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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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant
to Section 240.14-11(c) or
Section 240.14a-12
U.S. Bancorp
(Name of Registrant as Specified in Its Charter)
(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:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value
of transaction computed pursuant to
Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of
transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee
was paid previously. Identify the previous filing
by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[U.S. Bancorp Logo]
Notice of 1998
Annual Meeting
of Shareholders
and Proxy Statement
Meeting Date: April 22, 1998
U.S. Bancorp
601 Second Avenue South
Minneapolis, Minnesota 55402
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[U.S. Bancorp Logo]
601 Second Avenue South
Minneapolis, Minnesota 55402
March 17, 1998
To Our Shareholders:
You are cordially invited to attend the 1998 Annual Meeting
of Shareholders of U.S. Bancorp, which will be held at 2:00 p.m.,
local time, on Wednesday, April 22, 1998, at the Minneapolis
Convention Center, 1301 Second Avenue South, Minneapolis,
Minnesota 55403. For your convenience, a map showing the location
of the Minneapolis Convention Center is provided on the back of
the accompanying Proxy Statement.
As you know, the Company previously was named First Bank
System, Inc. On August 1, 1997, Portland, Oregon-based U. S.
Bancorp merged with and into the Company and the Company changed
its name to U.S. Bancorp. This will be the first Annual Meeting
of Shareholders of the Company following the merger.
Holders of record of the Company's Common Stock as of March
2, 1998 are entitled to notice of and to vote at the 1998 Annual
Meeting.
In addition to the election of Directors at this year's
Annual Meeting, you will be considering a proposal to increase
the number of authorized shares of capital stock. Your Board of
Directors has approved a three-for-one stock split in the form of
a 200% stock dividend, to be paid on May 18, 1998 to shareholders
of record on May 4, 1998, conditioned on shareholder approval of
this proposal. The proposed stock dividend reflects management's
continued confidence in the future performance of our business
and its continuing commitment to increase the value of your
investment in the Company. The stock dividend will place the
stock price in a range more attractive to some individual and
institutional investors and may result in a broader market for
the shares.
We hope you will be able to attend the meeting.
However, even if you anticipate attending in person, we urge you
to promptly mark, sign, date and return the accompanying proxy
card in the enclosed postage-paid envelope to ensure that your
shares will be represented. If you attend, you will, of course,
be entitled to vote in person. IF YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE AND RETURN THE ENCLOSED BUSINESS REPLY POSTCARD
TO REQUEST AN ADMISSION TICKET, WHICH WILL BE MAILED TO YOU PRIOR
TO THE MEETING DATE.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK,
SIGN AND DATE YOUR PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
Sincerely,
Gerry B. Cameron John F. Grundhofer
Chairman President and
Chief Executive Officer
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[U.S. Bancorp Logo]
601 Second Avenue South
Minneapolis, Minnesota 55402
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
To Be Held Wednesday, April 22, 1998
The 1998 Annual Meeting of Shareholders of U.S. Bancorp
(the "Company") will be held at the Minneapolis Convention
Center, 1301 Second Avenue South, Minneapolis, Minnesota 55403 on
Wednesday, April 22, 1998, at 2:00 p.m., local time, for the
following purposes:
1. To elect five persons to the Board of Directors.
2. To consider and act upon a proposal to amend Article
FOURTH of the Restated Certificate of Incorporation to
increase the authorized capital stock of the Company
to 1,550,000,000 shares, consisting of 50,000,000 shares
of Preferred Stock, par value $1.00 per share, and
1,500,000,000 shares of Common Stock, par value $1.25
per share.
3. To consider and act upon a proposal to ratify the
selection by the Board of Directors of the firm of
Ernst & Young LLP as independent auditors of the
Company for the fiscal year ending December 31, 1998.
4. To transact such other business as may properly come
before the meeting, including, if introduced at the
meeting, taking action upon the resolution quoted
under the heading "Shareholder Proposals" in the
accompanying Proxy Statement proposing annual election
of all Directors and the elimination of the Company's
classified Board of Directors.
Only shareholders of record at the close of business on
March 2, 1998 will be entitled to notice of and to vote at the
meeting and any adjournment or postponement thereof. A list of
such holders will be available for examination by any shareholder
for any purpose germane to the meeting during ordinary business
hours for ten days prior to the meeting at the Company's
headquarters, 601 Second Avenue South, Minneapolis, Minnesota.
March 17, 1998 By Order of the
Board of Directors
Lee R. Mitau
Secretary
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU PLAN TO ATTEND THE
MEETING, PLEASE COMPLETE AND RETURN THE ENCLOSED BUSINESS REPLY
POSTCARD TO REQUEST AN ADMISSION TICKET, WHICH WILL BE MAILED TO
YOU PRIOR TO THE MEETING DATE.
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PROXY STATEMENT
[U.S. BANCORP LOGO]
601 Second Avenue South
Minneapolis, Minnesota 55402
(612) 973-1111
TABLE OF CONTENTS
GENERAL MATTERS...................................................1
Voting, Execution and Revocation of Proxies.....................1
Annual Report...................................................3
Principal Shareholders..........................................3
PROPOSAL I. ELECTION OF DIRECTORS................................3
The Board of Directors..........................................3
Nominees for Election as Directors..............................4
Meetings of Board of Directors and Committees...................4
Information Regarding Nominees and Other Continuing Directors...8
PROPOSAL II. AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION.................................................16
Description of the Proposed Certificate Amendment
and Vote Required..............................................16
Purposes and Effects of Increasing the Authorized
Capital Stock..................................................16
Purposes and Effects of Proposed Three-for-One Stock Split.....18
Effective Date of the Certificate Amendment and Issuance
of Shares For Stock Split......................................20
Recommendation of the Board of Directors.......................21
PROPOSAL III. SELECTION OF AUDITORS.............................21
SECURITY OWNERSHIP OF MANAGEMENT.................................21
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..........25
EXECUTIVE COMPENSATION...........................................25
Report of the Compensation and Human Resources Committee.......25
Employment Contracts for the Named Executive Officers..........30
Summary Compensation Table.....................................31
Stock Options..................................................34
Personal Retirement Account....................................35
Old USB Retirement Plan........................................36
Supplemental Executive Retirement Plan.........................38
Compensation Committee Interlocks and Insider Participation....39
COMPARATIVE STOCK PERFORMANCE....................................39
CERTAIN TRANSACTIONS.............................................40
Stock Repurchases..............................................40
Loans to Management............................................40
Other Transactions.............................................41
POLICY ON CONFIDENTIAL VOTING....................................41
SHAREHOLDER PROPOSALS............................................42
PROPOSAL IV. ANNUAL ELECTION OF DIRECTORS......................42
AVAILABILITY OF FORM 10-K........................................44
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GENERAL MATTERS
This Proxy Statement has been prepared on behalf of the
Board of Directors by management of U.S. Bancorp (the "Company")
and is furnished in connection with the solicitation of proxies
for the Annual Meeting of Shareholders of the Company to be held
on April 22, 1998 and any adjournment or postponement thereof.
This Proxy Statement and the accompanying proxy card are first
being mailed to shareholders on or about March 17, 1998.
The Company previously was named First Bank System, Inc. On
August 1, 1997, Portland, Oregon-based U. S. Bancorp ("Old USB")
merged with and into the Company (the "Merger") and the Company
changed its name to U.S. Bancorp. This will be the first Annual
Meeting of Shareholders of the Company following the Merger.
The cost of soliciting proxies will be borne by the
Company. In addition to solicitation by mail, officers and other
employees of the Company may solicit proxies by telephone,
special communications or in person but will receive no special
compensation for such services. The Company will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy
material and annual reports to the owners of the stock in
accordance with the New York Stock Exchange schedule of charges.
The Company has engaged MacKenzie Partners, Inc. to assist in
proxy solicitation for an estimated fee of $10,000 plus
out-of-pocket expenses.
Voting, Execution and Revocation of Proxies
Holders of record of the Company's Common Stock as of March
2, 1998 are entitled to vote at the Company's Annual Meeting. As
of that date, there were approximately ________________ shares of
Common Stock of the Company outstanding. Each share is entitled
to one vote. There is no cumulative voting. Although the
Company's Bylaws require the presence, in person or by proxy, of
not less than one-third of the total number of shares of Common
Stock outstanding and entitled to vote for purposes of a quorum
at the Annual Meeting, under Delaware law, the proposal to adopt
the amendment to the Company's Restated Certificate of
Incorporation (the "Certificate Amendment Proposal") must be
approved by the holders of a majority of the outstanding shares
of Common Stock. When stock is registered in the name of more
than one person, each such person should sign the proxy card. If the
proxy card is signed as an attorney, executor, administrator, trustee,
guardian or in any other representative capacity, the signer's
full title should be given. If the shareholder is a corporation,
the proxy card should be signed in its corporate name by an executive
or other authorized officer.
If a proxy card is properly executed and returned in the form
enclosed, it will be voted at the meeting as follows, unless
otherwise specified by the shareholder therein: (i) FOR the
election as Directors of all the nominees listed herein; (ii) FOR
the Certificate Amendment Proposal; (iii) FOR the ratification of
the selection of Ernst & Young LLP as independent auditors of the
Company for the fiscal year ending December 31, 1998; and (iv) if
such proposal is introduced at the meeting, AGAINST the
shareholder proposal quoted under the heading
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"Shareholder Proposals--Proposal IV. Annual Election of
Directors." The Board of Directors does not know of any other
matters to come before the 1998 Annual Meeting of Shareholders.
If any other matters are brought before the meeting, however, the
accompanying proxy card will confer discretionary authority with
respect to any such other matters. Shares held in the Company's
Capital Accumulation Plan, a 401(k) plan ("CAP"), for which a
proxy is not received at least ten days prior to the meeting will
be voted by the trustee in the same proportion as votes actually
cast by CAP participants, in accordance with the terms of the
CAP. A proxy may be revoked at any time before being exercised by
delivery to the Secretary of the Company of a written notice of
termination of the proxy's authority or a duly executed proxy
card or ballot bearing a later date.
If an executed proxy card is returned and the shareholder
has explicitly abstained from voting on any matter or, in the
case of the election of Directors, has withheld authority to vote
with respect to any or all of the nominees, the shares
represented by such proxy will be considered present at the
Annual Meeting for purposes of determining a quorum and for
purposes of calculating the vote, but will not be considered to
have been voted in favor of such matter or, in the case of the
election of Directors, in favor of such nominee or nominees.
Under the rules of The New York Stock Exchange, Inc. (the
"NYSE"), brokers who hold shares in street name for customers who
are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers with
respect to the shareholder proposal described under "Shareholder
Proposals--Proposal IV. Annual Election of Directors" without
specific instructions from such customers. If an executed proxy
is returned by a broker holding shares in street name which
indicates that the broker does not have discretionary authority
as to certain shares to vote on one or more matters, such shares
will be considered present at the meeting for purposes of
determining a quorum but will not be considered to be represented
at the meeting for purposes of calculating the vote with respect
to such matters. If any other matters are properly brought before
the meeting, including, among other things, a motion to adjourn
or postpone the meeting to another time and/or place for the
purpose of soliciting additional proxies in favor of the
Certificate Amendment Proposal or to permit the dissemination of
information germane to the meeting, one or more of the persons
named in the proxy card will vote the shares represented by such
proxy upon such matters as determined in their discretion;
provided, however, that no proxy that is voted against the
Certificate Amendment Proposal will be voted in favor of any such
adjournment or postponement for the purpose of soliciting
additional proxies. Given that Delaware law requires the
affirmative vote of the holders of a majority of the outstanding
shares of Common Stock to approve the Certificate Amendment
Proposal, abstentions and broker non-votes will have the same
effect as votes against the approval of such proposal.
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Annual Report
The U.S. Bancorp 1997 Annual Report to Shareholders and
Annual Report on Form 10-K, including financial statements for
the year ended December 31, 1997, accompanies this Proxy
Statement.
Principal Shareholders
The following table sets forth information as of March 2,
1998 with respect to shares of the Company's Common Stock which
are held by the only persons known to the Company to be
beneficial owners of more than 5% of such stock. For purposes of
this Proxy Statement, beneficial ownership of securities is
defined in accordance with the rules of the Securities and
Exchange Commission and means generally the power to vote or
dispose of securities, regardless of any economic interest
therein.
Common Stock
Beneficially Owned
--------------------
Name of Shareholder Shares Percent
------------------- ------ -------
FMR Corp. ................................... 13,797,182(1) 5.62%
82 Devonshire Street
Boston, Massachusetts 02109
- --------------
(1) Information is based solely on a Schedule 13G filed with
the Securities and Exchange Commission by FMR Corp.
("FMR") on February 11, 1998 with respect to shares held
as of December 31, 1997. The Schedule 13G indicates that
Fidelity Management & Research Company, a registered
investment adviser and wholly owned subsidiary of FMR,
beneficially owns 12,386,602 of such shares; Fidelity
Management Trust Company, a bank and wholly owned
subsidiary of FMR, beneficially owns 1,310,580 of such
shares; and Fidelity International Limited, an investment
adviser and affiliate of FMR, beneficially owns 100,000 of
such shares. Of the 13,797,182 shares beneficially owned
by FMR, FMR has sole voting power with respect to
1,022,580 shares, shared voting power with respect to no
shares, and sole dispositive power with respect to
13,797,182 shares.
PROPOSAL I. ELECTION OF DIRECTORS
The Board of Directors
Pursuant to the Bylaws of the Company, the Board of
Directors has the authority to determine the number of Directors
from time to time (provided that, pursuant to the Company's
Restated Certificate of Incorporation, such number may not be
less than 12 or more than 30). The Company's Board of Directors
has determined that the number of Directors of the Company will
be reduced from 26 to 18 immediately following the 1998 Annual
Meeting. Directors
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Franklin G. Drake (Class I), John B. Fery (Class III), Norman M.
Jones (Class II), Kenneth A. Macke (Class III), Allen T. Noble
(Class II), Richard L. Robinson (Class II), N. Stewart Rogers
(Class III) and Benjamin R. Whiteley (Class I) are expected to
retire at the 1998 Annual Meeting.
Commencing with the election of Directors at the annual
meeting of shareholders in 1986, the Directors were divided into
three classes: Class I, Class II and Class III, each such class,
as nearly as possible, to have the same number of Directors. The
term of office of the Class III Directors will expire at the
annual meeting in 1998, the term of office of the Class I
Directors will expire at the annual meeting in 1999, and the term
of office of the Class II Directors will expire at the annual
meeting in 2000. At each annual election of Directors, the
Directors chosen to succeed those whose terms have then expired
shall be identified as being of the same class as the Directors
they succeed and shall be elected for a term expiring at the
third succeeding annual election of Directors. Vacancies and
newly created directorships resulting from an increase in the
number of Directors may be filled by a majority of the Directors
then in office and the Directors so chosen will hold office until
the next election of the class for which such Directors shall
have been chosen and until their successors are elected and
qualified. The accompanying proxy may not be voted for more than
five Directors.
Nominees for Election as Directors
It is intended that proxies accompanying this Proxy
Statement will be voted at the meeting FOR the election to the
Board of Directors of the nominees named, unless authority to
vote for one or more of the nominees is withheld as specified in
the proxy card. The affirmative vote 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 the
election of each nominee. Cumulative voting is not permitted.
Class III Directors are to be elected at the meeting for a
three-year term expiring at the annual meeting in 2001 and until
their successors are elected and qualified. Nominees for Class
III Directors are Carolyn Silva Chambers, Arthur D. Collins, Jr.,
John F. Grundhofer, Delbert W. Johnson and Jerry W. Levin. All of
these nominees are presently serving as Class III Directors. If
any of the nominees should be unavailable to serve as a Director,
an event which is not anticipated, the persons named as proxies
reserve full discretion to vote for any other persons who may be
nominated.
Meetings of Board of Directors and Committees
During 1997, the Board of Directors of the Company held six
regular meetings and three special meetings. The Board has
established the following committees to perform their assigned
functions: Executive Committee, Audit Committee, Credit Policy
and Community Responsibility Committee, Compensation and Human
Resources Committee, Finance Committee and Governance Committee.
During the past year, the Executive Committee did not meet, the
Audit Committee met five times, the Credit Policy and Community
Responsibility Committee met four times, the Compensation and
Human Resources Committee met eleven times, the Finance Committee
met three times and the Governance Committee met six times.
Incumbent Directors' attendance at Board and Committee meetings
averaged 92% during 1997 and each incumbent
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member of the Board of Directors attended at least 75% of the
aggregate of the total number of meetings of the Board of
Directors and of the Committees on which such Director served.
The members of the Executive Committee are John F.
Grundhofer (Chair), Gerry B. Cameron (Vice Chair), Roger L. Hale,
Norman M. Jones, Edward J. Phillips, S. Walter Richey and Richard
L. Schall. The Executive Committee is charged with acting with
the authority of the Board of Directors when the Board is not in
session, subject to applicable limitations set forth in the
Company's Bylaws and under Delaware law.
The members of the Audit Committee are Roger L. Hale
(Chair), Richard L. Schall (Vice Chair), Linda L. Ahlers, Arthur
D. Collins, Jr., Franklin G. Drake, Delbert W. Johnson, Kenneth
A. Macke, Allen T. Noble, Edward J. Phillips, Richard L. Robinson
and Benjamin R. Whiteley. The Audit Committee is charged with
assisting the Board in discharging its statutory and fiduciary
responsibilities for external and internal audits and the
monitoring of accounting and financial reporting practices,
determining that adequate administrative and internal accounting
controls are in place and that they operate in accordance with
prescribed procedures and codes of conduct, and reviewing certain
financial information that is distributed to shareholders and the
general public.
The members of the Credit Policy and Community
Responsibility Committee are Edward J. Phillips (Chair), Peter H.
Coors (Vice Chair), Linda L. Ahlers, Carolyn Silva Chambers,
Joshua Green III, John F. Grundhofer, Roger L. Hale, Delbert W.
Johnson, Norman M. Jones and Richard L. Schall. The Credit Policy
and Community Responsibility Committee reviews lending and credit
administration policies, practices and controls for the Company.
The Committee reviews the adequacy of written credit policies,
monitors significant lending and credit quality trends and
summaries of examination reports, and approves the adequacy of
the Company's allowance for credit losses. The Committee also has
general oversight responsibility for the Company's policy and
performance under the Community Reinvestment Act.
The members of the Compensation and Human Resources
Committee are S. Walter Richey (Chair), Jerry W. Levin (Vice
Chair), Arthur D. Collins, Jr., Robert L. Dryden, Delbert W.
Johnson, Richard L. Knowlton, Kenneth A. Macke, Paul A. Redmond
and Richard L. Robinson. The Compensation and Human Resources
Committee is charged with oversight responsibility for executive
management performance, the adequacy and effectiveness of
compensation and benefit plans and employee programs, and senior
management succession planning. In addition, the Committee makes
recommendations to the Board of Directors regarding remuneration
for senior management and Directors and adoption of employee
compensation and benefit plans, and is charged with the
administration of such plans, including the granting of stock
incentives or other benefits.
The members of the Finance Committee are Norman M. Jones
(Chair), Arthur D. Collins, Jr. (Vice Chair), Harry L. Bettis,
Gerry B. Cameron, John F. Grundhofer, Jerry W. Levin, S. Walter
Richey, N. Stewart Rogers and Walter Scott, Jr. The Finance
Committee reviews and approves and monitors compliance with
policies governing capital adequacy, dividends, interest rate
sensitivity and liquidity for the Company, as well as policies
governing the use of
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derivatives and the investment portfolio. The Committee makes
recommendations to the Board of Directors regarding the sale and
issuance and repurchase of debt and equity securities and reviews
other actions regarding the common and preferred capital of the
Company.
The members of the Governance Committee are Richard L.
Schall (Chair), Roger L. Hale (Vice Chair), John B. Fery, John F.
Grundhofer, Norman M. Jones, Edward J. Phillips, S. Walter Richey
and Walter Scott, Jr. The Committee serves as a forum for ideas
and suggestions to improve the quality of stewardship provided by
the Board of Directors. The Committee reviews the charters of the
various Board Committees to ensure they reflect the Company's
commitment to effective governance. The Committee also manages
the Board performance review process, assists the Board by
identifying, attracting and recommending candidates for Board
membership and administers the Director retirement policy. The
Committee recommends to the Board those persons whom it believes
should be nominees for election as Directors. The Committee will
consider qualified nominees recommended by shareholders. Any such
recommendation for the 1999 election of Directors should be
submitted in writing to the Secretary of the Company so as to be
received no later than 90 days in advance of the 1999 Annual
Meeting of Shareholders. Such recommendation must include
information specified in the Company's Bylaws that will enable
the Governance Committee to evaluate the qualifications of the
recommended nominee.
It is the Company's policy that a Director shall retire as
of the annual meeting of shareholders following the earlier of
either 12 years of service or such Director's sixty-seventh
birthday. Notwithstanding this policy, however, the Board of
Directors may, in consultation with the Governance Committee, ask
a particular Director to continue service beyond the normal
retirement date. The Board has requested that Mr. Schall, who is
68 and otherwise would have retired at the 1997 Annual Meeting of
Shareholders in accordance with the Company's policy, continue to
serve as a Director through his current term, and he has agreed
to do so. Mr. Schall is a Class I Director whose term expires at
the 1999 Annual Meeting of Shareholders. One of the nominees for
election as a Class III Director, Carolyn Silva Chambers, will
turn 67 prior to the 1999 Annual Meeting, which will be prior to
the expiration of her term at the 2001 Annual Meeting, if she is
elected.
The Company has a Director Retirement and Death Benefit
Plan (the "Plan") which 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 the 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 (provided that for eligible, current Directors,
retirement benefits will be based on the annual retainer and each
Director's service as of April 30, 1997 (except that additional
service after such date may be considered in determining the form
of benefit to be paid)). 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
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the event of a Director's death, a lump sum payment may be
made. In the event of certain types of changes of control of the
Company, benefits payable under the Plan will be paid in a lump
sum within 30 days thereof.
Directors who are not employees of the Company receive an
annual retainer of $23,000, with the exception of the Chair of
the Audit Committee who receives an annual retainer of $24,000,
plus all such Directors receive $1,000 for each meeting of the
Board attended. In addition, non-employee Committee Chairs
receive $2,000 and non-employee Directors receive $1,000 for each
Committee meeting attended.
Directors are 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 may defer all retainer and meeting fees until such
time as the Director ceases to be a member of the Board. In the
event of certain types of changes of control of the Company, the
plan will terminate and all deferred amounts will be paid in a
lump sum within 30 days thereof. Directors also may 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 apply to
employees. Directors may purchase shares of Common Stock with all
or any portion of the fees earned as a Director of the Company.
The purchase price is 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
receives the number of shares of the Company's Common Stock that
can be purchased with the participant's accumulated deductions at
the established purchase price.
Under the Company's 1997 Stock Incentive Plan, each
non-employee Director of the Company receives options to purchase
2,500 shares of the Company's Common Stock upon first being
elected to the Board of Directors and, thereafter, options to
purchase 1,700 shares of the Company's Common Stock on the date
of each annual meeting of shareholders if such Director's term of
office continues 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 is
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 certain family members or investment vehicles, 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 as 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 in connection with the exercise of an
option.
As required by the merger agreement relating to the
Company's acquisition of Metropolitan Financial Corporation in
January 1995, the Company entered into a consulting agreement
with Norman M. Jones engaging Mr. Jones for a three-year period
as an independent
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consultant to assist the Company in identifying and contacting,
on behalf of the Company, potential financial institution
acquisition candidates. The agreement further provides that the
Company is required to use its best efforts to secure the
election of Mr. Jones to the Company's Board of Directors for a
term of at least three years. The agreement provides that Mr.
Jones will be paid cash compensation of $200,000 annually for
such services, including his service as a Director of the
Company. Mr. Jones is expected to retire at the 1998 Annual
Meeting of Shareholders in accordance with the Company's
retirement policy for Directors, discussed above.
A portion of the cost of premiums incurred by non-employee
Directors of the Company who were former Directors of West One
Bancorp 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 are
subsidized by any other employer. Reimbursement is subject to the
same conditions and limits as are applicable to active employees.
Two non-employee Directors received health care subsidies and
related reimbursements for income taxes on such subsidies during
1997.
Information Regarding Nominees and Other Continuing Directors
There is shown below for each nominee for election as a
Director and for each other person whose term of office as a
Director will continue after the meeting, as furnished to the
Company, the individual's name, age, principal occupation and
business experience; the individual's period of service as a
Director of the Company and other directorships and positions
held.
Class III Directors--Nominees for election for a term expiring
at the 2001 Annual Meeting
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CAROLYN SILVA CHAMBERS (AGE 66) Director Since 1997
[Photo] Ms. Chambers has served as Chief Executive
Officer of Chambers Communications Corp.,
Eugene, Oregon, a broadcast and television
company, since 1983 and as Chairman since
1995. From 1983 to 1995, she served as
President. She also has served as President
and Chief Executive Officer of Chambers
Construction Company, Eugene, Oregon, a
construction firm, since 1986. She had served
as a director of Old USB since 1995. Ms.
Chambers is a Director of Portland General
Corporation. Her community involvement
includes service in various capacities with
Sacred Heart Health Services and as a Trustee
of the University of Oregon Foundation. She
serves as a member of the Credit Policy and
Community Responsibility Committee.
- -----------------------------------------------------------------
ARTHUR D. COLLINS, Jr. (Age 50) Director Since 1996
[Photo] Mr. Collins is President and Chief Operating
Officer of Medtronic, Inc., Minneapolis,
Minnesota, a leading medical device company.
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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. Prior
to joining Medtronic, Mr. Collins served in a
number of senior executive positions with
Abbott Laboratories from 1978 through 1992,
most recently as Corporate Vice President
responsible for worldwide diagnostic business
units. He serves as a Director of Medtronic,
Inc., TENNANT Company and GalaGen, Inc. He is
also a member of the Board of the National
Association of Manufacturers and numerous
civic organizations, including the Walker Art
Center in Minneapolis. Mr. Collins serves as
Vice Chair of the Finance Committee and also
as a member of the Audit Committee and the
Compensation and Human Resources Committee.
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JOHN F. GRUNDHOFER (Age 59) Director Since 1990
[Photo] Mr. Grundhofer is President and Chief
Executive Officer of the Company. He has
served in such positions since joining the
Company on January 31, 1990. Upon joining the
Company and until the Merger, he also served
as Chairman of the Board of Directors. Prior
to joining the Company, Mr. Grundhofer served
as 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 Trustee of Minnesota Mutual Life
Insurance Company and a Director of Irvine
Apartment Communities, Inc. and Donaldson
Company, Inc. Mr. Grundhofer is Chairman of
Minnesota Meeting, a Director of the Horatio
Alger Association, an Advisory Director of
the Minneapolis-based Metropolitan Economic
Development Association, and a member of the
Bankers Roundtable and of the CEO Board of
the School of Business Administration at the
University of Southern California. Mr.
Grundhofer serves as Chair of the Executive
Committee and also as a member of the Credit
Policy and Community Responsibility
Committee, the Finance Committee and the
Governance Committee.
- -----------------------------------------------------------------
DELBERT W. JOHNSON (Age 59) Director Since 1994
[Photo] Mr. Johnson is Chairman and Chief Executive
Officer of Pioneer Metal Finishing, a
division of Safeguard Scientifics Inc.,
Minneapolis, Minnesota, and one of the
largest metal finishing companies in the
United States. He joined the company in 1965
and was elected to his present position in
1978. From 1987 through 1993, Mr. Johnson
served on the Board of Directors of the
Federal
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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., TENNANT Company, Safeguard
Scientifics Inc. and CompuCom Systems, Inc. He
also serves on the Advisory Boards of
Hospitality House and Turning Point, Inc. Mr.
Johnson serves as a member of the Audit
Committee, the Credit Policy and Community
Responsibility Committee and the Compensation
and Human Resources Committee.
- -----------------------------------------------------------------
JERRY W. LEVIN (Age 53) Director Since 1995
[Photo] Mr. Levin is Chairman of Revlon, Inc., New
York, New York, a maker of cosmetics and
personal care and professional products;
Chairman and Chief Executive Officer of The
Coleman Company, Inc., Wichita, Kansas, a
manufacturer and marketer of outdoor
recreational products; and Executive Vice
President of MacAndrews & Forbes Holdings,
Inc. Revlon and Coleman are affiliate
companies of MacAndrews & Forbes. Mr. Levin
joined Revlon in 1991 as President and was
elected Chairman in November 1995. He was
elected Chairman of Coleman in February 1997,
and had been Chairman of Coleman's parent
company, Coleman Holdings, Inc., prior to
joining Revlon. Before joining MacAndrews &
Forbes, Mr. Levin served in a number of
senior executive positions with The Pillsbury
Company from 1974 through 1989. In addition
to serving as Chairman of Revlon and The
Coleman Company, he is also a Director of
Ecolab, Inc., Meridian Sports, Inc., Cosmetic
Center Inc. and Paradise Kitchens, Inc. His
community activities include serving as a
Director of United Way of New York City,
UJA-Federation of New York, the New York
Philharmonic, the Council on the Graduate
School of Business-University of Chicago and
the National Advisory Committee of the
College of Engineering-University of
Michigan. Mr. Levin serves as Vice Chair of
the Compensation and Human Resources
Committee and also as a member of the Finance
Committee.
Class I Directors--Whose terms expire at the 1999 Annual Meeting
- -----------------------------------------------------------------
LINDA L. AHLERS (Age 47) Director Since 1997
[Photo] Ms. Ahlers is President of the Department
Store Division of Dayton Hudson Corporation,
Minneapolis, Minnesota, a diversified retail
company. Ms. Ahlers has been associated with
Dayton Hudson since 1977. She assumed her
current position in February 1996 and
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previously served as Executive Vice
President, Merchandising, of Dayton's
Department Store Division, and in various
capacities with Target Stores, an affiliate
company of Dayton Hudson. Ms. Ahlers'
community activities include serving as a
member of the Minnesota Women's Economic
Roundtable, the Minnesota Women's Forum and
The Committee of 200. She is also a Director
of the Guthrie Theatre, Minneapolis,
Minnesota, the Renaissance Board, Detroit,
Michigan, and the Dayton Hudson Corporation
Foundation. Ms. Ahlers serves on the Audit
Committee and the Credit Policy and Community
Responsibility Committee.
- -----------------------------------------------------------------
GERRY B. CAMERON (Age 59) Director Since 1997
[Photo] Mr. Cameron was elected Chairman of the
Company in August 1997. He had served as
Chief Executive Officer and a Director of Old
USB since January 1994 and as Chairman of Old
USB since April 1994. He was also President
of Old USB from April 1994 to December 1995
and from February 1997 until the Merger. Mr.
Cameron was Vice Chairman of Old USB from
January 1993 through April 1994 and Executive
Vice President of United States National Bank
of Oregon from March 1979 until July 1993.
Mr. Cameron was elected a Director of United
States National Bank of Oregon in January
1993 and Chairman of the Board in July 1993.
He was President and Chief Executive Officer
of U.S. Bank of Washington, National
Association until January 1993. Mr. Cameron
is a Director of Tektronix, Inc., The
American Bankers Association, Blue Cross Blue
Shield of Oregon, The Regence Group, the
United Way of the Columbia-Willamette Area
and the Oregon Business Council. He is also a
member of the Bankers Roundtable and the
Advisory Board of the Pacific Rim Bankers
Program. Mr. Cameron serves as Vice Chair of
the Executive Committee and is also a member
of the Finance Committee.
- -----------------------------------------------------------------
ROBERT L. DRYDEN (Age 64) Director Since 1997
[Photo] Mr. Dryden is Executive Vice President,
Airplane Production, of The Boeing Company
(Commercial Airplane Group), Seattle,
Washington, a position he has held since
1990. He joined The Boeing Company in 1980
and has held numerous positions with the
company, including President of Boeing
Military Airplanes and President of Boeing
Computer Services. Mr. Dryden had served as a
Director of Old USB since 1995. He is also a
Director of Puget Sound Energy, Inc. Mr.
Dryden's civic activities include service as
a Director of Junior Achievement of Greater
Puget Sound and
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National Junior Achievement, on the executive
advisory council of Seattle Pacific
University's School of Business and
Economics, and as Chairman of the Board of
Trustees of the Overlake Hospital Medical
Center. Mr. Dryden serves as a member of the
Compensation and Human Resources Committee.
- -----------------------------------------------------------------
ROGER L. HALE (Age 63) Director Since 1987
[Photo] Mr. Hale is President and Chief Executive
Officer of TENNANT Company, Minneapolis,
Minnesota, a manufacturer of industrial and
commercial floor maintenance equipment and
products. He joined TENNANT in 1961 and was
appointed Assistant to the President in 1963.
Mr. Hale was elected Vice President in 1968
and, in 1975, was elected President and Chief
Operating Officer. He was elected Chief
Executive Officer in 1976. He serves as a
Director of TENNANT Company. His community
activities include serving as Chairman of the
Minneapolis Neighborhood Employment Network
and as Vice Chair of Public Radio
International. Mr. Hale serves as Chair of
the Audit Committee and Vice Chair of the
Governance Committee and is also a member of
the Credit Policy and Community
Responsibility Committee and the Executive
Committee.
- -----------------------------------------------------------------
RICHARD L. KNOWLTON (Age 65) Director Since 1992
[Photo] Mr. Knowlton is Chairman of The Hormel
Foundation, Austin, Minnesota, a public
foundation organized and operated for the
benefit of charitable organizations and which
is the principal shareholder of Hormel Foods
Corporation, a meat and food processing
company. He became Chairman of The Hormel
Foundation in December 1995 upon resigning as
Chairman and Chief Executive Officer of
Hormel Foods Corporation. He joined Hormel
Foods in 1948 and held numerous positions
with the company, including Sales Manager,
Vice President-Operations, President and
Chief Operating Officer, and Chairman,
President and Chief Executive Officer. Mr.
Knowlton serves as a Director of ReliaStar
Financial Corp., SUPERVALU INC. and Perth Corp.
In addition to being Chairman of The Hormel
Foundation, he is also a Director of the
University of Colorado Foundation, the Mayo
Foundation and the Horatio Alger Association.
Mr. Knowlton serves as a member of the
Compensation and Human Resources Committee.
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EDWARD J. PHILLIPS (Age 53) Director Since 1988
[Photo] Mr. Phillips is Chairman and Chief Executive
Officer of Phillips Beverage Company,
Minneapolis, Minnesota, an importer and
marketer of distilled spirits. Mr. Phillips
has been associated with Phillips Beverage
Company since 1969, having previously served
as its President during its ownership by Alco
Standard Corporation. He is a Director of
Weisman Enterprises, Inc. His community
activities include serving as Vice Chairman
and Director of Metropolitan-Mount Sinai
Foundation and as a Director of Amicus, the
Phillips Eye Institute, the Minnesota AIDS
Project, the Page Education Foundation, the
Paul E. Goldstein Family Foundation and the
Jeremiah Project. Mr. Phillips serves as
Chair of the Credit Policy and Community
Responsibility Committee and as a member
of the Audit Committee, the Governance
Committee and the Executive Committee.
- -----------------------------------------------------------------
RICHARD L. SCHALL (Age 68) Director Since 1987
[Photo] Mr. Schall is the retired Vice Chairman of
the Board and Chief Administrative Officer of
Dayton Hudson Corporation, Minneapolis,
Minnesota, a diversified retail company. He
retired from active employment in February
1985. Mr. Schall is a Director of Medtronic,
Inc., Meritex, Inc. and Ecolab, Inc. He is
also a member of the Board of the Santa
Barbara City College Foundation. Mr. Schall
serves as Chair of the Governance Committee
and Vice Chair of the Audit Committee and is
also a member of the Executive Committee and
the Credit Policy and Community
Responsibility Committee.
Class II Directors--Whose terms expire at the 2000 Annual Meeting
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HARRY L. BETTIS (Age 63) Director Since 1997
[Photo] Mr. Bettis has been a rancher in Payette,
Idaho for more than five years. Mr. Bettis
had served as a Director of Old USB since
1995. He was a Director of West One Bancorp
from 1971 until 1995. Mr. Bettis is President
of the Laura Moore Cunningham Foundation,
Idaho's largest private charitable
foundation, is a Director of the Peregrine
Fund National Center for Birds of Prey and a
trustee of Albertson's College of Idaho. He
serves as a member of the Finance Committee.
- -----------------------------------------------------------------
PETER H. COORS (Age 51) Director Since 1996
[Photo] Mr. Coors is Vice Chairman and Chief
Executive Officer of Coors
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Brewing Company, Golden, Colorado, 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 Distributing
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. His community
activities include serving as a member of the
Chief Executives' Organization and the
International Chapter of the Young
Presidents' Organization. He is also an
Executive Board member and President of the
Denver Area Council of the Boy Scouts of
America, a Board member of Up With People, a
Board member of Ducks Unlimited, Inc., a
Trustee of the Seeds for Hope Foundation, and
a Trustee of the Adolph Coors Foundation. Mr.
Coors serves as Vice Chair of the Credit
Policy and Community Responsibility
Committee.
- -----------------------------------------------------------------
JOSHUA GREEN III (Age 61) Director Since 1997
[Photo] 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 had served as a Director
of Old USB since December 1987. He also
served as Chairman of the Board of U.S. Bank
of Washington from February 1988 until
January 1997. Mr. Green was also Vice
Chairman of Old USB from December 1987 until
January 1993. He is a Director of Safeco
Corporation. Mr. Green's numerous civic
activities include service as a member of the
University of Washington's School of Business
Advisory and as a trustee of the Downtown
Seattle Association, the Corporate Council
for the Arts, the Rhododendron Species
Foundation, Fifth Avenue Theater and the
Woodland Park Zoological Society. Mr. Green
serves on the Credit Policy and Community
Responsibility Committee.
- -----------------------------------------------------------------
PAUL A. REDMOND (Age 61) Director Since 1997
[Photo] Mr. Redmond is Chairman and Chief Executive
Officer of The Washington Water Power
Company, Spokane, Washington, an electric and
gas utility. Mr. Redmond has been associated
with The Washington Water Power Company since
1965 and has served in various capacities,
including as Senior Vice President for
Operations, Executive Vice President and
President. He was
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elected to his current position in 1985. Mr.
Redmond had served as a Director of Old USB
since 1994. He serves as Chairman of the
Board of ITRON Inc. and also as a Director of
Hecla Mining Company. Mr. Redmond serves on
the Compensation and Human Resources
Committee.
- -----------------------------------------------------------------
S. WALTER RICHEY (Age 62) Director Since 1990
[Photo] Mr. Richey is Chairman and Chief Executive
Officer of Meritex, Inc., Minneapolis,
Minnesota, a company involved in real estate
management and development and warehousing.
Mr. Richey has been with Meritex, Inc. (and
its predecessor company) since 1973. He was
elected to his present position in 1978. Mr.
Richey also serves as a Director of Donaldson
Company, Inc. He is also a member of the
Board of Overseers of the Curtis L. Carlson
School of Management at the University of
Minnesota. Mr. Richey serves as Chair of the
Compensation and Human Resources Committee
and also as a member of the Executive
Committee, the Finance Committee and the
Governance Committee.
- -----------------------------------------------------------------
WALTER SCOTT, Jr. (Age 66) Director Since 1996
[Photo] Mr. Scott is Chairman, President and Chief
Executive Officer of Peter Kiewit Sons',
Inc., Omaha, Nebraska, a company engaged in
the construction, mining, telecommunications,
energy and computer outsourcing businesses.
Mr. Scott has been associated with Peter
Kiewit Sons' since 1949 and, with the
exception of a period of service with the
U.S. Air Force, has worked continuously for
the company on a full-time basis since 1953.
He has held numerous positions with the
company, including engineer, project
engineer, district engineer, assistant
district manager, district manager, Vice
President, Executive Vice President,
President, and Chairman, President and Chief
Executive Officer. He was elected to his
present position in 1979. Mr. Scott is also a
Director of Berkshire Hathaway Inc.,
Burlington Resources Inc., CalEnergy Company,
Inc., ConAgra, Inc., RCN Corporation,
Commonwealth Telephone Enterprises, Inc.,
Valmont Industries, Inc., and Northern
Electric plc. Mr. Scott's community
activities include serving as Chairman of the
Board of Policy Advisors for the University
of Nebraska Institute for Information
Science, Technology and Engineering, and as a
Director of the Heritage-Joslyn Foundation,
the Joslyn Art Museum, the Omaha Zoological
Society, the Omaha Zoo Foundation and the
Strategic Command Consultation Committee. Mr.
Scott serves as a member of the Finance
Committee and the Governance Committee.
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PROPOSAL II. AMENDMENT OF THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
Description of the Proposed Certificate Amendment
and Vote Required
On February 18, 1998, the Board of Directors adopted
resolutions (i) approving a proposal to amend Article FOURTH of
the Company's Restated Certificate of Incorporation to increase
the number of authorized shares of Common Stock from 500,000,000
shares, par value $1.25 per share, to 1,500,000,000 shares, par
value $1.25 per share, and to increase the number of authorized
shares of Preferred Stock from 10,000,000 shares, par value $1.00
per share, to 50,000,000 shares, par value $1.00 per share (the
"Certificate Amendment"), and (ii) subject to shareholder
approval of the Certificate Amendment, authorizing a
three-for-one stock split in the form of a 200% stock dividend
(the "Stock Split"). The Board of Directors determined that the
Certificate Amendment is advisable and directed that the
Certificate Amendment be considered at the 1998 Annual Meeting of
Shareholders. The affirmative vote of the holders of a majority
of the outstanding shares of Common Stock of the Company is
required to adopt the Certificate Amendment.
The full text of the proposed Certificate Amendment is as
follows:
RESOLVED, that the first sentence of Article
FOURTH of the Restated Certificate of Incorporation
of the Company be amended to read as follows:
"FOURTH: The total number of shares of all
classes of stock which the corporation shall have
the authority to issue is 1,550,000,000, consisting
of 50,000,000 shares of Preferred Stock of the par
value of $1.00 each and 1,500,000,000 shares of
Common Stock of the par value of $1.25 each."
Purposes and Effects of Increasing the Authorized Capital Stock
The Certificate Amendment would increase the number of
shares of Common Stock which the Company is authorized to issue
from 500,000,000 to 1,500,000,000 and the number of shares of
Preferred Stock which the Company is authorized to issue from
10,000,000 to 50,000,000.
The additional 1,000,000,000 shares of Common Stock for
which authorization is sought would be a part of the existing
class of the Company's Common Stock and, if and when issued,
would have the same rights and privileges as the shares of Common
Stock presently outstanding. Such additional shares of Common
Stock would not (and the shares of Common Stock currently
outstanding do not) entitle holders thereof to preemptive or
cumulative voting rights. The
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additional 40,000,000 shares of Preferred Stock for which
authorization is sought would be part of the existing class of
the Company's Preferred Stock and could be issued, with the
approval of the Board of Directors, without further action by the
shareholders (unless such action is required by applicable laws
or stock exchange regulation), in one or more series and with
such voting rights, designations, preferences, and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions contained in a
resolution or resolutions creating and designating such series.
The increase in authorized shares will, in addition to
providing sufficient Common Stock for issuance in connection with
the Stock Split, provide additional shares of Common Stock and
Preferred Stock for general corporate purposes, including future
stock dividends, raising additional capital, issuance pursuant to
employee benefit and shareholder stock plans and possible future
acquisitions. Other than the Stock Split, there are no present
plans, understandings or agreements for issuing a material number
of additional shares of Common Stock or any shares of Preferred
Stock from the additional shares of stock proposed to be
authorized pursuant to the Certificate Amendment.
The issuance of shares of Common Stock or Preferred Stock
(other than in the Stock Split or other pro rata stock dividends
on outstanding Common Stock), including the additional shares
that would be authorized if the Certificate Amendment is adopted,
may dilute the present equity ownership position of current
holders of Common Stock and may be made without shareholder
approval, unless otherwise required by applicable laws or stock
exchange regulation. Under existing NYSE regulations, approval of
the holders of a majority of the shares of Common Stock would
nevertheless generally be required in connection with any
transaction or series of related transactions that would result
in the original issuance of additional shares of Common Stock (or
securities convertible into or exercisable for Common Stock) (i)
if the Common Stock has, or will have upon issuance, voting power
equal to or in excess of 20% of the voting power outstanding
before the issuance of such Common Stock, (ii) if the number of
shares of Common Stock to be issued is or will be equal to or in
excess of 20% of the number of shares outstanding before the
issuance of the Common Stock, (iii) under certain circumstances,
if the issuance is (x) of more than 1% of either the number of
shares of Common Stock or the voting power outstanding before
such issuance and is to an officer or Director of the Company or
(y) of more than 5% of either the number of shares of Common
Stock or the voting power outstanding before such issuance and is
to a holder of more than 5% of either the number of shares of
Common Stock or the voting power outstanding, or (iv) if the
issuance would result in a change of control of the Company;
provided, however, that shareholder approval would not be
required for any such issuance involving (a) a public offering
for cash, or (b) certain "bona fide" private financings for cash,
if such financings involve the sale of Common Stock at a price
(or convertible securities with a conversion price) at least as
great as each of the book and market value of the Common Stock.
The Certificate Amendment might also have the effect of
discouraging an attempt by another person or entity, through the
acquisition of a substantial number of shares of Common Stock, to
acquire control of the Company with a view to consummating a
merger, sale of all or any part of the Company's assets or a
similar transaction, because the issuance of new
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shares of Common Stock or Preferred Stock could be used to dilute
the stock ownership of such person or entity. For instance,
although the Board of Directors has no intention at the present
time of doing so, it would have the power (subject to applicable
law or regulations) to issue a series of Preferred Stock that
could, depending on the terms of such series, impede the
completion of a merger, tender offer or other takeover attempt by
including class voting rights that would enable the holder to
block such a transaction.
The Board of Directors believes it is desirable to effect
the Stock Split and to have available additional authorized but
unissued shares that can be issued by the Board from time to
time, without the time delay and cost of shareholder approval
(except when approval is required by applicable law or NYSE
regulations as described above). If the Certificate Amendment is
adopted, there would be, after giving effect to the Stock Split,
approximately _____________ authorized shares of Common Stock and
approximately 49,987,250 authorized shares of Preferred Stock
that are not outstanding, reserved for issuance or held in the
treasury of the Company. As of March 2, 1998, the Company had
__________________ shares of Common Stock issued or reserved for
issuance, of which ______________ shares were outstanding,
___________ shares were held in the treasury of the Company, and
____________ shares were reserved for issuance under the
Company's 1997 Stock Incentive Plan, the Employee Stock Purchase
Plan, the Dividend Reinvestment Plan and certain outstanding
warrants, leaving _________ shares authorized, unreserved and
available for issuance. As of March 2, 1998, the Company had
12,750 shares of Preferred Stock reserved for issuance, all of
which are designated as Adjustable Rate Cumulative Preferred
Stock, Series 1990A. Of the additional shares of Common Stock
provided for by the Certificate Amendment, as of March 2, 1998,
approximately _________________ shares would be required to
effect the Stock Split and to be reserved for issuance under the
Company's stock-based plans and certain warrants as a result of
the Stock Split.
Purposes and Effects of Proposed Three-for-One Stock Split
The Board of Directors anticipates that the increase in the
number of outstanding shares of Common Stock of the Company
resulting from the three-for-one Stock Split will place the
market price of the Common Stock in a range more attractive to
some investors, particularly some individuals, and may result in
a broader market for the shares. The Company will apply for
listing of the additional shares of Common Stock to be issued
pursuant to the Stock Split on the NYSE, where shares of the
Company's Common Stock are listed for trading.
If the Certificate Amendment is adopted and the Stock Split
is effected, each shareholder of record at the close of business
on the Effective Date (defined below) would be the record owner
of, and entitled to receive, two additional shares of Common
Stock for each share of Common Stock then owned of record by such
shareholder.
The Company intends to continue to pay a cash dividend
quarterly on the Common Stock. Simultaneous with approval of the
Certificate Amendment, the Board of Directors declared a
quarterly cash dividend of $0.525 per share (equivalent to $0.175
per share on a post-split basis) payable March 15, 1998 to
holders of record of the Common Stock on March 2, 1998,
representing an increase in the quarterly dividend of $0.06 per
share (or approximately
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12.9%) from the 1997 dividend rate. No predictions can be made as
to future dividends. The decision to pay dividends is made
quarterly by the Board of Directors and depends on earnings, cash
flow requirements and other factors.
The Company has been advised by tax counsel that the
proposed Stock Split would result in no gain or loss or
realization of taxable income to owners of Common Stock under
existing United States Federal income tax laws and regulations.
The cost basis for tax purposes of each new share and each
retained share of Common Stock would be equal to one third of the
cost basis for tax purposes of the corresponding share
immediately preceding the Stock Split. In addition, the holding
period for the additional shares issued pursuant to the Stock
Split would be deemed to be the same as the holding period for
the original share of Common Stock. However, the laws of
jurisdictions other than the United States (including state and
foreign jurisdictions) may impose income taxes on the issuance of
the additional shares and shareholders are urged to consult their
personal tax advisors.
Shareholders who dispose of their shares subsequent to the
Stock Split may pay higher brokerage commissions on the same
relative interest in the Company because that interest is
represented by a greater number of shares. Shareholders may wish
to consult their respective brokers to ascertain the brokerage
commission that would be charged for disposing of the greater
number of shares.
In accordance with the Company's 1997 Stock Incentive
Plan, the Employee Stock Purchase Plan, the Dividend Reinvestment
Plan and certain warrants, it will be necessary to make
appropriate adjustments in the number of shares reserved for
issuance pursuant to such plans and warrants and, in the case of
the 1997 Stock Incentive Plan and warrants, in the exercise price
per share of awards granted under such plan and of the warrants.
On the Effective Date, the number of shares reserved for issuance
for awards to be granted under the 1997 Stock Incentive Plan will
be tripled. The number of shares to be acquired upon exercise of
outstanding stock options issued under the 1997 Stock Incentive
Plan would triple and the exercise price per share would be
divided by three.
If the Certificate Amendment is adopted and the Stock Split
is effected, for financial reporting purposes the value of the
Company's Common Stock account will be increased to reflect the
additional shares issued at par value $1.25 per share and the
value of the capital surplus account will be reduced a like
amount, with no overall effect on shareholders' equity. The
number of shares issued and outstanding, reserved for issuance
and held in the treasury would triple.
Effective Date of the Certificate Amendment and Issuance
of Shares For Stock Split
If the Certificate Amendment is adopted by the required
vote of shareholders, such amendment will become effective at the
close of business on May 4, 1998 (the "Effective Date"), which
would also constitute the record date for the determination of
the owners of Common Stock entitled to additional shares pursuant
to the Stock Split.
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Shares of Common Stock issued in the Stock Split will be
issued in book-entry form. If you are a shareholder of record at
the close of business on the Effective Date, book-entry shares
will be registered in your name on the records of the Company
maintained by First Chicago Trust Company of New York ("First
Chicago"), the Company's Stock Transfer Agent and Registrar. If
you prefer, you will have the opportunity to request physical
stock certificates to replace shares issued in book-entry form.
SHAREHOLDERS WHO HOLD STOCK CERTIFICATES ISSUED BY THE COMPANY
(INCLUDING UNDER ITS OLD NAME, "FIRST BANK SYSTEM, INC.") SHOULD
NOT SEND STOCK CERTIFICATES TO THE COMPANY OR FIRST CHICAGO. If
the Certificate Amendment is adopted and the Stock Split goes
forward, those certificates will remain valid for the number of
shares shown thereon, and should be carefully preserved by you.
You will be mailed an account statement reflecting only the
additional shares in book-entry form issued to you as a result of
the Stock Split. It is currently anticipated that account
statements reflecting additional shares will be mailed by First
Chicago on or about May 18, 1998.
Holders of certificates formerly representing common stock
of companies acquired by the Company, including Old USB
("Acquired Company Certificates"), will not be paid dividends or
distributions (including the Stock Split) until such Acquired
Company Certificates are surrendered for exchange into
certificates representing Common Stock of the Company. After the
proper surrender of Acquired Company Certificates, the record
holder thereof will be entitled to receive any such dividends or
distributions, without any interest thereon, which therefore had
become payable with respect to shares of the Company's Common
Stock issuable upon exchange of such Acquired Company
Certificates. HOLDERS OF ACQUIRED COMPANY CERTIFICATES ARE URGED
TO FORWARD SUCH CERTIFICATES TO FIRST CHICAGO FOR EXCHANGE
ACCOMPANIED BY APPROPRIATE TRANSMITTAL FORMS. Holders of Acquired
Company Certificates should contact First Chicago at (800)
482-1376 to obtain additional copies of the appropriate
transmittal forms and should comply with the instructions
contained therein in tendering any Acquired Company Certificates.
HOLDERS OF ACQUIRED COMPANY CERTIFICATES ARE RESPONSIBLE FOR
ENSURING DELIVERY OF THE ACQUIRED COMPANY CERTIFICATES TO FIRST
CHICAGO. DO NOT SEND ANY ACQUIRED COMPANY CERTIFICATES TO THE
COMPANY.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO AMEND ARTICLE FOURTH OF THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED CAPITAL
STOCK OF THE COMPANY TO 1,550,000,000 SHARES, CONSISTING OF
50,000,000 SHARES OF PREFERRED STOCK, PAR VALUE $1.00 PER SHARE,
AND 1,500,000,000 SHARES OF COMMON STOCK, PAR VALUE $1.25 PER
SHARE. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE VOTED
FOR THE CERTIFICATE AMENDMENT UNLESS OTHERWISE SPECIFIED.
PROPOSAL III. SELECTION OF AUDITORS
The Board of Directors of the Company has selected the
firm of Ernst & Young LLP as independent auditors of the Company
for the fiscal year ending December 31, 1998. A proposal to
ratify the appointment of Ernst & Young will be presented at the
meeting. Representatives of
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Ernst & Young are expected to be present at the meeting, will
have an opportunity to make a statement if they desire to do so
and will be available to answer appropriate questions from
shareholders. If the appointment of Ernst & Young is not ratified
by the shareholders, the Board of Directors is not obligated to
appoint other auditors, but will give consideration to such
unfavorable vote.
The Audit Committee of the Board of Directors has
recommended to the full Board the appointment of Ernst & Young,
after carefully considering the qualifications of such firm. This
included a review of its performance in prior years as well as
its reputation for integrity and competence in the fields of
auditing and accounting. The Audit Committee has expressed its
satisfaction with Ernst & Young in all of these respects.
Proxies will be voted in favor of ratifying this selection
unless otherwise specified. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR RATIFICATION OF THE SELECTION OF ERNST & YOUNG
LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1998.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 2, 1998 the
beneficial ownership (as defined in the rules of the Securities
and Exchange Commission) of the Company's Common Stock by
Directors, the executive officers named in the Summary
Compensation Table below and by all Directors and executive
officers as a group. Except as otherwise indicated, the named
beneficial owner has sole voting and investment power with
respect to the shares held by such beneficial owner.
Shares
Beneficially Approximate
Owned(1) Percent of Class
------------ ----------------
Linda L. Ahlers ................. *
Harry L. Bettis ................. (2) __%
Gerry B. Cameron ................ (3)(4) *
Carolyn Silva Chambers .......... *
Arthur D. Collins, Jr. .......... *
Peter H. Coors .................. *
Franklin G. Drake ............... (5) *
Robert L. Dryden ................ *
John B. Fery .................... *
Joshua Green III ................ (6) __%
John F. Grundhofer .............. (3)(7) *
Roger L. Hale ................... *
Delbert W. Johnson .............. *
Norman M. Jones ................. (8) *
Richard L. Knowlton ............. *
Jerry W. Levin .................. *
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Kenneth A. Macke ................ (9) *
Allen T. Noble .................. *
Edward J. Phillips .............. *
Paul A. Redmond ................. (10) *
S. Walter Richey ................ (11) *
Richard L. Robinson ............. (12) *
N. Stewart Rogers ............... *
Richard L. Schall ............... (13) *
Walter Scott, Jr. ............... (14) *
Benjamin R. Whiteley ............ (15) *
Gary T. Duim .................... (3)(16) *
Philip G. Heasley ............... (3) *
Robert D. Sznewajs .............. (3)(17) *
Richard A. Zona ................. (3) *
All Directors and executive
officers as a group
(39 persons) .................... (18) __%
- ---------------------
* Excluded because percentage beneficially owned is less than
1% of the Common Stock.
(1) Includes the following shares subject to options exercisable
within 60 days: Ms. Ahlers, 1,734 shares; Mr. Bettis, 6,040
shares; Mr. Cameron, 169,827 shares; Ms. Chambers, 9,438
shares; Mr. Collins, 5,700 shares; Mr. Coors, 5,700 shares;
Mr. Drake, 12,560 shares; Mr. Dryden, 11,440 shares; Mr.
Fery, 6,040 shares; Mr. Green, 6,040 shares; Mr. Grundhofer,
456,981 shares; Mr. Hale, 5,308 shares; Mr. Johnson, 8,200
shares; Mr. Knowlton, 5,633 shares; Mr. Levin, 5,700 shares;
Mr. Macke, 1,425 shares; Mr. Phillips, 5,211 shares; Mr.
Redmond, 14,269 shares; Mr. Rogers, 17,407 shares; Mr.
Schall, 8,200 shares; Mr. Scott, 4,200 shares; Mr. Whitely,
10,239 shares; Mr. Duim, 30,496 shares; Mr. Heasley, 82,902
shares; Mr. Sznewajs, 30,300 shares; and Mr. Zona, 188,361
shares.
(2) Includes 88,788 shares held by a limited partnership of
which Mr. Bettis is the general partner; 925,163 shares held
by a charitable foundation of which he is the president; and
373,122 shares held by a trust for the benefit of his
children and of which he is the trustee.
(3) Includes the following shares held in the CAP: Mr. Cameron,
______ shares; Mr. Grundhofer, _______ shares; Mr. Duim,
______ shares; Mr. Heasley, ______ shares; Mr. Sznewajs,
______ shares; and Mr. Zona, ______ shares. Ownership
information with respect to shares held in the CAP is
provided as of December 31, 1997, the most recent date for
which information is available. Voting of shares held in the
CAP is passed through to the participating employees;
however, if a proxy is not received with respect to such
shares, such shares will be voted by the trustee in
accordance with the terms of the CAP. See "General Matters
-- Voting, Execution and Revocation of Proxies" above.
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(4) Includes 20,000 shares held by a charitable foundation
created by Mr. Cameron.
(5) Excludes 4,455 shares owned by Mr. Drake's wife, as to which
he has no voting or investment power and disclaims
beneficial ownership, and includes 2,951 shares held in a
trust for the benefit of Mr. Drake's children of which he is
the trustee.
(6) Includes 1,646,138 shares owned by Joshua Green Corporation,
of which Mr. Green is chairman and chief executive officer;
3,977,625 shares held by a limited partnership of which
Joshua Green Corporation is the general partner; 148,959
shares held by various trusts as to which Mr. Green has
shared voting and investment power and of which various
family members of Mr. Green are beneficiaries; and 295,379
shares held by a charitable foundation of which Mr. Green is
president. Mr. Green owns 59% of the voting common stock of
Joshua Green Corporation and has sole voting power over
another 20% of such stock; accordingly, the other
shareholders and Directors of Joshua Green Corporation are
not deemed to have shared voting and dispositive power over
the shares of the Company's Common Stock beneficially owned by
Joshua Green Corporation by reason of their capacities as such.
Excludes 4,574 shares held by Mr. Green's wife, as to which
he has no voting or investment power and disclaims
beneficial ownership.
(7) Includes 186,554 shares held in a family trust of which Mr.
Grundhofer is the trustee, as to which he shares voting and
investment power, and 5,000 shares held in a charitable
foundation created by Mr. Grundhofer.
(8) Includes 23,497 shares held by Mr. Jones' wife and 2,682
shares held by Mr. Jones' grandchildren, as to which he
shares voting and investment power; ________ shares held by
a charitable trust of which he is a trustee and as to which
he shares voting and investment power; and 34,400 shares
held by a family trust of which he is a trustee and as to
which he shares voting and investment power.
(9) Excludes 500 shares held in a trust for the benefit of Mr.
Macke's children, as to which he has no voting or investment
power and disclaims beneficial ownership.
(10) Includes 942 shares held in joint tenancy with Mr. Redmond's
wife, as to which he shares voting and investment power.
(11) Excludes 2,551 shares held by Mr. Richey's wife, as to which
he has no voting or investment power and disclaims
beneficial ownership.
(12) Includes 129 shares held by a general partnership of which
Mr. Robinson is a partner, as to which he shares
voting and investment power.
(13) Includes 12,000 shares held in a family trust of which Mr.
Schall is a trustee and as to which he shares voting and
investment power.
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(14) Includes 711,803 shares held by a corporation controlled by
Mr. Scott, as to which he shares voting and investment
power and disclaims beneficial ownership.
(15) Excludes 755 shares held by Mr. Whiteley's wife, as to which
he has no voting or investment power and disclaims
beneficial ownership.
(16) Includes 1,530 shares held by a charitable foundation
created by Mr. Duim.
(17) Includes 15,610 shares held in a trust of which
Mr. Sznewajs is a trustee and as to which he shares voting and
investment power.
(18) Includes (i) ______ shares held in the CAP for the accounts
of certain executive officers as of December 31, 1997; and
(ii) 1,397,339 shares subject to options exercisable within
60 days.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's Directors and executive officers
and all persons who beneficially own more than 10% of the
outstanding shares of the Company's Common Stock to file with the
Securities and Exchange Commission and the NYSE initial reports
of ownership and reports of changes in ownership of such Common
Stock. Directors, executive officers and greater-than-10%-
beneficial owners are also required to furnish the Company with
copies of all Section 16(a) reports they file. To the Company's
knowledge, based upon a review of the copies of such reports and
certain representations furnished to the Company with respect to
the fiscal year ended December 31, 1997, all Section 16(a) filing
requirements applicable to the Company's Directors, executive
officers and greater-than-10%-beneficial owners were complied
with.
EXECUTIVE COMPENSATION
Report of the Compensation and Human Resources Committee
on Executive Compensation
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.
The 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 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.
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Role of the Committee
The Compensation and Human Resources Committee of the Board
of Directors (the "Committee") seeks to maintain executive
compensation policies which 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 which 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 nine 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 not comprised of the
same companies contained in the peer group index under
"Comparative Stock Performance" below, all of the comparator
companies are included in such peer group 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
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considered the performance of the Company's Common Stock. In this
regard, the Committee considers the performance of the Company's
Common Stock to be a favorable factor; 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 of 1986, as
amended (the "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 believes that
such qualification has been achieved. The Company 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
so 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 1997, base salaries were below the 50th percentile market
level of the comparator group. This is consistent with the
Company's strategic objectives.
Each year, Mr. 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. Grundhofer's report
and his performance is the subject of an executive session of the
Board. Subsequently, the Committee Chair prepares a formal
response which serves as Mr. Grundhofer's appraisal. The
Committee determines Mr. Grundhofer's salary for the coming year,
and his base salary is adjusted accordingly. In determining Mr.
Grundhofer's base salary adjustment, the Committee considers Mr.
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 a prior employment agreement between Mr.
Grundhofer and the Company, Mr. Grundhofer received the annual
base salary reported in the Summary Compensation Table from
December 1, 1994 through December 31, 1996. Mr. Grundhofer's base
salary was raised by $130,000 to $750,000 effective January 1,
1997. This increase positioned Mr. Grundhofer's base salary below
the 50th percentile of the comparator group, consistent with the
Company's executive compensation philosophy. Pursuant to the
current employment agreement dated
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August 1, 1997 between Mr. Grundhofer and the Company, Mr.
Grundhofer's base salary was raised by $90,000 to $840,000
effective August 1, 1997. This increase also positioned Mr.
Grundhofer's base salary below the 50th percentile of the
comparator group. 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 among the
Company's compensation comparator companies 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.
In 1997, the Company's targeted bonus level was above the
50th percentile level of the comparator group of companies, and
overall total targeted base pay plus bonus was approximately
equal to the 50th percentile. The Company's performance in 1997
exceeded the target level of performance. Specifically, with
respect to profitability factors, the Company exceeded its goals
for return on assets, net income, net charge-offs, noninterest
expense, and efficiency ratio. In addition, in measuring the
Company's performance relating to growth goals, the Committee
noted the Company's successful efforts to reposition its
businesses to remain competitive in a changing industry. Those
successful efforts included the integration of acquired
financial institutions, the introduction of new technology
throughout the Company, the effective conversion of acquired
banks' services, the internal growth of key businesses, the
development of people, and strategic leadership. In analyzing the
Company's risk management, the Committee observed that the
Company met its goals with respect to credit quality management.
As a result, actual bonus awards exceeded the target level.
Mr. 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. Because the Company exceeded its target
performance for 1997 based on the factors described in the
preceding paragraph, Mr. Grundhofer's actual bonus, as reported
in the Summary Compensation Table, was significantly above
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. During
1997, the Company granted stock options and restricted stock to
the six named executive officers. The following describes the
Company's practices relative to each long-term incentive vehicle.
Stock Options. During 1997, the Company granted reload
stock options to most executives, including three of the six
named executive officers, and regular stock options to all of the
six named executive officers. Under the 1997 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. The Company believes
that reload stock options advance its objective of executive
equity ownership by encouraging executives to exercise their
stock options, and thereby increase their direct equity
ownership, more quickly than if reload stock options were not
available.
In determining the actual size of regular 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.
Mr. Grundhofer in 1997 received regular stock options and
reload stock options as set forth in the Summary Compensation
Table. All of the options granted to Mr. Grundhofer have an
exercise price equal to the fair market value on the date of
grant. The number of reload stock options granted to Mr.
Grundhofer was equal to the number of shares of the Company's
Common Stock he tendered to the Company in payment of the
exercise price of options exercised during 1997, plus the number
of shares withheld by the Company in payment of the taxes arising
from the exercises.
Restricted Stock. The 1997 Stock Incentive Plan also
provides for the granting of restricted stock to executives. In
1997, restricted stock was granted to the six named executive
officers in order to improve the Company's ability to retain the
individuals who have been and will be critical to the long-term
financial success of the Company. In determining the size of
restricted stock grants, the Committee considers competitive
practices, individual contributions, and the dollar value of the
stock. However, formal weightings have not been assigned to these
factors. The restricted stock award to Mr. Grundhofer is set
forth in the Summary Compensation Table.
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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.
S. Walter Richey, Chair
Arthur D. Collins, Jr.
Robert L. Dryden
Delbert W. Johnson
Jerry W. Levin, Vice Chair
Richard L. Knowlton
Kenneth A. Macke
Paul A. Redmond
Richard L. Robinson
Employment Contracts for the Named Executive Officers
The Company has entered into employment agreements with
each of the executive officers named in the Summary Compensation
Table below. Under Mr. Cameron's agreement, he will serve as
Chairman of the Company through December 31, 1998 at an annual
salary not less than $840,000 and bonus such that his total cash
compensation is equal to the greater of his total salary
($800,000) and bonus ($848,640) in 1996 at Old USB, or the salary
and bonus for the year in question of the Company's Chief
Executive Officer. The employment agreement provides for lifetime
life insurance of $1 million. In the event Mr. Cameron's
employment is terminated by the Company without cause (as defined
in the agreement) or by Mr. Cameron for good reason (as defined
in the agreement), he will receive a lump-sum payment equal to
his base salary and annual bonus for the remainder of the term of
the agreement, the stock options and restricted stock granted
under the agreement will immediately vest, he will be provided
certain other enhanced benefits (including lifetime medical
benefits for himself and his spouse), and the Company will pay
any excise taxes which he may incur as a result of such payments,
and any income and excise taxes on such excise tax payments. Upon
his termination of employment for any reason, Mr. Cameron is
entitled to an annual pension benefit equal to $1 million per
year for life (less any benefit payable pursuant to the Company's
qualified retirement plan), and if his current wife survives him,
she will be entitled to receive an annual benefit of $500,000 per
year for her life.
Under Mr. Grundhofer's employment agreement, he will serve
as the Chief Executive Officer for a five-year term commencing
August 1, 1997, which term will automatically be extended by one
year on each anniversary of the commencement date unless either
party notifies the other of its intention not to renew the
agreement. Mr. Grundhofer's current annual base salary is
$840,000, and he is entitled to a performance-based annual bonus.
In the event Mr. Grundhofer's employment is terminated by the
Company without cause (as defined in the agreement) or by Mr.
Grundhofer for good reason (as defined in the agreement), he will
receive a
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lump-sum payment equal to three times his base salary and annual
bonus, all of his nonvested stock options and restricted stock
which would have vested during the remaining term of the
employment agreement will immediately vest, he will be provided
certain other enhanced benefits, including an additional three
years of service credit (five additional years if his employment
is terminated within two years of a change in control) for
purposes of computing his retirement benefit under the
Supplemental Executive Retirement Plan. The Company also will pay
any excise taxes which he may incur as a result of such payments,
and any income and excise taxes on such excise tax payments.
Certain special provisions apply to the determination and payment
of bonus awards if termination occurs in anticipation of or
within twenty-four months following a change in control. Pursuant
to his employment agreement, Mr. Grundhofer is entitled to a
minimum annual retirement benefit of $1 million from all of the
Company's qualified and nonqualified plans commencing at age 65.
Under the employment agreements and individual
change-in-control severance agreements for the remaining four
named executive officers, each of them will serve as Vice
Chairman of the Company for a period of three years beginning
August 1, 1997 and each will receive the same annual salary and
bonus. The agreements each provide for certain payments in the
event the respective employee's employment is terminated by the
Company other than for "cause" or by the individual for "good
reason," as such terms are defined in the agreements. With
respect to Messrs. Zona and Heasley, the agreements provide for a
lump-sum payment equal to three times the terminated individual's
annual salary plus the highest actual bonus paid to the executive
in any of the three years prior to the date of the Merger,
accelerated vesting of restricted stock and stock options,
certain other enhanced benefits and payment of any excise taxes
which may be incurred as a result of such payments, and any
income and excise taxes on such excise tax payments. The
agreements with Messrs. Sznewajs and Duim provide for
substantially similar benefits if their employment is terminated
in connection with a change in control of the Company. Otherwise,
the agreements with Messrs. Sznewajs and Duim provide for a
lump-sum payment equal to the product of (i) the number of months
remaining in the term of the agreement divided by 12,
multiplied by (ii) annual salary plus the highest actual bonus
paid to the executive in any of the three years prior to the
Merger. In addition, Messrs. Sznewajs' and Duim's restricted
stock and stock options will immediately vest (except that in the
event of termination by the executive for good reason, 25,000
shares of restricted stock would not vest), they will receive
certain other enhanced benefits and the Company will pay any
excise taxes which may be incurred as a result of such payments,
and any income and excise taxes on such excise tax payments.
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 of the Company and the
five other highest paid executive officers of the Company whose
salary and bonus paid by the Company in 1997 exceeded $100,000
(the "Named Executive Officers").
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Summary Compensation Table
Annual Compensation Long-Term Compensation
------------------------------------ ----------------------------------------------------
Long-
Restricted Securities Term
Other Annual Stock Underlying Incentive All Other
Name and Compensation Award(s) Options/ Payouts Compensation
Principal Position Year Salary($) Bonus($) ($) ($)(4) SARs(#) ($) ($)
- -------------------------- ---- --------- --------- ------------ ---------- --------- --------- --------
John F. Grundhofer 1997 787,500 1,764,000 140,946 (2) 4,346,875 572,715 88,539 (6)
President and 1996 620,000 1,302,000 144,106 (2) 0 753,366 64,169
Chief Executive Officer 1995 620,000 1,085,000 124,342 (2) 0 247,991 49,189
Gerry B. Cameron (1) 1997 350,000 1,764,000 2,114 (3) 6,520,313 200,000 3,611,789(5) 5,545,243 (7)
Chairman 1996
1995
Philip G. Heasley 1997 429,583 750,000 8,286 (3) 6,101,250 11,394 28,078 (8)
Vice Chairman 1996 324,792 635,200 7,669 (3) 0 192,265 20,214
1995 305,000 480,000 7,669 (3) 0 139,000 14,072
Richard A. Zona 1997 429,583 750,000 9,828 (3) 6,101,250 69,222 40,536 (8)
Vice Chairman 1996 363,750 712,200 8,423 (3) 0 330,804 26,808
1995 340,000 595,000 8,423 (3) 0 119,766 17,261
Gary T. Duim (1) 1997 187,500 750,000 2,055 (3) 4,346,875 100,000 675,970(5) 2,729,968 (9)
Vice Chairman 1996
1995
Robert D. Sznewajs (1) 1997 187,500 750,000 1,936 (3) 4,346,875 100,000 1,186,928(5) 3,364,700 (9)
Vice Chairman 1996
1995
</TABLE>
- ----------------------
(1) Mr. Cameron, Mr. Duim and Mr. Sznewajs became employees of
the Company following the Merger on August 1, 1997.
(2) Benefits received by Mr. Grundhofer include transportation-
related expenses of $45,878 in 1997, $55,276 in 1996 and
$41,711 in 1995.
(3) Perquisites which 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.
(4) 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,
1997 with market values as of such date as follows: Mr.
Grundhofer, 104,545 shares valued at $11,702,506; Mr.
Cameron, 75,000 shares valued at $8,395,313; Mr. Heasley,
99,394 shares valued at $11,125,916; Mr. Zona, 111,515
shares valued at $12,482,710; Mr. Duim, 50,000 shares valued
at $5,596,875; and Mr. Sznewajs, 50,000 shares valued at
$5,596,875. Mr. Cameron was granted 75,000 shares of
restricted stock on August 1, 1997, all of which vest on the
earliest of December
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31, 1998, a change of control, his death, his termination
without cause or his resignation for good reason. Mr.
Grundhofer was granted 50,000 shares of restricted stock on
August 1, 1997, vesting in equal installments over five
years or fully on a change of control, his death or
disability, his termination without cause or his
resignation for good reason. Messrs. Duim and Sznewajs were
each granted 50,000 shares of restricted stock on August 1,
1997, of which 8,333 shares vest on August 1, 1998, 8,333
shares vest on August 1, 1999 and 33,334 shares vest on
August 1, 2000 or fully on a change of control, their death
or disability, their termination without cause or their
resignation for good reason (except that in the event of
termination by the executive for good reason, 25,000 shares
of restricted stock would not vest). Messrs. Heasley and
Zona were each granted 60,000 shares of restricted stock
on November 2, 1997, of which 10,000 shares vest on
November 2, 1998, 10,000 shares vest on November 2, 1999,
10,000 shares vest on November 2, 2000 and 30,000 shares
vest on November 2, 2001 or fully on a change of control,
their death or disability, their termination without cause
or their resignation for good reason.
(5) Represents amounts paid by the Company following the Merger
or accrued by the Company under Old USB's Performance Share
Plan and Performance Cash Plan for the partial period ended
July 31, 1997.
(6) Includes (a) imputed income in the amount of $15,830 arising
from premiums paid by the Company with respect to life
insurance for the benefit of Mr. Grundhofer; (b) $67,959
paid pursuant to the Company's flexible compensation program
(net of amounts used to purchase benefits), $9,500 of which
was applied to Mr. Grundhofer's account in the CAP and
$58,459 of which was paid in cash; and (c) a matching
contribution made by the Company to Mr. Grundhofer's CAP
account in the amount of $4,750.
(7) Includes (a) $743 paid pursuant to the Company's flexible
compensation program (net of amounts used to purchase
benefits); (b) a matching contribution made by the Company
to Mr. Cameron's CAP account in the amount of $9,500; (c) a
contribution in the amount of $81,403 to Old USB's
Supplemental Benefits Plan that would have been allocated to
Mr. Cameron's CAP account had compensation subject to the
plan included deferred compensation and had limits under the
Code not been applicable; and (d) a payment of $5,453,597 in
connection with the Merger.
(8) Includes (a) amounts paid pursuant to the Company's flexible
compensation program (net of amounts used to purchase
benefits) as follows: Mr. Heasley, $23,328 and Mr. Zona,
$35,786; and (b) matching contributions made by the Company
to Mr. Heasley's and Mr. Zona's CAP accounts in the amount
of $4,750 each.
(9) Includes (a) a matching contribution made by the Company to
Mr. Duim's and Mr. Sznewajs' CAP accounts in the amount of
$9,500 each; (b) a contribution by the Company to Old USB's
Supplemental Benefits Plan that would have been allocated to
Mr. Duim's and Mr. Sznewajs' CAP accounts had compensation
subject to the plan
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included deferred compensation and had limits under the
Code not been applicable: to Mr. Duim, $23,950 and to Mr.
Sznewajs, $34,417; and (c) payments in connection with the
Merger of $2,696,518 to Mr. Duim and of $3,320,783 to Mr.
Sznewajs.
Stock Options
The following tables summarize stock option grants and
exercises during 1997 to or by the Named Executive Officers and
the values of options granted during 1997 and held by such
persons at the end of 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Option Grants in Year Ended December 31, 1997
Potential Realizable Value at
Individual Grants (1) (2) Assumed Annual Rates of
-------------------------------------------------- Stock Price Appreciation
for Option Term
Number of % of Total -------------------------------------------
Securities Options 5% ($) 10% ($)
Underlying Granted to Exercise ------------------- --------------------
Options Employees in or Base Expiration Stock Stock
Name Granted (#) Fiscal Year Price ($/Sh) Date Price Value Price Value
- ------------------ ----------- ------------ ------------ ---------- ------ --------- ------ ----------
John F. Grundhofer 71,373 (1) $72.6250 1/30/2000 $83.13 749,773 94.57 1,566,280
8,475 (1) 72.6250 2/19/2001 87.50 126,066 104.52 270,310
15,324 (1) 72.6250 1/15/2002 91.48 288,934 113.99 633,877
13,697 (1) 72.6250 1/19/2003 96.10 321,537 125.51 724,366
77,642 (1) 72.6250 1/19/2004 100.90 2,195,328 138.06 5,080,504
150,000 (2) 86.9375 8/1/2007 141.61 8,200,875 225.49 20,782,875
9,550 (1) 105.7500 1/15/2002 129.99 231,492 158.26 501,471
22,567 (1) 105.7500 1/19/2003 136.56 695,289 174.25 1,545,840
112,297 (1) 105.7500 1/19/2004 143.38 4,225,736 191.68 9,649,681
91,790 (1) 105.7500 12/19/2006 165.26 5,462,423 252.94 13,510,570
----------
572,715 10.1%
Gerry B. Cameron 200,000 (3) 3.5% 86.9375 8/1/2007 141.61 10,934,905 225.49 27,711,197
Philip G. Heasley 624 (1) 72.2500 12/19/2006 115.86 27,213 181.77 68,340
2,296 (1) 103.5000 2/16/2003 134.17 70,418 171.85 156,932
7,949 (1) 103.5000 1/19/2004 140.40 293,318 187.78 669,942
525 (1) 103.5000 12/19/2006 161.82 30,618 247.80 75,758
----------
11,394 0.2%
Richard A. Zona 729 (1) 71.0000 1/19/2004 98.79 20,259 135.36 46,918
2,639 (1) 71.8750 2/16/2003 95.43 62,162 125.05 140,329
29,909 (1) 71.8750 1/19/2004 99.81 835,508 136.51 1,933,168
35,945 (1) 103.5000 12/19/2006 161.82 2,096,312 247.80 5,186,864
----------
69,222 1.2%
Gary T. Duim 100,000 (2) 1.8% 86.9375 8/1/2007 141.61 5,467,453 225.49 13,855,598
Robert D. Sznewajs 100,000 (2) 1.8% 86.9375 8/1/2007 141.61 5,467,453 225.49 13,855,598
</TABLE>
- -------------------
(1) Represent reload stock options. Optionees 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
withhold sufficient shares to pay the taxes arising from the
exercise. The options described above are reload stock
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options to purchase the number of shares thus tendered
and/or withheld. The reload option will have an exercise
price equal to the closing price of the Common Stock on the
date of exercise of the base option, will be first
exercisable six months from such date and will expire on the
scheduled expiration date of the base option. All reload
options become fully exercisable in connection with a change
in control of the Company (as defined). The reload options
are nontransferable except to certain family members
or investment vehicles.
(2) The options were granted on August 1, 1997. One-third of the
total grant becomes exercisable on August 1, 1998, an
additional one-third becomes exercisable on August 1, 1999
and the final one-third becomes exercisable on August 1,
2000. The options also become fully exercisable upon the
executive's death or disability, upon a change of control,
or upon the executive's termination without cause or
resignation for good reason. The options are nontransferable
except to certain family members or investment vehicles.
(3) The options were granted on August 1, 1997. All of the
options become exercisable on December 31, 1998. The options
also become fully exercisable upon the executive's death or
disability, upon a change of control, or upon the executive's
termination without cause or resignation for good reason. The options
are nontransferable except to certain family members or investment
vehicles.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Aggregated Option Exercises In Last Fiscal Year
and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options Options
Acquired Value at 12/31/97(#) at 12/31/97($)(1)
On -------------- ----------------
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------------- ----------- ------------- ----------- -------------
John F. Grundhofer 495,766 $13,515,298 220,777 609,538 $9,404,362 $14,605,498
Gerry B. Cameron 48,745 3,311,654 207,993 200,000 13,675,975 5,000,000
Philip G. Heasley 53,374 608,562 72,132 90,770 4,077,301 3,455,871
Richard A. Zona 88,206 1,941,356 152,416 122,612 7,190,883 3,948,716
Gary T. Duim 25,190 1,602,182 41,821 100,000 2,850,472 2,500,000
Robert D. Sznewajs - - 54,300 100,000 3,427,502 2,500,000
</TABLE>
- ---------------
(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.
Personal Retirement Account
Effective July 1, 1986, the Company adopted a career
average pay defined benefit pension plan known as the "Personal
Retirement Account" ("PRA"). Essentially all full-time employees
of the Company and its subsidiaries are eligible to participate
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in PRA. As of December 31, 1997, 10,641 employees were
participating in PRA. Under the terms of PRA, a separate
"account" is maintained for each employee participating in the
plan. Each year, credits of from 3% to 6% of the participant's
total compensation for that year plus 3% of the participant's
total compensation in excess of $5,000 for that year are made to
the account for the participant. The basic percentage varies
depending upon the participant's number of years of service. If
the participant has less than ten years of service, the
percentage is 3%. If the participant has ten but less than twenty
years of service, the percentage is 4%. If the participant has
twenty but less than twenty-five years of service, the percentage
is 5%. If the participant has twenty-five or more years of
service, the percentage is 6%. Interest is credited to such
accounts. In addition, the plan provides certain special
additional credits for the accounts of 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 fifty 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 survivors of the participant. 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.
The Company maintains an unfunded deferred compensation
plan known as the Defined Benefit Excess Plan to provide
retirement benefits which would have been provided under the PRA
but for certain limitations established under the Code.
Based upon a number of assumptions, including retirement at
age 65, the following estimated annual payments would be made
upon retirement pursuant to the PRA and the Defined Benefit
Excess Plan to the following individuals: Mr. Grundhofer,
$373,996; Mr. Heasley, $641,249; and Mr. Zona, $413,741.
Old USB Retirement Plan
The Old USB Retirement Plan (the "Retirement Plan") covers
certain eligible employees and officers of the Company and its
participating subsidiaries who formerly were employees of Old
USB. The Retirement Plan provides for payment of monthly pension
benefits based upon an employee's years of service and
compensation level. Pursuant to the Old USB Supplemental Benefits
Plan (the "Supplemental Plan"), designated key employees,
including Mr. Sznewajs and Mr. Duim, will receive retirement
benefits in addition to those payable under the Retirement Plan.
The following table shows the estimated annual benefits payable
under the Retirement Plan (including amounts payable pursuant to
applicable provisions of the Supplemental Plan) for participants
with various years of benefit service and specified levels of
compensation (based on the average during the five consecutive
calendar years out of the last ten years for which compensation
was highest ("Highest Average Compensation")). The amounts shown
in the table are offset by an age 62 Social Security benefit of
$13,420.
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
U.S. BANCORP
ESTIMATED ANNUAL BENEFITS
Years of Service
Highest 5-Year
Average Covered
Compensation 15 20 25 30 35 45
$125,000 $38,143 $55,330 $55,330 $55,330 $55,330 $55,330
$150,000 $48,455 $69,080 $69,080 $69,080 $69,080 $69,080
$175,000 $58,768 $82,830 $82,830 $82,830 $82,830 $82,830
$200,000 $69,080 $96,580 $96,580 $96,580 $96,580 $96,580
$225,000 $79,393 $110,330 $110,330 $110,330 $110,330 $110,330
$250,000 $89,705 $124,080 $124,080 $124,080 $124,080 $124,080
$300,000 $110,330 $151,580 $151,580 $151,580 $151,580 $151,580
$350,000 $130,955 $179,080 $179,080 $179,080 $179,080 $179,080
$400,000 $151,580 $206,580 $206,580 $206,580 $206,580 $206,580
$450,000 $172,205 $234,080 $234,080 $234,080 $234,080 $234,080
$500,000 $192,830 $261,580 $261,580 $261,580 $261,580 $261,580
$550,000 $213,455 $289,080 $289,080 $289,080 $289,080 $289,080
$600,000 $234,080 $316,580 $316,580 $316,580 $316,580 $316,580
$650,000 $254,705 $344,080 $344,080 $344,080 $344,080 $344,080
$700,000 $275,330 $371,580 $371,580 $371,580 $371,580 $371,580
$750,000 $295,955 $399,080 $399,080 $399,080 $399,080 $399,080
$800,000 $316,580 $426,580 $426,580 $426,580 $426,580 $426,580
$850,000 $337,205 $454,080 $454,080 $454,080 $454,080 $454,080
$900,000 $357,830 $481,580 $481,580 $481,580 $481,580 $481,580
$950,000 $378,455 $509,080 $509,080 $509,080 $509,080 $509,080
$1,000,000 $399,080 $536,580 $536,580 $536,580 $536,580 $536,580
$1,050,000 $419,705 $564,080 $564,080 $564,080 $564,080 $564,080
$1,100,000 $440,330 $591,580 $591,580 $591,580 $591,580 $591,580
$1,150,000 $460,955 $619,080 $619,080 $619,080 $619,080 $619,080
$1,200,000 $481,580 $646,580 $646,580 $646,580 $646,580 $646,580
$1,250,000 $502,205 $874,080 $674,080 $674,080 $674,080 $674,080
$1,300,000 $522,830 $701,580 $701,580 $701,580 $701,580 $701,580
$1,350,000 $543,455 $729,080 $729,080 $729,080 $729,080 $729,080
$1,400,000 $564,080 $756,580 $756,580 $756,580 $756,580 $756,580
$1,450,000 $584,705 $784,080 $784,080 $784,080 $784,080 $784,080
$1,500,000 $605,330 $811,580 $811,580 $811,580 $811,580 $811,580
$1,550,000 $625,955 $839,080 $839,080 $839,080 $839,080 $839,080
</TABLE>
Compensation, for purposes of determining retirement
benefits payable under the Retirement Plan, generally consists of
a participant's non-deferred compensation up to a maximum annual
limit imposed by the Code and excludes amounts paid in excess of
limits on variable items such as commissions and long-term
incentive compensation. Internal Revenue Code limits are
disregarded, and deferred compensation is included in determining
retirement benefits payable, under the combined provisions of the
Retirement Plan and Supplemental Plan. Retirement benefits in the
table above are expressed in terms of single life annuities.
Benefits may be reduced from the amounts shown in the table if
the participant retires early (before age 65) or if the
participant elects to have benefits paid as a joint and survivor
annuity.
Messrs. Sznewajs and Duim have been awarded an enhanced
retirement benefit under the Supplemental Plan. Their enhanced
retirement benefit will depend on their respective years of benefit service
upon retirement. Their enhanced retirement benefits will equal a
fraction (2.75% multiplied by the number of years of benefit
service, up to a maximum of 55%) multiplied by
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their respective Highest Average Compensation. For this
purpose, Mr. Sznewajs has been credited with 11 years of benefit
service for service with a prior employer and, as of December 31,
1997, had a total of 14.735 years of benefit service credited to
his account, and, as of the same date Mr. Duim had a total of
9.929 years of benefit service credited to his account. Messrs.
Sznewajs and Duim are each fully vested in their respective
enhanced retirement benefits. If Mr. Sznewajs were to retire at
age 65 with Highest Average Compensation of $1,447,683, his
annual retirement benefits would be $755,808, assuming a single
life annuity, reduction for estimated Social Security benefits,
and benefits from previous employers. If Mr. Duim were to retire
at age 65 with Highest Average Compensation of $1,299,606, his
annual retirement benefits, based on the same assumptions as
stated for Mr. Sznewajs, would be $702,780. Messrs. Duim's and
Sznewajs' respective employment contracts provide that they will
receive retirement benefits from either the Company's retirement
plans or the retirement plans in effect at Old USB prior to the
Merger, whichever are more favorable.
Supplemental Executive Retirement Plan
The Company's Supplemental Executive Retirement Plan
("SERP") is available to certain executives with not less than
five years of service at the time of termination of employment or
death. The SERP generally provides retirement benefits at age 65
equal to 55% of an executive's average base salary and annual
incentive awards during his or her last three years of employment
(except that, pursuant to his employment agreement, Mr.
Grundhofer is entitled to 57.5% of such amount). Executives
receive credit for an additional five years of service at age 60
and may receive retirement benefits after age 60 which are equal
to the actuarial equivalent present value of the retirement
benefit which would be payable at age 65 (except that, pursuant
to his employment agreement, Mr. Grundhofer shall be 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 PRA, 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. A participant who has not yet begun to receive payments
or benefits under the SERP may elect to receive a distribution of
his or her entire SERP benefit under certain circumstances if a
change in control has occurred, subject to a 5% forfeiture of
benefits.
Based upon a number of assumptions, including retirement at
age 65, the following estimated annual payments would be made
upon retirement pursuant to the SERP to the following
individuals: Mr. Grundhofer, $634,219; Mr. Heasley, $255,595; and
Mr. Zona, $254,149.
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Compensation Committee Interlocks and Insider Participation
During 1997, the following individuals served as members of
the Compensation and Human Resources Committee: Arthur D.
Collins, Jr., Robert L. Dryden, Delbert W. Johnson, Richard L.
Knowlton, Jerry W. Levin, Kenneth A. Macke, Paul A. Redmond,
James J. Renier, S. Walter Richey and Richard L. Robinson. During
1997, banking subsidiaries of the Company engaged in loan
transactions with members of the Compensation and Human Resources
Committee and one or more of their affiliates. Such loans were
made in the ordinary course of business, were made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other persons and did not involve more than the
normal risk of collectibility or present other unfavorable
features.
COMPARATIVE STOCK PERFORMANCE
Set forth below are line graphs comparing the cumulative
total shareholder return on the Company's Common Stock over a
five-year and an eight-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, 1992 and December
31, 1989, respectively, 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. The first graph
provides a five-year history of shareholder return. The Company
believes that the second graph, which provides an eight-year
history, is useful in evaluating the Company's performance during
the tenure of Mr. Grundhofer and his senior management team.
Comparison of Five-Year Cumulative Total Return
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
USBC S&P 500 KBW 50
1992 100 100 100
1993 113 110 106
1994 126 112 100
1995 195 153 160
1996 275 189 227
1997 460 252 332
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Comparison of Eight-Year Cumulative Total Return
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
USBC S&P 500 KBW 50
1989 100 100 100
1990 83 97 72
1991 159 126 114
1992 193 136 145
1993 217 150 153
1994 243 152 145
1995 375 209 232
1996 529 257 329
1997 886 342 480
CERTAIN TRANSACTIONS
Stock Repurchases
During 1997 and as part of its then-authorized stock
repurchase program, the Company purchased shares of its Common
Stock held by certain members of management or their affiliates,
as follows: on January 14, 1997, the Company purchased (i) 1,000
shares from John R. Danielson, an executive officer of the
Company, for an aggregate purchase price of $71,250; (ii) 5,000
shares from the Zona Charitable Foundation, a private, tax-exempt
charitable foundation funded and controlled by Mr. Zona, for an
aggregate purchase price of $359,375; and (iii) 30,000 shares
from Mr. Grundhofer for an aggregate purchase price of
$2,156,250.
Loans to Management
During 1997, banking subsidiaries of the Company engaged in
loan transactions with certain of the Company's Directors,
executive officers and one or more of their affiliates. Such
loans were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other persons and did not involve more than the
normal risk of collectibility or present other unfavorable
features.
Pursuant to the Company's Stock Option Loan program,
Directors and active employees holding stock options are eligible
to receive loans from the Company to be used for the exercise of
stock options. Loans bear interest at the applicable federal
rate in effect under Section 1274(d) of the Code at the time the
loan is made. The following table shows as to the Company's
Directors and executive officers: (i) the outstanding balances of
stock option loans, if any, as of December 31, 1997, (ii) the
largest outstanding balances of such loans at any time during
1997, and (iii) the rate of interest applicable to such loans.
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Stock Option Loans
Stock Option Maximum Stock
Loan Balance of Option
Balance at Stock Option Loan
December 31, Loan Interest
1997 During 1997 Rate
------------- ------------ --------
David P. Grandstrand.. $ 73,950 $ 77,301 5.95%
David P. Grandstrand.. 124,534 125,723 6.01%
John F. Grundhofer.... 400,000 773,371 5.80%
Philip G. Heasley..... 490,953 490,953 5.47%
Philip G. Heasley..... 1,340,505 1,340,505 6.98%
Philip G. Heasley..... 1,408,477 1,408,477 5.80%
Philip G. Heasley..... 2,923,433 2,923,433 6.39%
Lee R. Mitau.......... 186,334 186,334 6.28%
David J. Parrin....... 211,156 211,156 5.65%
Daniel C. Rohr........ 657,421 657,421 4.94%
Daniel C. Rohr........ 1,099,911 1,099,911 6.98%
Daniel C. Rohr........ 1,690,605 1,690,605 6.32%
Daniel C. Rohr........ 1,845,909 1,845,909 6.24%
Robert H. Sayre....... 160,800 160,800 5.47%
Robert H. Sayre....... 198,505 198,505 7.21%
Richard A. Zona....... 572,013 597,307 5.47%
Richard A. Zona....... 571,446 580,668 6.39%
Other Transactions
Eugene Bank Tower Associates Limited Partnership, a
Washington limited partnership ("Eugene Tower Associates"), owns
and leases the U.S. Bank Center in Eugene, Oregon. Director
Carolyn Silva Chambers has an interest in a company which is a
general partner in Eugene Tower Associates. A bank subsidiary of
the Company made lease payments for space in the U.S. Bank Center
totaling approximately $834,000 during 1997.
POLICY ON CONFIDENTIAL VOTING
The Company has procedures to ensure that (i) all proxies,
ballots and voting tabulations that identify shareholders are
kept permanently confidential, except as disclosure may be
required by federal or state law or expressly permitted by a
shareholder; and (ii) the receipt and tabulation of proxy cards
are performed by an independent third party.
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SHAREHOLDER PROPOSALS
In order for shareholder proposals for the 1999 Annual
Meeting of Shareholders to be eligible for inclusion in the
Company's Proxy Statement, they must be received by the Company
at its principal office in Minneapolis, Minnesota on or before
November 17, 1998.
PROPOSAL IV. ANNUAL ELECTION OF DIRECTORS
Mr. Gerald R. Armstrong, 910 Fifteenth Street, No. 754,
Denver, Colorado 80202, the holder of record of 2,070 shares of
Common Stock, has advised the Company that he plans to introduce
the following resolution:
"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 shall also be on an annual basis."
The reasons given by the shareholder for such
resolution are as follows:
"Shareholders of COLORADO NATIONAL BANKSHARES, INC.
and the former U. S. BANCORP elected all of their directors
annually. The shareholders of the new U.S. BANCORP should
not be excepted.
"It is significant that the shareholders of Chase
Manhattan received one year terms for their directors upon
the merger with Chemical Bank.
"Recently, Ameritech, Time-Warner, Lockheed-Martin,
Campbell Soups, Atlantic Richfield, Pacific Enterprises,
Westinghouse, and other corporations have replaced three
year terms with the annual election of ALL directors.
"Occidental Petroleum corporation stated in its 1997
proxy statement in support of replacing three year terms
with one year terms for its directors:
"the current Board of Directors...does
recognize that under current views of corporate
governance a classified board is believed to
offer less protection against unfriendly
takeover attempts than previously assumed while
frustrating stockholders in their exercise of
oversight of the board. The Board of Directors
believes that the best interests of the
stockholders are not currently served by
maintaining a classified board...."
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"These actions have 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.
"In view of the size of our board, I believe annual
accountability is essential for all directors. Our
"Governance Committee" may welcome the opportunity to
recommend not re-electing certain nominees rather than deal
with "entrenched" directors who contribute very little.
"If you agree, please vote FOR this proposal. If your
proxy card is unmarked, your shares will be automatically
voted "against" this proposal."
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 will generally 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
arms-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
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the affirmative vote of 80% of the outstanding shares of the
Company's Common Stock to approve the amendment.
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. Proxies will be voted against
the shareholder proposal unless otherwise specified. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST APPROVAL OF THE
PROPOSAL REGARDING THE ANNUAL ELECTION OF ALL DIRECTORS.
AVAILABILITY OF FORM 10-K
The Company's Annual Report on Form 10-K detailing its
activities and financial results during 1997 is included as a
part of the Company's 1997 Annual Report to Shareholders. If a
shareholder requests copies of any exhibits to such Form 10-K,
the Company will require the payment of a fee covering its
reasonable expenses in furnishing such exhibits. Any such
requests should be addressed to Investor and Corporate Relations,
U.S. Bancorp, P.O. Box 522, Minneapolis, Minnesota 55480.
By Order of the
Board of Directors
Lee R. Mitau
Secretary
Dated: March 17, 1998
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[Map showing location of Minneapolis Convention Center]
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[Logo of U.S. Bancorp]
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF U.S. BANCORP.
The undersigned, having received the Notice of Annual
Meeting and Proxy Statement, revoking any proxy previously given,
hereby appoint(s) Susan E. Lester, Lee R. Mitau and David J.
Parrin as proxies (each with power to act alone and with full
power of substitution) to vote as directed all shares the
undersigned is (are) entitled to vote at the U.S. Bancorp 1998
Annual Meeting of Shareholders and authorize(s) each to vote in
his or her discretion upon such other business as may properly
come before the meeting, or any adjournment or postponement
thereof. IF THIS SIGNED PROXY CARD CONTAINS NO SPECIFIC VOTING
INSTRUCTIONS, MY (OUR) SHARES WILL BE VOTED "FOR" ALL NOMINEES
FOR DIRECTOR, "FOR" PROPOSALS 2 AND 3, "AGAINST" PROPOSAL 4, AND
IN THE DISCRETION OF THE NAMED PROXIES ON ALL OTHER MATTERS.
The nominees for Director are Carolyn Silva Chambers, Arthur D.
Collins, Jr., John F. Grundhofer, Delbert W. Johnson and Jerry W.
Levin.
[ ] Do not mail me future Annual Reports.
Another household member receives one.
[ ] Waive confidential voting.
[ ] Comments on reverse side.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
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[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" PROPOSALS 1, 2 AND 3
AND A VOTE "AGAINST" PROPOSAL 4.
VOTE FOR WITHHOLD
all nominees (except AUTHORITY
as marked to the to vote
contrary for all
below) nominees
1. Election of Directors
(See Reverse) [ ] [ ]
To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.
- -----------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Amendment of Restated
Certificate of
Incorporation [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Ratify the selection
of the firm of Ernst
& Young LLP as
independent auditors. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. Shareholder Proposal
--Annual Election of
Directors [ ] [ ] [ ]
Please sign exactly as your name(s) appear(s) on this
Proxy Card. Joint owners should each sign. If signed by an
attorney, executor, guardian or in some other capacity or as
officer of a corporation, please add title as such. PLEASE SIGN,
DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
X X Date , 1998
- -------------------- -----------------------------------
COMMENTS
- -----------------------------------------------------------------
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
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