PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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or Section 240.14a-12
USBANCORP, INC.
(Name of Registrant as Specified in its Charter)
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement
if other than Registrant)
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<PAGE>
NOTICE OF
ANNUAL
MEETING OF
SHAREHOLDERS
AND PROXY
STATEMENT
USBANCORP, INC.
MAIN AND FRANKLIN STREETS
P.O. BOX 670
JOHNSTOWN, PENNSYLVANIA 15907-0670
To Be Held April 25, 1995
Mailed to Security Holders March 22, 1995
<PAGE>
March 22, 1995
Dear Shareholder:
USBANCORP, Inc.'s Annual Meeting of Shareholders will be
held Tuesday, April 25, 1995, at 1:30 p.m., Eastern Time, at the
Sheraton Inn Greensburg, Route 30 East, 100 Sheraton Drive,
Greensburg, PA, 15601-9383.
The matters to be acted upon at the meeting are (a) the
election of six Class III directors, (b) the consideration of a
proposal to approve the adoption of an annual retainer plan for
the benefit of the independent directors of USBANCORP, Inc.,
(c) the consideration of a proposal to approve the adoption of an
Executive Annual Incentive Plan for the benefit of certain
executive officers of USBANCORP, Inc. and its subsidiaries and
(d) the consideration of a proposal to increase the number of
shares of common stock of USBANCORP, Inc. available for issuance
under the USBANCORP, Inc. 1991 Stock Option Plan.
Please review the enclosed material and sign, date and
return the proxy card whether you plan to attend or not so that
the matters coming before the meeting may be acted upon.
I look forward to meeting you and welcome the opportunity to
discuss the business of your Corporation.
Cordially,
/s/ Terry K. Dunkle
Terry K. Dunkle
Chairman, President and
Chief Executive Officer
<PAGE>
USBANCORP, Inc.
Johnstown, Pennsylvania 15901
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 22, 1995
To The Shareholders:
NOTICE IS HEREBY GIVEN that pursuant to the call of its
directors, the Annual Meeting of Shareholders of USBANCORP, Inc.
will be held at the Sheraton Inn Greensburg, Route 30 East, 100
Sheraton Drive, Greensburg, PA 15601-9383, on Tuesday, April 25,
1995, at 1:30 p.m., Eastern Time, for the purpose of considering
and voting on the following matters:
1. Election of six Class III directors for a term of three
years from the date of election and until their successors shall
have been elected and qualified (Matter No. 1);
2. Approval of an Independent Directors Annual Retainer
Plan for the benefit of outside directors of USBANCORP, Inc.
(Matter No. 2);
3. Approval of an Executive Annual Incentive Plan for the
benefit of executive officers of USBANCORP, Inc. and its
subsidiaries (Matter No. 3); and
4. Approval of an increase in the number of shares of
common stock of USBANCORP, Inc. available for issuance under the
USBANCORP, Inc. 1991 Stock Option Plan from 128,000 shares to
285,000 shares (Matter No. 4).
5. Such other business as may properly come before the
meeting or any adjournment thereof.
Only those shareholders of record at the close of business
on March 7, 1995, shall be entitled to notice of and to vote at
the meeting. A Proxy Statement, a proxy and a self-addressed
postage prepaid envelope are enclosed. Please complete, sign and
date the proxy and return it promptly in the envelope provided.
If you attend the meeting, you may revoke your proxy and vote in
person.
This Notice, the accompanying Proxy Statement and form of
proxy are sent to you by order of the Board of Directors.
/s/ Betty L. Jakell
Betty L. Jakell,
Secretary
Johnstown, Pennsylvania
March 22, 1995<PAGE>
USBANCORP, Inc.
Main and Franklin Streets
P.O. Box 670
Johnstown, Pennsylvania 15907-0670
PROXY STATEMENT
GENERAL
Introduction
The Proxy Statement and enclosed proxy are being mailed to
the shareholders of USBANCORP, Inc. ("USBANCORP"), on or about
March 22, 1995, in connection with the solicitation of proxies by
the Board of Directors of USBANCORP. The proxies will be voted
at the Annual Meeting of the Shareholders of USBANCORP to be held
on Tuesday, April 25, 1995, at 1:30 p.m., Eastern Time, at the
Sheraton Inn Greensburg, Route 30 East, 100 Sheraton Drive,
Greensburg, PA 15601-9383 (the "Annual Meeting"). USBANCORP's
Annual Report and Form 10-K for the year ended December 31, 1994,
accompanies this Proxy Statement. It should not be regarded as
proxy solicitation material.
Solicitation of Proxies
The cost of the solicitation of proxies will be borne by
USBANCORP. In addition to the use of the mails, some directors
and officers of USBANCORP may solicit proxies, without additional
compensation, in person, by telephone, telegram, or otherwise.
Arrangements may be made by USBANCORP with banks, brokerage
houses and other custodians, nominees and fiduciaries to forward
solicitation material to the beneficial owners of shares held by
them of record, and USBANCORP may reimburse them for reasonable
expense they incur in so doing.
Voting Securities
As of the close of business on March 7, 1995, there were
outstanding 5,584,722 shares of common stock, par value $2.50 per
share, of USBANCORP (the "USBANCORP Common Stock"), the only
class of capital stock of USBANCORP outstanding. Holders of
record of USBANCORP Common Stock as of the close of business on
March 7, 1995, are entitled to notice of and to vote at the
Annual Meeting. Except with respect to the election of
directors, each shareholder is entitled to one vote for each
share held. Holders of USBANCORP Common Stock are entitled to
cumulate their vote in the election of directors.
If a shareholder participates in USBANCORP's Dividend
Reinvestment and Common Stock Purchase Plan, the proxy card sent
to such shareholder will represent the number of shares
registered in the shareholder's name and the number of shares,
including fractional shares, credited to the shareholder's
Dividend Reinvestment Plan account.
If the enclosed form of proxy is appropriately marked,
signed and returned in time to be voted at the Annual Meeting,
the shares represented by the proxy will be voted in accordance
with the instructions marked thereon. Signed proxies not marked
to the contrary will be voted "FOR" the election of the nominees
of USBANCORP's Board of Directors, "FOR" the approval of the
Independent Directors Annual Retainer Plan, "FOR" the approval of
the Executive Annual Incentive Plan, and "FOR" the increase in
the number of shares of USBANCORP Common Stock available for
issuance under the USBANCORP 1991 Stock Option Plan.
Right of Revocation
Proxies may be revoked at will at any time before they have
been exercised by filing with the Secretary of USBANCORP an
instrument of revocation or a duly executed proxy bearing a later
date. Any shareholder attending the Annual Meeting may also
revoke a previously granted proxy by voting in person at the
Annual Meeting.
Quorum
Under USBANCORP's Bylaws, the presence, in person or by
proxy, of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast, constitutes
a quorum for the transaction of business at the Annual Meeting.
Principal Shareholders
No person is known to USBANCORP's management to own of
record or beneficially, as of March 7, 1995, 5% or more of the
outstanding shares of USBANCORP Common Stock.
MATTER NO. 1
ELECTION OF USBANCORP DIRECTORS
General
The Articles of Incorporation of USBANCORP provide that
USBANCORP's business shall be managed by a Board of Directors of
not less than 5 and not more than 25 persons. Under the Articles
of Incorporation, the total number of directors may be determined
by either a resolution adopted by a majority vote of the
directors then in office or by resolution of the shareholders at
a meeting. The number of directors for 1995 has been set by the
Board at 18.
USBANCORP's Board of Directors, as provided in its Articles
of Incorporation, is divided into three classes: Class I, Class
II and Class III, each being as nearly equal in number as
possible. The directors in each class serve terms of three years
each and until their successors are elected and qualified. Under
USBANCORP's Bylaws, a person elected to fill a vacancy on the
Board of Directors serves as a director for the remaining term of
office of the class to which he or she was elected.
The Board of Directors fixed the number of directors in
Class III at six and has nominated Messrs. Michael F. Butler,
James C. Dewar, Terry K. Dunkle, Dennis J. Fantaski, John H.
Kunkle, Jr. and Jack Sevy for election as Class III directors for
three-year terms to expire at the 1998 Annual Meeting of
Shareholders, and until their successors are duly elected and
qualified. Each of the Board nominees for election as director
is presently a director of USBANCORP. Directors Dunkle, Kunkle
and Sevy were elected by the shareholders at the 1992 Annual
Meeting. Director Dewar was appointed to the Board to fill a
vacancy created in accordance with the Merger Agreement dated
November 10, 1993, as amended on January 18, 1994, among
USBANCORP, United States National Bank in Johnstown ("U.S. Bank")
and Johnstown Savings Bank ("JSB"); and Directors Butler and
Fantaski were appointed to the Board in 1993 and 1994,
respectively. The remaining directors will continue to serve in
accordance with their previous election with the terms of the
Class I and Class II directors expiring in 1996 and 1997,
respectively.
The Bylaws of USBANCORP permit nominations for election to
the Board of Directors to be made by the Board of Directors or by
any shareholder entitled to vote for the election of directors.
All nominations for director to be made at the Annual Meeting by
shareholders entitled to vote for the election of directors must
be preceded by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the President of
USBANCORP not less than 60 days nor more than 90 days prior to
the Annual Meeting, which notice must contain certain information
specified in the Bylaws. No notice of nomination for election as
a director has been received from any shareholder as of the date
of this Proxy Statement. If a nomination is attempted at the
Annual Meeting which does not comply with the procedures required
by the Bylaws or if any votes are cast at the Annual Meeting for
any candidate not duly nominated, then such nomination and/or
such votes may be disregarded.
With respect to the election of directors, each shareholder
has the right to vote, for each share of USBANCORP Common Stock
held by him or her, as many votes as shall equal the number of
directors to be elected, and he or she, or his or her proxy, may
cast the whole number of votes for one nominee or distribute them
among two or more nominees. Unless authority is withheld as to a
particular nominee or as to all nominees, all proxies will be
voted for the six nominees listed below. The proxies will have
authority to cumulate votes in their discretion except to the
extent a shareholder withholds such authority on the form of
proxy. The six persons receiving the highest number of votes
cast at the Annual Meeting will be elected as Class III
directors. Abstentions and broker non-votes will not constitute
or be counted as "votes" cast for purposes of the Annual Meeting,
but will be counted for purposes of determining the presence of a
quorum.
Except as noted above, it is intended that shares
represented by proxies will be voted for the nominees listed
below, each of whom is now a director of USBANCORP and each of
whom has expressed his willingness to serve, or for any
substitute nominee or nominees designated by the USBANCORP Board
of Directors in the event any nominee or nominees become
unavailable for election. The USBANCORP Board of Directors has
no reason to believe that any of the nominees will not serve if
elected.
The following tables set forth, as to each of the nominees
for election as a Class III directors and as to each of the
continuing Class I and Class II directors, his age, principal
occupation and business experience, the period during which he
has served as a director of USBANCORP or an affiliate and other
business relationships. There are no family relationships
between any of the listed persons.
<TABLE>
<CAPTION>
Nominees for Election as
Class III Directors - Terms Expire in 1998
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) Companies
<S> <C> <C> <C>
Michael F. Butler 59 1993 None
Business Consultant and
Attorney-at-Law
James C. Dewar 57 1974 None
President and Owner, Jim
Dewar Oldsmobile, Inc.
Terry K. Dunkle 53 1988 None
Chairman, President and
Chief Executive Officer
of USBANCORP and Chairman
of the Board of United
States National Bank in
Johnstown, Three Rivers
Bank and Trust Company,
Community Bancorp, Inc.
and USBANCORP Trust Company
Dennis J. Fantaski 50 1994 None
President and Chief Executive
Officer of Community
Bancorp, Inc. and Community
Savings Bank
John H. Kunkle, Jr. 67 1989 None
Retired; Former Vice
Chairman and Director,
Commonwealth Land Title
Insurance Company
Jack Sevy 64 1984 None
Retired; Former Owner and
Operator, New Stanton West
Auto/Truck Plaza
<CAPTION>
Class I Directors - Terms Expire in 1996
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) Companies
<S> <C> <C> <C>
Jerome M. Adams 63 1973 None
Senior Partner, Adams,
Myers and Baczkowski,
Attorneys-at-Law
Robert A. Allen 69 1987 None
Retired; Former President,
Johnstown Sani-Dairy
James M. Edwards, Sr. 55 1984 None
President and Chief Executive
Officer, WJAC, Inc.
Richard W. Kappel 63 1967 None
CEO, Secretary and Treasurer,
William J. Kappel Wholesale Co.
James C. Spangler 67 1980 None
Retired; Former Owner,
Somerset Auction and
Transfer, Inc.
Robert L. Wise 51 1986 General Public
President, Fossil Generation Utilities Service
of GPU Service Corporation Corporation, General
Public Utilities
Nuclear Corporation and
Energy Initiatives,
Inc.
<CAPTION>
Class II Directors - Terms Expire in 1997
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) Companies
<S> <C> <C> <C>
Clifford A. Barton 66 1966 Crown American
Retired; Former Chairman, Realty Trust
President and Chief Executive
Officer of USBANCORP and
Chairman of the Board of
United States National Bank
in Johnstown, Three Rivers
Bank and Trust Company,
Community Bancorp, Inc. and
USBANCORP Trust Company
(continued on next page)
<PAGE>
Louis Cynkar 50 1994 None
President and Chief Executive
Officer of United States National
Bank in Johnstown
James F. O'Malley 69 1983 None
Senior Lawyer, Yost &
O'Malley, Attorneys-at-Law
Frank J. Pasquerilla 68 1969 Crown American
Chairman of the Board and Realty Trust
Chief Executive Officer,
Crown American Realty Trust
Thomas C. Slater 52 1980 None
Owner, President and Director,
Slater Laboratories, Inc.,
Clinical Laboratory
W. Harrison Vail 54 1984 None
President and Chief Executive
Officer, Three Rivers Bank
and Trust Company
________________________
<FN>
(1) All directors and nominees have held the positions indicated
or another senior executive position with the same entity or
one of its affiliates or predecessors for the past five
years except Director Butler who was a partner in Andrews &
Kurth, Attorneys-at-Law, prior to June 1, 1991.
(2) Reflects the earlier of the first year as a director of
USBANCORP, U.S. Bank, Three Rivers Bank and Trust Company
("Three Rivers Bank"), Community Bancorp, Inc.
("Community"), or JSB.
(3) All incumbent directors were elected by the shareholders
except for Director Butler, who was appointed in 1993, and
Directors Cynkar, Dewar, Edwards and Fantaski, who were
appointed by the Board of Directors in 1994. Directors
Dewar and Edwards were appointed to serve as a Class III and
Class I director, respectively, in connection with the
merger of JSB with and into U.S. Bank. Under the terms of
the merger agreement, USBANCORP has agreed to use its best
efforts to cause Directors Dewar and Edwards to be
renominated for an additional term upon the expiration of
their initial terms, which, with respect to Director Dewar,
is the term expiring in the current year and, with respect
to Director Edwards, is the term expiring in 1996.
</TABLE>
Security Ownership of Management
The following table sets forth information concerning the
number of shares of USBANCORP Common Stock beneficially owned, as
of March 7, 1995, by each present director, nominee for director,
and each executive officer named in the compensation table set
forth elsewhere herein.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent
Name of Beneficial Owner(1) Ownership(2) of Class
<S> <C> <C>
Jerome M. Adams............... 4,517.0898 *
Robert A. Allen............... 6,977.5083 *
Clifford A. Barton(3)......... 71,554.3184 1.3%
Michael F. Butler............. 5,268.5298 *
Louis Cynkar(4)............... 6,723.9966 *
James C. Dewar................ 19,832.7098 *
Terry K. Dunkle............... 16,844.0907 *
James M. Edwards, Sr.(5)...... 8,056.5347 *
Dennis J. Fantaski............ 7,962.0276 *
Orlando B. Hanselman.......... 5,688.3216 *
Richard W. Kappel............. 9,783.5298 *
John H. Kunkle, Jr............ 5,744.4704 *
James F. O'Malley(6).......... 33,514.8150 *
Frank J. Pasquerilla(7)....... 48,846.0431 *
Jack Sevy..................... 1,377.9600 *
Thomas C. Slater(8)........... 8,443.7445 *
James C. Spangler............. 5,409.5298 *
W. Harrison Vail.............. 15,207.3346 *
Robert L. Wise(9)............. 2,023.3412 *
Officers, Directors
and Nominees for
Directors as a
Group (10)................... 283,775.8957 5.1%
__________________
<FN>
*Less than 1%
(1) Except as noted below, each of the identified beneficial
owners, including the officers, directors and nominees for
director as a group, has sole investment and voting power as
to all the shares shown as beneficially owned with the
exception of those held by certain officers, directors and
nominees for director jointly with their spouses or directly
by their spouses or other relatives.
(2) Includes shares that may be acquired within sixty (60) days
upon the exercise of presently exercisable stock options as
follows: 4,166, 4,334, 3,666, 3,966, 8,500 and 24,632
shares of USBANCORP Common Stock held by Directors Cynkar,
Dunkle, Fantaski, Hanselman and Vail and the group,
respectively. In addition, Directors Cynkar, Dunkle,
Fantaski, Hanselman, and Vail and the group hold outstanding
options to acquire 2,334, 4,666, 2,334, 2,334, 3,000 and
14,668 shares of USBANCORP Common Stock, respectively, that
first become exercisable, in part, in January and February
of 1996, and therefore are excluded.
(3) Includes 35,510 shares of USBANCORP Common Stock held by
Mr. Barton's wife as to which shares Mr. Barton disclaims
beneficial ownership.
(4) Includes 839.2766 shares of USBANCORP Common Stock held by
Mr. Cynkar's wife as to which Mr. Cynkar disclaims
beneficial ownership.
(5) Includes 1,970 shares of USBANCORP Common Stock held by WJAC
Pension Plan of which Mr. Edwards is one of three trustees.
Mr. Edwards disclaims beneficial ownership of such shares.
(6) Includes 60.2575 and 1,651.7106 shares of USBANCORP Common
Stock held by Mr. O'Malley's wife and daughter,
respectively, as to which Mr. O'Malley disclaims beneficial
ownership.
(7) Includes 1,014 shares of USBANCORP Common Stock held by
Crown American Associates of which Mr. Pasquerilla is an
officer and controlling shareholder.
(8) Includes 572.9381 shares of USBANCORP Common Stock held by
Mr. Slater's wife as to which Mr. Slater disclaims
beneficial ownership.
(9) Includes 194.6364 shares of USBANCORP Common Stock held by
Mr. Wise's son as to which Mr. Wise disclaims beneficial
ownership.
(10) The group consists of 19 persons, being the members of the
Board of Directors of USBANCORP, the Chief Executive Officer
and each other named executive officer of USBANCORP set
forth on the compensation table elsewhere herein as of
March 7, 1995.
</TABLE>
Board and Committees
The Board of Directors has various standing committees
including an Audit Committee, a Nominating Committee and a
Management Compensation Committee (the "Compensation Committee").
During 1994, the Board of Directors held 6 meetings, the Audit
Committee held 5 meetings, the Nominating Committee held 2
meetings, and the Compensation Committee held 8 meetings. Each
director attended at least 75% of the combined total of meetings
of the Board of Directors and of each committee of which he was a
member except Messrs. Kunkle and Pasquerilla, who attended 73%
and 61%, respectively, due to scheduling conflicts and illness.
The Audit Committee is responsible for recommending to the
Board of Directors the appointment of an independent public
accountant to audit the books and accounts of USBANCORP and its
subsidiaries, reviewing the reports of the Audit Department and
the reports of examination conducted by the bank and bank holding
company regulators and USBANCORP's independent public
accountants, reviewing the adequacy of internal audit and control
procedures, and reporting to the Board of Directors. The Audit
Committee is presently comprised of Directors Adams, Dewar,
Kappel, Kunkle, O'Malley (Chairman), Sevy and Spangler.
The Nominating Committee presently consists of Directors
Barton, Dunkle, O'Malley and Pasquerilla (Chairman). The
Nominating Committee is responsible for nominating individuals to
stand for election as directors at the Annual Meeting of
Shareholders and will consider nominees recommended by
shareholders. Shareholders desiring to make such a
recommendation for the 1996 Annual Meeting of USBANCORP should
submit, on or before January 2, 1996, the candidate's name,
together with biographical information and his or her written
consent to nomination to: Chairman, President and CEO,
USBANCORP, Inc., Executive Offices, Main and Franklin Streets,
Johnstown, Pennsylvania 15901. Shareholders may also nominate
persons for election as directors in accordance with the
procedures set forth in Section 1.3 of USBANCORP's Bylaws.
Notification of such nomination, containing the required
information, must be mailed or delivered to the President of
USBANCORP not less than 60 days or more than 90 days prior to the
Annual Meeting.
The Compensation Committee is responsible for reviewing and
making recommendations regarding the compensation of corporate
officers. No director who is eligible to receive any benefit
under plans administered by the Compensation Committee, except
for benefits payable to directors under the Independent Directors
Annual Retainer Plan (the Committee's administration of which is
limited to coordinating the payment of a predetermined retainer)
may serve on the Compensation Committee. The Compensation
Committee is presently comprised of Messrs. Barton, O'Malley,
Pasquerilla and Wise (Chairman). See "Executive Compensation"
herein.
Compensation of Directors
Executive officers of USBANCORP who are directors or members
of committees of the USBANCORP Board of Directors or its
subsidiaries receive no compensation for such positions. In
1994, independent directors of USBANCORP received compensation
for attendance at USBANCORP Board of Directors meetings of $450
per meeting. A fee of $200 was paid for attendance at committee
meetings of the USBANCORP Board of Directors. Certain non-
officer directors of USBANCORP are also directors of U.S. Bank,
Three Rivers Bank, Community, Community Savings Bank ("Community
Savings") and USBANCORP Trust Company (the "Trust Company").
Directors serving on the Board of Directors of U.S. Bank, Three
Rivers Bank or the Trust Company are compensated for their
services by a payment of $350 for each Board of Directors meeting
attended and $200 for each committee meeting of those Boards
attended. The directors serving on the Board of Directors of
Community Savings are compensated for their services by a payment
of $600 for each Board of Directors meeting attended and $200 for
each committee meeting attended. Because the Boards of Directors
of Community and Community Savings are comprised of the same
members, the directors serving on the Board of Directors of
Community are not compensated for their services on the Community
Board. In 1994, the Board of Directors of USBANCORP adopted an
Independent Directors Annual Retainer Plan, pursuant to which
directors of USBANCORP receive a retainer of $6,000 per year
payable in USBANCORP Common Stock. The retainer is in addition
to the above-described director fees. See "MATTER NO. 2 -
Proposal to Approve Independent Directors Annual Retainer Plan."
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
The Compensation Committee oversees USBANCORP's executive
compensation programs to ensure that they: attract and retain
high caliber executives, deliver the total compensation package
in a cost-effective manner, reinforce key business objectives,
provide competitive compensation opportunities, encourage
management ownership of USBANCORP Common Stock, and comply with
applicable regulations.
There are two key components to the role of the Compensation
Committee. The Compensation Committee approves executive salary
adjustments and stock option awards to ensure that they are
consistent with USBANCORP's pay policy; and the Compensation
Committee establishes performance standards for USBANCORP's
annual incentive program and monitors actual performance against
these standards. In addition, from time to time, the
Compensation Committee also reviews other human resource issues,
including qualified and non-qualified benefits, management
performance evaluation, and succession planning.
Executive Compensation Policies
In October 1993, the Compensation Committee, with the
assistance of an independent consulting firm, established a
formal compensation policy. Implementation of this policy began
in 1994. The policy addresses each of the major components of
the executive pay program and is summarized below.
- - Establish a conservative executive base salary practice
(approximating the 40th percentile of competitive
practices -- defined below) in light of stakeholder
sensitivities, sustained performance results, and
USBANCORP's long-term focus.
- - Establish a competitive annual incentive program that
recognizes the achievement of important milestones toward
USBANCORP's long-term objectives, providing target and
maximum annual total cash opportunities that approximate the
40th and 60th percentiles of competitive annual total cash
practices, respectively. All plan participants should be
rewarded based upon corporate performance relative to goal.
Some participants should also be evaluated and rewarded, in
part, based upon subsidiary and individual performance
achievements, as appropriate.
- - Establish competitive long-term incentives that: align
management's financial interests with those of USBANCORP's
shareholders, help encourage management ownership of
USBANCORP Common Stock, support the achievement of
USBANCORP's long-term financial objectives, and provide
median long-term incentive reward opportunities.
- - Provide typical benefits through qualified programs
generally available to all employees, supplemented by non-
qualified arrangements, as appropriate.
- - Provide perquisites on a limited basis, only to the extent
that they support legitimate business needs.
- - Competitive pay practices are determined using two different
sets of data -- survey data and peer data.
- Survey data includes compensation data from banking
industry compensation surveys. Competitive
compensation practices are determined using
compensation levels at holding companies and
subsidiaries of comparable size to USBANCORP and its
subsidiaries for positions comparable to those held by
each named executive officer set forth on the
compensation table elsewhere herein.
- Peer data comes from a group of fifteen multi-bank,
bank holding companies of comparable size to USBANCORP.
Eight of the institutions are located in Pennsylvania
or Ohio to recognize USBANCORP's more immediate labor
markets and similar business environments. The
remaining seven institutions are generally located in
non-major metropolitan cities of the following states:
Illinois, Indiana, Michigan, and West Virginia.
- The indices used in the Performance Graph are Nasdaq
Stock Market (U.S. Companies) and Nasdaq Bank Stocks.
While USBANCORP believes that some of the surveyed
banks and some of the peer banks may be included within
these indices, it is not the intention of the
Compensation Committee to establish executive pay
practices based on the pay practices of the
organizations included in these indices. The
Compensation Committee believes that some of the
organizations in these indices would be either too
large or too small to be relevant for setting pay for
USBANCORP and subsidiary executives. The aforementioned
surveyed banks and peer banks provide the Compensation
Committee with an organizational-size-sensitive basis
for establishing executive pay practices.
Relationship of Performance Under Compensation Plans
Base salaries for executives of USBANCORP and subsidiaries
are established in light of competitive salaries for comparable
jobs in similarly-sized holding companies and banks, as defined
by surveyed and peer banks. The Compensation Committee relies
primarily on other compensation programs (annual and long-term
incentives) to establish the desired pay-for-performance
relationship. However, the existing philosophy of providing
USBANCORP and subsidiary executives with below-median base
salaries reflects the Compensation Committee's intention to
closely manage fixed compensation expenses until performance
reaches a sustainable level that suggests a median salary
practice is appropriate.
In 1994, USBANCORP recorded earnings, return on average
equity, and return on average assets (ROA) before acquisition
charges of $13.2 million, 10.41% and 0.87%, respectively. These
results were not sufficient to merit payment of annual incentives
to holding company personnel participating in the Executive
Annual Incentive Plan which was based on USBANCORP's return on
assets (see 1994 Compensation for the Chief Executive Officer
below). One subsidiary achieved its pre-tax return on assets
objective. As a result, employees of that subsidiary, including
one of the named executive officers of USBANCORP, received annual
incentive awards under the subsidiary performance component of
the Executive Annual Incentive Plan.
Mr. Dunkle received a bonus based on ROE performance as
outlined in his employment contract which was in effect through
the end of 1994 (see 1994 Compensation for the Chief Executive
Officer).
While overall financial results have not triggered payment
of holding company annual incentives, improvements in USBANCORP's
financial results have helped contribute to USBANCORP's recent
success in the stock market. At the close of 1989, USBANCORP's
stock price was $13.25 and no common stock dividends were paid.
At the close of 1994, USBANCORP's stock price had increased to
$21.00, an increase of 58%. The USBANCORP Common Stock dividend
attributable to 1994 performance increased to $0.97. To continue
to reinforce USBANCORP's commitment to creating value for
shareholders, options to acquire 25,500 shares of USBANCORP
Common Stock were granted on February 22, 1994, to a total of 19
employees. In addition, options to acquire 7,500 shares of
USBANCORP Common Stock were subsequently granted to two other new
employees. The options granted were consistent with the strategy
identified in the section "Executive Compensation Policies."
1994 Compensation for the Chief Executive Officer
At January 1, 1994, Mr. Dunkle's annual base salary was
$156,500, a reflection of his then current duties as President
and Chief Executive Officer, U.S. Bank. Upon the retirement of
Mr. Barton from and the promotion of Mr. Dunkle to the position
of Chairman, President and Chief Executive Officer of USBANCORP,
Mr. Dunkle's annual salary was increased to $220,000 effective
February 1994. Consequently, Mr. Dunkle earned a salary of
$215,375 during 1994.
The independent consultant's study (October 1993) identified
a target base salary for Mr. Dunkle that is consistent with
USBANCORP's base salary policy (approximating the 40th percentile
of competitive practices). The Compensation Committee decided to
move toward the target base salary over the first few years of
his tenure. Thus the base salary rate of $220,000 reflects a
transitional salary that is below the rate suggested by
USBANCORP's base salary policy.
Through 1994, an employment contract between Mr. Dunkle and
USBANCORP was in effect. This contract identified key parameters
of Mr. Dunkle's employment, including compensation arrangements.
The contract had the effect of excluding Mr. Dunkle from
participation in the Executive Annual Incentive Plan and
establishing separate ROE goals for determining his bonus. Thus
in 1995, Mr. Dunkle received an annual incentive award with a
cash value of $53,844 for 1994 performance under the terms of his
contract, not under the Executive Annual Incentive Plan. This
employment contract has since been terminated and replaced by a
Change in Control Agreement. See "Change in Control Agreements"
herein. Beginning in 1995, Mr. Dunkle, along with the other
named executive officers of USBANCORP set forth elsewhere on the
compensation table will participate in the Executive Annual
Incentive Plan (see MATTER NO. 3 - Proposal to Approve Executive
Annual Incentive Plan).
On February 22, 1994, the Compensation Committee awarded
options to Mr. Dunkle to acquire 5,000 shares of USBANCORP Common
Stock. This award is consistent with the strategy identified in
the section "Executive Compensation Policies" herein and reflects
the Compensation Committee's recognition of USBANCORP's success
in creating value for its shareholders. The exercise price of
$23.875 per optioned share is equal to the fair market value of
USBANCORP Common Stock (as defined in the 1991 Stock Option
Plan). These stock options vest and become exercisable in three
equal installments -- on the first, second and third
anniversaries of the award. The options expire ten years from
the date of the grant.
Impact of Omnibus Budget Reconciliation Act of 1993 - Section
162(m)
Commencing in 1994, Section 162(m) of the Omnibus Budget
Reconciliation Act of 1993 ("OBRA") prohibits a publicly owned
company from taking a compensation deduction for tax purposes for
annual compensation in excess of $1,000,000 for any of the
executive officers named in its Summary Compensation Table. To
the extent that certain guidelines are met, compensation in
excess of $1,000,000 is exempt from this limitation.
The Compensation Committee does not believe that the
deduction limit imposed by OBRA will affect the deductibility of
USBANCORP's existing compensation programs. The Compensation
Committee will continue to evaluate the potential impact of
Section 162(m) and take such actions as it deems appropriate.
This report is furnished by Messrs. Barton, O'Malley,
Pasquerilla, and Wise (Chairman) of the Compensation Committee.
Compensation Committee Interlocks and Insider Participation
Messrs. Barton, O'Malley, Pasquerilla and Wise (Chairman)
served as members of the Compensation Committee during 1994.
Each member of the Compensation Committee is excluded from
participation in any plan administered by the Compensation
Committee while serving as a member, except for participation in
the Independent Directors Annual Retainer Plan, the Compensation
Committee's administration of which is limited to coordinating
the payment of a predetermined retainer. Mr. Barton did not
serve on the Compensation Committee while serving as Chairman,
President and Chief Executive Officer of USBANCORP. Mr. Barton
also serves on the Compensation Committee of Crown American
Realty Trust, of which Mr. Pasquerilla is the Chief Executive
Officer.
Compensation Paid to Executive Officers
The following table sets forth information for the three
years ended December 31, 1994, concerning the annual and
long-term compensation for services in all capacities to
USBANCORP and its banking subsidiaries of those persons who were
(i) the Chief Executive Officers of USBANCORP during the fiscal
year ended December 31, 1994, and (ii) the other four most highly
compensated executive officers of USBANCORP or its banking
subsidiaries serving at December 31, 1994 (the "Named Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Long Term
Principal Position Annual Compensation Compensation(4)
Other Securities
Annual Underlying All Other
Year Salary($) Bonus($)(2) Compensation$(3) Options #(5) Compensation$(6)(7)(8)
<S> <C> <C> <C> <C> <C> <C>
Clifford A. Barton (1)............. 1994 $ 15,045 $ --- $ --- --- $14,582
Retired; Chairman, President 1993 180,540 45,135 --- 4,000 36,817
and Chief Executive Officer of 1992 171,960 27,944 --- --- 34,158
USBANCORP and Chairman of
the Board of U.S. Bank,
Three Rivers Bank, Community and
the Trust Company
Terry K. Dunkle.................... 1994 $215,375 $53,844 $ --- 5,000 $33,789
Chairman, President and 1993 156,480 39,120 --- 4,000 26,755
Chief Executive Officer of 1992 149,404 37,260 --- --- 15,839
USBANCORP and Chairman of
the Board of U.S. Bank,
Three Rivers Bank, Community and
the Trust Company
Louis Cynkar...................... 1994 $127,350 9,551 --- 2,500 10,889
President and Chief Executive 1993 103,980 16,252 --- 2,000 8,136
Officer of U.S. Bank 1992 100,440 6,596 --- --- 8,075
Dennis J. Fantaski............... 1994 $118,000 --- --- 2,500 8,488
President and Chief Executive 1993 100,521 21,890 --- 2,000 15,677
Officer of Community and 1992 89,160 9,585 --- --- 9,823
Community Savings
Orlando B. Hanselman............. 1994 $117,930 --- --- 2,500 8,309
Executive Vice President, 1993 92,790 16,965 --- 2,000 5,789
Chief Financial Officer 1992 69,333 9,999 --- --- 5,311
and Manager Corporate Services
of USBANCORP
W. Harrison Vail.................. 1994 $120,000 --- --- 2,500 9,903
President and Chief 1993 113,828 28,475 --- 4,000 5,598
Executive Officer of Three 1992 108,408 27,102 --- --- 3,589
Rivers Bank
__________________
<FN>
(1) Mr. Barton retired as Chairman, President and Chief
Executive Officer of USBANCORP and Chairman of the Board of
U.S.Bank, Three Rivers Bank, Community and the Trust Company
on January 31, 1994. Mr. Barton continues to serve as a
director of USBANCORP and the other named subsidiaries.
(2) Includes (a) amounts paid to Messrs. Dunkle and Vail under
their respective employment agreements, and (b) the cash and
cash value of stock awards made to executive officers of
USBANCORP and its subsidiaries under the Executive Annual
Incentive Plan. For purposes of this table, the cash value
of the stock awards was determined by multiplying the price
USBANCORP paid to acquire the shares in the open market
($22.25) by the number of shares awarded. For additional
information regarding the Executive Annual Incentive Plan,
see "MATTER NO. 3 -- Proposal to Approve Executive Annual
Incentive Plan."
(3) Unless otherwise indicated, no executive officer named in
the Summary Compensation Table received personal benefits or
perquisites in excess of the lesser of $50,000 or 10% of the
officer's total compensation (salary and bonus).
(4) USBANCORP has no long-term compensation plan other than the
1991 Stock Option Plan.
(5) Indicates number of shares for which options were granted
during 1994 and 1993 under the 1991 Stock Option Plan. No
grants of options were made in 1992. For additional
information regarding the 1991 Stock Option Plan, see MATTER
NO. 4 -- "Proposal to Approve Amendment to 1991 Stock Option
Plan."
(6) Includes amounts awarded under the Profit Sharing Plan of
USBANCORP and U.S. Bank. All full-time employees of
USBANCORP and U.S. Bank are entitled to participate in the
Profit Sharing Plan. A contribution during any plan year is
equal to 7-1/2% of U.S. Bank's income as defined in the plan.
(7) Includes (a) the value of the premium paid by USBANCORP of
$10,000 for a split dollar life insurance policy for Mr.
Dunkle, (b) amounts accrued to provide additional benefits
over ERISA limitations to Messrs. Cynkar, Dunkle, Fantaski,
and Vail, and (c) the premiums paid by USBANCORP and its
subsidiaries for life insurance policies with coverage
limits above $50,000 to Messrs. Cynkar, Dunkle, Fantaski,
Hanselman, and Vail. Also includes amounts paid to Mr.
Barton for accrued and unpaid vacation time preceding his
retirement on January 31, 1994 and to Mr. Fantaski for
moving expenses associated with his promotion to President
and Chief Executive Officer of Community and Community
Savings.
(8) Includes amounts contributed under a 401(k) Plan of
USBANCORP to Messrs. Fantaski and Vail. Under the USBANCORP
sponsored 401(k) plan, employees of Three Rivers Bank and
Community Savings are allowed to contribute up to 20% of
their compensation to the plan, with an employer match of
$.50 on each $1.00 of employee contribution up to a maximum
of 6% of an employee's compensation.
</TABLE>
<PAGE>
Option Grants Table
The following table sets forth information with respect to
grants of stock options made during 1994 to the Chief Executive
Officer and each of the Named Officers.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
Potential
Percent Realizable
of Total Value
Options at Assumed
Granted Annual
Number of to Rates of
Securities Employees Stock Price
Underlying in Exercise or Expira- Appreciation
Options Fiscal Base Price tion for Option
Name Granted (#)(1) Year ($/Share) Date Term($)
0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
Clifford A. Barton.... --- --- --- --- --- --- ---
Terry K. Dunkle....... 5,000 15.2 23.875 2/22/2004 0 75,074 190,253
Louis Cynkar.......... 2,500 7.6 23.875 2/22/2004 0 37,537 95,127
Dennis J. Fantaski.... 2,500 7.6 23.875 2/22/2004 0 37,537 95,127
Orlando B. Hanselman.. 2,500 7.6 23.875 2/22/2004 0 37,537 95,127
W. Harrison Vail...... 2,500 7.6 23.875 2/22/2004 0 37,537 95,127
Gains applicable to all
shareholders(2)....... --- --- --- --- 0 83,815,271 212,404,354
__________________
<FN>
(1) Options were granted under the 1991 Stock Option Plan to the
Chief Executive Officer and each of the Named Officers on
February 22, 1994. For additional information regarding the
1991 Stock Option Plan, see "Matter No. 4 -- Proposal to
Approve Amendment to the 1991 Stock Option Plan."
(2) The potential realizable gain to all shareholders (based on
5,582,155 shares of USBANCORP Common Stock outstanding at
December 31, 1994, with an assumed market price of $23.875)
at 5% and 10% assumed annual growth rates over a term of ten
years is provided as a comparison to the potential gain
realizable by the Chief Executive Officer and the Named
Officers at the same assumed annual rates of stock
appreciation.
</TABLE>
Option Exercises and Year-End Value Table
The following table sets forth information concerning the
exercise of options to purchase USBANCORP Common Stock by the
Chief Executive Officer and the Named Officers during the year
ended December 31, 1994, as well as the number of securities
underlying unexercised options and potential value of unexercised
options (both options which are presently exercisable and options
which are not presently exercisable) as of December 31, 1994.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE(1)
Number of Securities
Shares Underlying Unexercised Value of In-the-Money
Acquired Options at December 31, 1994 Options at December 31, 1994(3)
on Value
Name Exercise (#) Realized ($)(2) Exercisable(#) Unexercisable(#) Exercisable($) Unexercisable($)
<S> <C> <C> <C> <C> <C> <C>
Clifford A. Barton... 5,667 17,877 --- --- --- ---
Terry K. Dunkle...... 800 2,600 5,201 4,666 2,709 ---
W. Harrison Vail..... --- --- 8,500 3,000 15,625 ---
Louis Cynkar......... 500 3,250 4,666 2,334 6,250 ---
Dennis J. Fantaski... --- --- 4,666 2,334 7,813 ---
Orlando B. Hanselman. --- --- 4,666 2,334 7,813 ---
_______________________
<FN>
(1) Stock options were granted under the 1991 Stock Option Plan
on February 22, 1994, January 19, 1993 and December 17,
1991. Options become exercisable as follows: one-third one
year from date of grant; two-thirds, less the aggregate
number previously exercised, two years from date of grant;
and the remainder three years from date of grant.
(2) Represents the aggregate market value of the underlying
shares of USBANCORP Common Stock at the date of exercise
minus the aggregate exercise prices for options exercised.
(3) "In-the-money options" are stock options with respect to
which the market value of the underlying shares of USBANCORP
Common Stock exceeded the exercise price at December 31,
1994. The value of such options is determined by
subtracting the aggregate exercise price for such options
from the aggregate fair market value of the underlying
shares of USBANCORP Common Stock on December 31, 1994. Fair
market value was determined by reference to the average of
the high and low sale prices of USBANCORP Common Stock as
quoted on the Nasdaq Stock Market.
</TABLE>
<PAGE>
Retirement Plans
Pension Plan - U.S. Bank
U.S. Bank maintains a qualified defined benefit retirement
plan for its employees (the "U.S. Bank Plan"). Remuneration for
pension benefit purposes is base pay excluding overtime, bonus or
reimbursement of business expense. An employee's benefit under
the U.S. Bank Plan is determined on the basis of Final Average
Pay which means the average annual base pay received by an
employee in the five consecutive years out of the ten ending
before his normal retirement date for which the average is
highest.
U.S. Bank expects to make a contribution of $340,000 in 1995
for the 1994 plan year.
Estimated annual benefits payable upon retirement at age 65
considering 15 years of service (25 years of service for highly
compensated employees as such term is defined in IRC Section
414(q) of the Internal Revenue Code of 1986, as amended (the
"Code")) with respect to the specified remuneration are as
follows:
<TABLE>
<CAPTION>
PENSION TABLE
U.S. BANK
Five Calendar Year
Average Salary Annual Benefit at
Preceding Retirement Normal Retirement Date
<S> <C>
$ 15,000 $ 5,550
25,000 9,250
40,000 14,800
60,000 22,200
90,000 33,300
100,000 37,000
120,000 44,400
140,000 51,800
150,000(1) 55,500
<FN>
_______________________
(1) Effective for retirements on or after January 1, 1994,
annual compensation for Plan purposes may not exceed
$150,000. Employees with compensation exceeding $150,000 in
years before 1994 may have larger "preserved benefits."
</TABLE>
The above benefits are paid for the life of the employee
with a right of survivorship with respect to ten years of
post-retirement benefits. Other optional forms of benefit are
available, in actuarially equivalent amounts. Current
remuneration covered by the U.S. Bank Plan (base salary) in 1994
for Messrs. Dunkle and Cynkar was $215,375.00 and $127,350.00,
respectively, subject to the $150,000 limitation. As of December
31, 1994, Mr. Dunkle was credited with seven years of service and
Mr. Cynkar with nine years of service.
Effective January 1, 1986, the USBANCORP Board of Directors
adopted the U.S. Bank Plan for the benefit of employees of
USBANCORP on the same terms and conditions as for employees of
U.S. Bank. Contributions made by USBANCORP are limited to those
employees whose base salaries are paid by USBANCORP.
Effective July 11, 1994, JSB merged into U.S. Bank. Those
employees of JSB who became employees of U.S. Bank, as of the
date of merger, became members of the U.S. Bank Plan. JSB did
not maintain a defined benefit pension plan, and so no assets or
liabilities were transferred to the U.S. Bank Plan at the time of
merger.
Supplemental Pension Plan
The Board of Directors of U.S. Bank on February 20, 1981,
adopted a Supplemental Pension Plan under which the Executive
Committee of the Board of Directors may from time to time
designate executive officers of U.S. Bank as participants and
specify the amount of supplemental pension payment the
participant shall receive.
A participating officer agrees to perform, after retirement,
such advisory services as the Executive Committee may reasonably
request and enters into a noncompetition agreement with U.S.
Bank. Upon his retirement from U.S. Bank, a participant will be
entitled to receive supplemental monthly pension payments in a
specified amount for a period of fifteen years. If he should die
before retirement while in the service of U.S. Bank or if he
should die after payment of benefits has commenced, the
participant's spouse, if any, will be entitled to receive one-
half of the specified amount for the remainder of the fifteen
year period.
No payments are currently being made under this plan. U.S.
Bank purchased an annuity in 1988 for one retired officer who is
the only present participant.
USBANCORP has provided an additional pension for Mr. Barton.
The additional pension benefit will be paid in monthly
installments over Mr. Barton's lifetime with 180 monthly payments
guaranteed. If death occurs before Mr. Barton receives
180 payments, the remaining payments will be made to his
designated beneficiary. In 1994, USBANCORP made payments in the
amount of $23,298 to Mr. Barton under this supplemental plan.
USBANCORP has purchased a life insurance policy that will
reimburse USBANCORP, after Mr. Barton's death, for the after-tax
cost of all supplemental pension benefits, including the
insurance premiums, and a factor for the use of money. The life
insurance policy has been assigned to a Rabbi Trust established
by USBANCORP to assist it in satisfying its obligations to Mr.
Barton. Mr. Barton remains a general unsecured creditor of
USBANCORP and the assets of the trust are subject to the claims
of creditors.
Mr. Barton's supplemental pension will provide him with a
total retirement income equal to the income benefit he would have
received if he had been a participant in the U.S. Bank Plan for
all years of eligible service beginning with his initial date of
employment with Three Rivers Bank, through his retirement at
USBANCORP.
USBANCORP has also provided additional life insurance and
retirement benefit for Mr. Dunkle funded through a split-dollar
life insurance policy. USBANCORP pays a portion of the premiums
until Mr. Dunkle's normal retirement. At Mr. Dunkle's
retirement, USBANCORP will recover, through a withdrawal from the
policy, its cumulative premiums or the policy cash value if less.
Mr. Dunkle will receive a paid-up life insurance policy that will
include any remaining cash value. If Mr. Dunkle dies prior to
retirement, USBANCORP will be reimbursed for its total premiums
from the insurance proceeds. The annual premium paid by
USBANCORP is $10,000 per year, and USBANCORP has an interest in
the policy cash value equal to the lesser of its cumulative
premiums or the policy cash value.
The Compensation Committee determined that it was
appropriate to provide additional supplemental retirement
benefits to Mr. Dunkle commencing at his retirement, because
recent revisions in Code regulations significantly limit
retirement benefits payable to highly compensated executives
under qualified pension, profit sharing, and 401(k) plans.
Accordingly, on February 25, 1994, the Board of Directors of
USBANCORP adopted a supplemental executive retirement plan
("SERP") for the benefit of Mr. Dunkle.
The SERP will provide supplemental retirement benefits to
Mr. Dunkle, which, in combination with benefits from all
USBANCORP sponsored qualified and non-qualified pension plans,
will ensure an appropriate total retirement benefit for
Mr. Dunkle. The target retirement benefit is 55% of the final
three-year average salary of Mr. Dunkle commencing at his normal
retirement age of 65. Although the SERP is an unfunded plan,
USBANCORP can set aside assets to meet its obligations under the
plan. USBANCORP has purchased a life insurance policy on
Mr. Dunkle's life. Assuming continuation of current interest
rates and mortality charges, USBANCORP's total premium outlay
will be completed by the time Mr. Dunkle attains normal
retirement age. The policy is designed to accumulate sufficient
cash value at Mr. Dunkle's retirement to allow USBANCORP to
recover the after tax cost of each annual SERP payment. In
addition, at Mr. Dunkle's death, tax-free life insurance proceeds
will reimburse USBANCORP for all unrecovered costs associated
with the plan. USBANCORP will not recover interest for the time
value of money.
The life insurance policy has been assigned to a Rabbi Trust
established by USBANCORP to assist USBANCORP in satisfying its
obligations to Mr. Dunkle. The Trust Company, as trustee, is the
policy owner and beneficiary. Mr. Dunkle remains a general
unsecured creditor of USBANCORP and the assets of the trust are
subject to the claims of creditors.
The Board of Directors also approved the purchase of an
individual disability income policy for Mr. Dunkle. Mr. Dunkle
has collaterally assigned the policy to USBANCORP so that in the
event of his disability prior to retirement, the policy will pay
USBANCORP a monthly benefit sufficient to pay the premium on the
SERP life insurance policy on Mr. Dunkle's life. This would
relieve USBANCORP of the obligations to pay premiums on the SERP
policy if Mr. Dunkle becomes disabled, without reducing the
promised SERP retirement benefits to Mr. Dunkle.
Retirement Plan - Three Rivers Bank
Three Rivers Bank maintained a defined benefit pension plan
that was established during 1970 (the "Three Rivers Plan").
Effective July 1, 1993, the benefit formula of the Three
Rivers Plan was revised to duplicate the benefit formula of the
U.S. Bank Plan. Employees retiring on or after July 1, 1993,
will receive a benefit based upon the U.S. Bank Plan formula but
not less than the benefit earned through June 30, 1993, under the
former Three Rivers Plan formula.
Current remuneration covered by the Retirement Plan (base
salary) in 1994 for Mr. Vail was $120,000. As of December 31,
1994, Mr. Vail was credited with ten years of service.
Retirement Plan - Community Savings
Prior to June 30, 1993, Community Savings maintained a
retirement plan (the "Community Plan") for all eligible
employees.
Effective July 1, 1993, the Community Plan was merged into
the Three Rivers Plan. Assets and liabilities of the Community
Plan were transferred to the Three Rivers Plan. Employees
retiring on or after July 1, 1993, will receive a benefit based
upon the Three Rivers Plan benefit formula but not less than the
benefit earned through June 30, 1993, under the former Community
Plan formula. At December 31, 1994, Mr. Fantaski had 6 years of
credited service under the Community Plan. Current remuneration
covered by the Community Plan in 1994 was $118,000.
Change in Control Agreements
In 1994, USBANCORP entered into Change in Control Agreements
(the "Agreements") with Messrs. Terry K. Dunkle, Louis Cynkar,
Dennis J. Fantaski, Orlando B. Hanselman, and W. Harrison Vail,
pursuant to which USBANCORP agreed to provide the executives with
severance benefits upon the occurrence of certain enumerated
events ("Triggering Events") following a change in control of
USBANCORP ("Change in Control") (as defined in the Agreements).
The initial term of the Agreements is three years, subject to an
automatic one year extension on each anniversary date thereof,
unless either party gives notice to the other of an intention not
to renew. Under the Agreements, upon the occurrence of a
Triggering Event following a Change in Control, Mr. Dunkle would
be entitled to receive approximately 2.99 times his combined
salary and bonus which will be determined (a) during the initial
three year term of the Agreement by reference to his highest
salary and bonus paid in the year in which he is terminated or in
any one of the last five fiscal years preceding such termination,
and (b) after the expiration of the initial term, by reference to
the average of the executive's combined salary and bonus in the
preceding five years. The Change in Control Agreements for each
of Messrs. Cynkar, Fantaski, Hanselman and Vail are identical,
except that Messrs. Cynkar, Fantaski and Vail will receive one
times their combined base salary and bonus and Mr. Hanselman will
receive 1.5 times his combined base salary and bonus. The
executives, in their discretion, may receive these payments in a
lump sum or on a monthly installment basis. The Change in
Control Agreements also entitle the executives to continued
participation in the employee benefits plans of USBANCORP for a
period of three years with respect to Mr. Dunkle, eighteen months
with respect to Mr. Hanselman and one year with respect to the
other executives. In addition, the Agreements provide that
options held by the executives to acquire USBANCORP Common Stock,
to the extent not currently exercisable, will become immediately
exercisable upon the occurrence of a Triggering Event following a
Change in Control and may be exercised by the executives at any
time prior to the earlier of the expiration date of the options
or 90 days after the executive's termination. The Agreements
also require USBANCORP to make additional payments to the
executives in the event that the severance payments described
above result in the imposition of an excise tax, pursuant to
Section 4999 of the Code on the payment of such amounts.
Performance Graph
Set forth is a graph comparing the yearly percentage change
in the cumulative total shareholder return on USBANCORP Common
Stock against the Nasdaq Stock Market (U.S. Companies) and the
NASDAQ Bank Stocks for the five years beginning January 1, 1990
and ended December 31, 1994.
<TABLE>
<CAPTION>
Legend
Symbol Index Description 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
<S> <C> <C> <C> <C> <C> <C> <C>
USBANCORP, INC., PA 100.0 100.3 142.4 180.6 202.1 186.1
Index for Nasdaq Stock
Market (US Companies) 100.0 84.9 136.3 158.6 180.9 176.9
Index for Nasdaq Bank
Stocks 100.0 73.2 120.2 174.9 199.3 198.7
</TABLE>
MATTER NO. 2
PROPOSAL TO APPROVE INDEPENDENT
DIRECTORS ANNUAL RETAINER PLAN
USBANCORP adopted in 1994 an Independent Directors Annual
Retainer Plan (the "Retainer Plan"), under which each independent
director of USBANCORP is paid an annual retainer (the "Retainer")
in the amount of Six Thousand Dollars ($6,000) payable in
USBANCORP Common Stock. The Retainer Plan was designed to more
closely align the interests of USBANCORP directors with those of
its shareholders by having an annual retainer paid in shares of
USBANCORP Common Stock.
Under the Retainer Plan, the total number of shares of
USBANCORP Common Stock awarded to a director is determined by
dividing the amount of the retainer by the fair market value of
the USBANCORP Common Stock on the date the shares are acquired.
The Retainer is paid to each independent director on the last
business day of the month in which the annual meeting of
shareholders is held (the "Payment Date"). Directors whose
service in any year begins after such date receive a pro rated
amount of the retainer based on the number of months he or she
served as a director with full credit given to the month in which
he or she became a director. Such pro rated amount is paid
annually on the first business day of December (the "Supplemental
Payment Date"). Under the Retainer Plan, on the Payment Date or
Supplemental Payment Date, as the case may be, the aggregate
dollar amount of the Retainer is immediately delivered by
USBANCORP, or an affiliate of USBANCORP, to an independent
broker/dealer for the purpose of acquiring USBANCORP Common Stock
in open market transactions. USBANCORP pays any brokerage
commissions incurred in connection with the acquisition of
USBANCORP Common Stock under the Retainer Plan.
The payment of the Retainer is administered by the
Compensation Committee and the Trust Company acts as custodian
with respect to the USBANCORP Common Stock acquired with the
Retainer. The Compensation Committee has no authority to
(a) select the participants, (b) determine the awards to be
granted, or the number of shares of USBANCORP Common Stock to be
issued or the times at which such awards are to be granted,
(c) establish the duration or nature of the awards, or (d) modify
any terms or conditions specified in the Retainer Plan.
The Retainer Plan may not be modified or amended by the
Board of Directors more often than once every six months except
for modifications or amendments required to be made to the
Retainer Plan for it to comply with the Code, the Employee
Retirement Income Security Act and the rules and regulations
promulgated thereunder. Subject to the foregoing, the Retainer
Plan may be modified or amended by the Board, without shareholder
approval so long as the modification or amendment is not of a
material nature.
Set forth in the table below is the aggregate amount paid to
the independent directors in 1994 under the Retainer Plan and the
aggregate number of shares of USBANCORP Common Stock awarded
under the Retainer Plan.
<TABLE>
<CAPTION>
Independent Directors Annual Retainer Plan(1)
Number of Shares of
Dollar Value ($)(2) USBANCORP Common Stock(3)
<S> <C> <C>
Independent
Directors $77,277 3,339
_________________
<FN>
(1) Fourteen members of the Board of Directors of USBANCORP were
eligible to participate in the Retainer Plan in 1994.
Messrs. Barton, Dewar and Edwards received a pro rated
amount of the Retainer as Director Barton's service because
an independent director of USBANCORP began in February 1994,
and Directors Dewar and Edwards were appointed to the Board
in July 1994.
(2) Based upon the purchase of 3,099 shares of USBANCORP Common
Stock at $23.00 per share and 240 shares of USBANCORP Common
Stock at $25.00 per share.
(3) With the exception of Director Barton who received
239 shares and Directors Dewar and Edwards who each received
120 shares, each independent director was awarded 260 shares
of USBANCORP Common Stock.
</TABLE>
Shareholder approval of the Retainer Plan is being sought
for the purpose of causing the Retainer Plan to qualify for an
exemption from Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Pursuant to the exemption
(a) each independent director will qualify as a disinterested
administrator for purposes of administration of other employee
benefit plans, and (b) the award of shares of USBANCORP Common
Stock thereunder will be exempt from the short swing profit rules
of Section 16 of the Exchange Act.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION
OF THE RETAINER PLAN. The affirmative vote of a majority of all
votes cast at the Annual Meeting is required to adopt the
Retainer Plan. All proxies will be voted "FOR" adoption of the
Retainer Plan unless a shareholder specifies to the contrary on
such shareholder's proxy card.
MATTER NO. 3
PROPOSAL TO APPROVE EXECUTIVE ANNUAL INCENTIVE PLAN
The Board of Directors of USBANCORP believes that
USBANCORP's Executive Annual Incentive Plan (the "Incentive
Plan") constitutes an important part of USBANCORP's compensation
program and, accordingly, has adopted an amended and restated
executive annual incentive plan.
The Incentive Plan has been designed to (a) focus management
on explicit annual performance objectives for USBANCORP and its
subsidiaries, the achievement of which the Board believes will
contribute to the attainment of USBANCORP's long term goals, (b)
reinforce management's focus on achieving higher returns for
USBANCORP's shareholders, (c) provide compensation opportunities
that are competitive with other financial institutions in
USBANCORP's peer group, and (d) control overhead and improve
performance by basing a portion of management's total
compensation upon the achievement of certain specified
performance goals.
The Incentive Plan is administered under the direction of
the Compensation Committee. The Compensation Committee has the
authority under the Incentive Plan to: (a) approve plan
participants, (b) establish performance targets, (c) establish
participant reward opportunities, (d) determine the timing and
amount of award distributions, and (e) establish such other
measures as the Compensation Committee may deem necessary to
accomplish the objectives of the Incentive Plan. The
Compensation Committee also has the authority under the Incentive
Plan to construe and interpret the Incentive Plan and to make any
changes to the Incentive Plan the Compensation Committee deems
necessary. Shareholder approval of any such change would not be
required unless such modification or change was deemed material.
Any decision of the Compensation Committee shall be binding on
all parties, including USBANCORP, its subsidiaries and the
participants in the Incentive Plan. The Compensation Committee
has the authority, in its sole discretion, to terminate the
Incentive Plan at any time.
The Incentive Plan provides for the grant of cash and stock
awards to those executive officers of USBANCORP and its
subsidiaries who are in a position to substantially contribute to
the financial success of USBANCORP and/or its subsidiaries.
Under the Incentive Plan, executive officers are placed in one of
five categories based upon the capacity in which they are serving
as an officer of USBANCORP or its subsidiaries. The officers
classification dictates the maximum award opportunities available
to the officer.
Under the Incentive Plan, the Chief Executive Officer of
USBANCORP, after consultation with the Chief Executive Officers
of USBANCORP's banking subsidiaries, recommends, in writing to
the Compensation Committee, the officers who he believes are
entitled to participate in the Plan and the class to which each
officer should be assigned. The recommendations are subject to
the approval of the Compensation Committee.
The amount of the award, if any, to be granted to
participants under the Incentive Plan is based upon the
attainment by USBANCORP and/or its subsidiaries of certain
specified performance goals including the following: (a) the
return on equity of USBANCORP as compared to other financial
institutions in USBANCORP's peer group, (b) the total return to
shareholders of USBANCORP as compared to other financial
institutions in USBANCORP's peer group, (c) USBANCORP's rating as
determined by a nationally recognized bank consulting firm that
utilizes a letter grading and percentile ranking system which
compares the capital adequacy, asset quality, return on average
assets, and liquidity of USBANCORP to other financial
institutions in USBANCORP's peer group, (d) USBANCORP's banking
subsidiaries' pre-tax returns on assets as compared to pre-
established budgeted pre-tax return on assets for the
subsidiaries, and (e) an evaluation of each participant's
performance using USBANCORP's performance appraisal system. The
classification of a participant dictates the weight that each of
the above performance measures is given by the Compensation
Committee.
Earned awards will be paid in the form of 50% cash and 50%
USBANCORP Common Stock.
Set forth in the table below is information regarding the
awards that have been paid to each of the following participants
under the Incentive Plan which was in effect for the fiscal year
ended December 31, 1994.
<TABLE>
<CAPTION>
EXECUTIVE ANNUAL INCENTIVE PLAN
__________________________________
Number of Shares
Total of USBANCORP Cash
Name and Position Dollar Value ($)(1) Common Stock Award
<S> <C> <C> <C>
Clifford A. Barton, --- --- ---
Retired; Former Chairman,
President and Chief
Executive Officer of
USBANCORP and Chairman
of the Board of U.S. Bank,
Three Rivers Bank,
Community and
the Trust Company
Terry K. Dunkle, --- --- ---
Chairman, President
and Chief Executive
Officer of USBANCORP
and Chairman of the Board
of U.S. Bank, Three Rivers
Bank, Community and the
Trust Company
W. Harrison Vail --- --- ---
President and Chief
Executive Officer of
Three Rivers Bank
Louis Cynkar 9,551 86 7,637.50
President and Chief
Executive Officer of
U.S. Bank
Dennis J. Fantaski --- --- ---
President and Chief
Executive Officer of
Community and Community
Savings
Orlando B. Hanselman --- --- ---
Executive Vice President,
Chief Financial Officer
and Manager Corporate
Services.
Named Executives as a group 9,551 86 7,637.50
Independent directors --- --- ---
as a group
Other officers 43,755 413 34,565.75
and employees as a group
_____________________
<FN>
(1) The sum of (a) the cash award and (b) the product of: (i) the
price paid by USBANCORP to acquire the share of USBANCORP Common Stock in the
open market of $22.25, and (ii) the number of shares granted under the
Incentive Plan.
</TABLE>
Shareholder approval of the Incentive Plan is being sought
for the purpose of causing the Incentive Plan to qualify for an
exemption from Section 16(b) of the Exchange Act. Pursuant to
the exemption, awards of shares of USBANCORP Common Stock under
the Incentive Plan will be exempt from the short swing profit
rules of Section 16 of the Exchange Act.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF
THE INCENTIVE PLAN. The affirmative vote of a majority of all
votes cast at the Annual Meeting is required to adopt the
Incentive Plan. All proxies will be voted "FOR" adoption of the
Incentive Plan unless the shareholders specifies to the contrary
on such shareholder's proxy card.
MATTER NO. 4
PROPOSAL TO APPROVE AMENDMENT
TO 1991 STOCK OPTION PLAN
The Board of Directors of USBANCORP believes that
USBANCORP's stock option program constitutes an important part of
its compensation program and, accordingly, USBANCORP has adopted,
subject to shareholder approval, an amendment to the USBANCORP,
Inc. 1991 Stock Option Plan (the "Option Plan") solely to
increase the number of shares of USBANCORP Common Stock available
for issuance thereunder from 128,000 shares to 285,000 shares.
The purpose of the Option Plan is to enhance the
performance focus of the executives of USBANCORP and its
subsidiaries. By encouraging ownership of USBANCORP Common Stock
among those employees who have significant roles in USBANCORP's
success, the Option Plan more closely aligns the interests of its
employees with those of its shareholders, which USBANCORP
believes ultimately benefits its shareholders. Moreover,
USBANCORP believes that the Option Plan has a positive effect on
USBANCORP's ability to attract, motivate and retain employees of
outstanding skill and ability.
Since its adoption in 1991 through December 31, 1994,
USBANCORP has issued options under the Option Plan to acquire
89,500 shares of USBANCORP Common Stock. The amendment to the
Option Plan, if approved by the shareholders of USBANCORP, would
increase the number of shares currently available for future
grants to 195,500.
The Option Plan
The principal features of the Stock Option Plan are
described below.
The Option Plan, as amended, authorizes a Committee
(the "Stock Option Committee") to grant options to purchase up to
an additional 157,000 shares of USBANCORP Common Stock for a
total of 285,000 shares to eligible employees of USBANCORP.
Under the Option Plan, the Committee has full and final authority
to (a) grant stock options, (b) determine to whom such options
shall be granted, (c) determine the number of shares to be
covered by such options, and (d) interpret the Option Plan and
prescribe rules and procedures it deems necessary and advisable
for the administration of the Option Plan. Under the Option
Plan, the Stock Option Committee must consist of at least three
members of the Board of Directors, none of whom may be or were,
within one year prior to becoming a member of the Stock Option
Committee, eligible for a grant of stock options under the Option
Plan.
Under the Option Plan, the Stock Option Committee may
grant (a) incentive stock options (as defined in Section 422 of
the Code, as amended) and/or (b) non-statutory qualified stock
options (options which do not qualify under Section 422 of the
Code). Options granted under the Option Plan become exercisable
by the optionee in the amount of one-third on or after the first
anniversary date of the grant, two-thirds on or after the second
anniversary date of the grant, and the remainder after the third
anniversary of the date of the grant. Incentive stock options
expire by their terms after ten years (five years in the case of
an employee owning 10% or more of USBANCORP Common Stock) from
their date of grant. Nonqualified stock options expire ten years
and six months from their date of grant.
The exercise price of an option is determined by the
Stock Option Committee but must be at least 100% of the fair
market value per share of USBANCORP Common Stock (as defined in
the Option Plan). The option price may be paid in cash and/or in
shares of USBANCORP Common Stock owned by the optionee.
Shares issued or delivered under the Option Plan may be
either authorized, but unissued shares or treasury shares as
determined from time to time by the Board. If any option granted
under the Option Plan is cancelled or expires without having been
exercised in full, the number of shares subject to such option
will be available for purposes of the Option Plan.
If a stock dividend, stock split or related
distribution is made upon the USBANCORP Common Stock, the shares
subject to an outstanding option will be adjusted or substituted
to give effect to such distribution. No fractional shares will
be issued under the Option Plan. Any fractional shares arising
from a distribution described above will be eliminated and not
carried forward to any subsequent adjustments or substitutions
required pursuant to the terms of the Option Plan.
Salaried employees of USBANCORP or its subsidiaries
with executive, managerial, technical or professional
responsibility are eligible to participate in the Option Plan.
Stock options granted under the Option Plan are not
transferrable except by an optionee by will or by the operation
of the laws of descent and distribution. If an optionee
voluntarily terminates his or her employment, options held by
such optionee may be exercised to the extent they are exercisable
on the date of his or her termination at any time prior to the
earlier of (a) the expiration date of the option, or (b) three
months from the date of termination. If an employee retires
under a retirement plan of USBANCORP or its subsidiaries or
becomes disabled, any outstanding options held by the optionee,
may be immediately exercised in full by the optionee (whether or
not exercisable on the date of termination of employment) at any
time prior to the earlier of (a) the expiration date of the
option, or (b) (i) with respect to an employee who retires, the
date which is three months after the date of termination of
employment and (ii) with respect to an employee who becomes
disabled, one year after the date of termination of employment.
Options held by the estate of a deceased employee may at any time
be exercised in full by the person or persons entitled to do so
under the will or by operation of law at any time prior to the
expiration date of the option or within one year from the date of
death, whichever is earlier. If employment of an optionee
terminates for any other reason, the right of such optionee to
exercise any options shall terminate as of the date of
termination.
The obligation of USBANCORP to issue or deliver shares
of USBANCORP Common Stock under the Option Plan is subject to
such issuance and delivery being in compliance with all
applicable laws, regulations, rules and orders which may be in
effect at that time.
Generally, options become exercisable, in full, within
three years from the date of issuance. However, upon the
occurrence of certain events, outstanding options will become
immediately exercisable for a period of sixty days. These events
include (a) a tender offer or an exchange offer commenced by a
person or group, other than USBANCORP, for shares of USBANCORP
Common Stock, (b) the acquisition by any person or group of
shares of USBANCORP Common Stock that gives them the right to
vote 20% or more of all shares entitled to vote for the election
of directors, (c) the filing by any person or group of its or
their intention or possible intention to acquire or change
control of USBANCORP, (d) as of any date, the persons who
constituted the majority of the Board of Directors of USBANCORP
during the two period prior to such date cease to constitute at
least the majority thereof, unless the election or nomination for
election by shareholders of USBANCORP of each new director was
approved by a vote of at least two-thirds of the directors still
then in office who were directors at the beginning of the two
year period, and (e) approval by the shareholders of USBANCORP of
an agreement providing for (i) the merger or consolidation of
USBANCORP with another corporation where (A) present shareholders
of USBANCORP will not thereafter beneficially own shares of the
resulting entity in an amount equal to at least 40% of all voting
shares of the resulting entity entitled to vote for the election
of directors, or (B) members of the Board of Directors of
USBANCORP immediately prior to the merger or consolidation do not
immediately thereafter constitute a majority of the Board of
Directors of the resulting entity or (ii) the sale or disposition
of all or substantially all of the assets of USBANCORP.
The Board may amend, suspend or terminate the Option
Plan at any time without shareholder approval; provided, however,
that the Board may not, without shareholder approval, amend the
Option Plan to (a) increase the total number of shares that may
be issued, (b) increase the total number of shares issued
pursuant to any option granted to any one optionee, or (c) make
any change in the class of eligible employees or set forth a
period during which stock options may be granted.
Tax Consequences
The Option Plan permits eligible employees of USBANCORP
and its subsidiaries to receive grants of incentive stock
options, which qualify for certain tax benefits. In addition,
the Option Plan permits eligible employees of USBANCORP to
receive grants of nonqualified stock options, which do not
qualify for special tax benefits.
The Option Plan is not a qualified plan under Code
Section 401(a). USBANCORP has been advised that under the Code
the following federal income tax consequences will result when
incentive stock options or nonqualified stock options, or any
combination thereof, are granted or exercised, although the
following is not intended to be a complete statement of the
applicable law.
Incentive Stock Options
An optionee generally will not be deemed to receive any
income for federal income tax purposes at the time an incentive
stock option is granted, nor will USBANCORP be entitled to a tax
deduction at that time. Upon the sale or exchange of the shares
at least two years after the grant of the option and one year
after receipt of the shares by the optionee upon exercise, the
optionee will recognize long-term capital gain or loss upon the
sale of such shares equal to the difference between the amount
realized on such sale and the exercise price.
If the foregoing holding periods are not satisfied or
the option is exercised more than three months after the
optionee's employment with USBANCORP has terminated, the optionee
will recognize upon the sale of the underlying shares, ordinary
income equal to the difference between the exercise price and the
lower of the fair market value of the stock at the date of the
option exercise or the sale price of the stock. If the sale
price exceeds the fair market value on the date of exercise, the
gain in excess of the ordinary income portion will be treated as
either long-term or short-term capital gain, depending on whether
the stock has been held for more than 12 months after the date of
sale. Any loss on disposition is a long-term or short-term
capital loss, depending upon whether the optionee held the stock
for more than 12 months. A different rule for measuring ordinary
income upon such a premature disposition may apply if the
optionee is a director or 10 percent shareholder of USBANCORP or
an officer of USBANCORP subject to Section 16(b) of the Exchange
Act. If USBANCORP cancels an option, the optionee recognizes
income to the extent of the amount paid by USBANCORP to cancel
the option over the optionee's basis in such option, if any.
No income tax deduction will be allowed to USBANCORP
with respect to shares purchased by an optionee upon the exercise
of an incentive stock option, provided that such shares are held
at least two years after the date of grant and at least one year
after the date of exercise. However, if these holding periods
are not satisfied, USBANCORP may deduct an amount equal to the
ordinary income recognized by the optionee upon disposition of
the shares.
The exercise of an incentive stock option and the sale
of stock acquired by such exercise could subject an optionee to
alternative minimum tax liability for federal income tax
purposes.
Nonqualified Stock Options
An optionee will not be deemed to receive any income
for federal income tax purposes at the time a nonqualified stock
option is granted, nor will USBANCORP be entitled to a tax
deduction at that time. At the time of exercise, however, the
optionee will realize ordinary income in an amount equal to the
excess of the fair market value of the shares at the time of
exercise of the option over the option price of such shares.
USBANCORP is allowed a federal income tax deduction in an amount
equal to the ordinary income recognized by the optionee due to
the exercise of a nonqualified stock option.
Stock-for-Stock Exchange
An optionee who exchanges "statutory option stock" of
USBANCORP in payment of the purchase price upon the exercise of
an incentive stock option will be deemed to make a "disqualifying
disposition" of the statutory option stock so transferred unless
the applicable holding requirements (two years from the date of
the grant and one year after the exercise of an incentive stock
option) with respect to such statutory option stock are met after
the exercise of incentive stock options but also upon the
exercise of qualified stock options and stock acquired under
certain other stock purchase plans. If an optionee exercises
nonqualified stock options by exchanging previously-owned
statutory option stock, the Internal Revenue Service has ruled
that the optionee will not recognize gain on the disposition of
the statutory option stock (assuming the holding period
requirements applicable to such statutory option stock have been
satisfied) because of the non-recognition rule of Code
Section 1036.
New Plan Benefits and Distribution Table
The following table shows as to the following participants
(i) the number of option shares that were granted in 1994 under
the Option Plan; and (ii) the aggregate number of option shares
granted under the Option Plan since its adoption in 1991.
<TABLE>
<CAPTION>
Name and Position(2)(3) Options Granted(1)
From Inception
1994 of Option Plan
<S> <C> <C>
Clifford A. Barton, --- 9,000
Retired; Former Chairman,
President and Chief Executive
Officer of USBANCORP and
Chairman of the Board of
U.S. Bank, Three Rivers Bank,
Community and the Trust Company
Terry K. Dunkle, 5,000 19,000
Chairman, President and Chief
Executive Officer of USBANCORP
and Chairman of the Board of
U.S. Bank, Three Rivers Bank,
Community and the Trust Company
W. Harrison Vail 2,500 13,000
President and Chief Executive
Officer of Three Rivers Bank
Louis Cynkar 2,500 8,500
President and Chief Executive
Officer of U.S. Bank
Dennis J. Fantaski, 2,500 8,500
President and Chief Executive
Officer of Community and
Community Savings
Orlando B. Hanselman, 2,500 8,500
Executive Vice President,
Chief Financial Officer and
Manager Corporate Services
of USBANCORP
Named Executives as a group 15,000 66,500
Independent directors as a --- ---
group
Other officers 10,500 23,000
and employees as a group
___________________
<FN>
(1) The exercise price of the options granted in 1994, was
$23.875 per share. The weighted average exercise price of
the options granted since the inception of the Option Plan
through December 31, 1994, is $20.00. The fair market value
of USBANCORP Common Stock on March 7, 1995, was $22.50.
(2) Except for the Chief Executive Officer and certain of the
Named Officers, none of the nominees for director have been
issued options under the Option Plan.
(3) No Options have been issued to any associates of any of the
directors, executive officers or nominees for director of
USBANCORP and except as disclosed in the table above, no
person has received options to purchase five percent (5%) or
more of the total shares authorized for issuance under the
Option Plan.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION
OF THE AMENDMENT TO THE 1991 STOCK OPTION PLAN. The affirmative
vote of a majority of all votes cast at the Annual Meeting is
required to adopt the Option Plan. All proxies will be voted
"FOR" adoption of the amendment to the Option Plan unless a
shareholder specifies to the contrary on such shareholder's proxy
card.
FINANCIAL INFORMATION
Requests for printed financial material for USBANCORP or any
of its subsidiaries - annual or quarterly reports, Forms 10-K and
10-Q and Call Reports - should be directed to Orlando B.
Hanselman, Executive Vice President, Chief Financial Officer, and
Manager Corporate Services, USBANCORP, Inc., Main & Franklin
Streets, P.O. Box 670, Johnstown, PA 15907-0670, telephone (814)
533-5319.
TRANSACTIONS WITH MANAGEMENT
Certain directors, nominees and executive officers and/or
their associates were customers of and had transactions with
USBANCORP or its subsidiaries during 1994. Transactions that
involved loans or commitments by subsidiary banks were made in
the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated
persons and did not involve more than normal risk of
collectability or present other unfavorable features. These
loans represented in the aggregate less than 11% of shareholders'
equity as of December 31, 1994.
Mr. Adams, a director of USBANCORP and Three Rivers Bank, is
a partner in a law firm which rendered services to Three Rivers
Bank during 1994 and will render such services in 1995.
AUDITORS
Arthur Andersen & Co. has audited USBANCORP's financial
statements for the fiscal year ended December 31, 1994, and the
report on such financial statements appears in the Annual Report
to Shareholders. Arthur Andersen & Co. has been selected by the
USBANCORP Board of Directors to perform an examination of the
consolidated financial statements of USBANCORP for the year
ending December 31, 1995.
Representatives of Arthur Andersen & Co. are expected to be
present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and are expected to be
available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors knows of no other matters to be
presented at the Annual Meeting. If, however, any other business
should properly come before the Annual Meeting, or any
adjournment thereof, it is intended that the proxies will be
voted with respect thereto in accordance with the best judgment
of the persons named in the proxies.
SHAREHOLDERS PROPOSALS FOR NEXT ANNUAL MEETING
Any shareholder desiring to present a proposal to be
considered at the 1996 Annual Meeting of Shareholders should
submit the proposal in writing to: Terry K. Dunkle, Chairman,
President and Chief Executive Officer, USBANCORP, Inc., Executive
Offices, Main and Franklin Streets, P.O. Box 670, Johnstown, PA
15907-0670 no later than November 23, 1995.
By Order of the Board of Directors
/s/ Betty L. Jakell
Betty L. Jakell
Secretary
March 22, 1995<PAGE>
APPENDICES
1. Appendix A - Proxy for Annual Meeting of Shareholders of
USBANCORP, Inc.
2. Appendix B - Independent Directors Annual Retainer Plan.
3. Appendix C - Executive Annual Incentive Plan.
4. Appendix D - 1991 Stock Option Plan.
<PAGE>
APPENDIX A
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS OF USBANCORP, INC.
The undersigned shareholder(s) of USBANCORP, Inc.,
Johnstown, Pennsylvania do(es) hereby appoint Earl F. Glock and
James V. Saly, or either one of them my (our) attorney(s) with
full power of substitution, for me (us) and in my (our) name(s),
to vote all the common stock of said Corporation standing in my
(our) name(s) on its books on March 7, 1995 at the Annual Meeting
of its Shareholders to be held at the Sheraton Inn Greensburg,
Route 30 East, 100 Sheraton Drive, Greensburg, Pennsylvania
15601-9383 on Tuesday, April 25, 1995, at 1:30 p.m., or any
adjournment(s) thereof, as follows:
Mark an "X" in the box below to indicate your vote.
1. Election of Directors
FOR all nominees listed below (except as
marked to the contrary below) [ ]
WITHHOLD AUTHORITY to vote for all
nominees listed below [ ]
Special instructions: TO WITHHOLD authority to vote for any
individual nominee(s), draw a line through the nominee's name(s)
below.
Class III Directors For Terms Expiring 1998
Michael F. Butler Terry K. Dunkle John H. Kunkle, Jr.
James C. Dewar Dennis J. Fantaski Jack Sevy
2. Directors Annual Retainer Plan
FOR approval of Retainer Plan [ ]
AGAINST approval of Retainer Plan [ ]
ABSTAIN [ ]
3. Executive Annual Incentive Plan
FOR approval of Incentive Plan [ ]
AGAINST approval of Incentive Plan [ ]
ABSTAIN [ ]
4. 1991 Stock Option Plan
FOR approval of an amendment to the
Option Plan [ ]
AGAINST approval of an amendment to
the Option Plan [ ]
ABSTAIN [ ]
(Proxy contained on reverse side)
5. In their discretion, vote upon such other matters as may
properly come before the meeting or any adjournment(s)
thereof.
IN ABSENCE OF A CONTRARY DIRECTION, THE SHARES REPRESENTED SHALL
BE VOTED IN FAVOR OF ITEMS 1 THROUGH 4, AND IN THE BEST JUDGMENT
OF THE PERSONS NAMED IN THIS PROXY WITH RESPECT TO ITEM 5.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND
MAY BE REVOKED PRIOR TO EXERCISE.
This will ratify and confirm all that said attorney(s) may do or
cause to be done by virtue hereof. Said attorney(s) is (are)
authorized to exercise all the power that I (we) would possess if
present personally at said meeting or any adjournment thereof. I
(we) hereby revoke all proxies by me (us) heretofore given for
any meeting of Shareholders of said Corporation.
Receipt is acknowledged of the Notice and Proxy Statement for
said meeting, each dated March 22, 1995.
If you plan on attending the meeting in person, indicate in the
box below. WILL ATTEND [ ]
___________________________________
Signature of Shareholder
___________________________________
Signature of Shareholder
Please date and sign exactly as
your name(s) appear(s) hereon.
When signing as attorney, executor,
administrator, trustee or guardian,
etc., you should indicate your full
title. If stock is in joint
name(s), each joint owner should
sign.
Date:________________________, 1995
Please sign and return promptly in enclosed addressed envelope
<PAGE>
APPENDIX B
USBANCORP, INC.
RESOLUTIONS RE: INDEPENDENT DIRECTORS ANNUAL RETAINER PLAN
WHEREAS, the Management Compensation Committee
recommended that an annual retainer in the amount of $6,000 be
paid to each independent director of the Company in Company
common stock in lieu of cash;
WHEREAS, the Board of Directors deems it to be in the
best interest of the Company that the annual retainer be paid
pursuant to a formula plan, as defined in Section 16 of the
Securities Exchange Act of 1934, as amended (the "Act"), and set
forth in standing resolutions of the Board of Directors,
permitting each independent director to qualify as a
disinterested administrator, pursuant to Rule 16b-3(c)(2)(i)(A),
for purposes of administration of other employee benefit plans of
the Company; and
WHEREAS, the Board of Directors deems it to be in the
best interest of the Company that the payment of such annual
retainer comply with Section 16 of the Act, permitting shares
awarded thereunder to be exempt from Section 16(b) of the Act by
virtue of Rule 16b-3.
NOW, THEREFORE BE IT:
RESOLVED, that each independent Director of the Company
be paid an annual retainer (the "Retainer"), in the amount of
$6,000 and that such amount shall be delivered by the Company, or
an affiliate of the Company, to an independent broker dealer for
the purpose of acquiring Company Common Stock in open market
transactions.
RESOLVED, that the Retainer shall be paid to each
independent Director, and the amount of the Retainer shall be
delivered to the independent broker dealer annually, on the last
business day of the month in which the Annual Meeting of
Shareholders is held (the "Payment Date"), or, for an independent
Director whose service in any year begins after such date, the
Retainer shall be pro rated, with full credit given to the month
in which he became a director, and shall be paid, annually, on
the first business day of December;
RESOLVED, that the total number of shares of Company
common stock included in each stock award will be determined by
dividing $6,000 by the fair market value of the common stock on
the Payment Date or, in the case of a Director whose service in
any year begins after such date, on the first business day of
December.
RESOLVED, that the Company is authorized to pay any
brokerage commissions incurred in connection with the acquisition
of Company Common Stock with the Retainer;
RESOLVED that USBANCORP Trust Company is authorized to
act as custodian with respect to any Company Common Stock
acquired with the Retainer;
RESOLVED, that stock received pursuant to these
resolutions must be held by each independent Director for at
least six (6) months from the date of grant of such common stock
and thereafter may be sold only in accordance with the rules and
regulations of the Securities and Exchange Commission;
RESOLVED, that no amendment or modification may be made
to these resolutions more often than once every six months other
than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules and
regulations promulgated thereunder;
RESOLVED that the payment of the Retainer shall be
administered by the Management Compensation Committee (the
"Committee"), which Committee has no authority, discretion or
power to (i) select the participants, (ii) determine the awards
to be granted or the number of shares of stock to be issued or
the times at which such awards are to be granted, (iii) establish
the duration or nature of the awards or (iv) after any terms or
conditions specified herein, except in the sense of administering
the payment of the Retainer subject to the provisions of these
resolutions;
RESOLVED, that the proper officers of the Company are
authorized and directed to present these resolutions to the
shareholders at the next Annual Meeting of Shareholders; and
FURTHER RESOLVED, that the proper officers of the
Company are hereby authorized and directed, for and on behalf of
the Company, to take any and all such actions, and to execute,
deliver and file any and all such documents, instruments, and
papers as they, in their discretion, deem necessary or advisable
to carry out the intent of the foregoing resolutions.
<PAGE>
APPENDIX C
USBANCORP, Inc.
and Subsidiaries
EXECUTIVE ANNUAL INCENTIVE PLAN
March 1995
<PAGE>
TABLE OF CONTENTS
PARAGRAPH PAGE
I. PLAN OBJECTIVES. . . . . . . . . . . . . . . . . . . . . . . . . 1
II. PLAN ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 1
III. PLAN PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . 2
IV. PAY/PERFORMANCE LINKAGE. . . . . . . . . . . . . . . . . . . . . 3
V. PERFORMANCE MEASURE WEIGHTINGS . . . . . . . . . . . . . . . . . 3
VI. PAYMENT OF AWARDS. . . . . . . . . . . . . . . . . . . . . . . . 3
<PAGE>
I. PLAN OBJECTIVES
The purposes of this Plan are to:
A. Communicate and focus management on explicit annual
performance objectives for USBANCORP, Inc. (the
"Corporation") and subsidiaries ("Banks"), the
achievement of which contribute to the attainment of
the Corporation's long-term goals.
B. Reinforce senior management's focus on achieving higher
returns to shareholders.
C. Provide compensation opportunities which are
competitive with other peer banking institutions.
D. Help control overhead and improve overall performance
by placing a portion of management's annual
compensation at risk.
II. PLAN ADMINISTRATION
A. The Plan shall be administered under the direction of
the Compensation Committee of the Corporation (the
"Committee").
B. The Committee has full authority, within the limits of
the Plan, to:
1. approve Plan participants;
2. establish performance targets;
3. establish participant reward opportunities;
4. determine the timing and amount of award
distributions; and
5. establish such other measures as may be necessary
to the objectives of the Plan.
The Committee shall receive input from the CEO of the
Corporation regarding participation of positions other
than senior management.
C. The Committee may authorize an adjustment to the
payments determined under preestablished schedules if
extraordinary circumstances have occurred and such
adjustments would better serve the purpose of the Plan.
The Committee may also adjust award payments if it
determines that performance results have not been
consistent with longer-term financial and operational
objectives such as dividend distributions, appropriate
leverage ratios, adequate loan loss reserves, etc.
D. The Committee has full authority to construe and
interpret the Plan and to make any changes deemed
necessary. The decisions shall be final, conclusive
and binding on all parties, including the Corporation
and/or Banks, and participating staff members. The
Committee has full authority to terminate the Plan in
its sole discretion.
III. PLAN PARTICIPATION
A. Eligibility
Awards under this Plan may be made only to officers and
key executives of the Corporation and/or Banks who are
in a position to substantially contribute to the
financial success of the Corporation and/or Banks.
B. The Chief Executive Officer of the Corporation with
input from the CEOs of the Banks shall recommend, in
writing to the Committee, the staff members who are to
be participants under the Plan for each award period.
These recommendations are to be effective only after
they have been approved by the Committee.
C. At the Committee's discretion, participants may be
added to the Plan during the first six months of the
year and may participate based upon their earnings for
the time participated during the year.
D. Termination of employment during a year when awards are
made:
1. In the event of the resignation or discharge of a
participant during an award cycle, participation
in the Plan will cease and no award will be earned
for the Plan year; however, the Committee may
elect to make an exception and pay a full or
partial award.
2. In the event of disability or retirement of the
participant within the provisions of the pension
plan or other policies of the Corporation and/or
Banks, the participant shall be paid a pro rata
amount based upon time employed during the period.
3. In the event of the death of a participant during
an award period, the participant's designated
beneficiary shall be paid a pro rata amount based
upon time employed during the period.
4. In the event a participant resigns or is dismissed
due to divestiture, corporate restructuring, or
job elimination, the participant, at the
discretion of corporate CEO, shall be paid a pro
rata amount based upon time employed during the
period.
E. Awards will be prorated accordingly for participants
who are moved between grades or between the Corporation
and a Bank during any Plan year.
F. Awards are not assignable and there is no entitlement
to award or implicit continued employment by virtue of
participation in the Plan.
G. Participants who take a paid leave of absence during a
Plan year will continue to participate in the Plan but
will not participate if the absence is an unpaid leave.
IV. PAY/PERFORMANCE LINKAGE
Awards are based upon up to five measures of corporate,
subsidiary, and individual performance. Performance
measures include: USBANCORP return on equity, returns to
shareholders of USBANCORP common stock, USBANCORP's
financial soundness as measured by an independent firm's
CAMEL rating, pre-tax return on assets of USBANCORP
subsidiaries, and individual performance as evaluated using
the Company's formal performance appraisal system.
V. PERFORMANCE MEASURE WEIGHTINGS
Plan participants' incentive opportunities will be allocated
across corporate, subsidiary (where appropriate), and
individual performance objectives. All participants will
have a corporate component to their incentive opportunities.
The CEO of the holding company will not have an individual
component to his/her annual incentive opportunity, thus it
is based entirely on quantifiable performance objectives.
VI. PAYMENT OF AWARDS
Awards will be subject to required payroll deductions with
50% of the award payable in USBANCORP, Inc. stock and 50% in
cash credited to participant's checking account in a lump
sum. Awards will be paid after all calculations are made
and approved by the Compensation Committee which generally
will take place in February or March following the close of
the Plan year. This Plan will become effective for the
fiscal year commencing January 1, 1995, and shall continue
in effect each fiscal year thereafter until amended or
terminated by the Compensation Committee.
<PAGE>
APPENDIX D
USBANCORP, INC.
1991 STOCK OPTION PLAN
August 23, 1991, as
amended on February 24, 1995
<PAGE>
USBANCORP, INC.
1991 STOCK OPTION PLAN
The purposes of the 1991 Stock Option Plan (the "Plan")
are to encourage eligible employees of USBANCORP, INC. (the
"Corporation") and its Subsidiaries, including Directors and
officers of the Corporation who are employees, to increase their
efforts to make the Corporation and each Subsidiary more
successful, to provide an additional inducement for such
employees to remain with the Corporation or a Subsidiary, to
reward such employees by providing an opportunity to acquire the
Common Stock, par value $2.50 per share, of the Corporation (the
"Common Stock") on favorable terms and to provide a means through
which the Corporation may attract able persons to enter the
employment of the Corporation or one of its Subsidiaries. For
purposes of the Plan, the term "Subsidiary" means any corporation
in an unbroken chain of corporations beginning with the
Corporation if each of the corporations (other than the last
corporation in the unbroken chain) owns stock possessing at least
fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in the
chain.
SECTION 1
Administration
The Plan shall be administered by a Committee (the
"Committee") appointed from time to time by the Board of
Directors of the Corporation (the "Board") and consisting of no
fewer than three members of the Board, none of whom is, or was
within one year prior to becoming a member of the Committee,
eligible for selection as a person to whom stock options may be
granted pursuant to the Plan or any other plan of the Corporation
or any of its affiliates (as "affiliates" is defined in
regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
entitling the participants therein to acquire stock or stock
options of the Corporation or any of its affiliates. If at any
time a member of the Committee would not be eligible for initial
appointment to the Committee, said member shall be deemed to have
resigned from the Committee. The Board may at any time, without
cause, remove any person from the Committee by written notice to
such person. Any member of the Committee may resign by written
notice to the Board.
The Committee shall interpret the Plan and prescribe
such rules, regulations and procedures in connection with the
operations of the Plan as it shall deem to be necessary and
advisable for the administration of the Plan consistent with the
purposes of the Plan.
The Committee shall keep records of any action taken at
its meetings. A majority of the Committee shall constitute a
quorum at any meeting and the acts of a majority of the members
present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee, shall be the
acts of the Committee.
SECTION 2
Eligibility
Those salaried employees of the Corporation or any
Subsidiary with executive, managerial, technical or professional
responsibility, who may or may not be an officer or a member of
the Board of Directors, shall be eligible to receive stock
options as described herein.
Subject to the provisions of the Plan, the Committee
shall have full and final authority, in its discretion, to grant
stock options as described herein and to determine the employees
to whom stock options shall be granted and the number of shares
to be covered by each stock option. In determining the
eligibility of any employee, as well as in determining the number
of shares which may be acquired pursuant to each stock option,
the Committee shall consider the positions and the
responsibilities of the employee being considered, the nature and
value to the Corporation or a Subsidiary of his or her services,
his or her present and/or potential contribution to the success
of the Corporation or a Subsidiary and such other factors as the
Committee may deem relevant.
SECTION 3
Shares Available under the Plan
The aggregate number of shares of the Common Stock
which may be issued or delivered and as to which stock options
may be granted under the Plan is 285,000 shares. All of such
shares are subject to adjustment and substitution as set forth in
Section 6.
If any stock option granted under the Plan is cancelled
by mutual consent or terminates or expires for any reason without
having been exercised in full, the number of shares subject to
such stock option shall again be available for purposes of the
Plan.
The shares which may be issued or delivered under the
Plan may be either authorized but unissued shares or treasury
shares or partly each, as shall be determined from time to time
by the Board.
SECTION 4
Grant of Stock Options
The Committee shall have authority, in its discretion,
to grant "incentive stock options" pursuant to Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), to grant
"non-statutory stock options" (stock options which do not qualify
under such Section 422 of the Code) or to grant both types of
stock options, provided that the exercise of one type of option
shall not affect the other type.
To the extent that the aggregate fair market value of
stock with respect to which incentive stock options are
exercisable for the first time by any individual during any
calendar year (under all plans of the individual's employer
corporation and its parent and subsidiary corporations) exceeds
$100,000, such stock options shall be treated as options which
are non-statutory stock options. The preceding sentence shall be
applied by taking options into account in the order in which they
are granted. Also, for this purpose, the fair market value of
any stock shall be determined as of the date the option with
respect to such stock was granted.
SECTION 5
Terms and Conditions of Stock Options
Stock options granted under the Plan shall be subject
to the following terms and conditions:
(A) The purchase price at which each stock option may
be exercised (the "option price") shall be such price as the
Committee, in its discretion, shall determine but shall not
be less than one hundred percent (100%) of the fair market
value per share of Common Stock which may be acquired
pursuant to the stock option on the date of grant, except
that in the case of an incentive stock option granted to an
employee who, immediately prior to such grant, owns stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation or
any Subsidiary (a "Ten Percent Employee"), the option price
shall not be less than 110% of such fair market value on the
date of grant. For purposes of this Section 5(A), the fair
market value of the Common Stock shall be determined as
provided in Section 5(H) below. Also, for purposes of this
Section 5(A), an individual (i) shall be considered as
owning not only shares of the Common Stock owned
individually, but also all shares that are at the time
owned, directly or indirectly, by or for the spouse,
ancestors, lineal descendants and brothers and sisters
(whether by the whole or half blood) of such individual and
(ii) shall be considered as owning proportionately any
shares owned, directly or indirectly, by or for any
corporation, partnership, estate or trust in which such
individual shall be a stockholder, partner or beneficiary.
(B) The option price shall be payable in full in any
one or more of the following ways:
(i) in cash; and/or
(ii) in shares of the Common Stock (which are
owned by the optionee free and clear of all liens and
other encumbrances and which are not subject to the
restrictions set forth in Section 7 below) having a
fair market value on the date of exercise of the stock
option, determined as provided in Section 5(H), equal
to the option price for the shares being purchased.
If the option price is paid in whole or in part in
shares of Common Stock, any portion of the option price
representing a fraction of a share shall be paid in cash. The
date of exercise of a stock option shall be determined under
procedures established by the Committee, and the option price
shall be payable at such time or times as the Committee, in its
discretion, shall determine. No shares shall be issued or
delivered upon exercise of a stock option until full payment of
the option price has been made. When full payment of the option
price has been made and subject to the restrictions set forth in
Section 7, the optionee shall be considered for all purposes to
be the owner of the shares with respect to which payment has been
made. Payment of the option price with shares shall not increase
the number of shares of Common Stock which may be issued or
delivered under the Plan as provided in Section 3.
(C) Subject to Section 8 hereof, stock options may be
exercised at the following rate. On or after the first
anniversary of the date on which the options were granted
(the "Grant Date"), one-third of such options may be
exercised (rounded upward to the nearest whole share). On
or after the second anniversary of the Grant Date two-thirds
of such options may be exercised (rounded upward to the
nearest whole share) minus the aggregate number of such
options previously exercised. On or after the third
anniversary of the Grant Date, the remainder of the options
may be exercised. No incentive stock option shall be
exercisable after the expiration of ten years (five years in
the case of a Ten Percent Employee) from the date of grant.
No non-statutory stock option shall be exercisable after the
expiration of ten years and six months from the date of
grant. Subject to this Section 5(C) and Sections 5(F), 5(G)
and 5(H) below, stock options may be exercised at such
times, in such amounts and subject to such restrictions as
shall be determined, in its discretion, by the Committee.
(D) No stock option rights shall be transferable by an
optionee other than by will, or if an optionee dies
intestate, by the laws of descent and distribution of the
state of domicile of the optionee at the time of death, and
all stock options shall be exercisable during the lifetime
of an optionee only by the optionee.
(E) Unless otherwise determined by the Committee and
set forth in the stock option agreement referred to in
Section 5(G) or an amendment thereto:
(i) If the employment of an optionee who is not a
Disabled Optionee (as defined in Section 5(F) below) is
voluntarily terminated with the consent of the
Corporation or a Subsidiary, any then outstanding stock
option held by such an optionee shall be exercisable
(to the extent exercisable on the date of termination
of employment) by such an optionee at any time prior to
the earlier of the expiration date of such stock option
or the date which is three months after the date of
termination of employment;
(ii) If an optionee retires under any retirement
plan of the Corporation or a Subsidiary, any then
outstanding stock option held by such an optionee shall
be exercisable in full (whether or not so exercisable
on the date of termination of employment) by such an
optionee at any time prior to the earlier of the
expiration date of such stock option or the date which
is three months after the date of termination of
employment;
(iii) If the employment of an optionee who is a
Disabled Optionee is terminated, any then outstanding
stock option held by such optionee shall be exercisable
in full (whether or not so exercisable on the date of
termination of employment) by the optionee at any time
prior to the earlier of the expiration date of such
stock option or the date which is one year after the
date of termination of employment;
(iv) The following transfers of employees will
not be treated as a termination of employment:
(a) A transfer of an employee between
Subsidiaries of the Corporation;
(b) A transfer of an employee from the
Corporation to one of its Subsidiaries; or
(c) A transfer of an employee to the
Corporation from one of its Subsidiaries.
(v) Following the death of an optionee during
employment, any outstanding stock option held by the
optionee at the time of death shall be exercisable in
full (whether or not so exercisable on the date of the
death of the optionee) by the person or persons
entitled to do so under the will of the optionee, or,
if the optionee shall fail to make testamentary
disposition of the stock option or shall die intestate,
by the legal representative of the optionee, at any
time prior to the expiration date of such stock option
or within one year after the date of death, whichever
is the shorter period. Following the death of an
optionee after termination of employment during a
period when a stock option is exercisable as provided
in clauses (i), (ii) and (iii) above, any outstanding
stock option held by the optionee at the time of death
shall, to the extent the stock option was exercisable
by the optionee at the time of death, be exercisable by
such person or persons as would have been so entitled
had the employee died prior to the termination of
employment, so long as such exercise occurs prior to
the earlier of the expiration date of such stock option
or the date which is one year after the date of death.
(F) If the employment of an optionee terminates for
any reason other than voluntary termination with the consent
of the Corporation or a Subsidiary, disability, retirement
under any retirement plan of the Corporation or a
Subsidiary, or death, the rights of such optionee under any
then outstanding stock option shall terminate at the time of
such termination of employment. In addition, the Committee
may in its discretion immediately terminate all stock
options held by the optionee if an optionee (i) engages in
the operation or management of a business, whether as owner,
partner, officer, director, employee or otherwise and
whether during or after termination of employment, which is
in competition with the Corporation or any of its
Subsidiaries; (ii) uses for his own benefit or discloses to
a third party information pertaining to the Corporation or
any of its Subsidiaries which the Corporation or its
Subsidiaries consider to be confidential; or
(iii) interferes with the relationship between the
Corporation or a Subsidiary and its employees, suppliers or
customers.
"Disabled Optionee" shall mean an individual who is
unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous
period of not less than 12 months.
Whether termination of employment is a voluntary
termination with the consent of the Corporation or a
Subsidiary; whether an optionee is a Disabled Optionee;
whether an optionee has engaged in the operation or
management of a business which is in competition with the
Corporation or any of its Subsidiaries; whether an optionee
uses for his own benefit or discloses to a third party
information pertaining to the Corporation or any of its
Subsidiaries which is confidential; and whether an optionee
has interfered with the relationship between the Corporation
or a Subsidiary and its employees, suppliers or customers
shall be determined in each case by the Committee, whose
determination shall be final and binding unless such
determination is demonstratably arbitrary and capricious.
(G) All stock options shall be confirmed by a stock
option agreement, or an amendment thereto, which shall be
executed by the Chief Executive Officer, the President (if
other than the Chief Executive Officer) or any Executive
Vice President on behalf of the Corporation and by the
employee to whom such stock options are granted.
(H) Fair market value of the Common Stock, so long as
the Common Stock trades in the Over-the-Counter market or on
a stock exchange, shall be computed by taking a weighted
average of the mean between the highest and lowest selling
prices per share of the Common Stock as quoted in such
reliable publication as the Committee, in its discretion,
may choose to rely upon, on the nearest date before and the
nearest date after the date as of which fair market value is
to be determined on which there are sales.
If at any time the Common Stock does not trade in the
Over-the-Counter market or on a stock exchange, the fair
market value of the Common Stock shall be determined by an
independent and experienced appraiser which is selected by
the Committee. Fair market value shall be determined
without regard to any restriction applicable to the Common
Stock other than a restriction which, by its terms, will
never lapse.
(I) The obligation of the Corporation to issue or
deliver shares of the Common Stock under the Plan shall be
subject to (i) the effectiveness of a registration statement
under the Securities Act of 1933, as amended, with respect
to such shares, if deemed necessary or appropriate by
counsel for the Corporation, (ii) the condition that the
shares shall have been listed (or authorized for listing
upon official notice of issuance) upon each stock exchange
on which such shares may then be listed and (iii) all other
applicable laws, regulations, rules and orders which may
then be in effect; provided, however, that if the Company
Stock shall be delisted from all national stock exchanges
and/or deregistered in accordance with the provisions of the
Securities Exchange Act of 1934, as amended, the Corporation
shall have the obligation to issue and deliver shares of
Common Stock under the Plan upon the exercise of any then
outstanding stock option.
Subject to the foregoing provisions of this Section 5
and the other provisions of the Plan, any stock option granted
under the Plan shall be subject to such other terms and
conditions as the Committee shall deem advisable.
SECTION 6
Adjustment and Substitution of Shares
If a dividend or other distribution shall be declared
upon the Common Stock payable in shares of Common Stock, the
number of shares of Common Stock then subject to any outstanding
stock option and the number of shares which may be issued or
delivered under the Plan but are not then subject to an
outstanding stock option shall be adjusted by adding thereto the
number of shares which would have been distributable thereon if
such shares had been outstanding on the date fixed for
determining the stockholders entitled to receive such stock
dividend or distribution.
If the outstanding shares of Common Stock shall be
changed into or exchangeable for a different number or kind of
shares of stock or other securities of the Corporation or another
corporation, whether through reorganization, reclassification,
recapitalization, stock split-up, combination of shares, merger
or consolidation, then there shall be substituted for each share
of Common Stock subject to any then outstanding stock option and
for each share of Common Stock which may be issued or delivered
under the Plan but is not then subject to an outstanding stock
option, the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock
shall be so changed or for which each such share shall be
exchangeable.
In the case of any adjustment or substitution as
provided for in this Section 6, the aggregate option price for
all shares subject to each then outstanding stock option prior to
such adjustment or substitution shall be the aggregate option
price for all shares of stock or other securities (including any
fraction) to which such shares shall have been adjusted or which
shall have been substituted for such shares. Any new option
price per share shall be carried to at least three decimal places
with the last decimal place rounded upwards to the nearest whole
number.
No adjustment or substitution provided for in this
Section 6 shall require the Corporation to issue or sell a
fraction of a share or other security. Accordingly, all
fractional shares or other securities which result from any such
adjustment or substitution shall be eliminated and not carried
forward to any subsequent adjustment or substitution.
If any such adjustment or substitution provided for in
this Section 6 requires the approval of stockholders in order to
enable the Corporation to grant incentive stock options, then no
such adjustment or substitution shall be made without prior
stockholder approval. Notwithstanding the foregoing, in the case
of incentive stock options, if the effect of any such adjustment
or substitution would be to cause the stock option to fail to
continue to qualify as an incentive stock option or to cause a
modification, extension or renewal of such stock option within
the meaning of Section 424 of the Code, the Committee may elect
that such adjustment or substitution not be made but rather shall
use reasonable efforts to effect such other adjustment of each
then outstanding stock option as the Committee in its sole
discretion shall deem equitable and which will not result in any
disqualification, modification, extension or renewal (within the
meaning of Section 424 of the Code) of such incentive stock
option.
SECTION 7
Restrictions on Transfer of Certain Shares
Shares of Common Stock acquired under exercise of an
option pursuant to Section 5(B)(ii) by a person then subject to
the provisions of Section 16 of the Exchange Act shall not be
sold or otherwise transferred prior to the expiration of six
months after the date of the grant of the option. The
Corporation is authorized to (i) retain the certificate(s)
representing such shares or place such certificates in the
custody of its transfer agent, (ii) place a restrictive legend on
such shares, and/or (iii) issue a stop transfer order to the
transfer agent with respect to such shares in order to enforce
the transfer restrictions of this Section.
SECTION 8
Acceleration of the Exercise Date of Stock Options
Notwithstanding any other provision of this Plan, all
stock options shall become exercisable upon the occurrence of any
of the events listed below whether or not such options are then
exercisable under the provisions of the applicable agreements
relating thereto:
(A) Stock option rights shall be exercisable during
any one or more of the following periods:
(i) for a period of 60 days beginning on the date
on which shares of Common Stock are first purchased
pursuant to a tender offer or exchange offer (other
than such an offer by the Corporation or a Subsidiary),
whether or not such offer is approved or opposed by the
Corporation or a Subsidiary and regardless of the
number of shares of Common Stock purchased pursuant to
such offer;
(ii) for a period of 60 days beginning on the
date the Corporation acquires knowledge that any person
or group deemed a person under Section 13(d)(3) of the
Exchange Act (other than any director of the
Corporation on August 23, 1991, any Affiliate or
Associate of any such director (with such terms having
the respective meanings set forth in Rule 12b-2 under
the Exchange Act as in effect on August 23, 1991), any
member of the family of any such director, any trust
(including the trustees thereof) established by or for
the benefit of any such persons, or any charitable
foundation, whether a trust or a corporation (including
the trustees and directors thereof) established by any
of such persons), in a transaction or series of
transactions shall become the beneficial owner,
directly or indirectly (with beneficial ownership
determined as provided in Rule 13d-3, or any successor
rule, under the Exchange Act), of securities of the
Corporation entitling the person or group to 20% or
more of all votes (without consideration of the rights
of any class of stock to elect directors by a separate
class vote) to which all shareholders of the
Corporation would be entitled if the election of
Directors were an election held on such date;
(iii) for a period of 60 days beginning on the
date of filing under the Exchange Act of a Statement on
Schedule 13D, or any amendment thereto, by any person
or group deemed a person under Section 13(d)(3) of the
Exchange Act, disclosing an intention or possible
intention to acquire or change control of the
Corporation;
(iv) for a period of 60 days beginning on the
date, during any period of two consecutive years, when
individuals who at the beginning of such period
constitute the Board of Directors of the Corporation
cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for
election by the shareholders of the Corporation, of
each new Director was approved by a vote of at least
two-thirds of the Directors then still in office who
were Directors at the beginning of such period; and
(v) for a period of 60 days beginning on the date
of approval by the shareholders of the Corporation of
an agreement (a "reorganization agreement") providing
for (a) the merger or consolidation of the Corporation
with another corporation where the shareholders of the
Corporation, immediately prior to the merger or
consolidation, will not beneficially own, immediately
after the merger or consolidation, shares of the
corporation issuing cash or securities in the merger or
consolidation entitling such shareholders to 40% or
more of all votes (without consideration of the rights
of any class of stock to elect directors by a separate
class vote) to which all shareholders of such
corporation would be entitled in the election of
Directors or where the members of the Board of
Directors of the Corporation, immediately prior to the
merger or consolidation, do not, immediately after the
merger or consolidation, constitute a majority of the
Board of Directors of the corporation issuing cash or
securities in the merger or consolidation or (b) the
sale or other disposition of all or substantially all
the assets of the Corporation.
SECTION 9
Effect of the Plan on the Rights of Employees and Employer
Neither the adoption of the Plan nor any action of the
Board or the Committee pursuant to the Plan shall be deemed to
give any employee any right to be granted a stock option under
the Plan and nothing in the Plan, in any stock option granted
under the Plan or in any stock option agreement shall confer any
right upon any employee to continue in the employment of the
Corporation or any Subsidiary or diminish in any way the right of
the Corporation or any Subsidiary to terminate the employment of
any employee at any time. The granting of a stock option shall
impose no obligation upon the Optionee to exercise such option.
SECTION 10
Amendment
The right to alter and amend the Plan at any time and
from time to time and the right to revoke or terminate the Plan
are hereby specifically reserved to the Board; provided always
that no such revocation or termination shall terminate any
outstanding stock option theretofore granted under the Plan; and
provided further that no such alteration or amendment of the Plan
shall, without prior stockholder approval, (a) increase the total
number of shares which may be issued under the Plan, (b) increase
the total number of shares issuable pursuant to any stock option
granted to any one optionee, (c) make any changes in the class of
eligible employees or (d) extend the period set forth in the Plan
during which stock options may be granted. No alteration,
amendment, revocation or termination of the Plan shall, without
the written consent of the holder of a stock option theretofore
granted under the Plan, adversely affect the rights of such
holder with respect to such stock option.
SECTION 11
Effective Date and Duration of Plan
The effective date and date of adoption of the Plan
shall be August 23, 1991 (the "Effective Date"), the date of
adoption of the Plan by the Board, provided that such adoption of
the Plan by the Board is approved by the affirmative vote of the
holders of at least a majority of the outstanding shares of
Common Stock at a meeting of such holders duly called, convened
and held within one year of the Effective Date. Notwithstanding
any provision of the Plan to the contrary, no stock option
granted under the Plan prior to such shareholder approval may be
exercised until after such approval. No stock option may be
granted under the Plan subsequent to the date which is ten (10)
years following the effective date of the Plan.
SECTION 12
Application of Funds
The proceeds received by the Corporation for the sale
of the Common Stock pursuant to exercise of stock options shall
be used for general corporate purposes.
SECTION 13
Reservation of the Stock
The Corporation shall be under no obligation to
purchase or reserve Common Stock to satisfy the exercise of stock
options. The grant of stock options to employees hereunder shall
not be construed to constitute the establishment of a trust of
the Common Stock issuable pursuant to such stock options, and no
particular Common Stock shall be identified as optioned and
reserved for employees hereunder. The Corporation shall be
deemed to have complied with the terms of the Plan if, at the
time of issuance and delivery pursuant to the exercise of a stock
option, it has a sufficient number of shares of the Common Stock
authorized and unissued or in its treasury which may then be
appropriated and issued for purposes of the Plan, irrespective of
the date when such Common Stock was authorized.
SECTION 14
Governing Law
The Plan and all determinations and actions taken
pursuant thereto shall be governed by the laws of the
Commonwealth of Pennsylvania and construed in accordance
therewith.
This Plan has been prepared, negotiated and delivered
in, and shall be construed and enforced in accordance with, the
laws of the Commonwealth of Pennsylvania.
