SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X]
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
STATE STREET BOSTON CORPORATION
.................................................................
(Name
................................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name
.......................................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check(check the appropriate box):
[X]
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: ............................................................
.....................................................................................................................................................................
2) Aggregate numernumber of securities to which transaction applies:
............................................................
.....................................................................................................................................................................
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
............................................................
..................................................................................................................................................... .................
4) Proposed maximum aggregate value of transaction:
............................................................
.....................................................................................................................................................................
5) Total fee paid:
............................................................
..................................................................................................................................................... .................
[ ] Fee paid previously with preliminary materials.
[ ]Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ...............................
.......................................................................................................................................................................
2) Form, Schedule or Registration Statement No.: ...............................
.......................................................................................................................................................................
3) Filing Party: ...............................
.................................................................................................................................................
4) Date Filed: ................................
[Letterhead]
March 11, 1997
..................................................................................................................................................
[State Street Letterhead]
| March 12, 2001 |
DEAR STOCKHOLDER:
You are
We cordially invitedinvite you to attend the 19972001 Annual Meeting of Stockholders of State Street Boston Corporation. The meeting will be held in the Enterprise Room at 225 Franklin Street, Boston, Massachusetts on Wednesday, April 16, 1997,18, 2001, at 10:00 a.m.
Your Board of Directors and management look forward
Details regarding admission to greeting
those stockholders able to attend.
The notice ofthe meeting and proxy statement which follow
describe the business to be conducted atare more fully described in the meeting. You will
be asked to elect six directorsaccompanying Notice of Annual Meeting and to act upon proposals to
change the name of the Corporation, to increase the authorized
shares of Common Stock, to approve the Senior Executive Annual
Incentive Plan and to approve the 1997 Equity Incentive Plan.
State Street's goal is to be the leading servicer of
institutional investors worldwide. Each of these proposals is
designed to help achieve this goal in competitive global markets.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THESE PROPOSALS.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
[letterhead]
| Sincerely, /s/David A. Spina |
[State Street Letterhead]
NOTICE OF 19972001 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders
| 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 conduct other business if properly raised. | |
| 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 or other nominee, you may have the choice of instructing the record holder as to the voting of your shares over the Internet or by telephone. Follow the instructions on the form you receive from your broker or bank. | |
| By Order of the Board of Directors, | |
| Maureen Scannell Bateman | |
| March 12, 2001 | Secretary |
STATE STREET BOSTON CORPORATION:
The 1997 Annual Meeting of Stockholders of State Street Boston
Corporation will be held on Wednesday, April 16, 1997, 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 consider and take action on a proposed amendment to
the Restated Articles of Organization of the Corporation
to change the name of the Corporation from State Street
Boston Corporation to State Street Corporation;
3. To consider and take action on a proposed amendment to
the Restated Articles of Organization of the Corporation
to increase the number of authorized shares of Common
Stock from 112,000,000 to 250,000,000 and to authorize
the issuance from time to time of the authorized and
unissued shares of the Corporation by the Board of
Directors;
4. To approve the Senior Executive Annual Incentive Plan.
5. To approve the 1997 Equity Incentive Plan; and
6. To act upon such other business as may properly come
before the meeting and any adjournments thereof.
Stockholders of record at the close of business on February
28, 1997 are entitled to notice of and to vote at the meeting and
any adjournments thereof.
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED FOR YOUR USE. FURNISHING THIS PROXY WILL NOT
AFFECT YOUR RIGHT TO REVOKE THIS PROXY OR TO VOTE IN PERSON SHOULD
YOU ATTEND THE MEETING.
By Order of the Board of Directors,
John R. Towers
Secretary
March 11, 1997
STATE STREET BOSTON CORPORATION
225 Franklin Street, Boston, Massachusetts 02110
PROXY STATEMENT
This
GENERAL INFORMATION
When was this proxy statement and the accompanying proxy whichcard scheduled to be sent to stockholders?
This proxy statement and accompanying proxy card are scheduled to be sent to stockholders beginning on March 11, 1997,
are furnished in connection with the solicitation by the12, 2001.
Who is soliciting my vote?
The Board of Directors of State Street Boston Corporation (the "Corporation"("State Street") of
proxiesis soliciting your vote for the 19972001 Annual Meeting of Stockholders of the
Corporation toStockholders.
How many votes can be held on April 16, 1997 and at any adjournments
thereof. The Board of Directors has fixed the close of business on
February 28, 1997 as the record date for determining the
stockholders entitled to notice of and to vote at the meeting. On
the record date __,cast by all stockholders?
___,___,___ shares of Common Stock of the
Corporation wereState Street are outstanding and entitled to be voted at the meeting. AllEach 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 represented by properly executed proxies, if such
proxies are received in time and not revoked, will be voted at suchthe meeting in accordance with your instructions. If you do not give any specifications thereon or, if no
specifications are made, proxiesinstructions, your shares will be voted by the persons named in the proxy card in accordance with the recommendations of the Board of Directors. Each shareDirectors 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 other nominee, 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 owned the shares as of February 28, 2001, and if you wish to vote at the meeting you must first obtain from the record holder a proxy issued in your name.
Participants in State Street’s Salary Savings Program will receive proxy cards separately. State Street Bank and Trust Company, as trustee, will vote in accordance with written instructions from the participants, and, where no instructions are received, the shares will be voted in accordance with the trust documents.
What are the Board’s recommendations on how to vote my shares?
The Board of Directors recommends a vote:
- FOR election of the 9 directors (page 3)
- FOR increasing the authorized number of shares of Common Stock
is entitled(page 21)
- FOR approval of the Senior Annual Executive Incentive Plan (page 22)
- AGAINST approval of the stockholder proposal relative to
one vote. Any proxy may be revoked at any time before it is voted by notifyingtheSecretary in writing, by executing a later dated proxy or by notifyingapplication of theSecretary atModel Business Corporation Act to State Street (page 24)
1
Who pays the meeting and voting in person.
The Corporationcost for soliciting proxies?
State Street 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 Corporationrenumeration. State Street intends to request brokers, banks, brokerage houses,
custodians, other nominees and fiduciaries to forward these soliciting materialmaterials to their principals and to obtain 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 D.F. King &
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 aidapprove each item?
The nine nominees for election as directors who receive a plurality of the shares voted for election of directors 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 solicitationauthorized shares (Item 2).
The affirmative vote of proxies. The costa majority of such
servicesthe shares present in person or represented by proxy at the meeting and entitled to vote is $_____, plus expenses.
The Corporation'snecessary to approve the Senior Executive Annual Report, including financial
statementsIncentive Plan (Item 3) and the stockholder proposal (Item 4).
How is the vote counted?
Votes cast by proxy or in person at the Annual Meeting will be counted by the persons appointed by State Street to act as tellers for the year ended December 31, 1996,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. Shares properly voted to "abstain" on a particular matter are considered as shares that are entitled to vote for the purpose of determining a quorum but are treated as having voted against the matter. If a stockholder holds shares through 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. Shares that are subject to a broker non-vote are counted for determining the quorum but as not entitled to vote on the particular matter, so without voting instructions a broker non-vote could occur on Item 4, and this will have no effect on whether the required vote under the By-laws has been received on these matters.
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.
What happens if the meeting is being mailedpostponed or adjourned?
Your proxy may be voted at the postponed or adjourned meeting. You will still be able to stockholders together with thischange your proxy statement.
until it is voted.
2
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 19, 1996,21, 2000, the Board of Directors fixed the number of directors at 17,18, effective withat the 1997time of the 2001 Annual Meeting. Nine 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 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 director is currently a director. The designation of the nominees into different classes is being made in order to make the classes of directors as nearly equal in number as possible.
It is intended that, unless you give contrary instructions, shares represented by proxies solicited by the Board of Directors will unless contrary instructions are
given, be voted for the election of the sixnine nominees listed below as directors. Although the Board of Directors does not contemplateWe have no reason to believe 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.
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 19972001 ANNUAL MEETING
CLASS I
I. MACALLISTER BOOTH DIRECTOR SINCE 1990
Retired
Class IIINominees with Terms Expiring in 2002
RONALD E. LOGUE | Director since 2000 |
Vice Chairman President and Chief ExecutiveOperating Officer of Polaroid Corporation, a manufacturer of instant image recording
products.State Street. He was elected Vice Chairman in 1999 and Chief Operating Officer in May 2000. Prior to that time. Mr. Booth,Logue, age 65, joined Polaroid in 1958 as a
supervisor in the Film Division.55, headed State Street’s Global Investor Services Group. He is alsoresponsible 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 Western
Digital Corporation, Jobs for Massachusetts and The Conference
Board, chairman of Inroads National Board of Directors, a member of
the board of trustees of Eye Research Institute and a corporator of
Emerson Hospital of Concord, Massachusetts.Metropolitan Boston Housing Partnership. He received B.S. and M.B.A. degrees from Cornell University.
JAMES I. CASH, JR. DIRECTOR SINCE 1991
James E. Robison ProfessorBoston College.
NICHOLAS A. LOPARDO | Director since 2000 |
Vice Chairman of Business Administration at the
Harvard University Graduate SchoolState Street since 1997 and Chairman and Chief Executive Officer of Business Administration.State Street Global Advisors, State Street’s investment management group. Mr. Cash,Lopardo, age 49, 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., Tandy
Corporation and WinStar Communications. He received a B.S. degree54, joined State Street Global Advisors in mathematics from Texas Christian University and M.S. and Ph.D.
degrees in computer science and management information systems from
Purdue University.
TRUMAN S. CASNER DIRECTOR SINCE 1990
Partner in the law firm of Ropes & Gray. Mr. Casner, age 63,
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 and a member
of the corporation of Woods Hole Oceanographic Institution.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
3
Susquehanna University. He is on the American Law Institute.
ARTHUR L. GOLDSTEIN Director since 1995Bankers 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 INominee with Term Expiring in 2003
DAVID A. SPINA | Director since 1989 |
Chairman and Chief Executive Officer of Ionics, Incorporated,
an international company involvedState 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 purification and treatment
of water. Mr. Goldstein, age 61, is aMassachusetts Taxpayers Foundation, Inc., director of Cabot
Corporation. He isthe United Way of Massachusetts Bay, Jobs for Massachusetts and the Pioneer Institute for Public Policy Research, a member of the National AcademyMassachusetts Governor’s Board of Engineering
andEconomic Advisors, a membercorporator of the visiting committees at Harvard BusinessDana Hall School and Harvard School of Public Health. He is a trusteechairman emeritus of the California Institute of Technology and the Massachusetts General
Physician's Organization, Inc., an overseer of the Boston Museum of
Science and is a director of Jobs for Massachusetts, Inc. and the
Massachusetts High Technology Council.Housing Investment Corporation. Mr. Goldstein received a
B.S. degree in chemical engineering from Rensselaer Polytechnic
Institute, a masters degree from the University of Delaware and an
M.B.A. from Harvard University.
DAVID B. PERINI Director since 1980
Chairman and Chief Executive Officer of Perini Corporation, a
construction and real estate development company. Mr. Perini, age
59,Spina holds a B.S. degree from the College of the Holy Cross and receivedan M.B.A. from Harvard University. He was an officer in the United States Navy from 1964 to 1969, serving a J.D. degree from Boston College Law Schooltour of duty in 1962. He
joined Perini CorporationVietnam.
Class IINominees with Terms Expiring in 1962. He has received awards from the
National Conference of Christians and Jews, the Italian American
Charitable Society and received the 1994 Ralph Lowell Distinguished
Citizen Award. Mr. Perini is a trustee of St. John's Preparatory
School.
DENNIS J. PICARD Director since 19912004
DAVID P. GRUBER | Director since 1997 |
Retired Chairman, and Chief Executive Officer and Director of RaytheonWyman-Gordon Company, a diversified, technology-based international company, since 1991.manufacturer of forging, investment casting and composite airframe structures for the commercial aviation, commercial power and defense industries. Mr. Picard,Gruber, age 64,59, joined RaytheonWyman-Gordon in 19551991 and held engineering
and management assignments leading to his election as president and
directorretired in 1989.1999. He is a member of the National Academyboard of Engineeringtrustees of Manufacturers’ Alliance for Productivity and its Industry Advisory Board, a fellowInnovation, chairman of the AmericanWorcester Polytechnic Institute of AeronauticsMechanical Engineering Advisory Committee and Astronautics and a fellow of
the Institute of Electrical and Electronic Engineers. Mr. Picard
is a trustee of Northeastern University and Bentley College, a
corporator of Emerson Hospital, a director of the Discovery
Museums, the John F. Kennedy Library Foundation, Jobs for
Massachusetts, a member of the Nationalboard 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 Roundtable, The
Business Council, the Defense Policy Advisory Committee on Trade
(DPACT), the President's Export Council, the advisory committeeAdministration 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 American Red Cross,board of directors of Cooper Industries, the Armed Services YMCAboards of trustees of the United
StatesRockefeller Foundation, Bryn Mawr College, the Children’s Museum, Boston, and the Armed Forces Communications and Electronics
Association. He is a graduateboard of Northeastern University and holds
honorary doctorates from Northeastern University, Merrimack College
and Bentley College.
DIRECTORS SERVING UNTIL THE 1998 ANNUAL MEETING
Class II
JOSEPH A. BAUTE DIRECTOR SINCE 1990
Consultant to Markem Corporation, which provides systems and
services to mark customer products, since June 1993. Mr. Baute,
age 69, was for many years the chairman and chief executive officer
of Markem Corporation. He joined Markem in 1954 and held
engineering, sales and marketing positions until 1968 when he
became vice president and chief operating officer for Markem-USA,
Markem U.K. and Markem Europa. He was elected president and
director of Markem Corporation in 1973, chief executive officer in
1977 and chairman in 1979. He is a director of Houghton Mifflin
Company, Dead River Company, Inso Corporation, Markem Corporation
and Cerion Technologies. He is past director and chairmanoverseers of the Federal Reserve BankBeth 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 Boston. Mr. Baute received B.A.Chicago and M.S.
degreesa Ph.D. in behavioral sciences from Dartmouth College.
CHARLES R. LAMANTIA DIRECTOR SINCE 1993
Presidentthe 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.services worldwide. Dr. LaMantia, age 57, was president and chief
operating officer of Arthur D. Little, Inc. from 1986 to 1988.
Prior to rejoining Arthur D. Little in 1986, he was president of
Koch Process Systems, Inc. From 1977 to 1981, Dr. LaMantia was
vice president in charge of Arthur D. Little's services to the
chemical, metals and energy industries, having assumed that
position after 10 years on the firm's consulting staff. He61, is a member of The Conference Boardthe board of Marathon Technologies and the Massachusetts Business
Roundtableadvisory board of StoneGate Partners, IntellectExchange and an overseer of WGBHseveral non-profit research and the Boston Museum of
Science.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
Former President
4
ALFRED POE | Director since 1994 |
Private Investor pursuing startups in the functional food business. Mr. Poe, age 52, was chief executive officer of Meal Enhancement Group and Corporate Vice
PresidentMenuDirect 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 a food manufacturing company.
Mr. Poe, age 48, joined Campbell Soup Company in 1991. From 1982
to 1991, Mr. Poe was with Mars, Inc. and held various sales and
marketing assignments inpresident of the United States and the United Kingdom.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.
DAVID A. SPINA DIRECTOR SINCE 1989
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 OperatingExecutive Officer of the Corporation since
1995.IMS Health. Mr. Spina, age 54, joined State Street in 1969 as a credit
analyst. He was elected executive vice president in 1982 and vice
chairman in 1992. Mr. Spina held the positions of chief financial
officer and treasurer from 1977 to 1992. Mr. Spina is head of
State Street's custody business, which consists of custody,
recordkeeping and related services for institutional investors,
including marketing, customer service, systems and technology
groups. HeWeissman is a director of the Metropolitan Boston Housing
Partnership, Inc., a member of the Boston Coordinating Committee,
a member of the executive committee of the Massachusetts Taxpayers
Foundation, Inc., chairman of the board of trustees of the Dana
Hall School and a member of the Banker's Roundtable. Mr. Spina is
Chairman Emeritus of the Massachusetts Housing Investment
Corporation and a former director of the Massachusetts Bankers
Association. 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
combat tour of duty in Vietnam.
ROBERT E. WEISSMAN DIRECTOR SINCE 1989
Chairman, Chief Executive Officer and Director of Cognizant Corporation, one of three companies resulting from the
restructuring of The Dun & Bradstreet Corporation, which provides
commercial data services, since November 1996. Mr. Weissman, age
56, joined Dun & Bradstreet in 1979. He became Chairman on April
1, 1995 and Chief Executive Officer on January 1, 1994.Technology Solutions Corp. He is a member of the Institute of Management Accountants, the Society of
Manufacturing Engineers, the Institute of Electrical and Electronic
Engineers, The Business Roundtable, the Committee for Economic Development and The U.S.-Japan Business Council and is a trusteevice chairman of the corporation of Babson College. Mr. Weissman received a degree in Business Administration from Babson College in 1964.College.
CONTINUING DIRECTORS SERVING UNTIL THE 1999 ANNUAL MEETING
WITH TERMS EXPIRING IN 2002
Class III
TENLEY E. ALBRIGHT, M.D. DIRECTOR SINCE
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. Following 23 years in private practice of surgery, Dr.
Albright, age 61, founded and became chairman of a clinical
diagnostic research laboratory. She has been65, 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, since
1994.facility. She serves on the board of directors of The West Company,
the Whitehead Institute for Biomedical Research,is consultant to and is a memberformerly chairman of the Board of Regents of the National Library of Medicine at National Institutes of Health,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 Massachusetts
Society forHarvard Medical Research,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 attendingand Radcliffe College and has received honorary degrees from Williams College,
Hobart and William Smith Colleges, Russell Sage College, New
England School of Law, Chatham College, State University of New
York at Cortland, Springfield College and Lasell College. Dr.
Albright won the Gold Medal in figure skating at the 1956 Olympics
in Cortina, Italy. She serves as a spokesperson for the American
Red Cross, Massachusetts Bay Chapter.
MARSHALL N. CARTER DIRECTOR SINCE 1991
Chairman and Chief Executive Officer of the Corporation.
Prior to joining State Street in 1991, Mr. Carter, age 56, was with
Chase Manhattan Bank for 15 years, the last three years as head of
global securities services. He served as a Marine Corps officer in
Vietnam for two years where he was awarded the Navy Cross and
Purple Heart and had international affairs service as a White House
Fellow. Mr. Carter is a member of the board of directors of
Euroclear in Brussels and the Federal Reserve Bank of Boston. 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
NADER F. DAREHSHORI | Director since 1990 |
Chairman of the Board, President and Chief Executive Officer of Houghton Mifflin Company, publisher. Mr. Darehshori, age 60,
served as college division vice president and manager of Houghton
Mifflin's midwestern sales region from 1984 until he was promoted
to vice president and director of the college division in 1986. In
1987 he was elected senior vice president, college division. He
was promoted to executive vice president and then to vice chairman
in 1989 and to his present position in 1990. Mr. Darehshori has
served64, serves as a director of Houghton Mifflin Company since 1989 and is chairman of its executive committee. He is a director of Commercial Union CorporationCGU Insurance Group and chairman of the Massachusetts Business
Roundtable.Boston Public Library Foundation. He is a trustee of Wellesley College, and the WGBH Educational Foundation. He is a member of the National Executive
Board of the National Conference of Christians and JewsFoundation and the Dana-Farber National Advisory Council for the Women's Cancers
Program.Cancer Institute. Mr. Darehshori also serves on the boards of the Boston
Public Library Foundation and the Boston Symphony Orchestra.
CHARLES F. KAYE DIRECTOR SINCE 1979
Chairman, Transportation Investments, Incorporated, a lessor
and asset manager of intermodal transportation equipment. Mr.
Kaye, age 69, is a graduate of St. Thomas University and received
a J.D. degree from Boston College Law School. He was senior
partner of the firm of Kaye, Sheldon and Barton and special counsel
to the Massachusetts Institute of Technology before joining XTRA
Corporation in 1967 as a director and general counsel. Mr. Kaye
became vice chairman in 1970 and served as chairman, president and
chief executive officer of XTRA from 1973 to 1990. Mr. Kaye is a
trustee of Bentley College and Lawrence Academy, a member of the
Visiting Committeeboard of the Massachusetts General Hospital, chairman
of the Alpha Omega FoundationBusiness Roundtable and town moderator of Littleton,
Massachusetts. He has been the recipient of the Association of American Railroads annual Intermodal Man of the Year Award and the
Air Force Association Distinguished Service Award.
JOHN M. KUCHARSKI Publishers.
5
JOHN M. KUCHARSKI | Director since 1991 |
Retired Chairman of the Board President and Chief Executive Officer of EG&G, Inc., which providesa provider of scientific and technological products and services worldwide. Mr. Kucharski, age 61, joined EG&G in 1972
and was elected president and director in 1986. He65, is a director of Nashua Corporation, New England Electric System and Eagle
Industry Co. Ltd.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
President, Premier Enterprises and
BERNARD W. REZNICEK | Director since 1991 |
National Director, - Utility
Marketing ofSpecial Markets, for Central States Indemnity Co. of Omaha, an insurance company specializing in credit card and utility payment protection for consumers, since January,
1997.1997, 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, Mr. Reznicek, age 60,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.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.AM.B.A. from the University of Nebraska. He serves on the boards of California Energy Company, GuaranteeCSG Systems International, 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 69, joined Polaroid in 1958. He is a director of John Hancock Mutual Life Insurance Company, StoneThermoLase Corporation and Western Digital Corporation and past chairman of the national board of directors of Inroads. He received B.S. and M.B.A. degrees from Cornell University.
TRUMAN S. CASNER | Director since 1990 |
Partner in the law firm of Ropes & WebsterGray. Mr. Casner, age 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 | Director since 1995 |
Chairman and Chief Executive Officer of Ionics, Incorporated, an international company involved in the purification and CSG Systems
International.
GENERAL INFORMATIONtreatment of water. Mr. Goldstein, age 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 California Institute of Technology, Massachusetts General Physicians’ Organization, Inc., 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.
6
DENNIS J. PICARD | Director since 1991 |
Chairman Emeritus of Raytheon Company, with products and services in commercial and defense electronics and special mission aircraft. Mr. Picard, age 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 an 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, a director of the Discovery Museums and a member of the Business Council. He is a graduate of Northeastern University and holds honorary doctorates from Northeastern University, Merrimack College and Bentley College.
| RICHARD P. SERGEL | Director since 1999 |
President, Chief Executive Officer and Director of National Grid U.S.A. since 1999, the successor to New England Electric System (NEES), an electric power provider. Mr. Sergel, age 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 M.B.A. from the University of Miami. He served in the United States Air Force.
General Information
The Board of Directors has the overall responsibility for the conduct of the business of the Corporation.our business. Of the present 1719 directors 15currently in office, 16 are outside directors and 23 are executive officers of the Corporation.State Street. The Board of Directors held 74 meetings during 19962000 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 1211 meetings during 1996.2000. 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 suchall the powers of the Board of Directors asthat may be legally delegated to it by the Board in the management and direction of the business and affairs of State Street, including the review and approval of policies for the extension of credit, investment of the Corporation's assets and financial management; to
monitormanagement, and monitoring activities under these policies and reportpolicies. The Committee reports periodically to the Board,
and to act on behalf of the Board on recurring matters and between
meetings under specific delegations.Board. Its members are Charles F.
Kaye, Chair, Joseph A. Baute, Marshall N. Carter, Truman S. Casner, Chair; I. MacAllister Booth; James I. Cash; David P. Gruber, and David A. Spina. During 1996,2000, the Committee held 1412 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,policies; monitors communication with external auditors and bank regulatory authoritiesauthorities; and recommends the selection of the Corporation's independent auditors. TheSpecific functions and responsibilities of the Committee are set forth in the charter adopted by the Board of Directors which is composed of Joseph A. Baute, Chair,attached as Appendix A to this proxy statement. Its members are John M. Kucharski, Chair; Tenley E. Albright, JamesAlbright; I. Cash, Jr.MacAllister Booth, and John M. Kucharski.Charles R. LaMantia. During 1996,2000, the Committee held 98 meetings.
The EXECUTIVE COMPENSATION COMMITTEE overseessets and administers policies which relate to the compensation system for the Corporation'sState Street's executive officers and non-management
directors. The Committee consistsother incentive programs of State Street. Its members are Robert E. Weissman, Chair,Chair; I. MacAllister Booth,Booth; Nader F. Darehshori, Charles F. Kaye,Darehshori; Charles R. LaMantia, and Bernard W.
7
Reznicek. None of these individuals is or has been an officer or employee of State Street or the Bank. During 1996,2000, the Committee held 5 meetings.
The NOMINATING COMMITTEE which held 2 meetings during 1996,
is composed of I. MacAllister Booth, Chair, Marshall N. Carter,
Arthur L. Goldstein, David B. Perini, Dennis J. Picard and Alfred
Poe. The 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. COMPENSATION OF DIRECTORSIts members are Arthur L. Goldstein, Chair; Dennis J. Picard; Alfred Poe; David A. Spina, and Diana C. Walsh. During 2000, the Committee held 2 meetings.
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 $22,000,$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 424 shares of deferred stock payable when the director leaves the Board or retires, for the period April 19962000 through March 1997. In 1996,2001. For this period, all outside directors elected to receive their annual retainer in shares of Common Stock. Under a plan effective January 1, 1995, non-employeeThe directors with at least five years' service are eligiblemay elect to defer either 50% or 100% of all fees and compensation payable during any calendar year pursuant to State Street’s Deferred Compensation Plan for a retirement
benefit equalDirectors. Three directors have elected to their annual retainer at retirement, payable
monthly for a period equal to the length of service of the director
on the Board up to a maximum of ten years. No retirement benefits
were paid in 1996.
defer compensation.
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 nominee for
Class I Director,director, the Class IIformer chairman, the current chairman and Class III Directors, the 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, 1997.2001 based on information furnished by each person. None of the nominees, other directors or executive officersindividuals owned beneficially as much as 1% of the outstanding shares of Common Stock. The nominees, other directors and executive officersgroup in the aggregate beneficially owned _._%1.40% of the Corporation's
Common Stock.
AMOUNT AND NATURE
OF BENEFICIAL
NAME OWNERSHIP
Tenley E. Albright, M.D. 7,701(1)
A. Edward Allinson 101,000(2)
Joseph A. Baute 7,317(3)
I. MacAllister Booth 4,588
Dale L. Carleton 72,651(2)
Marshall N. Carter 88,705(2)
James I. Cash, Jr. 3,872
Truman S. Casner 6,194(4)
Nader F. Darehshori 5,194
Arthur L. Goldstein 982
Charles F. Kaye 30,422
John M. Kucharski 3,486
Charles R. LaMantia 2,752(4)
Nicholas A. Lopardo 117,010(2)(4)
David B. Perini 16,812
Dennis J. Picard 4,534
Alfred Poe 1,622
Bernard W. Reznicek 4,836
David A. Spina 377,972(2)(5)
Robert E. Weissman 5,872
All of the above and other
executive officers as a group
(25 persons) 982,073(2)(4)
___________________
(1) Includes 3,199 shares held in trust for a family member
pursuant to a trust of which Dr. Albright is a co-trustee and
1,100 shares owned by a family member with respect to which
she disclaims beneficial ownership.
(2) Includes shares which may be acquired within 60 days through
the exercise of stock options as follows: Mr. Allinson,
60,000; Mr. Carleton, 44,288; Mr. Carter, 46,400; Mr. Lopardo,
111,422; Mr. Spina, 153,000, and the group, 504,158.
(3) Includes 200 shares owned by a member of Mr. Baute's family
with respect to which he disclaims beneficial ownership.
(4) Includes shares as to which voting power is shared, as
follows: Mr. Casner, 2,000; Dr. LaMantia, 500; Mr. Lopardo,
5,488, and the group, 9,418.
(5) Includes 20,000 shares owned by a member of Mr. Spina's family
with respect to which he disclaims beneficial ownership.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
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 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. |
| (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
1996complied 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 19962000 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.Bank and its affiliates. The transactions include loans and commitments made in the ordinary
9
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 ornor did they present other unfavorable features. TheDuring 2000, the Bank and other subsidiaries of the
CorporationState Street have used products or services of Dun & BradstreetGartner, Inc. and a subsidiary of Ionics, Incorporated, with which Mr. Weissman, a director, was associated during 1996.two of the directors of State Street were associated. Additional transactions of this nature may be expected to take place in the ordinary course of business in the future. Ropes & Gray, a law firm of which Mr. Casner, a director of 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 is allowed to borrow
from the Bank other than through the use of a reserve account with
limits of up to $20,000 as allowed by Massachusetts law and at the
same interest rate paid by the public.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Corporation's Executive Compensation
Committee are I. MacAllister Booth, Nader F. Darehshori, Charles F.
Kaye, Charles R. LaMantia, Bernard W. Reznicek and Robert E.
Weissman, Chair. No present or former officer of the Corporation
or the Bank served as a member of the Committee.
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 banking,
trust, investment managementfinancial expertise to provide sophisticated investors with an integrated range of products and securities processing capabilities
to supportservices spanning the investment strategies of our customers worldwide.
The Corporation'scycle. Our 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 our 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-term and long-term performance targets. The executive compensation program places emphasis on challenging performance goals, business growth, and sustainable real growth in earnings per share. SixteenBy including stock-based compensation plans as a major part of the compensation strategy, we link closely the goals of stockholders and executives. Eighteen executives participated in the executive compensation program in 1996.2000. The former chairman, the current chairman and chief executive officer, the president,vice chairmen, and the executive vice presidents are considered executives for this purpose. TheIn May 2000, Marshall N. Carter, Chairman and Chief Executive Compensation Committee is comprised entirelyOfficer retired as chief executive officer and announced his intention to retire as chairman at the end of independent, non-employee directors. The Committee develops,
reviews and recommends to2000. At its meeting on May 18, 2000, the Board of Directors for its approval,
strategic compensation plans for executiveselected David A. Spina, President and Chief Executive Officer of the Corporation.
The plans are designed to align executive compensation withCorporation and announced that he would become Chairman upon Mr. Carter’s retirement. Mr. Spina became Chairman of the Corporation's business strategy and to attract and retain high
caliber executives. The program provides significant compensation
opportunities which are directly related to the achievementBoard of challenging long-term goals and growth in the Corporation's stock
price. By including stock-based compensation plans within the
compensation strategy, State Street links closely the goalsDirectors as of stockholders and executives.January 1, 2001.
The principles of thisthe 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
total 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 senior officers and managers who make significant contributions to the
Corporation participate in the Corporation's stock option planequity incentive programs and in a variety of annual incentive plans. State Street
The Committee is comprised entirely of independent, non-employee directors, each of whom also offers
specific bonus opportunitiesqualifies 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 individuals who have specialized
sales, trading or investment responsibilities. Outstanding
performance by these specialists is rewarded with bonuses linked
directly toexecutive compensation, equity incentive programs, and other incentive programs. The Committee on an annual basis reviews and evaluates the attainment of challenging and measurable business
goals.executive compensation program.
The Committee met five times in 19962000 and reported its
activitiesprovided reports to the Board of Directors.Directors about its activities at each of these meetings. In conjunction with its annual comprehensive 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 and total return to stockholders was compared, and in considering modifications to existing plans. The Committee, with assistance from its independent consultant, validated a this
10
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 selected technology-based companies engaged in servicing
businesses and believed to be competing with the Corporation for
the same caliber of executive talent, and New England bank holdingU.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."
As a result of its reviews, the Committee determined that the
fundamental elements of the compensation plan -- salary, bonus,
stock options and performance units- - are appropriate for a
program that supports the Corporation's business strategy, provides
competitive compensation and creates value for stockholders. The
Committee, however, determined that revisions to the Senior
Executive Annual Incentive Plan were needed based upon competitive
data supplied by the independent compensation consultant. A new
plan, which will increase the bonus opportunity for participants in
the plan, is being submitted to stockholders for approval at this
year's annual meeting. In addition, the 1997 Equity Incentive Plan
was approved by the Board of Directors for submission to
stockholders at this year's annual meeting. This plan will replace
the 1994 Stock Option and Performance Unit Plan. The new plan will
provide for additional forms of stock compensation which are not
available under the 1994 plan and will give the Executive
Compensation Committee additional discretion in determining the
terms and conditions of stock and stock based grants as well as
expand the potential performance measures which the Committee may
elect to use for performance awards. More information on these
plans is provided below in this report and elsewherePresentation" in this proxy statement.
The elements of the Corporation's executive compensation program currently consist of base salary, annual bonus, performance unitsawards, stock options, deferred stock and restricted stock options.awards. These are integrated components where salary and bonus reflect one yearone-year results, performance unitsawards reflect two
yeartwo-year results, and stock options, deferred stock, and restricted stock awards reflect long-term stock price appreciation. As a result of its 2000 review, the Committee has determined that the fundamental elements of this compensation plan are appropriate for a program that is intended to support State Street's business strategy, provide competitive compensation, and create value for stockholders. The Executive Compensation Committee's policies with respect to each of these elements, including the bases for the compensation reported for 19962000 to the Corporation's chief executive
officer, Mr. Carter and chief operating officer, Mr. Spina, are discussed below.
BASE SALARIES
Base Salaries
The Committee recommended to the Board of Directors the base salary of Mr. Carter, Mr. Spina, Mr. Logue, and Mr. Lopardo, each of who were members during 2000 of the Board of Directors, and reviewed the salaries of the other executives. Base salaries for executives are determined by subjectively evaluating the responsibilities of the position, the strategic value of the position to State Street, and the experience and performance of the individual. No specific formula is used to set base salaries. The Committee has determined, however, that to be competitive it is appropriate for State Street’s executive salary levels to be near the median of the reference group. Annual adjustments, if any, to base salary adjustmentslevels 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’s last salary increase.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 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.group and the performance of 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. WhenAs compared to salaries paid to chairman of the board and chief executive officer positionsposition in the reference group, Mr. Carter'sCarter’s salary was slightly above themedian and Mr. Spina’s salary was below median.
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.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. At its meeting in December 1995,1999 meeting, the Committee assigned a range of bonus opportunity for Mr. Carter for 2000 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 of specific predetermined performance targets for 1996 underestablished by the Senior Executive
Annual Incentive Plan. This plan provides that if maximum annual
targets are achieved, the award to the chief executive officer
would be a maximum of 75% of 1996 salary paid, the award to the
chief operating officer would be a maximum of 60% of salary paid,
and the award to other participants would be a maximum of 50% of
1996 salary paid.
The Committee believes that consistent double digit increases
in earnings per share and a consistent return on equity in the 18%
range produces superior performance that will be reflected in the
Corporation's stock price.Committee. Annually, the Committee reviews one
year and five yearState Street’s earnings per share andgrowth, return on equity performance, datarevenue growth, and total stockholder return for the reference group as well as other companies
represented in the S&P Financial Index. The Corporation's total
return to stockholders for the oneone- and five yearfive-year period as compared to the S&P Financial Index is also reviewed.Index. In establishing theperformance targets for the annual incentive plan, the Committee considers thethis data noted above 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. Aggregate competitive data showing
the level of bonus awards for executives in the reference group of
companies is also considered. 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 19962000 performance targets established by the Committee were based on return on equity
and earnings per share. Each goal was weighted 50%. Performance
targets for 1996 were established at a minimum target of 14% return
on equityshare and a maximum target of 18% return on equity. The Committee established a performance/payout schedule which identified various objective earnings per share targets were establishedand return on equity levels at a minimum target of
$2.77 and a maximum target of $3.65. The Plan provided that no
bonuswhich specific awards would be paid for performance at or below the minimum
targets, performance at or above the maximum targets would result
in 100% of the bonus being paid, and payout levels were established
for specific performance points between the minimum and maximum
targets.earned.
At its meeting in February 1997,2001, the Committee reviewed
information supplied by the Corporation's independent auditors and
certified that the Corporationspecific performance goals had been achieved an 18.1% return on equity
and earned $3.56 per share in 1996. This equates to 100% of the
maximum potential bonus award for the return on equity target and
99% of the maximum potential bonus award for the earnings per share
target. The Committee approved a total bonus payment for 2000 of $1,557,600 for Mr. Carter equal to
74.5% of his 1996 salary paid.and $1,168,200 for Mr. Spina's bonus was 59.6% of
salary paid.Spina. Bonuses to thefor other participants in the plan who
receivedreceiving bonuses averaged 49.7%totaled $5,858,346 for the year.
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 total 1996 salaries paid to
those receiving bonuses.
At its meetings in December 1996,material terms of which have been approved by stockholders. In general, the Committee recommended
that the Board of Directors approveperformance measures under such a newplan must be reapproved by stockholders every five years. The Senior Executive Annual Incentive Plan. This plan is being submitted to shareholders for
approvalPlan was approved by stockholders at this year's annual meeting and is described in detailthe 1997 Annual Meeting. Described elsewhere in this proxy statement. The new plan has been designedstatement is an amended Senior Executive Annual Incentive Plan which stockholders are being asked to makeapprove at the Corporation's plan more competitive and to give the
Committee greater choice in the performance measures which can be
used. Under this plan the Committee would assign each executive a
minimum, target and maximum bonus award, stated as a percent of
salary. The Committee has determined that if the plan isApril 2001 meeting. If approved,
by the stockholders, the minimum award for Mr. Carter for 1997 will
be 0% of salary, the target bonus award will be 90% of salary and
the maximum award will be 180% of salary. The minimum bonus for
Mr. Spina will be 0% of salary, the target bonus award will be 80%
of salary and the maximum will be 160% of salary. The minimum
bonus awards for other members of the executive group will be 0% of
salary and the target bonus awards will range from 50% of salary to
65% of salary with maximums at two times the target percent. Any
bonus earned is subject to reduction by the Executive Compensation
Committee. Under the new plan the maximum bonus payable to any
single participant is limited to $2.5 million and the Committee may
provide that some portion or all of any award payment be made in
shares of common stock of the Corporation in lieu of cash.
All awards will be made after certification byin effect for the Executive
Compensation Committee that2002 plan year.
Performance Awards/Equity Awards
Longer term compensation is provided to executives in the establishedform of both performance goals have
been met.
PERFORMANCE UNITS
awards and equity awards.
Performance unitsAwards - Performance awards represent a contingent right to a cash payment, based onupon 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 unitsawards have been granted to the Corporation's executives once every two years or at the time an officer joined the executive group. UnderPerformance award payments, if any, are made every two years.
The Committee granted performance awards under the 1994 Stock Option1997 Equity Incentive Plan to the executive group in December 1998. This grant included an award of 127,000 units to Mr. Carter and Performance Unit Plan,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. All of these grants had a two-year performance period covering the years 1999 and 2000. The Committee established performance targets for the 1999-2000 performance period for these grants, tied to a combination of financial measures, used for determining the number of shares
earned covered a measurement period of two years and included one
or more of anbased upon return on equity, earnings per share, target, a return on equity target,
and a total return to stockholders target.stockholder return. In December 1993, executives were grantedFebruary 2001, the Committee certified data confirming that 100% of performance units by
the Board of Directorsawards had been earned for the 1995-1996two-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 period.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 thethese 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 independentCommittee’s compensation consultantconsultant. These grants have a two-year performance period covering the years 2001 and represented long-term
incentive opportunity at approximately the seventy-fifth
percentile for companies in the reference group. This grant
included 30,000 performance units granted to Mr. Carter and 20,000
performance units granted to Mr. Spina.
At its meeting in December 1994, the2002. The Committee
12
also established performance targets for the 1995-19962001-2002 performance period, for these
performance units. Forty percent of the performance units granted
were tied to a combination of financial measures, based upon return on equity, target, 40% of the performance
units granted were tied to an earnings per share, target and 20% of
the performance units granted were tied to a total return to
stockholders target.
Afterstockholder return. As soon as practicable after the end of the two yeartwo-year performance period, ending December 31, 1996,2002, a cash payment waswill be calculated based onupon the number of performance unitsawards earned, if any, times the market value of the
Corporation'sState Street’s common stock at the end of the performance period.
For this purpose, market value is defined as the value of a share
of common stock equal to the average daily high and low prices on
the last ten days of the performance period. In this way, the final cash value of the performance unitsawards relates directly to both corporate financial performance in determining how many unitsawards are earned and stock price appreciation in determining the cash value of the sharesunits earned.
At its meeting in February 1997, the Executive Compensation
Committee reviewed certified data confirming that 90% of the units
with a return on equity target were earned, 91% of the units with
an earnings per share target were earned and 100% of the units with
a total return to stockholders target were earned. The Committee
determined that Mr. Carter had earned 27,666 units of the 30,000
units he had been granted and that Mr. Spina had earned 18,444
units of the 20,000 units he had been granted. Based upon the
average high and low prices of the Corporation's common stock
during the last ten trading days of 1996, the Committee approved
payment of $1,776,583 to Mr. Carter and $1,184,335 to Mr. Spina.
At its meeting in December 1996, the Executive Compensation
Committee granted performance units under the 1994 plan to the
executive group. This grant included 40,000 performance units
granted to Mr. Carter and 25,000 performance units granted to Mr.
Spina. The size of the grants was determined based upon data
supplied by the independent compensation consultant and represents
long-term incentive opportunity at approximately the seventy-fifth
percentile for companies in the reference group. These grants have
a two year performance period covering the years 1997 and 1998. At
its meeting in February 1997, the Committee established performance
targets for the 1996-1997 performance period for these grants.
Forty percent of the performance units granted will be tied to a
return on equity target, 40% of the performance units granted will
be tied to earnings per share target and 20% of the performance
units granted will be tied to a total return to stockholders
target.
STOCK OPTIONS
Stock Options - Stock options are granted to executives every two years orannually, although the Committee has the authority to grant options at any time and has in the time an officer joinspast 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 grants is determinedawards based upon subjective factors, including: the perceived importance of the executive’s contribution to the success of State Street, similar to the subjective factors considered in setting base salary; a target level of long-term incentive opportunity at approximately the seventy-fifth percentile
for companies inwith respect to the reference group. In targeting long-term
incentive opportunity, the Committee reliedgroup, based upon data supplied by the independent compensation consultant, which took into accountconsultant; and the amount of and annual value of the two-year performance unitsawards which were being granted atto the same time.
At its meetingrespective executive in December of 1996,that year or in the Committee granted Mr.
Carter options to purchase 150,000 shares and Mr. Spina options to
purchase 80,000 shares.prior year. The exercise price of options is equal to the market price of the shares at the time of the grantgrant. The options have a ten-year life and the
options become exercisable in equal installments over a three yearthree-year period. Because stock options are granted at market price, the value of the stock options is wholly dependent upon an increase in the Corporation's stock price.price of State Street stock. The Committee views stock option grants as a part of the executive'sexecutive’s annual total compensation package for the
period covered by the grant. Therefore, 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.
1997 EQUITY INCENTIVE PLAN
The performance units
At its meeting in December 2000, the Committee granted Mr. Spina options to purchase 125,400 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’s determination.
Deferred and Restricted Stock – Deferred and restricted stock options grantedawards are used to executives
in 1996, were grantedrecruit, motivate, and retain high-potential individuals. Typically, deferred and restricted stock awards are made to individuals who are not members of the executive group. However, the Committee may grant deferred and restricted stock to members of the executive group as part of a recruitment package or based upon subjective factors to reward what is considered to be exceptional performance. Three members of the executive group received restricted stock awards and/or deferred stock under the 1994 Stock Option and Performance
Unit Plan which was approved by stockholders at the 1994 Annual
Meeting. The Board of Directors is recommending that the
stockholders approve the 1997 Equity Incentive Plan whichin 2000. The awards were made without payment from the recipients.
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 replace the 1994 plan.be paid on March 30, 2001. In addition, in recognition of Mr. Carter’s services to stockState 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 unexerciable options and
performance awards,held by Mr. Carter as of January 1, 2001, while retaining the new plan will allow for additional formsexpiration dates of stock and stock based grants including stock, restricted stock,
unrestricted stock and deferred stock, to be made to key employees
of the Corporation. It will provide the Executive Compensation
Committee with additional flexibility in determining performance
measures and other terms and conditions of any award under the
plan.
TAX LAWthese 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 paid executive officers, if those individuals are employed on the last day of the tax year. Performance-basedGenerally, however, performance-based compensation that satisfies the requirements of Section 162(m) is not however,
generally subject to the deduction limit, provided certain
requirements of Section 162(m) are satisfied.limit. The Committee reviewed all elements of the executive compensation program against the standards for qualifying for the tax deduction. AwardsStock option and performance unit awards under the 1994 Stock Option1997 Equity Incentive
13
Plan and Performance Unit Plan andawards under the Senior Executive Annual Incentive Plan have been designed to qualify as performance-based compensation, with the intended result that the deduction of compensation under these plans, including compensation from the exercise of options or from performance units,awards, would not be affected by the Section 162(m) deduction limits. The new Senior
Executive Annual Incentive Plan and the 1997 Equity Incentive Plan,
which stockholders are being asked to approve at this year's annual
meeting, have also been designed to permit qualification of awards
as performance-based compensation. A portion of a bonus earned in 19962000 under the State Street Global Advisors'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).
CONCLUSION and, in appropriate cases, will strive to structure such compensation so that any such limitation will not apply.
Conclusion
Through the programsprogram 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 its efforts to expand globally,our 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 F. Kaye
Charles R. LaMantia
Bernard W. Reznicek
Robert E. Weissman, Chair
| Submitted by, | |
| Robert E. Weissman, Chair | |
| I. MacAllister Booth | |
| Nader F. Dareshori | |
| Charles R. LaMantia | |
| Bernard W. Reznicek |
14
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 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 | 2000 | 821,276 | 1,168,200 | 0 | 0 | 125,400 | 8,385,029 | 24,638 |
| Nicholas A. Lopardo 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 | 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. |
15
These tables provide information with respect to option grants to and option exercises by the Named Executive Officers in 2000, the value of the Corporation's Common
Stock at the endoptions held by them as of the performance period.
(2) Reflects the Corporation's contributionsDecember 31, 2000, and long-term incentive awards to the Salary
Savings Program in 1996.
(3) Mr. Spina was elected President and Chief Operating Officer
on December 21, 1995.
(4) Includes bonuses from the Corporation's Senior Executive
Annual Incentive Plan and from the State Street Global
Advisors' Incentive Plan. Mr. Lopardo also received an
award of 44,000 shares of the Corporation's Common Stock in
1996 under the Global Advisors Equity Compensation Plan.
In general, such shares will be delivered at the end of 10
years and will vest in 20% installments in years 6 through
10, subject to earlier delivery under certain
circumstances.
(5) Includes compensation received by Mr. Allinson of $100,750
in 1994, $100,750 in 1995 and $___,___ in 1996 as Chairman
of Boston Financial Data Services, Inc. which is 50% owned
by the Corporation.
Option Grants in stock price over the exercise price when the
options are exercised.
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
Fiscal Year-End Option Values
Number of Securities Underlying Unexercised Options at | Value of |
| 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 | 3,591,874 |
| 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 |
| (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. |
16
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 | |
| Nicholas A. Lopardo | 45,200 | 2001-2002 | |
| Ronald E. Logue | 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, |
17
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, 1991January 1, 1996 and ended December 31, 1996, 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, 19911995 and assumingassumes reinvestment of dividends. The S&P Financial Index is a publicly available measure of 6774 of the Standard & Poor's 500 companies, representing 3130 banking companies, 1921 insurance companies and 1723 diversified financial services companies.
[insert graph here]
1991 1992 1993 1994 1995 1996
State Street
Boston Corporation
Total Return 100 138 120 93 149 217
S&P 500 Index
Total Return 100 108 118 120 165 203
S&P Financial Index
Total Return 100 123 137 132 204 275
| 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 |
18
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 percents of base
salarycontribution credit percentages 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 the participant retiresthey 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 balancebalances or annuity 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. On October
1, 1987,participant may receive and the Corporationamount 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. For certain participants, the 1995 Supplemental Plan also contains special benefits provisions that may apply in lieu of or in addition to the 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 percent 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 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.
As of December 31, 1996,2000, the credited years of service for each of the Named Executive Officers (except Mr. Carter, who has retired) were as follows: Mr. Carter, 4; Mr. Spina, 23;27; Mr. Lopardo, 8;12; Mr. Allinson, 12,Logue, 9; Mr. Towers, 16, and Mr. Carleton, 17.Ms. Bateman, 2. Current compensation covered by the Retirement Planthese retirement arrangements as of
19
December 31, 19962000 for each of thethese Named Executive Officers was as follows: Mr. Carter, $1,205,627;Spina, $1,451,983; Mr. Spina, $817,301;Logue, $925,628; Mr. Lopardo, $1,332,251;$1,975,628; Mr. Allinson, $632,251,Towers, $663,013, and Mr. Carleton, $489,220.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, 19962000 are as follows: Mr. Carter, $602,814;Spina, $725,992; Mr. Spina, $408,651;Logue, $462,814; Mr. Lopardo, $666,126;$987,814; Mr. Allinson, $314,275,Towers, $333,007, and Ms. Bateman, $312,802.
In recognition of Mr. Carleton, $244,610.
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, AllinsonTowers, and CarletonMs. 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 thethese executive officers are employed by the Corporation
until December 31, 1997 with provision for automatic renewal,State Street and remain in effect for a period of two years after a change of control. If the employment of theany 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 they would become entitled to various benefits under the employment agreements,agreement, including payment of three times the executive officers'officer's base salary and bonus,
unless the executive officers' employment were terminated by the
Corporation for cause orbonus. A termination by the executive officers withoutofficer for 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, 1996,2000, they would have been entitled to receive the following amounts as severance pay: Mr. Carter,
$__________Spina, $4,925,973; Mr. Spina, $_________;Logue, $3,376,932; Mr. Lopardo, $_________;$6,346,932; Mr. Allinson, $_________,Towers, $2,448,111, and Mr. Carleton, $_________.Ms. Bateman, $2,093,250. The Corporation will make additional payments in an amount such that
after the payment of income and excise taxes,employment agreements also entitle the executive officer
willofficers to 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, Lopardo, AllinsonLogue, Towers, and CarletonMs. 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 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, and the sale of a majority of the Corporation's assets.
The Corporation entered into a letter agreement with Mr.
Carter (the "Carter Letter Agreement") that provides for severance
pay equal to two years' salary and bonus if (i) his employment is
terminated for reasons other than voluntary resignation, death or
malfeasance before July 23, 2001, and (ii) he is not eligible for
the severance benefits set forth in the change in control
arrangements described above. In such circumstances, for purposes
of determining the amount payable to Mr. Carter pursuant to the
1995 Supplemental Plan (i) the forfeiture and termination
provisions described above will be deemed inapplicable, and (ii)
the benefits otherwise payable thereunder will be reduced by
multiplying such amounts by a fraction, the numerator of which is
the number of whole calendar months Mr. Carter was employed by the
Corporation and the denominator of which is 120. Such payments
shall terminate in the event that Mr. Carter becomes employed by
one of the top five master trust or custody banks or one of the top
five mutual fund custodians within two years of termination (the
"Non-Competition Clause"). The Carter Letter Agreement also
provides that in the event of a change in control of the
Corporation and termination of Mr. Carter's employment under
circumstances which 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 receive had his employment with the
Corporation continued an additional three years.
On December 6, 1996, the Corporation established an Executive
Compensation Trust (the "Trust") to provide a source for payments
required to be made to participants, including Messrs. Carter,
Spina, Lopardo, Allinson and Carleton, under the 1987 Supplemental
Plan, the 1995 Supplemental Plan and to Mr. Carter pursuant to the
Carter Letter Agreement. The Trust has been partially funded in
the amount of $1,000,000. The Trust is revocable until a change of
control occurs, at which time it becomes irrevocable. A change of
control is defined to include the acquisition of 25% or more of the
Corporation's then outstanding stock or other change of control as
determined by regulatory authorities, a significant change in the
composition of the Board of Directors, merger or consolidation by
the Corporation without certain approvals of the Board of
Directors, and the sale of a majority of the Corporation's assets.
AMENDMENT OF THE RESTATED ARTICLES OF ORGANIZATION TO CHANGE THE
NAME OF THE CORPORATION
On December 19, 1996, the Board of Directors approved the
submission to the stockholders of an amendment of the Corporation's
Restated Articles of Organization to change the name of the
Corporation from "State Street Boston Corporation" to "State Street
Corporation".
The Corporation combines information technology with banking,
trust, investment management and securities processing capabilities
to support the investment strategies of its customers worldwide.
The Corporation is a financial services and investment management
company with substantial opportunities for growth globally.
The Corporation has been steadily expanding its operations
outside the United States. Today, the Corporation has offices in
15 countries and settles securities in 72 markets. The name of the
Corporation has gained distinctive recognition over the years as a
financial institution dedicated to its customers' needs.
The Board believes it is appropriate at this time to adopt
"State Street Corporation" as the name of the Corporation to
enhance its image of serving institutional investors worldwide and
extend its global reach at the same time that it maintains its ties
to the marketplace which it has been serving since 1792.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THIS PROPOSAL TO AMEND THE RESTATED ARTICLES OF ORGANIZATION TO
CHANGE THE NAME OF THE CORPORATION TO STATE STREET CORPORATION.
(ITEM 2 ON PROXY CARD)
Directors.
20
AMENDMENT OF THE RESTATED ARTICLES OF ORGANIZATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
On December 19, 1996,21, 2000, the Board of Directors approved the submission to the stockholders of an amendment to the Corporation'sState Street's Restated Articles of Organization to increase the authorized Common Stock of the CorporationState Street from 112,000,000250,000,000 shares, $1 par value, to 250,000,000500,000,000 shares, $1 par value, and authorize the Board to issue
from time to time authorized and unissued shares of the
Corporation.value.
As of February 28, 1997,2001, there were outstanding ______________,___,___ shares of Common Stock and ______________an additional _,___,___ shares were held in the treasury. Of the ____________,___,___ authorized and unissued shares on that date, _______________,___,___ shares were reserved for issuance pursuant toupon exercise of stock options granted under the Corporation's stock optionState Street's equity incentive plans, and for
the State Street Global Advisors Equity Compensation Plan,
5,000,000 shares were reserved for the 1997 Equity Incentive Plan,
subject to the approval of the plan by the stockholders, and
__________________,___ shares were reserved for issuance pursuant to the 7 3/4% Convertible Subordinated Debentures due 2008. While the BoardAs of Directors has not authorized or taken any
action with respectFebruary 28, 2001, there were ___ unissued shares available for issuance (giving effect to the issuancereservation of shares covered by the
proposal to increase the number of authorized share of Common Stock
and has no current agreement, arrangement, or understanding with
respectfor issuance).
Subject to the issuance of any such shares, the Board is currently
contemplating a stock split (to be effected by a one-for-one stock
dividend)approval of the outstanding Common Stock. The Board's decision to
approve a stock dividend will be based upon market and other
factors deemed relevant by the Board from time to time. The number
of currently authorized but unissued and unreserved shares of
Common Stock would be insufficient to accomplish a stock split of
any significant size. Although there can be no assurance that a
stock dividend will be authorized, the contemplation of a stock
dividend was an important factor the Board considered in proposing
an increase in the number of authorized shares.
The Board of Directors believes that it is advisable to have the authorized shares of Common Stock, in excessthe Board of those shares
outstanding (including, if authorized, the additionalDirectors 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 this proposal) available for general corporate
purposes, such as financings, acquisitions, stock splits, stock
dividendsthe ownership of State Street and, accordingly, will be in the best interests of State Street and the employee benefit plans.stockholders.
The continued
availabilityIndenture of Trust under which State Street's 7 3/4% Debentures were issued contains provisions for the adjustment of the number of shares of Common Stock providesto be issued upon conversion of the Corporationdebentures, and State Street's equity incentive plans contain anti-dilution provisions following the payment of a stock dividend.
If the proposed amendment to the Restated Articles of Organization is approved by the stockholders, the close of business on April 30, 2001 will be the record date for the determination 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 stock dividend will not result in any taxable income to stockholders for either federal or Commonwealth of Massachusetts 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 flexibility to take advantage of various opportunities as
they arise.proposed stock dividend.
The additional shares of Common Stock to be authorized by the amendment will be identical to the shares of Common Stock now authorized and outstanding and will carry Preferred Share Purchase Rights. The increase in authorized shares will not affect the terms 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 the CorporationState Street (for voting, distributions and 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 additional Common Stock provided for in this proposal) available for general corporate purposes, such as financings, acquisitions, additional stock dividends and the employee benefit plans. The continued availability of shares of Common Stock provides State Street with the flexibility to take advantage of various opportunities as they arise.
21
The additional shares of Common Stock as well as the previously authorized Preferred Stock, the employment stock option
and performance unitequity incentive plan agreements discussed above, the Rights Agreement and certain provisions of the By-laws establishing procedures for stockholders to bring proposals or nominations before stockholders' meetings, the classified Board, restrictions on the calling of special stockholder meetings and stockholder action by written consent could, under some circumstances, be used to make a change inof control of the CorporationState Street more difficultdifficult. On September 15, 1988, the Board of Directors established a Rights Agreement (subsequently amended as of September 20, 1990)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 conditions, currently a right may be exercised to purchase one two-hundredthfour-hundredth share of a new series of participating preferred stock at an exercise price of $75,$265, subject to adjustment.adjustment (including as a result of the proposed stock split). The rights become exercisable if a party acquires or obtains the right to acquire 20%10% or more of the Corporation'sState Street's Common Stock or after commencement or public announcement of an offer for 20%10% or more of the
Corporation'sState Street's Common Stock. When exercisable, under certain conditions, each right also entitles the holder thereof to purchase shares of Common Stock of either the CorporationState Street or of the acquiror having a market value of two times the then current exercise price of the right.
Although
Except for the CorporationCommon Stock dividend authorized by the Board of Directors, State Street has no immediate plans to issue additional shares of PreferredCommon Stock or Common Stock, thePreferred Stock. The Board of Directors would have sole discretion to issue uncommitted shares of Common Stock from time to time to effect the stock split discussed
above or for any other corporate purpose, including in reaction to any unsolicited acquisition proposal, without further action by the stockholders, subject to requirements of corporate law and the New York Stock Exchange and other exchanges on which the Corporation'sState Street's Common stockStock is listed. The 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
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
PROVIDE FOR AN INCREASE IN THE AUTHORIZED NUMBER OF SHARES OF THE
CORPORATION'S COMMON STOCK FROM 112,000,000 TO 250,000,000 AND TO
AUTHORIZE THE ISSUANCE OF AUTHORIZED AND UNISSUED SHARES OF THE
CORPORATION FROM TIME TO TIME BY THE BOARD OF DIRECTORS. (ITEM 3 ON
PROXY CARD)
this proposal to amend the Restated Articles of Organization to increase the authorized
number of shares of State Street's Common Stock (Item 2 on your proxy card)
APPROVAL OF THE SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN
The Executive Compensation Committee (the "Committee") and the Board of Directors have approved and recommend for stockholder approval the Senior Executive Annual Incentive Plan (the "Annual Incentive Plan")., including the business criteria on which the performance goals are to be based. The Annual Incentive Plan provides additional incentive to Senior Executivessenior executives to achieve targeted levels of achievement. The Annual Incentive Plan is intended as a successor plan to the incentive plans for senior executivesSenior Annual Incentive Plan previously approved by the stockholders to provide more flexibility to the
Committee to help achieve the Corporation's goal of being the
leading servicer of institutional investors worldwide. Principal
changes include additional performance goals, an increase in the
maximum award level, and a provision that a portion of any payments
made underApril 1997. If approved, the Annual Incentive Plan maywould be made in stock ofeffect for the Corporation.2002 plan year.
Stockholders are being asked to approve the material terms of the Annual Incentive Plan, including the business criteria on which the performance goals are based and maximum awards payable, so that compensation under the Annual Incentive Plan may be deductible by the CorporationState Street under Section 162(m) of the Internal Revenue Code. For a more complete discussion of Section 162(m), see the Report of the Executive Compensation Committee at page __.10. Approval by stockholders of the Annual Incentive Plan and certification by the Committee that targeted performance has been achieved shall beare each a condition to the rights of senior executives to receive any benefits under the Annual Incentive Plan. The following is a description of the Annual Incentive Plan:
ELIGIBLE PARTICIPANTS
22
Eligible Participants
The Chief Executive Officer the President and such other key executives as the Committee may designate participate in the Annual Incentive Plan. To receive an award with respect to a calendar year, unless the Committee determines otherwise, a participant must generally be an employee of the
Corporation,State Street, or one of its subsidiaries, on December 31 of such year. If, however, an individual is no longer an employee of the
CorporationState Street or one of its subsidiaries at the time awards are approved by the Committee, the Committee in its discretion may cause any award otherwise payable under the terms of the Annual Incentive Plan to be forfeited. The CorporationState Street has approximately
_______6 executives who are eligible to participate.
PERFORMANCE GOALS
Performance Goals
Corporate achievement of objectively determinable performance goals established by the Committee determines whether, and the extent to which, a participant earns his or her award. The goals are based on any or any combination of:of the following 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 shareholderstockholder return, revenue, growth, operating
leveragemarket share, quality/service, organizational development, strategic initiatives and market share.risk control. No payments under an award will be made under the Annual Incentive Plan unless the performance goals are met or exceeded. AWARDSOnce established for an award period, 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 State Street (such as stock splits, stock dividends or recapitalizations).
Awards
The Committee may provide for varying levels of payment under an award depending on whether performance goals have been met or exceeded.exceeded and may reduce, including to zero, amounts otherwise payable under an award. No more than $2,500,000$7,500,000 shall be payable under an award to any one individual for any award year. All payments shallwill be made in cash except that the Committee may provide that a certain portion of the payment be made in State Street stock of the Corporation issued pursuant to the 1997 Equity Incentive Plan which the stockholders
are also being asked to approve at the Annual Meeting.Plan. A participant may elect to have all or a portion of an award deferred under deferral rules which may be established by the Committee.
All awards will be made only after certification by the Committee that the performance goals have been achieved.
ADMINISTRATION
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 performance 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
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
23
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, for 1996, see the Annual Bonuses section of the Report of the Executive Compensation Committee and the Summary Compensation Table.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
If the proposal is not approved, the plan will be reconsidered by the Board of Directors.
The Board of Directors unanimously recommends that you vote
FOR ADOPTION OF THE SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN. (ITEM
4 ON PROXY CARD)
APPROVAL OF THE 1997 EQUITY INCENTIVE PLAN
On December 19, 1996,
adoption of the Senior Executive Annual Incentive Plan. (Item 3 on your proxy card)
STOCKHOLDER PROPOSAL
Patrick Jorstad, of 1851 North Scott Street, #156, Arlington, Virginia, 22209, owner of _____ whole shares of Common Stock as of February 28, 2001, has submitted the proposal set forth below for inclusion in the proxy statement. In accordance with applicable proxy regulations, the proposed resolution and supporting statement, for which the Board of Directors ofand State Street accept no responsibility, are set forth below.
Stockholder Resolution
Believing that the Corporation
adoptedhas taken alarming steps in recent years to restrict the1997 Stock Incentive Plan (the "1997 Plan") and recommended its approval by the stockholders. The 1997 Plan is designed to advance thefree exchange of important information among shareholders regarding their mutual interestsofin the Corporationand its stockholders by granting key employees of the Corporation and its subsidiaries, non-employee directors and other key persons, stock and stock-based awards (collectively, the "Awards"), including stock options; restricted and unrestricted stock; rights to receive cash or stock in connection with achievement of performance goals ("Performance Awards")(See Note 1 below);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
Believing that the
Corporation's stock option plans have contributed to the progressfree exchange ofthe Corporation by providing incentives to persons key to its success. Intense competitioninformation amongbusiness firms for executivesshareholders, andother key persons makes it important for the Corporation to maintain an effective compensation program in order to continue to attract, motivate,between shareholders andretain 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. The Board believes that the 1997 Plan will assist the Corporation in meeting the competitive situation created by the varied compensation programs of other companies. The 1997 Plan is intended to replace the 1994 Stock Option and Performance Unit Plan, and upon approval of the 1997 Plan no additional grants will be made under the existing plan. The following is a summary of the principal features of the 1997 Plan. This summary is qualified in its entirety by the complete text of the 1997 Plan as set forth in Exhibit A of this proxy statement. SUMMARY OF THE 1997 PLAN ADMINISTRATION; ELIGIBLE PERSONS. The 1997 Plan is administered by a Committee ofthe Board of Directors,(which currentlyis conducive to the most desirable and efficient corporate governance regime;Cognizant that the Revised Model Business Corporations Act (as amended; hereinafter, "the RMBCA") provides best practices for corporate governance of domestic U.S. stock corporations; and
Realizing that the RMBCA secures and guarantees many shareholder rights and privileges that are in keeping with the free and unfettered exchange of relevant information of mutual interest to shareholders,
Be it hereby resolved that:
It is the
Executive Compensation Committee) consisting of no fewer than two directors. During such times as the Common Stock is regulated under the Securities Exchange Act of 1934 (the "1934 Act") (and except as the Board otherwise determines), all memberssense of theCommittee shall be "non-employee" directors within the meaning of Rule 16b-3 under the 1934 Act and "outside directors" as that term is used in Section 162(m)shareholders of theInternal Revenue Code. All members of the Committee serve at the pleasure ofCorporation that the Board ofDirectors. The Committee has full power, subject toDirectors should, with all diligent speed, adopt a standing policy that the1997 Plan, to grant awards at such time or times as it chooses, determineRMBCA shall govern thesize, type, and terms of any award, waive compliance with award terms, and amend, cancel, and regrant awards (except that persons eligible to participate in the 1997 Plan will be those key employeesconduct of the Corporationand its subsidiaries and other key persons or entities, including non-employee directors, who areina position to make significant contributions to the success of the Corporation and its subsidiaries, as selected from time to time by the Committee.) Approximately ______________ persons are eligible to participate in the 1997 Plan. SHARES SUBJECT TO THE 1997 PLAN. Under the 1997 Plan, an aggregate of 4,000,000 shares of Common Stock of the Corporation is authorized for issuance. The maximum number of shares for which any individual may be granted options or stock appreciation rights under the 1997 Plan during a calendar year is in each case 500,000. The maximum number of shares (or their equivalent fair market value in cash) that may be delivered to any individual under performance awards made under the 1997 Plan is 250,000. (The 4,000,000, 500,000, and 250,000 amounts are subject to adjustment upon certain occurrences.) No Awards may be made under the 1997 Plan after December 18, 2006. 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. The term of each option will be fixed by the Committee but may not exceed 10 years from the date of grant. On February 28, 1997, the closing price of the Common Stock on the New York Stock Exchange, as reported in The Wall Street Journal, was $______. The Committee will determine at what time or times each option may be exercised. Options may be made exercisable in installments, and the exercisability of options may be accelerated by the Committee. The option exercise price of options granted under the 1997 Plan must be paid in cash or, if the Committee so determines, by delivery of shares of unrestricted Common Stock (including by attestation of ownership), by delivery of an unconditional broker's undertaking to deliver the exercise price, or a combination of such methods of payment. In the event of termination of employment by reason of retirement permitted by a retirement plan, disability, or death, except as the Committee may otherwise determine, an option may thereafter be exercised in accordance with its terms for a period ending one year after the last installment of the option becomes exercisable or one year following retirement, death, or disability, if later, subject to the stated term of the option. If an optionee terminates employment for any reason other than retirement permitted by a retirement plan, disability, or death, or if a service relationship of a Participant other than an employee terminates for any reason, except as the Committee may otherwise determine, his or her options will remain exercisable, to the extent then exercisable, for three months (or if the Participant dies within such 3-month period, for one year) following termination, subject to the stated term of the option. STOCK APPRECIATION RIGHTS. The Committee may also grant stock appreciation rights entitling the holder upon exercise to receive an amount in any combination of cash or shares of Common Stock (as determined by the Committee), measured in whole or in part by reference to the appreciation since the date of grant in the value of the shares of Common Stock covered by such right. Stock appreciation rights may be granted separately from or in tandem with the grant of an option. Each tandem stock appreciation right terminates upon the termination or exercise of any accompanying option. In addition to stock appreciation rights exercisable at the discretion of the holder, the Committee may also determine in its sole discretion that, if so requested by an option holder, the Corporation will pay the optionee, in cancellation of the related option, any combination of cash or Common Stock, equal to the difference between the fair market value of the shares covered by the option and the exercise price. Based on current accounting and reporting standards, there would be a charge to earnings with respect to any stock appreciation rights which have been granted, based upon the amount of appreciation, if any, in the market value of the shares covered under the rights, and there would be a credit to earnings, to the extent of previously recognized charges for appreciation, for decline in the market value of such shares. Based on current accounting and reporting standards, applicable charges and credits would commence with the granting of stock appreciation rights, based on market appreciation or depreciation and would continue to be recorded quarterly until the exercise, surrender, or termination of the rights. 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 Stock, the participant will have all rights of a shareholder 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 Annual Incentive Plan described above. DEFERRED STOCK. The Committee may also make Deferred Stock awards under the 1997 Plan. These are awards entitling the recipient to receive shares of Common Stock in one or more installments at a future date or dates, as determined by the Committee. Receipt of Deferred Stock may be conditioned on such matters as the Committee shall determine, subject to acceleration in the Committee's discretion. Except as otherwise determined by the Committeeall suchrights to which a participantinstances where it is notirrevocably entitled will terminate upon the participant's termination of employment. PERFORMANCE AWARDS. The Committee may also award Performance Awards entitling the recipient to receive shares of Common Stock or cashinsuch combinations as the Committee may determine, up to a maximum of 250,000 shares (or their equivalent value in cash) to any individual over the life of the 1997 Plan. Payment of the Performance Award may be conditioned on achievement of individual, corporate, departmental or other performance goals and will be subject to such other conditions as the Committee shall determine. Except as otherwise determined by the Committee, rights under a Performance Award will terminate upon a participant's termination of employment. Performance Awards under the 1997 Plan that are intended to qualify as performance-based compensation under Section 162(m)(4)(C) of the Internal Revenue Code ("exempt awards") must provide for payment solely upon attainment of one or more objectively determinable performance goals established by the Committee (in accordancedirect conflict withthe rules under Section 162(m) of the Internal Revenue Code) based on one or more of the following performance criteria: (i) return on equity, (ii) earnings per share, (iii) the Corporation's total 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 the exemption rules under Section 162(m) of the Internal Revenue Code, the Committee may provide that performance goals will be adjusted to eliminate the effect of extraordinary items (as determined in accordance with generally accepted accounting principles) or changes in the Common Stock by reason of a stock dividend, stock split, extraordinary dividend or similar event. SUPPLEMENTAL GRANTS. In connection with Awards under the 1997 Plan, the Committee may at any time grant to a participant the right to receive a cash payment in up to the amount estimated to be necessary to cover federal, state, and local income taxes with respect to such Award and with respect to the cash payment itself. ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS, ETC. The Committee is required to make appropriate adjustments in connection with outstanding Awards to reflect stock dividends, stock splits, and similar events, including distributions to stockholders other than normal cash dividends. In the event of a merger, acquisition, disposition, or similar corporate transaction or a material change in law or accounting principles or practices, the 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 or Awards. Except as provided by the Committee at time of grant, in the event of a consolidation or merger in which the Corporation is not the surviving corporation or which results in the acquisition of substantially all of the outstanding Common Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of substantially all of the Corporation's assets or a dissolution or liquidation of the Corporation, unvested Awards and Awards not yet exercisable will be forfeited unless the Committee makes the Award vested and free of restrictions (and exercisable, if the Award requires exercise) or, in the case of a participant who will be employed by or otherwise providing services to a surviving or acquiring entity, provide for assumption of the award by such entity or for the grant of a substitute award. In all events, in the event of a "Change of Control" (as defined in the 1997 Plan) of the Corporation, options and SARs shall become exercisable, Restricted Stock shall vest, and holders of Performance Awards shall be entitled to a cash payment in such amount as shall be specified in the award. After such a Change of Control, options and SARs shall remain exercisable following a termination of employment or other service relationship (other than in the event of death, retirement or disability) for seven months or until the expiration of the original term of the award if earlier. Neither the Committee nor the Board may impose additional conditions on exercise or otherwise amend an award without the holder's written consent. Stock may be substituted for cash in certain circumstances where cash payments would result in adverse accounting treatment. CERTAIN TAX PAYMENTS. The Corporation will withhold applicable taxes from any cash payment made pursuant to an Award. In the case of Awards involving Common Stock, the Committee may require the participant to remit an amount equal to the required tax withholding or make other arrangements satisfactory to the Committee for the payment of such taxes. The Committee may permit shares to be withheld from an Award, or may permit the participant to deliver shares, with a value equal to the required withholding. In the case of an ISO, the Committee may require that the participant agree to provide for withholding taxes if a withholding obligation arises at time of exercise or in the future. TRANSFERABILITY OF AWARDS. In general, Awards under the 1997 Plan are nontransferable except in the event of death. However, the Committee in its discretion may permit transfers to other persons or entities. NONCOMPETITION, ETC. The Committee may provide in connection with any Award that the participant's rights to enjoyment of the Award or to any cash or Common Stock deliverable under the Award be conditioned upon the participant's agreeing (on terms determined by the Committee) not to compete with the Corporation and its subsidiaries, not to disclose confidential information, and not to solicit employees, advisors or business from the Corporation and its subsidiaries. AMENDMENT AND TERMINATION. The Committee may at any time amend or discontinue the 1997 Plan or amend awards for the purpose of satisfying changes in the law or for any other lawful purpose. However, no such action shall adversely affect any rights under outstanding awards without the holder's consent. Moreover, any amendment requiring stockholder approval for purposes of satisfying any then-applicable incentive stock option rules or Section 162(m) rules shall be subject to such stockholder approval to the extent then required. FEDERAL INCOME TAX CONSEQUENCES The Corporation is advised that under the federal income tax laws as now in effect, the income tax consequences associated with stock options awarded under the 1997 Plan are, in summary, as follows: INCENTIVE OPTIONS. No ordinary taxable income is realized by the optionee upon the grant or exercise of an ISO. If no disposition of shares issued to an optionee pursuant to the exercise of an ISO is made by the optionee within two years from the date of grant or within one year after the transfer of such shares to the optionee, then (a) upon sale of such shares, any amount realized in excess of the option price (the amount paid for the shares) will be taxed to the optionee as a long-term capital gain and any loss allowed for tax purposes will be long-term capital loss, and (b) no deduction will be allowed to the Corporation. The exercise of an ISO will, however, increase the optionee's alternative minimum taxable income and may result in alternative minimum tax liability for the optionee. If shares of Common Stock acquired upon the exercise of an ISO are disposed of by the optionee prior to the expiration of the two-year or one-year holding periods described above (a "disqualifying disposition"), generally (a) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares at exercise (or, if less, the amount realized on a sale of such shares) over the option price thereof, and (b) the Corporation will be entitled to deduct such amount. Any further gain recognized will be taxed as short-term or long-term capital gain and will not result in any deduction by the Company. Special rules may apply where all or a portion of the exercise price of the ISO is paid by tendering shares of Common Stock. A disqualifying disposition will eliminate the alternative minimum taxable income adjustment associated with the exercise of the ISO if it occurs in the same calendar year as the year in which the adjustment occurred. If an ISO is exercised at a time when it no longer qualifies for the tax treatment described above, the option is treated as a nonstatutory option. Generally, an ISO will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment (one year following termination of employment, in the case of termination by reason of permanent and total disability), except in certain cases where the ISO is exercised after the death of the optionee. Options otherwise qualifying as ISOs will also be treated for federal income tax purposes as nonstatutory options to the extent they (together with other ISOs held by the optionee) first become exercisable in any calendar year for shares having a fair market value, determined at the time of the option grant, exceeding $100,000. NONSTATUTORY OPTIONS. With respect to nonstatutory options under the 1997 Plan, no income is realized by the optionee at the time the option is granted. Generally, (a) at exercise, ordinary income, subject (in the case of options granted to an employee) to withholding, is realized by the optionee in an amount equal to the difference between the option price and the fair market value of the shares on the date of exercise, and a corresponding deduction will be available to the Corporation, and (b) any gain or loss recognized upon a later sale is treated as capital gain or loss, either short-term or long-term depending on the applicable holding period for the sale. CERTAIN LIMITATIONS. Section 162(m) of the Internal Revenue Code limits to $1 million the deduction a public corporation may claim for remuneration paid to any of its five top officers, subject to a number of exceptions and special rules. Eligible performance-based compensation is exempt from this limit. The Corporation intends that compensation associated with the exercise of stock options (and stock appreciation rights) awarded under the 1997 Plan will qualify for this performance-based exemption. The Internal Revenue Code also limits the amount of compensation that may be paid without penalty in connection with a change in control. In general, if the total of an individual's change-in-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-in-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 in control may be required to be taken into account. The foregoing discussion is provided for the information of stockholders and does not purport to be a complete description of the federal tax consequences in respect of option transactions under the 1997 Plan, nor does it describe state or local tax consequences. GRANTS UNDER THE 1997 PLAN The table below sets forth information with respect to Restricted Stock Awards granted to date under the 1997 Plan, conditioned upon stockholder approval of the 1997 Plan. 1997 EQUITY INCENTIVE PLAN Name and Position Number of Units ----------------- ------------- Executive Group Non-Executive Officer Employee Group Except as described in the preceding paragraph, 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 1997 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 BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THE 1997 EQUITY INCENTIVE PLAN. (ITEM 5 ON PROXY CARD) VOTE REQUIRED Consistent with state law and underthe Corporation's By-lawsa majorityor applicable state or federal laws. It is the further sense of theshares entitledshareholders 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
cast on a particular matter, present in person or represented by proxy, constitutes a quorum as to such matter. Votes cast by proxy or in person at the 1997 Annual Meeting will be counted by persons appointed by the Corporation to act as tellers for the meeting. The six nominees for election as directors at the 1997 Annual Meeting who receive a pluralityadvisory of thevotes properly cast for the election of directors shall be elected directors. The affirmative vote of a majority of all shares outstanding and entitled to vote is required to approve Items 2 and 3sense of theaccompanying Notice of 1997 Annual Meeting of Stockholders.shareholders.24
Note 1: The
affirmative vote of a majorityfirst paragraph of theoutstanding shares of Common Stock present in person or represented by proxy at the meeting and entitled to vote is necessary to approve the action proposed in Items 4 and 5 of the accompanying Notice of 1997 Annual Meeting of Stockholders, although in order to list the shares issuable under Item 5 on the New York Stock Exchange, the total votes cast on Item 5 must represent over 50% in interest of all shares entitled to vote on the Item. The tellers will count shares represented by proxies that withhold authority to vote for a nominee for election as a director or that reflect abstentions and "broker non-votes" (i.e., shares represented at the meeting held by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote and (ii) the broker or nominee does not have the discretionary voting power on a particular matter) only as shares that are present and entitled to vote on the matter for purposes of determining the presence of a quorum. Abstentions, withheld votes and broker non-votes will not be counted as votes cast and will have the effect of a vote against Items 2 and 3. In the event that sufficient votes in favor of the proposals set forth in Items 2, 3, 4 or 5 of the Notice of 1997 Annual Meeting of Stockholders are not received by the time of the meeting or any adjournment thereof, the persons named as proxies may propose one or more adjournments of the meeting to permit further solicitation of proxies with respect to the proposal. Any such adjournment will require the affirmative vote of the majority of the shares voted on the question in person or by proxy at the session of the meeting to be adjourned. The persons named as proxies will vote in favor of such adjournment those proxies which they are entitledproposal 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 theeventfirst 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
personsas this one.
- For more information: http://www.listen.to/the_shareholders.
BOARD OF 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.
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 further solicitationattempting to impose a model statutory scheme over a completely different state statute is not in the best interest of proxies will
resultState Street or its stockholders.
25
State Street, a Massachusetts corporation, is a bank holding company and was organized in approval1970. 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. State Street has Articles of Organization and By-laws covering the manner and procedures for operation of the organization. The Articles of Organization and By-Laws are amended and updated whenever appropriate.
We believe that State Street has clear rules for the conduct of its Annual Meetings intended to benefit all of the stockholders present at the meeting.
The Board of Directors unanimously recommends that you vote
AGAINST
this stockholder proposal. They will vote against any
such adjournment those proxies required to be voted against the
proposal and will not vote any proxies that direct them to abstain
from voting(Item 4 on the proposal.
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, 1997. It is expected2001. Ernst & Young LLP acted as independent auditors for State Street for the year ended December 31, 2000. We 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.
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
26
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 19982002 Annual Meeting of Stockholders for inclusionmay do so by following the procedures prescribed in Rule 14a-8 under the Corporation's proxy
material for that meetingSecurities Exchange Act of 1934 and State Street's By-laws. To be eligible, the stockholder proposals must submit such proposals tobe received by the Secretary of the CorporationState Street on or before November 11, 1997 for
inclusion in the proxy materials circulated by the Board of
Directors relating to the 1998 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 19982002 Annual Meeting must be delivered to the Secretary of the CorporationState Street no earlier than January 16, 199818, 2002 and no later than February 15, 199819, 2002 unless the date of the 19982002 Annual Meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from the anniversary date of the 19972001 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)defined in the By-laws) a stockholder's notice shall be considered timely if delivered not later than the 10th day following the date on which public announcement (as defined)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 Boston
Corporation, 225 Franklin Street, Boston, Massachusetts 02110.
OTHER MATTERS
The Board of Directors does not know of any other matters whichthat may be presented for action at the meeting. Should any other business come before the meeting, the persons named on the enclosed proxy will, as stated therein, have discretionary authority to vote the shares represented by such proxies in accordance with their best judgment.
The Board of Directors would like
State Street's Annual Report, including financial statements for the year ended December 31, 2000, is being mailed to have you together with this proxy statement.
Even if you plan to attend the meeting, in person. Please, however,please mark, date, sign and return the enclosed proxy as promptly as possible in any event.possible. If you attend the meeting, you may nonetheless vote in person by ballot if you desire.
March 11, 1997
EXHIBIT12, 2001
27
Appendix A
STATE STREET BOSTON CORPORATION
1997 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to
advance the interests of State Street Boston Corporation (the
"Company") and its subsidiaries by enhancing their ability to
attract and retain employees and other persons or entities who are
in a position to make significant contributions to the success
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").
A-1
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. 28 |
| 9. | Review the following with appropriate representatives of management:
|
| 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 at such time or times
as it may choose; (b) determineCommittee will provide information on its review of the sizeCorporation’s audited financial statements and its related discussions with management. The report will also provide information on the Committee'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.
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
priorconduct audits or 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 4,000,000. 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.
A-2
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 500,000,
which limitation shall be construed and applied consistently with
the rules under Section 162(m) of the Internal Revenue Code.
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.
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.
A-3
(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.
(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.
A-4
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 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.
A-5
(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 be automatically forfeited to the Company
without consideration.
A-6
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.
A-7
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.
6.5. 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.
A-8
(c) Limitations and Special Rules. No more than an aggregate
of 250,000 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 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.
A-9
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 (i) 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.
A-10
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.
A-11
(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:
(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.
A-12
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 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.
A-13
Notwithstanding the foregoing, if any right granted pursuant
to this Paragraph 7.4 would make a Change of Control transaction
ineligible for pooling of interests accounting under applicable
accounting principles that but for this Paragraph 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 Paragraph 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 Paragraph 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
A-14
(3) Consummation by the Company of a reorganization,
merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company ("Business
Combination"); excluding, however, such a Business Combination
pursuant to which (i) all or substantially all of the
individuals and entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to
such Business Combination own, directly or indirectly, more
than 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.
A-15
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.
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.
A-16
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.
A-17
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.
A-18
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.
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.
A-19
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.
A-20
[STATE STREET LOGO]
State Street Boston Corporation
225 Franklin Street
Boston, Massachusetts 02101
PROXY PROXY
Conduct.
29
| State Street Corporation | ||
| 225 Franklin Street | ||
| Boston, MA 02110-2804 | SSBCM/PS/01 |
| PROXY | PROXY |
STATE STREET BOSTON CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
Annual Meeting of Stockholders - APRIL 16, 1997April 18, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of State Street Boston Corporation
(the "Corporation") hereby appoints Susanne G. Clark,Elizabeth D. Corse, Evalyn Lipton Fishbein and Claire A. Fusco, (eachor any of them, with power to act
without the others and withfull power of substitution)substitution, as proxies to representvote all shares of Common Stock of State Street Corporation which the undersigned is entitled to vote at the Annual Meeting of Stockholders of theState Street Corporation to be held at 225 Franklin Street, Boston, Massachusetts 02110 on April 16, 1997 and18, 2001 at 10:00 A.M., or at any adjournmentsadjournment thereof, as indicated on the reverse side, and in their discretion on any other matters that may properly come before the meeting or any adjournment thereof.
To vote in accordance with all the powerBoard of Directors' recommendations just sign and date the undersigned would
possess if personally present, andother side; no boxes need to vote, as designated, all
shares of Common Stock of the Corporation which the undersigned
may be entitled to vote at said Meeting, hereby revoking any
proxy heretofore given.
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS JUST SIGN AND DATE THE OTHER SIDE; NO BOXES NEED
TO BE CHECKED.
checked.
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 VOTE,MARK, DATE, AND SIGN ON OTHERTHE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
| HAS YOUR ADDRESS CHANGED? | DO YOU HAVE ANY COMMENTS? |
____________________________________________ ____________________________________________ ____________________________________________ | ____________________________________________ ____________________________________________ ____________________________________________ |
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 | Please mark your vote as | [x] | |
The Board of Directors recommends a vote FOR Items 1, 2 and 3. | The Board of Directors recommends a vote AGAINST Item 4. | |
| Item 1 - Election of Nine Directors. For All For All (See reverse) [ ] [ ] [ ] 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). 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. In their discretion, the Proxies are authorized to vote | ||
RECORD DATE SHARES: | COMMENTS/ADDRESS CHANGE (Mark box at right if you have written comments/ [ ] address change on the reverse side of this card.) |
Please be sure to sign and date this Proxy.
Signature_________________________________ Signature_______________________________ Date___________________
NOTE: Please sign this proxy exactly as your name appearsname(s) appear(s) on the books of theState 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?
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------- -------------------------------
- ------------------------------- -------------------------------
- ------------------------------- -------------------------------
- ------------------------------- -------------------------------
1. Election of Six Directors:
[x]PLEASE MARK VOTES AS IN FOR ALL
THIS EXAMPLE FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
Each of these matters is fully I.Booth J.Cash, Jr. T.Casner
described in the Notice of and A.Goldstein D.Perini D.Picard
Proxy Statement for the Meeting, If you do not wish your shares
receipt of which is hereby voted "FOR" one or more
acknowledged. THE BOARD OF nominees, mark the "FOR ALL
DIRECTORS RECOMMENDS THAT YOU EXCEPT" box and strike a line
GRANT AUTHORITY FOR THE ELECTION through the nominee(s) name.
OF DIRECTORS AND THAT YOU VOTE Your shares will be voted for
FOR ITEMS 2, 3, 4 AND 5. THE the remaining nominee(s).
SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED IN ACCORDANCE 2. Proposal to Approve the
WITH THE SPECIFICATIONS MADE. Amendment of the Restated
IF NO SPECIFICATION IS MADE, THE Articles of Organization to
PROXY WILL BE VOTED IN ACCORDANCE Change the Name of the
WITH THE BOARD OF DIRECTORS' Corporation
RECOMMENDATIONS. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to Approve the
Amendment of the Restated
RECORD DATE SHARES: Articles of Organization to
Increase the Number of
Authorized Shares of Common
Stock
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
REGISTRATION 4. Proposal to Approve the
Senior Executives Annual
Incentive Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. Proposal to Approve the 1997
Equity Incentive Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. In their discretion, the
Proxies are authorized to
Please be sure to sign and date vote upon such other business
this Proxy. as may properly come before
the meeting or any
Date adjournments thereof.
-----------
Mark box at right if comments
- ------------------------------- or address change have been [ ]
Stockholder Co-owner noted on the reverse side of
signs here signs here this card.
- -----------------------------------------------------------------
---------------------------------------------------
| DETACH CARD | DETACH CARD |
STATE STREET BOSTON CORPORATION
DEAR STOCKHOLDER:
You are
Dear Stockholder:
We cordially invitedinvite you to attend the 19972001 Annual Meeting of Stockholders of State Street Boston Corporation. The meeting will be held in the Enterprise Room at 225 Franklin Street, Boston, Massachusetts on Wednesday, April 16, 1997,18, 2001, at 10:00 a.m.
Your Board of Directors and management look forward
Details regarding admission to greeting
those stockholders able to attend.
The notice ofthe meeting and proxy statement which follow describe the business to be conducted atare more fully described in the meeting. You will be asked
to elect six directorsaccompanying Notice of Annual Meeting and to act upon proposals to change the
name of the Corporation, to increase the authorized shares of
Common Stock, to approve the Senior Executives Annual Incentive
Plan and to approve the 1997 Equity Incentive Plan. State
Street's goal is to be the leading servicer of institutional
investors worldwide. Each of these proposals is designed to help
achieve this goal in competitive global markets. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THESE
PROPOSALS.
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