Exhibit 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of August 1, 1997, by and between U.S. Bancorp
(formerly First Bank System, Inc.), a Delaware corporation (as further defined
in Section 8.13.11 hereof, "Employer"), and John F. Grundhofer ("Executive"),
replacing the Amended and Restated Employment Agreement by and between Executive
and Employer dated as of August 15, 1996 (the "Prior Agreement").
In consideration of the respective undertakings of Employer and
Executive set forth below, Employer and Executive agree as follows:
1. Employment. Employer hereby employs Executive, and Executive accepts
such employment and agrees to perform services for the Employer, for the period
and upon the other terms and conditions set forth in this Agreement.
2. Term of Employment. The term of Executive's employment pursuant to
this Agreement will commence on August 1, 1997 (the "Commencement Date") and,
unless terminated at an earlier date in accordance with Section 5 of this
Agreement, shall continue in effect until the fifth anniversary of the
Commencement Date; and, commencing on the first anniversary of the Commencement
Date and on each anniversary thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not later than 30 days
prior to any such date of automatic extension of this Agreement, Employer or
Executive shall have given the other party to this Agreement written notice that
the Agreement will not be so extended. The term of Executive's employment
commencing on the Commencement Date and ending pursuant to the terms hereof is
hereinafter referred to as the "Period of Employment."
3. Position and Duties.
3.01 Service with Employer. During the Period of Employment,
Executive agrees to perform such reasonable executive employment duties as
Employer shall assign to him from time to time and shall have the title of
President and Chief Executive Officer and upon the earlier of (x) the retirement
of Gerry B. Cameron, and (y) January 1, 1999, the Executive shall have the
additional title of Chairman of the Board of Directors of the Employer;
provided, however, that Employer may name another executive President during the
Period of Employment so long as Executive retains the other titles as herein
provided. Executive also agrees to serve, for any period for which he is
elected, as a director on the Board of Directors of Employer
and to serve as a member of any committee of the Board of Directors of Employer
to which Executive may be elected or appointed.
3.02 Performance of Duties. Executive agrees to serve Employer
faithfully and to the best of his ability and to devote his full business time,
attention and efforts to the business and affairs of Employer during the Period
of Employment; provided, however, that Executive may engage in other activities,
such as activities involving charitable, educational, religious and similar
types of organizations, speaking engagements, membership on the boards of
directors of other organizations (as Employer may from time to time approve),
management of Executive's personal investments, and similar types of activities
to the extent that such other activities do not inhibit in any material way or
prohibit the performance of Executive's duties under this Agreement, or inhibit
in any material way or conflict with the business of Employer and its
subsidiaries.
4. Compensation.
4.01 Base Salary. As base compensation for all services to be
rendered by Executive under this Agreement, Employer will pay to Executive
during the Period of Employment a base annual salary ("Annual Salary") to be
paid in substantially equal installments in accordance with Employer's standard
payroll procedures and policies. The Annual Salary will be at least $840,000,
but the Annual Salary may be increased (but not reduced) from time to time in
the sole discretion of Employer; provided, however, that for any of the three
years beginning after a Change in Control, as defined in Section 8.13, during
the Period of Employment Executive's Annual Salary shall be increased by a
percentage not less than the average percentage increase in the base annual
salary for each of the next five highest paid officers of Employer for such
year.
4.02 Annual Bonus. During the Period of Employment, Executive
will be entitled to participate in the Employer's Executive Incentive Plan (or,
if such Plan shall cease to exist, Employer's annual bonus award program, if
any, for Employer's executives at Executive's grade level) with a target bonus
opportunity at least as great as that provided to the Executive immediately
prior to the Commencement Date. The award of an annual bonus is highly
discretionary and is subject to the terms and provisions of the Executive
Incentive Plan (or, if such Plan shall cease to exist, Employer's annual bonus
award program, if any, for Employer's executives at Executive's grade level).
4.03 Options and Restricted Stock. During the Period of
Employment, Executive will be eligible to receive grants of Employer's stock
options and restricted stock, or other awards pursuant to equity-based plans of
Employer. Such grants are highly discretionary and would be subject to the terms
of the applicable agreements prescribed by Employer from time to time.
Notwithstanding the foregoing, the Executive shall be granted
on the date hereof 50,000 shares of restricted common stock of the Employer (the
"Restricted Stock"). The Restricted Stock shall vest in five equal installments
on each of the first through fifth anniversaries of the date of grant but shall
vest immediately upon the Executive's death or Disability (as defined in the
Employer's Disability Program) or upon a termination of the Executive's
employment by the Employer without Cause or by the Executive for Good Reason, or
upon a Full Change in Control. The Executive shall be granted as of the date
hereof an option (the "Option") to acquire 150,000 shares of the Employer's
common stock at their Fair Market Value on the date of grant (as defined in the
Employer's 1997 Stock Incentive Plan). The Option shall have a term of 10 years
and shall vest and become exercisable in full on the fifth anniversary of the
date of grant, subject to acceleration in the event of achievement of
performance targets set forth in the grant of the Option, and shall be subject
to all other terms and conditions currently applicable to options granted under
such Plan to other executive officers of the Employer. The Option shall vest and
become immediately exercisable upon the Executive's death or Disability (as
defined in the Employer's Disability Program) or upon a termination of the
Executive's employment by the Employer without Cause or by the Executive for
Good Reason, or upon a Full Change in Control.
4.04 Participation in Other Benefit Plans. During the Period
of Employment, Executive will be entitled to participate in such retirement
plans, major medical, hospital, surgical and dental plans, executive disability
plans and other Employer benefits not described elsewhere in this Section 4 as
are being provided by Employer to executives at Executive's grade level from
time to time to the extent that Executive's age, positions and other factors
qualify him for such benefits. If, for any period during the Period of
Employment, Executive is not eligible by reason of length of service to
participate in such plans maintained by Employer, Employer shall provide
Executive with benefits equivalent to those provided under such plans and, with
respect to benefits provided by Employer equivalent to those provided under
Employer's major medical, hospital, surgical and dental plans, shall compensate
Executive on an after-tax basis for any additional income taxes payable by
Executive by reason of Employer providing such benefits directly rather than
through such plans. Upon a termination of employment for any reason and for the
remainder of the Executive's life and that of his current spouse, the Employer
shall continue to provide medical and dental benefits in the aggregate to the
Executive and his current spouse pursuant to the Employer's Retiree Health Care
Program at a subsidized cost on the same basis as the Employer subsidizes
premiums for retirees of the Employer who retired prior to January 1, 1993
(collectively "Medical Benefits"). The Executive and his current spouse's
entitlement to Medical Benefits shall survive the termination of this Agreement.
4.05 Long-Term Disability Benefits. During the Period of
Employment, Executive's annual benefit under Employer's long-term disability
plan not be less than 60% of the total of (i) Executive's base annual salary at
the date of disability plus (ii) the annual average of bonuses received by
Executive during the three prior Executive Incentive Plan years (or, if such
Plan shall cease to exist, such other annual bonus award program, if any,
pursuant to which Executive received annual bonus payments), and Employer agrees
to pay Executive (at the time benefits are payable under the long-term
disability plan) the excess, if any, of such annual benefit over the annual
benefit provided by Employer's long-term disability plan.
4.06 Survivor Benefit Programs; Life Insurance. During the
Period of Employment, Executive will be entitled to participate in survivor
benefit programs covering Employer's executives at Executive's grade level in
effect on the Commencement Date or as modified or supplemented by Employer from
time to time. If, for any period during the Period of Employment, Executive is
not eligible to participate in such survivor benefit programs, Employer shall
provide Executive with benefits equivalent to those provided under such
programs. In addition, during the Period of Employment Employer shall continue
to provide a life insurance policy with a face value of at least $1 million for
the benefit of a beneficiary designated by Executive (or, if no beneficiary is
designated, for the benefit of Executive's spouse). Such insurance policy shall
be in addition to the amount of group term insurance, if any, provided to
Executive under an insurance plan maintained by Employer for its employees
generally. Executive hereby represents to Employer that Executive is insurable
on normal terms and conditions.
4.07 Retirement Benefits. The Executive shall be entitled to a
retirement benefit pursuant to the Employer's Non-Qualified Supplemental
Executive Retirement Plan in effect
as of the date hereof (the "NQSRP"), with the following modifications: (i) the
Executive's lifetime annual pension benefit commencing at age 65 shall be 57.5%
of his final three year's average compensation, (ii) the Executive shall be
fully vested in this benefit at age 60, with no actuarial or other reduction for
retirement prior to age 65 but after age 60 but with a reduction for
commencement of benefits prior to age 65, (iii) the Prior Plans' Offset (as
defined in the NQSRP) shall be fixed at $270,000 per year, and (iv) the
Executive's minimum actual pension from all Employer qualified plans and the
NQSRP shall not be less than $1 million per year, commencing at age 65 and, if
the joint and survivor form of benefit is elected, his spouse's minimum total
survivor benefit from all sources upon executive's death at or after age 65
shall not be less than $500,000 per year. In the event of any conflict between
the terms of this Section 4.07 and the NQSRP, the provisions of this Section
4.07 shall prevail.
4.08 Vacation and Sick Leave. During the Period of Employment,
Executive will be entitled to reasonable paid vacation periods each year, will
be entitled to carry over to subsequent years unused vacation periods, and upon
termination of employment will be entitled to be paid for unused vacation
periods, in each case in accordance with Employer's policy for executives at
Executive's grade level from time to time. Executive will also be entitled to
reasonable sick leave in accordance with Employer's policy for executives at
Executive's grade level from time to time.
4.09 Perquisites. During the Period of Employment, Employer
will provide Executive with such perquisites as Employer from time to time
provides to executives at Executive's grade level including, without limitation,
(a) an automobile or automobile allowance consistent with Employer's policies
for an executive at Executive's grade level, (b) reimbursement of initiation
fees, if any, and dues for one country club and one business club of Executive's
choice, and (c) the reimbursement of the cost of financial and tax counseling
(subject to an annual limit of two percent of current base annual salary).
Additionally, during the Period of Employment, Employer will reimburse Executive
for the difference between (i) interest payments made by Executive on
Executive's real estate mortgage loan for his personal residence (with the loan
amount not to exceed 80% of the purchase price for such residence) and (ii) the
interest payments that would apply to such loan if the interest rate on such
loan were one percentage point less than the interest rate generally prevailing
in the market at the time the loan was entered into.
4.10 Expenses. Employer will reimburse Executive for all
expenses and disbursements reasonably incurred by Executive in the performance
of his duties during the Period of Employment, and such other facilities or
services as Employer and Executive may, from time to time, agree are
reimbursable, subject to the presentment of appropriate vouchers in accordance
with the Employer's normal policies for expense verification.
4.11 Indemnity and Hold Harmless. Except to the extent
inconsistent with Employer's charter or bylaws, Employer will indemnify
Executive and hold Executive harmless to the fullest extent permitted by law
with respect to acts of Executive as an officer and director of Employer during
the Period of Employment. Employer further agrees that if and to the extent
Employer in its sole discretion maintains directors' and officers' insurance
policies, Executive will be covered by such policies with respect to acts of
Executive as an officer and director of Employer during the Period of Employment
to the same extent as all other officers and directors of Employer under such
policies.
4.12 Payments on Account of Restricted Stock Relating to
Former Employment. Employer has established and is maintaining a bookkeeping
account for Executive (the "Bookkeeping Account"), which account was initially
credited with $305,074, representing the amount agreed to be paid to Executive
and not paid to date in respect of shares of Wells Fargo & Company ("Wells
Fargo") Common Stock transferred by Wells Fargo to Executive, but not vested, as
of January 30, 1990. The amount credited to the Bookkeeping Account shall be
deemed to have been invested in such stock, bonds or other securities as
Executive shall, from time to time, designate in writing to Employer's Executive
Vice President, Human Resources, or such other individual as Employer shall
designate, which deemed investments must be reasonably acceptable to Employer
and must be of a type that Employer would be permitted to make under applicable
laws and regulations. The Bookkeeping Account shall be credited or debited, as
the case may be, with gains or losses deemed incurred as a result of such
designated, deemed investments.
Certain debits have been made to the Bookkeeping Account as
provided in the Employment Agreement dated December 30, 1992 by and between
Employer and Executive (the "1992 Employment Agreement"). The balance of the
Bookkeeping Account shall become payable to, or with respect to, Executive upon
the earliest of the following events (i) January 30, 2003, (ii) Executive's
death or (iii) Executive's termination of employment for any reason within 24
months after a Change in Control.
In the event the balance of the Bookkeeping Account becomes payable upon
Executive's termination of employment for any reason other than death within 24
months after a Change in Control, the entire balance shall be paid within 30
days of such event. In the event the balance of the Bookkeeping Account becomes
payable upon Executive's death, the entire balance shall be paid by December 31
of the calendar year in which Executive dies. Upon the occurrence of any other
event giving rise to Employer's obligation to pay Executive the balance of the
Bookkeeping Account, on January 30 of each year beginning in the year 2003 and
for each of the next nine consecutive years, after taking into account any
amount credited or debited to the Bookkeeping Account as a result of the deemed
investment thereof or otherwise pursuant to the terms of this Section 4.12, the
following proportions of the Bookkeeping Account shall be paid to Executive:
1/10, 1/9, 1/8, 1/7, 1/6, 1/5, 1/4, 1/3, 1/2 and the entire remaining balance
thereof.
Employer, in its sole and absolute discretion, may alter the
timing or manner of payment of the balance of the Bookkeeping Account in the
event that Executive establishes to the satisfaction of Employer severe
financial hardship. Severe financial hardship will be deemed to have occurred in
the event of Executive's impending bankruptcy, a dependent's long and serious
illness or other events of similar magnitude. Executive may designate a
beneficiary or beneficiaries who, upon his death, are to receive distributions
that otherwise would have been paid to Executive. All designations shall be in
writing and shall be effective only if and when delivered to Employer during the
lifetime of Executive.
Employer shall have the right to deduct from all payments made
pursuant to this Section 4.12 any federal, state or local taxes required by law
to be withheld with respect to such payments. Executive and Employer understand
and agree that the timetable set forth above with respect to the payment of the
balance of the Bookkeeping Account is irrevocable and shall not be subject to
any amendment or modification. Further, Executive and Employer understand and
agree that Employer is under a contractual obligation to make payments to
Executive in accordance with this Section 4.12. Such payments shall not be
financed from any trust fund, insurance or otherwise and shall be paid solely
out of the general funds of Employer, and Executive shall have no interest
whatsoever in any investments made by Employer on account of Executive's request
with respect to deemed investments of the Bookkeeping Account. Executive will
not have any interest whatsoever in any specific asset of Employer as a result
of this Agreement, and Executive's rights to payments hereunder shall be no
greater than the right of any other general, unsecured creditor of Employer. In
no event
shall Employer make any payment hereunder to any assignee or creditor of
Executive or a beneficiary. Prior to the time of payment hereunder, Executive or
a beneficiary thereof shall have no rights by way of anticipation or otherwise
to assign or otherwise dispose of any interest under this Section 4.12, nor
shall such rights be assigned or transferred by operation of law.
5. Termination.
5.01 Grounds for Termination. The Period of Employment will
terminate prior to the expiration of the term set forth in Section 2 of this
Agreement in the event that:
(a) Executive shall die.
(b) Executive shall qualify for and accrue payments under
Employer's Disability Program for a period covering 90
consecutive days.
(c) Employer shall terminate the Period of Employment for Cause.
"Cause" means termination upon (i) the willful and continued
failure by Executive to substantially perform his duties with
Employer (other than any such failure resulting from his
disability or from termination by Executive for Good Reason),
after a written demand for substantial performance is
delivered to Executive that specifically identifies the manner
in which Employer believes that Executive has not
substantially performed his duties, and Executive has failed
to resume substantial performance of his duties on a
continuous basis within 14 days of receiving such demand, (ii)
the willful engaging by Executive in conduct which is
demonstrably and materially injurious to Employer, monetarily
or otherwise, (iii) Executive's conviction of a felony which
impairs his ability substantially to perform his duties with
Employer or (iv) the issuance of an order under Section
8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act
("FDIC") by which Executive is removed and/or permanently
prohibited from participating in the conduct of the affairs of
Employer and/or any other Affiliate of Employer. For purposes
of this paragraph, no act, or failure to act, on Executive's
part will be deemed "willful" unless done, or omitted to be
done, by Executive not in good faith and without reasonable
belief that his action or
omission was in the best interest of Employer. Failure to
perform Executive's duties with Employer during any period of
disability shall not constitute Cause.
(d) Executive shall terminate the Period of Employment for Good
Reason. "Good Reason" means termination by Executive upon the
occurrence, without Executive's consent, of any one or more of
the following: (i) the assignment to Executive of any duties
inconsistent in any respect with Executive's position
(including status, offices, titles, and reporting
requirements), authorities, duties, or other responsibilities
as in effect immediately prior to such assignment or any other
action of Employer which results in a diminishment in such
position, authority, duties, or responsibilities, other than
an insubstantial and inadvertent action which is remedied by
Employer promptly after receipt of notice thereof given by
Executive, and other than the Employer's providing the title
of President of the Employer to another executive, provided
that the Executive continues as Chairman of the Board (if he
is then Chairman of the Board) and Chief Executive Officer of
the Employer; (ii) a reduction by Employer in Executive's base
salary as in effect on the Commencement Date or as the same
shall be increased from time to time; (iii) Employer's
requiring Executive to be based at a location in excess of 30
miles from the location of Executive's principal office as of
the Commencement Date; (iv) the failure by Employer to provide
Executive with compensation and benefits at least equal (in
terms of benefit levels and/or reward opportunities) to those
provided for under each compensation or benefit plan, program,
policy and practice as in effect at the Commencement Date (or
as in effect following the Commencement Date, if greater); (v)
the failure of Employer to obtain a satisfactory agreement
from the Resulting Corporation (as hereinafter defined) or any
other successor to Employer to assume and agree to perform
this Agreement; (vi) a material breach by Employer of its
obligations under this Agreement after notice in writing from
Executive and a reasonable opportunity for Employer to correct
such conduct; (vii) any purported termination by Employer of
Executive's employment that is not effected pursuant to a
Notice of Termination (as hereinafter defined); (viii) for the
24 month period following a Full Change in Control (as
hereinafter defined) (or prior to a Full Change in Control in
the event of an
Anticipatory Termination (as hereinafter defined)), the
failure by the Employer to provide Executive total cash
compensation (consisting of base salary plus cash bonus) with
respect to any fiscal year or portion thereof at least equal
to the greater of (x) actual total cash compensation paid to
Executive with respect to the prior fiscal year or (y) the
average annual total cash compensation paid to Executive with
respect to the prior two fiscal years (total cash compensation
with respect to any fiscal year or portion thereof shall be
determined at the time the bonus with respect to such fiscal
year or portion thereof is determined, even if such bonus is
determined after the 24-month period following a Full Change
in Control, and the bonus portion of cash compensation for
services rendered in any portion of a fiscal year within 24
months following a Full Change in Control shall be determined
by reference to the pro-rata portion of any annual bonus for
such fiscal year) and (ix) within 24 months following a
Partial Change in Control (as hereinafter defined) (or prior
to a Partial Change in Control in the event of an Anticipatory
Termination), a reduction by Employer in Executive's annual
target bonus or maximum bonus award opportunities as in effect
in the prior fiscal year Executive's right to terminate the
Period of Employment for Good Reason shall not be affected by
Executive's incapacity due to physical or mental illness.
Executive's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any circumstance
constituting Good Reason. Termination by Executive of the
Period of Employment for Good Reason shall constitute
termination for Good Reason for all purposes of this
Agreement, notwithstanding that Executive may also thereby be
deemed to have "retired" under any applicable retirement
programs of Employer.
(e) Employer terminates the Period of Employment other than for
"Cause."
(f) Executive terminates the Period of Employment for any reason
not constituting Good Reason.
Notwithstanding any termination of the Period of Employment, Executive, in
consideration of his employment hereunder to the date of such termination, will
remain bound by the provisions of this Agreement that specifically relate to
periods, activities or obligations upon or subsequent to the termination of
Executive's employment.
5.02 Effect of Termination.
(a) In the event of termination of the Period of Employment
pursuant to the provisions of Section 5.01(a) above,
Executive's trust estate or estate, as the case may be (as
determined in accordance with Section 8.02 of this Agreement),
will be entitled to be paid the base annual salary otherwise
payable to Executive pursuant to Section 4.01 of this
Agreement only through the date of such termination.
Additionally, Executive's survivors will be entitled to any
benefits provided under Employer's survivor benefit program.
If the joint and survivor form of benefit is elected, the
Executive's current spouse, should she survive the Executive,
shall be entitled to a survivor benefit based on a 50% joint
and survivor annuity pursuant to the Executive's retirement
benefits described in Section 4.07, commencing on what would
have been the Executive's 65th birthday. In addition, the
Restricted Stock shall vest immediately and the Option shall
vest and become immediately exercisable. The Executive's
current spouse shall also be entitled to the provision of
Medical Benefits.
(b) In the event of termination of the Period of Employment
pursuant to the provisions of Section 5.01(b) above, Executive
will be entitled to be paid the base annual salary otherwise
payable to Executive pursuant to Section 4.01 of this
Agreement only through the date of such termination. Executive
will be entitled to benefits under Employer's Disability
Program and to the benefits provided for in Section 4.05 in
connection with Employer's Disability Plan. If Executive shall
cease to be eligible for long-term disability payments
pursuant to the Disability Plan within three years following
the date of such termination, Employer will pay Executive a
lump sum payment in the amount of Executive's annual base
salary at the time of such termination. The Executive shall
receive the retirement benefits described in Section 4.07
commencing on his 65th birthday. In addition, the Restricted
Stock shall vest immediately and the Option shall vest and
become immediately exercisable. The Executive and his current
spouse shall also be entitled to the provision of Medical
Benefits.
(c) In the event of termination of the Period of Employment
pursuant to the provisions of Section 5.01(c) or (f) above,
Employer will have no further obligations hereunder except
that Employer will pay Executive his
base salary, at the rate then in effect, and continue to
provide Executive and his current spouse Medical Benefits.
Executive will not be paid any annual bonus pursuant to
Section 4.02 of this Agreement for the calendar year in which
the termination occurs or any subsequent calendar year.
(d) In the event of termination of the Period of Employment
pursuant to the provisions of Sections 5.01(d) or 5.01(e)
above, Employer will (i) pay Executive his full base salary
through the date of termination at the rate in effect at the
time Notice of Termination is given; (ii) pay as damages to
Executive, not later than 30 days following the date of
termination, a lump sum payment equal to three times the sum
of (A) Executive's annual base salary in effect at the time
Notice of Termination is given and (B) the annual target bonus
potential available to Executive at the time Notice of
Termination is given (or, in the event of termination within
24 months following a Change in Control or in the event of an
Anticipatory Termination, if either of the following amounts
is greater, the bonus earned in the last fiscal year prior to
the date of termination or the average bonus earned in the
last three fiscal years prior to the date of termination,
whichever is larger), (iii) continue to provide the employee
benefits described in Sections 4.04, 4.05 (with disability
benefits to be calculated as of the date of termination), and
4.06 to which Executive was entitled on the date of such
termination for a period of three years from the date of such
termination and thereafter, to provide the Executive and his
current spouse with Medical Benefits, (iv) continue to provide
the perquisites described in Section 4.09 to which Executive
was entitled on the date of such termination for a period of
three years from the date of such termination, (v) cause the
acceleration of the exercisability of any stock option or the
vesting of any restricted stock grants (other than those
pursuant to Employer's Restricted Stock and Performance Plan)
that would have become exercisable or vested, as the case may
be, during the remaining Period of Employment had no such
termination occurred, and cause the Restricted Stock and the
Option to become immediately vested and exercisable, as the
case may be, (vi) cause the acceleration of vesting of
restrcted stock grants under Employer's Restricted Stock and
Performance Plan if the vesting schedule has been determined
at the time of such termination and such vesting would have
occurred during
the remaining Period of Employment had no such termination
occurred, (vii) give Executive credit for three additional
years of age and service (or five additional years in the
event of termination within 24 months following a Change in
Control or in the event of an Anticipatory Termination) for
all purposes in determining Executive's retirement benefits
pursuant to Section 4.07 and the NQSRP, (viii) in the event of
termination within 24 months following a Change in Control or
in the event of an Anticipatory Termination, pay Executive the
full amount of any long-term cash incentive award for any plan
periods then in progress to the extent not provided for in any
Employer long-term cash incentive plan or plans, (ix) in the
event of termination within 24 months following a Change in
Control or in the event of an Anticipatory Termination, pay
Executive the year-to-date pro-rata amount of any annual cash
incentive award for any plan as in effect immediately prior to
the Change in Control to the extent not provided for in such
plan or plans, and (x) pay for individual outplacement
counseling services to Executive up to a maximum of $60,000.
Except as otherwise provided in clause (ix) of this Section
5.02(d), Executive will not be paid any annual bonus pursuant
to Section 4.02 of this Agreement for the calendar year in
which the termination occurs.
5.03 Notice of Termination. Any purported termination by
Employer or Executive of the Period of Employment shall be communicated by
written Notice of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which indicates the
specific termination provision in Section 5.01 above relied upon.
5.04 Offsets. Executive shall have no duty to seek other
employment. However, in the event of termination of the Period of Employment
pursuant to the provisions of Sections 5.01(d) or 5.01(e), the following offsets
will apply to reduce the payments and benefits which Executive shall be entitled
to receive pursuant to Section 5.02(d): (i)(A) in the event of termination
within 24 months following a Change in Control or in the event of an
Anticipatory Termination, the amount payable to Executive pursuant to Section
5.02(d)(ii) will be offset by any salary, cash bonus and other earned income
(within the meaning of Section 911(d)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code")) received by Executive for services rendered by
Executive to persons or entities other than the Employer during or with respect
to the 36-month period after the date of termination, or (B) in the event of
termination
at any time not within 24 months following a Change in Control and that is not
an Anticipatory Termination, one-third of the amount payable to Executive
pursuant to Section 5.02(d)(ii)(A) and the entire amount payable to Executive
pursuant to Section 5.02(d)(ii)(B) shall be offset by amounts received by
Executive which are described in subparagraph (A) above; (ii) the benefits
payable to Executive pursuant to Section 5.02(d)(iii) and (iv) shall be
discontinued if Executive obtains full-time employment providing welfare
benefits during the 36-month period following the date of termination; and (iii)
in the event of termination at any time within 24 months following a Change in
Control or in the event of an Anticipatory Termination, any additional benefits
under Employer's SERP pursuant to Section 5.02(d) will be reduced by the amount
of vested defined benefit pension benefits and vested defined benefit
non-qualified supplemental retirement benefits actually payable to Executive
without any risk of forfeiture from persons or entities other than Employer
which are attributable to services rendered by Executive to such other persons
or entities during the 36 months following the date of termination of
Executive's employment. Such reduction shall be calculated based on the vested
benefits payable at age 65 under the single life annuity form of payment under
the applicable plans which are accrued by Executive during such period. The
foregoing calculations for a particular plan shall be made by the actuary for
such plan in accordance with generally accepted actuarial principles. The amount
of such reduction at age 65 shall be actuarially reduced if Executive's benefits
under the Employer's NQSRP, as modified by Section 4.07, commence before
Executive attains age 65.
Not less frequently than annually (by December 31 of each
year), Executive shall account to Employer with respect to all payments and
benefits received by Executive which are required hereunder to be offset against
payments or benefits received by Executive from Employer. If the Employer has
paid amounts in excess of those to which Executive is entitled (after giving
effect to the offsets provided above), Executive shall reimburse Employer for
such excess by December 31 of such year. The requirements imposed under this
paragraph shall terminate on December 31 of the calendar year which includes the
third anniversary of the date of termination.
5.05 Additional Payments. In the event any payment or
distribution of any type by Employer to Executive or for his benefit, whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (the "Total Payments"), would be subject to the excise
tax imposed by Section 4999 of the Code, or any interest or penalties with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are collectively referred to as
the "Excise Tax"), then Executive shall be entitled to receive an additional
cash payment (a "Gross-Up Payment") equal to an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, Executive would retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Total Payments. For purposes of determining the
amount of the Gross-Up Payment, which determination shall be made by the
Employer's independent auditors, at the Employer's sole expense, Executive's tax
rate shall be deemed to be the highest statutory marginal state and Federal tax
rate (on a combined basis) (including Executive's share of F.I.C.A. and Medicare
taxes) then in effect. If no determination by Employer's auditors is made prior
to the time a tax return reflecting the Total Payments is required to be filed
by Executive, Executive will be entitled to receive a Gross-Up Payment
calculated on the basis of the Total Payments reported by Executive in such tax
return, within 30 days of the filing of such tax return. In all events, if any
tax authority determines that a greater Excise Tax should be imposed upon the
Total Payments than is determined by the Employer's independent auditors or
reflected in Executive's tax return pursuant to this Section 5.05, Executive
shall be entitled to receive the full Gross-Up Payment calculated on the basis
of the amount of Excise Tax determined to be payable by such tax authority from
Employer within 30 days of such determination.
5.06 Nonexclusivity of Rights. Nothing in this Agreement shall
prevent or limit Executive from continuing or future participation in any
benefit, bonus, incentive, retirement or other plan or program provided by
Employer and for which Executive may qualify, nor, except as expressly provided
in this Agreement, shall anything herein limit or reduce such rights as
Executive may have under any other agreement with, or plan, program, policy or
practice of, Employer. Amounts which are vested benefits or which Executive is
otherwise entitled to receive under any agreement with, or plan, program, policy
or practice of, Employer (including, without limitation, the cash-out of unused
vacation days upon termination of employment) shall be payable in accordance
with such agreement, plan, program, policy or practice, except as explicitly
modified by this Agreement. Notwithstanding the foregoing, if Executive becomes
entitled to benefits under Article 5 of this Agreement, Executive shall not be
entitled to receive payments under any other severance pay plan or program
sponsored or maintained by Employer or any of its Affiliates.
6. Non-Competition and Unfair Competition.
6.01 Agreement Not to Compete. Without the approval by
resolution of the Board of Directors of Employer, upon termination of
Executive's employment with Employer by Employer for Cause pursuant to Section
5.01(c) or by Executive without Good Reason pursuant to Section 5.01(f),
Executive will not, for a period of three years thereafter, become an officer,
employee, agent, partner, director or substantial stockholder (holding more than
5% of the voting securities), of any bank, savings bank, trust company, bank and
trust company, savings and loan association or holding company thereof, in each
case if such entity conducts business in the State of California, the State of
Colorado, the State of Idaho, the State of Illinois, the State of Iowa, the
State of Kansas, the State of Minnesota, the State of Montana, the State of
Nebraska, the State of Nevada, the State of North Dakota, the State of Oregon,
the State of South Dakota, the State of Utah, the State of Washington, the State
of Wisconsin, the State of Wyoming or any other State in which Employer has
substantial operations.
6.02 Agreement Not to Solicit. Without the approval by
resolution of the Board of Directors of Employer, upon termination of
Executive's employment with Employer for any reason whatsoever, Executive will
not, for the remainder of the Period of Employment if no termination had
occurred (or, if longer, for the one-year period following such termination),
(i) solicit or aid in soliciting as a customer or client of banking or related
financial services (including, without limitation trust, credit card and
investment management services) any person, firm, corporation, association or
other entity (A) that was a customer or client of Employer or any other
Affiliate of Employer, and for which Executive or anyone under Executive's
supervision performed any services or with which substantial business relations
were maintained by Employer or any other Affiliate of Employer at any time
during the five years prior to the termination of the Period of Employment or
(B) whose identity or particular needs Executive otherwise discovered as a
result of his employment with Employer, or (ii) solicit or aid in soliciting any
employees of Employer or any other Affiliate of Employer to leave their
employment. Without the approval by resolution of the Board of Directors of
Employer, upon termination of Executive's Employment with Employer for any
reason whatsoever, Executive agrees never to copy, remove from Employer or its
Affiliates, dispose or make any use of any confidential customer list,
confidential business information with respect to customers, confidential
materials relating to the practices or procedures of Employer or its Affiliates,
or any other proprietary information.
7. Taxes. All payments to be made to Executive under this Agreement
will be net of required withholding of federal, state and local income and
employment taxes. Whenever under this Agreement Executive is to be compensated
or reimbursed on an "after-tax basis," Executive will be assumed to be subject
to federal income taxes at the highest marginal rate applicable to individuals
and to state income taxes at the highest marginal effective rate for residents
of Minneapolis, Minnesota.
8. Miscellaneous.
8.01 Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of Minnesota.
8.02 Successor. This Agreement shall be binding upon and inure
to the benefit of Employer and its successors. This Agreement will inure to the
benefit of, be enforceable by, and any amounts and benefits owed to Executive at
the time of Executive's death, unless otherwise provided herein, will be paid
to, the Trustee under the John F. and Beverly J. Grundhofer Living Trust
Agreement, or, if such Trust is not then in existence, the personal
representative or personal representatives of Executive's estate. Reference to
the "John F. and Beverly J. Grundhofer Living Trust Agreement" means that
certain Declaration of Trust, John F. and Beverly J. Grundhofer Living Trust,
dated February 22, 1988, by and between John F. and Beverly J. Grundhofer, as
donors and as original Trustees, as amended and existing at John F. Grundhofer's
death. Reference to the Trustee under the John F. and Beverly J. Grundhofer
Living Trust Agreement means the then acting Trustee or Trustees under the John
F. and Beverly J. Grundhofer Living Trust Agreement and any successor Trustees.
Employer will require the Resulting Corporation or any other
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or consolidated
assets of Employer and its subsidiaries to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Employer would
be required to perform if no such succession had taken place. Failure of
Employer to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Executive to compensation from Employer in the same amount and on the same terms
as Executive would be entitled to hereunder if Executive terminated his
employment for Good Reason following a Change in Control, except that for
purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date of termination and Notice of Termination shall be deemed to have
been given on such date. In any case where a successor assumes the Employer's
obligations under this Agreement by operation of law, the requirements imposed
in this paragraph will be satisfied if the successor acknowledges to Executive
in writing that it has assumed the Employer's obligations under this Agreement
by operation of law within 30 days of receipt of a written notice from Executive
requesting such acknowledgment.
8.03 Prior Agreements. This Agreement contains the entire
agreement of the parties relating to the employment of Executive by Employer and
the other matters discussed herein and supersedes all prior agreements and
understandings with respect to such subject matter, and the parties hereto have
made no agreements, representations or warranties relating to the subject matter
of this Agreement which are not set forth herein. The Prior Agreement is hereby
terminated and shall have no further force or effect. The Change in Control
Severance Pay Agreement entered into between Employer and Executive on March 16,
1992, which was attached as Exhibit A to the 1992 Employment Agreement with
Employer, remains terminated and of no force or effect.
8.04 Amendments. No amendment or modification of this
Agreement will be deemed effective unless made in writing and signed by each
party hereto.
8.05 No Waiver. No term or condition of this Agreement will be
deemed to have been waived, nor will there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver will not be deemed a continuing waiver unless specifically stated, will
operate only as to the specific term or condition waived and will not constitute
a waiver of such term or condition for the future or as to any act other than
that specifically waived.
8.06 Assignment. This Agreement is not assignable, in whole or
in part, by any party without the written consent of the other party.
8.07 Injunctive Relief. Executive agrees that it would be
difficult to compensate Employer fully for damages for any violation of the
provisions of this Agreement, including without limitation the provisions of
Section 6. Accordingly, Executive specifically agrees that Employer will be
entitled to
temporary and permanent injunctive relief to enforce the provisions of this
Agreement and that such relief may be granted without the necessity of proving
actual damages. This provision with respect to injunctive relief will not,
however, diminish the right of Employer to claim and recover damages in addition
to injunctive relief.
8.08 Disputes and Legal Fees.
(a) Before a Change in Control. Any controversy or claim arising
out of or relating to this Agreement, or the breach thereof,
which is not resolved by the parties will not sooner than 30
days after the dispute shall arise, be settled by arbitration
before three arbitrators in accordance with the rules of the
American Arbitration Association, and judgment upon an award
rendered by the arbitrators, or at least a majority of them,
may be entered in any court having jurisdiction thereof;
provided, however, that Employer will be entitled to seek
injunctive or other equitable relief in a court of law to
enforce the provisions of Section 6. Such arbitration shall be
conducted in Minneapolis, Minnesota. The expenses incurred in
connection with any arbitration, including but not limited to
each party's legal fees and the arbitrators' fees and
expenses, will be allocated between the parties according to
the relative fault of each, as determined by the arbitrators.
(b) After a Change in Control. Subparagraph (a) above shall not
apply after a Change in Control, and the provisions of this
subparagraph (b) shall apply instead. If Executive so elects,
any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. If
Executive does not elect arbitration, Executive may pursue
any and all legal remedies available to him. Employer shall
pay to Executive any legal fees and expenses reasonably
incurred by him after a Change in Control. If Executive elects
arbitration, Employer will pay all fees and expenses of the
arbitrator.
8.09 Severability. To the extent that any provision of this
Agreement shall be determined to be invalid or unenforceable, the invalid or
unenforceable portion of such provision will be deleted from this Agreement, and
the validity and
enforceability of the remainder of such provision and of this Agreement will be
unaffected. In furtherance of and not in limitation of the foregoing, it is
expressly agreed that should the duration of or geographical extent of, or
business activities covered by, the noncompetition covenant contained in Section
6 be determined to be in excess of that which is valid or enforceable under
applicable law, then such provision will be construed to cover only that
duration or extent, or those activities which may validly or enforceably be
covered. Executive acknowledges the uncertainty of the law in this respect and
expressly stipulates that this Agreement will be construed in a manner which
renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.
8.10 Notices. All notices under this Agreement will be in
writing and will be deemed effective when delivered in person (in Employer's
case, to its Secretary) or twenty-four (24) hours after deposit thereof in the
U.S. mails, postage prepaid, for delivery as registered or certified mail --
addressed, the case of Executive, to him at his last residential address known
by Employer and, in the case of Employer, to its corporate headquarters
attention of its Secretary, or to such other address as Executive or Employer
may designate in writing at any time or from time to time to the other party. In
lieu of notice by deposit in the U.S. mails, a party may give notice by
telegram, telex or telecopy, in which case such notice will be deemed effective
upon receipt.
8.11 Counterparts. This Agreement may be executed by the
parties hereto in counterparts, each of which will be deemed to be an original,
but all such counterparts will together constitute one and the same instrument.
8.12 Headings. The headings of paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
8.13 Change in Control. For purposes of this Agreement, the
following additional definitions shall apply:
8.13.1 "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such person, is the Beneficial
Owner, directly or indirectly, of securities of Employer representing
20% or more of the combined voting power of Employer's then outstanding
securities, but shall not include any Company Entity.
8.13.2 "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 promulgated under the Exchange Act.
8.13.3 "Announcement Date" shall mean the date of the public
announcement of the transaction, event or course of action that results
in a Change in Control.
8.13.4 "Anticipatory Termination" shall mean a termination of
employment pursuant to Section 5.01(d) or 5.01(e) hereof as a result of
an act or event that occurs prior to a Change in Control and after the
Announcement Date and either (i) at the request of any other party to a
transaction, or any Person associated with the event or course of
events (other than Employer or a Company Entity), that results in a
Change in Control, or (ii) otherwise in contemplation of a Change in
Control; provided, that no termination shall be deemed an Anticipatory
Termination unless the Change in Control to which it relates actually
occurs.
8.13.5 "Associate" shall have the meaning ascribed to such term in Rule
12b-2 promulgated under the Exchange Act.
8.13.6 "Beneficial Owner" shall have the meaning ascribed to such term
in Rule 13d-3 promulgated under the Exchange Act.
8.13.7 "Board of Directors" shall mean the board of directors of
Employer.
8.13.8 "Change in Control" shall mean a Full Change in Control or a
Partial Change in Control.
8.13.9 "Company Entity" shall mean Employer, any subsidiary of
Employer or any employee benefit plan of Employer or of any subsidiary
of Employer or any entity holding shares of the voting capital stock of
Employer organized, appointed or established for, or pursuant to the
terms of, any such plan.
8.13.10 "Continuing Director" shall mean any person who is a member of
the Board of Directors, while such person is a member of the Board of
Directors, who is not an Acquiring Person or an Affiliate or Associate
of an Acquiring Person, or a representative of an Acquiring Person or
of any such Affiliate or Associate, and who (x) was a member of the
Board of Directors as of the date of this Agreement or (y) subsequently
becomes a member of the
Board of Directors, if such person's initial nomination for election or
initial election to the Board of Directors has been approved in advance
by the Continuing Directors; provided that any director designated by
or on behalf of a Person who has entered into an agreement with
Employer (or who is contemplating entering into such an agreement) to
effect a consolidation or merger of Employer or a Company Entity, or
other reorganization, with or into one or more entities which are not
Company Entities, and any director that serves in connection with the
act of the Board of Directors of increasing the number of directors and
filling vacancies in connection with, or in contemplation of, any such
transaction, shall not be deemed to have received such advance approval
for initial nomination or election, and any such director shall not be
deemed to be a Continuing Director; provided, further, that any such
director shall subsequently become a Continuing Director at such time
as a new term of office as a director is approved by Employer's
shareholders at an annual meeting of shareholders occurring subsequent
to the completion of any such transaction (and excluding any annual
meeting at which the shareholders approve any such transaction), and,
provided, further, that in the case of a Permitted Transaction, any
such director shall not become a Continuing Director until the later of
(i) the end of the three-year period following consummation of such
Permitted Transaction or (ii) such time as a new term of office as a
director is approved by Employer's shareholders at an annual meeting of
shareholders occurring subsequent to the completion of such Permitted
Transaction.
8.13.11 "Employer" shall mean U.S Bancorp (formerly First Bank System,
Inc.), a Delaware corporation, or any successor thereto pursuant to
Section 8.02 hereof (including a Resulting Corporation) or by
operation of law.
8.13.12 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
8.13.13 "Full Change In Control" shall mean:
(A) the public announcement (which, for purposes of this
definition, shall include, without limitations a report filed pursuant
to Section 13(d) of the Exchange Act) by Employer or any Person that a
Person (other than a Company Entity) has become the Beneficial Owner,
directly or indirectly, of securities of Employer (x) representing 20%
or more, but not more than 50% of the combined voting power of
Employer's then outstanding securities unless the transaction resulting
in such ownership has been approved
in advance by the Continuing Directors or (y) representing more than
50% of the combined voting power of Employer's then outstanding
securities (regardless of any approval by the Continuing Directors); or
(B) the Continuing Directors cease to constitute a majority of
the Board of Directors of Employer or the Resulting Corporation, except
in accordance with the terms of a Permitted Transaction and except as a
result of the death, retirement or disability of one or more Continuing
Directors (unless any such death, retirement or disability occurs
following a Permitted Transaction and any vacancies created thereby are
not filled in accordance with the terms of the written agreement
governing such Permitted Transaction); or
(C) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the consolidated assets of Employer and its
subsidiaries or the adoption of any plan of liquidation or dissolution
of Employer.
8.13.14 "Partial Change in Control" shall mean:
(A) a consolidation or merger of Employer or a Company Entity,
or other reorganization, with or into one or more entities which are
not Company Entities, as a result of which less than 60% of the
outstanding voting securities of the Resulting Corporation are, or are
to be, owned by former shareholders of Employer as determined
immediately prior to consummation of such transaction (excluding voting
securities of the Resulting Corporation owned, or to be owned, by such
shareholders by reason of their ownership prior to such transaction of
securities of any entity other than Employer) and as a result of which
the Continuing Directors constitute (i) more than 50% of the Board of
Directors of the Resulting Corporation or (ii) exactly 50% of the Board
of Directors of the Resulting Corporation if the transaction resulting
in such event is a Permitted Transaction;
(B) the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant
to Section 13(d) of the Exchange Act) by Employer or any Person that a
Person (other than a Company Entity) has become the Beneficial Owner,
directly or indirectly, of securities of Employer representing 20% or
more, but not more than 50% of the combined voting power
of Employer's then outstanding securities if the transaction resulting
in such ownership has been approved in advance by the Continuing
Directors; or
(C) the effective date of the merger of First Bank System,
Inc. and U.S. Bancorp.
8.13.15 "Permitted Transaction" shall mean a transaction in which,
pursuant to a written agreement between Employer and all Persons who
have entered into an agreement with Employer to effect a transaction
described in paragraph (A) of the definition of Partial Change in
Control, it is agreed that (w) the Chief Executive Officer of Employer
immediately prior to the consummation of such transaction shall be the
Chief Executive Officer of the Resulting Corporation for not less than
three years following consummation of such transaction, (x) upon
termination of service of any Continuing Director for any reason,
including upon death, disability or retirement, prior to the expiration
of such director's term during such three-year period, the vacancy
thereby created shall be filled by a nominee selected solely by the
Continuing Directors, (y) upon expiration of the term of any such
director during such three-year period, the nominee to succeed such
director shall be selected solely by the Continuing Directors and (z)
the parties will take other appropriate steps to ensure that the Board
of Directors of the Resulting Corporation will be evenly divided
between Continuing Directors and all directors designated by other
parties to the transaction during such three-year period.
8.13.16 "Person" shall have the meaning ascribed to such term as such
term is used in Sections 13(d) and l4(d) of the Exchange Act.
8.13.17 "Resulting Corporation" shall mean the surviving corporation in
any consolidation, merger or other reorganization to which Employer is
a party; provided, however, that if the surviving corporation in any
such transaction is a subsidiary of another corporation, then the
Resulting Corporation is the ultimate parent corporation of such
surviving corporation; and provided, further, that in the event of a
consolidation, merger or other reorganization to which a Company Entity
(other than Employer) is a party, then Employer shall be deemed the
Resulting Corporation.
8.14 Code Section 162(m). Notwithstanding any other provision
of this Agreement to the contrary, to the extent that Employer's tax deduction
for remuneration in respect of the
payment of any amount under Sections 5.02, 5.05 or 8.02 of this Agreement would
be disallowed under Code Section 162(m) by reason of the fact that Executive's
applicable employee remuneration, as defined in Code Section 162(m)(4), either
exceeds or, if such amount were paid, would exceed the $1,000,000 limitation in
Code Section 162(m)(1), Employer may, in its sole discretion, defer the payment
of such amount, but only to the extent that, and for so long as, Employer's tax
deduction in respect of the payment thereof would be so disallowed under Code
Section 162(m); provided that no payment may be deferred beyond three months
after the end of Employer's fiscal year in which Executive's termination of
employment occurs, and Employer may accelerate the payment of previously
deferred amounts if it determines that the amount of the tax deduction that
would be disallowed is not significant. Amounts which are deferred under this
Section 8.14 will be credited with interest at a rate determined by Employer
from time to time, but in no event less than the long-term applicable federal
rate under Code Section 1274(d) in effect from time to time.
IN WITNESS WHEREOF, Executive and Employer have executed this
Agreement as of the date set forth in the first paragraph hereof.
U.S. BANCORP
By /s/ Lee R. Mitau
-------------------------------------
Its Executive Vice President,
General Counsel and Secretary
/s/ John F. Grundhofer
---------------------------------------
John F. Grundhofer