Executives of U.S. Bancorp initially didn't want to sell to First Bank System Inc., but they are likely to be richly rewarded for doing so.
Gerry B. Cameron, U.S. Bancorp's chairman and chief executive officer, would get $5.95 million in cash once shareholders approve the company's sale to First Bank. The deal is scheduled for a vote July 31, according to proxy materials released Tuesday.
The Portland, Ore., banking company justifies the payment as something Mr. Cameron "would have been entitled to under (his) existing employment agreements with USBC if (he) had been terminated without cause," according to the proxy.
About 4,000 First Bank and U.S. Bancorp employees are expected to lose their jobs as a result of the blockbuster merger. Mr. Cameron, 58, is to become chairman of the new company, which would be called U.S. Bancorp but be based in Minneapolis, where First Bank System is headquartered.
U.S. Bancorp spokesman Karen Tolstad said Mr. Cameron stands to get the payment as an incentive to stay with the company. "We've seen through other takeovers in our business, especially hostile takeovers, how important continuity of management is," Ms. Tolstad said.
Mr. Cameron is to retire next year, according to the proxy.
His nearly $6 million bonus to stick around a year is only one of the many considerations in the $8.4 billion deal, the largest unveiled in the banking industry this year.
Two other U.S. Bancorp executives are getting the same sort of "severance package" as Mr. Cameron. They are Robert D. Sznewajs, vice chairman, who stands to get $3.54 million, and Gary T. Duim, executive vice president, who is to receive $2.86 million. Mr. Duim and Mr. Sznewajs would both become vice chairmen at the new banking company, the proxy stated.
An unspecified number of other top U.S. Bancorp officers are to split $18.6 million among them.
The investment bankers and lawyers who prepared the deal will get $39 million. Merrill Lynch & Co., which advised First Bank, will get $10 million for its services. U.S. Bancorp's adviser, Credit Suisse First Boston, will get $14 million.
It was not disclosed exactly how much will be paid First Bank's law firms-Sullivan & Cromwell and Cleary, Gottlieb, Steen & Hamilton - nor to U.S. Bancorp's-Wachtell, Lipton, Rosen & Katz.
Mr. Cameron has said publicly that he did not initially expect to sell to First Bank. And the proxy indicates deep board disagreement over how to respond to First Bank chief executive John F. Grundhofer's overture.
When Mr. Cameron notified his board on Feb. 20 of First Bank's interest, according to the proxy, "there was extensive discussion among the directors concerning the desirability of continuing discussions with FBS."
In fact, the board voted not to pursue the matter, according to the proxy. But after the meeting "several directors" contacted Mr. Cameron to encourage him to investigate "strategic alternatives."
The board authorized negotiations March 11, and the deal was announced March 20.
After the merger is completed, Mr. Cameron will be paid at least $1.6 million for becoming chairman. He would also get 75,000 shares and options on 200,000 more. Upon his retirement he would get $1 million per year for life and his wife would receive $500,000 per year should she survive him.
