock (determined without regard to any restrictions) on the date the Committee certifies under C. above that the performance goal or goals with respect to the award have been met. |
| E. | Subject to such rules and limitations as the Committee may prescribe from time to time (the "deferral rules"), a participant may elect to have all or any portion of an award payment deferred for a fixed term of years, until retirement, death, disability or other termination of employment, or until the occurrence of some other event. Any amount so deferred shall be credited to the participant's account on the books of the Company and shall represent an unfunded and unsecured liability of the Company to pay the amount so deferred plus such additional amount, if any, representing notional earnings on the deferral ("earnings") as may be prescribed under the deferral rules. The portion of any award payable in Deferred Stock (as defined in the 1997 Equity Incentive Plan) shall likewise represent an unfunded and unsecured promise by the Company to deliver shares in the future pursuant to the terms of the 1997 Equity Incentive Plan. Earnings with respect to a deferred award shall be limited so as to satisfy the requirements of Treas. Regs. Section 1.162-27(e)(2)(iii)(B) (relating to reasonable rates of interest or other returns based on predetermined actual investments) and any limitations imposed by the Federal Deposit Insurance Corporation or similar limitations. |
| F. | To be entitled to payment under an award, a participant must be employed by the Company or one of its subsidiaries on December 31 of the award year, except as the Committee may otherwise determine. In addition, the Committee in its discretion may cause an award to a participant to be forfeited if the participant, although employed by the Company or a subsidiary on December 31 of the award year (or on such other date, if any, as may have been fixed by the Committee), has ceased to be employed by the Company and its subsidiaries prior to the date that other awards are (or, but for deferral, would be) paid for such year. |
| G. | The Committee in its discretion may reduce (including to zero) any amount otherwise payable under an award, with or without specifying its reasons for doing so. |
ACTIONS BINDING; NO RIGHT TO EMPLOYMENT, ETC.:
The Committee shall have complete discretion to construe and administer the Plan, to determine eligibility for awards, to determine performance goals, to determine whether or not any performance goal has been satisfied, to determine the amount of payment under any award, and otherwise to do all things necessary or appropriate to carry out the Plan. Actions by the Committee under the Plan shall be conclusive and binding on all persons.
Nothing in the Plan or in any award shall entitle any participant to continued employment with the Company and its subsidiaries, and the loss of benefits or potential benefits under an award shall in no event constitute an element of damages in any action brought against the Company or its subsidiaries.
AMENDMENT AND TERMINATION:
The Committee may at any time amend the Plan or awards made under the Plan, but only to the extent consistent with continued qualification of awards under Section 162(m)(4)(C) of the Code. The Committee may terminate the Plan at any time.