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Ust Inc – ‘DEF 14A’ for 5/4/04

On:  Thursday, 3/25/04, at 9:59am ET   ·   Effective:  3/25/04   ·   For:  5/4/04   ·   Accession #:  950123-4-3751   ·   File #:  0-17506

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 1: DEF 14A     Definitive Proxy Materials: Ust Inc.                HTML    329K 

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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:

UST Inc.

Payment of Filing Fee (Check the appropriate box):

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100 West Putnam Avenue

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

March 26, 2004             

To the Stockholders of UST:

      The 2004 Annual Meeting of Stockholders of UST Inc. (the “Company”) will be held at Cole Auditorium of the Greenwich Library, 101 West Putnam Avenue, Greenwich, Connecticut, on Tuesday, the 4th day of May 2004, at 10:00 a.m., Eastern Daylight Saving Time, for the following purposes:

      Stockholders of record at the close of business on March 5, 2004 will be entitled to vote at the meeting. The approximate date of mailing of this Proxy Statement is March 26, 2004.

      You are urged to vote your proxy promptly whether or not you plan to attend the meeting in person. Please sign and date the enclosed proxy card and return it promptly in the enclosed postage paid envelope or you may also vote your shares either via telephone or the Internet. Please read the instructions printed on the top portion of your proxy card. The Company’s transfer agent, which is tabulating votes cast for the meeting, will count the last vote received from a stockholder, whether by telephone, proxy or ballot or electronically through the Internet. Please note all votes cast via telephone or the Internet must be cast prior to 5:00 p.m., Eastern Daylight Saving Time, on Monday, May 3, 2004.

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100 West Putnam Avenue

PROXY STATEMENT

Solicitation of Proxy

      The enclosed proxy is solicited by the Board of Directors (the “Board”) of UST Inc. (the “Company”) for use at the Annual Meeting of Stockholders to be held May 4, 2004, including any adjournment thereof (the “Annual Meeting”). Whether or not you plan to attend the Annual Meeting, the Board respectfully requests the privilege of voting on your behalf and urges you to either sign, date and return the enclosed proxy or vote your shares via telephone or the Internet. By doing so you will, unless such proxy is subsequently revoked by you, authorize the persons named therein, or any of them, to act on your behalf at the Annual Meeting.

      Any stockholder who submits a proxy may revoke it by giving a written notice of revocation to the Secretary or, before the proxy is voted, by submitting a duly executed proxy bearing a later date. The Company’s transfer agent, which is tabulating votes cast at the Annual Meeting, will count the last vote received from each stockholder, whether by telephone, proxy or ballot or electronically through the Internet.

      As of March 5, 2004, the record date for the Annual Meeting, the outstanding stock of the Company entitled to vote consisted of 165,646,555 shares of common stock (“Common Stock”) (each entitled to one vote).

      Appearance at the meeting in person or by proxy of the holders of Common Stock entitled to cast at least 82,823,278 votes is required for a quorum.

Attendance and Procedures at Annual Meeting

      Attendance at the Annual Meeting will be limited to stockholders of record, beneficial owners of Common Stock entitled to vote at the meeting having evidence of ownership, a duly appointed proxy holder with the right to vote on behalf of an absent stockholder (one proxy holder per absent stockholder) and invited guests of the Company. Any person claiming to be the proxy holder of an absent stockholder must, upon request, produce written evidence of such authorization. If you wish to attend the Annual Meeting but your shares are held in the name of a broker, bank or other nominee, you should bring with you a proxy or letter from the broker, bank or nominee as evidence of your beneficial ownership of the shares. Management requires all signs, banners, placards, cameras and recording equipment to be left outside the meeting room.

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Action to be Taken at Meeting

      1. Three directors will be elected to serve for terms of three years each and until their respective successors are elected and qualified.

      2. A resolution will be offered to ratify and approve the selection of independent auditors of the accounts of the Company for the year 2004.

      3. The Company has been advised that two resolutions will be offered by stockholders.

      Your authorized proxies will vote FOR the election of the individuals herein nominated for directors and the resolution regarding the auditors, and AGAINST stockholder proposal no. 4, unless you designate otherwise. A proxy designating how it should be voted will be voted accordingly. If no designation is made on the proxy with respect to stockholder proposal no. 3, your authorized proxies will not vote on that proposal.

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Proposal No. 1

Election of Directors

      The Certificate of Incorporation provides for the election of one-third (as nearly as possible) of the Board annually.

      The Board, upon recommendation of the Nominating & Corporate Governance Committee, nominated the three directors standing for election at the Annual Meeting for terms expiring at the Annual Meeting of Stockholders to be held in 2007. Edward T. Fogarty, a director since 1997 and Lowell P. Weicker, Jr., a director since 1995, will each retire from the Board at the expiration of their current terms of office and, accordingly, are not standing for reelection at the Annual Meeting. To help ensure that the number of directors in each class is, as nearly as possible, equal in number, Messrs. Clancey and Gierer will be standing for election at this Annual Meeting rather than the Annual Meeting of Stockholders to be held in 2005. The Board currently consists of ten members and, with the retirements of Messrs. Fogarty and Weicker, shall be reduced to eight at the Annual Meeting.

      Directors are elected by a plurality of the votes cast. “Plurality” means that the nominees who receive the largest number of votes cast “For” are elected as directors, up to the maximum number of directors to be chosen at the Annual Meeting. Consequently, any shares not voted “For” a particular nominee as a result of a direction to withhold or a broker non-vote will not affect the outcome of the vote.

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The Nominees

      Set forth in the following Table I is certain information with respect to each person nominated by the Board and each person whose term of office as a director will continue after the Annual Meeting, including the number of shares of Common Stock beneficially owned by such person as of January 31, 2004.

TABLE I

		Name of Nominee*
		or Director		Business History
		John D. Barr Age 56 Shares beneficially owned:   Outstanding shares — 2,050   Shares subject to options — 0 Present term expires 2005 Director since 2003		Mr. Barr has served as President and Chief Executive Officer of Automotive Performance Industries (“API”) and Chairman of API’s operating group, Performance Logistics Group since 1999. He previously served as President and Chief Operating Officer and as a member of the Board of Directors of Quaker State Corporation from 1995 to 1999. He also serves as a director of United Auto Group, Clean Harbors Inc., and James Hardie, N.V.
		*John P. Clancey Age 58 Shares beneficially owned:   Outstanding shares — 9,122   Shares subject to options — 19,000 Nominated for term to expire 2007 Present term expires 2005 Director since 1997		Mr. Clancey has served as Chairman of Maersk Sealand since December 1999. He served as President and Chief Executive Officer of Sea-Land Service, Inc., from July 1991 to December 1999. He also serves as a director of Foster Wheeler Ltd.
		Edward H. DeHority, Jr. Age 73 Shares beneficially owned:   Outstanding shares — 8,885   Shares subject to options — 23,500 Present term expires 2006 Director since 1990		Mr. DeHority is a retired certified public accountant and attorney. He was employed by Ernst & Young LLP from 1958 to 1988.

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		Name of Nominee*
		or Director		Business History
		Patricia Diaz Dennis Age 57 Shares beneficially owned:   Outstanding shares — 1,869   Shares subject to options — 3,000 Present term expires 2006 Director since 2001		Ms. Diaz Dennis has served as Senior Vice President, General Counsel and Secretary of SBC West since May 2002. She served as Senior Vice President — Regulatory and Public Affairs of SBC Communications Inc. (“SBC”) from November 1998 to May 2002 and as Senior Vice President and Assistant General Counsel of SBC from September 1995 to November 1998. She also serves as a director of Entravision Communications Corporation.
		Elaine J. Eisenman, Ph.D. Age 55 Shares beneficially owned:   Outstanding shares — 4,614   Shares subject to options — 20,500 Present term expires 2005 Director since 1996		Dr. Eisenman has served as Senior Vice President — Human Resources and Administration of Children’s Place Retail Stores Inc. since September 15, 2003. She served as Chairman of Management & Capital Partners from April 2001 through December 2002. She served as Executive Vice President and Chief Administrative Officer of Enhance Financial Services Group, Inc. from December 1999 through February 2001 and as Executive Vice President — Human Resources and Administration from January 1998 to December 1999.
		*Vincent A. Gierer, Jr. Age 56 Shares beneficially owned:   Outstanding shares — 610,765   Shares subject to options — 915,600 Nominated for term to expire 2007 Present term expires 2005 Director since 1986		Mr. Gierer has served as Chairman of the Board and Chief Executive Officer since December 1, 1993 and has served as President since September 27, 1990. He has been employed by the Company since 1978.

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		Name of Nominee*
		or Director		Business History
		*Joseph E. Heid Age 57 Shares beneficially owned:   Outstanding shares — 3,411   Shares subject to options — 1,500 Nominated for term to expire 2007 Present term expires 2004 Director since 2003		Mr. Heid served as Chairman, President and Chief Executive Officer of Esprit de Corp from December 1999 to July 2002. From November 1997 to November 1999, he served as President of Revlon International. He previously served as Senior Vice President of Sara Lee Corporation. Mr. Heid is a certified public accountant. He also serves as a director of Maidenform, Inc.
		Peter J. Neff Age 65 Shares beneficially owned:   Outstanding shares — 7,063   Shares subject to options — 19,000 Present term expires 2006 Director since 1997		Mr. Neff served as President and Chief Executive Officer of Rhône-Poulenc, Inc., the U.S. subsidiary of Rhône-Poulenc, S.A. from 1991 to 1996.

      Messrs. Clancey, Gierer and Heid are now directors and will serve for the terms indicated. Your proxy, unless otherwise marked, will be voted for the aforesaid nominees for such terms. In the event that any nominee is not available for election at the time of the meeting or any adjournment thereof, an event which is not anticipated, your proxy may be voted for a substitute nominee and will be voted for the other nominees named above.

      As of January 31, 2004, all directors and executive officers as a group beneficially owned 904,854 shares of Common Stock and had exercisable options to acquire 1,952,100 shares of Common Stock, which together represented in the aggregate approximately 1.7% of the outstanding Common Stock including options held by all such persons. No executive officer or director beneficially owned more than 1% of the aggregate amount of the outstanding Common Stock including options held by the respective person.

      The Board held nine meetings during 2003. No director attended fewer than 75% of the meetings held. Absent unusual or extraordinary circumstances, each director is expected to attend the Company’s Annual Meeting of Stockholders. All but one member of the Board were in attendance at the 2003 Annual Meeting.

Executive Sessions

      The nonemployee directors of the Company meet in executive session without management on a regular basis. The chair of the Nominating & Corporate Governance Committee presides at such executive sessions. In his absence, the nonemployee directors will designate another person to preside over such executive sessions.

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Director Independence

      The recently amended corporate governance listing standards of the New York Stock Exchange (the “NYSE rules”) require that the Board be comprised of a majority of independent directors. The Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder by the Securities and Exchange Commission (the “SEC”), and the NYSE rules, taken together, require that the Audit Committee, the Nominating & Corporate Governance Committee and the Compensation Committee, each be comprised solely of independent directors.

      To ensure compliance with these requirements, each year, the Board, acting through the Nominating & Corporate Governance Committee, reviews the relationships that each director has with the Company based primarily on a review of the questionnaires completed by the directors regarding employment and compensation history, affiliations and family and other relationships and on discussions with the directors. Only those directors whom the Board affirmatively determines have no material relationship with the Company may, under the NYSE rules, qualify as independent directors. To assist in the review process, the Board has established standards concerning relationships that, absent special circumstances, would not be deemed material and thereby cause a director not to be considered independent. These standards are set forth in the Company’s Corporate Governance Guidelines which are available on the Company’s website at www.ustinc.com under the heading “Investors/ Corporate Governance.”

      In light of the foregoing, the Nominating & Corporate Governance Committee has reviewed, on behalf of the Board, the independence of all directors and has determined, based on the information provided to it by the directors, that, as of the Annual Meeting, all directors other than Mr. Gierer, the Company’s Chairman of the Board and Chief Executive Officer, will qualify as independent directors under the NYSE rules, and that, as of the Annual Meeting, each member of the Audit Committee will also satisfy the additional independence requirements applicable, under the federal securities laws and the NYSE rules, to members of an audit committee.

Director Nomination Procedures

      It is the Company’s desire to select individuals for nomination to the Board who are the most highly qualified and who, if elected, will enhance the Board’s ability to oversee and direct, in an effective manner, the business of the Company and to best serve the general interests of the Company and its stockholders. In its assessment of potential nominees, the Nominating & Corporate Governance Committee will consider whether any such nominee:

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      Such matters will be considered in light of the then current diversity and overall composition of the Board.

      The Nominating & Corporate Governance Committee believes that the minimum qualifications for serving as a director of the Company are that a nominee reflects the highest personal and professional ethics and integrity, has the ability to make independent and analytical judgments and has adequate time to devote to Board responsibilities. In addition, the Nominating & Corporate Governance Committee examines a candidate’s specific experience and skills, potential conflicts of interest and independence from management and the Company.

      The Nominating & Corporate Governance Committee identifies potential nominees through referrals by current directors and executive officers and also from a search firm specializing in identifying director candidates whose services have been retained by the Committee. The Nominating & Corporate Governance Committee presently has on retainer the firm of Canny, Bowen Inc. to assist in identifying potential candidates. The Committee will consider candidates from other sources, including, as described below, from stockholders.

      Mr. Barr, the Board’s newest member, was introduced to the Nominating & Corporate Governance Committee by Canny, Bowen Inc.

      Once an individual has been proposed for consideration by the Nominating & Corporate Governance Committee as a possible candidate, the Nominating & Corporate Governance Committee reviews the person’s background and qualifications, including in light of any other candidates that it may be considering, any vacancies as well as the needs and the then current composition of the Board. If the Nominating & Corporate Governance Committee determines that the proposed candidate warrants further consideration, a meeting may be arranged with the proposed candidate and the chair and/or other members of the Nominating & Corporate Governance Committee.

      The Nominating & Corporate Governance Committee will consider and evaluate candidates suggested in a timely manner by stockholders, taking into account the qualities of any individual so suggested and the vacancies and needs of the Board. To enable the Nominating & Corporate Governance Committee to consider and evaluate properly any such candidate prior to the next Annual Meeting, the Corporate Secretary should receive, no later than November 26, 2004 (i.e., the date which is four months before the calendar date relating to the then current year corresponding to the calendar date in the immediately preceding year on which the proxy statement for the prior year’s annual meeting was mailed to stockholders), the following information:

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All such proposed candidates shall be reviewed and evaluated in accordance with the selection criteria discussed above. The Nominating & Corporate Governance Committee’s evaluation process does not vary based on whether or not a proposed candidate is recommended by a stockholder.

Compensation of Directors

      The monthly retainer for all nonemployee directors for their services as directors, including committee assignments, is $5,000. Nonemployee directors are reimbursed for reasonable expenses incurred by them in connection with performance of their services to the Company as members of the Board and its committees. Employee directors receive no additional compensation for their services as directors.

      The Company maintains the UST Nonemployee Directors’ Restricted Stock Award Plan (the “Directors’ Restricted Stock Plan”). The Directors’ Restricted Stock Plan provides for the automatic award to each nonemployee director of 50 shares of restricted stock for each meeting of the Board attended and 40 shares of restricted stock for each Board committee meeting attended. The shares of restricted stock vest on the third anniversary date of the award. Once awarded, dividends on restricted shares are paid to the nonemployee director and all shares may be voted; however, ownership may not be transferred until service on the Board terminates. Unvested shares will be forfeited in the event of a voluntary resignation or refusal to stand for reelection, but vesting will be accelerated in the event of change in control, death, disability or age-related mandatory retirement from service pursuant to the Board’s retirement policy.

      The Company also maintains the UST Nonemployee Directors’ Stock Option Plan (the “Directors’ Stock Option Plan”). The Directors’ Stock Option Plan, which was approved by stockholders at the 1995 Annual Meeting, provides for an annual, automatic grant of an option to purchase 1,500 shares of Common Stock on the first business day following each annual meeting, beginning in 1995, to each member of the Board who is not then an employee of the Company. The Directors’ Stock Option Plan, as amended effective June 30, 2000, also provides for the issuance of additional options at the discretion of the Compensation Committee. All options will be granted with an exercise price per share equal to the fair market value per share of Common Stock on the date the option is granted and will first become exercisable six months after the date of grant. The option exercise period will expire ten years after the date of grant and will not be affected by a participant’s cessation of membership on the Board.

      The Company also maintains the UST Nonemployee Directors’ Retirement Plan (the “Directors’ Retirement Plan”), a nonqualified, nonfunded plan that applies to nonemployee members of the Board (who are not former employees), whose service as such includes periods beginning on or after January 1, 1988, and whose service equals or exceeds 36 months. Under the terms of the Directors’ Retirement Plan, an eligible director will receive one-twelfth of 75% of his or her highest annual compensation (including the value of all restricted stock awards) each month, beginning at age 65 (or such later date upon which occurs his or her termination of service) and continuing over

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      In addition, the Company maintains the UST Directors’ Supplemental Medical Plan (the “Directors’ Medical Plan”), a self-insured medical reimbursement plan that applies to nonemployee members of the Board who are not former employees. The Directors’ Medical Plan provides for an additional $7,500 of annual coverage for each participant for reasonable, medically-related expenses above the participant’s basic medical plan coverage. Coverage continues upon a participant’s retirement from the Board for a period equal to the participant’s period of service on the Board.

      The Company also makes available to its nonemployee directors up to $12,500 annually in tax and financial planning services. After retirement from the Board, this benefit continues in the amount of $6,500 annually for a period equal to the retired director’s period of service on the Board. In addition, nonemployee directors are covered under the Company’s group life insurance, accidental death and dismemberment and business travel accident policies.

Committees of the Board

      The Company has an Audit Committee, a Compensation Committee, a Nominating & Corporate Governance Committee and a Strategic Review Committee.

      The Audit Committee, which met nine times during 2003, is currently comprised of the following directors: Edward H. DeHority, Jr. — Chairman, John D. Barr, Patricia Diaz Dennis, Joseph E. Heid and Lowell P. Weicker, Jr., each of whom is an independent director under the NYSE rules, as currently in effect. The Board has determined that Messrs. DeHority and Heid both qualify as “audit committee financial experts” in accordance with the rules of the SEC. As specified in its charter, a copy of which is attached to this proxy statement as Appendix A, the functions of the Audit Committee include the following:

      The Audit Committee has the authority to institute special investigations and to retain outside advisors as it deems necessary in order to carry out its responsibilities. The Audit Committee’s Report appears on page 12 of this proxy statement.

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      The Compensation Committee, which met seven times in 2003, is comprised of the following directors: Peter J. Neff — Chairman, John P. Clancey, Patricia Diaz Dennis and Edward H. DeHority, Jr., each of whom is an independent director under the NYSE rules, as currently in effect. As specified in its charter, the functions of the Compensation Committee include the following:

      The Compensation Committee has the authority to retain such outside advisors as it deems necessary in order to carry out its responsibilities. The Compensation Committee Report on Executive Compensation appears on pages 14 to 16 of this proxy statement.

      The Nominating & Corporate Governance Committee, which met five times during 2003, is comprised of the following directors: John P. Clancey — Chairman, Edward T. Fogarty, Joseph E. Heid and Peter J. Neff, each of whom is an independent director under the NYSE rules, as currently in effect. As specified in its charter, the functions of the Nominating & Corporate Governance Committee include the following:

      The Strategic Review Committee, which met three times in 2003, is comprised of the following directors: Vincent A. Gierer, Jr. — Chairman, John D. Barr, Elaine J. Eisenman, Edward T. Fogarty, Joseph E. Heid, Peter J. Neff and Lowell P. Weicker, Jr. The Strategic Review Committee has oversight responsibility for significant financial matters of the Company, financial terms of any proposed significant acquisitions or divestitures, investment results of employee trust funds, dividend policy and other capital transactions including the share repurchase policy and the Company’s strategic plans.

      A copy of the charter for each of the Audit Committee, the Compensation Committee and the Nominating & Corporate Governance Committee is available on the Company’s website at www.ustinc.com under the heading “Investors/ Corporate Governance/ Committee Composition and Charters.” A copy of each such charter is also available to stockholders in print free of charge upon request, addressed to the Corporate Secretary at UST Inc., 100 West Putnam Avenue, Greenwich, Connecticut 06830.

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REPORT OF THE AUDIT COMMITTEE

      The Audit Committee (the “Committee”) oversees on behalf of the Board the 1) integrity of the Company’s financial statements and financial reporting processes as well as the integrity of the Company’s systems of internal accounting and financial controls; 2) Company’s compliance with legal and regulatory requirements; 3) independent auditor’s qualifications, independence and performance; and 4) performance of the Company’s internal audit function.

      In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management the Company’s audited financial statements for the year ended December 31, 2003.

      The Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Committee under auditing standards generally accepted in the United States. In addition, the Committee has reviewed and discussed the independent auditors’ independence including the matters in the written disclosures required by the Independence Standards Board; discussed with the independent auditors matters required by the Statement on Auditing Standards 90, “Audit Committee Communications”; and has considered the compatibility of permitted non-audit services performed by the auditors with the auditors’ independence.

      The Committee discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits. The Committee meets with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

      In addition, the Committee reviewed and discussed with the independent auditors the report concerning the firm’s internal quality-control procedures.

      In reliance on the reviews and discussions referred to above, the Committee recommended to the Board (and the Board has approved) that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 for filing with the Securities and Exchange Commission. The Committee and the Board have also recommended, subject to stockholder approval, the selection of the Company’s independent auditors.

February 18, 2004

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Independent Auditor Fees

      The aggregate fees billed for professional services provided to the Company by Ernst & Young LLP (“Ernst & Young”) for the fiscal years ended December 31, 2003 and December 31, 2002 were as follows:

      Audit Fees represent fees for professional services performed in connection with the audit of the Company’s annual financial statements and the review of the quarterly reports on Form 10-Q and registration statements filed with the SEC.

      Audit-Related Fees were for services related to employee benefit plan audits and assistance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002.

      Tax Fees were for professional services performed with respect to tax compliance, tax advice and tax planning services.

      The Audit Committee had considered and determined that the performance of those services other than audit services would not impair Ernst & Young’s independence.

Audit Committee Pre-Approval Policies and Procedures

      The Company determines and communicates its need for specific additional services to be provided by Ernst & Young for which advance approval of the Audit Committee is requested. The Audit Committee reviews and considers each request on an as needed basis and, if it so determines, approves such services.

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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

      The Compensation Committee (the “Committee”), which is comprised entirely of independent directors, (a) reviews and approves, as appropriate, the Company’s overall compensation program with respect to its officers, including all executive officers, and the various components of total compensation of the executive officers; and (b) administers the Company’s compensation plans under which it has been authorized consistent with the terms of such plans, including, as applicable, approving all equity-based awards pursuant to the Company’s Amended and Restated Stock Incentive Plan (the “Stock Plan”) and awards to each executive officer pursuant to the Company’s Incentive Compensation Plan (“ICP”).

Executive Compensation Policy

      It has been the Committee’s longstanding policy to link pay and performance by placing the majority of total compensation at risk subject to the Company’s financial performance. During 2003, the Committee reviewed the Company’s executive compensation program for assurance that total compensation is competitive and effective in helping the Company attract, retain and motivate highly qualified executives, recognizing the challenges and risks associated with the tobacco industry. With the assistance of outside compensation consultants, one of which was retained by the Committee, the Company’s executive compensation policy and design was evaluated against current practices and corporate governance trends. A comparator group consisting of 16 companies in similar industries with comparable financials and with whom the Company competes for talent was selected solely for the purpose of competitive analysis. Because of the aforesaid criteria, this peer group is not the same as the group used for comparing investment performance in the graph included in this proxy statement.

      The Committee’s review resulted in several modifications to the Company’s executive compensation program which are primarily intended to (i) more specifically define the link between pay and performance; and (ii) improve the alignment of short and long-term incentives by focusing more directly on the achievement of clearly defined objectives and measurable results. The Committee determined that total compensation (base salary, annual bonus and long-term incentives consisting of equity-based awards) is to be targeted at the median of the comparator group (size adjusted for market capitalization) with a 20% premium. This premium is reflective of the discount applied to the Company’s market capitalization by the investment community as well as to recognize the Company’s challenges associated with recruiting and retaining talented executives in the tobacco industry. Ranges within job bands have been established around the target total compensation for the purpose of providing flexibility in rewarding for individual performance.

Specific Components of Compensation Program

      Base Salary. Base salary, which the Committee believes should be the pay component least related to Company performance, represents the smallest portion of total compensation and is the only individual component of total compensation targeted at the median of the comparator group. Ranges around the target have been established for the purpose of providing flexibility in rewarding for individual performance. Beginning in 2004, base salaries will be reviewed annually rather than on the previous three-year cycle. In determining base salary increases, the following factors are considered: individual job performance and scope, the targeted percentage of the executive’s total cash compensation and the Company’s overall merit increase pool.

      Annual Incentives. Annual bonuses are awarded under the ICP, which is directly linked to Company performance through operating earnings. The ICP formula, which was last approved by

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      For the fiscal year ended December 31, 2003, the Company was required to take a charge in the amount of $15.9 million which was the result of write downs at a subsidiary primarily due to a lack of management oversight. It was determined that, in order to avoid any negative impact on the Company’s stockholders, the charge would be absorbed by a reduction of the 2003 ICP fund and, accordingly, the aggregate 2003 ICP fund was reduced by 38%. Target awards for executive officers were established based upon pre-established individual performance objectives. Each executive officer’s bonus award was based on an evaluation of his respective performance of those pre-established objectives. In the case of one executive officer, other considerations were taken into account. Certain bonuses for the executive officers were then reduced further depending on the specific circumstances relating to each executive officer and the charge. Aggregate 2003 ICP awards made to the executive officers constituted 61% of their aggregate cash compensation for 2003 and 44% of their total compensation for 2003.

      Equity-Based Awards. In 2003, stockholders approved the Stock Plan, which provides for equity-based awards. The Committee believes the Stock Plan supports the compensation policy discussed above, since the value of awards made thereunder are linked to increases in shareholder value derived from the appreciation in the Company’s stock price. The Company’s executive officers, in 2003, were awarded both stock options and restricted shares pursuant to the Stock Plan. In determining each award, the Committee considered, without assigning any particular weight to any one factor: (i) the individual performance and scope of responsibilities of each executive officer; (ii) the grant date value (based upon the modified Black-Scholes option pricing model) of the last regular grant of stock options that the executive officer received in 2001; and (iii) the executive’s targeted goal for total compensation.

2003 Compensation of Chief Executive Officer

      Mr. Gierer’s performance is reviewed annually by the Committee and each component of his compensation is determined by the Committee, consistent with the policy discussed above. In its evaluation of Mr. Gierer’s performance, the Committee considers the Company’s attainment of targeted financial objectives, i.e., net earnings and diluted EPS. It also considers Mr. Gierer’s achievement of certain strategic initiatives designed to further the Company’s earnings growth and profitability. As discussed above, the Committee assigned a higher weight on the Company’s overall financial performance based on Mr. Gierer’s position with the Company.

      Mr. Gierer’s annual base salary was set at $1,050,000, effective January 1, 2004. His 2003 ICP award was determined by the Committee which considered the Company’s overall financial performance and evaluated Mr. Gierer’s achievement of his pre-established performance objectives. In its evaluation of Mr. Gierer’s performance, a higher weight was assigned to the attainment

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      The Committee determined Mr. Gierer’s 2003 equity-based awards by first taking into account the factors described above under “Equity-Based Awards”. The grant date value of Mr. Gierer’s 2001 stock option grant was $1,080,000 which was then converted into 66,700 shares subject to options and 13,300 restricted shares. These awards are subject to the vesting schedules described in the Summary Compensation Table and the Option Grants in Last Fiscal Year Table appearing on pages 18 and 19, respectively of this proxy statement.

Executive Stock Ownership Guidelines

      Executive Stock Ownership Guidelines have been established by the Committee to encourage officers to obtain and hold Company stock in an effort to align their interests with those of the Company’s stockholders as well as to demonstrate their long-term commitment to the future growth of the Company. The guidelines provide that all officers are expected to own, at a minimum, depending on job band, a target number of shares whose market value equals one to five times their base salary within a five-year time frame to achieve the applicable target.

Limitations on the Deductibility of Executive Compensation

      Current federal tax law imposes an annual, individual limit of $1 million on the deductibility of the Company’s compensation payments to the CEO (as hereinafter defined) and its four most highly compensated other executive officers. Performance-based compensation that satisfies the conditions of Section 162(m) of the Internal Revenue Code is excluded for purposes of this limitation. The 2003 awards made to the CEO and the other executive officers pursuant to the ICP as well as the awards made pursuant to the Stock Plan were subject to, and made in accordance with, the Committee’s pre-established performance goals. The Committee has determined to ensure, to the maximum extent practicable, the deductibility of all performance-based compensation payments made to the Company’s executive officers.

February 18, 2004

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COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*

Among UST Inc., S&P Tobacco Index & S&P 500 Index

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COMPENSATION OF EXECUTIVE OFFICERS

      The tables and descriptive information which follow are intended to comply with the SEC regulations for executive compensation requirements applicable to, among other reports and filings, annual proxy statements. This information is being furnished with respect to the Company’s Chief Executive Officer (“CEO”) and its four other most highly compensated executive officers as of December 31, 2003 (collectively, the “Named Executive Officers”).

TABLE II

Summary Compensation Table

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      All options to purchase Common Stock of the Company granted to the Named Executive Officers for 2003 in the table below have been granted under the Company’s Amended and Restated Stock Incentive Plan.

TABLE III

Option Grants in Last Fiscal Year

      The following table contains information about the options to purchase Common Stock that were exercised in 2003 by the Named Executive Officers and the aggregate value of these officers’ unexercised options at the end of 2003.

TABLE IV

Aggregated Option Exercises in Last Fiscal Year

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TABLE V

Pension Table

      The above Pension Table sets forth information for determining the estimated annual retirement benefits payable as a life annuity to the Named Executive Officers under the Company’s defined benefit plans pursuant to which benefits are determined by final compensation and years of service (the “Retirement Plans”). Compensation for purposes of the Retirement Plans means the highest three-year average compensation (salary and 25% of bonus actually paid in the applicable year) in the ten-year period immediately preceding retirement. Table II shows salary paid in 2001-2003 and bonus for the 2001-2003 years actually paid in 2002-2004. For 2003, the three-year average compensation covered by the Retirement Plans for each of the Named Executive Officers was as follows: Mr. Gierer, $1,353,333; Mr. Verheij, $769,750; Mr. D’Alessandro, $565,667; Mr. Kohlberger, $451,583; and Mr. Kessler, $747,917. As of December 31, 2003, the credited years of service under the Retirement Plans were approximately as follows: Mr. Gierer, 26 years; Mr. Verheij, 17 years; Mr. D’Alessandro, 23 years; Mr. Kohlberger, 25 years; and Mr. Kessler, 4 years. Pension Table calculations assume retirement on December 31, 2003 and take into account offsets for social security benefits.

      The Named Executive Officers also participate in a supplemental retirement plan (the “Supplemental Plan”). The formula by which benefits are determined under the Supplemental Plan is as follows: the greater of 105% of the accrued benefit under the Retirement Plans or 45% of the executive’s highest compensation (salary plus 25% of bonus) paid during any of the three consecutive twelve-month periods within the 36 months immediately preceding retirement (for retirement at age 55), increasing in constant whole-percentage increments to the greater of 110% of such accrued benefit or 50% of such compensation (for retirement at age 60 or thereafter), less amounts payable under the Retirement Plans. The estimated annual benefits payable as a life annuity at normal retirement age (assuming compensation and service as of December 31, 2003) under the Supplemental Plan for each of the Named Executive Officers (after taking into account reductions for benefits under the Retirement Plans) are approximately as follows: Mr. Gierer, $76,739; Mr. Verheij, $156,951; Mr. D’Alessandro, $41,231; Mr. Kohlberger, $24,191 and Mr. Kessler, $343,386.

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Employment Contracts and Termination of Employment and Change in Control Arrangements

      The Company is party to employment agreements with Messrs. Gierer (with an initial term of 4 years) and Verheij (with an initial term of 3 years) which set forth the terms and conditions of such officers’ employment and termination of employment with the Company. The stated initial terms of the agreements are generally automatically extended, subject to expiration at age 65. The employment agreements provide that such officers will be entitled to certain severance benefits if the Company terminates their employment for any reason other than death, disability or “cause” (as defined in the agreements) or if the officer terminates his employment for “good reason,” including termination following a “change in control of the Company” (as such terms are defined in the agreements). The severance benefits that would be payable to Mr. Gierer consist principally of the continuation over the remaining term of the officer’s employment agreement or, if greater, three years, of an annual amount equal to the sum of his base salary and the highest ICP payment made to Mr. Gierer in any of the preceding three years. In the event of a termination based on a change in control, the ICP taken into account for this purpose would be limited to an amount equal to 75% of base salary, the multiple would in all cases be three and the benefits would be paid in a lump sum. The severance benefits that would be payable to Mr. Verheij consist principally of payments equal to the sum of his base salary and the highest ICP payment made to Mr. Verheij in any of the three years preceding termination, multiplied by three, to be paid in installments over a two-year period. In the event of a termination of employment based on a change in control, such payments would be made in a lump sum. In addition, the Company would maintain certain employee benefit plans in effect for the officers’ continued benefit or provide substantially equivalent benefits for three years following the termination of the officers’ employment under circumstances entitling the officer to severance under the agreements. Under the terms of Mr. Verheij’s agreement, the Company may reduce the welfare benefits provided to the extent that comparable benefits are provided by a new employer. In the event that any payments made pursuant to the employment agreements in connection with a change in control are subjected to the excise tax imposed under Section 4999 of the Internal Revenue Code, the Company would increase each officers’ severance payment as necessary to restore the officer to the same after-tax position he would have had if such excise tax had not been imposed.

      The employment agreements for Messrs. Gierer and Verheij each provide that such officer shall, if serving as a director, resign as such upon termination of employment for any reason. Messrs. Gierer and Verheij have also agreed not to engage in “competitive activity” (as defined in the agreements) (i) in the case of Mr. Gierer, during the period he is entitled to receive severance under the agreement and (ii) in the case of Mr. Verheij, during the five-year period following termination of his employment; provided, however, that these non-compete provisions will not apply following a change in control of the Company. Based upon current salary levels, the approximate lump-sum value of the severance payments, exclusive of the effect of state and local taxes, that would have been payable to the aforementioned executive officers if their employment had terminated on December 31, 2003 following a change in control of the Company would be as follows: Mr. Gierer, $5.2 million and Mr. Verheij, $5.7 million.

      On June 30, 2000, the Company entered into an employment agreement with Mr. Kohlberger which sets forth the terms and conditions of his employment and termination of employment with the Company. The initial three-year term of the agreement is automatically extended each year, subject to expiration at age 65. The employment agreement provides that Mr. Kohlberger will be entitled to certain severance benefits if: (1) he is dissatisfied at any time with his reporting relationship or

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      In addition, the Company is party to severance agreements with Messrs. D’Alessandro, Kohlberger and Kessler which set forth the benefits to be paid upon certain terminations of employment following a change in control of the Company. Each of the agreements has a three-year term that is generally automatically extended and, in any event, expires no earlier than two years following a change in control. Each agreement provides that the officer will be entitled to the severance benefits described below if the Company terminates his employment within the two-year period following a change in control for any reason other than death, “disability” or “cause” or if the officer terminates his employment for “good reason” (as such terms are defined in the agreement). The benefits consist of a lump-sum payment equal to three times the sum of the officer’s base salary and the highest ICP payment made to the officer in any of the preceding three years, provided that such ICP amount is capped at 75% of base salary for this purpose. The Company would also maintain specified welfare benefit plans in effect for the officer’s continued benefit or provide substantially equivalent benefits for three years. Based upon current salary levels, the approximate before-tax lump-sum value of the severance payments, exclusive of any reductions attributable to any change in control benefits payable under other of the Company’s employee benefit plans or arrangements, that would have been payable to the aforementioned executive officers if their employment had terminated on December 31, 2003 following a change in control would be as follows: Mr. D’Alessandro, $2.4 million; Mr. Kohlberger, $1.8 million and Mr. Kessler, $2.9 million.

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Indebtedness of Management

      Since January 1, 2003, none of the Company’s directors, executive officers, nominees for election as directors or certain relatives or associates of such persons has been indebted to the Company in an aggregate amount in excess of $60,000 except as noted below in Table VI, which represents unpaid balances on loans made pursuant to stock option exercises under the terms of the UST Inc. 1992 Stock Option Plan, as previously approved by stockholders and which has expired with respect to the grant of options. Unpaid balances on such loans are secured by the pledging of the shares with the Company and by the optionee’s personal installment promissory note bearing interest at the applicable federal rate in effect under the Internal Revenue Code (the “Code”) on the date the loan is made. No new loans have been made to the Company’s directors or executive officers on or after July 30, 2002 nor have the loans existing on or prior to July 30, 2002 been modified or renewed.

TABLE VI

Proposal No. 2

      A Proposal to Ratify and Approve the Selection of Independent Auditors of the Accounts of the Company and its Consolidated Subsidiaries for the Year 2004.

      The Board has selected the firm of Ernst & Young LLP (“Ernst & Young”), Certified Public Accountants, as independent auditors of the accounts of the Company and its consolidated subsidiaries for the year 2004. Ernst & Young has been serving the Company and its subsidiaries in this capacity for many years. The Board’s selection was made upon the unanimous recommendation of the Audit Committee.

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      Representatives of Ernst & Young are expected to be present at the Annual Meeting, will have an opportunity to make a statement if so desired and will be available to respond to appropriate questions.

      Ratification of the selection of the Company’s independent auditors is not required by any statute or regulation to which the Company is subject or by the Company’s By-Laws. If the stockholders do not ratify the selection of Ernst & Young, the selection of independent auditors will be reconsidered by the Board.

      The following resolution will be offered at the meeting:

      THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE FOREGOING RESOLUTION (Proposal No. 2). Your appointed proxies will vote your shares FOR Proposal No. 2 unless you instruct otherwise in the proxy form.

      The affirmative vote of a majority of the shares of Common Stock present in person or by proxy is required to adopt this proposal. In accordance with Delaware law, abstentions will, while broker non-votes will not, be treated as present for purposes of the preceding sentence.

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STOCKHOLDER PROPOSALS

      The following Proposal Nos. 3 and 4, which are printed verbatim, have been submitted by stockholders. The name, address and shareholdings of the proponents will be furnished upon oral or written request to the Secretary of the Company. For the reasons set forth following the proposals, the Board makes no recommendation for voting on Proposal No. 3 and recommends a vote AGAINST Proposal No. 4.

Proposal No. 3

“3 – Shareholder Input on Poison Pills

RESOLVED: Shareholders request that our Directors increase shareholder voting rights and submit the adoption, maintenance or extension of any poison pill to a shareholder vote as a separate ballot item as soon as may be practical. Also once this proposal is adopted, any dilution or removal of this proposal is requested to be submitted to a shareholder vote as a separate ballot item at the earliest possible shareholder election. Directors have the flexibility of discretion accordingly in scheduling the earliest shareholder vote and in responding to shareholder votes.

We as shareholders voted in support of this topic:

This percentage is based on yes and no votes cast. I believe this level of shareholder support is more impressive because the 61% support followed our Directors’ objection to the proposal. I believe that there is a greater tendency for shareholders, who more closely follow our company’s corporate governance, to vote in favor of this proposal topic.

I do not see how our Directors object to this proposal because it gives our Directors the flexibility to ignore our shareholder vote if our Directors seriously believe they have a good reason. I believe our majority vote is a strong signal of shareholder concern. Shareholder voices have been heard, but not a satisfactory response from our Directors. This topic also won an overall 60% yes-vote at 79 companies in 2003.

Nick Rossi, P. O. Box 249, Boonville, Calif. 95415 submitted this proposal.

          The Potential of a Tender Offer Can Motivate Our Directors

Hectoring directors to act more independently is a poor substitute for the bracing possibility that shareholders could turn on a dime and sell the company out from under its present management.

Wall Street Journal, Feb. 24, 2003

          Diluted Stock

An anti-democratic scheme to flood the market with diluted stock is not a reason that a tender offer for our stock should fail.

Source: The Motley Fool

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          Akin to a Dictator

Poison pills are akin to a dictator who says, “Give up more of your freedom and I’ll take care of you.

Source: T. J. Dermot Dunphy, CEO of Sealed Air (NYSE) for more than 25 years

The key negative of poison pills is that pills can preserve management deadwood instead of protecting investors.

Source: Morningstar.com

I believe our Directors may make a token response to this proposal – hoping to gain points in the new corporate governance rating systems. A reversible response, which could still allow our directors to give us a poison pill on short notice, would not substitute for this proposal.

          Council of Institutional Investors Recommendation

The Council of Institutional Investors www.cii.org, an organization of 130 pension funds investing $2 trillion, called for shareholder approval of poison pills. Based on the 60% overall yes-vote in 2003 many shareholders believe companies should allow their shareholders a vote.

Shareholder Input on Poison Pills

COMPANY’S RESPONSE

      THE BOARD OF DIRECTORS MAKES NO RECOMMENDATION AS TO WHETHER STOCKHOLDERS SHOULD VOTE FOR OR AGAINST THE FOREGOING RESOLUTION (Proposal No. 3).

      The Board values good corporate governance and is mindful of its fiduciary duties to stockholders. In that regard, the Board is mindful that a significant number of stockholders supported a similar proposal submitted by the proponent at last year’s Annual Meeting and would intend, irrespective of the vote on this proposal, to consider the sentiments of those stockholders, if and when appropriate in the future, based on the circumstances then facing the Company.

      The Company, however, does not presently have, nor has it ever had, a shareholder rights plan. In light of this, as well as the Board’s intention to consider, if and when appropriate in the future, the advisability of seeking a stockholder vote, the Board has no position on this resolution.

      In light of the foregoing, the Board makes NO RECOMMENDATION as to whether stockholders should vote for or against this proposal.

      Your appointed proxies will not vote your shares on Proposal No. 3 unless you instruct otherwise in the proxy form.

      The affirmative vote of a majority of shares of Common Stock present in person or by proxy is required to adopt this proposal. In accordance with Delaware law, abstentions will, while broker non-votes will not, be treated as present for purposes of the preceding sentence.

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Proposal No. 4

“REDUCING NITROSAMINES (TSNA) IN ORAL SNUFF

UST

Whereas: UST has been sued by individuals and states attorney generals for the harm caused by our products. We also have agreed to pay millions of dollars to settle these claims:

      Oral snuff has been determined by the U.S. Surgeon General to cause oral cancer (See the 1989 Report of the Surgeon General of the United States entitled Reducing the Health Consequences of Smoking: 25 Years of Progress at page 90 and the 1985 Special Report of the Surgeon General of the United States entitled The Health Consequences of Using Smokeless Tobacco.);

      The principle cancer causing agent in oral snuff is a class of compounds called tobacco specific nitrosamines (TSNA). (See the 1989 Report of the Surgeon General of the United States entitled Reducing the Health Consequences of Smoking: 25 Years of Progress at page 90 and the 1985 Special Report of the Surgeon General of the United States entitled The Health Consequences of Using Smokeless Tobacco.) One tobacco manufacturer, Star Scientific, has developed a process for reducing the levels of TSNA to below 1 microgram/gram. (See K.D. Brunnemann, J. Qi and D. Hoffman, Chemical Profile of Two Types of Oral Snuff Tobacco (revised February 28, 2002, available (in English) at www.smokeless.de/news.) This represents a barely detectable level;

      A recent study done by the American Health Foundation found that some of our company’s snuff products have TSNA levels forty times greater than Star’s products;

      Our Company has developed new manufacturing procedures for a new brand of snuff called Revel that has a TSNA level of 1 ug/g;

      In our opinion, the failure to remove a known defect in our products increases our risk of adverse litigation; this becomes all the more serious when it can be shown that our Company has the ability to virtually eliminate the nitrosamines which are a significant cause of cancer. We believe that the failure to diminish the TSNA levels could seriously diminish the value of our stock.

      As shareholders who are concerned about both the value of our company’s stock and its moral responsibility to its consumers, we believe that the new technology must be applied to all our brands, especially since it has been shown the reduction of TSNA can significantly reduce oral cancer.

RESOLVED: that the shareholders request the Board to adopt a policy of reducing, as rapidly as possible, TSNA levels in all of the company’s oral snuff products to the lowest feasible levels.”

COMPANY’S RESPONSE

      THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE FOREGOING RESOLUTION (Proposal No. 4).

      While the U.S. Surgeon General reached the judgment in 1986, based on studies then available, that smokeless tobacco “can cause cancer”, more than 70% of the studies published since that time have not found a statistically significant association between smokeless tobacco and oral cancer in the populations studied. Those studies included two large scale, well-designed epidemiological studies specifically involving moist snuff, the Company’s principal smokeless tobacco product. Indeed, those studies published since the publication of the 1986 Surgeon General’s Report led the

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      Smokeless tobacco is a complex mixture containing several thousand naturally occurring constituents that are found in the tobacco plant. Among those constituents are certain nitrosamines, including tobacco-specific nitrosamines (TSNAs). TSNAs are also formed during the curing and fermentation of tobacco. They are referred to as “tobacco-specific” nitrosamines because they are generally found only in tobacco or tobacco products. They are part of a larger family of nitrosamine compounds, some of which are found in food products such as fish, cured meat and cheese.

      Some TSNAs have been reported to cause cancers in test animals (“laboratory carcinogens”) when those TSNAs are tested in isolation — without the other constituents of smokeless tobacco. However, smokeless tobacco, which contains TSNAs, has not been shown to cause cancer in animals.¹

      Several scientific and governmental organizations have classified TSNAs with respect to their possible carcinogenicity. The WHO’s International Agency for Research on Cancer (IARC) has not classified any TSNA as “carcinogenic to humans.” Rather, IARC has classified certain TSNAs only as “possibly carcinogenic to humans” or as “unclassifiable as to [their] carcinogenicity to humans.”

      Nevertheless, in order to address concerns expressed by some in the public health community and to be prepared for possible future regulatory requirements, the Company has been engaged in a longstanding program to reduce the overall level of TSNAs in its moist smokeless tobacco products to the lowest levels possible while maintaining consumer acceptability.

      The Company has invested more than 75 million dollars over the past twenty years in its VIPM (Vertically Integrated Process Management) program and similar efforts. The VIPM program is designed to attack the TSNA issue at every stage of the process that may affect the formation of TSNAs — literally from “seed to shelf.” The VIPM program involves assessment and possible modification of tobacco crop management, leaf curing, leaf processing and aging, leaf formulation, the fermentation process, finishing and packaging of the product, and the shelf-life of the product. There are, of course, some natural variations that impact TSNA development from year to year. For example, the amount of rainfall that occurs during a crop-growing season and during the period tobacco is aged in barns will affect TSNA levels.

      The Company’s commitment to the reduction of TSNAs is further evidenced by its purchase in 1997 of F.W. Rickard Seeds, Inc., a company that for more than 60 years has been engaged in the production and marketing of a wide variety of high quality hybrid and conventional tobacco seed. Importantly, Rickard Seeds is engaged in several initiatives to address the issue of TSNA levels in finished tobacco products by starting at the beginning — the tobacco seed and tobacco genetics. In one initiative, the Company has instituted a protocol developed to screen seed used in commercial seed production. A second initiative seeks a direct genetic intervention in the production of TSNAs. The Company is committed to continuing this important work.

      The VIPM program and other efforts by the Company have resulted in very substantial reductions in the average levels of TSNAs in the Company’s moist smokeless tobacco products. For

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Copenhagen/ Skoal TSNA Levels

TSNA = Total of reported levels of four TSNAs on dry weight basis in parts per million

Copenhagen/Skoal TSNA levels = Average of TSNA levels reported in the scientific literature for Copenhagen Fine Cut and Skoal Fine Cut Wintergreen, excluding anomalous data for 1986

TSNA Values Displayed on Chart*

References

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      The Company’s successful efforts to reduce TSNA levels are also demonstrated by the levels of NNN and NNK (the only TSNAs classified by IARC as “possibly carcinogenic to humans”) in its moist smokeless tobacco products. Overall average NNN and NNK levels for 2003 for eight of the Company’s leading moist smokeless tobacco products are provided below.

Overall Average Nitrosamine Levels (2003)

*ppm = parts per million

      The Company intends to continue its efforts to reduce TSNAs to the lowest levels possible, while maintaining consumer acceptability, in all of its moist snuff brands. Indeed, the Company’s newest brand, Revel, has TSNA levels among the lowest of most smokeless tobacco products currently available, including some Swedish moist snuff products.

      In light of the foregoing, this proposal has been substantially implemented. In addition to the foregoing, the Company believes that this proposal contains a number of assertions which are false and misleading.

      In addition, the Company notes that a similar proposal, which was included in last year’s proxy statement, had received the affirmative vote of less than 4% of the shares of Common Stock that were voted on the proposal.

      Accordingly, the Board believes that the adoption of this proposal is neither appropriate nor in the best interests of the Company or its stockholders and urges stockholders to vote AGAINST it.

      Your appointed proxies will vote your shares AGAINST Proposal No. 4 unless you instruct otherwise in the proxy form.

      The affirmative vote of a majority of shares of Common Stock present in person or by proxy is required to adopt this proposal. In accordance with Delaware law, abstentions will, while broker non-votes will not, be treated as present for purposes of the preceding sentence.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section 16(a) of the Securities Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of common stock, to file with the SEC and the New York Stock Exchange initial reports of beneficial ownership and reports of changes in beneficial ownership of Common Stock. Such persons are also required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during 2003 all Section 16(a) filing requirements applicable to such individuals were complied with.

BENEFICIAL OWNERSHIP OF COMMON STOCK

      The following table sets forth certain information, as of December 31, 2003, regarding all persons which, to the knowledge of the Company, beneficially own 5% or more of the outstanding Common Stock.

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      The Board has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may contact any member (or all members) of the Board including, without limitation, the director who presides at executive sessions of the Board or the nonemployee directors as a group, any Board committee or any chair of any such committee by mail. To communicate with directors, correspondence should be addressed to the Board of Directors or any such individual directors or group or committee of directors, by either name or title. All such correspondence should be sent “c/o Corporate Secretary” at UST Inc., 100 West Putnam Avenue, Greenwich, Connecticut 06830.

      A copy of all such communications will be provided, as appropriate, to any member (or all members) of the Board, including, without limitation, the director who presides at executive sessions of the Board, the nonemployee directors as a group, any Board committee or any chair of any such committee if the address label of the communication is so addressed. Communications, as appropriate, may be reviewed initially by the General Counsel’s office or by the Corporate Secretary, who shall report on the status thereof to the Board of Directors, the Audit Committee or, as appropriate, other directors. The Company reserves the right not to forward to the directors any material received in the nature of advertising or promotions of a product or service, or that otherwise constitutes patently offensive material.

INFORMATION RESPECTING PROXIES

      Your shares are registered in the name and manner shown on the enclosed form of proxy. Please sign the proxy in the same manner. It is not necessary for you to indicate the number of shares you hold.

      Expenses incurred in connection with the solicitation of proxies for the Annual Meeting will be borne by the Company. In addition to solicitation by mail, arrangements may be made pursuant to which brokers, bank nominees and other institutional holders of record will distribute at the Company’s expense proxies and proxy material to the appropriate beneficial owners, and assistance in the solicitation of proxies from such holders of record will be rendered by Georgeson Shareholder, New York, New York, for a fee of approximately $20,000.

OTHER BUSINESS

      The Board knows of no other business which will come before the meeting. If any other business shall properly come before the meeting, including any proposal submitted by a stockholder

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2005 ANNUAL MEETING

      If a stockholder wishes to submit a proposal for inclusion in the Proxy Statement prepared for the 2005 Annual Meeting of Stockholders, such proposal must be received by the Secretary at the Company’s office no later than November 26, 2004.

      In addition, the By-Laws provide that only such business as is properly brought before the Annual Meeting will be conducted. For business to be properly brought before the meeting or nominations to be properly made at the Annual Meeting by a stockholder, notice must be received by the Secretary not less than 90 days prior to the anniversary date of the immediately preceding Annual Meeting and such notice must provide certain requisite information. Accordingly, if a stockholder intends to present a matter at the 2005 Annual Meeting, notice of such must be received by the Secretary at the Company’s office no later than February 4, 2005. Notice must be received by such date if the matter is to be considered “timely” under Rule 14a-4(c) of the Securities Exchange Act. A copy of the By-Laws may be obtained by writing to the Secretary.

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APPENDIX A

UST

AUDIT COMMITTEE CHARTER

      The Audit Committee (the “Committee”) is responsible for assisting the Board of Directors (the “Board”) of UST Inc. (the “Company”) in fulfilling its oversight responsibility to stockholders, potential investors and the investment community relating to:

      The Committee shall report regularly to, and review with, the Board any issues that arise with respect to any of the matters set forth above.

      The Committee is also responsible for preparation of its report as required by the proxy rules promulgated by the Securities and Exchange Commission (the “SEC”) to be included in the Company’s annual proxy statement.

      The Committee shall be given the resources necessary to satisfy its oversight responsibilities including the authority to institute special investigations and to retain special counsel or experts and to receive appropriate funding, as determined by the Committee, to compensate such advisors.

      The Committee may form subcommittees for any purpose that it deems appropriate and may delegate to such subcommittees such power and authority as the Committee deems appropriate; provided, however, that the Committee shall not delegate to a subcommittee any power or authority required by any law, regulation or listing standard to be exercised by the Committee as a whole.

      The Committee shall be appointed by the Board and shall consist of not less than three directors, each of whom shall be appointed by the Board upon recommendation of the Nominating & Corporate Governance Committee.

      The Committee members shall satisfy the independence, experience and expertise requirements of the New York Stock Exchange, the Securities Exchange Act of 1934 and the rules promulgated thereunder and any other applicable regulatory requirements.

      No member of the Committee may have any material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). Committee members shall not serve simultaneously on the audit committees of more than two other public companies without the approval of the Board.

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      No member of the Committee may receive, other than Director’s fees (including any additional amounts paid to chairs of committees and to members of committees of the Board), any consulting, advisory or other compensatory fee from the Company.

      The Chairman of the Committee shall be designated by the Board. Committee members may be removed by the Board in its discretion.

      The Company’s General Counsel, Corporate Secretary and the Vice President responsible for the internal audit function (or, in the absence of such officer, the Director — Internal Audit) shall be non-voting attendees of the Committee and they (or their designees) shall, except as otherwise provided elsewhere herein or as determined by the Committee, be present at each Committee meeting.

      The Committee shall meet at such times as the members of the Committee shall deem appropriate in accordance with fulfilling their duties and shall report its activities to the Board so that the Board is kept informed of the Committee’s activities on a current basis.

      The Committee, in its discretion, may ask members of management or others to attend its meetings (or portions thereof) and to provide pertinent information as necessary.

      The Committee shall meet separately, as often as it deems appropriate, with the independent auditor and the Vice President responsible for internal audit and, in addition, shall provide the independent auditor and the Vice President responsible for internal audit an opportunity to meet with them without members of management present at any time. The Committee shall also meet separately, as appropriate, with the Company’s counsel to discuss legal matters that may have a significant impact on the Company’s financial statements.

      The Committee shall maintain, through such meetings, open lines of communications among the Board, the Company’s Vice President responsible for internal audit, its independent auditor, financial management and the General Counsel.

      The Committee shall be directly responsible for the appointment, retention, compensation, evaluation and oversight of the independent auditor, in its sole discretion (subject, if applicable, to stockholder ratification), including all engagement fees and terms. The independent auditor shall report directly, and be ultimately accountable, to the Committee. The Committee shall also be responsible for resolving disagreements between management and the independent auditor.

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