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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-12
U.S. Bancorp
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[US BANCORP LOGO]
U.S. BANCORP
601 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402-4302
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 17, 2001
Dear U.S. Bancorp Shareholders:
The Annual Meeting of Shareholders of U.S. Bancorp (the "Corporation") will
be held at the Minneapolis Convention Center, 1301 Second Avenue South,
Minneapolis, Minnesota, on Tuesday, April 17, 2001, at 11:00 a.m. local time.
The purpose of the meeting is to consider and act on the following:
1. To elect Directors for three year terms ending in the year 2004.
2. To consider and act upon a proposal to approve the U.S. Bancorp
Executive Incentive Plan.
3. To consider and act upon a proposal to approve the U.S. Bancorp 2001
Stock Incentive Plan.
4. To act on the proposal submitted by Gerald Armstrong, a shareholder of
the Corporation, for annual election of directors if it is introduced at
the meeting.
5. To transact any other business that may properly come before the Annual
Meeting, and any adjournment.
Shareholders who are of record at the close of business on March 9, 2001,
are entitled to vote at the meeting.
Shareholders are cordially invited to attend the meeting. IF YOU WISH TO
ATTEND THE MEETING BUT YOUR SHARES ARE HELD IN THE NAME OF A BROKER, TRUST, BANK
OR OTHER NOMINEE, PLEASE BRING A PROXY OR LETTER FROM THE BROKER, TRUSTEE, BANK
OR NOMINEE WITH YOU TO CONFIRM YOUR BENEFICIAL OWNERSHIP OF THE SHARES. Please
vote your proxy by mail, by telephone or by internet submission whether or not
you plan to attend so that your shares may be represented at the meeting. If you
attend the meeting, you may revoke your Proxy and vote in person if you choose.
By order of the Board of Directors,
/s/ JENNIE P. CARLSON
Jennie P. Carlson
Secretary
Minneapolis, Minnesota
March 16, 2001
YOUR VOTE IS IMPORTANT. PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY
WHETHER OR NOT YOU INTEND TO ATTEND THE MEETING.
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[US BANCORP LOGO]
U.S. BANCORP
601 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402-4302
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is provided with the solicitation of proxies for the
Board of Directors of U.S. Bancorp (the "Corporation" or "Company"), for use at
the Annual Meeting of Shareholders to be held on April 17, 2001. A Notice of
Annual Meeting is attached and a form of proxy is enclosed. These proxy
materials are first being mailed to shareholders of the Corporation on or about
March 16, 2001.
On February 27, 2001, the merger of the old U.S. Bancorp and Firstar
Corporation ("Firstar") was completed, with the Corporation as the continuing
registrant for SEC reporting purposes. As a result of the merger, Firstar is no
longer required to file periodic reports or proxy statements under the
Securities Exchange Act of 1934. Because of the significance of that merger to
former shareholders of both the old U.S. Bancorp and Firstar, this proxy
statement in a number of instances contains both disclosure relating to the old
U.S. Bancorp and supplemental disclosure relating to Firstar, both of which
existed for all of 2000. All references in this proxy statement to old U.S.
Bancorp mean U.S. Bancorp as it existed prior to the merger. All references in
this proxy statement to Firstar Corporation mean Firstar Corporation as it
existed prior to the merger.
All references to share amounts in this proxy statement are adjusted to
reflect the exchange ratios in the merger, in which shareholders of the old U.S.
Bancorp received 1.265 shares of the Corporation for each share of old U.S.
Bancorp they held, and shareholders of Firstar Corporation received one share of
the Corporation for each share of Firstar they held.
THE PROXY
If you are a registered U.S. Bancorp shareholder, you may vote your proxy
in one of three ways:
1. By mail. Sign, date and mail the enclosed proxy card in the return
envelope provided.
2. By telephone. Follow the instructions on the enclosed proxy card.
3. By internet. Follow the instructions on the enclosed proxy card.
Telephone or internet proxy instructions must be received by April 16 at
5:00 p.m. Minneapolis time to be counted for the meeting.
All proxy voting procedures are designed to properly authenticate
shareholder identities and to accurately reflect and count proxies. You may
incur costs if you vote on the internet, including possible access charges from
internet providers and telephone companies, which will be your responsibility.
Shareholders whose shares are held in the name of a bank, broker, or other
nominee may or may not be able to use telephone and internet voting. For
information, please refer to the voting materials you receive or contact your
broker, trustee, bank or nominee.
Any shareholder who gives a proxy may revoke or revise that proxy at any
time before the meeting by giving written notice to the Corporation's Secretary,
by executing and returning a later dated proxy, or by voting by ballot at the
meeting.
The Corporation pays the cost to solicit proxies. In addition to soliciting
proxies by mail, directors, officers and regular employees of the Corporation
may solicit proxies electronically or in person without additional
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compensation. The Corporation may request banks, brokerage houses or other
custodians, nominees or fiduciaries to solicit proxies and will reimburse those
entities for reasonable expenses associated with such solicitation. The
Corporation has engaged MacKenzie Partners to assist in proxy solicitation for
an estimated fee of $11,500 plus expenses.
OUTSTANDING VOTING SECURITIES AND PRINCIPAL HOLDERS
1,903,750,794 shares of the Corporation's Common Stock, par value $0.01,
(the "Common Stock") were outstanding on the close of business on March 9, 2001,
(the "Record Date"). Each of those shares is entitled to one vote on each matter
submitted at the meeting. Only shareholders of record at the close of business
on the Record Date are entitled to vote at the meeting.
As of December 31, 2000, no person or group was known by the Corporation to
be the beneficial owner of more than five percent (5%) of U.S. Bancorp's
outstanding Common Stock.
The following table lists information about the beneficial ownership of the
Corporation's Common Stock as of February 26, 2001 by each of the nominees for
Director and each other Director who is serving as a director of the Corporation
as of the date of this proxy statement, the Chief Executive Officer and certain
other executive officers individually, as reported to the Corporation by those
persons as of February 26, 2001 and for the directors and the Corporation's
executive officers as a group.
SHARES BENEFICIALLY PERCENTAGE
NAME OWNED(1)(2)(3)(4) OF CLASS
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Linda L. Ahlers............................................. 50,103
Andrew Cecere............................................... 427,139
William L. Chenevich........................................ 109,305
Arthur D. Collins, Jr. ..................................... 50,830
Peter H. Coors.............................................. 53,213
John C. Dannemiller......................................... 122,032
Richard K. Davis............................................ 1,024,146
Andrew S. Duff.............................................. 598,367
Daniel J. Frate............................................. 708,922
Victoria Buyniski Gluckman.................................. 108,857
Joshua Green III............................................ 20,624,775(5) 1.08
Jerry A. Grundhofer......................................... 4,803,997 0.25
John F. Grundhofer.......................................... 5,229,490 0.28
Joseph E. Hasten............................................ 145,399
J. P. Hayden, Jr. .......................................... 3,061,061(6) 0.16
Roger L. Howe............................................... 529,945
Thomas H. Jacobsen.......................................... 3,218,217 0.17
Delbert W. Johnson.......................................... 74,100
Joel W. Johnson............................................. 26,267
Jerry W. Levin.............................................. 60,245
Sheldon B. Lubar............................................ 867,537
Frank Lyon, Jr. ............................................ 14,158,796 0.74
Daniel F. McKeithan, Jr. ................................... 76,655
Lee R. Mitau................................................ 722,106
David M. Moffett............................................ 1,032,059
David B. O'Maley............................................ 865,520(7)
O'dell M. Owens, M.D........................................ 83,632
Thomas E. Petry............................................. 251,908
Richard G. Reiten........................................... 29,394
S. Walter Richey............................................ 126,276
Warren R. Staley............................................ 26,562
Patrick T. Stokes........................................... 22,222
John J. Stollenwerk......................................... 54,545
Directors and Officers as a Group................. 59,286,473 3.11
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(1) Shares listed reflect the exchange ratios in the merger.
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(2) Listed shares may include shares held in the name of a person's spouse,
minor children, other relatives and trusts and estates as to which
beneficial ownership is disclaimed. Listed shares also include shares held
pursuant to the Corporation's Deferred Compensation Plan. Under the terms of
the trust in which they are held, such shares are subject to the creditors
of the Corporation and may not be voted until released to the individual
participants.
(3) Includes shares which may be purchased upon exercise of presently
exercisable options or options exercisable in 60 days in the following
amounts: Ms. Ahlers, 39,532 shares; Mr. Cecere, 342,258 shares; Mr.
Chenevich, 87,500 shares; Mr. Collins, 41,989 shares; Mr. Coors, 42,065
shares; Mr. Dannemiller, 79,143 shares; Mr. Davis, 887,478 shares; Mr. Duff,
502,018 shares; Mr. Frate, 545,597 shares; Ms. Buyniski Gluckman, 78,987
shares; Mr. Green, 42,273 shares; Mr. Jerry Grundhofer, 4,124,151 shares;
Mr. John Grundhofer, 4,050,751 shares; Mr. Hasten, 85,459 shares; Mr.
Hayden, 39,205 shares; Mr. Howe, 43,225 shares; Mr. Jacobsen, 3,209,344
shares; Mr. Delbert Johnson, 43,313 shares; Mr. Joel Johnson, 22,389 shares;
Mr. Levin, 42,843 shares; Mr. Lubar, 7,367 shares; Mr. Lyon, 10,362 shares;
Mr. McKeithan, 7,155 shares; Mr. Mitau, 603,036 shares; Mr. Moffett, 914,046
shares; Mr. O'Maley, 79,062 shares; Dr. Owens, 20,393 shares; Mr. Petry,
79,505 shares; Mr. Reiten, 22,389 shares; Mr. Richey, 54,711 shares; Mr.
Staley, 22,389 shares; Mr. Stokes, 10,362 shares and Mr. Stollenwerk, 7,055
shares.
(4) Includes the following shares which are held for the individual's account in
the Corporation's 401(k) Plans: Mr. Cecere, 3,720 shares; Mr. Davis, 4,559
shares; Mr. Jerry Grundhofer, 15,456 shares; Mr. John Grundhofer, 11,204
shares; Mr. Hasten, 1,146 shares; Mr. Mitau, 3,012 shares; and Mr. Moffett,
9,946 shares.
(5) Includes 6,247,094 shares owned by Joshua Green Corporation, of which Mr.
Green is Chairman and Chief Executive Officer; 12,468,881 shares held by a
limited partnership of which Joshua Green Corporation is the general
partner; 433,453 shares held by a trust as to which Mr. Green has shared
voting and investment power and of which a family member of Mr. Green is
beneficiary; and 1,089,338 shares held by a charitable foundation of which
Mr. Green is President.
(6) Includes shares which are owned by companies for which Mr. Hayden serves as
Chairman and Director in the following amounts: The Midland Company, 125,829
shares; American Family Home Insurance Company, 1,357,200 shares; American
Modern Home Insurance Company, 724,000 shares; American Western Home
Insurance Company, 177,800 shares; and American Modern Life Insurance
Company of Ohio, 75,600 shares.
(7) Includes 720,000 shares which are owned by Ohio National Life Insurance
Company for which Mr. O'Maley serves as Chairman, President and Chief
Executive Officer.
ELECTION OF DIRECTORS
The Corporation's Restated Certificate of Incorporation, as amended,
provides that the number of Directors constituting the Board of Directors shall
be not less than 12 nor more than 30. The Board of Directors is divided into
three classes: Class I (terms expire in 2002), Class II (terms expire in 2003)
and Class III (terms expire in 2001). The Certificate of Incorporation provides
that nominees for each Class of the Board of Directors are to be elected to
serve for a term of three years. The Board of Directors currently consists of 25
members.
At the 2001 Annual Meeting, the eight Directors in Class III are to be
elected to hold office until the Annual Meeting in the year 2004 and until their
successors are duly elected and qualified. All of the nominees are current
Directors. The persons named in the Proxy intend to vote for the election of
these nominees. If any nominee becomes unable to serve, which is not currently
anticipated, the persons named as proxies reserve full discretion to vote for
any other persons who may be nominated.
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The following information concerns the nominees and continuing Directors:
CLASS I DIRECTORS
(TERMS EXPIRE IN 2002)
LINDA L. AHLERS: born 1950, Director since 1997. Ms. Ahlers is President of
Marshall Field's, the department store division of Target Corporation,
Minneapolis, Minnesota, a diversified retail company. Ms. Ahlers has been
associated with Target Corporation (formerly known as Dayton Hudson Corporation)
since 1977. She assumed her current position in February 1996 and previously
served as Executive Vice President, Merchandising, of the department store
division, and in various capacities with Target Stores, an affiliate company of
Target Corporation.
J. P. HAYDEN, JR.: born 1929, Director since 1973. Mr. Hayden is currently
a Director of The Midland Company and Chairman of the Executive Committee of The
Midland Company's Board of Directors. Mr. Hayden was Chairman of the Board and
Chief Executive Officer of The Midland Company prior to March of 1998.
THOMAS H. JACOBSEN: born 1943, Director since 1989. Mr. Jacobsen is
Chairman Emeritus of Firstar Corporation (now U.S. Bancorp) and former Chairman
and Chief Executive Officer of Mercantile Bancorporation, Inc. Mr. Jacobsen is
also a Director of the Federal Reserve Bank of St. Louis.
JOEL W. JOHNSON: born 1943, Director since 1999. Mr. Johnson is Chairman,
President and Chief Executive Officer of Hormel Foods Corporation, Austin,
Minnesota, a meat and food processing company. Mr. Johnson joined Hormel in 1991
as Executive Vice President, Sales and Marketing. He was elected President in
1992 and assumed the title of Chief Executive Officer in 1993. He was elected
Chairman of the Board in 1995. Mr. Johnson is a Director of Hormel Foods
Corporation, Ecolab, Inc., Meredith Corporation, the American Meat Institute and
the Grocery Manufacturers of America.
SHELDON B. LUBAR: born 1929, Director since 1986. Mr. Lubar is Chairman of
Lubar & Co., a Milwaukee, Wisconsin, investment and management firm. Mr. Lubar
is also a Director of Grant Prideco, Inc., Massachusetts Mutual Life Insurance
Company, MGIC Investment Corporation, Jefferies Group, Inc., C2, Inc.,
Weatherford International Inc. and various private industrial companies.
DAVID B. O'MALEY: born 1946, Director since 1995. Mr. O'Maley is Chairman,
President and Chief Executive Officer of Ohio National Financial Services, Inc.,
and a number of its affiliates, including The Ohio National Life Insurance
Company. He is a Director of Ohio National Equity Sales Company and Ohio
National Equities, Inc., both NASD broker dealers. He is also a Director of The
Midland Company.
O'DELL M. OWENS, M.D.: born 1947, Director since 1991. Dr. Owens is Medical
Director of United Healthcare, Cincinnati, Ohio. Prior to that he was Director
of Reproductive Endocrinology and Infertility at The Christ Hospital, Cincinnati
Ohio.
WARREN R. STALEY: born 1942, Director since 1999. Mr. Staley is Chairman
and Chief Executive Officer of Cargill, Incorporated, Minneapolis, Minnesota, an
international marketer, processor and distributor of agricultural, food,
financial and industrial products. Mr. Staley joined Cargill in 1969 and was
elected President and Chief Operation Officer in 1998. He was named CEO in June
1999 and Chairman in August 2000. He also has held merchandising, administrative
and general management positions in corn milling in the United States and in
Europe, was head of Cargill in Argentina and was President of Worldwide Feed and
President of North America and Latin America for Cargill. He has been a director
of Cargill since 1995.
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CLASS II DIRECTORS
(TERMS EXPIRE IN 2003)
PETER H. COORS: born 1946, Director since 1996. Mr. Coors was named
Chairman of Coors Brewing Company, Golden, Colorado in May, 2000. Prior to that
he was Vice Chairman and Chief Executive Officer of Coors Brewing Company and
Vice President of Adolph Coors Company. Mr. Coors has been associated with Coors
Brewing Company since 1970 and has served in various capacities, including as
Director of Financial Planning, Director of Market Research, Vice President of
Sales and Marketing and President of Coors Distribution Company, and as
President of the brewing division of Adolph Coors Company. He serves as a
Director of Adolph Coors Company and Energy Corporation of America.
JOSHUA GREEN III: born 1936, Director since 1987. Mr. Green is Chairman of
the Board and Chief Executive Officer of Joshua Green Corporation, Seattle,
Washington, a family investment firm, and Chairman of its wholly owned
subsidiary, Sage Manufacturing Corporation, a manufacturer of fly-fishing rods
and reels. He also served as Chairman of the Board of U.S. Bank of Washington
from February 1988 until January 1997 and was Vice Chairman of the former U.S.
Bancorp of Portland, Oregon, from December 1987 until January 1993. Mr. Green is
a Director of Safeco Corporation and Port Blakely Tree Farms.
JERRY A. GRUNDHOFER: born 1944, Director since 1993. Mr. Grundhofer is
President and Chief Executive Officer of the Corporation and Chairman,
President, and Chief Executive Officer of U.S. Bank National Association and
Firstar Bank, N.A. and has served the Corporation through its predecessors,
Firstar Corporation and Star Banc Corporation in that capacity since 1993. Mr.
Grundhofer is also a Director of Ecolab, Inc., The Midland Company, Ohio
National Financial Services, Inc. and The Ohio National Life Insurance Company.
ROGER L. HOWE: born 1935, Director since 1985. Mr. Howe, prior to his
retirement September 1, 1997, was Chairman of the Board of U.S. Precision Lens,
Inc. Mr. Howe is also a Director of Cintas Corporation and Converges
Corporation.
FRANK LYON, JR.: born 1941, Director since 1995. Mr. Lyon is President of
Wingmead, an agricultural concern and duck habitat.
DANIEL F. McKEITHAN, JR.: born 1935, Director since 1977. Mr. McKeithan is
President and Chief Executive Officer of Tamarack Petroleum Company, Inc., an
operator of oil and gas wells and President of Active Investor Management, Inc.,
a manager of oil and gas wells. Mr. McKeithan is also a Director of Marcus
Corporation and a Trustee of Northwestern Mutual Life Insurance Company.
S. WALTER RICHEY: born 1935, Director since 1990. Mr. Richey is the former
Chairman and Chief Executive Officer of Meritex, Inc., Roseville, Minnesota, a
company involved in real estate management and development and warehousing. Mr.
Richey was with Meritex, Inc. (and its predecessor company) from 1973 until
1998. He serves as a Director of Donaldson Company, Inc.
PATRICK T. STOKES: born 1942, Director since 1992. Mr. Stokes is Senior
Executive Vice President of Anheuser-Busch Companies and President and Chief
Executive Officer of Anheuser-Busch, Inc., the Companies' brewing subsidiary. He
is a member of the Board of Directors of Anheuser-Busch Companies.
JOHN J. STOLLENWERK: born 1940, Director since 1998. Mr. Stollenwerk is
President and Chief Executive Officer of Allen-Edmonds Shoe Corporation. He is a
director of Badger Meter, Inc. and Koss Corporation and a Trustee of
Northwestern Mutual Life Insurance Company.
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CLASS III DIRECTORS
(NOMINEES FOR TERMS EXPIRE IN 2004)
ARTHUR D. COLLINS, JR.: born 1947, Director since 1996. Mr. Collins is
President and Chief Operating Officer of Medtronic, Inc., Minneapolis,
Minnesota, a leading medical device and technology company. Mr. Collins joined
Medtronic in 1992. He was elected to his present position in 1996 and previously
served as Chief Operating Officer, Corporate Executive Vice President and
President of Medtronic International. He serves as a Director of Medtronic,
Inc., Cargill, Inc., and TENNANT Company.
JOHN C. DANNEMILLER: born 1938, Director since 1990. Mr. Dannemiller
retired as Chairman of Applied Industrial Technologies, formerly known as
Bearings, Inc., in October 2000. Mr. Dannemiller is also a Director of Lamson &
Sessions and Pentacon, Inc.
VICTORIA BUYNISKI GLUCKMAN: born 1951, Director since 1991. Ms. Buyniski
Gluckman is Founder, President and Chief Executive Officer of United Medical
Resources, Inc. Ms. Buyniski Gluckman is also a Director of The Health Alliance,
Ohio National Financial Services, Inc. and The Ohio National Life Insurance
Company.
JOHN F. GRUNDHOFER: born 1939, Director since 1990. Mr. Grundhofer is
Chairman of the Corporation. He served as Chief Executive Officer from 1990
until February 27, 2001. He served as President from 1990 until July, 1999, and
reassumed that position from August, 2000 until February, 2001. He served as
Chairman from 1990 until the merger of U.S. Bancorp and First Bank System in
1997, and reassumed the position of Chairman in January, 1999. Prior to joining
the Corporation, Mr. Grundhofer was Vice Chairman and Senior Executive Officer
for Southern California with Wells Fargo Bank, N.A. In addition to serving as a
Director of the Company, Mr. Grundhofer is also a Director of Minnesota Life
Insurance Company and Donaldson Company, Inc.
DELBERT W. JOHNSON: born 1939, Director since 1994. Mr. Johnson is Vice
President of Safeguard Scientifics, Inc., Wayne, Pennsylvania, a diversified
information technology company that develops, operates and manages emerging
growth information technology companies. Prior to February 1, 2000, he was
Chairman and Chief Executive officer of Pioneer Metal Finishing, Minneapolis,
Minnesota, a division of Safeguard Scientifics and one of the largest metal
finishing companies in the United States. He joined Pioneer Metal Finishing in
1965 and was elected Chairman and Chief Executive Officer in 1978. From 1987
through 1993, Mr. Johnson served on the Board of Directors of the Federal
Reserve Bank of Minneapolis and, in 1989, was named Chairman. In 1990, he was
selected as Vice Chairman of the Federal Reserve Board Conference of Chairmen
and in 1990 became Chairman. He serves as a Director of Ault Inc., Safeguard
Scientifics, Inc. and CompuCom Systems, Inc.
JERRY W. LEVIN: born 1944, Director since 1995. Mr. Levin is Chairman and
Chief Executive Officer of Sunbeam Corporation, Boca Raton, Florida, a leading
consumer products company. Prior to joining Sunbeam in June 1998, Mr. Levin was
Chairman and Chief Executive Officer of The Coleman Company, Inc., Wichita,
Kansas, a manufacturer and marketer of outdoor recreational products, from
February 1997 until March 1998. He served as Chief Executive Officer of Revlon,
Inc., New York, New York, a maker of cosmetics and personal care and
professional products, from 1992 until January 1997. He was President of Revlon
from 1991 to 1992. Prior to that, Mr. Levin was Chairman of Coleman Holdings,
Inc., the parent of The Coleman Company from 1989 to 1991. Before joining
Coleman in 1989, Mr. Levin served in a number of senior executive positions with
The Pillsbury Company since 1974. Mr. Levin is a Director of Sunbeam
Corporation, Revlon, Inc. and Ecolab, Inc.
THOMAS E. PETRY: born 1939, Director since 1987. Mr. Petry retired in 1998
as Chairman and Chief Executive Officer of Eagle-Picher Industries, Inc. Mr.
Petry is also a Director of CINergy, Wm. Powell Co., Union Central Life
Insurance Company.
RICHARD G. REITEN: born 1939, Director since 1998. Mr. Reiten is Chairman,
President and Chief Executive Officer of Northwest Natural Gas Company,
Portland, Oregon. Mr. Reiten joined Northwest Natural in 1996. He was elected to
his present position in 1997 and previously served as Chief Operating Officer.
Mr. Reiten also has served as President and Chief Operating Officer of Portland
General Electric
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Company and as President of Portland General Corporation. He serves as a
Director of Northwest Natural, ESCO, Inc. Regence BlueCross BlueShield of
Oregon, The Regence Group and AEGIS Ltd. He is also a member of the Board of the
American Gas Association.
Dates listed for the nominees and continuing Directors include service as
Directors of predecessor holding companies to the Corporation.
PROPOSAL TO APPROVE THE U.S. BANCORP EXECUTIVE INCENTIVE PLAN
APPROVAL OF THE EXECUTIVE INCENTIVE PLAN
REASONS FOR APPROVAL AND VOTE REQUIRED
On February 27, 2001, our Board of Directors adopted the Executive
Incentive Plan (which we call the "Incentive Plan" in this proxy statement),
subject to approval by our shareholders. The Incentive Plan is an annual bonus
plan designed to provide selected executives with incentive compensation based
upon the achievement of objective performance goals. The purpose of the
Incentive Plan is to advance the interests of U.S. Bancorp and our shareholders
by attracting and retaining key senior executives and by encouraging these
executives to contribute to the continued success and growth of our business.
The Incentive Plan is being submitted for shareholder approval in order to
permit all compensation paid by U.S. Bancorp under the Incentive Plan to be tax
deductible. Under Section 162(m) of the Code, the allowable deduction for
compensation paid or accrued with respect to the chief executive officer and
each of the four other most highly compensated executive officers of a publicly
held corporation is limited to $1,000,000 per fiscal year. Some types of
compensation are exempted from this deduction limitation, including "qualified
performance-based compensation," as defined in Section 162(m) of the Code and
related regulations. The Incentive Plan is designed so that amounts awarded
under it can qualify as "qualified performance-based compensation" for purposes
of Section 162(m). The availability of the Section 162(m) exemption for benefits
that may be paid under the Incentive Plan for performance in the fiscal year
ending December 31, 2001 is conditioned upon shareholder approval of the
Incentive Plan.
Approval of the Incentive Plan requires the affirmative vote of the holders
of a majority of the shares of our Common Stock present in person or represented
by proxy at the Annual Meeting and entitled to vote.
SUMMARY OF THE INCENTIVE PLAN
The following summary describes certain significant terms of the Incentive
Plan. The full text of the Incentive Plan is set forth as Appendix A to this
proxy statement. Because the summary does not cover all of the provisions of the
Incentive Plan, you are encouraged to read the copy of the Incentive Plan
attached.
Administration. The Incentive Plan provides that it shall be administered
by the compensation committee of our Board of Directors. The compensation
committee has full power and authority, subject to the provisions of the
Incentive Plan, to (a) establish and amend such rules and regulations as are
necessary for the proper administration of the Incentive Plan, (b) construe,
interpret and administer the Incentive Plan and any or agreement relating to the
Incentive Plan and (c) make all other determinations and take all other actions
necessary for the administration of the Incentive Plan.
The compensation committee may amend the Incentive Plan prospectively at
any time for any reason. Also, the compensation committee may terminate or
curtail the benefits of the Incentive Plan to any participant.
Eligibility; Designation of Participants. Any executive officer of U.S.
Bancorp who also is an "officer" within the meaning of Section 16(a) of the
Exchange Act is eligible to participate in the Incentive Plan, if the executive
officer is designated as a participant by the compensation committee. We
currently have 12 executive officers who are considered to be "officers" within
the meaning of Section 16(a) of the Exchange Act. The Incentive Plan provides
that, on or before the 90th day of each fiscal year, the compensation committee
shall designate all participants in the Incentive Plan for the year.
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Determination of Awards. Under the Incentive Plan, at the time the
compensation committee designates the participants in the Incentive Plan, the
compensation committee will also establish for each participant for the fiscal
year one or more "Performance Thresholds" and a "Target Award." The Target Award
for each participant will be a percentage determined by the compensation
committee, which percentage may be greater or lesser than 100%. Performance
Thresholds are objective goals relating to U.S. Bancorp's Earnings per Share,
and will include a minimum Earnings per Share threshold. "Earnings per Share"
means U.S. Bancorp's earnings per share computed in accordance with generally
accepted accounting principles as reported in our consolidated financial
statements for the applicable year, adjusted in the same manner as Operating
Earnings (as defined below).
Unless the minimum Earnings per Share threshold is achieved by U.S. Bancorp
for the fiscal year, no participant will receive any payment under the Incentive
Plan. If the minimum threshold level is reached, each participant in the
Incentive Plan will receive a bonus payment for the year in an amount determined
by the committee subject to the terms of the Incentive Plan described below.
Under the Incentive Plan, the bonus payment received by any participant
will be an amount not greater than (a) the participant's annualized base salary,
as of the last day of the year with respect to which bonus payments are being
made, multiplied by (b) the participant's Target Award for that year. However,
if U.S. Bancorp's Earnings per Share is equal to or greater than a designated
Performance Threshold, then the participant will be entitled to receive a larger
bonus payment which in no event shall exceed 0.2% of U.S. Bancorp's Operating
Earnings for that year (as defined below).
In addition, even if U.S. Bancorp's Earnings per Share equals or exceeds a
designated Performance Threshold for a given year, the compensation committee
has the discretion to reduce the amount any bonus payment otherwise payable to
any participant under the Incentive Plan. In determining whether payments to any
participant in the Incentive Plan will be reduced, the compensation committee
will consider such financial and individual performance factors as it determines
to be appropriate.
For purposes of the Incentive Plan, "Operating Earnings" means our net
income computed in accordance with generally accepted accounting principles as
reported in our consolidated financial statements for the applicable year,
adjusted to eliminate (i) the cumulative effect of changes in generally accepted
accounting principles, (ii) gains and losses from discontinued operations, (iii)
extraordinary gains and losses and (iv) any other unusual or nonrecurring gains
or losses that are separately identified and quantified in our financial
statements, including merger-related charges.
Based on U.S. Bancorp's Operating Earnings of $3,106,920,000 in fiscal
2000, if the Incentive Plan had been in effect in fiscal 2000, the maximum bonus
payable under the Incentive plan would have been $6,213,840.
Employment Termination. Except as otherwise determined by the compensation
committee, no bonus payment under the Incentive Plan with respect to any year
shall be paid or owed to a participant whose employment terminates prior to the
last day of that year.
Form of Awards. Payments to participants in the Incentive Plan will be
made in cash or in U.S. Bancorp Common Stock after the completion of the fiscal
year and after the compensation committee has made the necessary determinations
under the Incentive Plan. Payments are also made subject to applicable elections
under any deferred compensation plans of U.S. Bancorp.
Transferability. Participants and their beneficiaries do not have the
right to transfer or assign any payments to be made under the Incentive Plan.
Tax Obligations. The compensation committee has the authority to establish
any policy to ensure that all federal, state and local taxes are withheld or
collected from each participant in the Incentive Plan.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE
THE INCENTIVE PLAN. PROXIES WILL BE VOTED FOR THE PROPOSAL UNLESS OTHERWISE
SPECIFIED.
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PROPOSAL TO APPROVE THE U.S. BANCORP 2001 STOCK INCENTIVE PLAN
APPROVAL OF THE 2001 STOCK INCENTIVE PLAN
REASONS FOR APPROVAL AND VOTE REQUIRED
On February 27, 2001, our Board of Directors adopted the 2001 Stock
Incentive Plan (which we call the "Stock Plan" in this proxy statement), subject
to approval by our shareholders. The purpose of the Stock Plan is to aid in
attracting and retaining employees, management, other personnel and non-employee
directors capable of assuring our future success, to offer these individuals
incentives to put forth maximum efforts for the success of our business and to
afford them an opportunity to acquire a proprietary interest in U.S. Bancorp.
The Stock Plan authorizes the grant of stock options and several other
types of stock-based awards. The Board of Directors believes that stock options
and other stock-based awards have been, and will continue to be, a very
important factor in attracting and retaining talented employees and non-employee
directors.
In addition, the Board of Directors believes that stock-based compensation
aligns the interests of our management and non-employee directors with the
interests of our shareholders, and that we should encourage management and
non-employee directors to own equity in U.S. Bancorp. Stock incentive awards
enhance shareholder value by increasing our employees' loyalty to U.S. Bancorp
and providing increased motivation for them to contribute to our future success.
Approval of the Stock Plan requires the affirmative vote of the holders of
a majority of the shares of our Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote.
SUMMARY OF THE STOCK PLAN
The following summary describes certain significant terms of the Stock
Plan. The full text of the Stock Plan is set forth as Appendix B to this proxy
statement. Because the summary does not cover all of the provisions of the Stock
Plan, you are encouraged to read the copy of the Stock Plan attached.
Shares Authorized. The Stock Plan will authorize the issuance of an
aggregate of 100,000,000 shares of our Common Stock. Not more than 10,000,000
shares will be available for granting any types of awards other than stock
options and stock appreciation rights. The total number of shares authorized for
issuance under the Stock Plan represent 5.25% of the shares of our Common Stock
issued and outstanding on March 9, 2001. The closing price per share of our
Common Stock on such date, as reported by The New York Stock Exchange (the
"NYSE"), was $23.02.
If any shares of Common Stock subject to an award under the Stock Plan or
to which an award relates are not purchased or are forfeited, or if any award
terminates without the delivery of shares or other consideration, the shares
previously used for the awards will be available for future awards under the
Stock Plan. In addition, if any shares are delivered by a Stock Plan participant
as payment to U.S. Bancorp of the purchase price relating to an award (or
delivered to pay the participant's tax withholding obligations), then only the
number of shares issued net of the shares tendered shall be deemed issued for
purposes of determining the maximum number of shares available for granting of
future awards under the Stock Plan.
Eligibility. Any employee, officer, director, consultant (including any
member of a regional advisory board of U.S. Bancorp or our affiliates) or
independent contractor providing services to U.S. Bancorp or any of our
affiliates is eligible to receive awards under the Stock Plan. We estimate that
approximately 50,000 employees will be eligible to participate in the Stock Plan
during 2001.
Plan Administration. The Stock Plan will be administered by a committee of
our Board of Directors composed of a number of independent directors. The
committee will have the authority to establish rules for the administration of
the Stock Plan, to select the individuals to whom awards are granted, to
determine the types of awards to be granted and the number of shares of Common
Stock covered by the awards, and to set the vesting and other terms and
conditions of awards.
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The committee has the authority to determine whether the payment of any
amounts received under any award may be deferred for federal income tax
purposes. The committee may accelerate the vesting of awards. However, the Stock
Plan limits the committee's discretion to accelerate the exercisability of
options or the lapse of restrictions on restricted stock and restricted stock
units to accelerations relating to a change in control, death, disability or
certain types of termination of employment.
The committee may delegate to one or more officers who are also directors
of U.S. Bancorp the right to grant awards with respect to individuals who are
not subject to Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
Types and Terms of Awards. The Stock Plan will permit the granting of (a)
stock options, including "incentive stock options" meeting the requirements of
Section 422 of the Internal Revenue Code of 1986 (the "Code"), and "nonqualified
stock options" that do not meet such requirements, (b) stock appreciation
rights, or "SARs," (c) restricted stock and restricted stock units, (d)
performance awards and (e) other awards valued in whole or in part by reference
to or otherwise based upon our Common Stock (which we refer to in this proxy
statement as "other stock-based awards"). Awards may be granted for no cash
consideration or for any cash or other consideration as may be determined by the
committee or required by applicable law. Awards may provide that upon the grant
or exercise thereof the holder will receive shares of Common Stock, cash or any
combination thereof, as the committee determines.
The exercise price per share under any stock option, the grant price of any
SAR, and the purchase price of any security that may be purchased under any
other stock-based award will not be less than 100% of the fair market value of
our Common Stock on the date of grant. Awards granted under the Stock Plan may
not have a term longer than 10 years. No person may be granted any award or
awards, the value of which is based solely on an increase in the value of our
Common Stock after the date of grant, for more than 5,000,000 shares of Common
Stock in the aggregate in any calendar year.
Stock Options. Options may be exercised by payment of the exercise price,
either in cash or, at the discretion of the committee, in whole or in part by
tendering previously owned shares of our Common Stock or other consideration
having a fair market value on the date of exercise equal to the exercise price.
Determinations of fair market value under the Stock Plan will be made in
accordance with methods and procedures established by the committee. For
purposes of the Stock Plan, the fair market value of our Common Stock on a given
date will be the closing price of the Common Stock as reported by the NYSE on
that date.
The Stock Plan provides that the committee may grant "reload" options,
either separately or together with another option. Pursuant to a reload option,
a participant who exercises an option by tendering shares of our Common Stock
(or who pays the amount of tax required to be withheld upon such exercise by
tendering shares) would be granted a new option to purchase a number of shares
not exceeding the number of shares tendered to exercise the option and pay
withholding taxes. The term of the reload option may not be longer than the term
of the original option.
SARs. The holder of an SAR will be entitled to receive the excess of the
fair market value (calculated as of the exercise date or, if the committee so
determines, as of any time during a specified period before or after the
exercise date) of a specified number of shares over the grant price of the SAR.
Restricted Stock and Restricted Stock Units. The holder of restricted
stock may have all of the rights of our shareholders (including the right to
vote the shares subject to the restricted stock award and to receive any
dividends with respect to the stock), or these rights may be restricted.
Restricted stock may not be transferred by the holder until the restrictions
established by the committee have lapsed.
Holders of restricted stock units will have the right, subject to any
restrictions imposed by the committee, to receive shares of Common Stock (or a
cash payment equal to the fair market value of the shares) at some future date.
Upon termination of the holder's employment during the restriction period,
restricted stock and restricted stock units are forfeited, unless the committee
determines otherwise.
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Subject to certain exceptions, the Stock Plan requires that time-based
vesting restrictions on awards of restricted stock and restricted stock units
lapse no sooner than three years following the date of grant, and that
performance-based vesting restrictions expire no sooner than one year following
the date of grant.
Performance Awards. Performance awards will provide their holders the
right to receive payments, in whole or in part, upon the achievement of goals
established by the committee during performance periods established by the
committee. A performance award granted under the Stock Plan may be denominated
or payable in cash, shares of Common Stock or restricted stock.
Other Stock-Based Awards. The committee also is authorized to grant other
types of stock-based awards. The Stock Plan provides that the committee shall
establish the terms and conditions of such awards.
Transferability. In general, no award and no right under any award granted
under the Stock Plan will be transferable by its recipient otherwise than by
will or by the laws of descent and distribution. However, awards (other than
incentive stock options) may be transferable pursuant to terms determined by the
committee as specifically provided in individual award agreements.
Withholding Obligations. Under the Stock Plan, the committee may permit
participants receiving or exercising awards to surrender previously owned shares
of Common Stock to U.S. Bancorp to satisfy federal, state or local withholding
tax obligations.
Adjustments. In the event of any dividend or other distribution,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of shares
of Common Stock or other securities of U.S. Bancorp, or other similar corporate
transaction affecting the shares of Common Stock, the committee will, in order
to prevent the diminution or enlargement of any benefits resulting from an award
under the Incentive Plan, adjust the number of shares subject to the award and
the exercise price and other provisions of the award. Except for these
adjustments, no option may be amended to reduce its initial exercise price, and
no option may be canceled and replaced with an option or options having a lower
exercise price.
Amendments. The Board of Directors may amend, alter or discontinue the
Stock Plan at any time. However, shareholder approval must be obtained for any
amendment that requires the approval of shareholders under any rules or
regulations of the NYSE, any other securities exchange or the National
Association of Securities Dealers, Inc. that are applicable to U.S. Bancorp.
Effective Date; Term. The Stock Plan will become effective immediately
upon approval by our shareholders. Awards under the Stock Plan will only be
granted during a 10-year period beginning on the effective date of the Stock
Plan. However, any award granted may extend beyond this 10-year period.
TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
generally applicable to awards under the Stock Plan.
Options and SARs. The grant of an option or SAR is not expected to result
in any taxable income for the recipient. The holder of an incentive stock option
generally will have no taxable income upon exercising the incentive stock option
(except that an alternative minimum tax liability may result), and U.S. Bancorp
will not be entitled to a tax deduction when an incentive stock option is
exercised.
Upon exercising a nonqualified stock option, the optionholder must
recognize ordinary income equal to the excess of the fair market value of the
shares of Common Stock acquired on the date of exercise over the exercise price,
and U.S. Bancorp will be entitled at that time to a tax deduction for the same
amount. Upon the exercise of an SAR, the amount of any cash received and the
fair market value on the exercise date of any shares of Common Stock received
are taxable to the recipient as ordinary income, and are deductible by U.S.
Bancorp.
The tax consequence to an optionholder upon a disposition of shares
acquired through the exercise of an option will depend on how long the shares
have been held and upon whether the shares were acquired by
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exercising an incentive stock option or by exercising a nonqualified stock
option or SAR. Generally, there will be no tax consequences to U.S. Bancorp in
connection with the disposition of shares acquired under an option. However,
U.S. Bancorp may be entitled to a tax deduction in the case of a disposition of
shares acquired under an incentive stock option before the applicable incentive
stock option holding periods set forth in the Code have been satisfied.
Other Awards. For other awards granted under the Stock Plan that are
payable in cash or shares of Common Stock and that are either transferable or
not subject to substantial risk of forfeiture, the holder of such an award must
recognize ordinary income equal to the excess of (a) the cash or the fair market
value of the shares of Common Stock received (determined as of the date of such
receipt) over (b) the amount (if any) paid for the shares of Common Stock by the
holder of the award. In this case, U.S. Bancorp will be entitled at that time to
a deduction for the same amount if and to the extent that amount satisfies
general rules concerning deductibility of compensation.
For an award that is payable in shares of Common Stock that are restricted
as to transferability and subject to substantial risk of forfeiture, unless a
special election is made pursuant to the Code, the holder of the award must
recognize ordinary income equal to the excess of (i) the fair market value of
the shares of Common Stock received (determined as of the first time the shares
became transferable or not subject to substantial risk of forfeiture, whichever
occurs earlier) over (ii) the amount (if any) paid for the shares of Common
Stock by the holder. In this case, U.S. Bancorp will be entitled at that time to
a tax deduction for the same amount if and to the extent that amount is
deductible.
Special Rules. Special rules may apply in the case of individuals subject
to Section 16(b) of the Exchange Act. In particular, unless a special election
is made pursuant to the Code, shares received pursuant to the exercise of a
stock option or SAR may be treated as restricted as to transferability and
subject to a substantial risk of forfeiture for a period of up to six months
after the date of exercise. Accordingly, the amount of any ordinary income
recognized, and the amount of U.S. Bancorp's tax deduction, are determined as of
the end of such period.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE
THE STOCK PLAN. PROXIES WILL BE VOTED FOR THE PROPOSAL UNLESS OTHERWISE
SPECIFIED.
EXECUTIVE COMPENSATION
In addition to disclosure with respect to "named executive officers" (as
defined for purposes of the SEC's proxy rules) and other executive officers of
old U.S. Bancorp and for the benefit of our shareholders in light of the
recently completed merger between old U.S. Bancorp and Firstar, the Compensation
Committee of the Corporation has elected for this year's annual proxy statement
to provide supplemental executive compensation information relating to certain
former executives of Firstar who are currently executive officers of the
Corporation. Accordingly, we have included a section on Executive Compensation,
one for Firstar Corporation as of December 31, 2000, as well as for old U.S.
Bancorp as of December 31, 2000.
FIRSTAR CORPORATION
EXECUTIVE COMPENSATION AND REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of Firstar is composed entirely of independent
outside directors and is responsible for setting corporate compensation policy.
The goal of the Corporation's compensation program is to attract, motivate,
reward and retain the management talent required to achieve corporate objectives
and increase shareholder value.
Base salaries of the Named Executives other than for Mr. Jerry Grundhofer
and Mr. Jacobsen were determined by the compensation committee using senior
management's recommendations. Salaries were
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decided based on individual performance and industry standards as determined
through external compensation studies and information from regional bank holding
companies.
The Compensation Committee administers the Executive Bonus Plan, the
purpose of which is to reward the achievement of corporate financial objectives
established in advance by the Compensation Committee. The performance measures
for determining plan awards include fully diluted earnings per share (EPS),
return on average equity (ROE), credit quality, and individual performance
against established objectives. The plan provides awards, however, only if the
corporation's EPS meets a specified threshold established by the Compensation
Committee and approved by the Board of Directors at the beginning of each plan
year. The opportunity for a bonus award for the Named Executives in 2000 ranged
from 21% to 200% of base salary depending on the individual's position, and the
amount by which actual EPS exceeded the threshold set. Bonuses were paid 75% in
cash and 25% in the corporation's common stock.
The Compensation Committee also administers the corporation's Stock
Incentive Plan, the purpose of which is to encourage long-term growth in the
Corporation's shareholder value. Stock options and restricted stock may be
granted pursuant to the plan, based on factors including corporate performance,
individual responsibilities and performance, grant guidelines based on the
Black-Scholes valuation method, and information from regional bank holding
companies and other competitive indices. 2000 options are subject to a vesting
schedule with full vesting four years from the date of grant.
Mr. Jerry Grundhofer's compensation was determined by the compensation
committee and approved by the board. His 2000 base salary of $925,000 as well as
his 2000 bonus opportunity and stock option grant were established under the
terms of his employment agreement with the Corporation, and are consistent with
industry standards as determined from a peer group of regional bank holding
companies. The peer group includes some of the financial holding companies in
the S & P Major Regional Bank Index listed in the Stock Performance Chart that
follows. His bonus was based on the same criteria as that described previously
for the other Executive Officers. He was granted options for 1,070,000 shares on
December 12, 2000, exercisable pursuant to a four year vesting schedule at a
grant price of $21.6875. Mr. Jacobsen's 2000 base salary and bonus opportunity
were established in accordance with his employment agreement with the
Corporation.
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS OF U.S. BANCORP
Thomas E. Petry, Chair Roger L. Howe Richard G. Reiten
Arthur D. Collins Jerry W. Levin S. Walter Richey
Peter H. Coors Frank Lyon, Jr. John J. Stollenwerk
J.P. Hayden, Jr. David B. O'Maley
Employment Agreements. The Corporation has entered into employment
agreements with Messrs. Jerry Grundhofer, Chenevich, Davis, Hasten and Moffett.
The agreements are designed to enhance the Corporation's ability to attract and
retain high caliber senior management at a time when mergers and acquisitions
are common in the financial services industry. In general, the agreements
provide for the payment of a lump sum severance benefit to the officer,
including a gross-up for federal excise tax purposes if necessary pursuant to
Section 280(g) of the Internal Revenue Code, plus the continuation of certain
medical and other benefits, in the event that the officer's employment is
terminated involuntarily by the Corporation, or voluntarily by the officer for
good reason. For Messrs. Chenevich, Davis, Hasten and Moffett, payment is
provided only in the event such termination occurs during a specified period
following a Change of Control of the Corporation. Change of Control is defined
in the document and includes certain mergers, sales of assets or tender offers.
Among other things, Mr. Jerry Grundhofer's agreement provides for severance
benefits of three times salary and bonus, and accelerated vesting of stock
awards, in the event of a qualified termination during his Employment Period
(either before of following a Change of Control). In addition, Mr. Jerry
Grundhofer's agreement provides for the granting of past employer service credit
for vesting purposes under the
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Corporation's Non-Qualified Retirement Plan upon three years of service. Mr.
Jerry Grundhofer's rights in the Non-Qualified Retirement Plan are fully vested.
Messrs. Chenevich, Davis, Hasten and Moffett have agreements which provide for
lump sum benefits of three times salary and bonus in the event of a qualified
termination following a Change of Control during the officer's protected period.
The Corporation also maintains an employment agreement with Mr. Jacobsen.
Among other things, Mr. Jacobsen's agreement provides that the sum of his base
salary and bonus shall be equal to that paid to the Corporation's CEO during the
Initial Period of employment. In addition, Mr. Jacobsen's agreement provides for
a retirement benefit under the Corporation's Non-Qualified Retirement Plan
commencing upon the conclusion of his Initial Period of employment and the
continuation of certain medical and other benefits.
Retention Agreements. The Corporation maintains a retention agreement with
Mr. Chenevich. The agreement generally provides for a lump sum payment in the
event that the executive remains in good standing in his position with the
Corporation for a specified period of time. The agreement provides for a payment
of $240,000 if Mr. Chenevich is actively employed with the Corporation on May 1,
2004.
These agreements remain in effect following the merger and no "Change of
Control" as defined in these agreements occurred as a result of the merger for
Firstar executives.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------- ------------------------------------ ALL OTHER
NAME AND SALARY BONUS OTHER STOCK OPTIONS LONG TERM COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($) AWARDS($) (#) INCENTIVE($) ($)
------------------ ---- ------- --------- -------- --------- --------- ------------ ------------
JERRY A. GRUNDHOFER...... 2000 942,788(3) 282,837 1,070,000 61,769(4)
President, Chief 1999 850,000 1,700,000 590,000 428,104
Executive Officer and 1998 800,000 1,000,000 1,140,000 12,900
Director of the
Corporation
RICHARD K. DAVIS......... 2000 407,692(3) 106,000 350,000 358,631(5)
Vice Chairman 1999 350,000 525,000 540,000 12,698
of the Corporation 1998 325,000 331,500 270,000 10,891
DAVID M. MOFFETT......... 2000 407,692(3) 106,000 350,000 489,899(6)
Vice Chairman 1999 350,000 525,000 540,000 42,248
and Chief Financial 1998 325,000 331,500 270,000 10,892
Officer of the
Corporation
JOSEPH E. HASTEN(7)...... 2000 343,784 74,531 340,000 712,122(8)
Vice Chairman of the
Corporation
WILLIAM L. CHENEVICH..... 2000 331,250(3) 74,531 300,000 33,758(9)
Vice Chairman 1999 207,692 675,000 585,000 350,000 64,144
of the Corporation
THOMAS H. JACOBSEN(7).... 2000 921,451 277,500 500,000 954,890(10)
---------------
(1) Includes amounts deferred at the direction of the executive officer
pursuant to the Firstar Corporation Thrift Savings 401(k) Plan and, if
applicable, the Firstar Corporation Deferred Compensation Plan.
(2) Reflects bonus earned during the fiscal year. In some instances all or a
portion of the bonus was paid during the next fiscal year.
(3) Includes one week's pay more than established base salary due to a pay
cycle change to semi-monthly.
(4) Includes $5,100 Corporate contribution to the Firstar Corporation Thrift
Savings 401(k) Plan and $3,487 split dollar life insurance premium. Split
dollar insurance premiums are based on the cost of equivalent group term
insurance. Also includes $2,351 in moving expenses; $18,600 in car
allowance; $24,532 in additional transportation-related expenses; and
$7,699 financial planning.
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(5) Includes $5,100 Corporate contribution to the Firstar Corporation Thrift
Savings 401(k) Plan and $726 split dollar life insurance premium. Split
dollar insurance premiums are based on the cost of equivalent group term
insurance. Also includes $350,000 retention bonus and; $2,805 financial
planning.
(6) Includes $5,100 Corporate contribution to the Firstar Corporation Thrift
Savings 401(k) Plan and $1,005 split dollar life insurance premium. Split
dollar insurance premiums are based on the cost of equivalent group term
insurance. Also includes $350,000 retention bonus; $126,062 club dues
(including gross-up for taxes); $3,782 in additional transportation-related
expenses; and $3,950 financial planning.
(7) Mr. Hasten and Mr. Jacobsen were not listed in the Summary Compensation
Table in 2000.
(8) Includes $7,650 Corporate contribution to the Mercantile 401(k) Plan and
$1,567 in group term life insurance. Also includes $681,083 in excise tax
payment; $19,922 in company-paid life insurance premiums; and $1,900
financial planning.
(9) Includes $124 split dollar life insurance premium, and $1,720 in group term
life insurance. Split dollar insurance premiums are based on the cost of
equivalent group term insurance. Also includes $30,301 in moving expenses;
and $1,613 financial planning.
(10) Includes $850,403 non-qualified retirement plan payment, $7,650 Corporate
contribution to the Mercantile 401(k) Plan, $96,287 in excise tax payment;
and $550 car allowance.
OPTION GRANTS IN LAST FISCAL YEAR
% OF TOTAL
OPTIONS
GRANTED TO
INDIVIDUAL GRANTS OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION GRANT DATE
NAME GRANTED(#) FISCAL YEAR BASE PRICE($) DATE PRESENT VALUE($)(1)
----------------- ---------- -------------- ------------- ---------- -------------------
Jerry A. Grundhofer......... 1,070,000 8.4 $21.6875 12/12/10 $7,650,500
Richard K. Davis............ 350,000 2.7 $21.6875 12/12/10 $2,502,500
David M. Moffett............ 350,000 2.7 $21.6875 12/12/10 $2,502,500
Joseph E. Hasten............ 40,000 0.3 $17.7500 03/14/10 $ 217,600
300,000 2.4 $21.6875 12/12/10 $2,145,000
William L. Chenevich........ 300,000 2.4 $21.6875 12/12/10 $2,145,000
Thomas H. Jacobsen.......... 500,000 3.9 $22.0000 09/20/07 $3,310,000
---------------
(1) Grant date option values calculated through use of the "Black Scholes"
pricing model. Values are calculated assuming risk free rates of return of
5.3% - 6.6%, dividend rate of 2.5%, volatility rates of 31% - 37%, quarterly
reinvestment of dividends, and an average term of five years. No adjustments
have been made for nontransferability or risk of forfeiture.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUE
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN THE
OPTIONS 12/31/00(#) MONEY OPTIONS 12/31/00($)
SHARES ACQUIRED VALUE REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
Jerry A. Grundhofer......... 98,000 1,993,967 4,124,151 2,382,500 57,666,629 2,501,563
Richard K. Davis............ -- -- 887,478 976,250 8,427,220 821,094
David M. Moffett............ 282,204 5,733,285 914,046 976,250 8,944,943 821,094
Joseph E. Hasten............ -- -- 85,459 392,500 409,866 716,875
William L. Chenevich........ -- -- 87,500 562,500 51,563 623,438
Thomas H. Jacobsen.......... 94,095 1,308,391 2,909,344 0 15,775,097 0
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Defined Benefit Pension Plans. Compensation in the form of payments from
the Corporation's noncontributory defined benefit pension plans is not included
in the compensation tables above. Substantially all employees, except those
formerly employed by Mercantile Bancorporation, Inc. (MBI) prior to its
acquisition, are eligible to receive benefits from this pension plan, which are
based upon average base salary during the five consecutive years of service in
which compensation was the highest and upon the employee's years of service,
with a normal retirement age of 65 and one year of plan participation. The 2001
total of annual payments as a life annuity with 120 guaranteed payments
(exclusive of Social Security) from the pension plan may be individually
estimated using the following information.
YEARS OF SERVICE
TABLE 1
CURRENT
ANNUAL
EARNINGS 10 15 20 25 30 35
--------- ------- ------- ------- --------- --------- ---------
125,000 15,247 22,871 30,495 38,118 45,742 53,366
150,000 18,657 27,985 37,313 46,642 55,970 65,298
175,000 22,066 33,099 44,132 55,166 66,199 77,232
200,000 25,476 38,214 50,951 63,689 76,427 89,165
225,000 28,885 43,328 57,770 72,213 86,656 101,098
250,000 32,295 48,442 64,589 80,736 96,884 113,031
300,000 39,114 58,670 78,227 97,784 117,341 136,897
400,000 52,751 79,127 105,503 131,878 158,254 184,629
600,000 80,027 120,041 160,054 200,068 240,081 280,095
800,000 107,303 160,954 214,606 268,257 321,908 375,560
1,000,000 134,579 201,868 269,157 336,446 403,736 471,025
1,400,000 189,130 283,695 378,260 472,825 567,390 661,955
1,800,000 243,681 365,522 487,363 609,203 731,044 852,885
2,200,000 298,233 447,349 596,465 745,582 894,698 1,043,814
2,500,000 339,146 508,719 678,293 847,866 1,017,439 1,187,012
2,800,000 380,060 570,090 760,120 950,150 1,140,180 1,330,210
3,000,000 407,336 611,003 814,671 1,018,339 1,222,007 1,425,675
The benefits in the shaded area do not reflect the $170,000 compensation
limit or the $126,000 annual benefit limit which apply under Federal law. The
actual benefits payable from the qualified pension plan will take into account
these limits, and will be adjusted accordingly as the limits are adjusted each
year. Also, these benefits were estimated using a five year average of
compensation determined from the "Current Annual Earnings" shown above.
For purposes of computing benefits under this plan, on December 31, 2000
Mr. Grundhofer had eight years of credited service; Mr. Davis, seven years; Mr.
Moffett, seven years; and Mr. Chenevich, two years.
The noncontributory defined benefit plan covering substantially all former
MBI employees, including Mr. Hasten and Mr. Jacobsen, is a career average plan
wherein benefits are computed as an account balance. The plan credits
participant's accounts with between 2% and 7% of base pay and bonus, depending
on the age of the participant, as well as interest credits on the participant's
accounts that vary based on 10-year Treasury bond rates, but are not less than
5.5% per year. Benefits may be paid as a lump sum after age 45 at termination or
retirement. Optional forms of payment are also available.
Non-Qualified Retirement Plan. Compensation in the form of payments from
the Corporation's noncontributory, non-qualified retirement plan, to the extent
it replaces income lost due to legislated limits on benefits and compensation,
is included in the above table. In addition, the plan provides non-qualified
supplemental account balances for former MBI employees subjected to the
legislated limits. Federal laws
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limit the pay that may be considered under the qualified plans. The
non-qualified retirement plan pays the additional pension benefits that would be
paid under the qualified plans if the federal pay and benefit limits were not in
effect. Mr. Jacobsen is eligible for an additional supplemental non-qualified
benefit under the terms of his employment agreement with the Corporation, equal
to $2.5 million per year in the form of a joint and 50% survivor annuity
commencing May 1, 2001, less an offset for qualified plan benefits. Certain
officers of the Corporation including Messrs. Jerry Grundhofer, Davis and
Moffett are eligible for augmented combined benefits under the qualified,
non-qualified and certain other prior employer plans based on a percentage of
final average compensation (base plus bonus). Eligibility for such augmented
benefits is determined by the Compensation Committee of the Board of Directors
based on individual performances and level of responsibility. The 2000 total of
annual payments as a life annuity with 120 guaranteed payments at the augmented
level (less benefits replaced due as a life annuity with 120 guaranteed payments
at the augmented level (less benefits replaced due to the application of
legislated limits) may be individually estimated using the following table.
TABLE 2
YEARS OF SERVICE
CURRENT
ANNUAL
EARNINGS 10 15 20 25 30 35
--------- --------- --------- ------- --------- --------- ---------
125,000 52,942 45,318 37,694 30,071 22,447 14,823
150,000 63,170 53,842 44,514 35,185 25,857 16,529
175,000 73,399 62,366 51,333 40,299 29,266 18,233
200,000 83,627 70,889 58,152 45,414 32,676 19,938
225,000 93,856 79,413 64,971 50,528 36,085 21,643
250,000 104,083 87,936 71,789 55,642 39,494 23,347
300,000 124,540 104,984 85,427 65,870 46,313 26,757
400,000 165,454 139,078 112,702 86,327 59,951 33,576
600,000 247,281 207,267 167,254 127,240 87,227 47,213
800,000 329,108 275,457 221,805 168,154 114,503 60,851
1,000,000 410,935 343,646 276,357 209,068 141,778 74,489
1,400,000 574,590 480,025 385,460 290,895 196,330 101,765
1,800,000 738,244 616,403 494,562 372,722 250,881 129,040
2,200,000 901,898 752,782 603,666 454,549 305,433 156,317
2,500,000 1,024,639 855,066 685,492 515,919 346,346 176,773
2,800,000 1,147,380 957,350 767,320 577,290 387,260 197,230
3,000,000 1,229,207 1,025,540 821,872 618,204 414,536 210,868
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Stock Performance Chart. The following chart compares the yearly
percentage change in the cumulative total shareholder return on Firstar's common
stock during the five years ended December 31, 2000 with the cumulative total
return on the Standard & Poor's Major Regional Banks' Index and the Standard &
Poor's Stock Index. The comparison assumes $100 was invested on January 1, 1995
in the Firstar's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
[PERFORMANCE GRAPH]
-------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
-------------------------------------------------------------------------------------------
Firstar Corp 100.00 158.29 301.81 496.18 344.42 390.21
S&P Maj Reg Bnks 100.00 136.61 205.49 227.07 194.70 247.77
S&P 500 100.00 122.94 163.95 210.80 255.16 231.93
OLD U.S. BANCORP
EXECUTIVE COMPENSATION AND REPORT OF THE COMPENSATION AND HUMAN RESOURCES
COMMITTEE
To Our Shareholders:
U.S. Bancorp's executive compensation philosophy emphasizes the Company's
commitment to long-term growth in shareholder value. In general:
- Total compensation will be targeted above the 50th percentile of a group
of comparable banking companies. Any premium in targeted pay over the
50th percentile will be primarily in the form of stock incentives.
- Base salaries will be targeted below the 50th percentile of the
comparator group to minimize fixed expense and emphasize the relationship
of pay to performance.
- Annual incentives will be targeted above the 50th percentile of the
comparator group such that the total of targeted base salary plus
targeted annual incentive will be equal to the 50th percentile.
- Long-term awards will be targeted above the 50th percentile of the
comparator group and will be primarily in the form of stock incentives.
Actual pay will be influenced by both competitive practice and the
Compensation and Human Resources Committee's assessment of performance against
several criteria, including measures of profitability, growth
19
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consistent with long-range strategy, risk management, the development and
involvement of people, a continuing commitment to cultural diversity, and
succession planning. No formal weightings have been assigned to these factors.
ROLE OF THE COMMITTEE
The Compensation and Human Resources Committee of the Board of Directors
(the "Committee") seeks to maintain executive compensation policies that are
consistent with the Company's strategic business objectives and values. In
pursuing this goal, the Committee is guided by the following objectives:
- A significant portion of senior executives' compensation shall be
comprised of long-term, at-risk pay to focus management on the long-term
interests of shareholders.
- Executives' total compensation programs should emphasize pay that is
dependent upon meeting performance goals to strengthen the relationship
between pay and performance.
- Components of pay that are at risk should contain equity-based pay
opportunities to align executives' interests with those of shareholders.
- Executive compensation should be competitive to attract, retain, and
encourage the development of exceptionally knowledgeable and experienced
executives upon whom, in large part, the success of the Company depends.
The Committee is comprised of eight non-employee Directors. The Committee
approves the design of executive compensation programs and assesses their
effectiveness in supporting the Company's compensation objectives. The Committee
also reviews and approves all salary arrangements and other remuneration for
executives, evaluates executive performance, and considers related matters.
The Company obtains competitive market data from an independent
compensation consultant comparing the Company's compensation practices to those
of a group of comparator companies. The Committee reviews and approves the
selection of companies used for compensation comparison purposes. This
comparator group is comprised of companies in the banking industry with which
the Company competes for executive talent and which are generally comparable
with respect to business activities. While the comparator group is comprised of
fewer companies than the peer group index under "Comparative Stock Performance"
below, all of the comparator group companies are included in that index. The
Committee believes that the companies used for compensation comparisons are a
representative cross-section of the companies included in the peer group index.
ELEMENTS OF THE COMPENSATION PROGRAM
The key elements of the Company's executive compensation program are base
salary, annual incentives, and long-term incentives. In determining each
component of compensation, the Committee considers an executive's total
compensation package. Consistent with the Company's policy of aligning pay with
performance, a greater portion of total compensation is placed at risk than the
total compensation typically placed at risk by companies in the comparator
group. In determining the total compensation package for executives, the
Committee has considered the performance of the Company's Common Stock; however,
no formal weighting has been assigned to this factor. "Comparative Stock
Performance" below includes the type of information considered by the Committee
in this regard.
Policy With Respect to Section 162(m)
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction for compensation paid to executive officers named in the Proxy
Statement to $1 million, unless the compensation is performance-based. The
Committee has carefully considered the potential impact of this tax code
provision on the Company and has concluded that it is in the Company's and
shareholders' best interest to qualify certain of the Company's stock-based,
long-term incentives as performance-based compensation within the meaning of the
Code and thereby preserve the full deductibility of such long-term incentive
payments; the Committee
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22
believes that such qualification has been achieved. The Company in 2000 also
requested and received shareholder approval of the Executive Incentive Plan in
order to qualify payments under the terms thereof as performance-based
compensation within the meaning of the Code, and the Company believes that
payments made under that plan will qualify.
Base Salaries
Each executive's base salary is initially determined according to
competitive pay practices, his or her level of responsibility, prior experience,
and breadth of knowledge, as well as internal equity issues. The Committee uses
its discretion rather than a formal weighting system to evaluate these factors
and to determine individual base salary levels. Thereafter, base salaries are
reviewed on an annual basis, and increases are made based on the Committee's
subjective assessment of each executive's performance, as well as the factors
described above. In 2000, base salaries generally were below the 50th percentile
market level of the comparator group. This is consistent with the Company's
strategic objectives.
Each year, Mr. John Grundhofer prepares a written self-appraisal of his
performance which is presented to the Board of Directors. Each Director is
invited to comment on Mr. John Grundhofer's report, and the Committee Chair
prepares a formal response which serves as Mr. John Grundhofer's appraisal. The
Committee determines Mr. John Grundhofer's salary for the coming year, and his
base salary may be adjusted accordingly. In determining Mr. John Grundhofer's
base salary adjustment, the Committee considers Mr. John Grundhofer's execution
of his overall responsibility for the Company's financial performance, long-
range strategy, capital allocation, and management selection, retention, and
succession. However, formal weightings have not been assigned to these factors.
Pursuant to his employment agreement, Mr. John Grundhofer received an
annualized base salary of $900,000 during 2000. Mr. John Grundhofer's base
salary was below the 50th percentile of the comparator group, consistent with
the Company's executive compensation philosophy. See "Employment Contracts for
the Named Executive Officers" below.
Annual Incentives
The Company provides annual incentives to executives under the Executive
Incentive Plan. Annual incentives are intended to promote the Company's
pay-for-performance philosophy by providing executives with annual cash bonus
opportunities for achieving corporate, business unit, and individual performance
goals. No formal weightings are assigned to these levels of performance.
Eligible executives are assigned target bonus levels determined as a
percentage of base salary. The Committee sets the target bonus awards at a level
which, together with the amount of base pay, provides total direct compensation
which is approximately equal to the 50th percentile level within the comparator
group for total direct compensation. The Committee considers the targets it
establishes to be achievable, but to require above-average performance from each
of the executives. Actual awards, if any, are determined by the Committee based
on its subjective assessment of each executive's business unit and individual
performance. The assessment focuses on achievement of profitability, growth,
risk management, and general management objectives; however, formal weightings
have not been assigned to these factors.
The Company's 2000 return on assets, return on equity, net interest rate
margin and efficiency ratio all ranked near the top of the peer group. However,
revenue growth and earnings per share fell short of internal business plan
targets. The Committee evaluated the company's performance, both with respect to
its internal plan, and as compared with similar financial services companies.
After taking the above factors into consideration, bonuses approved by the
Committee were below target levels.
Mr. John Grundhofer's targeted annual bonus is consistent with the
Company's policy of setting a targeted annual bonus sufficient to provide total
direct compensation which is approximately equal to the 50th percentile level of
the comparator group. As a result of the factors discussed above, Mr. John
Grundhofer's bonus, as reported in the Summary Compensation Table, was below
target, consistent with the goals of the Executive Incentive Plan.
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Long-Term Incentives
The Committee believes that long-term incentive compensation opportunities
should be dependent on stock-based measures to strengthen the alignment between
management's interests and those of the Company's shareholders. Furthermore, in
keeping with the policy of placing a significant portion of executives' total
pay at risk, the Committee sets targeted long-term incentive compensation above
the 50th percentile levels among the Company's compensation comparator
companies. The following describes the Company's practices relative to each
long-term incentive vehicle.
Stock Options. As set forth in the Summary Compensation Table, during 2000
one of the five named executive officers was granted an option to purchase
shares of the Company's Common Stock. Under the 1999 Stock Incentive Plan,
options are granted at an option price not less than the fair market value of
the Common Stock on the date of grant. Thus, stock options have value only if
the stock price appreciates from the date the options are granted. This design
focuses executives on the creation of shareholder value over the long term and
encourages equity ownership in the Company.
In determining the actual size of stock option awards, the Committee
considers the value of the stock on the date of grant, competitive practice, the
amount of options previously granted, individual contributions, and business
unit performance. However, formal weightings have not been assigned to these
factors.
Restricted Stock. The 1999 Stock Incentive Plan also provides for the
granting of restricted stock to executives. Four of the five named executive
officers received restricted stock awards in 2000 as set forth in the Summary
Compensation Table.
CONCLUSION
The Committee believes the Company's executive compensation policies and
programs effectively serve the interests of shareholders and the Company. The
Company's various pay vehicles are appropriately balanced to provide increased
motivation for executives to contribute to the Company's overall future success
and to enhance the Company's value for the shareholders' benefit.
Thomas E. Petry, Chairman
Arthur D. Collins
Peter H. Coors
J. P. Hayden, Jr.
Roger L. Howe
Jerry W. Levin
Frank Lyon, Jr.
David B. O'Maley
Richard G. Reiten
S. Walter Richey
John J. Stollenwerk
EMPLOYMENT CONTRACTS FOR THE NAMED EXECUTIVE OFFICERS
The Company has entered into employment agreements with Messrs. John
Grundhofer and Andrew Duff.
The term of Mr. John Grundhofer's agreement started on February 27, 2001
and ends on December 31, 2002. During the term of the employment agreement, Mr.
John Grundhofer will serve as the Chairman of the board of directors and as the
Co-Chairman of the Executive Committee of the board. Until the first annual
stockholder's meeting following Mr. Grundhofer's 65th birthday, he shall serve
as a member of the company's board.
During the term of the employment agreement, Mr. John Grundhofer will be
entitled to receive a base salary and an annual bonus equal to the base salary
and annual bonus paid to the company's chief executive officer, but in no event
will Mr. John Grundhofer's base salary be less than $900,000. On February 27,
2001 he
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was granted 100,000 shares of restricted common stock and a stock option to
acquire 2.4 million shares of common stock at an exercise price of $23.34, which
was equal to the fair market value of such common stock on the date of grant.
The option has a term of ten years. The restricted stock and stock option will
vest in four equal annual installments beginning on February 27, 2002, subject
to earlier vesting upon a change of control of the company and certain
terminations of Mr. John Grundhofer's employment, including his retirement.
Commencing upon the expiration of the term of the agreement, John Grundhofer
will be paid an annual retirement benefit of $2.92 million, less any benefits
payable under the tax-qualified and non-qualified retirement plans. Mr.
Grundhofer will also be entitled to participate in the company's employee
benefit plans and programs and to receive the long-term disability, life
insurance and certain other payments provided pursuant to his prior agreement
with the company. The employment agreement also contains non-competition,
non-solicitation and confidentiality provisions that apply to Mr. John
Grundhofer while employed and during specified periods thereafter.
The employment agreement provides that, on a termination of Mr. John
Grundhofer's employment by the company other than for cause or disability, or by
him for good reason, he will be entitled to a payment consisting of:
- a pro rata annual bonus through the date of termination, based on the
highest annual bonus earned in the three years prior to the termination
date, plus
- the product of (a) the number of months from the date of termination
until December 31, 2002, divided by 12 and (b) the sum of his base salary
and annual bonus (based on the highest annual bonus earned in the three
years prior to the termination date).
Also, his restricted stock and stock options will vest immediately, and the
company will continue to provide him and his spouse with medical and dental
benefits for the remainder of their lives. If any amounts payable to Mr. John
Grundhofer under the employment agreement or otherwise would be subject to the
excise tax under section 4999 of the U.S. tax code, an additional payment will
be made so that after the payment of all income and excise taxes, Mr. John
Grundhofer will be in the same after-tax position as if no excise tax under
section 4999 had been imposed. However, if these additional payments (excluding
additional amounts payable due to the excise tax) do not exceed 110% of the
greatest amount that could be paid to Mr. John Grundhofer without requiring
payment of the excise tax, no additional payments will be made on account of the
excise tax, and instead, the payments otherwise due to him will be reduced as
necessary to prevent the application of the excise tax.
Under Mr. Duff's employment agreement, he will serve as President of U.S.
Bancorp Piper Jaffray Companies Inc., a subsidiary of the Company, for a period
of three years beginning May 1, 1998, and will receive a base salary and an
annual bonus determined on a basis consistent with that used to determine the
annual bonus to be paid to peer executives of U.S. Bancorp Piper Jaffray;
provided that, his base salary and annual bonus shall not be less than $1.2
million per year. (Mr. Duff became Chief Executive Officer of U.S. Bancorp Piper
Jaffray on January 1, 2000, and also serves as Vice Chairman of U.S. Bank,
Wealth Management and Capital Markets.) In the event that Mr. Duff's employment
is terminated by the Company without cause (as defined in the agreement) or for
reason of Mr. Duff's death, disability or terminal illness, Mr. Duff's agreement
provides for a lump sum payment equal to (i) the amount of Mr. Duff's minimum
annual compensation earned but not yet paid to him through the date of
termination, and (ii) the product of (x) the number of months remaining in Mr.
Duff's employment term divided by 12, and (y) Mr. Duff's minimum annual
compensation. In addition, a portion of Mr. Duff's restricted stock will vest
immediately upon termination and he will receive any other benefits required to
be paid or which he is eligible to receive through the date of termination.
The company has entered into individual change-in-control severance
agreements with Messrs. Cecere, Mitau and Frate. These agreements provide for
severance benefits following a change in control, if the executive's employment
is involuntarily terminated other than for "cause" (as defined in the
agreements) or if
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the executive voluntarily terminates his employment for "good reason" (as
defined in the agreements). Those severance benefits include:
- a payment equal to three times the sum of the executive's annual salary
plus average actual incentive pay for the three fiscal years preceding
the year in which the merger is announced;
- continuation of life, individual disability, medical and dental insurance
coverage for 36 months following the date of termination, subject to
certain conditions specified in the agreements;
- payment of the full amount of any long-term cash incentive award for any
plan periods then in progress;
- payment of the pro rata amount of any annual cash incentive award;
- credit for five additional years of service under the U.S. Bancorp
Non-Qualified Supplemental Executive Retirement Plan;
- three additional years of accruals under U.S. Bancorp's qualified or
non-qualified defined benefit plans; and
- individual outplacement counseling services.
Each of these change in control severance agreements also provides that, in
the event of a change in control of U.S. Bancorp, if an excise tax is payable
under section 4999 of the U.S. tax code because the payments and benefits
payable to a covered executive are deemed to constitute parachute payments
within the meaning of section 280G of the U.S. tax code, U.S. Bancorp will
provide the covered executive with an additional payment so that after the
payment of all income and excise taxes, the executive will be in the same
after-tax position he or she would have been in if no excise tax under section
4999 had been imposed.
The Company entered into a Severance Agreement and General Release, dated
October 6, 2000, with Philip G. Heasley, the Company's former President and
Chief Operating Officer, in connection with his departure from the Company.
Under the Severance Agreement, Mr. Heasley received his then-current salary
through November 30, 2000, after which time he received a monthly salary of
$10,000 until his last day of employment with the Company on January 1, 2001.
The Severance Agreement provides for Mr. Heasley to receive a lump sum payment
of $5,019,235 on November 30, 2000 and an additional payment of $3,522,084 on
March 2, 2001.
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SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer and the four other highest paid executive officers of the Company whose
salary and bonus paid by the Company in 2000 exceeded $100,000 (the "Named
Executive Officers"). Also included is a former executive officer who would have
been one of the four highest paid executives, except for his not being an
executive officer at year end.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------
AWARDS PAYOUTS
----------------------- ---------
LONG-
RESTRICTED SECURITIES TERM
OTHER ANNUAL STOCK UNDERLYING INCENTIVE ALL OTHER
NAME AND COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS($) ($) ($)(5) SARS(#) ($) ($)
------------------ ---- ---------- --------- ------------ ---------- ---------- --------- ------------
JOHN F. GRUNDHOFER........... 2000 900,000 1,500,000 173,436(3) 0 0 0 78,951(6)
Chairman of the Board and 1999 895,003 750,000 171,417(3) 0 2,427,936 0 68,025
Chief Executive Officer 1998 840,000 1,500,000 170,674(3) 0 695,264 0 127,958
ANDREW S. DUFF(1)............ 2000 350,000 825,000 666(4) 1,000,006 253,000 0 0
Vice Chairman 1999 202,500 1,645,000 666(4) 0 328,900 0 49,106
Wealth Management and 1998 130,000 1,000,000 0(4) 1,288,754 0 0 0
Capital Markets
ANDREW CECERE................ 2000 270,635 475,000 3,111(4) 1,000,006 0 0 8,562(7)
Vice Chairman and 1999 182,506 125,000 2,410(4) 0 221,240 0 8,400
Chief Financial Officer 1998 146,667 140,000 1,963(4) 0 132,878 0 8,721
LEE R. MITAU................. 2000 298,761 390,000 6,178(4) 500,003 0 0 10,656(7)
Executive Vice President,
Corporate 1999 283,343 160,000 6,289(4) 0 534,800 0 9,588
Development and General
Counsel 1998 270,833 260,000 5,870(4) 1,146,875 38,523 0 15,429
DANIEL J. FRATE(2)........... 2000 357,514 290,000 5,559(4) 1,000,006 0 0 8,972(7)
President, Payment Systems 1999 246,676 150,000 3,313(4) 610,000 370,128 0 8,766
and Retail Credit Cycle 1998 215,000 150,000 2,942(4) 0 122,957 0 14,720
PHILIP G. HEASLEY............ 2000 555,854 1,101,370 15,350(4) 0 0 0 3,967,305(8)
President and Chief
Operating 1999 491,683 400,000 11,560(4) 0 648,103 0 14,768
Officer 1998 450,000 650,000 10,902(4) 0 117,070 0 37,125
---------------
(1) Mr. Duff became an employee of the Company following the acquisition of
Piper Jaffray Companies Inc. on May 1, 1998. He also serves as Chief
Executive Officer of U.S. Bancorp Piper Jaffray, the Company's investment
banking subsidiary.
(2) Mr. Frate will be leaving the Company in April, 2001.
(3) Includes transportation-related expenses of $50,711 in 2000, $48,648 in
1999, and $55,198 in 1998, primarily related to providing personal security
for Mr. John Grundhofer.
(4) Perquisites that do not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus for a given Named Executive Officer have been
omitted.
(5) Determined by multiplying the market value of the Company's Common Stock on
the date of grant by the number of shares awarded. Recipients receive
dividends on, and have the right to vote, shares of restricted stock. The
Named Executive Officers held shares of restricted stock as of December 31,
2000 with market values as of such date as follows: Mr. John Grundhofer,
75,900 shares valued at $1,751,250; Mr. Duff, 96,346 shares valued at
$2,223,008; Mr. Cecere, 57,175 shares valued at $1,319,217; Mr. Mitau,
47,562 shares valued at $1,097,421; and Mr. Frate, 105,245 shares valued at
$2,428,342. Mr. Duff was granted 20,106 shares of restricted stock on May 1,
1998 and 19,065 shares on June 4, 1998, which shares vest on May 1, 2001 or
fully on his death, disability or terminal illness, or his termination
without cause. Messrs. Duff, Cecere, and Frate were each granted 57,175
shares of restricted stock on January 18, 2000, of which 11,435 vest in
three years after the date of grant, 11,436 vest in four years
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after the date of grant, and 34,304 vest in five years after the date of
grant, or fully on their death or their qualifying termination in
connection with a change in control or partially on their retirement or
disability, based on their months of service after the date of grant. Mr.
Mitau was granted 37,950 shares of restricted stock on February 17, 1998,
originally vesting in equal installments over four years. The 9,487
unvested shares remaining under this grant vested on February 27, 2001, the
effective date of the merger with Firstar. He was granted 28,588 shares of
restricted stock on January 18, 2000, of which 5,717 vest in three years
after the date of grant, 5,718 vest in four years after the date of grant,
and 17,153 vest in five years after the date of grant, or fully on his
death or his qualifying termination in connection with a change in control
or partially on his retirement or disability, based on his months of
service after the date of grant. Mr. Frate was granted 25,300 shares of
restricted stock on January 22, 1999, with an original vesting schedule of
5,060 in three years after the date of grant, 5,060 in four years, and
15,180 in five years after the date of grant. All these shares vested on
February 27, 2001, the effective date of the merger with Firstar.
(6) Includes (a) imputed income in the amount of $22,530 arising from premiums
paid by the Company with respect to life insurance for the benefit of Mr.
John Grundhofer; (b) $49,621 paid pursuant to the Company's flexible
compensation program (net of amounts used to purchase benefits), $10,500 of
which was applied to Mr. John Grundhofer's account in the Savings Plan and
$39,121 of which was paid in cash; and (c) a matching contribution made by
the Company to Mr. John Grundhofer's Savings Plan account in the amount of
$6,800.
(7) Includes (a) amounts paid pursuant to the Company's flexible compensation
program (net of amounts used to purchase benefits), as follows: Mr. Cecere,
$1,762 (all of which was applied to his account in the Savings Plan); Mr.
Mitau, $3,856 (all of which was applied to his account in the Savings Plan);
Mr. Frate, $2,172 (all of which was applied to his account in the Savings
Plan); (b) matching contributions made by the Company to Messrs. Cecere's,
Mitau's, and Frate's Savings Plan accounts in the amount of $6,800 each.
(8) Includes (a) $11,486 paid pursuant to the Company's flexible compensation
program (net of amounts used to purchase benefits), $10,500 of which was
applied to Mr. Heasley's account in the Savings Plan and $986 of which was
paid in cash; (b) $31,154 in accrued but unused vacation; (c) a matching
contribution made by the Company to Mr. Heasley's Savings Plan account in
the amount of $6,800 and (d) $3,917,865 in connection with Mr. Heasley's
termination of employment.
STOCK OPTIONS
The following tables summarize stock option grants and exercises during
2000 to or by the Named Executive Officers and the values of options granted
during 2000 and held by such persons at the end of 2000.
OPTIONS/SAR GRANTS IN YEAR ENDED DECEMBER 31, 2000
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
---------------------------------------------------- ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION TERM
NUMBER OF % OF TOTAL -------------------------------------
SECURITIES OPTIONS/SARS EXERCISE 5%($) 10%($)
UNDERLYING GRANTED TO OR BASE ----------------- -----------------
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION STOCK STOCK
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE PRICE VALUE PRICE VALUE
---- ------------ ------------ --------- ---------- ----- --------- ----- ---------
Andrew S. Duff......... 253,000(1) 2.5 17.49 1/18/10 28.49 2,783,000 45.37 7,053,640
---------------
(1) This option was granted January 18, 2000 and vests one-third each year for
three years. If Mr. Duff terminates employment due to disability or
retirement, the option remains in effect as if termination of employment had
not occurred. This option also becomes fully exercisable upon Mr. Duff's
death, or in certain circumstances following a change in control. The option
is nontransferable except to family members or family trusts or
partnerships, and contains a reload feature as follows: Optionees who are
active employees may tender previously acquired shares of the Company's
Common Stock in payment of the exercise price of a stock option and may
tender previously acquired shares or request the Company to
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withhold sufficient shares to pay the taxes arising from the exercise. The
Company will issue a reload stock option to purchase the number of shares
thus tendered and/or withheld. The reload option has an exercise price equal
to the closing price of the Common Stock on the date of exercise of the base
option, is first exercisable six months from such date and expires on the
scheduled expiration date of the base option. All reload options become
fully exercisable in certain circumstances upon a change in control of the
Company, and are nontransferable except to family members or family trusts
or partnerships.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
ACQUIRED OPTIONS/SARS AT THE-MONEY OPTIONS/SARS
ON VALUE 12/31/00(#) AT 12/31/00($)(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
John F. Grundhofer...................... 0 0 1,748,451 2,302,300 0 65,250
Andrew S. Duff.......................... 0 0 88,785 581,900 758,683 1,412,500
Andrew Cecere........................... 0 0 152,508 189,750 0 0
Lee R. Mitau............................ 0 0 223,536 379,500 7,341 0
Daniel J. Frate......................... 0 0 216,696 328,900 0 0
Philip G. Heasley....................... 0 0 171,553 632,500 0 0
---------------
(1) Based upon the difference between the per-share option exercise price and
the market value of the Common Stock at the applicable measurement date.
RETIREMENT PLANS
All of the Named Executive Officers participate in the Company's retirement
plans, the terms of which are summarized below. Under the terms of Mr. John
Grundhofer's employment agreement with the Company (described earlier), he will
receive an annual retirement benefit of $2.92 million less any benefits payable
under the Company's tax-qualified and non-qualified retirement plans described
below. Because of this guaranteed retirement amount, Mr. John Grundhofer's
specific retirement benefits under the following plans have not been identified.
Cash Balance Pension Plan
Effective July 1, 1986, the Company adopted a career average pay defined
benefit pension plan, now known as the "Cash Balance Pension Plan" (the "Cash
Balance Plan"). Essentially all full-time employees of the Company and its
subsidiaries are eligible to participate in the Cash Balance Plan, and as of
January 1, 2001, 25,371 employees were participating. Under the terms of the
Cash Balance Plan, a separate "account" is maintained for each participating
employee. The Cash Balance Plan provides for pay-based credits to the account of
each participant of 4% of the participant's eligible compensation, plus 4% of
the participant's eligible compensation in excess of the Social Security taxable
wage base for each year of qualifying service. For this purpose, eligible
compensation includes wages for federal tax withholding purposes, pre-tax
contributions to the Savings Plan and flexible spending accounts, and income
resulting from the vesting of restricted stock, but excludes income arising from
the exercise of stock options, reimbursement for expenses, expense allowances,
short-term and long-term disability payments, and imputed income items.
Investment credits are also determined for such accounts based on the
participant's investment election. In addition, the Cash Balance Plan provides
certain special additional credits for the accounts of certain eligible
participants who had at least five years of service as of January 1, 1986, and
had a total age plus years of service equal to 50 or greater. At the time of
normal or early retirement, the accumulated account of the participant is
converted into one of several available forms of lifetime annuities or is
distributed in a single lump sum to the participant. In the event of the death
of the participant, the account balance is payable to the participant's
survivors. Plan benefits become 100% vested after five years of service, subject
to accelerated vesting under certain circumstances in connection with a change
in control of the Company.
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Effective January 1, 1999, if it produces a greater benefit, participants
receive a benefit from the Cash Balance Plan based on an alternative minimum
benefit formula in lieu of the benefit based on their account. The minimum
benefit is up to two times the participant's final five-year average eligible
compensation, plus an additional two times final five-year average compensation
that exceeds the Social Security taxable wage base in the year the participant's
employment ends. For this purpose, eligible compensation is determined in the
same manner as described for the Cash Balance Plan. The full minimum benefit is
reduced for employees who terminate their employment before age 65, commence
their benefit before age 65 or complete less than 20 years of service. The
reduction is based on several factors, including age at retirement, years of
service at retirement and potential total years of service with the Company at
retirement. For employees of U.S. Bancorp Piper Jaffray Inc., a subsidiary of
the Company, years of service are counted from the date they entered the plan
(January 1, 1999 or later) while their total projected service is based on their
original hire date with U.S. Bancorp Piper Jaffray. For certain former
participants in the Retirement Plan of the former USB which old U.S. Bancorp
acquired in August, 1997 and the West One Bancorp Retirement Plan, which were
merged into the Cash Balance Plan on December 31, 1998, the formula uses a
multiple of three and one-half, instead of two. For such employees, the full
minimum benefit is reduced if the employee terminates his or her employment
before age 62, commences his or her benefit before age 65 or completes less than
35 years of service.
Defined Benefit Excess Plan
The Company maintains an unfunded deferred compensation plan known as the
Defined Benefit Excess Plan to provide retirement benefits that would have been
provided under the Cash Balance Plan but for the voluntary deferred of
compensation under a non-qualified deferred compensation plan and certain
limitations established under the Code and the Cash Balance Plan.
Supplemental Executive Retirement Plan
The Company's Supplemental Executive Retirement Plan (the "SERP") is
available to certain executives with not less than five years of service at the
time of termination of employment or death. The five-year service requirement
does not apply, however, under certain circumstances involving a change in
control of the Company. The SERP generally provides retirement benefits at age
65 equal to 55% of an executive's "Final Average Compensation" (except that,
pursuant to his employment agreement, Mr. Grundhofer is entitled to 57.5% of his
Final Average Compensation). Final Average Compensation is the average base
salary and annual incentive award during the executive's last three years of
employment. Such compensation is substantially similar to the comparable
compensation reflected in the Summary Compensation Table. Executives receive
credit for an additional five years of service at age 60 and may receive
retirement benefits after age 60 that are equal to the actuarial equivalent
present value of the retirement benefit that would be payable at age 65 (except
that, pursuant to his prior employment agreement, Mr. Grundhofer became fully
vested at age 60, with no actuarial or other reduction for retirement prior to
age 65 but after age 60, but with a reduction for commencement of benefits prior
to age 65). Payments under the SERP are reduced by other sources of retirement
income, including benefits under the Cash Balance Plan, the Defined Benefit
Excess Plan, a portion of Social Security benefits and estimated benefits
provided by other employers. Lesser benefits are available in the event of
termination prior to age 65. The SERP provides for payment of benefits in the
form of a single lump sum or an annuity. Under certain circumstances in
connection with a change in control of the Company, a participant who has not
yet begun to receive payment of benefits under the SERP may elect to receive a
distribution of the entire SERP benefit, subject to a 5% forfeiture of benefits.
The aggregate benefits payable under the SERP at age 65 to the Named
Executive Officers (other than Mr. Duff, who does not participate in the SERP)
will be based on the executive's Final Average Compensation during his last
three years of employment (unless the minimum benefit formula under the Cash
Balance Plan and Defined Benefit Excess Plan produces a greater benefit, as
described above). The table below shows estimated retirement benefits payable
under all retirement plans, based on a 55% SERP benefit in terms of a single
life annuity payable at age 65. As of December 31, 2000, Messrs. Cecere, Mitau
and Frate were credited with 15, 5 and 12 years of service under the SERP,
respectively, and had Final Average
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Compensation of $466,667, $572,639 and $468,750, respectively. Based upon a
number of assumptions, including retirement at age 65, the estimated value of
the annual annuity payment Messrs. Cecere, Mitau and Frate would be entitled to
receive upon retirement would be $970,059, $626,287 and $1,017,857 respectively.
Mr. Duff's projected retirement benefits are determined under the Cash Balance
Plan and Defined Benefit Excess Plan. Based upon a number of assumptions,
including retirement at age 65, the estimated value of the annual annuity
payment Mr. Duff would be entitled to receive upon retirement would be $714,000.
FINAL 3 YRS YEARS OF SERVICE
BASE + ---------------------------------------------------------------------
BONUS 10 15 20 25 30 35
----------- -------- -------- -------- ---------- ---------- ----------
$ 400,000 $117,063 $154,183 $179,463 $ 196,263 $ 207,103 $ 207,103
$ 500,000 $149,553 $195,953 $227,553 $ 248,553 $ 262,103 $ 262,103
$ 600,000 $182,043 $237,723 $275,643 $ 300,843 $ 317,103 $ 317,103
$ 700,000 $214,533 $279,493 $323,733 $ 353,133 $ 372,103 $ 372,103
$ 800,000 $247,023 $321,263 $371,823 $ 405,423 $ 427,103 $ 427,103
$ 900,000 $279,513 $363,033 $419,913 $ 457,713 $ 482,103 $ 482,103
$1,000,000 $312,003 $404,803 $468,003 $ 510,003 $ 537,103 $ 537,103
$1,100,000 $344,493 $446,573 $516,093 $ 562,293 $ 592,103 $ 592,103
$1,200,000 $376,983 $488,343 $564,183 $ 614,583 $ 647,103 $ 647,103
$1,300,000 $409,473 $530,113 $612,273 $ 666,873 $ 702,103 $ 702,103
$1,400,000 $441,963 $571,883 $660,363 $ 719,163 $ 757,103 $ 757,103
$1,500,000 $474,453 $613,653 $708,453 $ 771,453 $ 812,103 $ 812,103
$1,600,000 $506,943 $655,423 $756,543 $ 823,743 $ 867,103 $ 867,103
$1,700,000 $539,433 $697,193 $804,633 $ 876,033 $ 922,103 $ 922,103
$1,800,000 $571,923 $738,963 $852,723 $ 928,323 $ 977,103 $ 977,103
$1,900,000 $604,413 $780,733 $900,813 $ 980,613 $1,032,103 $1,032,103
$2,000,000 $636,903 $822,503 $948,903 $1,032,903 $1,087,103 $1,087,103
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COMPARATIVE STOCK PERFORMANCE
The chart below shows line graphs comparing the cumulative total
shareholder return on the Old U.S. Bancorp's Common Stock over a five-year
period with the cumulative total return on the Standard and Poor's 500 Stock
Index and the Keefe, Bruyette & Woods 50 Bank Index over the same periods,
assuming the investment of $100 in each on December 31, 1995 and the
reinvestment of all dividends. The Keefe, Bruyette & Woods 50 Bank Index is a
market capitalization-weighted total return index of the 50 largest U.S. banks,
including all money center and most major regional banks, published by Keefe,
Bruyette & Woods, Inc.
[PERFORMANCE GRAPH]
KBW 50 S&P 500 USB
------ ------- ---
1995 100.00 100.00 100.00
1996 141.00 123.00 141.00
1997 207.00 164.00 236.00
1998 224.00 211.00 229.00
1999 216.00 255.00 158.00
2000 259.00 232.00 201.00
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of the Corporation (the
"Committee") is responsible for assisting the Board in monitoring the integrity
of the financial statements of the Corporation, compliance by the Corporation
with legal and regulatory requirements, and the independence and performance of
the Corporation's internal and external auditors.
The consolidated financial statements of Firstar Corporation and of old
U.S. Bancorp for the year ended December 31, 2000 were audited by
PricewaterhouseCoopers LLP and Ernst & Young LLP, respectively. Audited
consolidated financial statements of the Corporation for the year ended December
31, 2000, to be presented on a combined restated basis, are not yet available.
As part of its activities, the Committee has:
1. Reviewed and discussed the audited financial statements of Firstar
Corporation and of old U.S. Bancorp with management;
2. Discussed with each of the independent auditing firms the matters
required to be discussed by Statement on Auditing Standards No. 61;
3. Received the written disclosures and letters from each of the
independent auditing firms required by Independence Standards Board
Standard No. 1; and
4. Discussed with each of the independent auditing firms the respective
auditor's independence.
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Based on the review and discussions referred to above, the Committee
recommended to the Board of Directors that the audited consolidated financial
statements of Firstar Corporation and of old U.S. Bancorp for the year ended
December 31, 2000 be included in applicable filings with the SEC on Form 8-K and
Form 10-K, respectively.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF U.S. BANCORP
Warren R. Staley, Chair Roger L. Howe Thomas E. Petry
Linda L. Ahlers Delbert W. Johnson Richard G. Reiten
Victoria Buyniski Gluckman Daniel F. McKeithan, Jr. John J. Stollenwerk
Joshua Green III O'Dell M. Owens, M.D.
AUDIT FEES
Fees for the most recent annual audit of Firstar's Corporation's
consolidated financial statements were $2.2 million, and all other fees paid to
Firstar's principal independent auditor for the year ended December 31, 2000
aggregated $3.1 million, including audit-related fees of $2.1 million,
tax-related fees of $0.3 million and nonaudit fees of $0.7 million. Fees for the
most recent annual audit of old U.S. Bancorp's consolidated financial statements
were $1.4 million and all other fees paid to old U.S. Bancorp's principal
independent auditor for the year ended December 31, 2000 aggregated $16.0
million, including audit-related fees of $7.0 million, tax-related fees of $7.1
million and nonaudit fees of $1.9 million. Audit-related services generally
include audits of the financial statements of pension and other employee benefit
plans, audits of the financial statements of certain subsidiary and affiliated
entities, internal audit services, reviews of internal controls not related to
the audit of the consolidated financial statements, due diligence assistance on
business acquisitions, and audit reports issued in connection with
capital-raising activities. Tax-related services include primarily tax
consulting and compliance.
The Audit Committee of the Board of Directors has considered whether the
provision of audit-related, tax-related and nonaudit services, fees for which
are disclosed above, is compatible with maintaining the principal accountants'
independence.
SHAREHOLDER PROPOSAL FOR ANNUAL ELECTION OF DIRECTORS
Mr. Gerald R. Armstrong, 910 Fifteenth Street, No. 754, Denver, Colorado
80202-2924, (303) 355-1199, the owner of 7,966 shares of Common Stock, has
advised the Company that he plans to introduce the following resolution at the
Annual Meeting:
"That the shareholders of U.S. Bancorp, assembled in person and by
proxy in an annual meeting, request that the Board of Directors take those
steps necessary to cause annual elections for all directors by providing
that at future elections in annual meetings, all directors be elected
annually and not by classes as is now provided and that on the expiration
of the present terms their subsequent elections also be on an annual
basis."
The reasons given by the shareholder for such resolution are as follows:
In last year's annual meeting, 266,276,695 shares were voted FOR this
resolution. This is 20,908,498 shares greater than shares voted "against"
which included all unmarked proxies. Our Board of Directors, however, has
failed to recognize this mandate from its owners.
Shareholders of COLORADO NATIONAL BANKSHARES, the former U.S. BANCORP,
BANK OF COMMERCE, WESTERN BANCORP and SCRIPPS FINANCIAL CORPORATION elected
all of their directors annually. Shareholders of U.S. BANCORP should not be
excepted.
In past meetings, the proponent noted that a consideration of a merger
was the voting rights and that Wells Fargo had one-year terms for its
directors. (Subsequently, Wells Fargo merged with Norwest which also had
one-year terms for its directors.)
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It is significant that the shareholders of Chase Manhattan received
one-year terms for their directors upon the merger with Chemical Bank.
Occidental Petroleum, Ameritech, Time-Warner, Lockheed-Martin,
Campbell Soups, Atlantic Richfield, Pacific Enterprises, Westinghouse, are
among many corporations replacing three year terms with the annual election
of all directors.
THE HOME DEPOT stated in its 2000 proxy statement supporting replacing
three-year terms with one-year terms for its directors:
"We believe that it is in the best interest of ... Stockholders to
eliminate the classified Board so that stockholders elect all directors
annually. The amendment ... will allow stockholders to review and express
their opinions on the performance of all directors each year. Because there
is no limit to the number of terms an individual may serve, the continuity
and stability of the Board's membership and our policies and long-term
strategic planning should not be affected."
These actions increased shareholder voting rights by 300% -- and, at no
cost to the shareholders.
The proponent believes the current system produces only a facade of
continuity which should be displaced; and accountability and performance be
substituted as the basis for re-election to our board of directors.
If you agree, please vote FOR this proposal. Your shares will be
automatically voted "against" it if your proxy is unmarked.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE FOREGOING
PROPOSAL FOR THE FOLLOWING REASONS:
In 1986, the shareholders of the Company decided, by a vote at the Annual
Meeting, to amend the Company's Certificate of Incorporation to divide the Board
of Directors into three classes, with approximately one-third of the Directors
elected each year for a three-year term. The Board continues to believe that a
"staggered" Board of Directors provides important benefits to both the Company
and its shareholders. The Board believes that the staggered election approach
facilitates continuity and stability of leadership and policy by helping ensure
that at any given time a majority of the Directors will have prior experience as
Directors of the Company and will be familiar with its business and operations.
This permits more effective long-term strategic planning. The Board believes
that the continuity and quality of leadership promoted by a staggered Board
helps create long-term value for the shareholders of the Company.
Additionally, the Board believes that the staggered election approach
affords the Company valuable protection against an inadequate unsolicited
proposal to take over the Company. In the event of a hostile takeover, the fact
that at least two shareholders' meetings generally will be required to effect a
change in control of the Board of Directors may encourage the person seeking to
obtain control of the Company to initiate arm's length discussions with
management and the Board. This will assist management and the Board in seeking
to assure that if a transaction is negotiated, it is on the most favorable terms
for the shareholders of the Company.
Approval of the proposal would not in itself declassify the Board of
Directors. Approval of the proposal would only serve as a request that the Board
of Directors take the necessary steps to end the staggered system of electing
Directors. Declassification of the Board would require an amendment to the
Company's Restated Certificate of Incorporation. The Company's Restated
Certificate of Incorporation requires the affirmative vote of 80% of the
outstanding shares of the Company's Common Stock to approve the amendment.
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The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present in person or represented by proxy at the meeting
and entitled to vote is necessary for approval of the shareholder proposal
regarding the annual election of all Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST APPROVAL OF THE PROPOSAL
REGARDING THE ANNUAL ELECTION OF ALL DIRECTORS. PROXIES WILL BE VOTED AGAINST
THE SHAREHOLDER PROPOSAL UNLESS OTHERWISE SPECIFIED.
COMPENSATION OF DIRECTORS
FIRSTAR DIRECTOR COMPENSATION
Directors of Firstar Corporation, except for Mr. Jerry A. Grundhofer,
received an annual retainer fee of $30,000 plus a fee of $1,500 for each Board
meeting attended and a fee of $1,000 for each Committee meeting attended.
Committee Chairpersons received an annual retainer fee of $5,000. Each Director
of Firstar Corporation, except for Mr. Jerry A. Grundhofer, received options to
purchase 15,100 shares of Firstar Corporation stock, subject to a four-year
vesting schedule.
Directors may choose to convert all or part of their compensation into
options to purchase Firstar stock issued pursuant to the Firstar Option Plan.
Directors who so elected received options based on market value at the date of
grant.
Directors may choose to defer all or part of their compensation pursuant to
the Firstar Deferred Compensation Plan. Participants in that plan may elect to
be credited with the investment return of Firstar stock or certain mutual funds.
OLD U.S. BANCORP DIRECTOR COMPENSATION
During 2000 Directors of old U.S. Bancorp who were not employees of the
Company ("Non-Employee Directors") received an annual retainer of $23,000 with
the exception of the Chair of the Audit Committee who received an annual
retainer of $24,000, plus all such Directors received $1,000 for each meeting of
the Board attended. In addition, Non-Employee Directors who were Committee
Chairs received $2,000 and Non-Employee Directors received $1,000 for each
Committee meeting attended.
During 2000 Directors were able to elect to use their Director compensation
to purchase shares of the Company's Common Stock through the Employee Stock
Purchase Plan upon substantially the same terms and conditions as applied to
employees. Directors were allowed to purchase shares of Common Stock with all or
any portion of their fees earned as a Director. The purchase price was the lower
of (a) 85% of the fair market value of the Company's Common Stock on the first
day of the purchase period, or (b) 85% of the fair market value of the Company's
Common Stock on the last day of the purchase period. On the last business day of
the purchase period, each participant received the number of shares of the
Company's Common Stock that could be purchased with the participant's
accumulated deductions at the established purchase price. Non-Employee Directors
were also offered the opportunity to defer all or a part of their Director
compensation in accordance with the terms of the Deferred Compensation Plan for
Directors. Under such plan, a Director was allowed to defer all retainer and
meeting fees until such time as the Director ceased to be a member of the Board.
Deferred amounts are credited with interest at a rate determined by the Company,
which is currently the monthly equivalent of the 120-month rolling average of
the 10-year Treasury Note, determined as of September 30 of the previous year.
Under the Company's 1999 Stock Incentive Plan, each Non-Employee Director
received an option to purchase 9,487 shares of the Company's Common Stock upon
first being elected to the Board of Directors, and an option to purchase 6,451
shares of the Company's Common Stock on the date of each annual meeting of
shareholders if such Director's term of office continued after such annual
meeting. Each option granted to a Non-Employee Director upon initial election to
the Board or as of the date of each annual meeting of shareholders was
exercisable in full as of the date of grant, has an exercise price per share
equal to the fair market value of a share of Common Stock as of the date of
grant, is nontransferable except to family members
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35
or family trusts or partnerships, and expires on the tenth anniversary of the
date of grant. Such options granted to Non-Employee Directors include provisions
entitling the optionee to a further option (a "reload option") if the optionee
exercises an option, in whole or in part, by surrendering other shares of the
Company's Common Stock or if shares of the Company's Common Stock are delivered
or withheld a payment of an amount representing income tax obligations in
connection with the exercise of an option, which reload options shall be for the
number of shares of the Company's Common Stock surrendered as part or all of the
exercise price plus the number of shares, if any, delivered or withheld as
payment of an amount representing income tax obligations.
The Company has a Director Retirement and Death Benefit Plan that provides
for payments to Non-Employee Directors after they cease to be Directors. In
January 1997, the Board of Directors determined to freeze benefits under this
plan for Directors then-serving and terminate the plan for new Directors, both
effective as of April 30, 1997. Plan benefits are payable to persons who have
completed 60 months of service as a Director (measured as provided in the plan).
Benefits accrue in the amount of the annual retainer in effect on the date a
Director's service terminates multiplied by the number of years of service, not
to exceed 10 years. Benefits are paid in annual installments over a 10-year
period. If a Director retires after reaching age 67 or after completion of 12
years of service, the Director receives lifetime payments not limited to 10
years calculated based on the annual retainer in effect on the date of
retirement. Due to the termination of this plan, benefits for eligible, current
Directors will be determined as if their service as Directors has terminated on
April 30, 1997 (except that additional service after such date may be considered
in determining the form of benefit to be paid). As a result, the benefits
payable to those Directors will be based on the annual retainer and each
Director's service as of April 30, 1997. A Director who retires after 12 years
of service, but who is not then 67, does not receive the first payment until age
67. In the event of the Director's death, a lump sum payment may be made. In the
event of certain types of changes in control of the Company, benefits payable
under the plan will be paid in a lump sum within 30 days thereof.
A portion of the cost of premiums incurred by Non-Employee Directors who
were former Directors of West One Bancorp (a company acquired by Old USB in
1995) for health care insurance coverage of such Directors and their dependents
will be subsidized or reimbursed by the Company upon request, provided that no
portion of such premiums is subsidized by any other employer. Reimbursement is
subject to the same conditions and limits as are applicable to active employees.
One Non-Employee Director received health care subsidies and related
reimbursements for income taxes on such subsidies during 2000.
CORPORATE GOVERNANCE INFORMATION
CURRENT BOARD COMMITTEES
Executive Committee: The Executive Committee has the authority to exercise
all powers of the Board of Directors between regularly scheduled board meetings
and acts as a credit committee. Members include:
Jerry A. Grundhofer, Co-Chair Delbert W. Johnson Richard G. Reiten
John F. Grundhofer, Co-Chair Sheldon B. Lubar S. Walter Richey
Arthur D. Collins Daniel F. McKeithan, Jr. Warren R. Staley
J.P. Hayden, Jr. David B. O'Maley Patrick T. Stokes
Roger L. Howe Thomas E. Petry
Audit Committee: The Audit Committee is responsible for overseeing the
work of PricewaterhouseCoopers LLP, the Corporation's outside independent
auditor for 2001. The Committee reviews recommendations on various matters made
by the outside auditors and action taken by management and the Corporation's
internal audit staff, and considers the scope of the audit and proposed fees.
The Board of Directors of the Corporation has adopted a written charter for the
Audit Committee. A copy of the charter is included as Appendix C to this proxy
statement. The members of the Audit Committee are independent, as
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such term is defined in the applicable sections of the New York Stock Exchange's
listing standards. Members include:
Warren R. Staley, Chair Roger L. Howe Thomas E. Petry
Linda L. Ahlers Delbert W. Johnson Richard G. Reiten
Victoria B. Buyniski Gluckman Daniel F. McKeithan, Jr. John J. Stollenwerk
Joshua Green, III O'dell M. Owens
Compensation Committee: The Compensation Committee sets policy for
compensation, reviews the recommendations of the Chief Executive Officer as to
compensation of officers, establishes the compensation of the Chief Executive
Officer and approves eligibility for benefits under the Corporation's employee
benefit plans. Members include:
Thomas E. Petry, Chair Roger L. Howe Richard G. Reiten
Arthur D. Collins Jerry W. Levin S. Walter Richey
Peter H. Coors Frank Lyon, Jr. John J. Stollenwerk
J.P. Hayden, Jr. David B. O'Maley
Community Outreach and Fair Lending Committee: The Community Outreach and
Fair Lending Committee is responsible for reviewing the Corporation's activities
with respect to community development and compliance with the Community
Reinvestment Act and fair lending regulations. Members include:
Peter H. Coors, Chair Joshua Green III Frank Lyon, Jr.
Linda L. Ahlers Thomas H. Jacobsen O'dell M. Owens
Victoria Buyniski Gluckman Delbert W. Johnson John J. Stollenwerk
John C. Dannemiller Joel W. Johnson
Governance Committee: The Governance Committee administers the affairs of
the Board of Directors, evaluates current Directors and nominates new directors.
Shareholders who wish to suggest Director nominees should contact the Committee
by mail at the Corporate Headquarters. Members include:
Sheldon B. Lubar, Chair John C. Dannemiller Jerry W. Levin
Peter H. Coors J.P. Hayden, Jr. Daniel F. McKeithan
Arthur D. Collins Joel W. Johnson Patrick T. Stokes
PRIOR FIRSTAR CORPORATION
The Board of Directors of Firstar Corporation held seven regular meetings
and one special meeting in 2000.
The Board of Directors of Firstar Corporation had an Executive Committee,
an Audit Committee, a Compensation Committee, a Community Outreach and Fair
Lending Committee and a Governance Committee.
The Executive Committee of the Corporation held ten meetings in 2000. The
Committee has the authority to exercise all powers of the Board of Directors
between regularly scheduled Board meetings.
The members of the Executive Committee of Firstar were: Messrs. Jerry
Grundhofer, Hayden, Howe, Jacobsen, Lubar, McKeithan, Petry and Stokes.
The Audit Committee of Firstar Corporation held five meetings in 2000 and
was responsible for the review of the work of PricewaterhouseCoopers LLP, the
Corporation's outside independent auditor for 2000. The Committee reviewed
recommendations on various matters made by the outside auditors and action taken
by management and the Corporation's internal auditor to implement these
recommendations. The Committee also considered the scope of the audit to be
performed for the Corporation and its subsidiaries and the proposed fees for
this work. The Committee recommended action to the Board of Directors of the
Corporation in connection with all the above matters.
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The members of the Audit Committee of Firstar were: Ms. Buyniski Gluckman,
and Messrs. Garvin, Hayden, Hladky, Howe, Petry, McKeithan, Schnuck, Stollenwerk
and Wirtz
The Compensation Committee of the Corporation held six meetings in 2000 and
set policy for compensation, reviewed the recommendations of the Chief Executive
Officer as to compensation of officers, established the compensation of the
Chief Executive Officer and approved eligibility for benefits under the
Corporation's non-qualified retirement plan. It also administered the
Corporation's Stock Incentive Plans. The members of the Compensation Committee
of Firstar were Messrs. Hayden, Howe, Lyon, O'Maley, Petry and Stollenwerk.
The Community Outreach and Fair Lending Committee of Firstar Corporation
held two meetings in 2000. The Committee was responsible for reviewing the
Corporation's activities with respect to community development and compliance
with the Community Reinvestment Act and fair lending regulations. The members of
the Community Outreach and Fair Lending Committee of Firstar were: Ms. Buyniski
Gluckman and Messrs. Dannemiller, Hladky, Lyon, Owens, Schnuck and Stollenwerk.
The Governance Committee of Firstar Corporation held three meetings in
2000. The Committee administered the affairs of the Board of Directors,
evaluated current Directors, and nominated new Directors. The members of the
Governance Committee were Messrs. Dannemiller, Hayden, Lubar, McKeithan and
Stokes.
All Directors of Firstar Corporation attended at least 75% of the aggregate
of the number of regular and special meetings of the Board of Directors held
during 2000 and all committees of the Board on which the Director served during
the 1999 calendar year.
OLD U.S. BANCORP
The Board of Directors of old U.S. Bancorp had six regular and two special
meetings in 2001.
The Board of Directors of old U.S. Bancorp had an Executive Committee, an
Audit committee, a Credit Policy and Community Responsibility Committee, a
Compensation and Human Resources Committee, a Finance Committee and a Governance
Committee.
The Executive Committee held two meetings in 2000. The Executive Committee
had the authority of the Board of Directors when the Board was not in session,
subject to limitations in the Bylaws and under Delaware law. The members of the
Executive Committee were Messrs. John Grundhofer, Collins, Coors, Delbert
Johnson, Levin, Phillips and Richey.
The Audit Committee held 6 meetings in 2000. The Audit Committee assisted
the Board with its responsibilities for external and internal audits, accounting
and financial reporting practices, determinations of adequate accounting
controls and reviewed financial information. The members of the Audit Committee
were Ms. Ahlers and Messrs. Coors, Green, Joel Johnson, Phillips, Redmond,
Reiten, Richey and Staley.
The Credit Policy and Community Responsibility Committee met four times in
2000. The Credit Policy and Community Responsibility Committee reviewed lending
and credit administration policies, practices and controls. It also monitored
lending and credit quality trends, examination reports and the adequacy of
allowance for credit losses. It also was responsible for policy and performance
under the Community Reinvestment Act. The members of the Credit Policy and
Community Responsibility Committee were: Ms. Ahlers and Messrs. Coors, Bettis,
Green, John Grundhofer, Delbert Johnson, Joel Johnson and Phillips.
The Compensation and Human Resources Committee held nine meetings in 2000.
It was responsible for executive management performance, compensation and
benefit and succession planning. It also recommended compensation for senior
management and adoption of employee compensation and benefit plans to the Board
and administered such plans. The members of the Compensation and Human Resources
Committee were: Messrs. Richey, Levin, Collins, Coors, Dryden, Delbert Johnson,
Phillips and Redmond.
The Finance Committee held five meetings in 2000. It was responsible for
reviewing, monitoring, and approving policies and procedures for capital
adequacy, dividends, interest rate sensibility, liquidity, the use of
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derivatives and the investment portfolio generally. The members of the Finance
committee were: Messrs. Collins, Reiten, Bettis, Green, John Grundhofer, Levin,
Richey and Staley.
The Governance Committee held four meetings in 2000. The Governance
Committee was responsible for corporate governance, including the Board review
process, recruitment of Directors, and committee charters. The members of the
Governance Committee were: Messrs. Collins, Delbert Johnson, Coors, John
Grundhofer, Phillips, Reiten, and Richey.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Several of the Directors of the Corporation and the entities with which
they are associated were customers of and had various transactions with the
Corporation's subsidiary banks and broker dealers in the ordinary course of
business during 2000. All loans, loan commitments and sales of notes included in
these transactions were made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with others and did not
involve more than the normal risk of collectability or present other unfavorable
features.
STOCK REPURCHASES
During 2000 and as part of its authorized stock repurchase program, the
Corporation purchased shares of its Common Stock held by certain executive
officers as follows: J.F. Grundhofer Trust: 66,780 shares on July 21, 2000, for
an aggregate amount of $973,875.
LOANS TO MANAGEMENT
Under the Corporation's stock option loan program, Directors and employees
holding stock options are eligible to receive loans from the Corporation to be
used for the exercise of stock options. Loans bear interest at the applicable
federal rate in effect at the time the loan is made. The following table lists
the outstanding balances of stock option loans as of December 31, 2000, which
are also the maximum amounts outstanding during 2000, to the Corporation's
Directors and executive officers.
John F. Grundhofer....................................... $ 250,000
Lee R. Mitau............................................. 175,000
R. Todd Firebaugh........................................ 349,000
Daniel C. Rohr........................................... 4,793,000
The Corporation also engaged in loan transactions with executive officers
solely to allow the executive officers to invest in the U.S. Bancorp Piper
Jaffray ECM Fund I (the "ECM Fund"). Terms of the loans require annual interest
payments on the principal balance outstanding from time to time at the rate of
seven percent (7%) per year, with maturity at December 31, 2007. The following
table lists the outstanding balances of ECM Fund loans as of December 31, 2000
to the Corporation's executive officers.
Andrew Duff............................................... $161,152
Daniel C. Rohr............................................ 78,400
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's Directors and executive officers to file with the Securities
and Exchange Commission (SEC) and the New York Stock Exchange (NYSE) reports of
ownership and changes in ownership of Common Stock of the Corporation. Officers
and Directors are required by SEC regulation to furnish the Corporation with
copies of all Section 16(a) forms they file.
Based solely on review of the copies of such reports furnished to the
Corporation or written representations that no other reports were required, the
Corporation believes that all required filings applicable to the officers and
Directors of Firstar Corporation and old U.S. Bancorp were properly filed during
the 2000 year.
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INDEPENDENT AUDITORS
The Board of Directors of the Corporation appointed PricewaterhouseCoopers
LLP as independent auditors of the Corporation and its subsidiaries for the year
2001.
The Board of Directors of Firstar Corporation appointed
PricewaterhouseCoopers LLP as independent auditors of the Corporation and its
subsidiaries for the year 2000. The Board of Directors and shareholders of the
old U.S. Bancorp appointed Ernst & Young LLP as independent auditors for the
year 2000.
Representatives of PricewaterhouseCoopers LLP and Ernst & Young LLP will be
present at the 2001 Annual Meeting, will be available to answer shareholder
questions and will have the opportunity to make statements if they desire to do
so.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 2002 Annual Meeting will be eligible for
consideration for inclusion in the Company's Proxy Statement if they are
received by the Company at its principal office in Minneapolis, Minnesota, on or
before November 15, 2001. Proposals for director nominations and business made
outside the process of Rule 14a-8 under the federal proxy rules must be received
by the Secretary of the Corporation no later than November 15, 2001. If the
Company does not receive timely notice, such business will be excluded from
consideration at the meeting. This advance notice requirement supersedes the
statutory notice period in Rule 14a-4(c)(1) of the federal proxy rules regarding
the discretionary voting authority of the named proxies in connection with such
shareholder business. The Corporation will determine whether or not the proposal
is proper for inclusion in the Proxy Statement at the time of any such
submission.
OTHER BUSINESS
The Board of Directors knows of no other matters to be presented at the
Annual Meeting. If any other matters arise before the meeting, the Board of
Directors intends for the holders of the proxies to vote in accordance with the
recommendations of Management.
By order of the Board of Directors,
/S/ JENNIE P. CARLSON
Jennie P. Carlson
Secretary
Minneapolis, Minnesota
March 16, 2001
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APPENDIX A
U.S. BANCORP
EXECUTIVE INCENTIVE PLAN
1. Establishment. On February 27, 2001, the Board of Directors of U.S.
BANCORP, upon recommendation by the Compensation Committee of the Board of
Directors, approved an executive incentive plan for executives as described
herein, which plan shall be known as the "U.S. BANCORP EXECUTIVE INCENTIVE
PLAN." This Plan shall be submitted for approval by the stockholders of U.S.
Bancorp at the 2001 Annual Meeting of Stockholders. This Plan shall be effective
as of January 1, 2001, subject to its approval by the stockholders, and no
benefits shall be issued pursuant thereto until after this Plan has been
approved by the stockholders.
2. Purpose. The purpose of this Plan is to advance the interests of U.S.
Bancorp and its stockholders by attracting and retaining key employees, and by
stimulating the efforts of such employees to contribute to the continued success
and growth of the business of the Company.
3. Definitions. When the following terms are used herein with initial
capital letters, they shall have the following meanings:
3.1. Base Salary. A Participant's annualized base salary, as
determined by the Committee, as of the last day of a Performance Period.
3.2. Code. The Internal Revenue Code of 1986, as it may be amended
from time to time, and any proposed, temporary or final Treasury
Regulations promulgated thereunder.
3.3. Committee. The Compensation Committee of the Board of Directors
of the Company designated by such Board to administer the Plan which shall
consist of members appointed from time to time by the Board of Directors.
Each member of the Committee shall be an "outside director" within the
meaning of Section 162(m) of the Code.
3.4. Company. U.S. Bancorp a Delaware corporation, and any of its
subsidiaries or affiliates, whether now or hereafter established.
3.5. Earnings per Share or EPS. The Company's Earnings per Share
shall be computed in accordance with generally accepted accounting
principles, as in effect from time to time, as reported in the Company's
consolidated financial statements for the applicable Performance Period,
adjusted in the same fashion that Operating Earnings are to be adjusted as
provided in Section 3.7 hereof.
3.6. Maximum Award. a dollar amount equal to two-tenths of one
percent (0.20%) of the Company's Operating Earnings for the Performance
Period.
3.7. Operating Earnings. The Company's net income computed in
accordance with generally accepted accounting principles as reported in the
Company's consolidated financial statements for the applicable Performance
Period, adjusted to eliminate (1) the cumulative effect of changes in
generally accepted accounting principles; (2) gains and losses from
discontinued operations; (3) extraordinary gains or losses; and (4) any
other unusual or nonrecurring gains or losses which are separately
identified and quantified in the Company's financial statements, including
merger related charges.
3.8. Participant. Any executive officer of the Company who is also an
"officer" within the meaning of Section 16(a) of the Securities Exchange
Act of 1934 and who is designated by the Committee, as provided for herein,
to participate with respect to a Performance Period as a Participant in
this Plan. Directors of the Company who are not also employees of the
Company are not eligible to participate in the Plan.
3.9. Performance Threshold. The preestablished, objective performance
goals selected by the Committee with respect to each Performance Period and
which shall be based solely on Earnings Per Share.
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3.10. Performance Period. Each consecutive twelve-month period
commencing on January 1 of each year during the term of this Plan and
coinciding with the Company's fiscal year.
3.11. Plan. This U.S. BANCORP EXECUTIVE INCENTIVE PLAN.
3.12. Target Award. A percentage, which may be greater or less than
100%, as determined by the Committee with respect to each Performance
Period.
4. Administration.
4.1. Power and Authority of Committee. The Plan shall be administered
by the Committee. The Committee shall have full power and authority,
subject to all the applicable provisions of the Plan and applicable law, to
(a) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it deems necessary or advisable for the proper
administration of the Plan, (b) construe, interpret and administer the Plan
and any instrument or agreement relating to the Plan, and (c) make all
other determinations and take all other actions necessary or advisable for
the administration of the Plan. Unless otherwise expressly provided in the
Plan, each determination made and each action taken by the Committee
pursuant to the Plan or any instrument or agreement relating to the Plan
(x) shall be within the sole discretion of the Committee, (y) may be made
at any time and (z) shall be final, binding and conclusive for all purposes
on all persons, including, but not limited to, Participants and their legal
representatives and beneficiaries, and employees of the Company.
4.2. Determinations made prior to each Performance Period. At any
time ending on or before the 90th day of each Performance Period, the
Committee shall:
(a) designate all Participants and their Target Awards for such
Performance Period; and
(b) establish one or more Performance Thresholds (including a
minimum level of achievement), based solely on EPS.
4.3. Certification. Following the close of each Performance Period
and prior to payment of any amount to any Participant under the Plan, the
Committee must certify in writing the Company's Operating Earnings and EPS
for that Performance Period and certify as to the attainment of all other
factors upon which any payments to a Participant for that Performance
Period are to be based.
4.4. Stockholder Approval. The material terms of this Plan shall be
disclosed to and approved by stockholders of the Company in accordance with
Section 162(m) of the Code. No amount shall be paid to any Participant
under this Plan unless such stockholder approval has been obtained.
5. Incentive Payment.
5.1. Formula. Each Participant shall receive a bonus payment for each
Performance Period in an amount not greater than:
(a) the Participant's Base Pay for the Performance Period,
multiplied by
(b) the Participant's Target Award for the Performance Period;
provided, however, that in the event that the Company's EPS for a
Performance Period is equal to or in excess of a designated Performance
Threshold for that Performance Period, then each Participant shall be
entitled to a bonus payment for that Performance Period which is not
greater than the Maximum Award for that Performance Period.
5.2. Limitations.
(a) Minimum EPS Achievement. In no event shall any Participant
receive any payment hereunder unless the Company's EPS for a Performance
Period is at least equal to a minimum EPS as determined by the Committee
for that Performance Period.
(b) Discretionary Reduction. The Committee shall retain sole and
full discretion to reduce by any amount the incentive payment otherwise
payable to any Participant under this Plan.
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(c) Continued Employment. Except as otherwise provided by the
Committee, no incentive payment under this Plan with respect to a
Performance Period shall be paid or owed to a Participant whose
employment terminates prior to the last day of such Performance Period.
(d) Maximum Payments. No Participant shall receive a payment under
this Plan for any Performance Period in excess of the Maximum Award for
that Performance Period.
6. Benefit Payments.
6.1. Time and Form of Payments. Subject to any deferred compensation
election pursuant to any such plans of the Company applicable hereto,
benefits shall be paid to the Participant in cash and /or common stock of
the Company as soon as administratively feasible upon the completion of a
Performance Period, after the Committee has certified that the Company
Performance Threshold has been attained, determined the Maximum Award for
that Performance Period and made the other certifications provided for in
Section 4.3 hereof.
6.2. Nontransferability. Participants and beneficiaries shall not
have the right to assign, encumber or otherwise anticipate the payments to
be made under this Plan, and the benefits provided hereunder shall not be
subject to seizure for payment of any debts or judgments against any
Participant or any beneficiary.
6.3. Tax Withholding. In order to comply with all applicable federal
or state income, social security, payroll, withholding or other tax laws or
regulations, the Committee may establish such policy or policies as it
deems appropriate with respect to such laws and regulations, including
without limitation, the establishment of policies to ensure that all
applicable federal or state income, social security, payroll, withholding
or other taxes, which are the sole and absolute responsibility of the
Participant, are withheld or collected from such Participant.
7. Amendment and Termination; Adjustments. Except to the extent prohibited
by applicable law and unless otherwise expressly provided in the Plan:
(a) Amendments to the Plan. The Committee may amend this Plan
prospectively at any time and for any reason deemed sufficient by it
without notice to any person affected by this Plan and may likewise
terminate or curtail the benefits of this Plan both with regard to persons
expecting to receive benefits hereunder in the future and persons already
receiving benefits at the time of such action.
(b) Correction of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan in the manner and to the extent it shall deem
desirable to carry the Plan into effect.
8. Miscellaneous.
8.1. Effective Date. This Plan shall be deemed effective, subject to
stockholder approval, as of January 1, 2001.
8.2. Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
8.3. Applicability to Successors. This Plan shall be binding upon and
inure to the benefit of the Company and each Participant, the successors
and assigns of the Company, and the beneficiaries, personal representatives
and heirs of each Participant. If the Company becomes a party to any
merger, consolidation or reorganization, this Plan shall remain in full
force and effect as an obligation of the Company or its successors in
interest.
8.4. Employment Rights and Other Benefit Programs. The provisions of
this Plan shall not give any Participant any right to be retained in the
employment of the Company. In the absence of any specific agreement to the
contrary, this Plan shall not affect any right of the Company, or of any
affiliate of the Company, to terminate, with or without cause, any
Participant's employment at any time. This
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Plan shall not replace any contract of employment, whether oral or written,
between the Company and any Participant, but shall be considered a
supplement thereto. This Plan is in addition to, and not in lieu of, any
other employee benefit plan or program in which any Participant may be or
become eligible to participate by reason of employment with the Company. No
compensation or benefit awarded to or realized by any Participant under the
Plan shall be included for the purpose of computing such Participant's
compensation under any compensation-based retirement, disability, or
similar plan of the Company unless required by law or otherwise provided by
such other plan.
8.5. No Trust or Fund Created. This Plan shall not create or be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any affiliate and a Participant or any
other person. To the extent that any person acquires a right to receive
payments from the Company or any affiliate pursuant to this Plan, such
right shall be no greater than the right of any unsecured general creditor
of the Company or of any affiliate.
8.6. Governing Law. The validity, construction and effect of the Plan
or any incentive payment payable under the Plan shall be determined in
accordance with the laws of the State of Minnesota.
8.7. Severability. If any provision of the Plan is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction, such
provision shall be construed or deemed amended to conform to applicable
laws, or if it cannot be so construed or deemed amended without, in the
determination of the Committee, materially altering the purpose or intent
of the Plan, such provision shall be stricken as to such jurisdiction, and
the remainder of the Plan shall remain in full force and effect.
8.8. Qualified Performance-Based Compensation. All of the terms and
conditions of the Plan shall be interpreted in such a fashion as to qualify
all compensation paid hereunder as "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code.
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APPENDIX B
U.S. BANCORP
2001 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; ADOPTION.
(a) Purpose. The purpose of the U.S. Bancorp 2001 Stock Incentive Plan
(the "Plan") is to aid in attracting and retaining employees, management
personnel and other personnel and members of the Board of Directors who are not
also employees ("Non-Employee Directors") of U.S. Bancorp (the "Company")
capable of assuring the future success of the Company, to offer such personnel
and Non-Employee Directors incentives to put forth maximum efforts for the
success of the Company's business and to afford such personnel and Non-Employee
Directors an opportunity to acquire a proprietary interest in the Company.
(b) Adoption. The Company hereby adopts the Plan, subject to approval by
the stockholders of the Company. As so established and approved, the Plan shall
be known as the 2001 Stock Incentive Plan.
SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii)
any entity in which the Company has a significant equity interest, as
determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award or other
Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.
(d) "Change in Control" shall have the meaning ascribed to such term
in any Award Agreement, and shall include phrases of similar meaning such
as, by way of example but not limitation, "Full Change in Control" and
"Partial Change in Control."
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any regulations promulgated thereunder.
(f) "Committee" shall mean a committee of the Board of Directors of
the Company designated by such Board to administer the Plan and composed of
not less than two directors.
(g) "Eligible Person" shall mean any employee, officer, director
(including any Non-Employee Director), consultant (including, without
limitation, any member of a regional advisory board of the Company or any
Affiliate) or independent contractor providing services to the Company or
any Affiliate who the Committee determines to be an Eligible Person.
(h) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair
market value of such property determined by such methods or procedures as
shall be established from time to time by the Committee.
Notwithstanding the foregoing, for purposes of the Plan, the Fair
Market Value of Shares on a given date shall be, if the Shares are then
traded on the New York Stock Exchange, the closing price of the Shares as
reported on the New York Stock Exchange on such date or, if the New York
Stock Exchange is not open for trading on that date, on the most recent
preceding date when the New York Stock Exchange was open for trading.
(i) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code or any successor provision.
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(j) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not an incentive stock option.
(k) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(l) "Other Stock-Based Award" shall mean any right granted under
Section 6(e) of the Plan.
(m) "Participant" shall mean an Eligible Person designated to be
granted an Award under the Plan.
(n) "Performance Award" shall mean any right granted under Section
6(d) of the Plan.
(o) "Person" shall mean any individual, corporation, partnership,
association or trust.
(p) "Qualifying Termination" shall mean a termination of employment
under circumstances that, in the judgment of the Committee, warrant
acceleration of the exercisability of Options or the lapse of restrictions
relating to Restricted Stock or Restricted Stock Units. Without limiting
the generality of the foregoing, a Qualifying Termination may apply to
large-scale terminations of employment relating to the disposition or
divestiture of businesses or legal entities or similar circumstances.
(q) "Restricted Stock" shall mean any Share granted under Section 6(c)
of the Plan.
(r) "Restricted Stock Unit" shall mean any unit granted under Section
6(c) of the Plan evidencing the right to receive a Share (or a cash payment
equal to the Fair Market Value of a Share) at some future date.
(s) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934.
(t) "Shares" shall mean shares of Common Stock, $.01 par value, of the
Company or such other securities or property as may become subject to
Awards pursuant to an adjustment made under Section 7(c) of the Plan.
(u) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
SECTION 3. ADMINISTRATION.
(a) Power and Authority of the Committee. The Plan shall be administered
by the Committee. Subject to the terms of the Plan and applicable law, the
Committee shall have full power and authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to each Participant
under the Plan; (iii) determine the number of Shares to be covered by (or with
respect to which payments, rights or other matters are to be calculated in
connection with) each Award; (iv) determine the terms and conditions of any
Award or Award Agreement; (v) amend the terms and conditions of any Award or
Award Agreement and accelerate the exercisability of Options or the lapse of
restrictions relating to Restricted Stock or Restricted Stock Units; provided,
however, that any such acceleration of exercisability or lapse of restrictions
shall be limited to accelerations relating to a Change in Control, a Qualifying
Termination, death or disability; (vi) determine whether, to what extent and
under what circumstances Awards may be exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited or suspended;
(vii) determine whether, to what extent and under what circumstances cash,
Shares, other securities, other Awards, other property and other amounts payable
with respect to an Award under the Plan shall be deferred either automatically
or at the election of the holder thereof or the Committee; (viii) interpret and
administer the Plan and any instrument or agreement relating to, or Award made
under, the Plan; (ix) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (x) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon any Participant, any holder or beneficiary of any Award and any employee of
the Company or any Affiliate.
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(b) Delegation. The Committee may delegate to one or more officers of the
Company or any Affiliate or a committee of such officers, but only to the extent
such officer or officers are also members of the Board of Directors of the
Company, the authority, subject to such terms and limitations as the Committee
shall determine, to grant Awards to Eligible Persons who are not officers or
directors of the Company for purposes of Section 16 of the Securities Exchange
Act of 1934, as amended. The Committee shall not delegate its powers and duties
under the Plan in any manner that would cause the Plan not to comply with the
requirements of Section 162(m) of the Code.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) Shares Available. Subject to adjustment as provided in Section 7(c),
the total number of Shares available for granting Awards under the Plan shall be
100,000,000. Not more than 10,000,000 of such Shares, subject to adjustment as
provided in Section 7(c) of the Plan, will be available for granting any types
of Awards other than Awards of Options or Stock Appreciation Rights; provided,
however, that any Shares covered by an Award that is not an Option or Stock
Appreciation Rights that are forfeited shall again be available for purposes of
the foregoing limitation. If any Shares covered by an Award or to which an Award
relates are not purchased or are forfeited, or if an Award otherwise terminates
without delivery of any Shares, then the number of Shares counted against the
aggregate number of Shares available under the Plan with respect to such Award,
to the extent of any such forfeiture or termination, shall again be available
for granting Awards under the Plan. In addition, if any Shares are used by a
Participant as full or partial payment to the Company of the purchase price
relating to an Award, whether by actual delivery or attestation, or in
connection with satisfaction of tax obligations relating to an Award, whether by
actual delivery, attestation or having shares withheld from the Award, only the
number of Shares issued net of the Shares tendered or withheld shall be deemed
delivered for purposes of determining the maximum number of Shares available for
granting of Awards under the Plan.
(b) Accounting for Awards. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of Shares available for
granting Awards under the Plan. Such Shares may again become available for
granting Awards under the Plan pursuant to the provisions of Section 4(a) of the
Plan, subject to the limitations set forth in Section 4(c) of the Plan.
(c) Incentive Stock Options. Notwithstanding the foregoing, the number of
Shares available for granting Incentive Stock Options under the Plan shall not
exceed 100,000,000, subject to adjustment as provided in Section 7(c) of the
Plan and Section 422 or 424 of the Code or any successor provisions.
(d) Award Limitations Under the Plan. No Eligible Person may be granted
any Award or Awards, the value of which Awards are based solely on an increase
in the value of the Shares after the date of grant of such Awards, for more than
5,000,000 Shares (subject to adjustment as provided in Section 7(c) of the
Plan), in the aggregate, in any calendar year beginning with the year commencing
January 1, 2001. The foregoing limitation specifically includes the grant of any
"qualified performance-based" Awards within the meaning of Section 162(m) of the
Code.
SECTION 5. ELIGIBILITY.
Any Eligible Person, including any Eligible Person who is an officer or
director of the Company or any Affiliate, shall be eligible to be designated a
Participant; provided, however, that an Incentive Stock Option may be granted
only to full-time or part-time employees (which term as used herein includes,
without limitation, officers and directors who are also employees), and an
Incentive Stock Option shall not be granted to an employee of an Affiliate
unless the Affiliate is also a "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code or any successor provision.
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SECTION 6. AWARDS.
(a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee; provided, however, that such
purchase price shall not be less than 100% of the Fair Market Value of a
Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee at the time of grant but in no event shall any Option have a term
of more than 10 years.
(iii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including, without
limitation, cash, Shares previously owned by the Participant, other
securities, other Awards or other property, or any combination thereof,
having a Fair Market Value on the exercise date equal to the relevant
exercise price) in which, payment of the exercise price with respect
thereto may be made or deemed to have been made.
(iv) Reload Options. The Committee may grant "reload" Options,
separately or together with another Option, pursuant to which, subject to
the terms and conditions established by the Committee and any applicable
requirements of Rule 16b-3 or any other applicable law, the Participant
would be granted a new Option when the payment of the exercise price of a
previously granted Option is made by the delivery of shares of the
Company's Common Stock owned by the Participant pursuant to Section
6(a)(iii) hereof or the relevant provisions of another plan of the Company,
and/or when shares of the Company's Common Stock are tendered or forfeited
as payment of the amount to be withheld under applicable tax laws in
connection with the exercise of an option, which new Option would be an
option to purchase the number of Shares not exceeding the sum of (A) the
number of shares of the Company's Common Stock provided as consideration
upon the exercise of the previously granted Option to which such "reload"
Option relates and (B) the number of shares of the Company's Common Stock
tendered or forfeited as payment of the amount to be withheld under
applicable tax laws in connection with the exercise of the Option to which
such "reload" Option relates. "Reload" Options may be granted with respect
to Options granted under this Plan or any other stock option plan of the
Company or any of its Affiliates (which shall explicitly include plans
assumed by the Company in connection with mergers, combinations and similar
transactions). Such "reload" Options shall have a term that shall not
extend beyond the term of the previously granted Option to which the
"reload" Option relates and shall have a per share exercise price equal to
the Fair Market Value as of the date of grant of the new Option. Any such
"reload" Options shall be subject to the availability of sufficient shares
for grant under the Plan.
(v) Elective Deferral. The Committee may from time to time establish
procedures pursuant to which a Participant may elect to defer, until a time
or times later than the exercise of an Option, receipt of all or a portion
of the Shares subject to such Option, all on such terms and conditions as
the Committee shall determine. If any such deferrals are permitted, then a
Participant who elects such deferral shall not have any rights as a
stockholder with respect to such deferred Shares unless and until Shares
actually are delivered to the Participant with respect thereto, except to
the extent otherwise determined by the Committee.
(b) Stock Appreciation Rights. The Committee is hereby authorized to grant
Stock Appreciation Rights to Participants subject to the terms of the Plan and
any applicable Award Agreement. A Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the Fair Market Value of one Share on the date of exercise
(or, if the Committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the Stock
Appreciation Right as specified by the Committee, which price shall not be less
than 100% of the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan and any applicable
Award Agreement, the grant price, term, methods of exercise, dates of
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exercise, methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units. The Committee is hereby
authorized to grant Awards of Restricted Stock and Restricted Stock Units to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Restrictions. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote a Share
of Restricted Stock or the right to receive any dividend or other right or
property with respect thereto), which restrictions may lapse separately or
in combination at such time or times, in such installments or otherwise as
the Committee may deem appropriate. Except as otherwise provided herein,
Awards of Restricted Stock and Restricted Stock Units shall contain
restrictions that lapse no sooner than three years following the date of
grant or, in the case of Awards with performance-based vesting provisions,
no sooner than one year following the date of grant; provided, however,
that restrictions may lapse sooner than such dates as to portions of such
Awards so long as restrictions as to the total number of Shares covered by
such Awards do not lapse sooner than such dates; and provided, further,
that such limitations shall not apply to Awards granted to new employees as
part of initial terms of employment or Awards granted to new or existing
employees in connection with the acquisition of businesses or assets by the
Company.
(ii) Forfeiture; Delivery of Shares. Except as otherwise determined
by the Committee, upon termination of employment (as determined under
criteria established by the Committee) during the applicable restriction
period, all Shares of Restricted Stock and all Restricted Stock Units at
such time subject to restriction shall be forfeited and reacquired by the
Company; provided, however, that the Committee may, when it finds that a
waiver would be in the best interest of the Company, including, without
limitation, in connection with Changes in Control, Qualifying Terminations,
death or disability, waive in whole or in part any or all remaining
restrictions with respect to Shares of Restricted Stock or Restricted Stock
Units. In the case of Restricted Stock, Shares shall be issued at the time
such Awards are granted and may be certificated or uncertificated. Shares
representing Restricted Stock that is no longer subject to restrictions
shall be delivered to the holder thereof promptly after the applicable
restrictions lapse or are waived. In the case of Restricted Stock Units, no
Shares shall be issued at the time such Awards are granted. Upon the lapse
or waiver of restrictions and the restricted period relating to Restricted
Stock Units evidencing the right to receive Shares, such Shares shall be
issued and delivered to the holders of the Restricted Stock Units.
(d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted and the amount of any payment or transfer to be made
pursuant to any Performance Award shall be determined by the Committee.
(e) Other Stock-Based Awards. The Committee is hereby authorized to grant
to Participants such other Awards that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purpose of the Plan; provided,
however, that such grants must comply with applicable law. Subject to the terms
of the Plan and any applicable Award Agreement, the Committee shall determine
the terms and conditions of such Awards. Shares or other securities delivered
pursuant to a purchase right granted under this Section 6(e) shall be purchased
for such consideration, which
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may be paid by such method or methods and in such form or forms (including
without limitation, cash, Shares, other securities, other Awards or other
property or any combination thereof), as the Committee shall determine, the
value of which consideration, as established by the Committee, shall not be less
than 100% of the Fair Market Value of such Shares or other securities as of the
date such purchase right is granted.
(f) General.
(i) Consideration for Awards. Awards may be granted for no cash
consideration or for any cash or other consideration as may be determined
by the Committee or required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted
under any plan of the Company or any Affiliate other than the Plan. Awards
granted in addition to or in tandem with other Awards or in addition to or
in tandem with awards granted under any such other plan of the Company or
any Affiliate may be granted either at the same time as or at a different
time from the grant of such other Awards or awards.
(iii) Forms of Payment Under Awards. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to be made by
the Company or an Affiliate upon the grant, exercise or payment of an Award
may be made in such form or forms as the Committee shall determine
(including, without limitation, cash, Shares, other securities, other
Awards or other property or any combination thereof), and may be made in a
single payment or transfer, in installments or on a deferred basis, in each
case in accordance with rules and procedures established by the Committee.
Such rules and procedures may include, without limitation, provisions for
the payment or crediting of reasonable interest on installment or deferred
payments.
(iv) Limits on Transfer of Awards. No Award and no right under any
such Award shall be transferable by a Participant otherwise than by will or
by the laws of descent and distribution; provided, however, that, if so
determined by the Committee, a Participant may, in the manner established
by the Committee, designate a beneficiary or beneficiaries to exercise the
rights of the Participant and receive any property distributable with
respect to any Award upon the death of the Participant; and provided,
further, that except in the case of an Incentive Stock Option, Awards may
be transferable as specifically provided in any applicable Award Agreement
or amendment thereto pursuant to terms determined by the Committee. Except
as otherwise provided in any applicable Award Agreement or amendment
thereto (other than an Award Agreement relating to an Incentive Stock
Option), pursuant to terms determined by the Committee, each Award or right
under any Award shall be exercisable during the Participant's lifetime only
by the Participant or, if permissible under applicable law, by the
Participant's guardian or legal representative. Except as otherwise
provided in any applicable Award Agreement or amendment thereto (other than
an Award Agreement relating to an Incentive Stock Option), no Award or
right under any such Award may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or encumbrance
thereof shall be void and unenforceable against the Company or any
Affiliate.
(v) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee at the time of grant but in no event
shall any Award have a term of more than 10 years.
(vi) Restrictions; Securities Exchange Listing. All certificates for
Shares or other securities delivered under the Plan pursuant to any Award
or the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or
the rules, regulations and other requirements of the Securities and
Exchange Commission and any applicable federal or state securities laws,
and the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. If the
Shares or other securities are traded on a securities exchange, the Company
shall not be required to deliver any Shares or other securities covered by
an Award unless and until such Shares or other securities have been
admitted for trading on such securities exchange.
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SECTION 7. AMENDMENT AND TERMINATION; ADJUSTMENTS.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may
amend, alter, suspend, discontinue or terminate the Plan at any time and
from time to time; provided, however, that, notwithstanding any other
provision of the Plan or any Award Agreement, without the approval of the
stockholders of the Company, no such amendment, alteration, suspension,
discontinuation or termination shall be made that, absent such approval,
would violate any rules or regulations of the New York Stock Exchange, any
other securities exchange or the National Association of Securities
Dealers, Inc. that are applicable to the Company.
(b) Amendments to Awards. Except as otherwise explicitly provided
herein, the Committee may waive any conditions of or rights of the Company
under any outstanding Award, prospectively or retroactively. The Committee
may not amend, alter, suspend, discontinue or terminate any outstanding
Award, prospectively or retroactively, without the consent of the
Participant or holder or beneficiary thereof, except as otherwise herein
provided. Except as provided in Section 7(c) hereof, no Option may be
amended to reduce its initial exercise price and no Option shall be
canceled and replaced with an Option or Options having a lower exercise
price without the approval of the stockholders of the Company.
(c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Shares, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of
Shares or other securities of the Company or other similar corporate
transaction or event affecting the Shares would be reasonably likely to
result in the diminution or enlargement of any of the benefits or potential
benefits intended to be made available under the Plan or under an Award
(including, without limitation, the benefits or potential benefits of
provisions relating to the term, vesting or exercisability of any Option,
the availability of any Tandem Stock Appreciation rights or "reload" Option
rights, if any, contained in any Option Award, and any Change in Control or
similar provisions of any Award), the Committee shall, in such manner as it
shall deem equitable or appropriate in order to prevent such diminution or
enlargement of any such benefits or potential benefits, adjust any or all
of (i) the number and type of Shares (or other securities or other
property) which thereafter may be made the subject of Awards, (ii) the
number and type of Shares (or other securities or other property) subject
to outstanding Awards and (iii) the purchase or exercise price with respect
to any Award; provided, however, that the number of Shares covered by any
Award or to which such Award relates shall always be a whole number.
(d) Correction of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
SECTION 8. INCOME TAX WITHHOLDING.
In order to comply with all applicable federal, state or local income tax
laws or regulations, the Company may take such action as it deems appropriate to
ensure that all applicable federal, state or local payroll, withholding, income
or other taxes, which are the sole and absolute responsibility of a Participant,
are withheld or collected from such Participant. In order to assist a
Participant in paying all federal and state taxes to be withheld or collected
upon exercise or receipt of (or the lapse of restrictions relating to) an Award,
the Committee, in its discretion and subject to such additional terms and
conditions as it may adopt, may permit the Participant to satisfy such tax
obligation by (i) electing to have the Company withhold a portion of the Shares
otherwise to be delivered upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes (but only to the extent of the minimum amount required to
be withheld under applicable laws or regulations) or (ii) delivering to the
Company Shares other than Shares issuable upon exercise or receipt of (or the
lapse of restrictions relating to) such Award with a Fair Market Value equal to
the amount of such taxes (but only to the extent of the minimum
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amount required to be withheld under applicable laws or regulations). The
election, if any, must be made on or before the date that the amount of tax to
be withheld is determined.
SECTION 9. GENERAL PROVISIONS.
(a) No Rights to Awards. No Eligible Person, Participant or other Person
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to different Participants.
(b) Award Agreements. No Participant will have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company.
(c) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
(d) No Right to Employment, etc. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ, or as
giving a Non-Employee Director the right to continue as a director, of the
Company or any Affiliate. In addition, the Company or an Affiliate may at any
time dismiss a Participant from employment, or terminate the term of a
Non-Employee Director, free from any liability or any claim under the Plan,
unless otherwise expressly provided in the Plan or in any Award Agreement.
(e) Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Minnesota.
(f) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
(j) Section 16 Compliance. The Plan is intended to comply in all respects
with Rule 16b-3 or any successor provision, as in effect from time to time, and
in all events the Plan shall be construed in accordance with the requirements of
Rule 16b-3. If any Plan provision does not comply with Rule 16b-3 as hereafter
amended or interpreted, the provision shall be deemed inoperative. The Board of
Directors, in its absolute discretion, may bifurcate the Plan so as to restrict,
limit or condition the use of any provision of the Plan with respect to persons
who are officers or directors subject to Section 16 of the Securities and
Exchange Act of 1934, as amended, without so restricting, limiting or
conditioning the Plan with respect to other Participants.
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SECTION 10. EFFECTIVE DATE OF THE PLAN.
The Plan shall be effective as of the date of approval by the stockholders
of the Company in accordance with applicable law.
SECTION 11. TERM OF THE PLAN.
New Awards shall be granted under the Plan only during a 10-year period
beginning on the effective date of the Plan. However, unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award theretofore
granted may extend beyond the end of such 10-year period, and the authority of
the Committee provided for hereunder with respect to the Plan and any Awards,
and the authority of the Board of Directors of the Company to amend the Plan,
shall extend beyond the end of such period.
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APPENDIX C
U.S. BANCORP
AUDIT COMMITTEE CHARTER
The U.S. Bancorp Audit Committee is appointed by the Board of Directors to
assist the Board in monitoring (1) the integrity of the financial statements of
U.S. Bancorp and its subsidiaries (the "Company") (2) the compliance by the
Company with legal and regulatory requirements, and (3) the independence and
performance of the Company's internal and external auditors.
The members of the Audit Committee shall meet the independence and
experience requirements of the New York Stock Exchange. The members of the Audit
Committee shall be appointed by the Board on the recommendation of the U.S.
Bancorp Governance Committee.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Company or the Company's outside counsel
or independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and
submit it to the Board of Directors for approval.
2. Review the annual audited financial statements with management,
including any significant issues regarding accounting and auditing
principles and practices as well as the adequacy of internal controls that
could significantly affect the Company's financial statements.
3. Review an analysis prepared by management and the independent
auditor of significant financial reporting issues and judgements made in
connection with the preparation of the Company's financial statements.
4. Review with management and the independent auditor the Company's
quarterly financial statements prior to the Company filing its quarterly
report on Form 10-Q.)
5. Review any significant changes to the Company's accounting
principles and practices as suggested by the independent auditor, internal
auditors or management.
6. Review with the independent auditor any problems or difficulties
the auditor may have encountered in the course of the audit, along with any
management letter provided by the auditor and the Company's response to
that letter. Such review should include:
a) Any difficulties encountered in the course of the audit,
including any restrictions on the scope of activities or access to
required information.
b) Any changes required in the planned scope of the audit.
c) The internal audit department's responsibilities, budget and
staffing.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if so
determined by the Audit Committee, recommend that the Board take
appropriate action to insure the independence of the auditor.
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10. Discuss with the independent auditor matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct
of the audit.
11. Review compliance with the Securities and Exchange Commission's
rules and other professional guidance related to internal audit services
provided by the Company's independent auditor.
12. Evaluate the performance of the independent auditor and, if so
determined by the Audit Committee, recommend that the Board replace the
independent auditor.
13. Review the appointment and replacement of the Director of Audit
and Compliance.
14. Review the annual internal audit plan and risk assessment, as well
as the progress against the plan and significant changes to the Company's
risk profile.
15. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.
16. Review the significant reports to management prepared by both the
Internal Audit and Compliance Department, as well as management's responses
thereto.
17. Review and approve the report required by the rules of the
Securities and Exchange Commission to be included in the Company's annual
proxy statement.
18. Review with management and the auditors their assessments of the
adequacy of internal controls and the resolution of any identified material
weaknesses or reportable conditions.
19. Review with management and the internal auditors their assessment
of compliance with laws and regulations regarding loans to insiders and
dividend restrictions.
20. Review with the Company's General Counsel legal matters that may
have a material impact on the financial statements, the Company's
compliance policies and any material inquiries received from regulators or
governmental agencies.
21. Review regulatory reports issued and management's responses
thereto.
22. Review the Company's Business Continuity Planning activities and
any actions being taken to address weaknesses noted.
23. Review and recommend for approval to the full Board, significant
policies in the areas under the purview of the Committee (e.g. Accounting
and Other Financial, Compliance, etc.)
24. Meet at least annually with the Chief Financial Officer, the
Director of Audit and Compliance, and the independent auditor in separate
executive sessions.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations.
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You may request a copy of the Form 10-K Annual Report filed with the
Securities and Exchange Commission (less exhibits) by contacting Investor
Relations, U.S. Bancorp at 601 Second Avenue South, Minneapolis, Minnesota
55402-4302.
56
U.S. BANCORP NOW OFFERS THREE WAYS FOR YOU TO VOTE YOUR PROXY
AS A SHAREHOLDER YOU CAN NOW HELP YOUR COMPANY SAVE BOTH TIME AND EXPENSE
BY VOTING THIS PROXY OVER THE INTERNET OR BY TOUCH TONE PHONE.
OPTION 1: Call toll free 1-800-214-9752 using a touch tone phone 24 hours
VOTE BY a day, 7 days a week. You will be asked to enter the
TELEPHONE information listed below. Then, if you wish to vote as
recommended by the Board of Directors, simply press 1. That's
all there is to it...End of call. If you do not wish to vote as
the Board recommends, you need only respond to a few simple
prompts. THERE IS NO CHARGE FOR THIS CALL. (DO NOT RETURN YOUR
PROXY CARD IF YOU VOTE BY PHONE.)
YOUR CONTROL NUMBER IS:
OPTION 2: Access www.voteyourproxy.com Follow the simple instructions.
VOTE ON THE (DO NOT RETURN YOUR PROXY CARD IF YOU VOTE ON THE INTERNET.)
INTERNET
YOUR PROXY NUMBER IS:
YOUR ISSUE NUMBER IS:
YOUR ACCOUNT NUMBER IS:
OPTION 3: If you do not wish to vote by touch tone phone or the Internet,
MAIL YOUR please complete and return the proxy card.
PROXY CARD
[TELEPHONE GRAPHIC] [COMPUTER GRAPHIC]
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| U.S. BANCORP 2001 ANNUAL MEETING OF SHAREHOLDERS |
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PROPOSAL 1: ELECTION OF CLASS III 1-ARTHUR D. COLLINS 5-DELBERT W. JOHNSON [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
DIRECTORS TO SERVE UNTIL THE ANNUAL 2-JOHN C. DANNEMILLER 6-JERRY W. LEVIN listed to the to vote for all
MEETING OF SHAREHOLDERS IN 2004 AND 3-VICTORIA BUYNISKI GLUCKMAN 7-RICHARD G. REITEN left (except as nominees listed to
UNTIL THEIR SUCCESSORS ARE ELECTED 4-JOHN F. GRUNDHOFER 8-THOMAS E. PETRY specified below). the left.
AND QUALIFIED.
(Instructions: To withhold authority to vote for any indicated nominee, write ----------> [ ]
the number(s) of the nominee(s) in the box provided to the right).
PROPOSAL II: To approve the U.S. Bancorp Executive Plan. [ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL III: To approve the U.S. Bancorp 2001 Stock Incentive Plan. [ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL IV.
PROPOSAL IV: To Approve the shareholder proposal for annual election of [ ] FOR [ ] AGAINST [ ] ABSTAIN
directors.
Check appropriate box
Indicate changes below: Date NO. OF SHARES
Address Change? [ ] New Change? [ ] --------------
[ ] Please check this box [ ]
if you plan to attend [ ]
the Annual Meeting [ ]
in person. [ ]
Signature(s) in Box
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57
[US BANCORP LOGO]
U.S. BANCORP
COMMON STOCK PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned appoints Jerry A. Grundhofer and Jennie P. Carlson, or either of
them, with power of substitution to each, as attorney and proxy and authorizes
either of them to represent the undersigned at the Annual Meeting of
Shareholders of U.S. Bancorp to be held at the Minneapolis Convention Center,
1301 Second Avenue South, Minneapolis, Minnesota on Tuesday April 17, 2001, at
11:00 a.m. central time, and at any applicable adjournment and to vote, as
designated on the reverse side, all shares of Common Stock of U.S. Bancorp held
as of record by the undersigned on March 9, 2001 and which the undersigned would
be entitled to vote at such Annual Meeting, revoking all former proxies.
THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN AND THIS PROXY IS PROPERLY RETURNED, THIS
PROXY WILL BE VOTED FOR PROPOSALS I, II AND III AND AGAINST PROPOSAL IV. PLEASE
SIGN, DATE AND RETURN THIS PROXY FORM USING THE ENCLOSED ENVELOPE.
IF YOU DO NOT VOTE BY TOUCH TONE PHONE OR INTERNET,
PLEASE VOTE, SIGN THIS PROXY ON THE REVERSE SIDE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
(SEE REVERSE SIDE TO VOTE)