NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

March 26, 2007

100 West Putnam Avenue

Greenwich, Connecticut 06830

To the Stockholders of UST Inc.:

The 2007 Annual Meeting of Stockholders of UST Inc. (the “Company”) will be held at the Cole Auditorium of the Greenwich Library, 101 West Putnam Avenue, Greenwich, Connecticut, on Tuesday, May 1, 2007, at 10:00 a.m., Eastern Daylight Savings Time, for the following purposes:

Stockholders of record as of the close of business on March 8, 2007 will be entitled to vote at the meeting. The approximate date of mailing of this Proxy Statement is on or about March 29, 2007. A list of stockholders entitled to vote at the meeting will be available for examination by any stockholder, for any purpose relevant to the meeting, on and after April 20, 2007, during normal business hours at the Company’s principal executive offices located at the above address.

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 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 at the meeting, will count the last vote received from a stockholder, whether by telephone, proxy, ballot or electronically through the Internet. Please note all votes cast via telephone or the Internet must be cast prior to 2:00 a.m., Eastern Daylight Savings Time, on Tuesday, May 1, 2007.

MARIA R. SHARPE

Senior Vice President and Secretary

TABLE OF CONTENTS

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100 West Putnam Avenue

Greenwich, Connecticut 06830

PROXY STATEMENT

Proxies and Voting Information

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 (the “Annual Meeting”) to be held on May 1, 2007, including any adjournment thereof. 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, ballot or electronically through the Internet.

As of the close of business on March 8, 2007, the record date for the Annual Meeting, the outstanding stock of the Company entitled to vote consisted of 160,594,570 shares of common stock (“Common Stock”). Each share of Common Stock is entitled to one vote.

Appearance at the Annual Meeting in person or by proxy of the holders of Common Stock entitled to cast at least 80,297,286 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 your shares are held in the name of a broker, bank or other nominee, and you wish to attend the Annual Meeting, you must bring with you a proxy or letter from the broker, bank or other 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.

Actions to be Taken at Annual Meeting

1. A resolution will be offered to adopt and approve an amendment to the Company’s Restated Certificate of Incorporation to declassify the Board of Directors so that each director would stand for re-election on an annual basis.

2(a). In the event the amendment to the Company’s Restated Certificate of Incorporation to declassify the Board of Directors is adopted and approved, nine directors will be elected to serve for terms of one year each, or until their respective successors are elected and qualified.

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3. A resolution will be offered to ratify the appointment of independent auditors of the accounts of the Company for the year 2007.

Your authorized proxies will vote FOR the resolution to amend the Company’s Restated Certificate of Incorporation to declassify the Board of Directors, FOR the election of the individuals herein nominated for directors, and FOR the resolution regarding the auditors, unless you designate otherwise. A proxy designating how it should be voted will be voted accordingly. If you hold your shares through a broker or other nominee and you do not provide instructions on how to vote, your broker or other nominee may have authority to vote your shares on certain matters.

Proposal No. 1

Declassification of the Board of Directors

General. Article Sixth of the Company’s Restated Certificate of Incorporation has provided for a classified board structure for many years. This structure divides the Board into three classes of directors, with each class serving a staggered three-year term. As a result, approximately one-third of the directors currently stand for election each year. To declassify the Board and implement a system providing for an annual election of the directors, the Company’s Restated Certificate of Incorporation must be amended.

The Board, upon the recommendation of the Nominating & Corporate Governance Committee, has adopted resolutions, subject to stockholder approval, approving and declaring the advisability of an amendment to Article Sixth of the Company’s Restated Certificate of Incorporation to declassify the Board and directed that this proposal, requesting that stockholders approve such amendment to Article Sixth, be submitted to a stockholder vote.

Background. Classified or staggered boards have been widely adopted and have a long history in corporate law. Proponents of a staggered system for the election of directors believe that such a system provides continuity and stability and facilitates long-term strategic planning by ensuring that a majority of a company’s directors at any given time have the prior relevant experience as directors of the company. As a tobacco company, we, in the past, have felt that a classified board structure was beneficial for this reason. Proponents of classified boards have also asserted that these provisions protect companies against unfair and abusive treatment of stockholders in takeover situations and/or proxy contests.

On the other hand, classified boards are felt by some to have the effect of reducing the accountability of directors to stockholders because classified boards limit the ability of stockholders to evaluate and elect all directors on an annual basis. In addition, the existence of a classified board of directors is of concern to some who feel that it may deter some tender offers or substantial purchases of stock that might give stockholders the opportunity to sell their shares at a price in excess of what they would otherwise receive.

The Board, over the years, has considered carefully the advantages and disadvantages of maintaining a classified board structure, and in the past concluded that it would be in the best interest of the Company and its stockholders to maintain a classified board. This year, the Board, in consultation with its advisors, has once again given due consideration to the various arguments for and against a classified board. After this review, the Board, upon the recommendation of the Nominating & Corporate Governance Committee, has decided that it is an appropriate time to propose declassifying the Board. While the Board recognizes that staggered terms can promote continuity and stability in the Board’s business strategies and policies, it has unanimously concluded, in light of, among other things, the vote of the Company’s stockholders at the last annual meeting on a stockholder proposal relating to this matter, that it is in the Company’s best interests to eliminate its classified board structure.

Implementation of the proposal. If the proposal is approved by the requisite vote of stockholders, the Company’s Restated Certificate of Incorporation will be amended to allow for the annual election of all directors beginning at the Annual Meeting. The proposed amendment to the Company’s Restated Certificate

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of Incorporation is annexed to this proxy statement as Appendix A, which shows the current language of Article Sixth and the changes to Article Sixth resulting from the amendment. If approved, this proposal will become effective upon the filing of a Certificate of Amendment to the Company’s Restated Certificate of Incorporation with the Secretary of State of the State of Delaware.

Miscellaneous. Under Delaware law, directors of companies that have a classified board of directors may only be removed for cause unless the certificate of incorporation provides otherwise. However, directors of companies that do not have a classified board may be removed with or without cause by a majority vote of the stockholders. Accordingly, if the proposed amendment to the Company’s Restated Certificate of Incorporation is approved, the Company’s stockholders would be able to remove, with or without cause, any or all members of the Board elected at this meeting or any subsequent meeting.

The current number of directors is ten and will be reduced to nine as of the Annual Meeting. The adoption of this proposal would not otherwise change the number of directors nor would it affect the authority of the directors to change that number and to fill any vacancies or newly created directorships.

If this proposal is not approved by the stockholders at the Annual Meeting, the Board will remain classified and the directors elected at the Annual Meeting will serve for a three-year term ending at the 2010 Annual Meeting of Stockholders.

The Resolution. The following resolution will be offered at the Annual Meeting:

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THIS PROPOSAL (Proposal No. 1). Your appointed proxies will vote your shares FOR Proposal No. 1, unless you instruct otherwise in the proxy form.

The affirmative vote of a majority of the outstanding shares of Common Stock present in person or by proxy is required to adopt this proposal. Accordingly, abstentions and broker non-votes will have the same effect as a vote against this proposal.

Proposal No. 2

Election of Directors

The Company’s Restated Certificate of Incorporation currently provides for the election of one-third (as nearly as possible) of the Board annually. Patrick J. Mannelly, a director since 2005, is not standing for re-election at the Annual Meeting. The Board currently consists of ten members and, with the departure of Mr. Mannelly, will be reduced to nine members at the Annual Meeting. If the stockholders approve the proposed amendment to the Company’s Restated Certificate of Incorporation to declassify the Board discussed above, all nine members of the Board will be up for re-election at the Annual Meeting. However, if the stockholders do not approve the proposed amendment, then the term of office of three of the current directors will expire at the Annual Meeting, the term of office of three of the current directors will expire at the 2008 Annual Meeting of Stockholders and the term of office of three of the current directors will expire at the 2009 Annual Meeting of Stockholders.

Directors are elected by a plurality of 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 broker non-vote will not affect the outcome of the vote. Your proxy, unless otherwise marked, will be voted for the nominees further described below. In the event that any nominee is not available for election at the time of the Annual 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 below. Your vote is required with respect to both Proposals 2(a) and 2(b). The proposal that will become effective will be based on whether stockholders approve Proposal No. 1.

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In the event the stockholders approve Proposal No. 1 regarding declassification of the Board, upon recommendation of the Nominating & Corporate Governance Committee, the Board has nominated the following nine current members of the Board to serve for a term of one year each to expire at the 2008 Annual Meeting of Stockholders, or until their respective successors are elected and qualified: John D. Barr, John P. Clancey, Patricia Diaz Dennis, Vincent A. Gierer, Jr., Joseph E. Heid, Murray S. Kessler, Peter J. Neff, Andrew J. Parsons and Ronald J. Rossi.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES FOR ELECTION AS DIRECTORS (Proposal No. 2(a)).

2(b) Election of three directors to serve for three-year terms

In the event the stockholders do not approve Proposal No. 1 regarding declassification of the Board, upon recommendation of the Nominating & Corporate Governance Committee, the Board has nominated the following three current members of the Board to serve for a term of three years each to expire at the 2010 Annual Meeting of Stockholders, or until their respective successors are elected and qualified: John P. Clancey, Vincent A. Gierer, Jr. and Joseph E. Heid.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES FOR ELECTION AS DIRECTORS (Proposal No. 2(b)).

The Nominees

Set forth in the following table is certain information with respect to each person nominated by the Board, including the number of shares of Common Stock beneficially owned by such person as of December 31, 2006. As described above, if Proposal No. 1 regarding declassification of the Board is approved, each of the nine below listed individuals will be nominated to serve as directors for terms of one year each rather than the “present terms” described below, or until their respective successors are elected and qualified. If Proposal No. 1 is not approved, only those three individuals listed below whose names are accompanied by an asterisk will be nominated to serve as directors for terms of three years each, or until their respective successors are elected and qualified. Further, if Proposal No. 1 is not approved, those six individuals listed below whose names are not accompanied by an asterisk will continue to serve as directors of the Company until the expiration of their present terms, or until their respective successors are elected and qualified.

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As of December 31, 2006, all directors and executive officers as a group beneficially owned 958,712 shares of Common Stock and had exercisable options to acquire 1,424,010 shares of Common Stock, which together represented in the aggregate approximately 1.5 percent of the outstanding Common Stock including options held by all such persons. No executive officer or director beneficially owned more than 1 percent of the aggregate amount of the outstanding Common Stock including options held by the respective person.

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CORPORATE GOVERNANCE AND

DIRECTOR INDEPENDENCE

Corporate Governance Guidelines

The 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 federal securities laws 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 below and in UST Inc.’s Corporate Governance Guidelines which are available on the Company’s website at www.ustinc.com under the heading “Investors/Corporate Governance/Corporate Governance Guidelines.” A printed copy of the Company’s Corporate Governance Guidelines is also available to stockholders free of charge upon oral or written request, addressed to the Secretary at UST Inc., 100 West Putnam Avenue, Greenwich, Connecticut 06830.

The independence standards, as set forth in the Company’s Corporate Governance Guidelines, provide as follows:

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Director Independence

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 non-executive Chairman of the Board, and Mr. Kessler, the Company’s President 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, the Nominating & Corporate Governance Committee and the Compensation Committee will also satisfy any additional independence requirements applicable, under the federal securities laws and the NYSE rules, to members of such committees. Mr. Mannelly, who is not standing for re-election at the Annual Meeting, also satisfies each of the foregoing independence requirements, as applicable.

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:

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

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

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, 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 Secretary should receive, no later than November 27, 2007, the following information:

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.

Communications with Directors

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 non-management 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 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 non-management 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 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

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directors any material received in the nature of advertising or promotions of a product or service, or that otherwise constitutes patently offensive material.

Code of Ethics

The Company has adopted a Code of Ethics for Senior Officers (the “Code”) that applies to its principal executive officer, principal financial officer and principal accounting officer (Controller). The Code is available on the Company’s website at www.ustinc.com under the heading “Investors/ Corporate Governance/ Codes of Conduct.” A free copy of the Code will be made available to any stockholder upon oral or written request addressed to the Secretary at UST Inc., 100 West Putnam Avenue, Greenwich, Connecticut 06830. The Company will post promptly on its website any amendment to the Code or waiver of a provision thereunder, rather than filing with the SEC any such amendment or waiver as part of a Current Report on Form 8-K. The Company has also adopted a Directors’ Code of Responsibility and a Code of Corporate Responsibility applicable to all employees. These codes are also posted on the Company’s website and are similarly available from the Company.

Policy Regarding Stockholder Rights Plans

The Board has adopted a policy which provides that the Company will not adopt a stockholder rights plan without first submitting such a plan to a vote of the Company’s stockholders, subject to limited exceptions as set forth in the policy. A copy of this policy is available on the Company’s website at www.ustinc.com under the heading “Investors/ Corporate Governance/ Rights Plan Policy.”

MEETINGS AND COMMITTEES OF THE BOARD

Board Meetings; Annual Meeting Attendance

The Board held eleven meetings during 2006. No director attended fewer than 75 percent of the meetings held, including meetings held by all committees of the Board on which such director served. Absent unusual or extraordinary circumstances, each director is expected to attend the Company’s Annual Meeting of Stockholders. All members of the Board were in attendance at the 2006 Annual Meeting of Stockholders.

Executive Sessions

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

Committees of the Board

The Board has four standing committees to facilitate and assist it in executing its responsibilities. The Committees are the Audit Committee, the Compensation Committee, the Nominating & Corporate Governance Committee and the Strategic Review Committee.

The Audit Committee, which met twelve times during 2006, is currently comprised of the following directors: Joseph E. Heid — Chairman, Patricia Diaz Dennis, Patrick J. Mannelly, Andrew J. Parsons and Ronald J. Rossi, each of whom is an independent director under the NYSE rules, as currently in effect. The Board has determined that all members of the Audit Committee are financially literate pursuant to the NYSE rules. The Board has also determined that Mr. Heid, Chairman of the Audit Committee, Mr. Rossi and Mr. Mannelly qualify as “audit committee financial experts” in accordance with the rules of the SEC. The Board has adopted a charter for the Audit Committee. As specified in its charter, the responsibilities of the Audit Committee include, among other things, the following:

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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 Report of the Audit Committee appears on page 47 of this proxy statement.

Compensation Committee

The Compensation Committee, which met nine times during 2006, is comprised of the following directors: Peter J. Neff — Chairman, John D. Barr, John P. Clancey and Ronald J. Rossi, each of whom is an independent director under the NYSE rules, as currently in effect. The Board has adopted a charter for the Compensation Committee. As specified in its charter, the responsibilities of the Compensation Committee include, among other things, 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 evaluates the Company’s compensation plans and policies against current and emerging compensation practices, legal and regulatory developments and corporate governance trends. This review provides assurances that the Company’s compensation programs will continue to assist in attracting and retaining the talent necessary to promote strong, long-term financial performance and stockholder returns. The Compensation Committee is assisted in its review of compensation plans and policies by an independent consulting firm, Frederic W. Cook & Co., Inc. (the “Cook Firm”). The Compensation Committee has directly engaged the Cook Firm since 2002. The Cook Firm is responsible solely to the Committee and its chair and does no work for the Company’s management independent of its work for the Committee. During 2006, the Committee also retained the services of the law firm Paul, Hastings, Janofsky & Walker LLP for legal advice related to employment agreements entered into by the Company.

The Committee generally meets before each Board meeting, or at the call of its chair. The Committee has full authority to decide the compensation, benefit and related aspects of employment for each of the Company’s officers. However, its decisions on the Chairman’s and Chief Executive Officer’s compensation are reviewed with the full Board, generally in executive session, and are subject to the Board’s ratification.

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Management prepares recommendations for the Compensation Committee’s consideration in all decision areas that come before it, including pay recommendations for individual executive officers. Management recommendations are reviewed in advance with the Cook Firm, as directed by the Committee, which provides independent advice to the Compensation Committee. The Cook Firm is charged with reviewing management’s recommendations and developing compensation recommendations for the Chairman and the Chief Executive Officer independent of management. The Cook Firm’s recommendations generally come directly to the Compensation Committee without the prior knowledge or consent of the Chairman or Chief Executive Officer.

The Compensation Committee also is responsible for reviewing the pay of the Company’s non-management directors, and recommending changes to the full Board. To help the Compensation Committee in this regard, the Company’s Human Resources staff provides comparative analyses and recommendations, which are reviewed with the Cook Firm. The Chairman and the Chief Executive Officer have no role in recommending or approving the Company’s non-management directors’ compensation program.

None of the Committee’s responsibilities for determining the compensation of the Company’s executive officers or other non-management directors has been delegated to other persons. Authority to make amendments to or to suspend or terminate any of the Company’s broad-based health and welfare and pension plans has, however, been delegated to the Chief Executive Officer by the Compensation Committee, provided that the annual cost of such amendments does not exceed $7,000,000.

The Compensation Discussion and Analysis and Compensation Committee Report appear on pages 16 to 25 of this proxy statement.

Compensation Committee Interlocks and Insider Participation

Messrs. Barr, Clancey, Neff and Rossi served as members of the Compensation Committee in fiscal year 2006. None of such committee members (i) was, during fiscal year 2006, an officer or employee of the Company or any of its subsidiaries, (ii) was formerly an officer of the Company or any of its subsidiaries or (iii) had any relationship requiring disclosure by the Company pursuant to any paragraph of Item 404 of Regulation S-K promulgated by the SEC. No executive officer of the Company served as an executive officer, director or member of a compensation committee of any other entity of which an executive officer or director of such entity is a member of the Compensation Committee of the Company or the Company’s Board of Directors.

Nominating & Corporate Governance Committee

The Nominating & Corporate Governance Committee, which met eight times during 2006, is comprised of the following directors: John P. Clancey — Chairman, Patricia Diaz Dennis, Joseph E. Heid, Andrew J. Parsons and Ronald J. Rossi, each of whom is an independent director under the NYSE rules, as currently in effect. The Board has adopted a charter for the Nominating & Corporate Governance Committee. As specified in its charter, the responsibilities of the Nominating & Corporate Governance Committee include, among other things, the following:

Strategic Review Committee

The Strategic Review Committee met eight times during 2006 and is comprised of the following directors: Murray S. Kessler — Chairman, John P. Clancey, Vincent A. Gierer, Jr., Joseph E. Heid, Patrick J. Mannelly, Peter J. Neff and Andrew J. Parsons. The Strategic Review Committee has oversight responsibility for significant financial matters of the Company and appoints the fiduciaries responsible for the oversight of the Company’s retirement plans and funded health and welfare benefit plans. The Board has adopted a charter for the Strategic Review Committee. As specified in its charter, the responsibilities of the Strategic Review Committee include, among other things, reviewing the Company’s cash position, capital structure, operating

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Committee Charters

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

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

UST Inc. (the “Company”) is a holding company for its wholly owned subsidiaries: U.S. Smokeless Tobacco Company and International Wine & Spirits Ltd.

The Company’s primary objective in the Smokeless Tobacco segment is to continue to grow the moist smokeless tobacco category by building awareness and social acceptability of smokeless tobacco products among adults, with a secondary objective of being competitive in every moist smokeless tobacco category segment. In pursuing its objectives in the Smokeless Tobacco segment, the Company faces significant regulatory restrictions and is the only smokeless tobacco company subject to the Smokeless Tobacco Master Settlement Agreement, which imposes significant restrictions on the marketing, sampling and advertising of the Company’s smokeless tobacco products. Because of these restrictions, executives are required to have in-depth knowledge of these complex regulatory requirements and face greater challenges than other consumer products companies in raising brand awareness.

Over the past several years, industry trends have shown that some adult consumers have migrated from premium brands to brands in the price value and sub-price value segments. As much of the Company’s profitability is generated from premium brand sales, a key to the Company’s future growth and profitability is attracting growing numbers of adult consumers, primarily smokers, since consumer research indicates that the majority of new adult consumers enter the category in the premium segment. Also crucial to the Smokeless Tobacco segment’s category growth success is product innovation, as evidenced by the contribution that new products have made to the Smokeless Tobacco segment’s results over the past several years. While category growth remains the Company’s priority, it is also focused on increasing adult consumer loyalty within the premium segment of the moist smokeless tobacco category.

The Company’s vision in the Wine segment is to be one of the premium fine wine companies in the world. To that end, the Company is focused on elevating Washington state wines to the quality and prestige of the top wine regions of the world, and being known for superior wine products, innovation and customer focus. The Company remains focused on the continued expansion of its sales force and category management staff to broaden the distribution of its wines in the domestic market, especially in certain account categories such as restaurants, wholesale chains and mass merchandisers. Sustained growth in the Company’s Wine segment will also be dependent on the successful introduction of new products and the extension of existing product lines.

In this environment, it is critical to the Company’s long-term success and prosperity that its business is managed by energetic, experienced and capable individuals with the quality, skills, knowledge and dedication to oversee the Company’s day-to-day business and the vision to anticipate and respond to future market and regulatory developments. It is also important for the Company to concentrate on developing the capabilities of its leaders, and to ensure that appropriate depth of executive talent exists within the Company.

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The objectives of the Company’s compensation programs are to attract first-class executive talent, retain key leaders, reward past performance, incent future performance and align the long-term interests of the Company’s executive officers with those of the Company’s stockholders. The Company’s executive compensation program is intended to assist the Company in assembling and motivating a management team with the collective and individual abilities that fit the profile necessary to accomplish the Company’s long-term goals. The Company uses a variety of compensation elements to achieve these objectives; such elements include base salary, annual incentive opportunities and long-term incentives, including performance-based and time-based restricted shares and stock options, each of which is discussed in more detail below. Each element of the executive compensation program also provides a framework for governing the Company’s overall employee compensation program, as the same elements of compensation generally apply to all salaried, non-union employees. Because the Company believes the performance of every employee is important to its success, the Company is mindful of the effect of executive compensation and incentive programs on all of its employees.

Oversight of the Executive Compensation Program

The Board of Directors (the “Board”) has a Compensation Committee (the “Committee”) composed of the following outside directors, each of whom is “independent” in accordance with the governance rules of the New York Stock Exchange: Peter J. Neff, Chair, John D. Barr, John P. Clancey and Ronald J. Rossi. The Committee is appointed by, and responsible to, the Board for making recommendations to the Board, and approving where appropriate, all matters related to executive and non-employee director compensation.

The Committee has a charter which has been established by the Board, a copy of the Committee’s charter is available on the Company’s website at www.ustinc.com under the heading “Investors/ Corporate Governance/ Committee Composition and Charters.” A printed copy of the charter is also available to stockholders free of charge upon oral or written request, addressed to the Secretary at UST Inc., 100 West Putnam Avenue, Greenwich, Connecticut 06830.

For additional information on the structure, scope of authority and operation of the Committee, see “Meetings and Committees of the Board — Compensation Committee” on page 14.

The Company’s Executive Compensation Philosophy

The Committee is responsible for establishing the principles that underlie the Company’s executive compensation program and that guide the design and administration of the Company’s compensation and benefit plans, agreements and arrangements for executive officers. These principles are intended to motivate executive officers to improve the financial position of the Company, to be accountable for the performance of the business segments or functions for which they are responsible and to make decisions about the Company’s business that will deliver stockholder value.

The Committee continuously evaluates the Company’s compensation plans and policies against current and emerging compensation practices, legal and regulatory developments and corporate governance trends and makes changes as appropriate. This review provides assurances that the Company’s compensation and benefit programs continue to serve their primary purpose which is to attract and retain the talent necessary to promote strong, long-term financial performance and stockholder returns. For officers other than the Chief Executive Officer (“CEO”), the Committee has adopted broad total compensation bands. There are four officer total compensation bands with minimums of 50 percent and maximums of 150 percent of the band midpoints. A single benchmark job was utilized to establish the midpoints for target total compensation, and targeted levels for each component of compensation (i.e., base salary, annual bonus and long-term equity awards) for each band. These ranges for total compensation, and each component thereof, provide appropriate flexibility to establish targets for each job within the band based on relevant market data and for rewarding individual performance. The total compensation for the CEO and each component of such compensation is not determined by reference to any compensation band. Rather, the CEO’s compensation is established by reference to market data for a comparator group of companies. See page 18 for a discussion of the manner in which CEO and other officer compensation benchmarks are established.

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1. Performance-based incentive compensation should represent the majority of total compensation

The Committee believes that a significant portion of an executive officer’s total compensation should be tied not only to how well the individual performs, but also to how well both the individual’s business unit or function and the Company perform against financial and non-financial business objectives while adhering to the Company’s core values. In addition, the proportion of an executive officer’s total compensation tied to the achievement of performance objectives should increase as the scope and level of the individual’s responsibilities increase. Thus, the Committee uses a variety of performance targets and performance-based compensation vehicles in the executive compensation program that are designed to incorporate performance criteria that promote the Company’s annual operating plan and long-term business strategy. These compensation vehicles include annual cash bonuses, stock options and performance-based restricted shares which pay out based on attainment of various goals related to, among other things, earnings per share (“EPS”) and premium moist smokeless tobacco unit volume.

The Committee further believes that executive compensation should be linked to the delivery of shareholder value, taking into consideration the impact of the unique regulatory environment in which the Company operates. Because the price volatility of the Company’s shares is often affected by factors other than Company performance and factors over which management has little control, such as litigation and regulatory restrictions, the Committee believes that a greater proportion of the incentive compensation should be delivered in cash, which is also less dilutive. Therefore, while the Company’s compensation program includes long-term incentives, through a series of equity-based awards which are tied to the long-term performance of the Company’s stock, a significant portion of incentive compensation is delivered in annual cash awards. This is in line with how the Company rewards its stockholders with strong cash dividends and share repurchases. The Committee recognizes that while stock prices may reflect corporate performance over the long-term, other factors, such as general economic conditions, state and federal regulation, litigation and varying attitudes among investors toward the stock market, in general, and tobacco companies in particular, may significantly affect the Company’s stock price at any point in time. Accordingly, the annual cash components of the executive compensation program consisting of base salary and annual incentive opportunities emphasize current corporate performance and the realization of defined business objectives in the short-term. For fiscal year 2006, depending on the scope and level of an individual’s responsibilities, between 22 to 28 percent of total target direct compensation (the sum of base salary, annual incentive compensation and long-term incentive compensation) was provided in base salary; between 40 – 51 percent of total target direct compensation was allocated to short-term incentive compensation; and between 26 – 40 percent of total target direct compensation was allocated to long-term incentive compensation.

2. Compensation levels should be competitive

In determining compensation levels, where possible, the Committee uses a comparator group of 14 companies with whom the Committee believes it competes for executive talent. Because the comparator group of companies includes companies outside the tobacco industry, this group of companies is not the same as the group used for comparing investment performance in the graph included on page 16 of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006. For 2006, the Company’s comparator group consisted of the following companies: Altria Group Inc., Anheuser-Busch Companies, Inc., Avon Products, Inc., Brown-Forman Corporation, Campbell Soup Company, the Clorox Company, Colgate- Palmolive Company, Fortune Brands Inc., the Hershey Company, McCormick & Company Inc., Molson Coors Brewing Company, Reynolds American Inc., Sara Lee Corporation, and Wm. Wrigley Jr. Company. Because of the variability in the market capitalization of these companies, where possible, the data used for benchmarking purposes is regressed for market capitalization. The Committee has determined that total compensation is to be targeted at the median of this comparator group (adjusted, where possible, for market capitalization), with an additional 20 percent premium to reflect the Company’s challenges in recruiting and retaining talented executives in the tobacco industry and the market dynamics of tobacco-related stocks. For short and long-term incentives, the actual payout, whether above, below or at the competitive median is determined by performance against pre-established relevant measures and objectives.

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To further the principles described above, each year the Committee reviews market data with respect to the comparator group listed above to ensure that the Company’s executive compensation program remains competitive and reviews the Company’s total executive compensation program with the input of its independent consultant, the Cook Firm, in light of evolving market practices, accounting and tax rules and other external regulatory developments. The Committee undertakes this review to ensure that, for each executive position, the Committee’s compensation decisions are appropriate, reasonable and consistent with the Company’s philosophy, considering the various markets in which the Company competes for executive talent. If necessary, the Company makes changes in programs to achieve competitive market positioning.

Where market data is not available for a particular position, with respect to these companies, the Company uses broad and custom compensation survey data prepared by Hewitt Associates. The survey data consist of industry data, as well as more general compensation data, which includes organizations similar in profitability across a variety of industries. Furthermore, the Committee does not limit its analysis to survey data relating to the organizations in the Company’s comparator group because the use of data applicable to the most relevant talent pool allows it to more precisely tailor compensation packages to the demands of the market. This broader comparison group is used because the Company’s competitors for qualified executives are not always limited to the companies in the Company’s business sector or comparator group. In situations where these survey data are used, consistent with the philosophy described, the total compensation is targeted to the median of the data utilized, with an additional 20 percent premium as explained above.

The benchmark information generated by the broader survey data is also used as an additional reference point in determining total compensation, even where comparator company data is available.

3. Compensation decisions should take into account total compensation and equity holdings

In approving executive officer compensation and severance arrangements, the Committee reviews and takes into consideration the cost of all programs, including perquisites and other Company sponsored benefits, and the cost of such arrangements under various possible scenarios, including change-in-control of the Company and termination of employment with and without cause. Tally sheets setting forth all of the possible payout scenarios are prepared by the Company and are reviewed by the Committee and its independent consultant. The Committee analyzes this information in relation to the practices of companies in the Company’s comparator group and where comparator company information is not available, to practices of other relevant companies or other survey data as described above. In special circumstances, the total compensation and the mix of payouts may be adjusted to address retention risks. The Committee also takes into consideration an executive officer’s total equity holdings and retention considerations when approving compensation arrangements. For example, during 2005 when the Chairman and CEO, Vincent A. Gierer, Jr. announced his intention to retire, in order to retain him through 2006, the Committee awarded him a $5 million cash retention bonus payable in July, 2007, provided that he remain as Chairman and CEO through December 31, 2006. This cash retention award was in lieu of any long-term awards for both 2005 and 2006. The award was designed as an all cash award to avoid the dilutive effect of equity awards and took into consideration Mr. Gierer’s significant equity holdings in the Company.

4. Executive officers should have a stake in their decisions

The Committee believes that it is in the best interests of the Company and its stockholders for the executive officers to have a financial interest in the long-term results of their businesses. Accordingly, the Company provides its executive officers with various ways to become stockholders of the Company. These opportunities include performance-based restricted stock awards, as well as stock option grants. The Company’s policies regarding stock ownership guidelines and holding requirements are discussed in more detail below.

Components of the Executive Compensation Program

The primary elements of the Company’s executive compensation program are:

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Each year, the Committee reviews each executive officer’s total compensation and compares it with market data for similar positions in the organizations included in the Company’s comparator group or market data for other relevant sources as described above. In addition, the CEO presents to the Committee his evaluation of each executive officer, which includes a review of the officer’s achievement against both Company financial and individual objectives. Information from these performance evaluations is utilized to determine increases in base salary, calculate annual incentive awards under the Company’s incentive compensation plan and determine the level of long-term incentive awards made to the officer.

1. Base Salary

The Committee typically reviews and determines the base salaries of all officers of the Company in April of each year. As described above, except for the CEO, the Committee has established and maintains four broad bands of base salary ranges for officers. The midpoint for base salary ranges is targeted at or near the median of the market base salary of designated positions determined as described above. Base salaries may be adjusted upward or downward within these broad salary bands in the Committee’s discretion. Each year, a merit increase guideline is established for all officers of the Company based on market data derived from several surveys, including surveys from the Conference Board, Hewitt Associates, Mercer, Watson Wyatt, and WorldatWork. Based on this data, the average merit increase guideline established for 2006 was 3.7 percent. In determining increases in base salary for each individual, the Committee takes into account the scope of responsibilities, experience, performance rating and internal equity within the Company. For 2006, base salary increases for individual executive officers ranged from 0 to 8 percent based on the foregoing criteria. In addition, the Committee may make adjustments in an individual’s base salary during the year based on changes in the executive’s responsibilities.

The salaries the Company paid to the CEO, CFO and the three other most highly-compensated executive officers during fiscal 2006 are shown in the Summary Compensation Table on page 26.

2. Annual Incentive Opportunity

At the beginning of each year, the Committee reviews annual incentive targets under the UST Inc. Incentive Compensation Plan (“ICP”) for the CEO, the CFO and the other executive officers of the Company. At that time, the Committee (i) sets the overall Company performance objectives for the year and, (ii) sets individual performance measures for the year. To determine what, if any, adjustments to targets are necessary, this process is undertaken after the Board has approved the Company’s annual operating plan for the current fiscal year. The Committee may make adjustments in an individual’s target during the year based on changes in the executive’s responsibilities, but typically does not make adjustments in the Company or individual performance targets. The weight attributed to Company performance versus individual objectives for executive officers varies based on the individual’s position. For the CEO, with respect to the 2006 performance period, 50 percent of the annual bonus was based on achievement against EPS targets, 20 percent was based on achievement against unit volume targets and 30 percent was based on achievement against individual objectives. The earnout with regard to each performance objective of the bonus ranges from 50 to 150 percent of the target allocated to each performance objective with a threshold of 80 percent and a maximum of 120 percent of the pre-established goal. The weighting for each performance objective varied for the other executive officers based on the position, but the threshold and maximums were the same as those for the CEO. Unlike the CEO, however, earnout for the individual performance goals for these other executive officers was 0 to 120 percent. The earnout for the CEO on individual objectives was set at a higher level to foster the transition of his duties to his successor. The overall Company performance objective for 2006 was an EPS target of $3.05. EPS for this purpose is diluted EPS from continuing operations as determined under Generally Accepted Accounting Principles excluding any items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence, or related to discontinued operations or a change in accounting principles or tax law or other regulations, provided that such items are specifically identified, quantified and disclosed in any public document, and provided further that such items have a quantifiable impact on net income or EPS reported to the SEC for that period. Individual performance objectives for each executive officer vary depending on his or her position and areas of responsibility. For 2006, such objectives included certain unit volume targets, completion of certain winery transactions,

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attainment of pre-established return on assets goals and leadership and talent development goals. These individual objectives are determined based on the Company’s business priorities.

Annual non-equity incentive awards under the ICP are also linked to Company performance with respect to operating earnings, as annual bonuses are awarded to executive officers out of the total ICP fund. The ICP formula, which was last approved by stockholders in 2003, provides for an aggregate bonus fund based upon fixed percentages of net earnings plus the provision for taxes and the ICP fund, as specified in the ICP. This formula requires that earnings exceed 12 percent of stockholders’ equity and that cash dividends have been declared and paid in the year. All salaried, non-union employees are eligible to participate in the ICP.

The annual non-equity incentive awards the Company paid to the CEO, the CFO and the three most highly-compensated executive officers during fiscal 2006 are shown in the Summary Compensation Table on page 26. Additional information about the annual incentive opportunities is shown in the Grants of Plan-Based Awards Table on page 28.

3. Long-Term Incentives

The Company’s long-term incentive program rewards the Company’s executive officers for Company performance over a period of more than one fiscal year. The Committee believes that long-term incentive compensation performs an essential role in retaining and motivating executive officers and that, by providing them with long-term incentives, their decisions affecting the operation of the business will be aimed at maximizing stockholder value.

Since fiscal year 2003, the long-term incentive awards have consisted of stock options and both time-based and performance-based restricted stock. Most recently in 2006, the long-term awards have focused on performance-based restricted stock with special stock option awards to recognize promotions or address retention issues. The Committee believes that performance-based restricted share awards better align executive officer interests with those of stockholders and are less dilutive. The Committee does, however, believe that options continue to provide significant incentive to produce long-term results in alignment with stockholder interests and, therefore, has from time to time granted special option awards. These awards are primarily designed to retain certain officers, foster their long-term ownership interests and ensure focus on long-term results. In the future, the Committee may award more stock options or approve different award types such as restricted stock units, performance shares or units or a mix of various long-term vehicles depending on market practices and the competitive environment.

Generally, the Committee determines the overall size of the long-term incentive award for each executive officer, including the CEO and CFO, and makes equity grants annually. In determining the level of each award in 2006, the Committee considered, without assigning any particular weight to any one factor, the following: (i) the individual performance and scope of responsibilities of each executive officer; (ii) existing stock-based awards held by the executive; and (iii) the executive’s target total compensation based on market data as described above.

When determining the cumulative effect of all awards to executive officers as a group, the Committee also considered share usage and stockholder dilution, as well as the accounting and tax implications of all awards.

The Committee has made grants of equity awards, including stock options, at varying times of the year. Stock option awards are effective as of the date that the Committee authorizes or approves such awards and, as provided in the 2005 UST Inc. Long-Term Incentive Plan (“2005 LTIP”), have exercise prices equal to the fair market value of the Company’s common stock as determined by taking the average of the high and low stock price of the Company’s common stock on the date of grant.

Although management makes recommendations for the Committee’s consideration, the timing of equity awards is in the Committee’s sole discretion. The Committee has made such awards without regard to the release of the Company’s financial results for the year or the release of any other material non-public information. The Committee met and approved the long-term incentive awards for executive officers and all other eligible employees on June 21, 2006. For executive officers, this award consisted of performance-based restricted stock with a forty-three month vesting period based on the attainment of specified EPS goals for each of 2007, 2008 and 2009. The EPS target for 2007 is $3.30. EPS for this purpose is diluted EPS as described above. The Committee believes that attainment of the EPS targets with respect to these awards

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presents management with a significant challenge, which if achieved, would generate results that deliver the growth investors seek. The material terms of the awards granted to executive officers are described in the narrative disclosure following the Grants of Plan-Based Awards Table on page 28. Additional terms and conditions of these equity awards are determined under the provisions of the 2005 LTIP. Copies of the 2005 LTIP and any amendments to the 2005 LTIP are attached as exhibits or incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, which can be found on the Company’s website at www.ustinc.com.

The Committee also made a special award of 200,000 non-qualified options to purchase shares of Company common stock to Mr. Kessler, President and Chief Operating Officer, on November 2, 2006, in recognition of his election to the position of Chief Executive Officer which was announced on that date. This award was made in order to recognize his promotion, retain him and foster his continued investment in the long-term success of the Company in alignment with stockholders’ interests. The material terms of this award are described in the narrative disclosure following the Grants of Plan-Based Awards Table on page 28. On December 6, 2006, the Company also granted 25,000 shares of restricted stock to Daniel W. Butler, President of U.S. Smokeless Tobacco Company, pursuant to the Company’s 2005 LTIP. The award was made in order to recognize Mr. Butler’s performance during 2006, enhance his ownership interests, retain him and foster his continued investment in the long-term success of the Company. The material terms of this award are described on page 31.

4. Defined Benefit and Defined Contribution Pension Plans

The Company sponsors a tax qualified defined benefit plan for its salaried employees as part of its competitive pay practices. Executive officers participate in the Company’s tax-qualified defined benefit pension plan on the same terms as the rest of the Company’s salaried employees. Because the Internal Revenue Code imposes limits on the annual compensation that can be taken into consideration to determine benefits under such plans and the total annual amounts that can be paid as benefits under such plans (limitations imposed by Internal Revenue Code (“IRC”) Sections 401(a)17 and 415), the Company has established and maintains unfunded, defined benefit pension plans for employees who are subject to such limitations, including executive officers, to compensate these individuals for the reduction in their pension benefits resulting from these limitations.

In addition, in order to attract and retain more seasoned, experienced executives, the Company maintains a supplemental pension plan for officers, the Officers’ Supplemental Retirement Plan (the “Supplemental Plan”), which provides an enhanced pension formula based on attainment of a certain age and level of service with the Company. Generally executive officers who have attained age fifty-five with ten years of service and five years of service as an officer are eligible to participate in the Supplemental Plan. The Supplemental Plan formula generally provides for an age 60 benefit equal to the greater of 110 percent of the tax qualified defined benefit formula or 50 percent of eligible compensation, offset by amounts payable under the tax qualified defined benefit plan and the Company’s unfunded, non-qualified defined benefit plans. The Company does not consider bonus payments in excess of 25% of the annual bonus amount or gains from prior equity awards when determining retirement benefits under the Supplemental Plan.

The actuarial present value of the accumulated pension benefits of the CEO, the CFO and the three other most highly-compensated executive officers as of the end of fiscal 2006, as well as a more detailed explanation of the Company’s defined benefit pension plans, are shown in the Pension Benefits at December 31, 2006 table on page 34.

The Company also maintains a tax qualified defined contribution plan for the benefit of all of its employees, the UST Inc. Employees’ Savings Plan. Executive officers participate in this plan on the same basis as all other employees. This plan provides for Company matching contributions of 100 percent of the first six percent contributed by employees.

5. Employment and Severance Agreements

The Company has entered into employment and/or severance agreements with all of its executive officers in order to ensure that the terms applicable to a separation from service are agreed upon in advance and not subject to future negotiation. In addition, certain of these agreements were entered into during the transition of Mr. Gierer’s responsibilities as CEO to Mr. Kessler, in order to ensure the continued focus of executive

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officers on the business. These agreements also provide for severance benefits after a change in control, if the executive officer’s employment is subsequently terminated (i.e., double trigger change in control agreements). Severance benefits in the event of a termination of employment after a change in control are intended to ensure retention of these executives in the event of such occurrence.

In 2006, the Company made changes to the change-in-control and severance agreements for four executive officers, including Murray S. Kessler, Robert T. D’Alessandro and Daniel W. Butler, to amend the definition of change-in-control to conform it to current market practices and ensure that such executives remain focused on the business during transitions in leadership and that the Company maintains its competitive market position. The Company believes these and other changes better align these arrangements with market practices and will further strengthen the talent retention objectives of the Company’s executive compensation program.

The material terms of the Company’s agreements with the CEO, CFO and the three other most highly-compensated executive officers as of the end of fiscal 2006 are described in the narrative disclosure following the Grants of Plan-Based Awards Table on page 28. The material terms of, and a quantification of amounts payable under, the change-in-control and severance agreements with the CEO, the CFO and the three most highly-compensated executive officers as of the end of fiscal year 2006 are described in the section Potential Payments Upon Termination or Change in Control on page 35.

On March 15, 2007, the Company filed a Current Report on Form 8-K announcing that the Chief Financial Officer, Robert T. D’Alessandro will be retiring April 1, 2007. The Company intends to enter into an agreement setting forth the terms of Mr. D’Alessandro’s retirement.

6. Other Benefits

The Company maintains medical, dental, vision, accidental death, disability, life insurance, business travel accident insurance and survivor income benefits for all of its salaried employees, as well as customary vacation, leave of absence, and other similar policies. Other than the vacation policy, executive officers are eligible to participate in these programs on the same basis as the rest of the Company’s salaried employees. For purposes of the vacation policy, executive officers receive a minimum of four weeks vacation annually irrespective of service. This vacation policy was adopted for executive officers to ensure that adequate periods of vacation are provided based on the level of responsibility of these positions.

7. Perquisites

The Company provides its executive officers with company cars, financial planning assistance, annual wine allowances, reimbursements for the costs associated with the installation and maintenance of security systems and periodic personal use of the Company’s aircraft. The Company provides these perquisites to assist officers in focusing on the Company, rather than their personal affairs and to foster the use of the Company’s wine products at events they host. The Company also provides executive officers with a one-time reimbursement for country club initiation fees. None of the named executive officers received any such reimbursement during 2006. The Company further believes that executives working in the tobacco industry, whose compensation information is publicly available, should have adequate security at their homes. The level of the perquisites allowed is based on the Company’s assessment of a reasonable amount necessary to accomplish its objective in providing these benefits. Neither the CEO nor the other executive officers receive any additional cash compensation to reimburse them for any income tax liability that may arise and become due and payable as a result of their receipt of these items. The Company does not pay any additional cash compensation to executive officers to reimburse them for any income taxes that become due and payable in connection with equity awards, including any taxes that become due as a result of the exercise or vesting of such awards.

The aggregate incremental cost to the Company of providing these benefits to the CEO, the CFO and the three most highly-compensated executive officers during fiscal 2006 are shown in the Summary Compensation Table on page 26.

Additional Executive Compensation Policies

In addition to the principal policies relating to the compensation elements described above, the Company has adopted a number of supplemental policies to further the goals of the executive compensation program,

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1. Stock Ownership Guidelines

Executive Stock Ownership Guidelines have been established by the Committee to encourage officers to obtain and hold Company stock, 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. These guidelines provide that within a five-year time frame, all officers are expected to own, at a minimum, depending on job band, shares with a market value of one to five times their base salary. The Company’s current stock ownership guidelines for executive officers are as follows:

Restricted shares, shares purchased through the Company’s Dividend Reinvestment and Stock Purchase Plan (a non-subsidized, non-discounted stock purchase plan applicable to all stockholders) and shares held directly by the executive officer or their spouse count toward satisfying the guidelines. Unexercised stock options and shares held in the UST Inc. Employees’ Savings Plan do not count toward satisfying the guidelines. Vested restricted shares must be held until guidelines are achieved. The guideline and ownership of the CEO, CFO and the three most highly-compensated executive officers as of the end of fiscal 2006 are as follows:

2. Holding Requirements

On December 8, 2005, prior to the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123(R) Share-Based Payment, the Board, upon the recommendation of the Committee, approved the acceleration of vesting of all outstanding, unvested stock options previously awarded to the Company’s employees and officers, including executive officers, under the UST Inc. Amended and Restated Stock Incentive Plan and the UST Inc. 1992 Stock Option Plan. The decision to accelerate the vesting of these options during 2005 was made in connection with the Company’s current intention to use other forms of equity compensation with decreasing dependence on stock options and to reduce the compensation expense that the Company would otherwise be required to record in future periods following the Company’s adoption of SFAS No. 123(R) on January 1, 2006.

In order to prevent unintended personal benefits to the Company’s officers, the accelerated vesting was conditioned on such officers entering into an amendment to their original option award agreements providing that such officers will not, subject to limited exceptions, sell, transfer, assign, pledge or otherwise dispose of any shares acquired upon exercising the accelerated portion of the options before the earlier of the date on which that portion of the options would have otherwise vested under the original terms of the applicable option agreements or separation from service.

3. Compensation Recovery Policy

The Company maintains a compensation recovery policy with respect to its equity awards and the Supplemental Plan. In general, equity award agreements for all employees provide that if an employee is terminated for cause, or if after an employee is terminated for other than cause, the Company discovers the occurrence of an

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act or failure to act by the employee, while in the employ of the Company, that would have enabled the Company to terminate the employee’s employment for cause had the Company known of such act or failure to act at the time of its occurrence, or subsequent to an employee’s termination of employment, the employee violates a non-competition provision, and in each case, such act is discovered by the Company within three years of its occurrence, then, amounts will be returned to the Company as follows:

According to the terms of the Supplemental Plan, if participants are terminated for cause they will not be entitled to a benefit under the plan. If subsequent to the participant’s termination of employment with the Company other than for cause, the Company discovers the occurrence of an act or failure to act by the participant that would have enabled the Company to terminate the participant’s employment for cause had the Company known of such act or failure to act at the time of its occurrence or the participant violates any secrecy or non-competition agreement, the participant forfeits the right to any future benefits under the plan and must repay to the Company all amounts received subsequent to the date on which the act or failure to act constituting cause or the violation of any secrecy or non-competition agreement occurred.

The Company does not have a policy related to the recovery of performance-based compensation following a restatement of its financial statements.

Accounting and Tax Implications 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 and its four other most highly compensated executive officers. Performance-based compensation that satisfies the conditions of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), is excluded for purposes of this limitation. The 2006 awards made to the CEO and the other executive officers pursuant to the ICP, as well as the awards made pursuant to the 2005 LTIP were subject to, and made in accordance with, the Committee’s pre-established performance goals and are, therefore, considered performance-based for this purpose. In designing compensation arrangements, the Committee seeks to mitigate the expense and dilution related to such arrangements and to ensure, to the maximum extent practicable, the deductibility of all compensation payments pursuant to Section 162(m).

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Company’s Compensation Discussion and Analysis for the year ended December 31, 2006 as required by Item 402(b) of Regulation S-K promulgated by the SEC. Based on such review and discussions, the Committee recommended to the Board, and the Board has approved, the inclusion of the Compensation Discussion and Analysis in the Company’s 2007 Proxy Statement and its incorporation by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, for filing with the SEC.

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Summary Compensation Table

The following table summarizes the compensation of the Named Executive Officers for the fiscal year ended December 31, 2006. The Named Executive Officers are the Company’s Chief Executive Officer, Chief Financial Officer, and three other most highly compensated executive officers determined by reference to their total compensation in the table below (excluding amounts disclosed in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column).

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All Other Compensation

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Grants of Plan-Based Awards for 2006

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Employment Agreements

Mr. Gierer

Until December 31, 2006, the Company was party to an employment agreement with Mr. Gierer which was entered into on July 23, 1987 and which had an initial term of 4 years. The stated initial term of the agreement with Mr. Gierer was generally automatically extended, subject to expiration at age 65. Mr. Gierer’s employment agreement provided that the Company would pay Mr. Gierer an annual salary in connection with his duties as Chairman of the Board and Chief Executive Officer of the Company and for such other responsibilities as may from time to time be assigned by the Board, subject to annual increase in the discretion of the Board. Mr. Gierer’s annual salary for 2006 is set forth in the Summary Compensation Table on page 26. In addition, Mr. Gierer’s employment agreement provided that he was eligible to participate in the Company’s long-term incentive plan as may be in effect from time to time, as well as the Company’s other compensation and benefit plans. Mr. Gierer’s employment agreement also provided for payments on certain terminations of employment, the material terms of which are described on page 35. Mr. Gierer’s employment agreement terminated on December 31, 2006 in connection with his retirement as Chairman and Chief Executive Officer of the Company on the same date.

In addition, as part of the Company’s succession planning process, effective November 3, 2005, the Company entered into a Retention Bonus Agreement whereby the Company agreed to pay a $5,000,000 retention bonus to Mr. Gierer as soon as practicable after July 1, 2007; provided that Mr. Gierer remained as Chairman and Chief Executive Officer of the Company through December 31, 2006. The agreement provided, however, that if Mr. Gierer’s employment terminated before December 31, 2006, for certain reasons (death, disability, termination for “good reason” (as defined in his employment agreement), or involuntarily without “cause”), he would receive a pro-rata payment of the retention bonus based on whole months worked from November 3, 2005 through the date of termination. The retention bonus was provided in lieu of any equity compensation grants that otherwise would have been made to Mr. Gierer in 2005 and 2006, the value of which would have been approximately equal to the retention bonus amount. The agreement also provided that if Mr. Gierer retired early at his own initiative or was terminated for “cause”, then the full amount of the retention bonus would be forfeited. The retention bonus amount was not included in the determination of any benefits under the Company’s pension or welfare benefit plans.

Mr. Kessler

Prior to January 1, 2007, the Company and Mr. Kessler were parties to an agreement that provided Mr. Kessler with certain severance payments and benefits in the event of termination of his employment under certain circumstances (the “Severance Agreement”). The term of the Severance Agreement was four years, but in no event less than two years following a change in control of UST Inc. (as defined in the Severance Agreement) if a change in control occurred during the four-year term. Under the Severance Agreement, if Mr. Kessler’s employment was terminated without “cause” or by Mr. Kessler for “good reason” (as defined in the Severance Agreement), he would be entitled to receive severance payments and benefits as described on page 36.

In light of Mr. Kessler’s appointment to the position of President and Chief Executive Officer effective January 1, 2007, the Company entered into a new employment agreement with Mr. Kessler. Mr. Kessler’s new employment agreement supercedes any and all previous agreements, including the Severance Agreement, between the Company and Mr. Kessler relating to his position, duties, compensation and benefits payable upon certain terminations of employment either prior to, in anticipation or contemplation of, or following a change in control of the Company.

Mr. Kessler’s employment agreement provides that the Company will pay Mr. Kessler an annual salary of $1,000,000 in connection with his duties as President and Chief Executive Officer of the Company and for such other responsibilities as may from time to time be assigned by the Board. Mr. Kessler’s employment agreement also provides that Mr. Kessler may be eligible for an annual bonus under the Company’s Incentive Compensation Plan and that his annual bonus target is $2,000,000, or such other amount as may be determined from time to time by the Board. In addition, Mr. Kessler’s employment agreement provides that he will be eligible to participate in the Company’s long-term incentive plan as may be in effect from time to time, as well as the Company’s other compensation and benefit plans. Mr. Kessler’s employment agreement

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Mr. Kessler’s employment agreement will continue in effect for a period of four years from its effective date. Thereafter, Mr. Kessler’s employment agreement will automatically renew for successive one-year periods, unless either the Company or Mr. Kessler gives written notice that it will not be extended.

Mr. Kohlberger

The Company is also party to an employment agreement with Mr. Kohlberger which was entered into on June 30, 2000. The initial three-year term of the agreement is automatically extended each year, subject to expiration at age 65. Mr. Kohlberger’s employment agreement provides that the Company will pay him an annual salary of not less than the salary in effect on June 30, 2000 in connection with his then assigned duties or such other responsibilities as may, from time to time, be assigned by the Board, subject to annual increase in the discretion of the Board. Mr. Kohlberger’s annual salary for 2006 is set forth in the Summary Compensation Table on page 26. Mr. Kohlberger’s employment agreement also provides that he may be eligible for an annual bonus under the Company’s Incentive Compensation Plan of not less than the annual bonus received in 1999; provided, however, that if the ICP fund is reduced below the level of the ICP fund with respect to the annual bonus received in 1999, such floor shall be reduced in the same proportion as the ICP fund. In addition, Mr. Kohlberger’s employment agreement provides that he will be eligible to participate in the Company’s long-term incentive plan as may be in effect from time to time, as well as the Company’s other compensation and benefit plans, and that the minimum level of recommended awards under the Company’s long-term incentive plan for the Committee’s consideration in each year shall be equal to 20,000 stock options. Mr. Kohlberger’s employment agreement also provides for payments on certain terminations of employment, the material terms of which are described on page 39.

2005 Long-Term Incentive Plan

On June 21, 2006, equity awards were granted under the UST Inc. 2005 Long-Term Incentive Plan to all named executive officers, with the exception of Mr. Gierer. These awards will vest on January 31, 2010 based on the attainment of pre-established EPS targets for each of 2007, 2008 and 2009, and continued service through that date. Under the terms of these awards, one-third of the award is earned each year based on performance for such year. For each year, “threshold” represents the payout if actual EPS is 75 percent of the target EPS for the year; “target” represents the payout if the specified EPS performance target is achieved for the year; and, “maximum” represents the highest payout possible under the terms of the award, if actual EPS is 115 percent of the target EPS for the year. If the minimum level of performance criteria with respect to a particular year is not achieved, no payout is earned for such year. The formula for determining the number of shares that will vest is applied to one-third of the total target award each year, based on the actual EPS performance for that year.

Executive officers have the right to receive nonforfeitable dividends on all restricted stock awards over the applicable vesting period based upon the target number of shares awarded. Dividends received on outstanding but unvested restricted shares during 2006 for Messrs. Gierer, Kessler, D’Alessandro, Kohlberger, and Butler were $142,272, $346,446, $77,520, $64,296, and $61,218, respectively. Shares of restricted stock may not be transferred or otherwise disposed of by the individual prior to the date on which they become vested.

For an explanation of the amount of equity awards as a percentage of total compensation, see Compensation Discussion and Analysis on page 16.

The Committee also made a special award of 200,000 non-qualified options to purchase shares of Company common stock to Mr. Kessler on November 2, 2006, in recognition of his upcoming appointment to the position of CEO which was announced on that date. These non-qualified stock options have an exercise price of $53.47, representing the fair market value of Company common stock on November 2, 2006 (the date of the grant) pursuant to the 2005 LTIP. Subject to earlier vesting due to death, disability or retirement, or upon a change in control of the Company (as defined in the 2005 LTIP), these stock options generally become exercisable at the rate of 25 percent per year commencing with the first anniversary of the date of grant, subject to continued employment.

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On December 6, 2006, the Company also granted 25,000 shares of restricted stock to Daniel W. Butler, the President of U.S. Smokeless Tobacco Company, pursuant to the Company’s 2005 LTIP. This award will vest on January 1, 2012, provided that he remains employed through that date and that the Company achieves positive EPS and pays dividends in three of any of the five fiscal years of the vesting period. Pro-rata vesting will apply in the event that his employment is terminated without “cause” or for “good reason” (as such terms are defined in his employment agreement). In addition, upon a change in control (as defined in the 2005 LTIP), the restricted stock will remain outstanding, but the performance criteria will lapse as of the date of the change in control and such restricted stock will vest upon the earlier of January 1, 2012 or termination of his employment other than for “cause” or for “good reason.”

Incentive Compensation Plan

The ICP provides for annual performance-based cash bonuses. A payout of bonuses for the 2006 fiscal year can only be earned if: (i) a cash dividend has been declared and paid for the year and (ii) Operating Earnings, as defined in the ICP, exceed 12 percent of the Company’s stockholders’ equity. Once the foregoing two requirements are met, awards under the ICP to executive officers are determined by the Compensation Committee based on actual performance against pre-established performance criteria. “Threshold” for purpose of determining annual non-equity incentive awards under the ICP, represents the payout if the minimum specified level of performance criteria is achieved; “target” represents the payout if the specified performance criteria are achieved; and, “maximum” represents the highest payout possible under the terms of the ICP. Performance criteria for payouts under the ICP depend on the individual executive officer’s responsibilities and include one or more of the following: EPS, unit volume, divisional contribution, and other pre-established individual goals. For an explanation of the amount of salary and ICP awards as a percentage of total compensation, see Compensation Discussion and Analysis on page 16.

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OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2006

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OPTION EXERCISES AND STOCK VESTED FOR THE YEAR ENDED DECEMBER 31, 2006

This table provides the aggregate amounts received or realized in connection with all exercises of stock options or the vesting of restricted stock during the year ended December 31, 2006.

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PENSION BENEFITS AT DECEMBER 31, 2006

The table below shows the present value of accumulated benefits payable to each Named Executive Officer, including the number of years of service credited to each executive, under the UST Inc. Retirement Income Plan for Salaried Employees (the “Pension Plan”), the UST Inc. Benefit Restoration Plan (the “Restoration Plan”), and the UST Inc. Officers’ Supplemental Retirement Plan (the “Supplemental Plan”). The present value of accumulated benefits was determined as of December 31, 2006, using interest rate and mortality assumptions consistent with those used in the Company’s financial statements. See Note 14 — Employee Benefit and Compensation Plans to the Company’s December 31, 2006 consolidated financial statements in its Annual Report on Form 10-K for further information on the assumptions used.

(1) Reflects the actuarial present value of the accumulated benefit for each individual, computed utilizing the same measurement date and assumptions used for the Company’s December 31, 2006 financial statements and related footnote disclosures. The calculated accumulated benefit assumes normal retirement age and current compensation levels, and includes amounts which the individual may not be entitled to receive because either the individual is not yet a “Participant” (as defined in the Retirement Plans) in the plan or such amounts are not yet vested.

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The Pension Plan and Restoration Plan (together, the “Retirement Plans”) provide an integrated program of retirement benefits for eligible employees. The Retirement Plans apply the same formulas and together replace a level of pre-retirement pensionable earnings that is identical for all similarly situated participants.