What are the key performance metrics tied to the Retention Units?

The vesting of the Retention Units is tied to the company's average Return on Equity (ROE) over the three-year period of 2010, 2011, and 2012. Specifically, the average ROE must be equal to or above the 50th percentile of the average ROE of a pre-established peer group during that same period.

What is the potential financial impact of these Retention Units for CEO Richard K. Davis?

Richard K. Davis was awarded Retention Units valued at $7 million. This award is 140% of his annual long-term equity incentive award. The actual payout depends on U.S. Bancorp meeting the specified performance targets related to its return on equity.

Under what conditions can the Retention Units be forfeited?

The Retention Units will be forfeited if the executive officer ceases to be employed by the Company or an affiliate, unless specific exceptions apply (e.g., disability, retirement under certain conditions, death). Most critically, if the company fails to meet the performance target (average ROE at or above the 50th percentile of peers for 2010-2012), all unvested Retention Units will be forfeited. They can also be forfeited if an executive violates confidentiality or non-solicitation agreements.

How do these Retention Units differ from the annual long-term incentive awards?

The Retention Units are described as 'special, one-time' awards specifically designed to retain key executives by linking a significant portion of their potential compensation to future company performance (ROE percentile ranking over three years). The annual long-term incentive awards, also granted on the same date, were composed of performance-based restricted stock units and stock options, and were valued separately. Mr. Davis's annual award was valued at $5 million.

US BANCORP \DE\ 8-K: Leadership Changes

Summary

This 8-K filing from U.S. Bancorp (USB) details significant executive compensation changes approved on February 16, 2010. The core of the announcement revolves around the issuance of special, one-time retention awards in the form of performance-restricted stock units (Retention Units) to the company's Managing Committee, including CEO Richard K. Davis. These awards are designed to incentivize key leadership to remain with the company and achieve specific performance targets over a three-year period (2010-2012). The primary condition for the vesting of these Retention Units is the company's average return on equity (ROE) meeting or exceeding the 50th percentile of its peer group over 2010, 2011, and 2012. If this performance target is met, the awards vest over a three-to-five-year period. Failure to meet the target results in forfeiture of all Retention Units. This structure clearly ties executive compensation to the company's sustained financial performance and market competitiveness, particularly in the challenging economic climate of 2010.

Key Highlights

1U.S. Bancorp awarded special, one-time retention awards (Performance Restricted Stock Units) to its Managing Committee on February 16, 2010.
2The vesting of these Retention Units is contingent on achieving an average Return on Equity (ROE) that ranks at or above the 50th percentile of a peer group for the years 2010-2012.
3If the performance target is met, 50% of the Retention Units vest on the third anniversary of the grant date, with the remaining 50% vesting on the fourth and fifth anniversaries.
4Failure to achieve the specified ROE performance target will result in the forfeiture of all Retention Units.
5CEO Richard K. Davis received a retention award valued at $7 million, representing 140% of his annual long-term incentive award.
6Other Managing Committee members received retention awards ranging from 44% to 133% of their annual long-term incentive grants.
7The awards are granted under the shareholder-approved U.S. Bancorp 2007 Stock Incentive Plan.

US BANCORP \DE\ 8-K Report, Executive Changes (Feb 18, 2010)

Summary

Key Highlights

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