EXHIBIT 10.13
EMPLOYMENT AGREEMENT
AGREEMENT by and between U.S. Bancorp, a Delaware corporation (the
"Company") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (the "Executive"), is effective as of October
16, 2001.
1. Certain Definitions. The "Effective Date" shall mean the first date
after the date hereof on which a Change of Control (as defined in Section 2)
occurs. Anything in this Agreement to the contrary notwithstanding, if a Change
of Control occurs and if the Executive's employment with the Company is
terminated prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment (i)
was at the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all purposes of this Agreement the
"Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 35% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the date hereof and ending on December 31, 2006 (the
"Employment Period").
4. Terms of Employment.
(a) Position and Duties. (i) During the Employment Period, the
Executive shall be President and Chief Executive Officer of the Company
and, in such capacity, the Executive shall be responsible for the
strategic direction and operations of the Company, and shall serve on
the Company's Board of Directors and shall have such other duties,
responsibilities and authorities as shall be consistent therewith. The
Executive shall also be Chairman, President and Chief Executive Officer
of U.S. Bank, N.A. and shall serve on its Board of Directors. In
addition to the above, the Executive shall be elected Chairman of the
Board of Directors of the Company effective upon the earlier of the
retirement of the current Chairman or December 31, 2002.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote full attention and time during normal
business hours to the business and affairs of the Company and to use
the Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood
2
and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary") of $975,000 until adjusted following any review of the Annual
Base Salary as hereinafter provided. The Annual Base Salary shall be
paid in equal semi-monthly installments. During the Employment Period,
the Annual Base Salary shall be reviewed by the Compensation Committee
of the Company's Board of Directors (the "Committee") at least every 12
months. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced below $975,000 or after any
such increase, and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") pursuant to the
U.S. Bancorp Executive Incentive Plan (or successor to such plan), pro
rated in the case of a bonus for any year during which the Executive
was employed for less than 12 months; provided, however, after the
Effective Date, the Annual Bonus shall be no less than 175% of the
Executive's Annual Base Salary ("Minimum Bonus"). Each such Annual
Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus
is awarded, unless the Executive shall elect to defer the receipt of
such Annual Bonus. For each fiscal year during the Employment Period,
the Executive's target bonus opportunity for achieving target
performance levels with respect to corporate and individual objectives
established by the Committee under the Company's then-applicable annual
incentive plan shall be at least 175% of his then-current Annual Base
Salary. During the Employment Period, the target Annual Bonus levels
shall be reviewed at least every 12 months. Any increase in such level
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement, and the target Annual Bonus levels
shall not be lowered after any such increase and shall not be less than
175% of the Executive's Annual Base Salary.
(iii) Restricted Stock Units. On or before January 2,
2002, the Company shall grant the Executive an award of restricted
stock units pursuant to the U.S. Bancorp 2001 Stock Incentive Plan
("Stock Plan") corresponding to such number of shares of common stock
of the Company (the "Restricted Stock Units") as equals the quotient of
(x) $5,600,000 divided by (y) the average New York Stock Exchange
closing price of common stock of the Company during the sixty (60)
trading day period ending on the day prior to such award date. To the
extent that dividends are paid on common stock of the Company after the
effective date of this Agreement (as first set forth above) and prior
to the Distribution Date, the Executive shall be entitled to receive
additional Restricted Stock Units on each dividend payment date of the
Company (including any dividend declared prior to the Distribution Date
and payable after such date, which shall be deemed paid on the
Distribution Date) having a fair market value (based on the
3
closing price of the Company's common stock on such payment date) equal
to the amount of dividends paid on common stock of the Company
represented by the Restricted Stock Units, which additional Restricted
Stock Units shall vest on the same basis as the award of Restricted
Stock Units above. Such award shall vest on December 31, 2006, provided
that the Executive is still employed by the Company on such date, and
once vested shall be distributable in common stock of the Company on
January 15 (the "Distribution Date") of the calendar year following the
calendar year in which the Executive's employment with the Company and
all affiliates shall terminate. The foregoing provisions of this
Section 4(b)(iii) to the contrary notwithstanding, the Executive shall
be allowed to elect, in writing, delivered to the Committee no later
than the October 1 immediately preceding the Distribution Date, to
surrender all or fewer than all of the Restricted Stock Units, if
vested, effective on the Distribution Date in exchange for an
additional benefit under the NQRP (as defined in Section 4(b)(v) below)
commencing at age 62 (or earlier on an actuarially reduced basis to the
extent so provided under the NQRP). The present value of such
additional benefit on the Distribution Date shall be equal to the
greater of (1) the product of (A) the number of Restricted Stock Units
surrendered, multiplied by (B) the average closing price of the
Company's common stock over the thirty (30) trading day period
immediately preceding the Distribution Date or (2) such product
determined by substituting the average closing price of the Company's
common stock over the thirty (30) trading day period immediately
preceding such October 1 (such greater product is the "Conversion
Value"). The Conversion Value shall be converted to the normal form of
annuity under the NQRP, using actuarial assumptions based on the FAS 87
interest rate and mortality assumptions in effect on such October 1,
and the annuity so converted from the Conversion Value shall be added
to any benefit payable to the Executive under the NQRP (as further
provided at Section 4(b)(v) below) at retirement.
(iv) Long-Term Incentive Plans. The Executive shall
be eligible to participate throughout the Employment Period in such
long-term incentive plans and programs of the Company ("Long Term
Incentive Programs") as may be in effect from time to time. The
Executive's level of incentive opportunity in such Long Term Incentive
Programs shall be established by the Committee annually and shall be at
a level and on terms and conditions consistent with participation by
other peer executives of the Company.
(v) Incentive, Savings and Retirement Plans.
A. During the Employment Period, the
Executive shall be eligible to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated
companies. The Executive shall participate in, and shall be fully
vested in his benefit under the Firstar Corporation Non-Qualified
Retirement Plan (or successor to such plan, the "NQRP") under which the
Executive shall be given service credit for his service with Firstar
Corporation, BankAmerica Corporation, Security Pacific Corporation and
▇▇▇▇▇ Fargo N.A. (together, the "Prior Employers"), provided that the
Company's obligation under the NQRP shall be offset by all other
pension benefits of the Company to which the Executive may be or may
become entitled (other than the additional benefit
4
provided at Section 4(b)(iii) above) and all pension benefits to which
the Executive is entitled from the Prior Employers (including, but not
limited to, Firstar Corporation's noncontributory defined benefit
pension plan); provided further that after the Effective Date in no
event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both
regular and special incentive opportunities, to the extent, if any,
that such distinction is applicable), savings opportunities and
retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and
its affiliated companies for the Executive under such plans, practices,
policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable
to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies, after taking into account the difference in age
between the Executive and the peer executives.
B. The provisions of the NQRP to the
contrary notwithstanding, the Executive's benefit under the NQRP shall
take into account the following:
a. The formula for determining the
Executive's supplemental benefit under Appendix B-3 of the
NQRP shall be modified by adding one-twelfth of the Grant Date
Value to each month of the calendar year immediately preceding
the Distribution Date for the purpose of determining
Executive's Monthly Earnings thereunder, provided that the
Executive remains continuously employed by the Company through
December 31, 2006 unless the termination of the Executive's
employment prior to December 31, 2006 is by the Company
without Cause or due to the Executive's Disability or is by
the Executive for Good Reason or due to his death. The "Grant
Date Value" shall be $5,600,000;
b. For purposes of determining the
Executive's supplemental pension benefit under the NQRP, the
amount of the Annual Bonus used in computing his Final Average
Monthly Earnings under such plan shall be the greater of (i)
the average during the applicable five year period of 175% of
the Executive's Annual Base Salary, or (ii) the average Annual
Bonus actually earned by the Executive during the applicable
five year period; provided that, if the Executive shall
terminate employment with the Company prior to December 31,
2006 for any reason, other than (1) a termination by the
Company without Cause, (2) due to his Disability, (3) a
termination by the Executive for Good Reason or (4) due to his
death, then the amount determined under clause (i) shall be
the average during the applicable five year period of 175% of
the Executive's Annual Base Salary per year for the calendar
years commencing 2002 through the date of such termination and
100% of the Executive's Annual Base Salary per year for
calendar years prior to 2002; and
5
c. In the event that the Executive
receives severance benefits pursuant to Section 6(a)(i)(C),
the Executive shall not be entitled to commence his receipt of
any supplemental pension benefit hereunder until after the
expiration of the Severance Period (as defined in Section
6(a)(i)(C)) and determined without regard for any payment of
such severance in a lump sum; provided, that if such Severance
Period shall expire prior to the date that the Executive
attains age 62, then, the third sentence of Section 4(b)(iii)
to the contrary notwithstanding, such supplemental pension
benefit may begin immediately following the last day of such
Severance Period without the actuarial reduction otherwise
applicable under the NQRP for the commencement of such benefit
prior to age 62.
(vi) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by the
Company and its affiliated companies including, without limitation,
medical, prescription, dental, disability, salary continuance, employee
life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, provided that
after the Effective Date in no event shall such plans, practices,
policies and programs provide the Executive with benefits which are
less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at
any time during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the
Company and its affiliated companies. For purposes of determining
eligibility for retiree medical benefits provided by the Company, the
Executive shall be treated as though he is at least age 55 and has at
least 10 years of service with the Company.
(vii) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable
business expenses incurred by the Executive.
(viii) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues,
and a monthly car allowance of $1,000, net to the Executive after
giving effect to (x) all income taxes payable by Executive that are
attributable to such allowance, and (y) any benefits that result from
the deductibility by the Executive of any such taxes.
(ix) Vacation. During the Employment Period, the Executive
shall be entitled to four weeks of paid vacation annually.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company
6
determines in good faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance with Section
12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive by the
Board which specifically identifies the manner in which the Board
believes that the Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of employment
of the Executive shall not be deemed to be for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of a majority of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable notice
is provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such
position,
7
authority, duties or responsibilities; provided, however, that (subject
to the election of the Executive as Chairman as provided at Section
4(a)(i) hereof) any change in the Executive's position (including
status, duties and titles), authority, duties or responsibilities, in
accordance with normal succession planning by the Company's Board of
Directors shall not constitute Good Reason if made with the Executive's
consent;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement;
(iii) the Company's requiring the Executive to be
based at any office or location after the Effective Date other than
where the Executive was located immediately prior to the Effective Date
other than in connection with a change of the Company's headquarters if
the Executive is relocated to such headquarters, or, after the
Effective Date, the Company's requiring the Executive to travel on
Company business to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
Notwithstanding the above, "Good Reason" shall exclude an isolated,
insubstantial and inadvertent action or failure to act not taken or occurring in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive.
For purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or
8
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Cause, Death or Disability. If, during the Employment Period or on or
after the Effective Date, the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive shall terminate employment
for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the higher of (I) the Minimum
Bonus and (II) the Annual Bonus paid or payable, including any
bonus or portion thereof which has been earned but deferred
(and annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was employed
for less than twelve full months), for the most recently
completed fiscal year during the Employment Period, if any
(such higher amount being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued
Obligations");
B. if the Date of Termination is on or after the
Effective Date, an amount equal to the difference between (a)
the actuarial equivalent of the benefit (utilizing actuarial
assumptions no less favorable to the Executive than those in
effect under the Company's qualified defined benefit
retirement plan (the "Retirement Plan") immediately prior to
the Effective Date) under the Retirement Plan and NQRP
combined which the Executive would receive if the Executive's
employment continued for three years after the Date of
Termination assuming for this purpose that all accrued
benefits are fully vested, and, assuming that the Executive's
compensation in each of the three years is that required by
Section 4(b)(i) and Section 4(b)(ii), and (b) the actuarial
equivalent of the Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the NQRP
combined as of the Date of Termination; and
C. an amount equal to the product of (a) 1/12,
multiplied by (b) the sum of (1) the Executive's Annual Base
Salary and (2) the Highest Annual Bonus, multiplied by (c) the
number of months remaining in the Employment Period (including
fractions thereof) but not more than thirty-six (36) months
("Severance Period");
9
(ii) all stock options, restricted stock and other
stock-based compensation (including, without limitation, the Restricted
Stock Units) shall become immediately exercisable or vested, as the
case may be;
(iii) for the number of months (including fractions
thereof) remaining in the Employment Period, after the Executive's Date
of Termination, or such longer period as may be provided by the terms
of the appropriate plan, program, practice or policy, the Company shall
continue benefits to the Executive and/or the Executive's family at
least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described
in Section 4(b)(vi) of this Agreement if the Executive's employment had
not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their
families; provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until the last day of the
Employment Period and to have retired on the last day of the Employment
Period;
(iv) the Company shall, at its sole expense as
incurred, provide the Executive with outplacement services the scope
and provider of which shall be selected by the Executive in his sole
discretion; and
(v) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the
Executive is entitled to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination. In
addition, the Restricted Stock Units shall become immediately vested and the
Executive's beneficiary under the NQRP shall have all rights of Executive to
surrender Restricted Stock Units for an additional benefit under the NQRP as set
forth at Section 4(b)(iii) hereof; provided, the thirtieth (30th) day after
Executive's death shall be substituted for "October 1" thereunder and the
"Distribution Date" shall be the ninetieth (90th) day after Executive's death.
With respect to the provision of Other Benefits after the Effective Date, the
term Other Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect
10
with respect to other peer executives and their beneficiaries at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other peer
executives of the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. In addition, the Restricted
Stock Units shall become immediately vested. On the Disability Effective Date,
the Executive shall be deemed to have retired (as a Normal Retirement if
occurring on or after his Normal Retirement Date or as an Early Retirement if
occurring on or after his Early Retirement Date and prior to his Normal
Retirement Date, as the case may be (as such terms apply under the NQRP)) for
all purposes under the NQRP and the provision of any additional supplemental
retirement benefits under this Agreement; provided, (x) such benefits, other
than any additional benefits set forth at Section 4(b)(iii) hereof, shall be
reduced by any benefit payable to Executive from workers compensation, any
long-term disability plan sponsored by the Company and any other disability
benefit provided to Executive under this Agreement, and (y) if the Executive
recovers from his Disability prior to his Normal Retirement Date all such
benefits under the NQRP and under this Agreement, other than any additional
benefits set forth at Section 4(b)(iii) hereof, shall cease and shall thereafter
recommence in accordance with the applicable provisions of the NQRP (including,
without limitation, recommencement of such benefits upon Executive's early
retirement thereunder), except that the amount of such benefit shall be the
greater of the amount payable to Executive on the Disability Effective Date
under such form of benefit as may be elected by the Executive on the Disability
Effective Date (without regard for any reduction hereunder for workers
compensation and disability benefits) or the amount payable under such form of
benefit at such subsequent retirement date. With respect to the provision of
Other Benefits after the Effective Date, the term Other Benefits as utilized in
this Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive
11
in a lump sum in cash within 30 days of the Date of Termination. Upon a
termination of the Executive's employment for Cause by the Company or by the
Executive without Good Reason, the Executive shall forfeit all stock options,
Restricted Stock Units, and other stock-based compensation that are not vested
on the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"); provided that the Company shall have no such
obligation if it is determined by a court that the Company was not in breach of
the Agreement and that the Executive's claims were not made in good faith.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes and any benefits that result from the deductibility by
the Executive of such taxes (including, in each case, any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect
12
thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by KPMG Peat Marwick or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
13
(iv) permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company
shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 9(c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and ▇▇▇ for a refund or
contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and ▇▇▇ for
a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable
year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(a) or 9(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 9(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 9(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
10. Confidential Information; Covenant Not to Compete.
(a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without
14
the prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. Except as provided
at Section 10(c), in no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
(b) Covenant Not to Compete.
A. Executive agrees that during the Employment Period
and for a period of three (3) years following his termination
of employment with the Company for any reason, he will not in
any way engage in conduct which is detrimental to the Company
or engage in, represent, furnish consulting services to, be
employed by, or have any interest in any "Financial Services
Company" (as hereinafter defined) within the United States;
provided, the Executive shall be permitted to continue to
serve as a member of the boards of directors of The Midland
Company and Ohio National Life Insurance Company. Further,
Executive shall not during the Employment Period and for a
period of three (3) years following his termination of
employment with the Company for any reason (1) induce or
attempt to induce any person or entity which is a customer of
the Company or any of its affiliates as of the date of
termination of Executive's employment to cease or reduce doing
business with the Company or any of its affiliates, or (2)
solicit or endeavor to cause any employee of the Company or
its affiliates to leave the employ of the Company or any of
its affiliates. Notwithstanding the foregoing, the Executive
shall not be prevented from owning up to three percent (3%) of
the outstanding stock of any publicly traded company which is
a Financial Services Company.
B. As used herein, the term "Financial Services
Company" means any national or state chartered bank; any bank
holding company; any other institution that engages as its
principal activity in taking deposits or making loans; any
entity that engages in commercial or consumer secured and
unsecured lending, transaction processing, insurance,
investment services, security brokerage, or trust services; or
any affiliates of any such institutions.
C. Executive agrees that this covenant is reasonable
with respect to its duration, geographic area and scope, and
acknowledges that compliance with Section 10(b) is necessary
to protect the business and goodwill of the Company.
(c) Consequences of Violation. In the event that the Executive
violates either Section 10(a) or (b) above, the Executive agrees that he shall:
(i) forfeit all vested but undistributed Restricted
Stock Units;
(ii) assign and tender to the Company, free and clear
of all liens and encumbrances, that number of shares of common stock of
the Company then owned directly or beneficially by the Executive equal
to the number of such shares distributed to the Executive pursuant to
the award of Restricted Stock Units;
15
(iii) pay cash to the Company an amount equal to the
gross proceeds realized by the Executive upon the sale through the New
York Stock Exchange, or if sold or otherwise disposed in any other
manner (including, without limitation, a disposition without receipt of
consideration such as by gift) the value (such value to be equal to the
product of such number of shares multiplied by the average of the
highest and lowest sale prices of the Company's common stock on the day
of such sale or disposition (or if not traded on such day then the
immediately preceding trading day)), of the difference between (A) all
shares of common stock of the Company directly or beneficially owned by
the Executive not to exceed the number of shares distributed to the
Executive pursuant to the award of Restricted Stock Units, minus (B)
the number of shares tendered to the Company pursuant to Section
10(c)(ii), such sale or other disposition occurring during the one-year
period immediately prior to the occurrence of the Executive's conduct
which constitutes such violation; and
(iv) forfeit any unpaid enhanced supplemental
retirement benefits provided to the Executive and shall pay cash to the
Company in an amount equal to the sum of the supplemental retirement
benefits paid to the Executive relating to the enhancements, in either
or both cases:
A. pursuant to the surrender of Restricted
Stock Units in consideration for an additional benefit under
the NQRP under Section 4(b)(iii), and
B. under Section 4(b)(v)(B) of this
Agreement.
All payments, assignments and tenders provided under this Section 10(c)
shall be paid by the Executive to the Company within 60 days following
notice of such violation from the Company.
11. Successors. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no
16
force or effect. This Agreement may not be amended or modified otherwise than by
a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party, by registered or
certified mail, return receipt requested, postage prepaid, or by reputable
overnight courier, addressed as follows:
If to the Executive:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
c/o Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇. ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Company:
U.S. Bancorp
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Director-Human Resources
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) If any provision of this Agreement conflicts with any
other agreement, policy, plan, practice or other Company document, the
provisions of this Agreement will control. This Agreement supersedes any prior
agreement between the Executive and the Company (or its predecessor) with
respect to the subject matter contained herein and may be amended only by a
writing signed by the Executive and the Company.
(d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability off any other
provision of this Agreement.
(e) The Company may withhold from any amounts payable under
this Agreement such federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(f) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
17
13. No Prohibited Payments. Notwithstanding anything in this Agreement
to the contrary, the Company shall not make any payment to the Executive which,
according to the opinion of the Company's outside counsel, would violate Section
2523(k) of the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer
Recovery Act of 1990 (codified at 12 U.S.C. 1828(k)), or any rules or
regulations promulgated thereunder.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Date:
----------------------------------
U.S. BANCORP
Date:
----------------------------------
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman, Compensation Committee
Date:
----------------------------------
By:
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Executive Vice President
Human Resources
Date:
----------------------------------
18
