<PAGE>
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO OF U.S. BANCORP]
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 our continued confidence in the Company's
future financial performance.
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.
<TABLE>
<S> <C>
Sincerely,
/s/ Gerry B. Cameron /s/ John F. Grundhofer
Gerry B. Cameron John F. Grundhofer
CHAIRMAN OF THE BOARD PRESIDENT AND
CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
[LOGO OF U.S. BANCORP]
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--Proposal IV.
Annual Election of Directors" 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.
<TABLE>
<S> <C>
March 17, 1998 By Order of the Board of Directors
/s/ Lee R. Mitau
Lee R. Mitau
SECRETARY
</TABLE>
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.
<PAGE>
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL MATTERS....................................................................... 1
Voting, Execution and Revocation of Proxies......................................... 1
Annual Report....................................................................... 2
Principal Shareholders.............................................................. 2
PROPOSAL I. ELECTION OF DIRECTORS..................................................... 3
The Board of Directors.............................................................. 3
Nominees for Election as Directors.................................................. 3
Meetings of Board of Directors and Committees....................................... 3
Information Regarding Nominees and Other Continuing Directors....................... 6
PROPOSAL II. AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION......... 13
Description of the Proposed Certificate Amendment and Vote Required................. 13
Purposes and Effects of Increasing the Authorized Capital Stock..................... 13
Purposes and Effects of Proposed Three-for-One Stock Split.......................... 14
Effective Date of the Certificate Amendment and Issuance of Shares For Stock
Split............................................................................. 15
Recommendation of the Board of Directors............................................ 16
PROPOSAL III. SELECTION OF AUDITORS................................................... 16
SECURITY OWNERSHIP OF MANAGEMENT...................................................... 17
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE............................... 19
EXECUTIVE COMPENSATION................................................................ 20
Report of the Compensation and Human Resources Committee on Executive
Compensation...................................................................... 20
Employment Contracts for the Named Executive Officers............................... 24
Summary Compensation Table.......................................................... 25
Stock Options....................................................................... 26
Personal Retirement Account......................................................... 28
Old USB Retirement Plan............................................................. 28
Supplemental Executive Retirement Plan.............................................. 30
Compensation Committee Interlocks and Insider Participation......................... 30
COMPARATIVE STOCK PERFORMANCE......................................................... 31
CERTAIN TRANSACTIONS.................................................................. 32
Stock Repurchases................................................................... 32
Loans to Management................................................................. 32
Other Transactions.................................................................. 33
POLICY ON CONFIDENTIAL VOTING......................................................... 33
SHAREHOLDER PROPOSALS................................................................. 33
PROPOSAL IV. ANNUAL ELECTION OF DIRECTORS........................................... 34
AVAILABILITY OF FORM 10-K............................................................. 35
</TABLE>
<PAGE>
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.
The Company's principal executive offices are located at 601 Second Avenue
South, Minneapolis, Minnesota 55402, and its telephone number is (612) 973-1111.
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 248,173,498 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 "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
<PAGE>
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 Certificate Amendment Proposal and 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.
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.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
----------------------------
NAME OF SHAREHOLDER SHARES PERCENT
- ------------------------------------------------------------------------------------- ----------------- ---------
<S> <C> <C>
FMR Corp. ........................................................................... 13,797,182(1) 5.56%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
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(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.
2
<PAGE>
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 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 in accordance with the Company's retirement
policy for Directors described below.
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 member of the Board of Directors attended at least 75% of the
3
<PAGE>
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
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
4
<PAGE>
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 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
5
<PAGE>
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
family members or family trusts or partnerships, and expires on the tenth
anniversary of the date of grant. Such options granted to non-employee Directors
include provisions entitling the optionee to a further option (a "reload
option") if the optionee exercises an option, in whole or in part, by
surrendering other shares of the Company's Common Stock or if shares of the
Company's Common Stock are delivered or withheld 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 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.
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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. 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.
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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 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. and as
a Director of Quest, a non-profit youth organization. Mr. Johnson serves
as a member of the Audit Committee, the Credit Policy and Community
Responsibility Committee and the Compensation and Human Resources
Committee.
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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.
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CLASS I DIRECTORS -- WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING
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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 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.
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GERRY B. CAMERON (Age 59) Director Since 1997
[PHOTO] Mr. Cameron was elected Chairman of the Board 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. He 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.
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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 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.
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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.
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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 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.
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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.
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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, 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.
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PETER H. COORS (Age 51) Director Since 1996
[PHOTO] Mr. Coors is Vice Chairman and Chief Executive Officer of Coors 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.
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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 and President
of the Joshua Green Foundation. 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.
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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 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.
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S. WALTER RICHEY (Age 62) Director Since 1990
[PHOTO] Mr. Richey is the former Chairman and Chief Executive Officer of
Meritex, Inc., Minneapolis, Minnesota, a company involved in real estate
management and development and warehousing. Mr. Richey was with Meritex,
Inc. (and its predecessor company) from 1973 until March 1998. Mr.
Richey 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.
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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. and Valmont Industries, Inc. 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 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 dividends on outstanding Common Stock), including
the additional shares that would be
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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 law 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 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
regulation as described above). If the Certificate Amendment is adopted, there
would be, after giving effect to the Stock Split, approximately 642,111,942
authorized shares of Common Stock and 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 285,962,686 shares of Common
Stock issued or reserved for issuance, of which 248,173,498 shares were
outstanding, no shares were held in the treasury of the Company, and 37,789,188
shares were reserved for issuance under the Company's 1997 Stock Incentive Plan,
the Employee Stock Purchase Plan, the Dividend Reinvestment Plan and certain
warrants, leaving 214,037,314 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 571,925,372
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 proposed stock dividend reflects the Board of Directors' continued
confidence in the Company's future financial performance. The Board 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
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of the Common Stock closer to the median price of shares listed on the NYSE,
where the Common Stock is listed for trading, and of shares included in the
Standard and Poor's 500 Stock Index, which index includes the Common Stock. The
Company will apply for listing of the additional shares of Common Stock to be
issued pursuant to the Stock Split on the NYSE.
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 would be 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 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 any whole 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 theretofore 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 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.
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. PROXIES WILL BE VOTED IN FAVOR OF
RATIFYING THIS SELECTION UNLESS OTHERWISE SPECIFIED.
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<PAGE>
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, by 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.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY APPROXIMATE
OWNED(1) PERCENT OF CLASS
------------ ------------------
<S> <C> <C>
Linda L. Ahlers........................................................................ 2,780 *
Harry L. Bettis........................................................................ 2,250,594(2) *
Gerry B. Cameron....................................................................... 315,841(3)(4) *
Carolyn Silva Chambers................................................................. 9,513 *
Arthur D. Collins, Jr.................................................................. 5,700 *
Peter H. Coors......................................................................... 6,652 *
Franklin G. Drake...................................................................... 27,203(5) *
Robert L. Dryden....................................................................... 12,006 *
John B. Fery........................................................................... 19,923 *
Joshua Green III....................................................................... 6,015,294(6) 2.42%
John F. Grundhofer..................................................................... 772,566(3)(7) *
Roger L. Hale.......................................................................... 25,308 *
Delbert W. Johnson..................................................................... 10,885 *
Norman M. Jones........................................................................ 197,456(8) *
Richard L. Knowlton.................................................................... 14,358 *
Jerry W. Levin......................................................................... 8,301 *
Kenneth A. Macke....................................................................... 23,799(9) *
Allen T. Noble......................................................................... 11,227 *
Edward J. Phillips..................................................................... 10,449 *
Paul A. Redmond........................................................................ 15,221(10) *
S. Walter Richey....................................................................... 18,969(11) *
Richard L. Robinson.................................................................... 16,476(12) *
N. Stewart Rogers...................................................................... 23,928 *
Richard L. Schall...................................................................... 32,757(13) *
Walter Scott, Jr....................................................................... 740,574(14) *
Benjamin R. Whiteley................................................................... 16,541(15) *
Gary T. Duim........................................................................... 92,550(3)(16) *
Philip G. Heasley...................................................................... 341,789(3) *
Robert D. Sznewajs..................................................................... 97,677(3)(17) *
Richard A. Zona........................................................................ 386,530(3) *
All Directors and executive officers as a group (39 persons)........................... 12,256,558(18) 4.91%
</TABLE>
- ------------------------
* 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. Jones, 3,742 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. Richey, 5,734
shares; Mr. Robinson, 4,724 shares; Mr. Rogers, 17,407 shares; Mr. Schall,
8,200 shares;
17
<PAGE>
Mr. Scott, 4,200 shares; Mr. Whiteley, 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, 23,014 shares;
Mr. Grundhofer, 2,138 shares; Mr. Duim, 4,882 shares; Mr. Heasley, 3,746
shares; Mr. Sznewajs, 755 shares; and Mr. Zona, 331 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.
(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; 3,827,625 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 186,171 shares held in a family trust of which Mr. Grundhofer is a
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;
2,000 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 952 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.
18
<PAGE>
(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 5,642 shares held in a trust of which Mr. Duim is a trustee and as
to which he shares voting and investment power, and 1,530 shares held by a
charitable foundation created by him.
(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) 51,308 shares held in the CAP for the accounts of certain
executive officers as of December 31, 1997; and (ii) 1,411,539 shares
subject to options exercisable within 60 days.
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.
19
<PAGE>
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.
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
20
<PAGE>
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 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
21
<PAGE>
$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 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.
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.
22
<PAGE>
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 four 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.
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
23
<PAGE>
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 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, and 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
24
<PAGE>
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 $100,000
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AWARDS PAYOUTS
------------------------ -----------
<CAPTION>
LONG-
RESTRICTED SECURITIES TERM
OTHER ANNUAL STOCK UNDERLYING INCENTIVE
NAME AND COMPENSATION AWARD(S) OPTIONS/ PAYOUTS
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) ($)(4) SARS(#) ($)
- ----------------------------- --------- ----------- --------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
John F. Grundhofer........... 1997 787,500 1,764,000 140,946(2) 4,346,875 572,715 0
President and 1996 620,000 1,302,000 144,106(2) 0 753,366 0
Chief Executive Officer 1995 620,000 1,085,000 124,342(2) 0 247,991 0
Gerry B. Cameron (1)......... 1997 350,000 1,764,000 2,114(3) 6,520,313 200,000 3,611,789(5)
Chairman of the Board 1996 -- -- -- -- -- --
1995 -- -- -- -- -- --
Philip G. Heasley............ 1997 429,583 750,000 8,286(3) 6,101,250 11,394 0
Vice Chairman 1996 324,792 635,200 7,669(3) 0 192,265 0
1995 305,000 480,000 7,669(3) 0 139,000 0
Richard A. Zona.............. 1997 429,583 750,000 9,828(3) 6,101,250 69,222 0
Vice Chairman 1996 363,750 712,200 8,423(3) 0 330,804 0
1995 340,000 595,000 8,423(3) 0 119,766 0
Gary T. Duim (1)............. 1997 187,500 750,000 2,055(3) 4,346,875 100,000 675,970(5)
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)
Vice Chairman 1996 -- -- -- -- -- --
1995 -- -- -- -- -- --
<CAPTION>
<S> <C>
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)
- ----------------------------- -------------
<S> <C>
John F. Grundhofer........... 88,539(6)
President and 64,169
Chief Executive Officer 49,189
Gerry B. Cameron (1)......... 5,545,243(7)
Chairman of the Board --
--
Philip G. Heasley............ 28,078(8)
Vice Chairman 20,214
14,072
Richard A. Zona.............. 40,536(8)
Vice Chairman 26,808
17,261
Gary T. Duim (1)............. 2,729,968(9)
Vice Chairman --
--
Robert D. Sznewajs (1)....... 3,364,700(9)
Vice Chairman --
--
</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 31, 1998, a
25
<PAGE>
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 ($9,500 of which was applied to his account in the CAP and $13,828
of which was paid in cash), and Mr. Zona, $35,786 ($9,500 of which was
applied to his account in the CAP and $26,286 of which was paid in cash);
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 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 $3,320,783 to Mr. Sznewajs.
STOCK OPTIONS
The following tables summarize stock option grants and exercises during 1997
to or by the Named Executive Officers and the values of options granted during
1997 and held by such persons at the end of 1997.
26
<PAGE>
OPTION/SAR GRANTS IN YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------ ------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE 5% ($) 10% ($)
UNDERLYING GRANTED TO OR BASE -------------------- --------------------
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION STOCK STOCK
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE PRICE VALUE PRICE VALUE
- ------------------------- ------------- ------------- ----------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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(4) 1.8% 86.9375 8/1/2007 141.61 5,467,453 225.49 13,855,598
Robert D. Sznewajs....... 100,000(4) 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 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 family members or family trusts or partnerships.
(2) The option vests as to 100% of the shares on August 1, 2002; provided that,
vesting as to one-third of the shares is subject to acceleration to April
1999 if the Company satisfies certain performance criteria for calendar year
1998, vesting as to an additional one-third of the shares is subject to
acceleration to April 2000 if the Company satisfies certain performance
criteria for calendar year 1999, and vesting as to the final one-third of
the shares is subject to acceleration to April 2001 if the Company satisfies
certain performance criteria for calendar year 2000. The option also becomes
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 option is nontransferable except to family members or
family trusts or partnerships. The option contains a reload feature as
described in footnote (1) above.
(3) The option was granted on August 1, 1997 and vests as to 100% of the shares
on December 31, 1998. The option also becomes 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
option is nontransferable except to family members or family trusts or
partnerships. The option contains a reload feature as described in footnote
(1) above.
(4) 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
27
<PAGE>
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
family members or family trusts or partnerships. The options contain a
reload feature as described in footnote (1) above.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES 12/31/97(#) 12/31/97($)(1)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ------------ ------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
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 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
28
<PAGE>
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.
U.S. BANCORP ESTIMATED ANNUAL BENEFITS
<TABLE>
<CAPTION>
HIGHEST 5-YEAR YEARS OF SERVICE
AVERAGE COVERED ----------------------------------------------------------
COMPENSATION 15 20 25 30 35
- --------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 125,000 $ 38,143 $ 55,330 $ 55,330 $ 55,330 $ 55,330
$ 150,000 $ 48,455 $ 69,080 $ 69,080 $ 69,080 $ 69,080
$ 175,000 $ 58,768 $ 82,830 $ 82,830 $ 82,830 $ 82,830
$ 200,000 $ 69,080 $ 96,580 $ 96,580 $ 96,580 $ 96,580
$ 225,000 $ 79,393 $ 110,330 $ 110,330 $ 110,330 $ 110,330
$ 250,000 $ 89,705 $ 124,080 $ 124,080 $ 124,080 $ 124,080
$ 300,000 $ 110,330 $ 151,580 $ 151,580 $ 151,580 $ 151,580
$ 350,000 $ 130,955 $ 179,080 $ 179,080 $ 179,080 $ 179,080
$ 400,000 $ 151,580 $ 206,580 $ 206,580 $ 206,580 $ 206,580
$ 450,000 $ 172,205 $ 234,080 $ 234,080 $ 234,080 $ 234,080
$ 500,000 $ 192,830 $ 261,580 $ 261,580 $ 261,580 $ 261,580
$ 550,000 $ 213,455 $ 289,080 $ 289,080 $ 289,080 $ 289,080
$ 600,000 $ 234,080 $ 316,580 $ 316,580 $ 316,580 $ 316,580
$ 650,000 $ 254,705 $ 344,080 $ 344,080 $ 344,080 $ 344,080
$ 700,000 $ 275,330 $ 371,580 $ 371,580 $ 371,580 $ 371,580
$ 750,000 $ 295,955 $ 399,080 $ 399,080 $ 399,080 $ 399,080
$ 800,000 $ 316,580 $ 426,580 $ 426,580 $ 426,580 $ 426,580
$ 850,000 $ 337,205 $ 454,080 $ 454,080 $ 454,080 $ 454,080
$ 900,000 $ 357,830 $ 481,580 $ 481,580 $ 481,580 $ 481,580
$ 950,000 $ 378,455 $ 509,080 $ 509,080 $ 509,080 $ 509,080
$ 1,000,000 $ 399,080 $ 536,580 $ 536,580 $ 536,580 $ 536,580
$ 1,050,000 $ 419,705 $ 564,080 $ 564,080 $ 564,080 $ 564,080
$ 1,100,000 $ 440,330 $ 591,580 $ 591,580 $ 591,580 $ 591,580
$ 1,150,000 $ 460,955 $ 619,080 $ 619,080 $ 619,080 $ 619,080
$ 1,200,000 $ 481,580 $ 646,580 $ 646,580 $ 646,580 $ 646,580
$ 1,250,000 $ 502,205 $ 674,080 $ 674,080 $ 674,080 $ 674,080
$ 1,300,000 $ 522,830 $ 701,580 $ 701,580 $ 701,580 $ 701,580
$ 1,350,000 $ 543,455 $ 729,080 $ 729,080 $ 729,080 $ 729,080
$ 1,400,000 $ 564,080 $ 756,580 $ 756,580 $ 756,580 $ 756,580
$ 1,450,000 $ 584,705 $ 784,080 $ 784,080 $ 784,080 $ 784,080
$ 1,500,000 $ 605,330 $ 811,580 $ 811,580 $ 811,580 $ 811,580
$ 1,550,000 $ 625,955 $ 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.
29
<PAGE>
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 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 $751,808, 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 $698,780. 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.
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.
30
<PAGE>
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
<TABLE>
<CAPTION>
U.S. BANCORP S&P 500 KBW 50
<S> <C> <C> <C>
1992 $ 100 $ 100 $ 100
1993 113 110 106
1994 126 112 100
1995 195 153 160
1996 275 189 227
1997 460 252 332
</TABLE>
31
<PAGE>
COMPARISON OF EIGHT-YEAR CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. BANCORP S&P 500 KBW 50
<S> <C> <C> <C>
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
</TABLE>
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.
32
<PAGE>
STOCK OPTION LOANS
<TABLE>
<CAPTION>
STOCK OPTION LOAN MAXIMUM BALANCE OF
BALANCE AT STOCK OPTION LOAN STOCK OPTION LOAN
DECEMBER 31, 1997 DURING 1997 INTEREST RATE
----------------- ------------------- ---------------------
<S> <C> <C> <C>
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%
</TABLE>
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.
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.
33
<PAGE>
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...."
"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."
34
<PAGE>
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 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
/s/ Lee R. Mitau
Lee R. Mitau
SECRETARY
Dated: March 17, 1998
35
<PAGE>
[MAP SHOWING LOCATION TO MINNEAPOLIS CONVENTION CENTER]
<PAGE>
[LOGO OF U.S. BANCORP]
PROXY
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 and Lee R. Mitau 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.
Comments and/or Change of Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
- --------------------------------------------------------------------------------
PLEASE MARK YOUR 7216
VOTES AS IN THIS
|X| EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, AND 3.
VOTE FOR WITHHOLD
ALL NOMINEES (EXCEPT AUTHORITY
AS MARKED TO THE TO VOTE FOR ALL
CONTRARY BELOW) NOMINEES
1. Election of Directors |_| |_|
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below.
- -------------------------------------------------------------------------------
The nominees for Director are
Carolyn Silva Chambers, Arthur
D. Collins, Jr., John F.
Grundhofer, Delbert W. Johnson
and Jerry W. Levin.
FOR AGAINST ABSTAIN
|_| |_| |_|
2. Amendment of Restated
Certificate of
Incorporation |_| |_| |_|
3. Ratify the selection of the
firm of Ernst & Young LLP
as independent auditors |_| |_| |_|
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "AGAINST"
PROPOSAL 4.
4. Shareholder
Proposal--Annual Election
of Directors |_| |_| |_|
Comments and/or change of
address on reverse side |_|
Waive confidential voting |_|
SIGNATURE(S)______________________ ______________________ DATE_____________,1998
NOTE: 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.
- --------------------------------------------------------------------------------
