PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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or Rule 14a-12
USBANCORP, INC.
(Name of Registrant as Specified in its Charter)
________________________________________________________________
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if other than Registrant)
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
USBANCORP, INC.
P.O. BOX 430
JOHNSTOWN, PENNSYLVANIA 15907-0430
To Be Held April 24, 2001
Mailed to Security Holders March 16, 2001
USBANCORP, Inc.
216 Franklin Street, P. O. Box 430
Johnstown, Pennsylvania 15907-0430
814-533-5202
March 16, 2001
Dear Shareholder:
USBANCORP, Inc.'s Annual Meeting of Shareholders will be
held Tuesday, April 24, 2001, at 1:30 p.m., Eastern Time, at the
Holiday Inn Downtown, Crown Ballroom, 250 Market Street,
Johnstown, Pennsylvania 15901-2996.
The matters to be acted upon at the meeting are:
(a) the election of five Class III directors;
(b) the approval of the USBANCORP, Inc. 2001 Stock
Incentive Plan; and
(c) such other matters as may properly be brought before
the USBANCORP annual meeting or any adjournments thereof.
Please review the enclosed material and sign, date and
return the proxy card. Regardless of whether you plan to attend
the annual meeting in person, please vote now so that the
matters coming before the meeting may be acted upon.
I look forward to seeing you at the annual meeting.
Cordially,
Orlando B. Hanselman
Chairman, President and
Chief Executive Officer
USBANCORP, Inc.
P. O. Box 430 Johnstown, Pennsylvania 15907-0430
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 16, 2001
To The Shareholders:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its
directors, the Annual Meeting of Shareholders of USBANCORP, Inc.
will be held at the Holiday Inn Downtown, Crown Ballroom, 250
Market Street, Johnstown, Pennsylvania 15901-2996, on Tuesday,
April 24, 2001, at 1:30 p.m., Eastern Time, for the purpose of
considering and voting on the following matters:
1. Election of five Class III directors for a term of
three years from the date of election and until
their successors shall have been elected and
qualified (Matter No. 1);
2. Approval of the USBANCORP, Inc. 2001 Stock Incentive
Plan (Matter No. 2); and
3. Such other business as may properly come before the
meeting or any adjournment thereof.
Only those shareholders of record at the close of business
on March 5, 2001 shall be entitled to notice of and to vote at
the meeting. A Proxy Statement, a proxy card and a self-
addressed postage prepaid envelope are enclosed. Please
complete, sign and date the proxy card and return it promptly in
the envelope provided. If you attend the meeting, you may
revoke your proxy and vote in person.
This Notice, the accompanying Proxy Statement and form of
proxy are sent to you by order of the Board of Directors.
Betty L. Jakell,
Corporate Secretary
Johnstown, Pennsylvania
March 16, 2001
USBANCORP, Inc.
P.O. Box 430
Johnstown, Pennsylvania 15907-0430
PROXY STATEMENT
GENERAL
Introduction
The Proxy Statement and enclosed proxy card are being
mailed to the shareholders of USBANCORP, Inc. ("USBANCORP" or
the "Company") on or about March 16, 2001, in connection with
the solicitation of proxies by the Board of Directors of
USBANCORP. The proxies will be voted at the Annual Meeting of
the Shareholders of USBANCORP to be held on Tuesday, April 24,
2001, at 1:30 p.m., Eastern Time, at the Holiday Inn Downtown,
Crown Ballroom, 250 Market Street, Johnstown, Pennsylvania
15901-2996 (the "Annual Meeting"). USBANCORP's Annual Report
and Form 10-K for the year ended December 31, 2000 accompanies
this Proxy Statement. It should not be regarded as proxy
solicitation material.
Solicitation of Proxies
The cost of the solicitation of proxies will be borne by
USBANCORP. In addition to the use of the mails, some directors
and officers of USBANCORP may solicit proxies, without
additional compensation, in person, by telephone, telegram, or
otherwise. Arrangements may be made by USBANCORP with banks,
brokerage houses and other custodians, nominees and fiduciaries
to forward solicitation material to the beneficial owners of
shares held by them of record, and USBANCORP may reimburse them
for reasonable expenses they incur in so doing.
Voting Securities
As of the close of business on March 5, 2001 (the "Record
Date"), there were outstanding 13,499,101 shares of common
stock, par value $2.50 per share (the "USBANCORP Common Stock"),
the only class of capital stock of USBANCORP outstanding.
Holders of record of USBANCORP Common Stock as of the close of
business on the Record Date are entitled to notice of and to
vote at the Annual Meeting. Except with respect to the election
of directors, each shareholder is entitled to one vote for each
share held. Holders of USBANCORP Common Stock are entitled to
cumulate their vote in the election of directors.
If a shareholder participates in USBANCORP's Dividend
Reinvestment and Common Stock Purchase Plan, the proxy card sent
to such shareholder will represent the number of shares
registered in the shareholder's name and the number of shares,
including fractional shares, credited to the shareholder's
Dividend Reinvestment Plan account.
If the enclosed proxy card is appropriately marked, signed
and returned in time to be voted at the Annual Meeting, the
shares represented by the proxy will be voted in accordance with
the instructions marked thereon. Signed proxies not marked to
the contrary will be voted "FOR" the election of the nominees
for USBANCORP's Board of Directors and "FOR" approval of the
2001 USBANCORP, Inc. Stock Incentive Plan (the "2001 Incentive
Plan").
Right of Revocation
Proxies may be revoked at will at any time before they have
been exercised by filing with the Corporate Secretary of
USBANCORP an instrument of revocation or a duly executed proxy
bearing a later date. Any shareholder attending the Annual
Meeting also may revoke a previously granted proxy by voting in
person at the Annual Meeting.
Quorum
Under USBANCORP's Bylaws, the presence, in person or by
proxy, of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast,
constitutes a quorum for the transaction of business at the
Annual Meeting.
Principal Shareholders
The following table sets forth information regarding
persons or entities known to USBANCORP's management to own of
record or beneficially, as of March 5, 2001, 5% or more of the
outstanding shares of USBANCORP Common Stock.
Amount of
Name and Address Beneficial Percent of
of Beneficial Owner Ownership Common Stock
Dimensional Fund Advisors, Inc. 1,177,839 8.7%
1299 Ocean Avenue - 11th Floor
Santa Monica, California 90401
USBANCORP Trust and 779,964 5.8%
Financial Services
Company
P.O. Box 520
Johnstown, Pennsylvania 15907-0520
MATTER NO. 1
ELECTION OF USBANCORP DIRECTORS
General
The Articles of Incorporation of USBANCORP provide that
USBANCORP's business shall be managed by a Board of Directors of
not less than 5 and not more than 25 persons. Under the
Articles of Incorporation, the total number of directors may be
determined by either a resolution adopted by a majority vote of
the directors then in office or by resolution of the
shareholders at a meeting. The number of directors for 2001 has
been set by the Board at 15.
USBANCORP's Board of Directors, as provided in its Articles
of Incorporation, is divided into three classes: Class I, Class
II and Class III, each being as nearly equal in number as
possible. The directors in each class serve terms of three
years each and until their successors are elected and qualified.
Under USBANCORP's Bylaws, a person elected to fill a vacancy on
the Board of Directors serves as a director for the remaining
term of office of the class to which he or she was elected.
The Spin-Off
On April 1, 2000, USBANCORP distributed its subsidiary,
Three Rivers Bank and Trust Company ("Three Rivers Bank"), to
its shareholders in a tax-free spin-off. To accomplish this,
USBANCORP formed Three Rivers Bancorp, Inc. ("TRBC") and
contributed its stock in Three Rivers Bank to TRBC. USBANCORP
then declared a dividend to its shareholders of one share of
TRBC common stock for every two shares of USBANCORP Common Stock
held of record on March 24, 2000. This dividend was paid on
April 1, 2000. The result was that USBANCORP shareholders
initially owned two separate public companies, USBANCORP, which
owns U.S. Bank, and TRBC, which owns Three Rivers Bank. This
transaction, called a spin-off, also resulted in significant
changes in the Board of Directors and management of USBANCORP.
USBANCORP, as the sole shareholder of TRBC, elected the
Board of Directors of TRBC. The Board of Directors of TRBC
consisted of all the directors of Three Rivers Bank and six
directors of USBANCORP. Because federal law prohibits
individuals from serving on the Board of Directors of two
competing bank holding companies, the six USBANCORP directors
who became TRBC directors each resigned as a director of
USBANCORP effective as of the date of the spin-off.
In anticipation of the spin-off and the resignation of the
six USBANCORP directors, on February 25, 2000, the USBANCORP
Board of Directors increased the size of the USBANCORP Board of
Directors from 12 to 21, thereby creating nine vacancies. It
then appointed nine directors of U.S. Bank who did not already
serve as a director of USBANCORP to fill these vacancies. Upon
completion of the spin-off on April 1, 2000, the size of the
USBANCORP Board of Directors was reduced from 21 to 15 by the
resignation of the six directors who serve as TRBC directors.
In addition to changes in the Board of Directors, the spin-
off resulted in management changes. Effective April 1, 2000,
Terry K. Dunkle, the former Chairman, President and Chief
Executive Officer of the Company, resigned and assumed the
position of Chairman and CEO of TRBC. Orlando B. Hanselman, the
President and CEO of U. S. Bank, assumed the additional duties
of President and Chief Executive Officer of the Company on April
1, 2000. Shortly thereafter, Mr. Hanselman also was appointed
the Chairman of the Board of Directors of the Company and each
of its subsidiaries.
Nominees and Continuing Directors
The Board of Directors fixed the number of directors in
Class III at five and has nominated Daniel R. DeVos, James C.
Dewar, Bruce E. Duke, III, M. D., Orlando B. Hanselman and Kim
W. Kunkle for election as Class III directors for three-year
terms to expire at the 2004 Annual Meeting of Shareholders, and
until their successors are duly elected and qualified. Director
Dewar was elected by the shareholders at the 1998 Annual
Meeting. Directors DeVos, Duke, Hanselman and Kunkle were
appointed to fill the vacancies created on February 25, 2000 in
connection with the spin-off. The remaining directors will
continue to serve in accordance with their previous election or
appointment with the terms of the Class I and Class II directors
expiring in 2002 and 2003, respectively.
The Bylaws of USBANCORP permit nominations for election to
the Board of Directors to be made by the Board of Directors or
by any shareholder entitled to vote for the election of
directors. All nominations for director to be made at the
Annual Meeting by shareholders entitled to vote for the election
of directors must be preceded by notice in writing, delivered or
mailed by first class United States mail, postage prepaid, to
the President of USBANCORP not less than 60 days nor more than
90 days prior to the Annual Meeting, which notice must contain
certain information specified in the Bylaws. No notice of
nomination for election as a director has been received from any
shareholder as of the date of this Proxy Statement. If a
nomination is attempted at the Annual Meeting that does not
comply with the procedures required by the Bylaws or if any
votes are cast at the Annual Meeting for any candidate not duly
nominated, then such nomination and/or such votes may be
disregarded.
With respect to the election of directors, each shareholder
has the right to vote for each share of USBANCORP Common Stock
held by him or her, as many votes as shall equal the number of
directors to be elected, and he or she, or his or her proxy, may
cast the whole number of votes for one nominee or distribute
them among two or more nominees. Unless authority is withheld
as to a particular nominee or as to all nominees, all proxies
will be voted for the five nominees listed. The proxies will
have authority to cumulate votes in their discretion except to
the extent a shareholder withholds such authority on the form of
proxy. The five persons receiving the highest number of votes
cast at the Annual Meeting will be elected as Class III
directors. Abstentions and broker non-votes will not constitute
or be counted as "votes" cast for purposes of the Annual
Meeting, but will be counted for purposes of determining the
presence of a quorum.
Except as noted above, it is intended that shares
represented by proxies will be voted for the nominees listed,
each of whom is now a director of USBANCORP and each of whom has
expressed his or her willingness to serve, or for any substitute
nominee or nominees designated by the USBANCORP Board of
Directors in the event any nominee or nominees become
unavailable for election. The USBANCORP Board of Directors has
no reason to believe that any of the nominees will not serve if
elected.
The following tables set forth as to each of the nominees
for election as a Class III director and as to each of the
continuing Class I and Class II directors, his or her age,
principal occupation and business experience, the period during
which he or she has served as a director of USBANCORP, or an
affiliate or predecessor and other business relationships.
There are no family relationships between any of the listed
persons.
Nominees For Election As
Class III Directors - Term Expires in 2004
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) __Companies__
Daniel R. DeVos 58 1991 None
President & CEO,
Concurrent Technologies
Corporation
James C. Dewar 63 1974 None
CEO and President, Geo. C.
Dewar, Inc.; retired
President and CEO, Dewar's
Car World
Bruce E. Duke, III, M.D. 57 1987 None
Surgeon, Valley Surgeons, Inc.
Medical Practice
Orlando B. Hanselman 41 1995 None
Chairman, President and CEO
of USBANCORP and U. S. Bank,
Chairman of all subsidiaries
Kim W. Kunkle 46 1984 None
President & CEO,
Laurel Holdings, Inc.
Continuing Class I Directors - Term Expires in 2002
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) __Companies__
James M. Edwards, Sr. 61 1984 None
Retired President and Chief
Executive Officer, WJAC,
Incorporated
Rev. Christian R. Oravec 63 1990 None
President, St. Francis
University
Howard M. Picking, III 63 1970 None
President, The Picking Company
Sara A. Sargent 53 1996 None
President, The Sargent's Group
Robert L. Wise, 57 1986 None
Retired President and COO,
GPU Energy
Continuing Class II Directors - Term Expires in 2003
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) __Companies__
J. Michael Adams, Jr. 39 2000 None
Attorney-at-Law
McGuire Woods, LLC
Edward J. Cernic, Sr. 68 1998 None
President and CEO, Cernic
Enterprises, Inc.
Margaret A. O'Malley 41 1997 None
Attorney-at-Law
Yost & O'Malley
Mark E. Pasquerilla 41 1997 Crown American
Chairman, President and CEO, Realty Trust
Crown American Realty Trust
Thomas C. Slater 58 1980 None
Owner, President and Director,
Slater Laboratories, Inc.,
Clinical Laboratory
___________________
(1) All directors and nominees have held the positions
indicated or another senior executive position with the
same entity or one of its affiliates or predecessors for
the past five years except for Mr. Adams who was
formerly a partner with another law firm
prior to 1998, Howard M. Picking, III, who was
President of Miller-Picking Corporation, an air
conditioning machinery manufacturer from 1978 to July 1,
1997 when he retired, and Robert L. Wise who retired as
President and COO of GPU Energy in 2000.
(2) Reflects the earlier of the first year as a director of
USBANCORP, U.S. Bank, or Johnstown Savings Bank.
(3) All incumbent directors were elected by the shareholders
except Messrs. DeVos, Duke, Hanselman, Kunkle, Oravec,
Picking and Ms. Sargent who were appointed by the Board
of Directors on February 25, 2000.
Security Ownership of Management
The following table sets forth information concerning the
number of shares of USBANCORP Common Stock beneficially owned,
as of March 5, 2001, by each present director, nominee for
director, and each executive officer named in the compensation
table set forth elsewhere herein.
Amount and Nature
of Beneficial Percent
Name of Beneficial Owner(1) Ownership(2) of Class
J. Michael Adams, Jr.......... 7,297 *
Douglas B. Bickmore........... 1,433 *
Edward J. Cernic,Sr........... 33,276 *
James C. Dewar ............... 53,876 *
Daniel R. DeVos............... 2,394 *
Bruce E. Duke, III, M.D....... 10,897 *
Terry K. Dunkle............... 5,996 *
James M. Edwards, Sr.......... 23,862 *
Jeryl L. Graham............... 35,712 *
Orlando B. Hanselman.......... 99,925 *
Kim W. Kunkle (3)............. 36,775 *
Margaret A. O'Malley (4)...... 114,127 *
Kevin J. O'Neil............... 22,733 *
Rev. Christian R. Oravec...... 1,036 *
Mark E. Pasquerilla (5)....... 179,515 1.3
Howard M. Picking, III (6).... 20,821 *
Sara A. Sargent............... 13,196 *
Thomas C. Slater.............. 29,645 *
Ronald W. Virag............... 13,449 *
Robert L. Wise................ 17,341 *
Officers, Directors and
Nominees for Directors
as a Group
(20 persons)(7)............. 723,306 5.3
__________________
*Less than 1%
(1) Except as noted below, each of the identified beneficial
owners, including the officers, directors and nominees
for director as a group, has sole investment and voting
power as to all the shares shown as beneficially owned
with the exception of those held jointly by certain
officers, directors and nominees for director with
their spouses or directly by their spouses or other
relatives.
(2) Includes shares of USBANCORP Common Stock that may be
acquired within sixty (60) days of the Record Date upon
the exercise of presently exercisable stock options as
follows:-0-, 833, 29,764, 41,485, 11,507, -0- and 83,589
held by Dunkle, Bickmore, Graham, Hanselman, O'Neil,
Virag and the group, respectively. Also includes 600,
1,000, 1,000, and 800 shares of USBANCORP Common Stock
subject to restriction held by Bickmore, Graham,
O'Neil and Virag pursuant to restricted stock
awards made in March of 2000 that vest ratably over a
three year period. In addition, Bickmore, Graham,
Hanselman, O'Neil and Virag hold options to acquire
USBANCORP Common Stock that first become exercisable, in
part, during or after July of 2001 and therefore are
excluded.
(3) Includes 17,104 and 3,000 shares held by Laurel
Management Retirement Plan and Laurel Corporation,
respectively, of which Mr. Kunkle is an officer and has
voting and investment power.
(4) Margaret A. O'Malley is voting trustee of all shares of
USBANCORP Common Stock held by James F. O'Malley and
Jean O'Malley under a Voting Trust Agreement dated
March 3, 1997.
(5) Includes 162,545 shares of USBANCORP Common Stock held
by Crown American Enterprises, Inc. of which Mark E.
Pasquerilla is an officer and 13,500 shares held by
Marenrico Partnership of which Mr. Pasquerilla is one of
the partners.
(6) Includes 366 shares owned by The Picking Company of
which Mr. Picking is President.
(7) The group consists of 20 persons, being the members of
the Board of Directors of USBANCORP, the Chief Executive
Officer, the former Chief Executive Officer and each
other named executive officer of USBANCORP set forth on
the compensation table elsewhere herein.
Board and Committees
The Board of Directors has various standing committees
including an Executive Committee, an Audit Committee, a
Nominating Committee, an Investment/ALCO Committee and a
Management Compensation Committee (the "Compensation
Committee"). During 2000, the Board of Directors held
6 meetings, the Audit Committee held 11 meetings, the Nominating
Committee held 2 meetings, and the Compensation Committee held
5 meetings. Each director attended at least 75% of the combined
total of meetings of the Board of Directors and of each
committee of which he/she was a member.
The Executive Committee of the Company consists of the
seven largest shareholders of the Company who are members of the
Board of Directors. The Executive Committee serves as a
resource for management to seek guidance on issues between
regularly scheduled meetings or with respect to matters that
generally do not warrant calling a special Board meeting. In
addition, from time to time, the Executive Committee is asked to
study strategic issues in greater depth than may be practical
for the Board as a whole. Since July 2000, the Executive
Committee was comprised of Directors Pasquerilla (Chair),
O'Malley (Vice Chair), Cernic, Dewar, Hanselman, Kunkle and
Slater.
The Audit Committee is responsible for recommending to the
Board of Directors the appointment of an independent public
accountant to audit the books and accounts of USBANCORP and its
subsidiaries, reviewing the reports of the Audit Department and
the reports of examination conducted by the bank and bank
holding company regulators and USBANCORP's independent public
accountants, reviewing the adequacy of internal audit and
control procedures, and reporting to the Board of Directors.
Since July 2000, the Audit Committee was comprised of Directors
Dewar (Chair), O'Malley (Vice Chair), Adams, DeVos, Duke,
Oravec, Picking and Sargent.
Since July 2000, the Nominating Committee consisted of
Directors O'Malley (Chair), Cernic (Vice Chair), Adams, DeVos,
Hanselman, Kunkle, Pasquerilla, Sargent and Slater. The
Nominating Committee is responsible for nominating individuals
to stand for election as directors at the Annual Meeting of
Shareholders and will consider nominees recommended by
shareholders. Shareholders may nominate persons for election as
directors in accordance with the procedures set forth in
Section 1.3 of USBANCORP's Bylaws. Notification of such
nomination, containing the required information, must be mailed
or delivered to the President of USBANCORP not less than 60 days
or more than 90 days prior to the Annual Meeting.
Since July 2000, the Investment/ALCO Committee consisted of
Directors Slater (Chair), Kunkle (Vice Chair), Dewar, Hanselman,
Oravec, Pasquerilla, and Picking and officers Stopko and Fisher.
This committee is responsible for overseeing the investment
policy of the Company and monitoring interest rate, liquidity,
and market risk.
The Compensation Committee is responsible for reviewing and
making recommendations regarding the compensation of corporate
officers. No director who is eligible to receive any benefit
under plans administered by the Compensation Committee, except
for benefits payable to directors under the Independent
Directors Annual Retainer Plan (the Committee's administration
of which is limited to coordinating the payment of a
predetermined retainer) may serve on the Compensation Committee.
Since July 2000, the Compensation Committee was comprised of
Directors O'Malley (Chair), Pasquerilla (Vice Chair), Adams,
Cernic, DeVos, Dewar, Picking and Slater. See "Executive
Compensation" herein.
The Board of Directors of U. S. Bank also has standing
committees, including an Executive Committee, a Discount
Committee, a Pension Committee and a Board Technology Committee.
The membership of all of the Bank's Board committees was
reconstituted in July 2000 at the same time as the membership of
the Company's Board committees was reconstituted.
The Executive Committee of the Bank consists of the seven
largest shareholders of the Company who are members of the Board
of Directors. The Executive Committee serves as a resource for
management to seek guidance on issues between regularly
scheduled meetings or with respect to matters that generally do
not warrant calling a special Board meeting. In addition, from
time to time, the Executive Committee is asked to study
strategic issues in greater depth than may be practical for the
Board as a whole. The Executive Committee is comprised of
Directors Pasquerilla (Chair), O'Malley (Vice Chair), Cernic,
Dewar, Hanselman, Kunkle and Slater.
The Discount Committee of the Bank consists of Directors
and employees of the Bank. The Discount Committee is
responsible for establishing loan underwriting guidelines and
loan approvals in excess of an amount equal to 20% of the Bank's
legal lending limit. The Discount Committee is comprised of
Directors Kunkle (Chair), DeVos (Vice Chair), Cernic, Hanselman,
Pasquerilla, Sargent and Slater and Bank officers Carolyn M.
Concannon, Jeryl L. Graham, Douglas B. Bickmore, Leslie N.
Morgenstern (non-voting) and Joy Gaffud (non-voting).
The Pension Committee of the Bank consists of Directors and
officers of the Bank. The Pension Committee is responsible for
overseeing all broad-based employee benefit plans. The Pension
Committee consists of Directors Duke (Chair), Oravec (Vice
Chair), Cernic, Edwards, Hanselman and Wise and Bank employees
Connie J. Brinham, James A. Farley, Ray M. Fisher and Jeffrey A.
Stopko.
The Board Technology Committee of the Bank is responsible
for assessing the current technological capabilities of the
Bank, developing and implementing the Bank's technology
strategy, and approving specific technology initiatives. The
Board Technology Committee consists of Directors DeVos (Chair),
Sargent (Vice Chair), Edwards, Hanselman, Pasquerilla, Slater
and Wise.
Compensation of Directors
Executive officers of USBANCORP who are directors or
members of committees of the USBANCORP Board of Directors or its
subsidiaries receive no compensation for such positions. In
2000, independent directors of USBANCORP received a retainer of
$6,000 payable in USBANCORP Common Stock. In addition,
directors received cash compensation for attendance at USBANCORP
Board of Directors meetings of $550 per meeting. A fee of $400
was paid for attendance at each committee meeting of the
USBANCORP Board of Directors. Certain non-officer directors of
USBANCORP are also directors of U.S. Bank, and USBANCORP Trust
and Financial Services Company (the "Trust Company"). Directors
serving on the Board of Directors of U.S. Bank or the Trust
Company were compensated for their services by a payment of $450
for each Board of Directors meeting attended. A fee of $400 was
paid for each committee meeting attended. Directors who serve
on the board of UBAN Associates, Inc. receive no remuneration.
Additionally, the Company's independent compensation consultant
performed an analysis that compared the Company's director fee
levels to comparably sized financial institutions. This study
indicated that the annual retainer was approximately 38% of the
peer average while the Board meeting fees were in the 55th
percentile. The Company estimates overall total director
compensation somewhat below the 50th percentile as compared to
comparable financial institutions.
Executive Compensation
Compensation Committee Report on Executive Compensation
USBANCORP's Management Compensation Committee oversees
USBANCORP's executive compensation programs to ensure that they:
emphasize the enhancement of shareholder value, attract and
retain high caliber executives, deliver the total compensation
package in a cost-effective manner, reinforce key business
objectives, provide competitive compensation opportunities for
competitive results, encourage management ownership of USBANCORP
Common Stock, and comply with applicable regulations.
The role of the Committee is to approve executive salary
adjustments, to administer the Executive Annual Incentive Plan
(including the establishment of performance goals), and to
administer USBANCORP's equity compensation and incentive plans.
Additionally, from time to time, the Committee reviews other
human resource issues, including qualified and non-qualified
benefits, management performance evaluations, and succession
planning.
Executive Compensation Policy
The Committee uses a formal executive compensation policy
to help evaluate and administer executive pay. The policy
addresses each of the major components of the executive pay
program and is summarized below.
- Maintain competitive long-term incentives that: align
management's financial interests with those of
USBANCORP's shareholders, encourage management ownership
of USBANCORP Common Stock, support the achievement of
USBANCORP's long-term financial objectives, and provide
competitive long-term incentive reward opportunities.
- Maintain a conservative but market competitive executive
base salary program to ensure the appropriate
performance sensitivity and focus on long-term results.
- Maintain a competitive annual incentive program that
recognizes important achievements consistent with
USBANCORP's long-term objectives, providing target and
maximum annual total cash opportunities that approximate
competitive annual total cash practices. A portion of
all plan participants' incentive awards is based upon
corporate performance relative to goals. Certain
executives of the subsidiaries also are evaluated and
rewarded based upon subsidiary and individual
performance achievements
- Provide typical benefits through qualified programs
generally available to all employees, supplemented by
non-qualified arrangements, as appropriate.
- Competitive pay practices are determined using two
different sets of data - survey data and peer data:
- Survey data refers to compensation data from banking
industry compensation surveys. Competitive
compensation practices are determined using
compensation levels at holding companies and
subsidiaries of comparable size to USBANCORP and its
subsidiaries, for positions comparable to those held
by the officers identified in the Summary
Compensation Table included herein (the "Named
Officers").
- Peer data comes from a group of multi-bank, bank
holding companies of comparable size to USBANCORP.
The peer institutions are located in Pennsylvania,
Ohio, Illinois, Indiana, Michigan, and West Virginia.
- The indices used in the Stock Performance Chart are
Nasdaq Stock Market (U.S. Companies) and Nasdaq Bank
Stocks. While USBANCORP believes that some of the
surveyed banks and some of the peer banks may be
included within these indices, it is not the intention
of the Committee to establish executive pay practices
based on the pay practices of the organizations that
compose these indices. The Committee believes that some
of the organizations in these indices would be either
too large or too small to be relevant for setting pay
for USBANCORP and subsidiary executives.
Relationship of Performance Under Compensation Plans
USBANCORP relies on cash and equity-based incentive
arrangements, discussed below, to establish the desired
relationship between pay and performance.
The Company administers the Executive Annual Incentive Plan
through which participants can earn performance-based
compensation. In 2000, bonuses could be earned based on the
level of achievement for the following performance measures -
corporate return on equity (ROE), total return to shareholders,
a third-party comparative estimate of the holding company's
CAMEL rating (an overall indicator of the performance and
financial soundness of the institution), and individual
performance.
Because the corporate threshold target performance levels
for the goals above were not met, no awards were made to any
Named Officers for 2000 corporate performance under the
Executive Annual Incentive Plan. There will be no Executive
Annual Incentive Plan in 2001 because the Plan is being
redesigned to ensure that corporate performance based
compensation is properly aligned with shareholder interests and
correlates with the post spin-off strategic direction of the
Company.
In 2000, prior to the April 1 spin-off, the Committee
awarded Officers Bickmore, Graham, O'Neil, and Virag shares of
restricted stock. Also, the Committee made stock option awards
in 2000 to officers Bickmore, Graham, Hanselman and Virag.
These equity awards are provided, in part, to directly align
executive compensation with USBANCORP stock price performance.
The Committee uses a management stock ownership program to
emphasize the equity plans' role in aligning management and
shareholder interests. Target ownership levels range from a
fraction of salary to two and one-half times salary. The
Committee periodically reviews the progress of the executives in
working toward their ownership targets, which will be a
consideration in determining future compensation actions.
2000 Compensation for the Chief Executive Officer
Prior to the spin-off, Mr. Hanselman served as Executive
Vice President of USBANCORP as well as President and Chief
Executive Officer of U. S. Bank. He was awarded 10,000 stock
options in March of 2000 in order to maintain the intrinsic
value of his USBANCORP options that existed immediately prior to
the Three Rivers Bank spin-off. At the time of the April 1
spin-off, Mr. Hanselman retained his previous positions at U. S.
Bank and was also elected President and Chief Executive Officer
of USBANCORP. Mr. Hanselman did not receive any additional
salary for assuming the positions of President and Chief
Executive Officer of USBANCORP and his base salary remained at
$236,000. This salary level is in the bottom 25% of CEO
salaries for USBANCORP's peer group as determined by an
independent compensation consultant.
In June 2000, Mr. Hanselman was elected Chairman of the
Board of USBANCORP and all subsidiaries. In lieu of a
promotional increase for assuming the Chairman responsibilities,
Mr. Hanselman received an award of 10,000 stock options in July
2000. Additionally, as part of a post spin-off option grant
made to approximately 35 employees, Mr. Hanselman was awarded
50,000 stock options in July of 2000 as a further incentive to
increase shareholder value and to provide him with a total
compensation package consistent with the philosophy stated
earlier.
In October 2000, Mr. Hanselman volunteered to freeze his
annual base salary at its current level of $236,000 through
January 1, 2005. In exchange for this salary freeze, and to
further align Mr. Hanselman with the interests of the
shareholders, Mr. Hanselman received in December of 2000 a one-
time, non-recurring grant of 30,000 shares of USBANCORP Common
Stock (at $4.125 per share) and a tax gross-up award of $90,000
to be used to pay a portion of taxes related to the grant. By
foregoing salary increases and accepting equity based awards,
Mr. Hanselman is focused on aligning his financial interests
directly with share price appreciation and is demonstrating his
long-term commitment to the organization.
Like other Named Officers, Mr. Hanselman was not awarded a
cash bonus for 2000 with respect to corporate return on equity
and total shareholder return performance objectives established
by the Compensation Committee and outlined in the Executive
Annual Incentive Plan, as revised January 2000, that were not
met.
Impact of Omnibus Budget Reconciliation Act of 1993 - Section
162(m)
The Omnibus Budget Reconciliation Act of 1993 (OBRA)
Section 162(m) prohibits a publicly owned company from taking a
compensation tax deduction for annual compensation in excess of
$1,000,000 for any of the Named Officers. However, to the
extent that it is performance-based and certain guidelines are
met, compensation in excess of $1,000,000 is exempt from this
limitation.
The Committee does not believe that the deduction limit
imposed by OBRA will affect compensation deductibility given the
compensation opportunities of the Named Officers under
USBANCORP's existing compensation programs. The Committee notes
that none of the Named Officers received annual compensation in
excess of $1,000,000. The Committee will continue to evaluate
the potential impact of Section 162(m) and take such actions as
it deems appropriate.
This report is furnished by Directors O'Malley (Chair),
Pasquerilla (Vice Chair), Adams, Cernic, DeVos, Dewar, Picking
and Slater.
Compensation Committee Interlocks and Insider Participation
Directors Adams, Cernic, DeVos, Dewar, O'Malley (Chair),
Pasquerilla (Vice-Chair), Picking, and Slater served as members
of the Compensation Committee since July 2000. Each member of
the Committee is excluded from participation in any plan
administered by the Committee while serving as a member, except
for participation in the Independent Directors' Annual Retainer
Plan (the Compensation Committee's administration of which is
limited to coordinating the payment of a predetermined
retainer).
Compensation Paid to Executive Officers'
The following table sets forth information for the three
years ended December 31, 2000 concerning the annual and long-
term compensation for services in all capacities to USBANCORP
and its banking subsidiaries of the Named Officers.
Summary Compensation Table
Long Term
___________________________Annual Compensation__________ ________Compensation_____
Other Restricted Securities All Other
Name, Age and Annual Stock Awards Underlying Compensation
Principal Position Year Salary($) Bonus($)(1) Compensation($)(2)(9) ($) (3)(4) Options($)(5) ($)(6)(7)(8)
Orlando B. Hanselman, 41 2000 227,880 -- 213,750 -- 70,000 9,407
Chairman, President 1999 203,520 31,307 -- -- -- 26,247
and CEO of USBANCORP 1998 192,900 34,120 -- 72,984 9,000 15,489
and U.S. Bank and
Chairman of all
Subsidiaries
Terry K. Dunkle, 59 2000 42,500 -- -- -- -- 3,561
Former Chairman, 1999 340,042 58,837 -- -- -- 27,050
President and CEO 1998 330,060 65,649 -- 109,477 -- 26,159
of USBANCORP(10)
Jeryl L. Graham, 46 2000 137,940 -- -- 9,625 38,600 8,372
Executive Vice 1999 102,360 22,672 -- -- 22,239
President and Chief 1998 101,925 9,401 -- -- 12,418
Operating Officer of
USBANCORP and U.S.
Bank
Kevin J. O'Neil, 63 2000 134,000 -- -- 9,625 -- 9,175
President and CEO 1999 134,000 18,693 -- -- -- 16,660
of Standard 1998 129,000 18,305 -- 72,984 -- 9,771
Mortgage
Corporation of
Georgia, a
subsidiary of
USBANCORP
Ronald W. Virag, 55 2000 132,145 -- -- 7,700 19,100 8,826
President and CEO 1999 109,840 15,291 -- -- -- 19,851
of USBANCORP Trust 1998 107,100 15,197 -- 72,984 -- 11,030
and Financial
Services Company
Douglas B. Bickmore, 43 2000 97,950 39,931 -- 5,775 19,500 1,452
Vice President and 1999 85,300 14,062 -- -- 2,500 196
Manager of Commercial 1998 -- -- -- -- -- --
Lending and Leasing
of U.S. Bank
__________________
(1) No awards were paid for 2000 performance under
USBANCORP's Executive Annual Incentive Plan.
Mr. Bickmore was provided a cash award of $34,000
for return on equity performance attainment in the
leasing division of 19.66% pursuant to his employment
offer with U.S. Bank and $5,931 earned under various
other incentive and bonus award programs.
(2) Unless otherwise indicated, no other executive officer
named in the Summary Compensation Table received
personal benefits or perquisites in excess of the lesser
of $50,000 or 10% of the officer's total compensation
(salary and bonus).
(3) At the end of 2000, Hanselman, Dunkle, Graham,
O'Neil, Virag and Bickmore held 1,000, 0, 1,000, 2,000,
1,800, and 600 restricted shares worth $4,250, $0,
$4,250, $8,500, $7,650 and $2,550, respectively. The
restrictions on such shares lapse in three equal annual
increments on the anniversaries of the award. Dividends
are accrued and distributed when restrictions lapse on
the corresponding shares. Where appropriate, awards
have been adjusted to reflect the July 1998 3-for-1
stock split.
(4) Includes the value of outstanding restricted shares of
USBANCORP Common Stock only. On April 1, 2000,
USBANCORP spun off TRBC to its shareholders. As a
result, every two shares of USBANCORP Common Stock owned
by a USBANCORP shareholder entitled that shareholder to
one share of TRBC common stock. Correspondingly, for
every two restricted shares of USBANCORP Common Stock
awarded, one share of TRBC common stock was granted.
(5) Options were granted during 2000, 1999 and 1998 under
the 1991 Stock Option Plan to the Named Officers.
Where appropriate, awards have been adjusted to reflect
the July 1998 3-for-1 stock split.
(6) Includes amounts awarded under the Deferred Profit
Sharing Plan of USBANCORP and U.S. Bank. All full-time
employees of USBANCORP and U.S. Bank are entitled to
participate in the Deferred Profit Sharing Plan. The
maximum contribution during any plan year is limited to
15% of an individual's total compensation. Effective
January 1, 2000, the profit sharing formula was
modernized to better align it with the Company's
strategic direction and shareholder interests. The plan
was also made more restrictive by requiring greater
earnings for comparable historic contributions. As a
result of lower earnings and the change in the
calculation methodology, the 2000 contribution amounted
to 1% of an individual's compensation compared
to a contribution of 10.4% for 1999. Over a longer
term horizon, the Company projects that the annual
contribution should range between 4% and 6% of total
compensation.
(7) Includes (a) the value of the premiums paid by USBANCORP
for a split dollar life insurance policy for
Mr. Dunkle (TRBC has reimbursed the Company for the
premiums paid), (b) the premiums paid by USBANCORP and
its subsidiaries for life insurance policies with
coverage limits above $50,000 to Hanselman, Dunkle (pre-
spin-off), Graham, O'Neil, Virag and Bickmore, (c)
country club dues for Hanselman, Dunkle (pre-spin-off),
Graham and Virag, (d) allowance for personal car use for
Hanselman, Dunkle (pre-spin-off), Graham, O'Neil and
Virag, and (e) financial advisory services for
Hanselman.
(8) Includes amounts contributed under a 401(k) Plan of
Standard Mortgage Corporation of Georgia ("SMC") to
Mr. O'Neil. Under this 401(k) Plan, employees of SMC
are allowed to contribute up to 20% of their
compensation (up to a maximum dollar limit of $10,500)
to the plan with an employer match of $.50 on each $1.00
of employee contribution up to a maximum of 8% of an
employee's compensation.
(9) In November 2000, Mr. Hanselman and the Board of
Directors agreed to freeze his annual base salary at
$236,000 for a four year period through January 1, 2005.
In exchange for this salary freeze, the Board awarded
Mr. Hanselman a one-time, non-recurring grant of
30,000 shares of USBANCORP Common Stock (at the fair
market value on the grant date of $4.125) and a one-
time, non-recurring cash award of $90,000 to pay a
portion of the taxes related to the grant. Based on a
study conducted by an independent compensation
consultant, Mr. Hanselman's annual salary of $236,000
falls below the 25th percentile ($242,000) and is $78,600
below the 50th percentile ($314,600) annual salary level
for comparable executives.
(10) Effective April 1, 2000, the date of the spin-off,
of TRBC, Mr. Dunkle resigned as Chairman, President and
CEO of the Company and assumed the position of Chairman
and CEO of TRBC.
Option Grants Table
The following table sets forth information with respect to
grants of stock options made during 2000 to each of the Named
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Number of Percent Realizable Value
Securities of Total at Assumed
Underlying Options Annual Rates of
Options Granted to Exercise or Expira- Stock Price Appreciation
Granted(#) Employees in Base Price tion for Option Term ($)
Name (1) Fiscal Year ($/Share) Date 0% 5% 10%
Orlando B. Hanselman 10,000 2.7% $5.78 3/21/10 0 $ 36,350 $ 92,118
60,000 16.1% $4.86 7/31/10 0 $183,386 $464,735
Terry K. Dunkle 0 0% 0 0 0
Jeryl L. Graham 33,600 9.0% $4.86 7/31/10 0 $102,696 $260,252
5,000 1.3% $4.125 11/17/10 0 $ 12,971 $ 32,871
Kevin J. O'Neil 0 0 0 0 0
Ronald W. Virag 19,100 5.1% $4.86 7/31/10 0 $ 58,378 $147,941
Douglas B. Bickmore 19,500 5.2% $4.86 7/31/10 0 $ 59,600 $151,039
_________________________________________________________________________________________________
Gains applicable to -- -- -- 0 $35,815,549 $90,763,633
all shareholders
(1) Options were granted under the 1991 Stock Option Plan
to the indicated Named Officers on March 21, July 31
and November 17, 2000.
(2) The potential realizable gain to all shareholders (based
on 13.4 million shares of USBANCORP Common Stock
outstanding at December 31, 2000 with an assumed market
price of $4.25) at 0%, 5% and 10% assumed annual growth
rates over a term of ten years is provided as a
comparison to the potential gain realizable by the Named
Officers at the same assumed annual rates of stock
appreciation.
Option Exercises and Year-End Value Table
The following table sets forth information concerning the
exercise of options to purchase USBANCORP Common Stock by the
Named Officers during the year ended December 31, 2000, as well
as the number of securities underlying unexercised options and
potential value of unexercised options (both options that were
presently exercisable and options that were not exercisable) as
of December 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
Number of Securities
Underlying Unexercised Value of In-the-Money
Options at Options at
December 31, 2000(3) December 31, 2000(4)
Shares
Acquired on Value
Name Exercise(#)(1 Realized($)(2) Exercisable(#) Unexercisable(#) Exercisable($) Unexercisable($)
Orlando B. Hanselman 1,850 3,903 38,152 73,000 0 0
Terry K. Dunkle(5) 2,446 3,338 0 0 0 0
Jeryl L. Graham 762 1,270 29,764 38,600 0 325
Kevin J. O'Neil 0 0 11,507 0 0 0
Ronald W. Virag 0 0 0 19,100 0 0
Douglas B. Bickmore 0 0 833 21,167 0 0
_______________________
(1) Figures shown include only shares acquired via stock
option exercises in 2000. Since the inception of the
Stock Option Plan in 1991, Mr. Hanselman has paid
$115,310 to exercise 11,604 stock options. Ms. Graham
has paid $13,489 to exercise 1,312 stock options,
Mr. O'Neil has paid $130,351 to exercise 5,493 stock
options, and Mr. Virag has paid $57,793 to exercise
2,930 stock options and surrendered
10,225 shares to exercise 13,400 options.
(2) Represents the aggregate market value of the underlying
shares of USBANCORP Common Stock at the date of exercise
minus the aggregate exercise prices for options
exercised.
(3) Includes outstanding stock options to purchase USBANCORP
Common Stock only. On April 1, 2000, USBANCORP spun-off
TRBC to its shareholders. As a result, every two shares
of USBANCORP Common Stock owned by a USBANCORP
shareholder entitled that shareholder to one share of
TRBC common stock. Correspondingly, for every two
options to purchase USBANCORP Common Stock awarded
before the spin-off, one option to purchase TRBC common
stock was granted.
(4) "In-the-money options" are stock options with respect to
which the market value of the underlying shares of
USBANCORP Common Stock exceeded the exercise price at
December 31, 2000. The value of such options is
determined by subtracting the aggregate exercise price
for such options from the aggregate fair market value of
the underlying shares of USBANCORP Common Stock on
December 31, 2000. Fair market value was determined by
reference to the average of the high and low sale prices
of USBANCORP Common Stock as quoted on the Nasdaq Stock
Market.
(5) In connection with the spin-off, Mr. Dunkle's USBANCORP
options were cancelled.
Retirement Plans
Pension Plan
U.S. Bank maintains a qualified defined benefit retirement
plan for its employees (the "U.S. Bank Plan"). Remuneration as
of January 1, 2000, for pension benefit purposes is total cash
remuneration paid to an employee for a calendar year, including
base salary, wages, commissions, overtime, bonuses and any other
form of extra cash compensation and any pre-tax contributions
under a "qualified cash or deferred arrangement" (as defined in
Section 401(k) of the Code and applicable regulations) or under
a "cafeteria plan" (as defined in Section 125 of the Code and
applicable regulations). An employee's benefit under the U.S.
Bank Plan is determined on the basis of Final Average Pay which
means the average annual compensation (as defined by the U.S.
Bank Plan) received by an employee in the five consecutive years
out of the ten ending before the employee's termination of
employment for which the average is highest.
U.S. Bank is not required to make a contribution to the U.
S. Bank Plan in 2001 for the 2000 plan year.
Estimated annual benefits payable upon retirement at age 65
after 15 years of service with respect to the specified
remuneration are as follows:
PENSION TABLE
U.S. BANK
Five Calendar Year
Average Salary Annual Benefit at
Preceding Retirement Normal Retirement Date
$ 15,000 $ 5,550
25,000 9,250
40,000 14,800
60,000 22,200
90,000 33,300
100,000 37,000
120,000 44,400
140,000 51,800
150,000 55,500
160,000 59,200
170,000(1) 62,900
_______________________
(1) Effective for retirements on or after January 1, 1994,
annual compensation for Plan purposes may not exceed
$150,000 plus any increases indexed to cost of living
adjustments. Employees with compensation exceeding
$150,000 in years before 1994 may have larger "preserved
benefits."
The above benefits are paid for the life of the employee
with a right of survivorship with respect to ten years of post-
retirement benefits. Other optional forms of benefit are
available in actuarially equivalent amounts. Current
remuneration covered by the U.S. Bank Plan in 2000 for Bickmore,
Graham, Hanselman and Virag was $97,950, $137,940, $227,880 and
$132,145, respectively, subject to the $150,000 limitation (as
indexed). As of December 31, 2000, Mr. Bickmore was credited
with two years of service, Ms. Graham with 15 years of service,
Mr. Hanselman with 14 years of service and Mr. Virag with 6
years of service.
Effective January 1, 1986, the USBANCORP Board of Directors
adopted the U.S. Bank Plan for the benefit of employees of
USBANCORP on the same terms and conditions as for employees of
U.S. Bank. Contributions made by USBANCORP are limited to those
employees whose earnings are paid by USBANCORP.
Mr. O'Neil previously participated in the Three Rivers Bank
Pension Plan. Effective January 1, 2000, the benefits of
employees of SMC (a former subsidiary of Three Rivers Bank and
now a subsidiary of the Company) were frozen and will be
distributed upon each participant's termination. As of
December 31, 2000, Mr. O'Neil was credited with 7 years of
service (for eligibility purposes only).
Supplemental Pension Plans
The Board of Directors of USBANCORP approved the creation
of a supplemental executive retirement plan ("SERP") for
Mr. Hanselman. SERPs traditionally are funded out of cash flow
or other retained funds beginning after the date of the
executive's retirement, or through a split-dollar life insurance
plan. Because a primary goal in developing a SERP for Mr.
Hanselman was to increase Mr Hanselman's equity stake in the
Company, thus further aligning him with shareholder interests,
the Compensation Committee and the Board of Directors elected to
fund Mr. Hanselman's SERP through a grant of restricted stock.
Instead of using a SERP to assure an appropriate level of
retirement income for Mr. Hanselman, the Compensation Committee
and the Board of Directors, by funding Mr. Hanselman's SERP with
restricted stock, directly tie Mr. Hanselman's retirement income
to the future stock price of USBANCORP, thereby creating an
incentive to increase the stock price. Mr. Hanselman is
committed to the future of the Company and, because of his
belief in the future of USBANCORP, he is willing to put his
retirement income at risk in this manner.
Subject to shareholder approval of the 2001 Incentive Plan,
see "MATTER NO. 2-PROPOSAL TO APPROVE STOCK INCENTIVE PLAN",
Mr. Hanselman's SERP will be funded through a restricted stock
award in an amount not to exceed 173,000 shares of USBANCORP
Common Stock that will vest over a fifteen year period. No
award shares will vest during the first five year period. On
the fifth anniversary of the award, one-third of the award
shares will vest; thereafter additional shares equal to one-
fifteenth of the award shares will vest on each anniversary of
the award. Each vesting of shares will be a taxable event to
Mr. Hanselman, and will result in a tax deduction for USBANCORP.
In addition, dividends will accrue and be paid to Mr. Hanselman
at vesting, which will be a taxable event for Mr. Hanselman, and
also will result in a tax deduction for USBANCORP. Based on the
calculations of an independent compensation consultant,
projected dividends will be sufficient to cover the tax incurred
by Mr. Hanselman on each vesting date except the vesting of one-
third of the award shares that occurs on the fifth anniversary
of the award. In order to avoid the need to sell shares of
USBANCORP Common Stock after the fifth anniversary of the award
to satisfy this tax obligation, the Company will pay
Mr. Hanselman a one-time cash bonus in the approximate amount of
$124,000 which is projected to be sufficient to pay the tax due
in respect of the vested award shares. USBANCORP's independent
compensation consultant had originally proposed that the stock
award be for a higher number of shares. However, in order to
make the SERP cash-flow neutral to Mr. Hanselman, the cash bonus
was included and the total number of award shares was
correspondingly reduced to an amount not to exceed 173,000
shares.
In the event of Mr. Hanselman's death or disability prior
to the fifth anniversary of the award, there will be no
acceleration of the vesting schedule. Thereafter, in the event
of Mr. Hanselman's death or disability, one-half of all unvested
award shares will vest.
Mr. Hanselman will be entitled to only vote vested award
shares. Dividends on the award shares will accrue but not be
paid until the fifth anniversary of the award, at which time
accrued and unpaid dividends on vested award shares will be paid
to Mr. Hanselman. Thereafter, Mr. Hanselman will be entitled to
receive current and accrued and unpaid dividends on vested award
shares.
An independent compensation consultant has determined that
the annual cost of this SERP to the Company will be
approximately $46,000 on a pre-tax basis. This independent
compensation consultant further calculated that the Company will
receive tax deductions totaling approximately $2.4 million over
the fifteen-year life of the SERP.
USBANCORP provided additional life insurance and retirement
benefits for Mr. Dunkle funded through a split-dollar life
insurance policy. After the spin-off, TRBC assumed all
obligations and benefits that accrued to USBANCORP under the
policy.
In 1994 the Board of Directors of USBANCORP had provided a
SERP for the benefit of Mr. Dunkle in order to provide
supplemental retirement benefits to Mr. Dunkle, that, in
combination with benefits from all USBANCORP sponsored qualified
and non-qualified pension plans, insured an appropriate total
retirement benefit for Mr. Dunkle. After the spin-off, TRBC
assumed all obligations and benefits that accrued to USBANCORP
under the SERP.
The Board of Directors of U.S. Bank on February 20, 1981,
adopted a Supplemental Pension Plan under which the Executive
Committee of the Board of Directors may from time to time
designate executive officers of U.S. Bank as participants and
specify the amount of supplemental pension payment the
participant shall receive. A participating officer agrees to
perform, after retirement, such advisory services as the
Executive Committee may reasonably request and enters into a
noncompetition agreement with U.S. Bank. Upon his retirement
from U.S. Bank, a participant will be entitled to receive
supplemental monthly pension payments in a specified amount for
a period of fifteen years. If he should die before retirement
while in the service of U.S. Bank or if he should die after
payment of benefits has commenced, the participant's spouse, if
any, will be entitled to receive one-half of the specified
amount for the remainder of the fifteen year period. No
payments are currently being made under this plan.
Change in Control Agreements
In 1994, USBANCORP entered into Change in Control
Agreements (the "Agreements") with Messrs. Terry K. Dunkle,
Orlando B. Hanselman, Kevin J. O'Neil and Ronald W. Virag,
pursuant to which USBANCORP agreed to provide the executives
with severance benefits upon the occurrence of certain
enumerated events ("Triggering Events") following a change in
control of USBANCORP ("Change in Control") (as defined in the
Agreements). After the spin-off, the Agreement with Mr. Dunkle
terminated. The initial term of the Agreements was three years,
subject to an automatic one year extension on each anniversary
date thereof, unless either party gives notice to the other of
an intention not to renew. Under the Agreements, upon the
occurrence of a Triggering Event following a Change in Control,
Messrs. Hanselman, O'Neil and Virag would be entitled to receive
approximately 1.5 times their combined salary and bonus which
will be determined, after the expiration of the initial term, by
reference to the average of the executive's combined salary and
bonus in the preceding five years. The executives, in their
discretion, may receive these payments in a lump sum or on a
monthly installment basis. The Agreements also entitle the
executives to continued participation in the employee benefits
plans of USBANCORP for a period of eighteen months with respect
to Mr. Hanselman and one year with respect to the other
executives. In addition, the Agreements provide that options
held by the executives to acquire USBANCORP Common Stock, to the
extent not currently exercisable, will become immediately
exercisable upon the occurrence of a Triggering Event following
a Change in Control and may be exercised by the executives at
any time prior to the earlier of the expiration date of the
options or 90 days after the executive's termination. The
Agreements also require USBANCORP to make additional payments to
the executives in the event that the severance payments
described above result in the imposition of an excise tax,
pursuant to Section 4999 of the Code on the payment of such
amounts.
Performance Graph
Set forth is a graph comparing the yearly percentage change
in the cumulative total shareholder return on USBANCORP Common
Stock against the Nasdaq Stock Market (U.S. Companies) and the
Nasdaq Bank Stocks for the five years beginning January 1, 1996
and ended December 31, 2000.
[Insert Table]
Legend
Symbol Index Description 12/95 12/96 12/97 12/98 12/99 12/00
USBANCORP, INC., 100.0 131.4 236.2 198.2 121.9 85.3
Nasdaq Stock 100.0 123.0 150.7 212.5 394.9 237.6
Market (US Companies)
Nasdaq Bank Stocks 100.0 132.0 221.1 219.6 211.1 241.1
SIC 6020-6029,
6710-6719 US & Foreign
Notes:
A. The lines represent monthly index levels derived from
compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market
capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end,
is not a trading day, the preceding trading day is
used.
D. The index level for all series was set to 100.0 on
12/29/1995.
MATTER No. 2
APPROVAL OF 2001 USBANCORP
STOCK INCENTIVE PLAN
Description of the 2001 Stock Incentive Plan
The Board of Directors believes that USBANCORP's stock
incentive program constitutes an important part of USBANCORP's
compensation programs and, accordingly, USBANCORP has adopted a
new 2001 Stock Incentive Plan, that is subject to shareholder
approval.
Shareholders have previously authorized grants of options
to employees under the USBANCORP Stock Option Plan (the "1991
Plan"). Under the 1991 Plan, a total of 1,455,000 options are
available for issuance and at December 31, 2000, options to
acquire 531,378 shares are outstanding. The 1991 Plan expires,
by its terms, on August 23, 2001 and thereafter no further
options may be granted thereunder. Therefore, subject to
shareholder approval, USBANCORP has adopted the 2001 Stock
Incentive Plan (the "2001 Plan") to immediately replace the 1991
Plan. Pending approval of the 2001 Plan, and if approved,
thereafter, no additional options will be granted under the 1991
Plan.
The 2001 Plan is designed to improve the performance of
USBANCORP and its subsidiaries and, by doing so, to serve the
interests of the shareholders. By encouraging ownership of
USBANCORP Common Stock among those who play significant roles in
USBANCORP's success, implementation of the 2001 Plan will
continue to align the interests of USBANCORP's key employees
with those of its shareholders by relating capital accumulation
to increases in shareholder value. Moreover, adoption of the
2001 Plan should have a positive effect on USBANCORP's ability
to attract, motivate and retain employees of outstanding
leadership and ability.
The principal features of the 2001 Plan are described
below. See Exhibit "A" to this Proxy Statement for the full
text of the 2001 Plan.
The 2001 Plan authorizes the Compensation Committee of the
Board of Directors (the "Committee") or a director or officer
delegated by the Committee to grant stock options or restricted
stock of up to 800,000 shares of USBANCORP Common Stock, which
constitutes approximately 5.92% of the presently outstanding
shares of USBANCORP Common Stock.
Under the 2001 Plan, incentive stock options (as defined in
Section 422 of the Internal Revenue Code of 1986, as amended),
nonqualified stock options and restricted stock may be granted
to directors, officers and employees providing services to
USBANCORP and its affiliates. Grants must be approved by a
majority of the Committee present at a meeting or by a director
or officer designated by the Committee. Any shares as to which
a grant expires, lapses unexercised, or is terminated or
cancelled, may be subject to a new grant.
Options granted under the 2001 Plan may be exercised for a
maximum of 10 years after the date of grant. The Committee may
condition any exercise of an option upon satisfaction of such
conditions or vesting periods as it may determine, including,
without limitation, (i) acceleration of vesting in the event of
death, disability or other event such as a change in control of
USBANCORP (as defined in the 2001 Plan), or (ii) expiration,
forfeiture or post-termination exercise of an option in the
event of termination of service, including termination for cause
(as defined in the 2001 Plan)or upon retirement, death or
disability.
The aggregate fair market value (determined at the time the
option is granted) of the shares of Common Stock with respect to
which incentive stock options are exercisable for the first time
by an optionee during any calendar year may not exceed $100,000.
No employee may receive option grants in excess of 175,000
shares under the 2001 Plan in any twelve month period. No
option may be transferred by the optionee other than by will or
by the laws of descent and distribution, and each option is
exercisable during the optionee's lifetime only by the optionee.
At the election of the holder of a nonqualified option and
subject to the rules established by the Committee, any required
withholding taxes may be satisfied by USBANCORP withholding
shares of USBANCORP Common Stock issued on the exercise of a
nonqualified stock option that have a fair market value equal to
or less than any required withholding taxes, delivery by the
holder to USBANCORP of sufficient USBANCORP Common Stock to
satisfy the withholding obligation, or delivery by the holder to
USBANCORP of sufficient cash to satisfy the withholding
obligations.
In addition to the grant of both incentive stock options
and nonqualified stock options, the 2001 Plan provides for the
grant of restricted stock. The Committee may condition the
grant or vesting, or both, of restricted stock upon the
continued service of the grantee for a certain period of time
after the grant, attainment of such performance objectives as
the Committee may determine, or upon a combination of continued
service and performance objectives. The Committee may, in its
discretion, shorten or terminate the restriction period or waive
any of the conditions applicable to all or a portion of the
restricted stock. The restricted stock may not be sold,
transferred, assigned, pledged or otherwise encumbered or
disposed of during the restriction period or prior to the
satisfaction of any other conditions prescribed by the Committee
at the time of grant. Unless otherwise provided in the
applicable award agreement, during the restriction period, a
grantee of a restricted stock award will not be entitled to
vote, or receive dividends with respect to, the shares covered
by the grant. The Committee may require that any dividends
received on shares of restricted stock be reinvested in
additional shares of USBANCORP Common Stock and that such
purchased shares be subject to the same restrictions. Share
certificates with respect to restricted stock will be issued in
the name of the grantee and either held by the Secretary of the
Company or delivered to the grantee with an appropriate legend
or legends that reference the restrictions imposed. Upon the
expiration or termination of the restriction period and the
satisfaction of any other conditions prescribed by the
Committee, a stock certificate for shares shall be delivered,
free of any such restrictions, to the grantee.
Under the 2001 Plan, each award agreement shall set forth
the extent to which the grantee may exercise an option following
termination of service for any reason, including any termination
of service after a change in control of USBANCORP (as defined in
the 2001 Plan). With respect to a grant of restricted stock,
any restricted stock that has not vested, or with respect to
which all applicable restrictions and conditions have not
lapsed, shall be immediately forfeited upon termination by the
grantee of service with USBANCORP.
The Board of Directors of the Company may suspend or
terminate the 2001 Plan at any time without shareholder
approval. The Board of Directors of the Company may amend the
2001 Plan; in most cases, shareholder approval of a substantive
amendment will be required under applicable tax laws and Nasdaq
or exchange listing rules. The Committee may not modify or
amend the 2001 Plan with respect to any outstanding option or
impair or cancel any outstanding option without the consent of
the affected optionee. Without prior shareholder approval, the
2001 Plan does not permit the repricing of options or the
cancellation of existing options and the grant of new options
with a lower exercise price where the economic effect would be
the same as reducing the exercise price of the cancelled option.
If the 2001 Plan is approved by the shareholders, USBANCORP
anticipates that the shares subject to the 2001 Plan will be
registered with the Securities and Exchange Commission. The
cost of such registration will be borne by USBANCORP.
The executive officers listed in the Summary Compensation
Table included under the section entitled "COMPENSATION PAID TO
EXECUTIVE OFFICERS" in this Proxy Statement will be eligible to
receive grants under the 2001 Plan. Additionally, if the 2001
Plan is approved by the shareholders, the Board anticipates that
it will make an award to Mr. Hanselman in an amount not to
exceed 173,000 shares of restricted stock valued at
approximately $692,000 to fund the SERP more fully described
herein under "EXECUTIVE COMPENSATION-Supplemental Pension
Plans". As noted above, an independent compensation consultant
has advised the Company that the SERP would result in an annual
accounting charge to the Company of approximately $46,000 on a
pre-tax basis and is projected to result in tax deductions to
the Company totaling approximately $2.4 million over the
fifteen-year life of the SERP.
The grants previously made to executive officers of
USBANCORP and its subsidiaries under the 1991 Plan, and
information on options exercised during the last fiscal year,
are reflected in tables contained in the section of this Proxy
Statement entitled "COMPENSATION PAID TO EXECUTIVE OFFICERS."
Tax Consequences
The 2001 Plan permits eligible employees of USBANCORP and
its affiliates to receive grants of incentive stock options that
qualify for certain tax benefits. In addition, the 2001 Plan
permits eligible participants to receive grants of nonqualified
stock options or restricted stock that do not qualify for any
tax benefits.
The 2001 Plan is not a qualified plan under Code Section
401(a). USBANCORP has been advised that under the Code, the
following federal income tax consequences will result when
incentive stock options, nonqualified stock options, or
restricted stock, or any combination thereof, are granted or
exercised, although the following is not intended to be a
complete statement of the applicable law.
Incentive Stock Options. An optionee generally will not be
deemed to receive any income for federal tax purposes at the
time an incentive stock option is granted, nor will USBANCORP be
entitled to a tax deduction at that time. Upon the sale or
exchange of the shares at least two years after the grant of the
option and one year after receipt of the shares by the optionee
upon exercise, the optionee will recognize long-term capital
gain or loss upon the sale of such shares equal to the
difference between the amount realized on such sale and the
exercise price.
If the foregoing holding periods are not satisfied or the
option is exercised more than three months after the optionee's
employment with USBANCORP has terminated, the optionee will
recognize ordinary income equal to the difference between the
exercise price and the lower of the fair market value of the
stock at the date of the option exercise or the sale price of
the stock. If the sale price exceeds the fair market value on
the date of exercise, the gain in excess of the ordinary income
portion will be treated as either long-term or short-term
capital gain, depending on whether the stock has been held for
more than 12 months on the date of sale. Any loss on
disposition is a long-term or short-term capital loss, depending
upon whether the optionee has held the stock for more than 12
months. A different rule for measuring ordinary income upon
such a premature disposition may apply if the optionee is a
director or 10 percent shareholder of USBANCORP or an officer of
USBANCORP subject to Section 16(b) of the Securities Exchange
Act of 1934. If USBANCORP cancels an option by paying the
optionee the difference between the fair market value of a share
of USBANCORP Common Stock and the per share exercise price
multiplied by the number of shares subject to such option, then
the optionee recognizes income to the extent of the amount paid
by USBANCORP to cancel the option over the optionee's basis in
such option, if any.
No income tax deduction will be allowed USBANCORP with
respect to shares purchased by an optionee upon the exercise of
an incentive stock option, provided that such shares are held at
least two years after the date of grant and at least one year
after the date of exercise. However, if those holding periods
are not satisfied, USBANCORP may deduct an amount equal to the
ordinary income recognized by the optionee upon disposition of
the shares.
The exercise of an incentive stock option and the sale of
stock acquired by such exercise could subject an optionee to
alternative minimum tax liability for federal income tax
purposes.
Nonqualified Stock Options. An optionee will not be deemed
to receive any income for federal tax purposes at the time a
nonqualified stock option is granted, nor will USBANCORP be
entitled to a tax deduction at that time. At the time of
exercise, however, the optionee will realize ordinary income in
an amount equal to the excess of the market value of the shares
at the time of exercise of the option over the option price of
such shares. USBANCORP is allowed a federal income tax
deduction in an amount equal to the ordinary income recognized
by the optionee due to the exercise of a nonqualified stock
option at the time of such recognition by the optionee.
Stock-for-Stock Exchange. An optionee who exchanges
"statutory option stock" of USBANCORP in payment of the purchase
price upon the exercise of an incentive stock option will be
deemed to make a "disqualifying disposition" of the statutory
option stock so transferred unless the applicable holding
requirements (two years from the date of the grant and one year
after the exercise of an incentive option) with respect to such
statutory option stock are met after the exercise of incentive
stock options but also upon the exercise of qualified stock
options and stock acquired under certain other stock purchase
plans. If an optionee exercises nonqualified stock options by
exchanging previously-owned statutory option stock, the Internal
Revenue Service has ruled that the optionee will not recognize
gain on the disposition of the statutory option stock (assuming
the holding period requirements applicable to such statutory
option stock have been satisfied) because of the non-recognition
rule of Code Section 1036.
Restricted Stock. Upon expiration of the restricted period
applicable to a restricted stock grant, the fair market value of
such shares at such date, less any amount paid therefor, is
included in the grantee's ordinary income as compensation,
except that, in the case of restricted stock issued at the
beginning of the restriction period, the grantee may elect to
include in his or her ordinary income as compensation at the
time the restricted stock was granted, an amount equal to the
fair market value of such shares at such time, less any amount
paid therefor. The Company is entitled to a corresponding
income tax deduction to the extent that the amount represents
reasonable compensation and an ordinary, necessary business
expense, subject to any required income tax withholding.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR ADOPTION OF THE 2001 STOCK INCENTIVE PLAN. The affirmative
vote of a majority of all votes cast at the Meeting is required
to adopt the 2001 Stock Incentive Plan. All proxies will be
voted "FOR" adoption of the 2001 Stock Incentive Plan unless a
shareholder specifies to the contrary on such shareholder's
proxy card.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of USBANCORP
is composed of eight independent directors. Since July 2000,
the members of the Audit Committee are Directors Dewar (Chair),
O'Malley (Vice Chair), Adams, DeVos, Duke, Oravec, Picking and
Sargent.
The Audit Committee operates under a written charter
adopted by the Board of Directors. A copy of the Audit
Committee's Charter is attached to this Proxy Statement as
Exhibit B
The Audit Committee has reviewed the audited financial
statements of USBANCORP for the fiscal year ended December 31,
2000 and discussed them with management and USBANCORP's
independent accountants, Arthur Andersen LLP. The Audit
Committee also has discussed with the independent accountants
the matters required to be discussed by the U.S. Statement of
Auditing Standards No. 61.
The Audit Committee has received from the independent
accountants the written disclosures and letter required by the
U.S. Independence Standards Board Standard No. 1, and the Audit
Committee has discussed the accountants' independence from
USBANCORP and management with the accountants. Furthermore, the
Audit Committee has considered whether the fees paid by the
Company to Arthur Andersen and described below are compatible
with maintaining Arthur Andersen's independence from USBANCORP.
Based on the review and discussions described above, the Audit
Committee recommended to the Board of Directors that USBANCORP's
audited financial statements for the fiscal year ended
December 31, 2000 be included in USBANCORP's Annual Report on
Form 10-K for that fiscal year.
Audit Fees
The aggregate fees paid to Arthur Andersen for professional
services performed for the audit of USBANCORP's annual financial
statements for the year ended December 31, 2000 and the reviews
of the financial statements included in USBANCORP's quarterly
reports on Form 10-Q during 2000 were $152,600.
Financial Information Systems Design and Implementation Fees
Arthur Andersen provided systems consulting services to SMC
during 2000 when SMC changed its mortgage servicing system to an
in-house system. The fee for this consulting service was
$33,500.
All Other Fees
The aggregate fees paid to Arthur Andersen for professional
services performed on behalf of USBANCORP, other than audit fees
and Financial Information Systems Design and Implementation Fees
were $268,700. These fees were incurred largely with respect to
services performed by Arthur Andersen in connection with the
spin-off, tax reporting and consulting services and executive
compensation consulting services.
FINANCIAL INFORMATION
Requests for printed financial material for USBANCORP or
any of its subsidiaries - annual reports, Forms 10-K, 10-Q and
Call Reports - should be directed to Jeffrey A. Stopko, Senior
Vice President and Chief Financial Officer, USBANCORP, Inc.,
P.O. Box 430, Johnstown, PA 15907-0430, telephone (814) 533-
5310.
TRANSACTIONS WITH MANAGEMENT
Certain directors, nominees and executive officers and/or
their associates were customers of and had transactions with
USBANCORP or its subsidiaries during 2000. Transactions that
involved loans or commitments by subsidiary banks were made in
the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with
unrelated persons and did not involve more than the normal risk
of collectability or present other unfavorable features. These
loans represented in the aggregate less than 3.4% of
shareholders' equity as of December 31, 2000.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has audited USBANCORP's financial
statements for the fiscal year ended December 31, 2000 and the
report on such financial statements appears in the Annual Report
to Shareholders. Arthur Andersen LLP has been selected by the
USBANCORP Board of Directors to perform an examination of the
consolidated financial statements of USBANCORP for the year
ending December 31, 2001.
Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and are expected to be
available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors knows of no other matters to be
presented at the Annual Meeting. If, however, any other
business should properly come before the Annual Meeting, or any
adjournment thereof, it is intended that the proxies will be
voted with respect thereto in accordance with the best judgment
of the persons named in the proxies.
SHAREHOLDERS PROPOSALS FOR NEXT ANNUAL MEETING
Any shareholder desiring to present a proposal to be
considered at the 2001 Annual Meeting of Shareholders should
submit the proposal in writing to: Chairman, USBANCORP, Inc.,
Executive Offices, P.O. Box 430, Johnstown, PA 15907-0430 no
later than November 23, 2001.
By Order of the Board of Directors
/s/ Betty L. Jakell
Betty L. Jakell
Corporate Secretary
March 16, 2001
Exhibit A
USBANCORP, Inc.
2001 Stock Incentive Plan
USBANCORP, Inc.
USBANCORP, Inc.
2001 Stock Incentive Plan
USBANCORP, Inc. (the Company), a Pennsylvania
corporation, sets forth herein the terms of its 2001 Stock
Incentive Plan (the Plan) as follows:
1. Purpose
The Plan is intended to enhance the Company's and its
Affiliates' (as defined herein) ability to attract and retain
highly qualified officers, directors and employees, and to
motivate such officers, directors and employees to serve the
Company and its Affiliates and to expend maximum effort to
improve the business results and earnings of the Company, by
providing to such officers, directors and employees an
opportunity to acquire or increase a direct proprietary interest
in the operations and future success of the Company. To this
end, the Plan provides for the grant of stock options and
restricted stock in accordance with the terms hereof. Stock
options granted under the Plan may be nonqualified stock options
or incentive stock options, as provided herein.
2. Definitions
For purposes of interpreting the Plan and related
documents (including Award Agreements), the following
definitions shall apply:
2.1 "Affiliate" means, with respect to the
Company, any company or other trade or business that controls,
is controlled by, or is under common control with the Company
within the meaning of Rule 405 of Regulation C under the
Securities Act, including, without limitation, any Subsidiary.
2.2 "Award Agreement" means the stock option
agreement, restricted stock agreement, or other written
agreement between the Company and a Grantee that evidences and
sets out the terms and conditions of a Grant.
2.3 "Benefit Arrangement" shall have the meaning
set forth in Section 12 hereof.
2.4 "Board" means the Board of Directors of the
Company.
2.5 "Cause" means, unless otherwise provided in
an applicable employment agreement with the Company or an
Affiliate or in an Award Agreement, (i) negligence or willful
misconduct in connection with the performance of duties; (ii)
conviction of a criminal offense (other than minor traffic
offenses); or (iii) material breach of any term of any
employment, confidentiality, intellectual property, or non-
competition agreements, if any, between the employee and the
Company or an Affiliate.
2.6 "Change of Control" means (i) the
dissolution or liquidation of the Company or a merger,
consolidation, or reorganization of the Company with one or more
other entities in which the Company is not the surviving entity,
(ii) a sale of substantially all of the assets of the Company to
another person or entity, or (iii) any transaction (including
without limitation a merger or reorganization in which the
Company is the surviving entity) that results in any person or
entity (other than persons who are shareholders or Affiliates
immediately prior to the transaction) owning 50% or more of the
combined voting power of all classes of stock of the Company.
2.7 "Code" means the Internal Revenue Code of
1986, as now in effect or as hereafter amended.
2.8 "Covered Employee" means an employee who is,
or is likely to become a "covered employee" within the meaning
of Section 162(m) of the Code (or any successor provision).
2.9 "Committee" means the Compensation Committee
of the Board or such other committee as may be hereafter
designated by the Board to administer this Plan.
2.10 "Company" means USBANCORP, Inc.
2.11 "Disability" means the Grantee is unable to
perform each of the essential duties of such Grantee's position
by reason of a medically determinable physical or mental
impairment that is potentially permanent in character or that
can be expected to last for a continuous period of not less than
12 months; provided, however, that, with respect to rules
regarding expiration of an Incentive Stock Option following
termination of the Grantee's Service, Disability shall mean the
Grantee is unable to engage in any substantial gainful activity
by reason of a medically determinable physical or mental
impairment that can be expected to result in death or that has
lasted or can be expected to last for a continuous period of not
less than 12 months.
2.12 "Effective Date" means February 23, 2001,
the date the Plan is approved by the Board.
2.13 "Exchange Act" means the Securities
Exchange Act of 1934, as now in effect or as hereafter amended.
2.14 "Fair Market Value" means with respect to a
share of Stock, the closing price of the Stock on the Nasdaq
National Market (or such other exchange or market on which the
Stock may hereafter be listed for trading) on the Grant Date or,
if no sale of Stock is reported for such trading day, on the
next preceding day on which any sale shall have been reported.
2.15 Reserved.
2.16 "Grant" means an award of an Option or
Restricted Stock under the Plan.
2.17 "Grant Date" means, as determined by the
Committee, the latest to occur of (i) the date as of which the
Committee approves a Grant, (ii) the date on which the recipient
of a Grant first becomes eligible to receive a Grant under
Section 5 hereof, or (iii) such other date as may be specified
by the Committee.
2.18 "Grantee" means a person who receives or
holds an Option or Restricted Stock under the Plan.
2.19 "Incentive Stock Option" means an
"incentive stock option" within the meaning of Section 422 of
the Code, or the corresponding provision of any subsequently
enacted tax statute, as amended from time to time.
2.20 "Nonqualified Stock Option" means a stock
option that is not an Incentive Stock Option.
2.21 "Option" means an option to purchase one or
more shares of Stock pursuant to the Plan.
2.22 "Option Price" means the purchase price for
each share of Stock subject to an Option.
2.23 "Other Agreement" shall have the meaning
set forth in Section 12 hereof.
2.24 "Plan" means this USBANCORP, Inc. 2001
Stock Incentive Plan.
2.25 "Reporting Person" means a person who is
required to file reports under Section 16(a) of the Exchange
Act.
2.26 "Restricted Stock" means shares of Stock,
awarded to a Grantee pursuant to Section 9 hereof, that are
subject to restrictions and to a risk of forfeiture.
2.27 "Securities Act" means the Securities Act
of 1933, as now in effect or as hereafter amended.
2.28 "Service" means service as an employee,
officer, or director of the Company or an Affiliate. Unless
otherwise stated in the applicable Award Agreement, a Grantee's
change in position or duties shall not result in interrupted or
terminated Service, so long as such Grantee continues to be an
employee, officer, or director of the Company or an Affiliate.
Subject to the preceding sentence, whether a termination of
Service shall have occurred for purposes of the Plan shall be
determined by the Committee, which determination shall be final,
binding, and conclusive.
2.29 "Stock" means the common stock ($2.50 par
value) of the Company.
2.30 "Subsidiary" means any "subsidiary
corporation" of the Company within the meaning of Section 424(f)
of the Code.
2.31 "Ten-Percent Shareholder" means an
individual who owns more than ten percent (10%) of the total
combined voting power of all classes of outstanding stock of the
Company, its parent or any of its Subsidiaries. In determining
stock ownership, the attribution rules of Section 424(d) of the
Code shall be applied.
3. Administration of the Plan
3.1 Board; Delegation
Subject always to the right of the Board to
revoke its delegation, the Board hereby delegates administration
of the Plan to the Committee, provided that such administration
shall be consistent with the Company's articles of incorporation
and bylaws and applicable law. However, the Board does not
hereby delegate its power and authority with respect to (i)
Grants pursuant to the Plan to a Grantee who is a Covered
Employee within the meaning of Section 162(m) of the Code or
who, in the Board's judgment, is likely to be a Covered Employee
at any time during the period a Grant hereunder to such Grantee
would be outstanding, or (ii) the administration of the Plan
with respect thereto, if the Committee at anytime is not
comprised solely of "outside directors" within the meaning of
Section 162(m) of the Code.
3.2 Committee
The Committee shall have full power and authority to take all
actions and to make all determinations required or provided for
under the Plan, any Grant or any Award Agreement, and shall have
full power and authority to take all such other actions and make
all such other determinations not inconsistent with the specific
terms and provisions of the Plan that the Committee deems to be
necessary or appropriate to the administration of the Plan, any
Grant or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of
the members of the Committee present at a meeting or by
unanimous consent of the Committee executed in writing in
accordance with the Company's articles of incorporation and by-
laws and applicable law. The interpretation and construction by
the Committee of any provision of the Plan, any Grant or any
Award Agreement shall be final, binding, and conclusive. In the
event that the Plan, any Grant or any Award Agreement, entered
into hereunder provides for any action to be taken by or
determination to be made by the Committee, such action may be
taken by or such determination may be made by the Board. To the
extent permitted by law, the Committee may delegate its
authority under the Plan to a member of the Board or an
executive officer of the Company who is a member of the Board.
3.3 Grants
Subject to the other terms and conditions of the
Plan, the Committee shall have full and final authority to:
(i) designate Grantees,
(ii) determine the type or types of Grants
to be made to a grantee,
(iii) determine the number of shares of
Stock to be subject to a Grant
(provided however, that the number of
shares pursuant to a Grant made to any
Grantee who is a Covered Employee not
exceed 175,000 shares in any twelve
month period, where such action would
result in the loss of the otherwise
available exemption of the award under
Section 162(m) of the Code).
(iv) establish the terms and conditions of
each Grant (including, but not limited
to, the Option Price of any Option
(provided, however, that the Option
Price on any shares pursuant to a
Grant made to any Grantee who is a
Covered Employee shall not be less
than the Fair Market Value on the date
of grant where such action would
result in the loss of the otherwise
available exemption of the award under
Section 162(m) of the Code), the
nature and duration of any restriction
or condition (or provision for lapse
thereof) relating to the vesting,
exercise, transfer, or forfeiture of a
Grant or the shares of Stock subject
thereto, and any terms or conditions
that may be necessary to qualify
Options as Incentive Stock Options),
(v) prescribe the form of each Award
Agreement evidencing a Grant, and
(vi) amend, modify, or supplement the terms
of any outstanding Grant; provided
however, that (A) the Committee may
not reduce the term, extend the
vesting period, increase the exercise
price or otherwise amend, modify or
supplement the terms of any outstand-
ing Grant in a manner that adversely
affects the Grantee without the prior
written consent of the Grantee, or (B)
without the prior consent of the
Company's shareholders, reduce the
exercise price of any Grant following
the date of grant (other than such
equitable adjustments as may be
required by Section 14 hereof) and no
Grant may be cancelled and replaced
with a new Grant with a lower exercise
price where the economic effect would
be the same as reducing the exercise
price of the cancelled Grant.
Such authority specifically includes the authority, in order to
effectuate the purposes of the Plan but without amending the
Plan, to modify Grants to eligible individuals who are foreign
nationals or are individuals who are employed outside the United
States to recognize differences in local law, tax policy, or
custom. The Committee shall have the right, in its discretion,
to make Grants in substitution or exchange for any other Grant
under another plan of the Company, any Affiliate, or any
business entity to be acquired by the Company or an Affiliate.
The Company may retain the right in an Award Agreement to cause
a forfeiture of the gain realized by a Grantee on account of
actions taken by the Grantee in violation or breach of or in
conflict with any non-competition agreement, any agreement
prohibiting solicitation of employees or clients of the Company
or any Affiliate thereof or any confidentiality obligation with
respect to the Company or any Affiliate thereof, to the extent
specified in such Award Agreement applicable to the Grantee.
Furthermore, the Company may annul a Grant if the Grantee is an
employee of the Company or an Affiliate thereof and is
terminated for Cause as defined in any employment agreement
between the Grantee and the Company or any Affiliate, the
applicable Award Agreement or this Plan, as applicable.
3.4 Deferral arrangement
The Committee may permit or require the deferral
of any award payment into a deferred compensation arrangement,
subject to such rules and procedures as it may establish, which
may include provisions for the payment or crediting of interest
or dividend equivalents, including converting such credits into
deferred Stock equivalents and restricting deferrals to comply
with hardship distribution rules affecting 401(k) plans.
3.5 No liability
No member of the Board or of the Committee shall
be liable for any action or determination made in good faith
with respect to the Plan or any Grant or Award Agreement.
4. Stock subject to the Plan
Subject to adjustment as provided in Section 14
hereof, the number of shares of Stock available for issuance
under the Plan shall not exceed 800,000 outstanding shares of
the Company. Stock issued or to be issued under the Plan shall
be authorized but unissued shares or, to the extent permitted by
applicable law, issued shares that have been reacquired by the
Company. If any shares covered by a Grant are not purchased or
are forfeited, or if a Grant otherwise terminates without
delivery of any Stock subject thereto, then the number of shares
of Stock counted against the aggregate number of shares
available under the Plan with respect to such Grant shall, to
the extent of any such forfeiture or termination, again be
available for making Grants under the Plan.
5. Grant eligibility
5.1 Employees, Officers and Directors of the
Company
Grants (including Grants of Incentive Stock
Options, subject to Section 5.3) may be made under the Plan to
any employee, officer or director providing services to the
Company or an Affiliate.
5.2 Successive grants
An eligible person may receive more than one
Grant, subject to such restrictions as are provided herein.
5.3 Limitations on Incentive Stock Options
An Option shall constitute an Incentive Stock
Option only (i) if the Grantee of such Option is an employee of
the Company or any Subsidiary of the Company (or any parent of
the Company); (ii) to the extent specifically provided in the
related Award Agreement; and (iii) to the extent that the
aggregate Fair Market Value (determined at the time the Option
is granted) of the shares of Stock with respect to which all
Incentive Stock Options held by such Grantee become exercisable
for the first time during any calendar year (under the Plan and
all other plans of the Grantee's employer and its Affiliates)
does not exceed $100,000. This limitation shall be applied by
taking Options into account in the order in which they were
granted.
6. Award Agreement
Each Grant pursuant to the Plan shall be evidenced by
an Award Agreement, in such form or forms as the Committee shall
from time to time determine, which specifies the number of
shares subject to the Grant and provides for adjustment in
accordance with Section 14. Award Agreements granted from time
to time or at the same time need not contain similar provisions
but shall be consistent with the terms of the Plan. Each Award
Agreement evidencing a Grant of Options shall specify whether
such Options are intended to be Nonqualified Stock Options or
Incentive Stock Options, and in the absence of such
specification such options shall be deemed Nonqualified Stock
Options.
7. Terms and conditions of Options
7.1 Option Price
The Option Price of each Option shall be fixed by
the Committee and stated in the Award Agreement evidencing such
Option. In the case of an Incentive Stock Option, the Option
Price shall be at least the Fair Market Value on the Grant Date
of a share of Stock; provided, however, that in the event that a
Grantee is a Ten-Percent Shareholder, the Option Price of an
Incentive Stock Option granted to such Grantee shall be not less
than 110 percent of the Fair Market Value of a share of Stock on
the Grant Date.
7.2 Vesting and Option Period
Subject to Sections 7.3 and 14.3 hereof, each
Option granted under the Plan shall become exercisable at such
times and under such conditions as shall be determined by the
Committee and stated in the Award Agreement. For purposes of
this Section 7.2, fractional numbers of shares of Stock subject
to an Option shall be rounded down to the next nearest whole
number. Subject to the vesting terms outlined in individual
award agreements, the Committee may provide in the Award
Agreement for (i) accelerated exercisability of the Option in
the event the Grantee's Service terminates on account of death,
Disability, or another event, (ii) expiration of the Option
prior to its term in the event of the termination of the
Grantee's Service, (iii) immediate forfeiture of the Option in
the event the Grantee's Service is terminated for Cause.
7.3 Term
Each Option granted under the Plan shall
terminate, and all rights to purchase shares of Stock thereunder
shall cease, upon the expiration of ten years from the Grant
Date, or under such circumstances and on such date prior thereto
as is set forth in the Plan or as may be fixed by the Committee
and stated in the Award Agreement relating to such Option;
provided, however, that in the event that the Grantee is a Ten-
Percent Shareholder, an Option granted to such Grantee that is
intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant
Date.
7.4 Exercise of Options on Termination of
Service
Each Award Agreement shall set forth the extent
to which the Grantee shall have the right to exercise the Option
following termination of the Grantee's Service. Such provisions
shall be determined in the sole discretion of the Committee,
need not be uniform among all Options issued pursuant to the
Plan, and may reflect distinctions based on the reasons for
termination of Service. Notwithstanding the foregoing, each
Option shall provide that the Grantee shall have the right to
exercise the vested portion of any Option held at termination
for at least thirty (30) days following termination of Service
with the Company for any reason (other than for Cause), and that
the Grantee shall have the right to exercise the Option for at
least twenty-four (24) months if the Grantee's Service
terminates due to retirement at the normal retirement age, death
or Disability. For purposes of this Section 7.4 retirement at
the normal retirement age shall mean the youngest age at which
an employee of the Company may terminate employment and receive
payments under the Company's defined benefit pension plan.
7.5 Limitations on exercise of Option
Notwithstanding any other provision of the Plan,
in no event may any Option be exercised, in whole or in part,
prior to the date the Plan is approved by the shareholders of
the Company, or after ten years following the Grant Date, or
after the occurrence of an event referred to in Section 14
hereof that results in termination of the Option.
7.6 Exercise procedure
An Option that is exercisable may be exercised by
the Grantee's delivery to the Company of written notice of
exercise on any business day, at the Company's principal office,
on the form specified by the Company. Such notice shall specify
the number of shares of Stock with respect to which the Option
is being exercised and shall be accompanied by payment in full
of the Option Price of the shares for which the Option is being
exercised. The minimum number of shares of Stock with respect
to which an Option may be exercised, in whole or in part, at any
time shall be the lesser of (i) 100 shares or such lesser number
set forth in the applicable Award Agreement and (ii) the maximum
number of shares available for purchase under the Option at the
time of exercise. The Option Price shall be payable in a form
described in Section 10.
7.7 Right of holders of Options
Unless otherwise stated in the applicable Award
Agreement, an individual holding or exercising an Option shall
have none of the rights of a shareholder (for example, the right
to cash or dividend payments or distributions attributable to
the subject shares of Stock or to direct the voting of shares of
Stock) until the shares of Stock covered thereby are fully paid
and issued to such individual.
7.8 Delivery of Stock certificates
Promptly after the exercise of an Option by a
Grantee and the payment in full of the Option Price, such
Grantee shall be entitled to the issuance of a stock certificate
or certificates evidencing such Grantee's ownership of the
shares of Stock purchased upon such exercise of the Option.
8. Transferability of Options
During the lifetime of a Grantee, only the
Grantee (or, in the event of legal incapacity or incompetency,
the Grantee's guardian or legal representative) may exercise an
Option. No Option shall be assignable or transferable by the
Grantee to whom it is granted, other than by will or the laws of
descent and distribution.
9. Restricted Stock
9.1 Grant of Restricted Stock
The Committee may from time to time grant
Restricted Stock to persons eligible to receive Grants under
Section 5 hereof, subject to such restrictions, conditions, and
other terms as the Committee may determine.
9.2 Restrictions
At the time a Grant of Restricted Stock is made,
the Committee shall establish a restriction period applicable to
such Restricted Stock. Each Grant of Restricted Stock may be
subject to a different restriction period. The Committee may,
in its sole discretion, at the time a Grant of Restricted Stock
is made, prescribe conditions that must be satisfied prior to
the expiration of the restriction period, including the
satisfaction of corporate or individual performance objectives
or continued Service, in order that all or any portion of the
Restricted Stock shall vest. The restrictions applicable to a
Grant of Restricted Stock shall lapse at such times and under
such conditions as shall be determined by the Committee and
stated in the Award Agreement.
The Committee also may, in its sole discretion,
shorten or terminate the restriction period or waive any of the
conditions applicable to all or a portion of the Restricted
Stock. The Restricted Stock may not be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during
the restriction period or prior to the satisfaction of any other
conditions prescribed by the Committee with respect to such
Restricted Stock.
9.3 Restricted Stock certificates
The Company shall issue, in the name of each
Grantee to whom Restricted Stock has been granted, stock
certificates representing the total number of shares of
Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Committee may provide in
an Award Agreement that either (i) the Secretary of the Company
shall hold such certificates for the Grantee's benefit until
such time as the Restricted Stock is forfeited to the Company,
or the restrictions lapse, or (ii) such certificates shall be
delivered to the Grantee, provided, however, that such
certificates shall bear a legend or legends that comply with the
applicable securities laws and regulations and makes appropriate
reference to the restrictions imposed under the Plan and the
Award Agreement.
9.4 Rights of holders of Restricted Stock
Holders of Restricted Stock shall not have the
right to vote such Stock and shall not have the right to receive
any dividends declared or paid with respect to such Stock until
the applicable restriction lapses. The Committee may provide
that any dividends paid on Restricted Stock must be reinvested
in shares of Stock, which may or may not be subject to the same
vesting conditions and restrictions applicable to such
Restricted Stock. All distributions, if any, received by a
Grantee with respect to Restricted Stock as a result of any
stock split, stock dividend, combination of shares, or other
similar transaction shall be subject to the restrictions
applicable to the original Grant.
9.5 Termination of Service
Unless otherwise provided by the Committee in the
applicable Award Agreement, upon the termination of a Grantee's
Service with the Company or an Affiliate, any shares of
Restricted Stock held by such Grantee that have not vested, or
with respect to which all applicable restrictions and conditions
have not lapsed, shall immediately be deemed forfeited. Upon
forfeiture of Restricted Stock, the Grantee shall have no
further rights with respect to such Grant, including but not
limited to any right to vote Restricted Stock or any right to
receive dividends with respect to shares of Restricted Stock.
9.6 Delivery of Stock
Upon the expiration or termination of the
restriction period and the satisfaction of any other conditions
prescribed by the Committee, the restrictions applicable to
shares of Restricted Stock shall lapse, and, unless otherwise
provided in the Award Agreement, a stock certificate for such
shares shall be delivered, free of all such restrictions, to the
Grantee.
10. Form of payment
10.1 General rule
Payment of the Option Price for the shares of
stock purchased pursuant to the exercise of an Option shall be
made in cash or in cash equivalents acceptable to the Company.
10.2 Surrender of Stock
Payment of the Option Price for shares purchased
pursuant to the exercise of an Option may be made all or in part
through the tender to the Company of shares of Stock, which
shares, if acquired from the Company, shall have been held for
at least six months at the time of tender and which shall be
valued, for purposes of determining the extent to which the
Option Price has been paid thereby, at their Fair Market Value
on the date of exercise.
10.3 Cashless exercise
With respect to an Option only (and not with
respect to Restricted Stock), and for so long as the shares of
Stock are publicly traded, payment of the Option Price for
shares purchased pursuant to the exercise of an Option may be
made all or in part by delivery (on a form acceptable to the
Committee) of an irrevocable direction to a licensed securities
broker acceptable to the Company to sell shares of Stock and to
deliver all or part of the sales proceeds to the Company in
payment of the Option Price and any withholding taxes described
in Section 11.
11. Withholding taxes
The Company or any Affiliate, as the case may be,
shall have the right to deduct from payments of any kind
otherwise due to a Grantee any Federal, state, or local taxes of
any kind required by law to be withheld with respect to the
vesting of or other lapse or restrictions applicable to
Restricted Stock or upon the issuance of any shares of Stock
upon the exercise of an Option. At the time of such vesting,
lapse, or exercise, the Grantee shall pay to the Company or
Affiliate, as the case may be, any amount that the Company or
Affiliate may reasonably determine to be necessary to satisfy
such withholding obligation. Subject to the prior approval of
the Company or the Affiliate, which may be withheld by the
Company or the Affiliate, as the case may be, in its sole
discretion, the Grantee may elect to satisfy such obligations,
in whole or in part, (i) by causing the Company or the Affiliate
to withhold shares of Stock otherwise issuable to the Grantee or
(ii) by delivering to the Company or the Affiliate shares of
Stock already owned by the Grantee. The shares of Stock so
delivered or withheld shall have an aggregate Fair Market Value
equal to such withholding obligations. The Fair Market Value of
the shares of Stock used to satisfy such withholding obligation
shall be determined by the Company or the Affiliate as of the
date that the amount of tax to be withheld is to be determined.
A Grantee who has made an election pursuant to this Section 11
may satisfy his or her withholding obligation only with shares
of Stock that are not subject to any repurchase, forfeiture,
unfulfilled vesting, or other similar requirements.
12. Cutback Provision
Notwithstanding any other provision of this Plan or of
any other agreement, contract, or understanding heretofore or
hereafter entered into by a Grantee with the Company or any
Affiliate, except an agreement, contract, or understanding
hereafter entered into that expressly modifies or excludes
application of this paragraph (an Other Agreement), and
notwithstanding any formal or informal plan or other arrangement
for the direct or indirect provision of compensation to the
Grantee (including groups or classes of participants or
beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of
a benefit to or for the Grantee (a Benefit Arrangement), if the
Grantee is a "disqualified individual," as defined in Section
280G(c) of the Code, any Options or Restricted Stock held by
that Grantee and any right to receive any payment or other
benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment,
or benefit, taking into account all other rights, payments, or
benefits to or for the Grantee under this Plan, all Other
Agreements, and all Benefit Arrangements, would cause any
payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section
280G(b)(2) of the Code as then in effect (a Parachute Payment)
and (ii) if, as a result of receiving a Parachute Payment, the
aggregate after-tax amounts received by the Grantee from the
Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount
that could be received by the Grantee without causing any such
payment or benefit to be considered a Parachute Payment. In the
event that the receipt of any such right to exercise, vesting,
payment, or benefit under this Plan, in conjunction with all
other rights, payments, or benefits to or for the Grantee under
any Other Agreement or any Benefit Arrangement would cause the
Grantee to be considered to have received a Parachute Payment
under this Plan that would have the effect of decreasing the
after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the
right, in the Grantee's sole discretion, to designate those
rights, payments, or benefits under this Plan, any Other
Agreements, and any Benefit Arrangements that should be reduced
or eliminated so as to avoid having the payment or benefit to
the Grantee under this Plan be deemed to be a Parachute Payment.
13. Requirements of law
13.1 General
The Company shall not be required to sell or
issue any shares of Stock under any Grant if the sale or
issuance of such shares would constitute a violation by the
Grantee, any other individual exercising a right emanating from
such Grant, or the Company of any provision of any law or
regulation of any governmental authority, including without
limitation any federal or state securities laws or regulations.
If at any time the Company shall determine, in its discretion,
that the listing, registration or qualification of any shares
subject to a Grant upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the issuance or purchase of
shares hereunder, no shares of Stock may be issued or sold to
the Grantee or any other individual exercising an Option
pursuant to such Grant unless such listing, registration,
qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Company,
and any delay caused thereby shall in no way affect the date of
termination of the Grant. Specifically, in connection with the
Securities Act, upon the exercise of any right emanating from
such Grant or the delivery of any shares of Restricted Stock,
unless a registration statement under the Securities Act is in
effect with respect to the shares of Stock covered by such
Grant, the Company shall not be required to sell or issue such
shares unless the Committee has received evidence satisfactory
to it that the Grantee or any other individual exercising an
Option may acquire such shares pursuant to an exemption from
registration under the Securities Act. Any determination in
this connection by the Committee shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated
to, register any securities covered hereby pursuant to the
Securities Act. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of an Option
or the issuance of shares of Stock pursuant to the Plan to
comply with any law or regulation of any governmental authority.
As to any jurisdiction that expressly imposes the requirement
that an Option shall not be exercisable until the shares of
Stock covered by such Option are registered or are exempt from
registration, the exercise of such Option (under circumstances
in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the
availability of such an exemption.
13.2 Rule 16b-3
During any time when the Company has a class of
equity security registered under Section 12 of the Exchange Act,
it is the intent of the Company that Grants pursuant to the Plan
and the exercise of Options granted hereunder will qualify for
the exemption provided by Rule 16b-3 under the Exchange Act. To
the extent that any provision of the Plan or action by the
Committee does not comply with the requirements of Rule 16b-3,
it shall be deemed inoperative to the extent permitted by law
and deemed advisable by the Committee, and shall not affect the
validity of the Plan. In the event that Rule 16b-3 is revised
or replaced, the Board may exercise its discretion to modify
this Plan in any respect necessary to satisfy the requirements
of, or to take advantage of any features of, the revised
exemption or its replacement.
13.3 Financial reports
To the extent required by applicable law, not
less often than annually, the Company shall furnish to Grantees
summary financial information including a balance sheet
regarding the Company's financial condition and results of
operations, unless such Grantees have duties with the Company
that assure them access to equivalent information. Such
financial statements need not be audited.
14. Effect of changes in capitalization
14.1 Changes in Stock
The number of shares for which Grants of Options
and Restricted Stock may be made under the Plan shall be
proportionately increased or decreased for any increase or
decrease in the number or shares of Stock on account of any
recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or
other distribution payable in capital stock, or for any other
increase or decrease in such shares effected without receipt of
consideration by the Company occurring after the Effective Date
(any such event hereafter referred to as a Corporate Event). In
addition, subject to the exception set forth in the last
sentence of Section 14.4, the number of shares for which Grants
are outstanding shall be proportionately increased or decreased
for any increase or decrease in the number of shares of Stock on
account of any Corporate Event. Any such adjustment in
outstanding Options shall not change the aggregate consideration
payable with respect to shares that are subject to the
unexercised portion of an Option outstanding but shall include a
corresponding proportionate adjustment in the Option Price. The
conversion of any convertible securities of the Company shall
not be treated as an increase in shares effected without receipt
of consideration.
14.2 Reorganization in which the Company is the
surviving entity and in which no change of control occurs
Subject to the exception set forth in the last
sentence of Section 14.4, if the Company shall be the surviving
entity in any reorganization, merger, or consolidation of the
Company with one or more other entities and in which no Change
of Control occurs, any Grant theretofore made pursuant to the
Plan shall pertain to and apply solely to the common stock
shares to which a holder of the number of shares of Stock
subject to such Grant would have been entitled immediately
following such reorganization, merger, or consolidation, and in
the case of Options, with a corresponding proportionate
adjustment of the Option Price so that the aggregate
consideration thereafter shall be the same as the aggregate
consideration of the shares remaining subject to the Option
immediately prior to such reorganization, merger, or
consolidation. Subject to any contrary language in an Award
Agreement evidencing a Grant of Restricted Stock, any
restrictions applicable to such Restricted Stock shall apply as
well to any replacement shares received by the Grantee as a
result of the reorganization, merger, or consolidation.
14.3 Reorganization, sale of assets, or sale of
Stock that involves a change of control
Subject to the exceptions set forth in the last
sentence of this Section 14.3 and the last sentence of Section
14.4, (i) upon the occurrence of a Change of Control, all
outstanding shares of Restricted Stock shall be deemed to have
vested and all restrictions and conditions applicable to such
shares of Restricted Stock shall be deemed to have lapsed,
immediately prior to the occurrence of such Change of Control,
and (ii) either of the following two actions shall be taken:
(A) fifteen days prior to the scheduled consummation of a Change
of Control, all Options outstanding hereunder shall become
immediately exercisable and shall remain exercisable for a
period of fifteen days, or (B) the Board may elect, in its sole
discretion, to cancel any outstanding Grants and pay or deliver,
or cause to be paid or delivered, to the holder thereof an
amount in cash or securities having a value (as determined by
the Board acting in good faith), in the case of Restricted
Stock, equal to the formula or fixed price per share paid to
holders of shares of Stock and, in the case of Options, equal to
the product of the number of shares of Stock subject to the
Option (the Option Shares) multiplied by the amount, if any, by
which (I) the formula or fixed price per share paid to holders
of shares of Stock pursuant to such transaction exceeds (II) the
Option Price applicable to such Option Shares. With respect to
the Company's establishment of an exercise window, (i) any
exercise of an Option during such fifteen-day period shall be
conditioned upon the consummation of the event, and (ii) upon
consummation of any Change of Control the Plan, and all
outstanding but unexercised Options shall terminate. The Board
shall send written notice of an event that will result in such a
termination to all individuals who hold Options not later than
the time at which the Company gives notice thereof to its
shareholders. This Section 14.3 shall not apply to any Change
of Control to the extent that provision is made in writing in
connection with such Change of Control for the assumption or
continuation of the Options and Restricted Stock theretofore
granted, or for the substitution for such Options and Restricted
Stock for new common stock options and new common stock
restricted stock relating to the stock of a successor entity, or
a parent or subsidiary thereof, with appropriate adjustments as
to the number and prices, in which event the Plan and Options
and Restricted Stock theretofore granted shall continue in the
manner and under the terms so provided.
14.4 Adjustments
Adjustments under Section 14 related to shares of
Stock or securities of the Company shall be made by the
Committee, whose determination in that respect shall be final,
binding, and conclusive. No fractional shares or other
securities shall be issued pursuant to any such adjustment, and
any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest
whole share. The Committee may provide in the Award Agreements
at the time of Grant, or any time thereafter with the consent of
the Grantee, for different provisions to apply to a Grant in
place of those described in Sections 14.1, 14.2, and 14.3.
14.5 No limitations on Company
The making of Grants pursuant to the Plan shall
not affect or limit in any way the right or power of the Company
to make adjustments, reclassifications, reorganizations, or
changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all
or any part of its business or assets.
15. Duration and amendments
15.1 Term of the Plan
The Effective Date of this Plan is the date of
its adoption by the Board, subject to the approval of the Plan
by the Company's shareholders. In the event that the
shareholders fail to approve the Plan within twelve (12) months
after its adoption by the Board, any Grants already made shall
be null and void, and no additional Grants shall be made after
such date. The Plan shall terminate automatically ten (10)
years after its adoption by the Board and may be terminated on
any earlier date as next provided.
15.2 Amendment and termination of the Plan
The Board may, at any time and from time to time,
amend, suspend, or terminate the Plan as to any shares of Stock
as to which Grants have not been made. An amendment to the Plan
shall be contingent upon approval of the Company's shareholders
only to the extent required by applicable law, regulations, or
rules. No Grants shall be made after the termination of the
Plan. No amendment, suspension, or termination of the Plan
shall, without the consent of the Grantee, alter or impair
rights or obligations under any Grant theretofore awarded under
the Plan.
16. General provisions
16.1 Disclaimer of rights
No provision in the Plan or in any Grant or Award
Agreement shall be construed to confer upon any individual the
right to remain in the employ or service of the Company or any
Affiliate, or to interfere in any way with any contractual or
other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at
any time, or to terminate any employment or other relationship
between any individual and the Company or any Affiliate. The
obligation of the Company to pay any benefits pursuant to this
Plan shall be interpreted as a contractual obligation to pay
only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a
third party trustee or otherwise hold any amounts in trust or
escrow for payment to any participant or beneficiary under the
terms of the Plan.
16.2 Nonexclusivity of the Plan
Neither the adoption of the Plan nor the
submission of the Plan to the shareholders of the Company for
approval shall be construed as creating any limitations upon the
right and authority of the Board to adopt such other incentive
compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or
specifically to a particular individual or particular
individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock
options otherwise than under the Plan.
16.3 Captions
The use of captions in this Plan or any Award
Agreement is for the convenience of reference only and shall not
affect the meaning of any provision of the Plan or such Award
Agreement.
16.4 Other Award Agreement provisions
Each Grant awarded under the Plan may contain
such other terms and conditions not inconsistent with the Plan
as may be determined by the Committee, in its sole discretion.
16.5 Number and gender
With respect to words used in this Plan, the
singular form shall include the plural form, the masculine
gender shall include the feminine gender, etc., as the context
requires.
16.6 Severability
If any provision of the Plan or any Award
Agreement shall be determined to be illegal or unenforceable by
any court of law in any jurisdiction, the remaining provisions
hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.
16.7 Governing law
The validity and construction of this Plan and
the instruments evidencing the Grants awarded hereunder shall be
governed by the laws of the Commonwealth of Pennsylvania other
than any conflicts or choice of law, rule or principle that
might otherwise refer construction or interpretation of this
Plan and the instruments evidencing the Grants awarded hereunder
to the substantive laws of any other jurisdiction.
17. Execution
To record adoption of the Plan by the Board as of
February 23, 2001, and approval of the Plan by the shareholders
on ______, 2001, the Company has caused its authorized officer
to execute the Plan.
USBANCORP, Inc.
By:_______________________________
Title:____________________________
Exhibit B
USBANCORP, INC.
BOARD AUDIT COMMITTEE CHARTER
Approved by: USBANCORP Board Audit Committee 5/10/2000
U.S. Bank Board of Directors 5/26/2000
USBANCORP, Inc. Board of Directors 5/26/2000
USBANCORP Audit Committee Charter
The Board of Directors of USBANCORP, Inc. has defined the
authority, responsibility, and specific duties of the Board
Audit Committee.
Membership
The Audit Committee shall include six or more USBANCORP,
Inc. board members. Each member must satisfy the independence
and financial literacy standards of National Association of
Securities Dealers, Inc. (NASD), and one member must satisfy the
accounting or related financial Management expertise
requirements of NASD. A director will not be considered
"independent" if, among other things, he or she has:
- been employed by the corporation or its affiliates in
the current or past three years;
- accepted any compensation from the corporation or its
affiliates in excess of $60,000 during the previous
fiscal year (except for board service, retirement
plan benefits, or non-discretionary compensation);
- an immediate family member who is, or has been in the
past three years, employed by the corporation or its
affiliates as an executive officer;
- been a partner, controlling shareholder or an
executive officer of any for-profit business to which
the corporation made, or from which it received,
payments (other than those which arise solely from
investments in the corporation's securities) that
exceed five percent of the organization's
consolidated gross revenues for that year, or
$200,000, whichever is more, in any of the past three
years; or
- been employed as an executive of another entity where
any of the company's executives serve on that
entity's compensation committee.
One member shall be rotating, serving for a period of one
year so that the Audit Committee will annually include a new
member. Members shall be elected annually to serve a term of
one year. One of the members shall be appointed Chairman by the
Chairman of the Board. The Committee shall appoint a Secretary
who shall keep minutes of all meetings. Three members of the
Committee shall constitute a quorum.
Responsibility
The Audit Committee is a committee of the Board of
Directors. Its primary function is to assist the Board in
fulfilling its oversight responsibilities. The Independent
Public Accountant (IPA) ultimate accountability is to the Board
of Directors and the Audit Committee, as representatives of
shareholders. The Committee will review: the financial
information which will be provided to the shareholders and
others, the systems of internal controls which management and
the board of directors have established, compliance with laws
and regulations, as well as providing oversight of the Audit and
Loan Review processes.
In discharging its duty, the Audit Committee may rely on
the evaluations and conclusions of regulatory examiners as well
as internal and/or external auditors utilized by the Committee
in the performance or review of the Audit and Loan Review
functions.
In meeting its responsibilities, the Audit Committee shall:
1. Provide an open avenue of communication between the
internal auditors, the Independent Public Accountant, Regulatory
Authorities, and the Board of Directors.
2. Review and update the Committee's charter annually.
3. Recommend to the Board of Directors the Independent
Public Accountants (IPA) to be appointed, approve the
compensation of the IPA, receive and review all reports,
opinions or assessments issued by the IPA, and review and
approve the discharge of the Independent Public Accountants.
4. Review and concur in the appointment, replacement,
reassignment, or dismissal of the Chief Auditor and the Vice
President of Loan Review.
5. Provide effective oversight of the financial
reporting function:
a. Influence the overall tone for quality
financial reporting, sound internal controls, and ethical
behavior.
b. Oversee the comprehensive risk management
process that identifies, measures and prioritizes business and
financial reporting risks, and monitors the effectiveness of the
control and risk management processes established to manage
those risks. The objective will be satisfied by receiving
periodic written and verbal presentations from an Executive Risk
committee member.
c. Engage in meaningful discussions with the IPA
and with Management about the quality, not just the
acceptability, of financial reporting decisions and judgements.
6. Evaluate and ensure the independence of the Audit
and Loan Review functions and the Independent Public Accountant.
This review should include the evaluation of the formal and
written IPA provided statement regarding relationships and
services which may affect objectivity and independence of the
IPA. The Audit Committee should also, as necessary, discuss any
relevant matters, including those regarding objectivity and
independence, with the independent auditors and recommend that
the full board take appropriate action to address the auditors
independence.
7. Inquire of management, the Chief Auditor, Vice
President of Loan Review, Regulators, as appropriate, and the
Independent Public Accountant about significant risks or
exposures and assess the steps management has taken to minimize
such risk to the company.
8. Consider the Audit and Loan Review scope and plans
to ensure adequate coverage of identified risks.
9. Review with the Chief Auditor and the Independent
Public Accountant the coordination of audit effort to assure
completeness of coverage, reduction of redundant efforts, and
the effective use of comprehensive audit resources.
10. Consider and review with the Independent Public
Accountant and Chief Auditor:
a. The adequacy of the company's internal
controls including computerized information system controls and
security.
b. Any related significant findings and
recommendations of the Independent Public Accountant and
internal auditor together with management's responses thereto.
11. Review with the Independent Public Accountant at the
completion of the annual examination:
a. The company's annual financial statements and
related footnotes.
b. The Independent Public Accountant's audit of
the financial statements and their report thereon.
c. Any significant changes required in the
Independent Public Accountant's audit plan.
d. Any serious difficulties or disputes with
management encountered during the course of the audit.
e. Other matters related to the conduct of the
audit which are to be communicated to the committee under
Generally Accepted Auditing Standards.
f. Significant audit adjustments.
12. Consider and review with the Chief Auditor:
a. Significant findings during the year and
management's responses thereto.
b. Any difficulties encountered in the course of
their audits, including any restrictions on the scope of their
work or access to required information.
c. Any changes required in the planned scope of
their audit plan.
d. The Internal Auditing Department Charter.
e. Internal auditing's compliance with The IIA's
Standards for the Professional Practice of Internal Auditing
(Standards).
13. Ensure that the corporation's quarterly financial
statement are submitted to the IPA for review prior to filing
such statements in the corporation's quarterly report on
Form 10-Q, and review with the Independent Public Accountant
their comfort with filings with the SEC and other published
documents containing the company's financial statements and
consider whether the information contained in these documents is
consistent with the information contained in the financial
statements.
14. Review policies, procedures, and results of testing
with respect to officers' and Directors' expense accounts and
perquisites, including their use of corporate assets.
15. Review with the Chief Auditor and the Independent
Public Accountant the results of their review of the company's
compliance monitoring relative to the company's code of conduct.
16. Review legal and regulatory matters that may have a
material impact on the financial statements, related company
compliance policies, and programs and reports received from
regulators.
17. Meet, on an as needed basis, with the Chief Auditor,
the Independent Public Accountant, the Chairman of the Board
and/or the CEO in separate executive sessions to discuss any
matters that the Committee or these groups believe should be
discussed privately with the Audit Committee.
18. Report Committee actions to the Board of Directors
with such recommendations as the Committee may deem appropriate.
Annually, file a report with the Board summarizing their
performance of oversight responsibilities.
19. Prepare a Proxy statement disclosure which:
a. Discloses whether all Audit Committee members
are independent. If the Board of Directors has appointed a non-
independent member to the Audit Committee, disclose the nature
of the relationship and the reasons for the board's
determination that inclusion of this member is in the best
interests of the company and its shareholders;
b. Disclose whether the Audit Committee is
governed by a written charter, and if so, include a copy of the
charter at least once every three years;
c. Disclose whether the Audit Committee has
reviewed and discussed the audited financial statements with
management;
d. Disclose whether the Audit Committee has
discussed with the independent auditor certain matters required
under SAS No. 61 and whether the Audit Committee has received
and discussed the information required by Independence Standard
Board Standard No. 1 regarding the auditor's independence; and
e. Disclose whether the Audit Committee
recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K.
20. The committee will perform such other functions as
assigned by law, the company's charter or bylaws, or the Board
of Directors.
21. Annually review the staffing levels, salaries, and
qualifications of the personnel in the Audit and Loan Review
functions.
22. Annually review and approve the Audit and Loan
Review budgets ensuring that staff is maintaining technical
proficiency through continued education and the appropriate use
of technology. Consistency with Corporate goals is evaluated by
the Chairman of the Board and concerns would be addressed to the
Audit Committee. The Committee shall also periodically self-
assess the financial literacy and other skills of Committee
members against those skills that are needed to fulfill the
Committees responsibilities. The Committee, with the assistance
of Management, should develop and implement a skill enhancement
plan to eliminate any skill gaps. The Committee should also
periodically solicit feedback on the skill requirements and
skill gaps of the Audit Committee as perceived by the Board of
Directors, Executive Management, the Chief Internal Auditor and
the IPA.
23. Apprise the Board of Directors, as necessary, of
significant developments or concerns relative to Audit or Loan
Review responsibilities/efforts or findings.
24. The Audit Committee will review all notifications
from the CFO relative to significant accounting principle
changes, solicitations of second opinions, and corrections of
call reports.
25. The Committee will review and approve/ratify
material modifications impacting the work performed by Audit or
Loan Review.
26. The Audit Committee will review reports presented by
Loan Review as a means of recognizing and monitoring the
independent validation function relative to credit risk
management.
27. The Audit Committee will periodically evaluate the
source and composition of comprehensive Audit resources to
ensure that the volume of resources and competencies are
appropriate to meet the needs of the Committee and organization.
Authority
The Audit Committee shall be granted the authority to
conduct or authorize investigation into any matters within the
Committee's scope of responsibilities. The Committee or its
designees are empowered to obtain the full cooperation of any
employee when conducting the investigation. In addition, the
Committee is granted the authority to retain independent
counsel, accountants, or others to assist in the conduct of any
investigation/inquiry.
Meetings
The Audit Committee shall meet at least six times annually
and at any other time as that Committee deems necessary to
fulfill its obligations. Each member must attend, in person, at
least three Committee meetings during the 12 month audit period
of 10/1/XX through 9/30/XX. The Committee Chairman will be
responsible for scheduling meetings. As necessary or desirable,
the Chairman of the Committee shall have the authority to
request the presence at any meeting of any person who could
contribute to the subject of the meeting. This could include
members of management, representatives of the IPA, or outside
consultants. The specific meeting dates, times and locations
are included in the annual audit plan.
Minutes
Minutes of each meeting will be taken and prepared by the
Committee Secretary, who will retain in a permanent file a copy
of all Audit Committee Meeting Minutes. In addition, the
Minutes will be a part of the regular agenda at subsequent
scheduled full board meetings.
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