THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS
NOT COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES AND ARE NOT SOLICITING ANY
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Filed pursuant to Rule 424(b)(5)
Registration No. 333-65358
SUBJECT TO COMPLETION, DATED NOVEMBER 28, 2001
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 25, 2001)
12,000,000 SECURITIES
USB CAPITAL V
% TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED BY
[U.S. BANCORP]
------------------
The % Trust Preferred Securities, each with $25 liquidation amount,
are referred to in this prospectus supplement as the "capital securities." A
brief description of the capital securities can be found under "Summary" in this
prospectus supplement.
The capital securities have been approved for listing on the New York Stock
Exchange under the symbol "USB Pr D," subject to official notice of issuance.
Trading of the capital securities on the New York Stock Exchange is expected to
commence within 30 days of the date of this prospectus supplement.
INVESTING IN THE CAPITAL SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE S-9.
These securities and the junior subordinated debentures are not deposits or
other obligations of a bank. They are not insured by the FDIC or any other
government agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
------------------
PER CAPITAL
SECURITY TOTAL
----------- -----
Public offering price $ $
Underwriting commission to be paid by U.S. Bancorp $ $
Proceeds (before expenses) to USB Capital V $ $
Any accrued distributions on the capital securities from , 2001
should be added to the public offering price.
The underwriters expect to deliver the capital securities in book-entry
form only through The Depository Trust Company on or about , 2001.
------------------
MERRILL LYNCH & CO. SALOMON SMITH BARNEY U.S. BANCORP PIPER JAFFRAY
BANC OF AMERICA SECURITIES LLC
MORGAN STANLEY
UBS WARBURG
------------------
The date of this prospectus supplement is , 2001
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Summary..................................................... S-3
Risk Factors................................................ S-9
Forward-Looking Statements.................................. S-11
U.S. Bancorp................................................ S-12
USB Capital V............................................... S-12
Use of Proceeds............................................. S-13
Accounting Treatment........................................ S-14
Regulatory Treatment........................................ S-14
Capitalization.............................................. S-15
Ratios of Earnings to Fixed Charges and to Combined Fixed
Charges and Preferred Stock Dividends..................... S-15
Certain Terms of the Capital Securities..................... S-16
Certain Terms of the Junior Subordinated Debentures......... S-22
Relationship Among the Capital Securities, the Junior
Subordinated Debentures and the Guarantee................. S-24
United States Federal Income Tax Consequences............... S-26
ERISA Considerations........................................ S-31
Underwriting................................................ S-35
Legal Opinions.............................................. S-36
Experts..................................................... S-37
PROSPECTUS
About this Prospectus....................................... 3
Where You Can Find More Information......................... 3
About U.S. Bancorp.......................................... 4
About the Trusts............................................ 5
Use of Proceeds............................................. 5
Ratios of Earnings to Fixed Charges and to Combined Fixed
Charges and Preferred Stock Dividends..................... 6
Description of Junior Subordinated Debt Securities.......... 6
Description of Capital Securities........................... 15
Description of the Guarantee................................ 23
Relationship among the Capital Securities, the Corresponding
Junior Subordinated Debt Securities and the Guarantees.... 24
Book-Entry Issuance......................................... 25
Plan of Distribution........................................ 27
Validity of Securities...................................... 28
Experts..................................................... 28
Glossary.................................................... 29
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. This
prospectus supplement and the prospectus may be used only for the purpose for
which they have been prepared. No one is authorized to give information other
than that contained in this prospectus supplement and the prospectus and in the
documents referred to in this prospectus supplement and the prospectus and which
are made available to the public. We have not, and the underwriters have not,
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it.
We are not, and the underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information appearing in this prospectus supplement,
the prospectus or any document incorporated by reference is accurate as of any
date other than the date of the applicable document. Our business, financial
condition, results of operations and prospects may have changed since that date.
This prospectus supplement and the accompanying prospectus do not constitute an
offer, or an invitation on our behalf or on behalf of the underwriters, to
subscribe for and purchase, any of the capital securities, and may not be used
for or in connection with an offer or solicitation by anyone, in any
jurisdiction in which such an offer or solicitation is not authorized or to any
person to whom it is unlawful to make such an offer or solicitation.
S-2
SUMMARY
The following information should be read together with the information
contained in other parts of this prospectus supplement and in the accompanying
prospectus. It may not contain all the information that is important to you. You
should carefully read this entire prospectus supplement and the accompanying
prospectus to understand fully the terms of the capital securities and the
related guarantee and junior subordinated debentures, as well as the tax and
other considerations that are important to you in making a decision about
whether to invest in the capital securities. You should pay special attention to
the "Risk Factors" section of this prospectus supplement to determine whether an
investment in the capital securities is appropriate for you.
ABOUT U.S. BANCORP
We are a multi-state financial services holding company formed by the
merger of U.S. Bancorp and Firstar Corporation in February 2001. We are a bank
holding company registered under the Bank Holding Company Act and are
incorporated in Delaware. We are also a financial holding company under the Bank
Holding Company Act. We operate over 2,200 banking offices in 24 states in the
Midwest, South and West. We provide comprehensive banking, trust, investment and
payment systems products and services to consumers, businesses and institutions.
We operate a network of 5,200 branded ATMs and provide 24-hour,
seven-days-a-week telephone customer service. We also offer full-service
brokerage services at approximately 100 offices through U.S. Bancorp Piper
Jaffray. In addition, we are the largest provider of Visa corporate and
purchasing cards in the world, and are one of the largest providers of corporate
trust services in the nation. At September 30, 2001, we and our consolidated
subsidiaries, on a combined basis, reflecting the merger of U.S. Bancorp and
Firstar Corporation, had consolidated assets of $168.0 billion, consolidated
deposits of $104.0 billion and shareholders' equity of $17.0 billion.
Our banking subsidiaries are engaged in general commercial banking
business, principally in domestic markets. They range in size from less than
$1.0 million to over $100.0 billion in deposits and provide a wide variety of
services to individuals, businesses, industry, institutional organizations,
governmental entities and other financial institutions. Depository services
include checking accounts, savings accounts and time certificate contracts.
Ancillary services such as treasury management and receivable lockbox collection
are provided for corporate customers. Our bank and trust subsidiaries provide a
full range of fiduciary activities for individuals, estates, foundations,
business corporations and charitable organizations.
We provide banking services, through our subsidiary banks, to both domestic
and foreign customers and correspondent banks. These services include consumer
banking, commercial lending, financing of import/export trade, foreign exchange
and investment services. We also provide, through our non-bank subsidiaries,
services in trust, commercial and agricultural finance, data processing,
leasing, investment banking and brokerage services.
ABOUT USB CAPITAL V
USB Capital V is a business trust organized under Delaware law by the
trustees and us. USB Capital V was established solely for the following
purposes:
- to issue the capital securities, which represent undivided beneficial
ownership interests in USB Capital V's assets, in exchange for our junior
subordinated debentures;
- to issue the common securities to us in a total liquidation amount equal
to at least 3% of USB Capital V's total capital in exchange for our
junior subordinated debentures;
- to maintain USB Capital V's status as a grantor trust for federal income
tax purposes; and
- to engage in other activities that are directly related to the activities
described above, such as registering the transfer of the capital
securities.
Because USB Capital V was established only for the purposes listed above,
the junior subordinated debentures will be USB Capital V's sole assets. Payments
on the junior subordinated debentures will be USB Capital V's sole source of
income. USB Capital V will issue only one series of capital securities.
S-3
THE OFFERING
TITLE...................... USB Capital V % Trust Preferred Securities.
SECURITIES OFFERED......... 12,000,000 capital securities in denominations of
$25 each with an aggregate liquidation amount of
$300,000,000. Each capital security will represent
an undivided beneficial ownership interest in the
assets of USB Capital V. Each capital security will
entitle its holder to receive quarterly cash
distributions as described below.
USB CAPITAL V.............. The issuer of the capital securities is USB Capital
V, a Delaware business trust. We created it for the
sole purpose of issuing the capital securities and
common securities to us in exchange for our %
junior subordinated debentures due 2031 and
engaging in the other transactions described below.
USB Capital V has five trustees. The three
administrative trustees are officers of U.S.
Bancorp. First Union Trust Company, National
Association will act as the property trustee and
the Delaware trustee of USB Capital V.
USB Capital V will hold the junior subordinated
debentures that it receives from us in exchange for
the issuance of capital securities and common
securities to us. We will sell the capital
securities to the public and retain the common
securities that we receive from USB Capital V. We
will pay interest on the junior subordinated
debentures at the same rate and at the same times
as USB Capital V makes payments on the capital
securities. USB Capital V will use the payments it
receives on the junior subordinated debentures to
make the corresponding payments on the capital
securities. We will guarantee payments made on the
capital securities to the extent described below.
Both the junior subordinated debentures and the
guarantee will be subordinated to the holders of
our existing and future senior debt.
DISTRIBUTIONS.............. If you purchase the capital securities, as an
undivided beneficial owner in the junior
subordinated debentures, you will be entitled to
receive cumulative cash distributions at an annual
rate of %. Interest on the junior subordinated
debentures will accrue, and as a result
distributions on the capital securities will
accumulate, from the date of issuance, and will be
paid quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year,
beginning March 15, 2002, unless they are deferred
as described below.
DISTRIBUTION DEFERRAL...... We can, on one or more occasions, defer the
quarterly interest payments on the junior
subordinated debentures for up to 20 consecutive
quarterly periods. In other words, we may declare
at our discretion up to a five-year interest
payment moratorium on the junior subordinated
debentures and may choose to do that on more than
one occasion. A deferral of interest payments
cannot extend, however, beyond the maturity date of
the junior subordinated debentures, nor can we
begin a new interest deferral period until we have
paid all accrued interest on the junior
subordinated debentures from the previous interest
deferral period.
If we defer interest payments on the junior
subordinated debentures, USB Capital V will also
defer distributions on the capital securities.
S-4
Any deferred interest on the junior subordinated
debentures will accrue additional interest at an
annual rate of %, and, as a result, any
deferred distributions will accumulate additional
amounts at an annual rate of %, compounded
quarterly. Once we pay all deferred interest
payments on the junior subordinated debentures,
with accrued interest, we can again defer interest
payments on the junior subordinated debentures as
described above, but not beyond the maturity date
of the junior subordinated debentures.
During any period in which we defer interest
payments on the junior subordinated debentures, we
will not and our subsidiaries will not do any of
the following, with certain limited exceptions:
- declare or pay any dividends or distributions, or
redeem, purchase, acquire, or make a liquidation
payment on any of our capital stock;
- make any payment of principal of interest or
premium, if any, on or repay, repurchase or
redeem any of our debt securities (including
other junior subordinated debentures) that rank
equally with or junior in interest to the junior
subordinated debentures; or
- make any guarantee payments on any guarantee of
debt securities of any of our subsidiaries
(including under other guarantees of junior
subordinated debentures) if the guarantee ranks
equally with or junior in interest to the junior
subordinated debentures, except in some
circumstances.
If we defer payments of interest on the junior
subordinated debentures, the junior subordinated
debentures will be treated at that time as being
issued with original issue discount for United
States federal income tax purposes. This means you
would be required to accrue interest income in an
amount equal to the deferred distributions on your
capital securities even though you would not be
receiving any cash distributions on your capital
securities. These amounts would be included in your
gross income for United States federal income tax
purposes. For more information, see below under the
caption "United States Federal Income Tax
Consequences" in this prospectus supplement.
REDEMPTION................. USB Capital V will redeem all of the outstanding
capital securities when the junior subordinated
debentures are repaid at maturity. The junior
subordinated debentures are scheduled to mature on
December 15, 2031.
In addition, if we redeem any junior subordinated
debentures before their maturity, USB Capital V
will use the cash it receives on the redemption of
the junior subordinated debentures to redeem, on a
proportionate basis, the capital securities and the
common securities. We can redeem the junior
subordinated debentures before their maturity at
100% of their principal amount plus accrued and
unpaid interest in whole or in part on one or more
occasions any time on or after , 2006, or
in whole at any time if certain changes occur in
tax or investment company laws and regulations or
in the treatment of the capital securities for bank
regulatory purposes. These circumstances are more
fully described below under the caption
S-5
"Certain Terms of the Capital
Securities -- Redemption" in this prospectus
supplement.
We will not redeem the junior subordinated
debentures unless we obtain the prior approval of
the Board of Governors of the Federal Reserve
System to do so, if then required under the Federal
Reserve Board's capital rules.
LIQUIDATION PREFERENCE..... Upon any dissolution, winding-up or liquidation of
USB Capital V involving the liquidation of the
junior subordinated debentures, the holders of the
capital securities will be entitled to receive, out
of assets held by USB Capital V, subject to the
rights of any creditors of USB Capital V, the
liquidation distribution in cash. USB Capital V
will be able to make this distribution of cash only
if we redeem the junior subordinated debentures.
THE GUARANTEE.............. We will fully and unconditionally guarantee the
payments of all amounts due on the capital
securities to the extent USB Capital V has funds
available for payment of such distributions.
We also are obligated to pay most of the expenses
and obligations of USB Capital V (other than USB
Capital V's obligations to make payments on the
capital securities and common securities, which are
covered only by the guarantee).
The guarantee does not cover payments when USB
Capital V does not have sufficient funds to make
payments on the capital securities. In other words,
if we do not make a payment on the junior
subordinated debentures, USB Capital V will not
have sufficient funds to make payments on the
capital securities, and the guarantee will not
obligate us to make those payments on USB Capital
V's behalf. In addition, our obligations under the
guarantee are subordinate to our obligations to
other creditors to the same extent as the junior
subordinated debentures. For more information, see
"Description of the Guarantee" in the accompanying
prospectus.
DISSOLUTION OF USB CAPITAL
V AND DISTRIBUTIONS OF THE
JUNIOR SUBORDINATED
DEBENTURES............... We can dissolve USB Capital V at any time, subject
to obtaining the prior approval of the Federal
Reserve Board to do so, if then required under the
Federal Reserve Board's capital rules.
If we dissolve USB Capital V, or if USB Capital V
dissolves because of certain other specified events
(such as our bankruptcy), USB Capital V will
distribute the junior subordinated debentures to
holders of the capital securities and the common
securities on a proportionate basis.
USE OF PROCEEDS............ The net proceeds from the offering of the capital
securities are estimated to be $ . We
intend to use all of the proceeds from the sale of
the capital securities for general corporate
purposes. We expect the capital securities to
qualify as Tier 1 capital under the capital
guidelines of the Federal Reserve Board.
LISTING.................... The capital securities have been approved for
listing on the New York Stock Exchange. Trading is
expected to commence within 30 days
S-6
after the capital securities are first issued. You
should be aware that the listing of the capital
securities will not necessarily ensure that an
active trading market will be available for the
capital securities or that you will be able to sell
your capital securities at the price you originally
paid for them.
If USB Capital V distributes the junior
subordinated debentures, we will use our best
efforts to list them on the New York Stock Exchange
or wherever the capital securities are then listed.
FORM OF THE CAPITAL
SECURITIES................. The capital securities will be represented by one
or more global securities that will be deposited
with and registered in the name of The Depository
Trust Company, New York, New York. This means that
you will not receive a certificate for your capital
securities and the capital securities will not be
registered in your name. For more details, see the
information under the caption "Book-Entry Issuance"
in the accompanying prospectus.
S-7
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA OF U.S. BANCORP AND SUBSIDIARIES
We provide below selected consolidated financial data of our company as of
and for the periods specified. You should read the data below with the more
detailed information, consolidated financial statements and the notes to the
consolidated financial statements that we refer you to in the accompanying
prospectus under the caption "Where You Can Find More Information".
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------
2001 2000 2000 1999 1998
-------- -------- -------- -------- --------
($ AND SHARES IN MILLIONS,
EXCEPT PER SHARE DATA)
CONDENSED INCOME STATEMENT
Net interest income (taxable-equivalent
basis)...................................... $4,779.9 $4,572.8 $6,135.0 $5,932.7 $5,676.2
Securities gains, net......................... 307.1 1.1 8.1 13.2 29.1
Other noninterest income...................... 3,666.5 3,617.2 4,875.1 4,231.7 3,620.9
Merger and restructuring related charges...... 1,125.8 264.6 348.7 532.8 593.8
Other noninterest expense..................... 4,154.9 4,020.5 5,368.3 5,128.5 4,829.6
Provision for credit losses................... 1,880.8 598.5 828.0 646.0 491.3
-------- -------- -------- -------- --------
Income before taxes........................... 1,592.0 3,307.5 4,473.2 3,870.3 3,411.5
Taxable-equivalent adjustment................. 46.0 64.7 85.4 96.3 111.2
Income taxes.................................. 534.9 1,135.9 1,512.2 1,392.2 1,167.4
-------- -------- -------- -------- --------
Net income.................................... $1,011.1 $2,106.9 $2,875.6 $2,381.8 $2,132.9
-------- -------- -------- -------- --------
FINANCIAL RATIOS
Return on average assets...................... 0.82% 1.79% 1.81% 1.59% 1.49%
Return on average equity...................... 8.4 19.7 20.0 18.0 17.2
Net interest margin (taxable-equivalent
basis)...................................... 4.40 4.38 4.36 4.44 4.44
Efficiency ratio.............................. 58.3 52.3 51.9 55.7 58.3
Banking efficiency ratio(1)................... 53.5 47.5 46.8 52.0 56.1
PER COMMON SHARE
Earnings per share............................ $ 0.53 $ 1.10 $ 1.51 $ 1.25 $ 1.12
Diluted earnings per share.................... 0.52 1.10 1.50 1.23 1.10
Dividends declared............................ 0.5625 0.4875 0.65 0.4625 0.33
SELECTED FINANCIAL RATIOS EXCLUDING MERGER AND
RESTRUCTURING RELATED ITEMS
Return on average assets...................... 1.43% 1.94% 2.03% 1.94% 1.91%
Return on average equity...................... 14.7 21.4 22.4 22.0 22.0
Efficiency ratio.............................. 49.2 49.1 48.8 50.5 51.9
Banking efficiency ratio(1)................... 44.7 44.1 43.5 46.3 49.4
AVERAGE BALANCE SHEET DATA
Loans......................................... $119,535 $116,992 $118,317 $109,638 $102,451
Loans held for sale........................... 1,634 1,376 1,303 1,450 1,264
Investment securities......................... 20,712 17,448 17,311 19,271 21,114
Earning assets................................ 145,001 139,470 140,606 133,757 127,738
Assets........................................ 165,148 157,129 158,481 150,167 142,887
Noninterest bearing deposits.................. 24,408 23,792 23,820 23,556 23,011
Deposits...................................... 105,663 102,911 103,426 99,920 98,940
Short-term borrowings......................... 12,293 12,192 12,586 11,707 11,102
Long-term debt................................ 24,304 22,413 22,410 20,248 15,732
Total shareholders' equity.................... 16,012 14,257 14,365 13,221 12,383
Average shares outstanding.................... 1,919.9 1,909.5 1,906.0 1,907.8 1,898.8
Average diluted shares outstanding............ 1,932.9 1,922.1 1,918.5 1,930.0 1,930.5
YEAR-END BALANCE SHEET DATA
Loans......................................... $114,567 $121,283 $122,365 $113,229 $106,958
Investment securities......................... 25,628 16,714 17,642 17,449 20,965
Assets........................................ 167,830 160,765 164,921 154,318 150,714
Deposits...................................... 103,805 104,675 109,535 103,417 104,346
Long-term debt................................ 26,881 22,971 21,876 21,027 18,679
Company-obligated mandatorily redeemable
preferred securities........................ 2,115 1,400 1,400 1,400 1,400
Total shareholders' equity.................... 16,817 14,334 15,168 13,947 12,574
---------------
(1) Without investment banking and brokerage activity.
S-8
RISK FACTORS
Before purchasing any capital securities, you should read carefully this
prospectus supplement and the accompanying prospectus and pay special attention
to the following risk factors.
Because USB Capital V will rely on the payments it receives on the junior
subordinated debentures to fund all payments on the capital securities, and
because USB Capital V may distribute the junior subordinated debentures in
exchange for the capital securities, you are making an investment regarding the
junior subordinated debentures as well as the capital securities. You should
carefully review the information in this prospectus supplement and the
accompanying prospectus about the capital securities, the guarantee and the
junior subordinated debentures.
HOLDERS OF OUR SENIOR INDEBTEDNESS WILL GET PAID BEFORE YOU WILL GET PAID UNDER
THE GUARANTEE
Our obligations to you under the junior subordinated debentures and the
guarantee will be junior in right of payment to all of our existing and future
senior debt. This means that we cannot make any payments to you on the junior
subordinated debentures or the guarantee if we are in default on any of our
senior debt. Therefore, in the event of our bankruptcy, liquidation or
dissolution, our assets must be used to pay off our senior obligations in full
before any payments may be made on the junior subordinated debentures or the
guarantee.
As of September 30, 2001, we had outstanding senior debt of approximately
$11.1 billion. The indenture pursuant to which the junior subordinated
debentures will be issued, the guarantee and the certificate of trust which
created USB Capital V, do not limit our ability to incur additional senior debt.
For more information, see below under the captions "Certain Terms of the
Junior Subordinated Debentures -- Ranking" in this prospectus supplement and
"Description of the Guarantee -- Status of Guarantees" in the accompanying
prospectus.
OUR RESULTS OF OPERATIONS DEPEND UPON THE RESULTS OF OPERATIONS OF OUR
SUBSIDIARIES
We are a holding company that conducts substantially all of our operations
through our banks and other subsidiaries. As a result, our ability to make
payments on the junior subordinated debentures and the guarantee will depend
primarily upon the receipt of dividends and other distributions from our
subsidiaries.
There are various regulatory restrictions on the ability of our banking
subsidiaries to pay dividends or make other payments to us. At September 30,
2001, our banking subsidiaries could pay a total of approximately $470.6 million
in dividends to us without prior regulatory approval.
In addition, our right to participate in any distribution of assets of any
of our subsidiaries upon the subsidiary's liquidation or otherwise, and thus
your ability as a holder of the capital securities to benefit indirectly from
such distribution, will be subject to the prior claims of creditors of that
subsidiary, except to the extent that any of our claims as a creditor of such
subsidiary may be recognized. As a result, the capital securities will
effectively be subordinated to all existing and future liabilities and
obligations of our subsidiaries. Therefore, holders of the capital securities
should look only to our assets for payments on the capital securities. Further,
the junior subordinated debentures and the guarantee also will be effectively
subordinated to all existing and future obligations of our subsidiaries.
At September 30, 2001, our subsidiaries had outstanding debt and other
liabilities, including deposits, of approximately $151.0 billion.
IF WE DO NOT MAKE PAYMENTS ON THE JUNIOR SUBORDINATED DEBENTURES, USB CAPITAL V
WILL NOT BE ABLE TO PAY DISTRIBUTIONS AND OTHER PAYMENTS ON THE CAPITAL
SECURITIES AND THE GUARANTEE WILL NOT APPLY
USB Capital V's ability to make timely distribution and redemption payments
on the capital securities is completely dependent upon our making timely
payments on the junior subordinated debentures. If we default on the junior
subordinated debentures, USB Capital V will lack funds for the payments on the
S-9
capital securities. If this happens, holders of capital securities will not be
able to rely upon the guarantee for payment of such amounts because the
guarantee only guarantees that we will make distribution and redemption payments
on the capital securities if USB Capital V has the funds to do so itself but
does not. Instead, you or the property trustee may proceed directly against us
for payment of any amounts due on the capital securities.
For more information, see below under the caption "Certain Terms of the
Capital Securities -- Trust Enforcement Events" in this prospectus supplement.
DISTRIBUTIONS ON THE CAPITAL SECURITIES COULD BE DEFERRED; YOU MAY HAVE TO
INCLUDE INTEREST IN YOUR TAXABLE INCOME BEFORE YOU RECEIVE CASH
As long as the junior subordinated debentures are not in default, we can,
on one or more occasions, defer interest payments on the junior subordinated
debentures for up to 20 consecutive quarterly periods, but not beyond the
maturity date of the junior subordinated debentures. Because interest payments
on the junior subordinated debentures fund the distributions on the capital
securities, each such deferral would result in a corresponding deferral of
distributions on the capital securities.
We do not intend to defer interest payments on the junior subordinated
debentures. However, if we do so in the future, the capital securities may trade
at a price that does not reflect fully the value of the accrued but unpaid
distributions. Even if we do not do so, our right to defer interest payments on
the junior subordinated debentures could mean that the market price for the
capital securities may be more volatile than that of other securities without
interest deferral rights.
If we defer interest payments on the junior subordinated debentures, you
will be required to accrue interest income for United States federal income tax
purposes in respect of your proportionate share of the accrued but unpaid
interest on the junior subordinated debentures held by USB Capital V, even if
you normally report income when received. As a result, you will be required to
include the accrued interest in your gross income for United States federal
income tax purposes prior to your receiving any cash distribution. If you sell
your capital securities prior to the record date for the first distribution
after a deferral period, you will never receive the cash from us related to the
accrued interest that you reported for tax purposes. YOU SHOULD CONSULT WITH
YOUR OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE
CAPITAL SECURITIES.
For more information regarding the tax consequences of purchasing the
capital securities, see below under the caption "United States Federal Income
Tax Consequences -- Interest Income and Original Issue Discount" and "-- Sales
of Capital Securities or Redemption of Junior Subordinated Debentures" in this
prospectus supplement.
THE CAPITAL SECURITIES MAY BE REDEEMED PRIOR TO MATURITY; YOU MAY BE TAXED ON
THE PROCEEDS AND YOU MAY NOT BE ABLE TO REINVEST THE PROCEEDS AT THE SAME OR A
HIGHER RATE OF RETURN
The junior subordinated debentures (and therefore the capital securities)
may be redeemed in whole or in part on one or more occasions any time on or
after , 2006 or in whole upon the occurrence of certain special events
relating to changes in tax law, the Investment Company Act of 1940 or the
treatment of the capital securities for bank regulatory capital purposes,
subject to receipt of any necessary Federal Reserve Board approval. The
redemption price for the junior subordinated debentures would be equal to 100%
of the principal amount plus accrued and unpaid interest. If such a redemption
happens, USB Capital V must use the redemption price it receives to redeem on a
proportionate basis capital securities and common securities having an aggregate
liquidation amount equal to the aggregate principal amount of the junior
subordinated debentures redeemed.
The redemption of the capital securities would be a taxable event to you
for United States federal income tax purposes.
In addition, you may not be able to reinvest the money that you receive in
the redemption at a rate that is equal to or higher than the rate of return on
the capital securities.
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FEDERAL BANKING AUTHORITIES MAY RESTRICT THE ABILITY OF USB CAPITAL V TO MAKE
DISTRIBUTIONS ON OR REDEEM THE CAPITAL SECURITIES
Federal banking authorities will have the right to examine USB Capital V
and its activities because USB Capital V is our subsidiary. Under certain
circumstances, including any determination that our relationship to USB Capital
V would result in an unsafe and unsound banking practice, these banking
authorities have the authority to issue orders which could restrict the ability
of USB Capital V to make distributions on or to redeem the capital securities.
AN ACTIVE TRADING MARKET FOR THE CAPITAL SECURITIES MAY NOT DEVELOP
The capital securities have been approved for listing on the New York Stock
Exchange. Trading is expected to commence within 30 days after the capital
securities are first issued. You should be aware that the listing of the capital
securities will not necessarily ensure that an active trading market will be
available for the capital securities or that you will be able to sell your
capital securities at the price you originally paid for them.
WE GENERALLY WILL CONTROL USB CAPITAL V BECAUSE YOUR VOTING RIGHTS ARE VERY
LIMITED
You will only have limited voting rights. In particular, you may not elect
and remove any trustees, except when there is a default under the junior
subordinated debentures. If such a default occurs, a majority in liquidation
amount of the holders of the capital securities would be entitled to remove or
appoint the property trustee and the Delaware trustee.
For more information, see below under the caption "USB Capital V" in this
prospectus supplement.
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus contain
forward-looking statements. Statements that are not historical or current facts,
including statements about beliefs and expectations, are forward-looking
statements. Forward-looking statements involve inherent risks and uncertainties,
and important factors could cause actual results to differ materially from those
anticipated, including the following, in addition to those contained elsewhere
in this prospectus supplement and the accompanying prospectus and in our reports
on file with the Securities and Exchange Commission: (i) our investments in our
businesses and in our Internet development could require additional incremental
spending, and might not produce expected deposit and loan growth and anticipated
contributions to our earnings; (ii) general economic or industry conditions
could be less favorable than expected, resulting in a deterioration in credit
quality, a change in the allowance for credit losses, or a reduced demand for
credit or fee-based products and services; (iii) changes in the domestic
interest rate environment could reduce net interest income and could increase
credit losses; (iv) the conditions of the securities markets could change,
adversely affecting revenues from capital markets businesses, the value or
credit quality of our on-balance sheet and off-balance sheet assets, or the
availability and terms of funding necessary to meet our liquidity needs; (v)
changes in the extensive laws, regulations and policies governing financial
services companies could alter our business environment or affect operations;
(vi) the potential need to adapt to industry changes in information technology
systems, on which we are highly dependent, could present operational issues or
require significant capital spending; (vii) competitive pressures could
intensify and affect our profitability, including as a result of continued
industry consolidation, the increased availability of financial services from
non-banks, technological developments such as the Internet, or bank regulatory
reform; and (viii) acquisitions may not produce revenue enhancements or cost
savings at levels or within time frames originally anticipated, or may result in
unforeseen integration difficulties. Forward-looking statements speak only as of
the date they are made, and we undertake no obligation to update them in light
of new information or future events.
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U.S. BANCORP
We are a multi-state financial services holding company formed by the
merger of U.S. Bancorp and Firstar Corporation in February 2001. We are a bank
holding company registered under the Bank Holding Company Act and are
incorporated in Delaware. We are also a financial holding company under the Bank
Holding Company Act. We operate over 2,200 banking offices in 24 states in the
Midwest, South and West. We provide comprehensive banking, trust, investment and
payment systems products and services to consumers, businesses and institutions.
We operate a network of 5,200 branded ATMs and provide 24-hour,
seven-days-a-week telephone customer service. We also offer full-service
brokerage services at approximately 100 offices through U.S. Bancorp Piper
Jaffray. In addition, we are the largest provider of Visa corporate and
purchasing cards in the world, and are one of the largest providers of corporate
trust services in the nation. At September 30, 2001, we and our consolidated
subsidiaries, on a combined basis, reflecting the merger of U.S. Bancorp and
Firstar Corporation, had consolidated assets of $168.0 billion, consolidated
deposits of $104.0 billion and shareholders' equity of $17.0 billion.
Our banking subsidiaries are engaged in general commercial banking
business, principally in domestic markets. They range in size from less than
$1.0 million to over $100.0 billion in deposits and provide a wide variety of
services to individuals, businesses, industry, institutional organizations,
governmental entities and other financial institutions. Depository services
include checking accounts, savings accounts and time certificate contracts.
Ancillary services such as treasury management and receivable lockbox collection
are provided for corporate customers. Our bank and trust subsidiaries provide a
full range of fiduciary activities for individuals, estates, foundations,
business corporations and charitable organizations.
We provide banking services, through our subsidiary banks, to both domestic
and foreign customers and correspondent banks. These services include consumer
banking, commercial lending, financing of import/export trade, foreign exchange
and investment services. We also provide, through our non-bank subsidiaries,
services in trust, commercial and agricultural finance, data processing,
leasing, investment banking and brokerage services.
CONTACT INFORMATION
Our executive offices are located at U.S. Bank Place, 601 Second Avenue
South, Minneapolis, Minnesota 55402, and our telephone number is (612) 973-1111.
USB CAPITAL V
PURPOSE AND OWNERSHIP OF USB CAPITAL V
USB Capital V is a business trust organized under Delaware law by the
trustees and us. USB Capital V was established solely for the following
purposes:
- to issue the capital securities, which represent undivided beneficial
ownership interests in USB Capital V's assets, in exchange for our junior
subordinated debentures;
- to issue the common securities to us in a total liquidation amount equal
to at least 3% of USB Capital V's total capital in exchange for our
junior subordinated debentures; and
- to engage in other activities that are directly related to the activities
described above, such as registering the transfer of the capital
securities.
Because USB Capital V was established only for the purposes listed above,
the junior subordinated debentures will be USB Capital V's sole assets. Payments
on the junior subordinated debentures will be USB Capital V's sole source of
income. USB Capital V will issue only one series of capital securities.
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As issuer of the junior subordinated debentures, we will pay:
- all fees, expenses and taxes related to USB Capital V and the offering of
the capital securities and common securities; and
- all ongoing costs, expenses and liabilities of USB Capital V, except
obligations to make distributions and other payments on the common
securities and the capital securities.
For so long as the capital securities remain outstanding, we will:
- own, directly or indirectly, all of the common securities;
- cause USB Capital V to remain a business trust and not to voluntarily
dissolve, wind-up, liquidate or be terminated, except as permitted by the
certificate of trust by which USB Capital V was created;
- use our commercially reasonable efforts to ensure that USB Capital V will
not be an "investment company" for purposes of the Investment Company Act
of 1940; and
- take no action that would be reasonably likely to cause USB Capital V to
be classified as other than a grantor trust for United States federal
income tax purposes.
THE TRUSTEES
The business and affairs of USB Capital V will be conducted by its five
trustees. The three administrative trustees will be individuals who are our
employees. The fourth trustee, First Union Trust Company, National Association,
as property trustee, will hold title to the junior subordinated debentures for
the benefit of the holders of the capital securities and will have the power to
exercise all the rights and powers of a registered holder of the junior
subordinated debentures. The fifth trustee, First Union Trust Company, National
Association, as Delaware trustee, maintains its principal place of business in
Delaware and meets the requirements of Delaware law for Delaware business
trusts. In addition, First Union Trust Company, National Association, as
guarantee trustee, will hold the guarantee for the benefit of the holders of the
capital securities.
We have the sole right to appoint, remove and replace the trustees of USB
Capital V, unless an event of default occurs with respect to the junior
subordinated debentures. In that case, the holders of a majority in liquidation
amount of the capital securities will have the right to remove and appoint the
property trustee and the Delaware trustee.
ADDITIONAL INFORMATION
For additional information concerning USB Capital V, see "About the Trusts"
in the accompanying prospectus. USB Capital V will not be required to file any
reports with the SEC after the issuance of the capital securities. As discussed
below under the caption "Accounting Treatment" in this prospectus supplement, we
will provide certain information concerning USB Capital V and the capital
securities in the financial statements included in our own periodic reports to
the SEC.
OFFICE OF USB CAPITAL V
The executive office of USB Capital V is c/o U.S. Bancorp, 601 Second
Avenue South, Minneapolis, Minnesota 55402, and its telephone number is (612)
973-1111.
USE OF PROCEEDS
USB Capital V will issue the capital securities and common securities to us
in exchange for our junior subordinated debentures.
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We will sell the capital securities to the public. The net proceeds from
the offering of the capital securities are estimated to be $ . We
intend to use all of the proceeds from the sale of the capital securities for
general corporate purposes.
We are required by the Federal Reserve Board to maintain certain levels of
capital for bank regulatory purposes. On October 21, 1996, the Federal Reserve
Board announced that cumulative capital securities having the characteristics of
the capital securities could be included as Tier 1 capital for bank holding
companies. Such Tier 1 capital treatment, together with our ability to deduct,
for federal income tax purposes, interest payable on the junior subordinated
debentures, will provide us with a more cost-effective means of obtaining
capital for bank regulatory purposes than other Tier 1 capital alternatives
currently available to us.
ACCOUNTING TREATMENT
For financial reporting purposes, USB Capital V will be treated as our
subsidiary, and its accounts will be included in our consolidated financial
statements.
In our future financial reports, we will:
- present the junior subordinated debentures as part of a separate line
item on our consolidated balance sheets;
- record distributions payable on the capital securities as interest
expense; and
- include a footnote in our consolidated financial statements stating,
among other things, that the sole assets of USB Capital V are junior
subordinated debentures issued by us and providing information about the
capital securities, the junior subordinated debentures and the guarantee.
REGULATORY TREATMENT
We are required by the Federal Reserve Board to maintain certain levels of
capital for bank regulatory purposes. We expect that the capital securities will
be treated as Tier 1 capital of U.S. Bancorp for these purposes.
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CAPITALIZATION
We provide in the table below our unaudited consolidated capitalization as
of September 30, 2001 and as adjusted to reflect the issuance of the capital
securities. You should read it together with the detailed information and our
financial statements included in the documents incorporated by reference to the
accompanying prospectus. See "Where You Can Find More Information" in the
prospectus. The table also reflects adjustments for the issuance of the capital
securities and our application of the proceeds from the sale of the junior
subordinated debentures to USB Capital V as described under "Use of Proceeds"
assuming the transaction had occurred on September 30, 2001.
AS OF SEPTEMBER 30, 2001
-------------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN MILLIONS)
Deposits.................................................... $103,805 $103,805
Short-term borrowings....................................... 12,614 12,614
Long-term debt.............................................. 26,881 26,881
-------- --------
Total deposits and debt........................... 143,300 143,300
Company obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the junior
subordinated debentures of the parent company............. 2,115 2,415
Shareholders' equity
Common stock.............................................. 20 20
Capital surplus........................................... 4,918 4,918
Retained earnings......................................... 11,585 11,585
Treasury stock............................................ (62) (62)
Other comprehensive income................................ 356 356
-------- --------
Total shareholders' equity........................ 16,817 16,817
-------- --------
TOTAL CAPITALIZATION............................ $162,232 $162,532
======== ========
RATIOS OF EARNINGS TO FIXED CHARGES AND TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------- --------------------------------
2001 2000 1999 1998 1997 1996
------------- ---- ---- ---- ---- ----
RATIO OF EARNINGS TO FIXED CHARGES:
Excluding interest on deposits................ 1.13 2.76 2.99 2.94 2.86 3.64
Including interests on deposits............... 1.05 1.72 1.78 1.67 1.57 1.74
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS:
Excluding interests on deposits............... 1.13 2.76 2.99 2.94 2.84 3.60
Including interest on deposits................ 1.05 1.72 1.78 1.67 1.57 1.74
The ratio of earnings to fixed charges is computed by dividing income from
continuing operations before income taxes and fixed charges (excluding
capitalized interest), as adjusted for some equity method investments, by fixed
charges. Fixed charges consist of interest on debt (including capitalized
interest), amortization of debt discount, and expense and a portion of rentals
determined to be representative of interest. To compute the ratio of earnings to
combined fixed charges and preferred stock dividends, fixed charges is then
combined with preferred stock dividend requirements, adjusted to a pretax basis
on our outstanding preferred stock.
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CERTAIN TERMS OF THE CAPITAL SECURITIES
We have summarized below certain terms of the capital securities. This
summary supplements the general description of the capital securities under the
caption "Description of Capital Securities" and elsewhere in the accompanying
prospectus. To the extent that this summary is inconsistent with the description
in the accompanying prospectus, you should rely on the summary below. This
summary is not a complete description of all of the terms and provisions of the
capital securities. For more information, we refer you to the certificate of
trust, the form of the amended and restated trust agreement and the form of
capital security certificate (which will be substantially similar to the form of
the capital securities), which we filed as exhibits to the registration
statement of which the prospectus is a part.
The capital securities represent undivided beneficial ownership interests
in the assets of USB Capital V. The only assets of USB Capital V will be the
junior subordinated debentures. The capital securities will rank equally with
the common securities except as described below under the caption
"-- Subordination of Common Securities" in this section.
DISTRIBUTIONS
As an undivided beneficial owner in the junior subordinated debentures, you
will receive distributions on the capital securities that are cumulative and
will accumulate from the date of issuance at the annual rate of % of the
liquidation amount of $25 for each capital security. Interest on the junior
subordinated debentures will accrue and, as a result, distributions on the
capital securities will accumulate and will be payable quarterly in arrears on
March 15, June 15, September 15 and December 15 of each year, beginning March
15, 2002. The amount of distributions payable for any period will be computed on
the basis of a 360-day year comprised of twelve 30-day months. The amount of
distributions payable for any period shorter than a full quarterly period will
be computed on the basis of a 30-day month and, for periods of less than a
month, the actual number of days elapsed per 30-day month. If the capital
securities are issued in the form of global securities, as is expected, the
record date for determining who will receive distributions on the capital
securities will be the business day preceding the payment date for such
distributions; otherwise the record date will be the fifteenth day preceding the
payment date for such distributions. For more information on global securities,
see "-- Global Securities; Book-Entry Issue" below, and under the caption
"Book-Entry Issuance" in the accompanying prospectus.
Interest not paid when due will accrue additional interest at the annual
rate of % on the amount of unpaid interest, compounded quarterly. As a
result, distributions not paid when due will accumulate additional distributions
at the annual rate of % on the amount of unpaid distributions, compounded
quarterly. When we refer to any payment of distributions, the term
"distributions" includes any such additional accumulated distributions.
If distributions are payable on a date that is not a "business day",
payment will be made on the next business day and without any interest or other
payment as a result of such delay. A "business day" means each day except
Saturday, Sunday and any day on which banking institutions in The City of New
York are authorized or required by law to close or on which the corporate trust
office of the property trustee or the indenture trustee is closed for business.
USB Capital V's income available for the payment of distributions will be
limited to our payments made on the junior subordinated debentures. As a result,
if we do not make interest payments on the junior subordinated debentures, then
USB Capital V will not have funds to make distributions on the capital
securities.
DEFERRAL OF DISTRIBUTIONS
If the junior subordinated debentures are not in default, we can, on one or
more occasions, defer interest payments on the junior subordinated debentures
for up to 20 consecutive quarterly interest payment periods. A deferral of
interest payments cannot extend, however, beyond the maturity date of the junior
subordinated debentures. If we defer interest payments on the junior
subordinated debentures, USB Capital V also will defer distributions on the
capital securities. During a deferral period, interest on the junior
subordinated debentures will accrue and compound quarterly at the annual rate of
%, to the
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extent permitted by applicable law, and as a result distributions otherwise due
to you would continue to accumulate from the date that these distributions were
due.
Once we make all deferred interest payments on the junior subordinated
debentures, we again can defer interest payments on the junior subordinated
debentures in the same manner as discussed above. As a result, there could be
multiple periods of varying length during which you would not receive cash
distributions from USB Capital V.
We currently do not intend to defer interest payments on the junior
subordinated debentures. If we defer such interest payments, however, neither we
nor our subsidiaries generally will be permitted to pay dividends on or
repurchase shares of our capital stock or make payments on debt securities or
guarantees that rank equal or junior to the junior subordinated debentures and
the guarantee. These limitations are described in greater detail below under the
caption "Certain Terms of the Junior Subordinated Debentures -- Option to Defer
Interest Payments" in this prospectus supplement.
If we choose to defer payments of interest on the junior subordinated
debentures, then the junior subordinated debentures would at that time be
treated as being issued with original issue discount for United States federal
income tax purposes. This means you will be required to include your share of
the accrued but unpaid interest on the junior subordinated debentures in your
gross income for United States federal income tax purposes before you receive
cash distributions from USB Capital V. This treatment will apply as long as you
own capital securities. For more information, see below under the caption
"United States Federal Income Tax Consequences -- Interest Income and Original
Issue Discount" in this prospectus supplement.
PAYMENT OF DISTRIBUTIONS
Distributions on the capital securities will be payable to holders on the
relevant record date. As long as the capital securities are only in book-entry
form, the record date for the payment of distributions will be one business day
before the distribution date. If the capital securities are ever issued in
certificated form, the record date for the payment of distributions will be the
fifteenth day before the relevant payment date. Distributions payable on any
capital securities that are not paid on the scheduled distribution date will
cease to be payable to the person in whose name such capital securities are
registered on the relevant record date, and such distribution will instead be
payable to the person in whose name such capital securities are registered on a
special record date set for this purpose.
Payments on the capital securities while they are in book-entry form will
be made in immediately available funds to DTC, the depositary for the capital
securities.
REDEMPTION
We may redeem the junior subordinated debentures before their maturity at
100% of their principal amount plus accrued and unpaid interest:
- in whole or in part, on one or more occasions at any time on or after
, 2006 or
- in whole at any time if certain changes occur in tax or investment
company laws and regulations, or in the treatment of the capital
securities for bank regulatory capital purposes. These events, which we
refer to as "Special Events", are described in detail below under the
caption "-- Redemption Upon a Special Event".
We may not redeem the junior subordinated debentures unless we receive the
prior approval of the Federal Reserve Board to do so, if that approval is then
required under the Federal Reserve Board's capital rules.
GENERAL
When we repay the junior subordinated debentures, either at maturity on
December 15, 2031 or upon early redemption (as discussed above), USB Capital V
will use the cash it receives from the repayment or redemption of the junior
subordinated debentures to redeem a corresponding amount of the capital
securities and common securities. The redemption price for the capital
securities will be equal to the liquidation amount, $25 per capital security,
plus accumulated but unpaid distributions on the capital securities to the
redemption date.
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If less than all the capital securities and the common securities are
redeemed, the total amount of the capital securities and the common securities
to be redeemed will be allocated proportionately among the capital securities
and common securities, unless an event of default under the junior subordinated
debentures or similar event has occurred, as described below under the caption
"-- Subordination of Common Securities" in this section.
If we do not elect to redeem the junior subordinated debentures, then the
capital securities will remain outstanding until the repayment of the junior
subordinated debentures unless we liquidate USB Capital V and distribute the
junior subordinated debentures to you. For more information, see "-- Optional
Liquidation of USB Capital V and Distribution of Junior Subordinated Debentures"
in this section.
REDEMPTION UPON A SPECIAL EVENT
If a Special Event has occurred and is continuing, and we cannot cure that
event by some reasonable action, then we may redeem the junior subordinated
debentures within 90 days following the occurrence of the Special Event. A
"Special Event" means, for these purposes, the occurrence of a "Tax Event", a
"Regulatory Capital Event" or an "Investment Company Event." We summarize each
of these events below.
A "Tax Event" means that either we or USB Capital V will have received an
opinion of counsel (which may be our counsel or counsel of an affiliate but not
an employee and which must be reasonably acceptable to the property trustee)
experienced in tax matters stating that, as a result of any:
- amendment to, or change (including any announced prospective change) in,
the laws (or any regulations under those laws) of the United States or
any political subdivision or taxing authority affecting taxation; or
- interpretation or application of the laws, enumerated in the preceding
bullet point, or regulations by any court, governmental agency or
regulatory authority,
there is more than an insubstantial risk that:
- USB Capital V is, or will be within 90 days of the date of the opinion of
counsel, subject to U.S. federal income tax on interest received on the
junior subordinated debentures;
- interest payable by us to USB Capital V on the junior subordinated
debentures is not, or will not be within 90 days of the date of the
opinion of counsel, deductible, in whole or in part, for U.S. federal
income tax purposes; or
- USB Capital V is, or will be within 90 days of the date of the opinion of
counsel, subject to more than a minimal amount of other taxes, duties,
assessments or other governmental charges.
A "Regulatory Capital Event" means the reasonable determination by us that,
as a result of any:
- amendment to, or change (including any prospective change) in, the laws
or any applicable regulation of the United States or any political
subdivision; or
- as a result of any official or administrative pronouncement or action or
judicial decision interpreting or applying the laws or regulations, which
amendment is effective or announced on or after the date of issuance the
capital securities,
there is more than an insubstantial risk of impairment of our ability to treat
the capital securities (or any substantial portion) as Tier 1 capital (or its
equivalent) for purposes of the capital adequacy guidelines of the Federal
Reserve in effect and applicable to us.
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An "Investment Company Event" means the receipt by us and USB Capital V of
an opinion of counsel experienced in matters relating to investment companies to
the effect that, as a result of any:
- change in law or regulation; or
- change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority,
USB Capital V is or will be considered an investment company that is required to
be registered under the Investment Company Act, which change becomes effective
on or after the original issuance of the capital securities.
REDEMPTION PROCEDURES
USB Capital V will give you at least 30 days' but not more than 60 days'
notice before any redemption of capital securities. To the extent funds are
available for payment, USB Capital V will irrevocably deposit with DTC
sufficient funds to pay the redemption amount for the capital securities being
redeemed. USB Capital V also will give DTC irrevocable instructions and
authority to pay the redemption amount to its participants. Any distribution to
be paid on or before a redemption date for any capital securities called for
redemption will be payable to the registered holders on the record date for the
distribution.
Once notice of redemption is given and USB Capital V irrevocably deposits
the redemption amount, additional distributions on the capital securities will
cease to accumulate from and after the redemption date. In addition, all rights
of the holders of the capital securities called for redemption will cease,
except for the right to receive distributions payable prior to the redemption
date and the redemption amount.
If any redemption date is not a business day, the redemption amount will be
payable on the next business day, without any interest or other payment in
respect of any such delay.
If payment of the redemption amount for any capital securities called for
redemption is not paid because the payment of the redemption price on the junior
subordinated debentures is not made, interest on the junior subordinated
debentures will continue to accrue from the originally scheduled redemption date
to the actual date of payment, and, as a result, distributions on the capital
securities will continue to accumulate.
In addition, we may and our affiliates may, at any time, purchase
outstanding capital securities by tender, in the open market or by private
agreement.
OPTIONAL LIQUIDATION OF USB CAPITAL V AND DISTRIBUTION OF JUNIOR SUBORDINATED
DEBENTURES
We may dissolve USB Capital V at any time, and after satisfying the
creditors of USB Capital V, may cause the junior subordinated debentures to be
distributed to the holders of the capital securities. We may not dissolve USB
Capital V, however, unless we first receive:
- the approval of the Federal Reserve System to do so, if that approval is
then required under the Federal Reserve System's capital rules; and
- an opinion of independent counsel that the distribution of the junior
subordinated debentures will not be taxable to the holders for United
States federal income tax purposes.
See below under the caption "Certain Terms of the Junior Subordinated
Debentures -- Distribution of Junior Subordinated Debentures" in this prospectus
supplement.
If we elect to dissolve USB Capital V, thus causing the junior subordinated
debentures to be distributed to the holders of the capital securities, we will
continue to have the right to redeem the junior subordinated debentures in
certain circumstances as described above.
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SUBORDINATION OF COMMON SECURITIES
Payment of distributions or any redemption or liquidation amounts by USB
Capital V regarding the capital securities and the common securities will be
made proportionately based on the total liquidation amounts of the securities.
However, if we are in default under the junior subordinated debentures, USB
Capital V will make no payments on the common securities until all unpaid
amounts on the capital securities have been provided for or paid in full.
TRUST ENFORCEMENT EVENTS
An event of default under the indenture constitutes an event of default
under the amended and restated trust agreement. We refer to such an event as a
"Trust Enforcement Event". For more information on events of default under the
indenture, see "Description of Junior Subordinated Debt Securities -- Events of
Default" in the accompanying prospectus. Upon the occurrence and continuance of
a Trust Enforcement Event, the property trustee, as the sole holder of the
junior subordinated debentures, will have the right under the indenture to
declare the principal amount of the junior subordinated debentures due and
payable. The amended and restated trust agreement does not provide for any other
events of default.
If the property trustee fails to enforce its rights under the junior
subordinated debentures, any holder of capital securities may, to the extent
permitted by applicable law, institute a legal proceeding against us to enforce
the property trustee's rights under the junior subordinated debentures and the
indenture without first instituting legal proceedings against the property
trustee or any other person. In addition, if a Trust Enforcement Event is due to
our failure to pay interest or principal on the junior subordinated debentures
when due, then the registered holder of capital securities may institute a
direct action on or after the due date directly against us for enforcement of
payment to that holder of the principal of or interest on the junior
subordinated debentures having a principal amount equal to the total liquidation
amount of that holder's capital securities. In connection with such a direct
action, we will have the right under the indenture to set off any payment made
to that holder by us. The holders of capital securities will not be able to
exercise directly any other remedy available to the holders of the junior
subordinated debentures.
Pursuant to the amended and restated trust agreement, the holder of the
common securities will be deemed to have waived any Trust Enforcement Event
regarding the common securities until all Trust Enforcement Events regarding the
capital securities have been cured, waived or otherwise eliminated. Until all
Trust Enforcement Events regarding the capital securities have been so cured,
waived or otherwise eliminated, the property trustee will act solely on behalf
of the holders of the capital securities and only the holders of the capital
securities will have the right to direct the enforcement actions of the property
trustee.
VOTING RIGHTS
Holders of capital securities will have only limited voting rights. In
particular, holders of capital securities may not elect or remove any trustee,
except when there is a default under the junior subordinated debentures. If such
a default occurs, a majority in liquidation amount of the holders of the capital
securities would be entitled to remove or appoint the property trustee and the
Delaware trustee.
REMEDIES
So long as any junior subordinated debentures are held by the property
trustee, the holders of a majority of all outstanding capital securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the property trustee, or to direct the exercise of
any
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power conferred upon the property trustee under the amended and restated trust
agreement, including the right to direct the property trustee, as holder of the
junior subordinated debentures to:
- exercise the remedies available to it under the indenture as a holder of
the junior subordinated debentures, including the right to rescind or
annul a declaration that the principal of all the junior subordinated
indentures will be due and payable;
- consent to any amendment, modification or termination of the indenture or
the junior subordinated debentures; or
- waive any past default that is waivable under the indenture.
However, where a consent or action under the indenture would require the
consent or action of the holders of more than a majority of the total principal
amount of junior subordinated debentures affected by it, only the holders of
that greater percentage of the capital securities may direct the property
trustee to give the consent or to take such action. See "Description of Capital
Securities -- Voting Rights; Amendment of Each Trust Agreement" in the
accompanying prospectus.
If an event of default under the indenture has occurred and is continuing,
the holders of 25% of the total liquidation amount of the capital securities may
direct the property trustee to declare the principal and interest on the junior
subordinated debentures due and payable.
MEETINGS
Any required approval of holders of capital securities may be given at a
meeting of holders of capital securities convened for such purpose or pursuant
to written consent. The property trustee will cause a notice of any meeting at
which holders of capital securities are entitled to vote to be given to each
holder of record of capital securities in the manner described in the amended
and restated trust agreement.
No vote or consent of the holders of capital securities will be required
for USB Capital V to redeem and cancel its capital securities in accordance with
the amended and restated trust agreement.
GLOBAL SECURITIES; BOOK-ENTRY ISSUE
We expect that the capital securities will be issued in the form of global
securities held by The Depository Trust Company as described under the caption
"Book-Entry Issuance" in the accompanying prospectus.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee, other than during the occurrence and continuance of a
Trust Enforcement Event, undertakes to perform only the duties that are
specifically described in the amended and restated trust agreement and, after a
Trust Enforcement Event which has not been cured or waived, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his own affairs. Subject to this provision, the property trustee is
under no obligation to exercise any of the powers vested in it by the amended
and restated trust agreement at the request of any holder of capital securities
unless it is offered reasonable security and indemnity against the costs,
expenses and liabilities that might be incurred in connection with taking that
action.
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CERTAIN TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
We have summarized below certain terms of the junior subordinated
debentures. This summary supplements the general description of these securities
under the caption "Description of Junior Subordinated Debt Securities" and
elsewhere in the accompanying prospectus. To the extent that this summary is
inconsistent with the description in the accompanying prospectus, you should
rely on the summary below. This summary is not a complete description of all of
the terms and provisions of the junior subordinated debentures. For more
information, we refer you to the indenture and the form of the junior
subordinated debentures, which we filed as exhibits to the registration
statement of which the accompanying prospectus is a part.
The junior subordinated debentures will be issued pursuant to an indenture
between us and Wilmington Trust Company as indenture trustee. The indenture
provides for the issuance from time to time of junior subordinated debentures in
an unlimited dollar amount and an unlimited number of series.
INTEREST RATE AND MATURITY
The junior subordinated debentures will bear interest at the annual rate of
%, payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year, beginning March 15, 2002. Interest payments not paid
when due will themselves accrue additional interest at the annual rate of %
on the amount of unpaid interest, to the extent permitted by law, compounded
quarterly. The amount of interest payable for any period will be computed based
on a 360-day year comprised of twelve 30-day months. The amount of interest
payable for any period shorter than a full quarterly period will be computed on
the basis of a 30-day month and, for periods of less than a month, the actual
number of days elapsed per 30-day month. The distribution provisions of the
capital securities correspond to the interest payment provisions for the junior
subordinated debentures because the capital securities represent undivided
beneficial ownership interests in the junior subordinated debentures.
The junior subordinated debentures do not have a sinking fund. This means
that we are not required to make any principal payments prior to maturity.
The junior subordinated debentures will mature on December 15, 2031.
RANKING
The junior subordinated debentures will be unsecured and will rank junior
and be subordinate in right of payment to all our senior debt.
As a holding company, our assets primarily consist of the equity securities
of our subsidiaries. As a result, the ability of holders of the junior
subordinated debentures to benefit from any distribution of assets of any
subsidiary upon the liquidation or reorganization of such subsidiary is
subordinate to the prior claims of present and future creditors of that
subsidiary.
The capital securities, the junior subordinated debentures and the
guarantee do not limit our or our subsidiaries' ability to incur additional
debt, including debt that ranks senior in priority of payment to the junior
subordinated debentures and the guarantee. At September 30, 2001, approximately
$11.1 billion of our senior debt was outstanding. In addition, the junior
subordinated debentures will be effectively subordinated to all our
subsidiaries' existing and future obligations. At September 30, 2001, our
subsidiaries had outstanding debt and other liabilities, including deposits, of
approximately $151.0 billion.
REDEMPTION
We may, under certain circumstances, redeem some or all of the junior
subordinated debentures before their maturity. For more information, see above
under the caption "Certain Terms of the Capital Securities -- Redemption" in
this prospectus supplement.
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DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
If the property trustee distributes the junior subordinated debentures to
the holders of the capital securities and the common securities upon the
liquidation of USB Capital V, we will cause the junior subordinated debentures
to be issued in denominations of $25 principal amount and integral multiples
thereof. We anticipate that the junior subordinated debentures would be
distributed in the form of one or more global securities and that DTC would act
as depositary for the junior subordinated debentures. The depositary
arrangements for the junior subordinated debentures would be substantially the
same as those in effect for the capital securities.
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemption and other notices and
other matters, see "Book-Entry Issuance" in the accompanying prospectus.
OPTION TO DEFER INTEREST PAYMENTS
We can defer interest payments on the junior subordinated debentures for up
to 20 consecutive quarterly interest payment periods if the junior subordinated
debentures are not in default. A deferral of interest payments cannot extend,
however, beyond the maturity date of the junior subordinated debentures. During
the deferral period, interest will continue to accrue on the junior subordinated
debentures, compounded quarterly, and deferred interest payments will accrue
additional interest at %. No interest will be due and payable on the junior
subordinated debentures until the end of the deferral period except upon a
redemption of the junior subordinated debentures during a deferral period.
We may pay at any time all or any portion of the interest accrued to that
point during a deferral period. At the end of the deferral period or on any
redemption date, we will be obligated to pay all accrued and unpaid interest.
Once we pay all accrued and unpaid interest on the junior subordinated
debentures, we again can defer interest payments on the junior subordinated
debentures as described above, provided that a deferral period cannot extend
beyond the maturity date of the junior subordinated debentures.
CERTAIN LIMITATIONS DURING A DEFERRAL PERIOD
During any deferral period, we will not and our subsidiaries will not be
permitted to:
- declare or pay any dividends or distributions, or redeem, purchase,
acquire, or make a liquidation payment on any of our capital stock;
- make any payment of principal of interest or premium, if any, on or
repay, repurchase or redeem any of our debt securities (including other
junior subordinated debentures) that rank equally with or junior in
interest to the junior subordinated debentures; or
- make any guarantee payments on any guarantee of debt securities of any of
our subsidiaries (including under other guarantees of junior subordinated
debentures) if the guarantee ranks equally with or junior in interest to
the junior subordinated debentures.
However, at any time, including during a deferral period, we will be
permitted to:
- pay dividends or distributions in additional shares of our capital stock;
- make payments under the guarantee of the series of the capital securities
and the common securities;
- declare or pay a dividend in connection with the implementation of a
shareholders' rights plan, or issue stock under such a plan or repurchase
such rights; and
- purchase common stock for issuance pursuant to any employee benefit
plans.
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NOTICE
We will give USB Capital V, the administrative trustees and the property
trustee notice if we decide to defer interest payments on the junior
subordinated debentures. We will give that notice five business days before the
earlier of:
- the next date distributions on the capital securities are payable; or
- the date USB Capital V is required to give notice to the New York Stock
Exchange (or any applicable self-regulatory organization) or to holders
of the capital securities on the record date or the date any distribution
is payable, but in any event at least five business days before the
record date.
The administrative trustees will give notice to the holders of capital
securities if we decide to defer interest payments on the junior subordinated
debentures.
AGREEMENT BY PURCHASERS OF CERTAIN TAX TREATMENT
Each junior subordinated debenture will provide that, by acceptance of the
junior subordinated debentures, or a beneficial interest therein, the holder of
the junior subordinated debenture intends that such junior subordinated
debenture constitutes debt and agrees to treat it as debt for United States
federal, state and local tax purposes.
MISCELLANEOUS
Under an expense agreement entered into by us under the amended and
restated trust agreement, we will irrevocably and unconditionally guarantee, to
each person or entity to whom USB Capital V becomes indebted or liable, the full
payment of any costs, expenses or liabilities of USB Capital V, other than
obligations of USB Capital V to you under the terms of the capital securities or
other similar interests.
RELATIONSHIP AMONG THE CAPITAL SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of distributions and other amounts due on the capital securities
are irrevocably guaranteed by us, to the extent USB Capital V has funds
available for the payment of such distributions, as described under "Description
of the Guarantee" in the accompanying prospectus.
If we do not make payments under the junior subordinated debentures, USB
Capital V will not have sufficient funds to pay distributions or other amounts
due on the capital securities. The guarantee does not cover payment of
distributions when USB Capital V does not have sufficient funds to pay such
distributions. In that event, a holder of capital securities may institute a
legal proceeding directly against us to enforce payment of the junior
subordinated debentures to such holder in accordance with their terms, including
our right to defer interest payments.
Taken together, our obligations under the amended and restated trust
agreement, the junior subordinated debentures, the indenture and the guarantee
provide a full and unconditional guarantee of payments of distributions and
other amounts due on the capital securities.
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SUFFICIENCY OF PAYMENTS
As long as payments of interest, principal and other payments are made when
due on the junior subordinated debentures, those payments will be sufficient to
cover distributions and other payments due on the capital securities because of
the following factors:
- the total principal amount of the junior subordinated debentures will be
equal to the sum of the total stated liquidation amount of the capital
securities and the common securities;
- the interest rate and payment dates on the junior subordinated debentures
will match the distribution rate and payment dates for the capital
securities;
- as borrower, we will pay, and USB Capital V will not be obligated to pay,
all costs, expenses and liabilities of USB Capital V except USB Capital
V's obligations under the capital securities and common securities; and
- the amended and restated trust agreement further provides that USB
Capital V will engage only in activity that is consistent with the
limited purposes of USB Capital V.
We have the right to set-off any payment we are otherwise required to make
under the indenture with and to the extent we make a related payment under the
guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
If a Trust Enforcement Event occurs, the holders of capital securities
would rely on the enforcement by the property trustee of its rights as
registered holder of the junior subordinated debentures against us. In addition,
the holders of a majority in liquidation amount of the capital securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the property trustee or to direct the exercise of
any trust or power conferred upon the property trustee under the amended and
restated trust agreement, including the right to direct the property trustee to
exercise the remedies available to it as the holder of the junior subordinated
debentures.
If the property trustee fails to enforce its rights under the junior
subordinated debentures in respect of an event of default under the indenture
after a holder of capital securities has made a written request, such holder
may, to the extent permitted by applicable law, institute a legal proceeding
against us to enforce the property trustee's rights under the junior
subordinated debentures. In addition, if we fail to pay interest or principal on
the junior subordinated debentures, a holder of capital securities may institute
a proceeding directly against us for enforcement of payment to that holder of
the principal of or interest on junior subordinated debentures having a
principal amount equal to the total liquidation amount of that holder's capital
securities (which we refer to as a "direct action"). In connection with such a
direct action, we will have the right to set off any payment made to such holder
by us. The holders of capital securities will not be able to exercise directly
any other remedy available to the holders of the junior subordinated debentures.
LIMITED PURPOSE OF TRUST
The capital securities evidence undivided beneficial ownership interests in
the assets of USB Capital V, and USB Capital V exists for the sole purpose of
issuing the common securities and capital securities to us in exchange for the
junior subordinated debentures. A principal difference between the rights of a
holder of capital securities and a holder of junior subordinated debentures is
that a holder of junior subordinated debentures is entitled to receive from us
the principal of and interest accrued on junior subordinated debentures held,
while a holder of capital securities is entitled to receive distributions to the
extent USB Capital V has funds available for the payment of such distributions.
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RIGHTS UPON TERMINATION
Upon any dissolution, winding-up or liquidation of USB Capital V involving
the liquidation of the junior subordinated debentures, the holders of the
capital securities will be entitled to receive, out of assets held by USB
Capital V, subject to the rights of any creditors of USB Capital V, the
liquidation distribution in cash. Upon our voluntary or involuntary liquidation
or bankruptcy, the property trustee, as holder of the junior subordinated
debentures, would be our subordinated creditor, subordinated in right of payment
to all senior debt as described in the indenture, but entitled to receive
payment in full of principal and interest before any of our stockholders receive
payments or distributions. Because we are the guarantor under the guarantee and,
under the indenture, as borrower, we have agreed to pay for all costs, expenses
and liabilities of USB Capital V (other than USB Capital V's obligations to the
holders of the capital securities), the positions of a holder of capital
securities and a holder of the junior subordinated debentures relative to other
creditors and to our stockholders in the event of our liquidation or bankruptcy
would be substantially the same.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material United States federal income
tax consequences of the purchase, ownership and disposition of the capital
securities as of the date of this prospectus supplement. Where noted, it
constitutes the opinion of Squire, Sanders & Dempsey L.L.P., counsel to U.S.
Bancorp and USB Capital V.
Except where we state otherwise, this summary deals only with capital
securities held as capital assets by a holder who:
- is a United States person (as defined below), and
- purchases the capital securities upon original issuance at their original
issue price.
A "United States person" is a holder who is one of the following:
- a citizen or resident of the United States;
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision of the
United States;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust
- that is subject to the primary supervision of a court within the
United States and the control of one or more United States persons,
or
- that has a valid election in effect under applicable United States
Treasury regulations to be treated as a United States person.
Your tax treatment may vary depending on your particular situation. This
summary does not address all the tax consequences that may be relevant to
holders that are subject to special tax treatment, such as:
- dealers in securities or currencies;
- financial institutions;
- tax-exempt investors;
- traders in securities that elect to use a mark-to-market method of
accounting for their securities holdings;
- persons liable for alternative minimum tax;
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- insurance companies;
- persons holding capital securities as part of a hedging, conversion,
integrated or constructive sale transaction;
- persons holding capital securities as part of a straddle; or
- persons whose functional currency is not the United States dollar.
In addition, this summary does not include any description of the tax laws
of any state, local or foreign government.
Furthermore, if a partnership holds capital securities, the tax treatment
of a partner will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a partnership holding
capital securities, you should consult your own tax advisor.
This summary is based on the Internal Revenue Code of 1986, as amended
(which we refer to as the "Code"), the Treasury regulations promulgated under
the Code and administrative and judicial interpretations thereof. These income
tax laws, regulations and interpretations, however, may change at any time. Any
change could be retroactive to the issuance date of the capital securities.
The authorities on which this summary is based are subject to various
interpretations, and the opinions of Squire, Sanders & Dempsey L.L.P. are not
binding on the Internal Revenue Service (which we refer to as the "IRS") or the
courts. Either the IRS or the courts could disagree with the explanations or
conclusions contained in this summary. Nevertheless, Squire, Sanders & Dempsey
L.L.P. has advised us that they believe that the opinions expressed in this
summary, if challenged, would be sustained by a court with jurisdiction in a
properly presented case.
You should consult your own tax advisor regarding the tax consequences to
you of the purchase, ownership and disposition of the capital securities,
including the tax consequences under state, local, foreign and other tax laws.
For a discussion of the possible redemption of the capital securities upon the
occurrence of a Tax Event, see "Certain Terms of the Capital
Securities -- Redemption -- Redemption Upon a Special Event" in this prospectus
supplement.
CLASSIFICATION OF USB CAPITAL V
In connection with the issuance of the capital securities, Squire, Sanders
& Dempsey L.L.P. is of the opinion that under current law and assuming full
compliance with the terms of the amended and restated trust agreement, and based
upon certain facts and assumptions contained in such opinion, USB Capital V will
be classified as a grantor trust for United States federal income tax purposes
and not as an association taxable as a corporation. As a result, for United
States federal income tax purposes, you generally will be treated as owning an
undivided beneficial ownership interest in the junior subordinated debentures.
Thus, you will be required to include in your gross income your proportionate
share of the interest income or original issue discount that is paid or accrued
on the junior subordinated debentures. See below under the caption "-- Interest
Income and Original Issue Discount" in this section.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
U.S. Bancorp, USB Capital V and you (by your acceptance of a beneficial
ownership interest in a capital security) agree to treat the junior subordinated
debentures as indebtedness for all United States tax purposes. In connection
with the issuance of the junior subordinated debentures, Squire, Sanders &
Dempsey L.L.P. is of the opinion that under current law, and based on certain
representations, facts and assumptions set forth in its opinion, the junior
subordinated debentures will be classified as indebtedness for United States
federal income tax purposes.
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INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
We anticipate that the junior subordinated debentures will not be issued
with an issue price that is less than their stated redemption price at maturity.
In this case, subject to the discussion below, the junior subordinated
debentures will not be subject to the special original issue discount (which we
refer to as "OID") rules, at least upon initial issuance, so that you will
generally be taxed on the stated interest on the junior subordinated debentures
as ordinary income at the time it is paid or accrued in accordance with your
regular method of tax accounting.
If, however, we exercise our right to defer payments of interest on the
junior subordinated debentures, the junior subordinated debentures will become
OID instruments at such time. In such case, you will be subject to the special
OID rules described below. Once the junior subordinated debentures become OID
instruments, they will be taxed as OID instruments for as long as they remain
outstanding.
Under the OID economic accrual rules, the following occur:
- regardless of your method of accounting, you would accrue an amount of
interest income each year that approximates the stated interest payments
called for under the terms of the junior subordinated debentures using
the constant-yield-to-maturity method of accrual described in section
1272 of the Code;
- the actual cash payments of interest you receive on the junior
subordinated debentures would not be reported separately as taxable
income;
- any amount of OID included in your gross income (whether or not during a
deferral period) with respect to the capital securities would increase
your tax basis in such capital securities; and
- the amount of distributions in respect of such accrued OID would reduce
your tax basis in such capital securities.
The United States Treasury regulations dealing with OID and the deferral of
interest payments have not yet been addressed in any rulings or other
interpretations by the IRS. It is possible that the IRS could assert that the
junior subordinated debentures were issued initially with OID, merely because of
our right to defer payments of interest. If the IRS were successful in this
regard, you would be subject to the special OID rules described above,
regardless of whether we exercise our option to defer payments of interest on
such junior subordinated debentures.
Because the junior subordinated debentures are debt for tax purposes, you
will not be entitled to a dividends received deduction with respect to any
income you recognize on the capital securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF USB
CAPITAL V
As described under the caption "Certain Terms of the Capital
Securities -- Optional Liquidation of USB Capital V and Distribution of Junior
Subordinated Debentures" in this prospectus supplement, the junior subordinated
debentures held by USB Capital V may be distributed to you in exchange for your
capital securities if USB Capital V is liquidated before the maturity of the
junior subordinated debentures, as long as we first receive:
- the approval of the Federal Reserve System to do so, if that approval is
then required under the Federal Reserve System's capital rules; and
- an opinion of independent counsel to the effect that the distribution of
the junior subordinated debentures will not be taxable to you.
Under current law, except as described below, this type of distribution
from a grantor trust would not be taxable. Upon such a distribution, you will
receive your proportionate share of the junior subordinated debentures
previously held indirectly through USB Capital V. Your holding period and total
tax basis in the junior subordinated debentures will equal the holding period
and total tax basis that you had in your capital securities before the
distribution.
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If, however, USB Capital V is treated as an association taxable as a
corporation, a Tax Event will occur. If we elect to distribute the junior
subordinated debentures to you at this time, the distribution would be taxable
to USB Capital V and to you.
If you receive junior subordinated debentures in exchange for your capital
securities, you would accrue interest in respect of the junior subordinated
debentures received from USB Capital V in the manner described above under the
caption "-- Interest Income and Original Issue Discount" in this section.
In certain circumstances described above under the captions "Certain Terms
of the Capital Securities -- Redemption -- Redemption Upon a Special Event" in
this prospectus supplement, we may redeem the junior subordinated debentures and
distribute cash in liquidation of USB Capital V. This distribution of cash would
be taxable as described below under "-- Sales of Capital Securities or
Redemption of Junior Subordinated Debentures" in this section.
SALES OF CAPITAL SECURITIES OR REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES
If you sell your capital securities or receive cash upon redemption of the
junior subordinated debentures, you will recognize gain or loss equal to the
difference between:
- the amount realized on the sale or redemption of the capital securities
or junior subordinated debentures (less an amount equal to any accrued
but unpaid qualified stated interest that you did not previously include
in income, which will be taxable as interest income); and
- your adjusted tax basis in your capital securities or junior subordinated
debentures sold or redeemed.
Your gain or loss will be a capital gain or loss, provided that you held
the capital securities or junior subordinated debentures as a capital asset. The
gain or loss will generally be a long-term capital gain or loss if you have held
your capital securities or junior subordinated debentures for more than one
year. Long-term capital gains of individuals derived with respect to capital
assets held for more than one year are currently subject to tax at a maximum
rate of 20%. The deductibility of capital losses is subject to limitations.
NON-UNITED STATES HOLDERS
The following discussion only applies to you if you are not a United States
person. As discussed above, the capital securities will be treated by the
parties as evidence of undivided beneficial ownership interests in the junior
subordinated debentures. See above under the caption "-- Classification of USB
Capital V" in this section.
U.S. FEDERAL WITHHOLDING TAX
The 30% U.S. federal withholding tax will not apply to any payment of
principal or interest (including OID) on the capital securities (or the junior
subordinated debentures) provided that:
- you do not actually (or constructively) own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and the United States Treasury regulations;
- you are not a controlled foreign corporation that is related to us
through stock ownership;
- you are not a bank whose receipt of interest on the capital securities
(or the junior subordinated debentures) is described in section
881(c)(3)(A) of the Code; and
- (a) you provide your name and address on an IRS Form W-8BEN (or other
applicable form), and certify, under penalties of perjury, that you are
not a United States person, or (b) you hold your capital securities (or
junior subordinated debentures) through certain foreign intermediaries
and you
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satisfy the certification requirements of applicable United States
Treasury regulations. Special certification rules apply to non-United
States persons that are pass-through entities.
If you cannot satisfy the requirements described above, payments of
premium, if any, and interest (including OID) made to you will be subject to the
30% U.S. federal withholding tax, unless you provide us with a properly executed
(1) IRS Form W-8BEN (or other applicable form) claiming an exemption from, or
reduction in the rate of, withholding under the benefit of an applicable tax
treaty or (2) IRS Form W-8ECI (or successor form) stating that interest paid on
the capital securities (or the junior subordinated debentures) is not subject to
withholding tax because it is effectively connected with your conduct of a trade
or business in the United States as discussed below under the caption "U.S.
Federal Income Tax" in this section.
The 30% U.S. federal withholding tax will not apply to any gain that you
realize on the sale, exchange, retirement or other disposition of the capital
securities or junior subordinated debentures.
U.S. FEDERAL INCOME TAX
If you are engaged in a trade or business in the United States and interest
on the capital securities (or the junior subordinated debentures) is effectively
connected with the conduct of that trade or business, you will be subject to
U.S. federal income tax on that interest on a net income basis (although exempt
from the 30% withholding tax), in the same manner as if you were a United States
person as defined under the Code. In addition, if you are a foreign corporation,
you may be subject to a branch profits tax equal to 30% (or lower applicable
treaty rate) of your earnings and profits for the taxable year, subject to
adjustments, that are effectively connected with the conduct by you of a trade
or business in the United States.
Any gain realized on the disposition of a capital security (or a junior
subordinated debenture) generally will not be subject to U.S. federal income tax
unless (1) that gain is effectively connected with the conduct of a trade or
business by you in the United States, or (2) you are an individual who is
present in the United States for 183 days or more in the taxable year of that
disposition, and certain other conditions are met.
U.S. FEDERAL ESTATE TAX
Your estate will not be subject to U.S. federal estate tax on the capital
securities (or the junior subordinated debentures) beneficially owned by you at
the time of your death, provided that (1) you do not own 10% or more of the
total combined voting power of all classes of our voting stock (within the
meaning of the Code and the United States Treasury regulations) and (2) interest
on those capital securities (or junior subordinated debentures) would not have
been, if received at the time of your death, effectively connected with the
conduct by you of a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
UNITED STATES HOLDERS
In general, information reporting requirements will apply to payments of
income on the capital securities (or the junior subordinated debentures) and to
the proceeds of the sale of the capital securities (or the junior subordinated
debentures) made to you (unless you are an exempt recipient such as a
corporation). A backup withholding tax will apply to such payments if you fail
to provide a taxpayer identification number, a certification of exempt status,
or fail to report in full interest income.
NON-UNITED STATES HOLDERS
In general, no information reporting or backup withholding will be required
regarding payments of income on the capital securities (or the junior
subordinated debentures) that we make to you provided that we do not have actual
knowledge that you are a United States person and we have received from you
S-30
the certification described above in the fourth bullet point under the caption
"Non-United States Holders -- U.S. Federal Withholding Tax" in this section.
In addition, no information reporting or backup withholding will be
required regarding the proceeds of the sale of capital securities (or junior
subordinated debentures) made within the United States or conducted through
certain United States financial intermediaries if (1) the payor receives the
certification described above and does not have actual knowledge that you are a
United States person or (2) you otherwise establish an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against your U.S. federal income tax liability provided the
required information is furnished to the IRS.
ERISA CONSIDERATIONS
Each fiduciary of an employee benefit plan subject to Title I of ERISA, a
plan described in Section 4975 of the Code, including an individual retirement
arrangement or a Keogh plan, a plan subject to provisions under applicable
federal, state, local, non-U.S. or other laws or regulations that are similar to
the provisions of Title I of ERISA or Section 4975 of the Code ("Similar Laws"),
and any entity whose underlying assets include "plan assets" by reason of any
such employee benefit plan's or plan's investment in such entity (each of which
we refer to as a "Plan") should consider the fiduciary responsibility and
prohibited transaction provisions of ERISA, applicable Similar Laws and Section
4975 of the Code in the context of the Plan's particular circumstances before
authorizing an investment in the capital securities. Accordingly, such a
fiduciary should consider, among other factors, that each Plan investing in the
capital securities will be deemed to have represented that the Plan's purchase
of the capital securities is covered by one or more prohibited transaction
exemptions. Plan fiduciaries should also consider whether the Plan's investment
in the capital securities would satisfy the prudence and diversification
requirements of ERISA and would be consistent with the documents and instruments
governing their Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans from
engaging in certain transactions involving "plan assets" with persons who are
"parties in interest" under ERISA or "disqualified persons" under the Code
("Parties in Interest") regarding such a Plan. A violation of these "prohibited
transaction" rules may result in an excise tax, penalty or other liabilities
under ERISA and/or Section 4975 of the Code for such persons or, in the case of
an individual retirement account, the occurrence of a prohibited transaction
involving the individual who established the individual retirement account, or
his or her beneficiaries, would cause the individual retirement account to lose
its tax-exempt status, unless exemptive relief is available under an applicable
statutory or administrative exemption. Employee benefit plans that are
governmental plans (as defined in Section 3(32) of ERISA), certain church plans
(as defined in Section 3(33) of ERISA or Section 4975(g)(3) of the Code) and
foreign plans (as described in Section 4(b)(4) of ERISA) are not subject to the
requirements of ERISA or Section 4975 of the Code.
ERISA and the Code do not define "plan assets". However, regulations (the
"Plan Assets Regulations") promulgated under ERISA by the DOL generally provide
that when a Plan subject to Title I of ERISA or Section 4975 of the Code
acquires an equity interest in an entity that is neither a "publicly-offered
security" nor a security issued by an investment company registered under the
Investment Company Act, the Plan's assets include both the equity interest and
an undivided interest in each of the underlying assets of the entity unless it
is established either that equity participation in the entity by "benefit plan
investors" is not "significant" or that the entity is an "operating company," in
each case as defined in the Plan Assets Regulations. USB Capital V is not
expected to qualify as an operating company and will not be an investment
company registered under the Investment Company Act. For purposes of the Plan
Assets Regulations, equity participation in an entity by benefit plan investors
will not be significant if they hold, in the aggregate less than 25% of the
value of any class of such entity's equity, excluding equity interests held by
persons (other than a benefit plan investor) with discretionary authority or
control over the assets of the entity or who provide investment advice for a fee
(direct or indirect) with respect to such assets, and any affiliates thereof.
For purposes of this 25% test (the "Benefit Plan Investor
S-31
Test"), "benefit plan investors" include all employee benefit plans, whether or
not subject to ERISA or the Code, including governmental plans, "Keogh" plans,
individual retirement accounts and pension plans maintained by foreign
corporations, as well as any entity whose underling assets are deemed to include
plan assets under the Plan Assets Regulations (e.g., an entity of which 25% or
more of the value of any class of equity interests is held by employee benefit
plans or other benefit plan investors and which does not satisfy another
exception under the Plan Assets Regulations). No assurance can be given that the
value of the capital securities held by "benefit plan investors" will be less
than 25% of the total value of such capital securities at the completion of the
initial offering of the capital securities or thereafter, and no monitoring or
other measures will be taken regarding the satisfaction of the conditions to
this exception. All of the common securities will be purchased and held by U.S.
Bancorp.
For purposes of the Plan Assets Regulations, a "publicly-offered security"
is a security that is (a) "freely transferable", (b) part of a class of
securities that is "widely held", and (c)(i) sold to the Plan as part of an
offering of securities to the public pursuant to an effective registration
statement under the Securities Act of 1933 within 120 days after the end of the
fiscal year of the issuer during which the offering of such securities to the
public occurred or (ii) is part of a class of securities that is registered
under Section 12 of the Securities Exchange Act of 1934 (the "Registration
Requirement"). It is anticipated that the capital securities will be offered in
a manner which satisfies the Registration Requirement. The Plan Assets
Regulations provide that a security is "widely held" only if it is part of a
class of securities that is owned by 100 or more investors independent of the
issuer and of one another. A security will not fail to be "widely held" because
the number of independent investors falls below 100 subsequent to the initial
offering as a result of events beyond the control of the issuer. It is
anticipated that the capital securities will be "widely held" within the meaning
of the Plan Assets Regulations, although no assurance can be given in this
regard. The Plan Assets Regulations provide that whether a security is "freely
transferable" is a factual question to be determined on the basis of all
relevant facts and circumstances. The Plan Assets Regulations further provide
that when a security is part of an offering in which the minimum investment in
US $10,000 or less, certain restrictions described in the Plan Assets
Regulations ordinarily will not, alone or in combination, affect the finding
that such securities are "freely transferable". It is anticipated that the
capital securities will be "freely transferable" within the meaning of the Plan
Assets Regulations, although no assurance can be given in this regard.
As indicated above, there can be no assurance that any of the exceptions
set forth in the Plan Assets Regulations will apply to the capital securities,
and, as a result, under the terms of the Plan Assets Regulations, an investing
Plan's assets could be considered to include an undivided interest in the assets
held by USB Capital V (including the junior subordinated debentures).
If the assets of USB Capital V were to be deemed to be "plan assets" under
ERISA, this would result, among other things, in (i) the application of the
prudence and other fiduciary responsibility standards of ERISA to investments
made by USB Capital V and (ii) the possibility that certain transactions in
which USB Capital V might seek to engage could constitute "prohibited
transactions" under ERISA and the Code. If a prohibited transaction occurs for
which no exemption is available, any fiduciary that has engaged in the
prohibited transaction could be required (i) to restore to the Plan any profit
realized on the transaction and (ii) to reimburse the Plan for any losses
suffered by the Plan as a result of the investment. In addition, each
disqualified person (within the meaning of Section 4975 of the Code) involved
could be subject to an excise tax equal to 15% of the amount involved in the
prohibited transaction for each year the transaction continues and, unless the
transaction is corrected within statutorily required periods, to an additional
tax of 100%. Plan fiduciaries who decide to invest in USB Capital V could, under
certain circumstances, be liable for prohibited transactions or other violations
as a result of their investment in USB Capital V or as co-fiduciaries for
actions taken by or on behalf of USB Capital V. With respect to an individual
retirement account ("IRA") that invests in USB Capital V, the occurrence of a
prohibited transaction involving the individual who established the IRA, or his
or her beneficiaries, would cause the IRA to lose its tax-exempt status.
Regardless of whether the assets of USB Capital V are deemed to be "plan
assets" of Plans investing in USB Capital V, as discussed above, the acquisition
and holding of the capital securities with "plan
S-32
assets" of a Plan could itself result in a prohibited transaction. The DOL has
issued five prohibited transaction class exemptions ("PTCEs") that may provide
exemptive relief for direct or indirect prohibited transactions resulting from
the purchase and/or holding of the capital securities by a Plan. These class
exemptions are:
- PTCE 96-23 (for certain transactions determined by "in-house asset
managers");
- PTCE 95-60 (for certain transactions involving insurance company general
accounts);
- PTCE 91-38 (for certain transactions involving bank collective investment
funds);
- PTCE 90-1 (for certain transactions involving insurance company pooled
separate accounts); and
- PTCE 84-14 (for certain transactions determined by independent "qualified
professional asset managers").
Such class exemptions may not, however, apply to all of the transactions
that could be deemed prohibited transactions in connection with a Plan's
investment in the capital securities.
Any purchaser of the capital securities that is an insurance company using
assets of its general account should note that, based on the reasoning of the
United States Supreme Court set forth in John Hancock Mutual Life Insurance
Company v. Harris Trust & Savings Bank, 114 S. Ct. 517 (1993), and amendments to
ERISA Section 401(c), an insurance company's general account may be deemed to
include assets of Plans investing in such general account (e.g., through the
purchase of an annuity contract).
Any insurance company considering the use of its general account assets to
purchase capital securities should consult with its counsel concerning matters
affecting its purchase decision.
Because of ERISA's prohibitions and those of Section 4975 of the Code,
discussed above and the potential application of Similar Laws to Plans not
subject to Title I of ERISA or Section 4975 of the Code (a "Non-ERISA Plan"),
the capital securities, or any interest therein, should not be purchased or held
by any Plan or any person investing "plan assets" of any Plan, unless such
purchase and holding is covered by the exemptive relief available under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 (or some other applicable class or individual
exemption) (or, in the case of a Non-ERISA Plan, a similar exemption applicable
to the transaction). Accordingly, each purchaser or holder of the capital
securities or any interest therein will be deemed to have represented by its
purchase and holding thereof that either:
- it is not a Plan and no part of the assets to be used by it to purchase
and/or hold such capital securities or any interest therein constitutes
"plan assets" of any Plan; or
- it is itself a Plan, or is purchasing or holding the capital securities
or an interest therein on behalf of or with "plan assets" of one or more
Plans, and each such purchase and holding of such securities either (i)
satisfies the requirements of, and is entitled to full exemptive relief
under, PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 (or some other applicable
class or individual exemption) (or, in the case of a Non-ERISA Plan, a
similar exemption applicable to the transaction) or (ii) will not result
in a prohibited transaction under ERISA or the Code or its equivalent
under applicable Similar Laws.
Although, as noted above, governmental plans and certain other plans are
not subject to ERISA, including the prohibited transaction provisions thereof,
or of Section 4975 of the Code, Similar Laws governing the investment and
management of the assets of such plans may contain fiduciary and prohibited
transaction provisions similar to those under ERISA and Section 4975 of the Code
discussed above. Similarly, fiduciaries of other plans not subject to ERISA may
be subject to other legal restrictions under applicable Similar Laws.
Accordingly, fiduciaries of governmental plans or other plans not subject to
ERISA, in consultation with their advisors, should consider the impact of their
respective Similar Laws on their investment in capital securities, and the
considerations discussed above, to the extent applicable.
S-33
The foregoing discussion is general in nature and is not intended to be
inclusive. Consequently, and due to the complexity of the fiduciary
responsibility and prohibited transaction rules described above and the
penalties that may be imposed upon persons involved in non-exempt prohibited
transactions, it is particularly important that fiduciaries or other persons
considering purchasing the capital securities on behalf of or with "plan assets"
of any Plan consult with their counsel, prior to any such purchase, regarding
the potential applicability of ERISA, Section 4975 of the Code and any Similar
Laws to such investment and whether any exemption would be applicable and
determine on their own whether all conditions of such exemption or exemptions
have been satisfied such that the acquisition and holding of capital securities
by the purchaser Plan are entitled to full exemption relief thereunder.
S-34
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Smith Barney
Inc. are acting as joint bookrunning managers, and together with U.S. Bancorp
Piper Jaffray Inc., are acting as representatives of the underwriters named
below. Subject to the terms and conditions stated in the underwriting agreement
dated the date of this prospectus supplement, each underwriter has agreed to
purchase, and we have agreed to sell to that underwriter, the respective number
of capital securities set forth opposite the underwriter's name below:
NUMBER OF
CAPITAL
UNDERWRITERS SECURITIES
------------ ----------
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Salomon Smith Barney Inc. ..................................
U.S. Bancorp Piper Jaffray Inc. ............................
Banc of America Securities LLC..............................
Morgan Stanley & Co. Incorporated...........................
UBS Warburg LLC.............................................
----------
Total.......................................... 12,000,000
==========
The underwriting agreement provides that the obligations of the
underwriters to purchase the capital securities included in this offering are
subject to approval of legal matters by counsel and to other conditions. The
underwriters are obligated to purchase all capital securities if they purchase
any of the capital securities.
The underwriters propose to offer some of the capital securities directly
to the public at the public offering price set forth on the cover page of this
prospectus supplement and some of the capital securities to dealers at the
public offering price less a discount not to exceed $ per capital security.
The underwriters may allow, and dealers may reallow a concession not to exceed
$ per capital security on sales to other dealers. After the initial offering
of the capital securities to the public, the representatives may change the
public offering price and concessions.
The following table shows the underwriting discounts and commissions that
we are to pay to the underwriters in connection with this offering.
PAID BY
U.S. BANCORP
------------
Per capital security........................................ $
USB Capital V and we have agreed that, during a period of 30 days from the
date of this prospectus supplement, we will not offer, sell, contract to sell or
otherwise dispose of any capital securities, any other beneficial interests in
USB Capital V, or any capital securities or any other securities of USB Capital
V or U.S. Bancorp that are substantially similar to the capital securities,
including any guarantee of such securities, or any securities convertible into
or exchangeable for or representing the right to receive capital securities or
any such substantially similar securities of either USB Capital V or U.S.
Bancorp, without the prior written consent of the underwriters, except for the
capital securities offered in connection with this offering.
Prior to this offering, there has been no public market for the capital
securities. The capital securities have been approved for listing on the New
York Stock Exchange under the symbol "USB Pr D," subject to official notice of
issuance. Trading of the capital securities on the New York Stock Exchange is
expected to commence within a 30-day period after the initial delivery of the
capital securities. In order to meet one of the requirements for listing the
capital securities on the New York Stock Exchange, the underwriters have
undertaken to sell the capital securities to a minimum of 400 beneficial owners.
The representatives have advised us that they intend to make a market in the
capital securities prior to the commencement of trading on the New York Stock
Exchange, but are not obligated to do so, and may discontinue market making at
any time
S-35
without notice. We cannot give any assurance as to the liquidity of the trading
market for the capital securities.
In connection with the offering, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, on behalf of the underwriters, may purchase and sell the capital
securities in the open market. These transactions may include over-allotment,
syndicate covering transactions and stabilizing transactions. Over-allotment
involves syndicate sales of the capital securities in excess of the principal
amount of the capital securities to be purchased by the underwriters in the
offering, which creates a syndicate short position. Syndicate covering
transactions involve purchase of the capital securities in the open market after
the distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of the capital
securities made for the purpose of preventing or retarding a decline in the
market price of the capital securities while the offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Merrill Lynch, Pierce, Fenner & Smith Incorporated, in covering syndicate short
positions or making stabilizing purchases, repurchases the capital securities
originally sold by that syndicate member.
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the capital securities. They may also cause the
price of the capital securities to be higher than the price that otherwise would
exist in the open market in the absence of these transactions. The underwriters
may conduct these transactions in the over-the-counter market or otherwise. If
the underwriters commence any of these transactions, they may discontinue them
at any time.
We estimate that our share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately
$ .
Certain of the underwriters and certain of their respective affiliates have
performed banking, investment banking, custodial and advisory services for us
and our affiliates, from time to time, for which they have received customary
fees and expenses. The underwriters may, from time to time, engage in
transactions with and perform services for us in the ordinary course of their
business.
U.S. Bancorp Piper Jaffray Inc., one of our underwriters, is an affiliate
of ours. This offering is being conducted pursuant to Rule 2810 of the National
Association of Securities Dealers, Inc.
U.S. Bancorp expects to deliver the capital securities against payment on
or about the date specified in the last paragraph of the cover page of this
prospectus supplement, which is the fifth business day following the date of
this prospectus supplement. Under Rule 15c6-1 of the SEC under the Exchange Act,
trades in the secondary market generally are required to settle in three
business days, unless the parties to any such trade expressly agree otherwise.
Accordingly, if any purchaser wishes to trade the capital securities on the date
of this prospectus supplement or the next succeeding business day, it will be
required, by virtue of the fact that the capital securities initially will
settle on the fifth business day following the date of this prospectus
supplement, to specify an alternate settlement cycle at the time of any such
trade to prevent a failed settlement.
The underwriters do not intend to make sales of the capital securities to
accounts over which they exercise discretionary authority without obtaining the
prior written approval of the account holder.
USB Capital V and we have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or contribute to payments that the underwriters may be required to make
because of any of those liabilities.
LEGAL OPINIONS
Certain matters of Delaware law relating to USB Capital V will be passed
upon for USB Capital V and U.S. Bancorp by Richards, Layton & Finger, P.A.,
Wilmington, Delaware. The due authorization, execution and delivery of the
junior subordinated debentures and the validity of the junior subordinated
S-36
debentures and the guarantees will be passed upon for U.S. Bancorp and USB
Capital V by Squire, Sanders & Dempsey L.L.P., Cincinnati, Ohio. The validity of
the junior subordinated debentures and the guarantees will be passed upon for
the underwriters by Simpson Thacher & Bartlett, New York, New York. Simpson
Thacher & Bartlett has represented us on certain matters from time to time.
Certain United States federal income taxation matters also will be passed upon
for U.S. Bancorp and USB Capital V by Squire, Sanders & Dempsey L.L.P.,
Cincinnati, Ohio.
EXPERTS
Our financial statements as of December 31, 2000 and 1999 and for each of
the three years in the period ended December 31, 2000 incorporated in this
prospectus by reference from our Current Report on Form 8-K filed on April 17,
2000 have been audited by PricewaterhouseCoopers LLP, independent accountants,
as stated in their report. Such financial statements are incorporated in
reliance upon the report of such firm given as experts in accounting and
auditing.
S-37
PROSPECTUS
[US BANCORP LOGO(R)]
U.S. BANCORP
601 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402
(612) 973-1111
$8,000,000,000
U.S. BANCORP
JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBT SECURITIES
USB CAPITAL IV
USB CAPITAL V
USB CAPITAL VI
USB CAPITAL VII
CAPITAL SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED IN THIS PROSPECTUS, BY U.S.
BANCORP
------------------------
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and the applicable prospectus
supplement carefully before you invest.
------------------------
The securities will be unsecured obligations of USB and/or the trusts and
will not be savings accounts deposits or other obligations of any bank or
non-bank subsidiary of USB and/or the trusts and are not insured by the Federal
Deposit Insurance Corporation, the Bank Insurance Fund or any other government
agency.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus may not be used to sell securities unless accompanied by
the applicable prospectus supplement.
THE DATE OF THIS PROSPECTUS IS JULY 25, 2001.
You should rely on the information incorporated by reference or provided in
this prospectus. We have not authorized anyone else to provide you with
different information. Neither we nor the underwriters are making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front of this document.
---------------------
TABLE OF CONTENTS
PROSPECTUS
PAGE
----
About this Prospectus....................................... 3
Where You Can Find More Information......................... 3
About U.S. Bancorp.......................................... 4
About The Trusts............................................ 5
Use of Proceeds............................................. 5
Ratios of Earnings to Fixed Charges and to Combined Fixed
Charges and Preferred Stock Dividends..................... 6
Description of Junior Subordinated Debt Securities.......... 6
Description of Capital Securities........................... 15
Description of the Guarantee................................ 23
Relationship among the Capital Securities, the Corresponding
Junior Subordinated Debt Securities and the Guarantees.... 24
Book-Entry Issuance......................................... 25
Plan of Distribution........................................ 27
Validity of Securities...................................... 28
Experts..................................................... 28
Glossary.................................................... 29
2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we, along with the
trusts, USB Capital IV, USB Capital V, USB Capital VI and USB Capital VII, filed
with the SEC using a shelf registration process. Under this shelf process, we
may sell:
- debt securities;
- preferred stock;
- depositary shares;
- common stock; and
- debt warrants
and the trusts may sell:
- capital securities (representing undivided beneficial interests in the
trusts) to the public; and
- common securities to us in one or more offerings.
The trusts will use the proceeds from sales of securities to buy a series
of our junior subordinated debt securities with terms that correspond to the
capital securities.
We:
- will pay principal and interest on our junior subordinated debt
securities, subject to the payment of our more senior debt;
- may choose to distribute our junior subordinated debt securities pro-rata
to the holders of the related capital securities and common securities if
we terminate a trust; and
- will fully and unconditionally guarantee the capital securities based on:
-- our obligations to make payments on our junior subordinated debt
securities;
-- our obligations under our guarantee (our payment obligations are
subject to payment on all of our general liabilities); and
-- our obligations under the trust agreements.
This prospectus provides you with a general description of the capital
securities, the junior subordinated debt securities and the guarantee. The
description of the debt securities, the preferred stock, the depositary shares
and the debt warrants will be included in a separate prospectus in this
registration statement. Each time we sell capital securities, we will provide an
applicable prospectus supplement that will contain specific information about
the terms of that offering. The applicable prospectus supplement may also add,
update or change information in this prospectus. You should read this prospectus
and the applicable prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information."
The registration statement that contains this prospectus (including the
exhibits to the registration statement) has additional information about us and
about the trusts and the securities offered under this prospectus. That
registration statement can be read at the SEC web site or at the SEC offices
mentioned under the heading "Where You Can Find More Information."
The words "USB," "Company," "we," "our," "ours," and "us" refer to U.S.
Bancorp and its subsidiaries, unless otherwise stated. We have also defined
terms in the glossary section, at the back of this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document that we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's web site at http://www.sec.gov. Our SEC filings are also
available at the offices of the New York Stock Exchange. For further information
on obtaining copies of our public filings at the New York Stock Exchange, you
should call (212) 656-5060.
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information that we file with the SEC
will automatically update and supersede this information. We incorporate by
reference the following documents listed below and any future
3
filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act, until we or any underwriters sell all of the securities:
- Annual Report on Form 10-K for the year ended December 31, 2000;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2001; and
- Current Reports on Form 8-K filed on January 22, February 28, March 6,
March 12, March 16, April 17 (two reports), April 23, May 3 and July 17,
2001.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
U.S. Bancorp
601 Second Avenue South
Minneapolis, Minnesota 55402
Attn: Investor Relations Department
(612) 973-2263
The trusts have no separate financial statements. The statements would not
be material to holders of the capital securities because the trusts have no
independent operations.
Unless otherwise indicated, currency amounts in this prospectus and in any
prospectus supplement are stated in U.S. dollars.
ABOUT U.S. BANCORP
USB is the organization created by the acquisition by Firstar Corporation
of the former U.S. Bancorp of Minneapolis. The new company retained the U.S.
Bancorp name. We are a multi-state financial services holding company
headquartered in Minneapolis, Minnesota providing financial services as a
financial holding company and a bank holding company registered under the Bank
Holding Company Act and incorporated in Delaware. We provide a full range of
financial services including lending and depository services through over 2,200
banking offices principally in 24 states. We also engage in credit card,
merchant and ATM processing; mortgage banking; insurance; trust and investment
management; brokerage; leasing; and investment banking activities principally in
domestic markets As of June 30, 2001, we and our subsidiaries had consolidated
assets of $165.2 billion, consolidated deposits of $106.9 billion and total
shareholders' equity of $15.5 billion.
Our banking subsidiaries provide an array of banking services to both
domestic and foreign customers and correspondent banks. These banking
subsidiaries range in size from less than $1.0 million to $53.5 billion in
deposits. The consumer banking division delivers products and services to the
broad consumer market and small businesses through our banking offices,
telemarketing, on-line services, direct mail and automated teller machines
("ATMs"). This division encompasses community banking, metropolitan banking,
small business banking, consumer lending, mortgage banking and investment sales
through the branches. Our network of 5,200 branded ATMs offers customers an
additional banking convenience. The payment services division provides customers
with consumer and business credit cards, corporate and purchasing services,
lines of credit, ATM processing and merchant processing. Through this division,
we are the largest provider of VISA(R) corporate and purchasing cards in the
world. Our wholesale banking divisions offer lending, depository, treasury
management and other financial services to an array of middle market, large
corporate and public sector clients including institutional organizations,
government entities and other financial institutions. Depository services
include checking accounts, savings accounts and time certificates of deposits.
Ancillary services, such as treasury management, include receivable lockbox
collection, foreign exchange and investment services. Additionally, our bank and
trust subsidiaries provide a full range of fiduciary services for individuals,
estates, foundations, business corporations and charitable organizations. We are
one of the largest providers of corporate trust services in the nation.
Non-banking subsidiaries offer a variety of products and services to our
customers. Our wholly-owned subsidiary, U.S. Bancorp Piper Jaffray, engages in
equity and fixed income trading activities, offers investment banking and
underwriting services to corporate and public sector customers and provides
financial advisory services and securities, mutual funds annuities and insurance
products to customers and regionally based businesses through a network of over
100 offices.
Our principal executive offices are located at 601 Second Avenue South,
Minneapolis, Minnesota 55402-4302, and our telephone number is (612) 973-1111.
If you would like to know more about us, see our documents incorporated by
reference in this
4
prospectus as described under the section "Where You Can Find More Information."
If you would like to know more about us, see our documents incorporated by
reference in this prospectus as described under the section "Where You Can Find
More Information."
ABOUT THE TRUSTS
We created a number of trusts under Delaware law under separate trust
agreements established for each trust. A trust is a fiduciary relationship where
one person known as the trustee, holds some property for the benefit of another
person, in this case, the purchasers of the securities. For the securities being
sold, the trustees and we will enter into amended and restated trust agreements
that will be essentially in the form filed as an exhibit to the registration
statement, which will state the terms and conditions for each trust to issue and
sell the specific capital securities and common securities.
The trusts exist solely to:
- issue and sell capital securities and common securities;
- use the gross proceeds from the sale of the capital securities and common
securities to purchase corresponding series of our junior subordinated
debt securities;
- maintain their status as grantor trusts for federal income tax purposes;
and
- engage in other activities that are necessary or incidental to these
purposes.
We will purchase all of the common securities of each trust. The common
securities will represent an aggregate liquidation amount equal to at least 3%
of each trust's total capitalization. The capital securities will represent the
remaining 97% of each trust's total capitalization. The common securities will
have terms substantially identical to, and will rank equal in priority of
payment with, the capital securities. If we default on the corresponding junior
subordinated debt securities, then distributions on the common securities will
be subordinate to the preferred securities in priority of payment.
For each trust, as the direct or indirect holder of the common securities,
we have appointed five trustees to conduct each trust's business and affairs. As
holder of the common securities we (except in some circumstances) have the power
to:
- appoint the trustees;
- replace or remove the trustees; and
- increase or decrease the number of trustees.
This means that if you are dissatisfied with a trustee you will not be able
to remove the trustee without our assistance. Similarly, if we are dissatisfied
with a trustee we can remove the trustee even if you are satisfied with the
trustee.
The capital securities will be fully and unconditionally guaranteed by us
as described under "Description of the Guarantees."
The principal executive offices of each trust is c/o U.S. Bancorp, 601
Second Avenue South, Minneapolis, Minnesota 55402 and the telephone number is
(612) 973-1111.
USE OF PROCEEDS
Each trust will use all the proceeds from the sale of the capital
securities to purchase our junior subordinated debt securities. Except as
otherwise stated in the applicable prospectus supplement, we intend to use the
proceeds from the sale of our junior subordinated debt securities (including
corresponding junior subordinated debt securities) for general corporate
purposes, including working capital, capital expenditures, investments in or
advances to existing or future indebtedness, repayment of maturing obligations
and replacement of outstanding indebtedness. Pending such use, we may
temporarily invest the proceeds or use them to reduce short-term indebtedness.
The applicable prospectus supplement provides more details on the use of
proceeds of any specific offering.
5
RATIOS OF EARNINGS TO FIXED CHARGES AND TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The ratios of earnings to fixed charges and to combined fixed charges and
preferred stock dividends of USB for each of the periods indicated are as
follows:
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31
------------- --------------------------------
JUNE 30 2001 2000 1999 1998 1997 1996
------------- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges:
Excluding interest on deposits................ 2.35 2.76 2.99 2.94 2.86 3.64
Including interest on deposits................ 1.54 1.72 1.78 1.67 1.57 1.74
Ratios of Earnings to Combined Fixed Charges and
Preferred Stock Dividends:
Excluding interest on deposits................ 2.35 2.76 2.99 2.94 2.84 3.60
Including interest on deposits................ 1.54 1.72 1.78 1.67 1.57 1.74
The ratio of earnings to fixed charges is computed by dividing income from
continuing operations before income taxes and fixed charges (excluding
capitalized interest), as adjusted for some equity method investments, by fixed
charges. Fixed charges consist of interest on Debt (including capitalized
interest), amortization of Debt discount, and expense and a portion of rentals
determined to be representative of interest. To compute the ratio of earnings to
combined fixed charges and preferred stock dividends, fixed charges is then
combined with preferred stock dividend requirements, adjusted to a pretax basis
on our outstanding preferred.
DESCRIPTION OF JUNIOR
SUBORDINATED DEBT SECURITIES
This section describes the general terms and provisions of the junior
subordinated debt securities that are offered by this prospectus. The applicable
prospectus supplement will describe the specific terms of the series of the
junior subordinated debt securities offered under that prospectus supplement and
any general terms outlined in this section that will not apply to those junior
subordinated debt securities.
The junior subordinated indenture will be qualified under the Trust
Indenture Act. A form of the junior subordinated indenture is filed as an
exhibit to the registration statement relating to this prospectus.
This section summarizes the material terms and provisions of the junior
subordinated indenture and the junior subordinated debt securities. Because this
is a summary, it does not contain all of the details found in the full text of
the junior subordinated indenture and the junior subordinated debt securities.
If you would like additional information, you should read the form of junior
subordinated indenture and the form of junior subordinated debt securities.
GENERAL
We can issue the junior subordinated debt securities in one or more series.
A series of junior subordinated debt securities initially will be issued to a
trust in connection with a capital securities offering.
Unless otherwise described in the applicable prospectus supplement
regarding any offered junior subordinated debt securities, the junior
subordinated debt securities will rank equally with all other series of junior
subordinated debt securities, will be unsecured and will be subordinate and
junior in priority of payment to all of our Senior Debt as described below under
"Subordination."
The indenture does not limit the amount of junior subordinated debt
securities which we may issue, nor does it limit our issuance of any other
secured or unsecured Debt.
We can issue the junior subordinated debt securities under a supplemental
indenture, an officers' certificate or a resolution of our board of directors.
6
The applicable prospectus supplement will describe the following terms of
the junior subordinated debt securities:
- the title;
- any limit on the aggregate principal amount that may be issued;
- the date(s) on which the principal is payable or the method of
determining that date;
- the interest rate, if any, the interest payment dates, any rights we may
have to defer or extend an interest payment date, and the regular record
date for any interest payment or the method by which any of the foregoing
will be determined;
- the place(s) where payments shall be payable and where the junior
subordinated debt securities can be presented for registration of
transfer or exchange, and the place(s) where notices and demands to or on
us can be made;
- any period(s) within which or date(s) on which, price(s) at which and the
terms and conditions on which the junior subordinated debt securities can
be redeemed, in whole or in part, at our option or at the option of a
holder of the junior subordinated debt securities;
- our or any holder's obligation or right, if any, to redeem, purchase or
repay the junior subordinated debt securities and other related terms and
provisions;
- the denominations in which any junior subordinated debt securities will
be issued if other than denominations of $100,000 and integral multiples
of $1,000 in excess thereof;
- if other than in U.S. dollars, the currency in which the principal,
premium and interest, if any, that the junior subordinated debt
securities will be payable or denominated;
- any additions, modifications or deletions in the events of default or
covenants specified in the indenture;
- the portion of the principal amount that will be payable at declaration
of acceleration of the maturity;
- any additions or changes to the indenture as will be necessary to
facilitate the issuance of a series of junior subordinated debt
securities in bearer form, registrable or not registrable for the
principal, and with or without interest coupons;
- the index or indices used to determine the amount of payments of
principal and premium, if any, on any junior subordinated debt securities
and how these amounts will be determined;
- the terms and conditions under which temporary global securities are
exchanged for definitive junior subordinated debt securities of the same
series;
- whether the junior subordinated debt securities will be issued in global
form and, in that case, the terms and the depositary for these global
securities;
- the paying agent;
- the terms and conditions of any right to convert or exchange any junior
subordinated debt securities into any of our other securities or
property;
- the form of trust agreement and guarantee agreement;
- the relative degree, if any, to which the junior subordinated debt
securities shall be senior or subordinated to other junior subordinated
debt securities or any of our other indebtedness in right of payment; and
- any other terms of the junior subordinated debt securities consistent
with the provisions of the indenture.
Junior subordinated debt securities may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. Some U.S. federal income
tax consequences and special considerations applicable to any the junior
subordinated debt securities will be described in the applicable prospectus
supplement.
The applicable prospectus supplement will describe the restrictions,
elections, some U.S. federal income tax consequences, and specific terms and
other information related to the junior subordinated debt securities if the
purchase price, principal, premium, or interest of any of the junior
subordinated
7
debt securities is payable or denominated in one or more foreign currencies or
currency units.
If any index is used to determine the amount of payments of principal,
premium, or interest on any series of junior subordinated debt securities,
special U.S. federal income tax, accounting and other considerations applicable
to the junior subordinated debt securities will be described in the applicable
prospectus supplement.
OPTION TO EXTEND INTEREST PAYMENT DATES
If provided in the applicable prospectus supplement and if the junior
subordinated debentures are not in default, we shall have the right at any time
and from time to time during the term of any series of junior subordinated debt
securities to defer payment of interest for a number of consecutive interest
payment periods as specified in the applicable prospectus supplement (extension
period).
Some U.S. federal income tax consequences and considerations applicable to
any junior subordinated debt securities that permit extension periods will be
described in the applicable prospectus supplement.
REDEMPTION
Unless otherwise indicated in the applicable prospectus supplement, junior
subordinated debt securities will not be subject to any sinking fund.
Unless the applicable prospectus supplement indicates otherwise, we may, at
our option and subject to the receipt of prior approval by the Board of
Governors of the Federal Reserve System, if then required under applicable
capital guidelines or policies, redeem the junior subordinated debt securities
of any series:
- in whole at any time or in part from time to time; or
- upon the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event in whole (but not in part) at any time within 90
days of the occurrence of the Tax Event, the Investment Company Event or
Capital Treatment Event.
If the junior subordinated debt securities of any series are redeemable
only on or after a specified date or by the satisfaction of additional
conditions, the applicable prospectus supplement will specify the date or
describe these conditions.
Junior subordinated debt securities shall be redeemable in the
denominations specified in the prospectus supplement. Unless the applicable
prospectus supplement indicates otherwise, junior subordinated debt securities
will be redeemed at the redemption price.
A Tax Event means that either we or a trust will have received an opinion
of counsel (which may be our counsel or counsel of an affiliate but not an
employee and which must be reasonably acceptable to the property trustee)
experienced in tax matters stating that, as a result of any:
- amendment to, or change (including any announced prospective change) in,
the laws (or any regulations under those laws) of the United States or
any political subdivision or taxing authority affecting taxation; or
- interpretation or application of the laws enumerated in the preceding
bullet point or regulations, by any court, governmental agency or
regulatory authority;
there is more than an insubstantial risk that:
- a trust is, or will be within 90 days of the date of the opinion of
counsel, subject to U.S. federal income tax on interest received on the
junior subordinated debt securities;
- interest payable by us to the trusts on the junior subordinated debt
securities is not, or will not be within 90 days of the date of the
opinion of counsel, deductible, in whole or in part, for U.S. federal
income tax purposes; or
- a trust is, or will be within 90 days of the date of the opinion of
counsel, subject to more than a minimal amount of other taxes, duties,
assessments or other governmental charges.
An Investment Company Event means the receipt by us and a trust of an
opinion of counsel experienced in matters relating to investment companies to
the effect that, as a result of any:
- change in law or regulation; or
- change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority,
the trust is or will be considered an investment company that is required
to be registered under the Investment Company Act, which change becomes
8
effective on or after the original issuance of the capital securities.
A Capital Treatment Event means the reasonable determination by us that, as
a result of any:
- amendment to, or change (including any prospective change) in, laws or
any applicable regulation of the United States and any political
subdivision; or
- as a result of any official or administrative pronouncement or action or
judicial decision interpreting or applying the laws or regulations, which
amendment is effective or announced on or after the date of issuance the
capital securities,
there is more than an insubstantial risk of impairment of our ability to
treat the capital securities (or any substantial portion) as Tier 1 capital (or
its equivalent) for purposes of the capital adequacy guidelines of the Federal
Reserve, in effect and applicable to us.
Notice of any redemption will be mailed at least 30 days and not more than
60 days before the redemption date to each holder of redeemable junior
subordinated debt securities, at its registered address. Unless we default in
the payment of the redemption price, on or after the redemption date, interest
will cease to accrue on the junior subordinated debt securities or portions
called for redemption.
RESTRICTIONS ON SOME PAYMENTS
We agreed that we will not permit any of our subsidiaries to:
- declare or pay any dividends or distributions, or redeem, purchase,
acquire, or make a liquidation payment on any of our capital stock;
- make any payment of principal of interest or premium, if any, on or
repay, repurchase or redeem any of our debt securities (including other
junior subordinated debt securities) that rank equally with or junior in
interest to the junior subordinated debt securities; or
- make any guarantee payments on any guarantee of debt securities of any of
our subsidiaries (including under other guarantees) if the guarantee
ranks equally with or junior in interest to the junior subordinated debt
securities, except in some circumstances, if at that time:
-- we have actual knowledge of an event that with the giving of notice or
the lapse of time, or both, would constitute an event of default under
the indenture and we will not have taken reasonable steps to cure the
event of default;
-- the junior subordinated debt securities are held by a trust that is the
issuer of a series of related capital securities and we are in default
on our payment obligations under the guarantee relating to those related
capital securities; or
-- we have given notice of our selection of an extension period on the
junior subordinated debt securities of a series and we have not
rescinded the notice, or extension period, or any extension relating to
the junior subordinated debt securities shall be continuing.
MODIFICATION OF INDENTURE
We may and the trustee may change the indenture without your consent for
specified purposes, including:
- to fix any ambiguity, defect or inconsistency, provided that the change
does not materially adversely affect the interest of any holder of any
series of junior subordinated debt securities or, in the case of
corresponding junior subordinated debt securities, the interest of a
holder of any related capital securities so long as they remain
outstanding; and
- to qualify or maintain the qualification of the indenture under the Trust
Indenture Act.
In addition, under the indenture, we may and the trustee may modify the
indenture to affect the rights of the holders of the series of the junior
subordinated debt securities, with the consent of the holders of a majority in
principal amount of the outstanding series of junior subordinated debt
securities that are affected. However, we cannot and the trustee cannot take the
following actions without the consent of each holder of the outstanding junior
subordinated debt securities affected:
- change the maturity date of any series of junior subordinated debt
securities (except as otherwise specified in the applicable prospectus
supplement), or reduce the principal
9
amount, rate of interest, or extend the time of payment of interest;
- reduce the percentage in principal amount of junior subordinated debt
securities of any series, necessary to modify the indenture;
- modify some provisions of the indenture relating to modification or
waiver, except to increase the required percentage; or
- modify the provisions of the indenture relating to the subordination of
the junior subordinated debt securities of any series in a manner adverse
to the holders, provided that, in the case of corresponding junior
subordinated debt securities, as long as any of the related capital
securities are outstanding, no modification will be made that adversely
affects the holders of these capital securities in any material respect.
Also the indenture cannot be terminated, and a waiver of any event of
default or compliance with any covenant under the indenture cannot be
effective, without the prior consent of the holders of a majority of the
liquidation preference of the related capital securities unless and until
the principal of the corresponding junior subordinated debt securities
and all accrued and unpaid interest have been paid in full and some other
conditions are satisfied.
In addition, we may and the trustee may execute any supplemental indenture
to create any new series of junior subordinated debt securities, without the
consent of any holders.
EVENTS OF DEFAULT
The following are events of defaults under the indenture:
- failure to pay interest, when due under the terms of the series of junior
subordinated debt securities, and that failure continues for 30 days and
the time for payment has not been extended or deferred;
- failure to pay any principal of or premium on the series of junior
subordinated debt securities when due, whether at maturity, redemption by
declaration or otherwise;
- failure to observe or perform in any material respect, any other covenant
contained in the indenture, and that failure continues for 60 days after
we receive written notice from the trustee or holders of at least 25% in
principal amount of the outstanding series of junior subordinated debt
securities; or
- some events of bankruptcy, insolvency or reorganization.
The holders of a majority in aggregate outstanding principal amount of any
series of junior subordinated debt securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee. If an event of default under the indenture of any series occurs and is
continuing, the junior subordinated trustee or the holders of at least 25% in
aggregate principal amount of the outstanding junior subordinated debt
securities can declare the unpaid principal and accrued interest, if any, to the
date of acceleration on all the outstanding junior subordinated debt securities
of that series to be due and payable immediately. Similarly, in the case of
corresponding junior subordinated debt securities, if the trustee or holders of
the corresponding junior subordinated debt securities fail to make this
declaration, the holders of at least 25% in aggregate liquidation preference of
the related capital securities will have that right.
The holders of a majority in aggregate outstanding principal of the series
of junior subordinated debt securities can rescind a declaration of acceleration
and waive the default if the default (other than the non-payment of principal
which has become due solely by acceleration) has been cured and a sum sufficient
to pay all principal and interest due (other than by acceleration) has been
deposited with the trustee. In the case of corresponding junior subordinated
debt securities, if the holders of the corresponding junior subordinated debt
securities fail to rescind a declaration and waive the default, the holders of a
majority in aggregate liquidation amount of the related capital securities will
have that right.
The holders of a majority in aggregate outstanding principal amount of the
junior subordinated debt securities of any affected series may, on behalf of
holders of all of the junior subordinated debt securities, waive any past
default, except:
- a default in the payment of principal or interest (unless the default has
been cured or a sum sufficient to pay all matured installments
10
of principal and interest has been deposited with the trustee); or
- a default in a covenant or provision of the indenture which cannot be
modified or amended without the consent of the holders of each
outstanding junior subordinated debt securities.
In the case of corresponding junior subordinated debt securities, if the
holders of the corresponding junior subordinated debt securities fail to rescind
a declaration and waive the default, the holders of a majority in liquidation
preference of the related capital securities will have that right.
We are required to file annually, with the trustee, a certificate stating
whether or not we are in compliance with all the conditions and covenants
applicable to us under the junior subordinated indenture.
If an event of default occurs and is continuing on a series of
corresponding junior subordinated debt securities, the property trustee will
have the right to declare the principal, of, and the interest on, the
corresponding junior subordinated debt securities, and any amounts payable under
the indenture, to be immediately due and payable, and to enforce its other
rights as a creditor for these corresponding junior subordinated debt
securities.
ENFORCEMENT OF SOME RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If an event of default under the indenture has occurred and is continuing,
and this event can be attributable to our failure to pay interest or principal
on the related junior subordinated debt securities when due, you may institute a
legal proceeding directly against us to enforce the payment of the principal of
or interest on those subordinated debt securities having a principal amount
equal to the liquidation amount of your related capital securities. We cannot
amend the indenture to remove the right to bring a direct action, without the
written consent of holders of all capital securities. If the right to bring a
direct action is removed, the applicable trust may become subject to reporting
obligations under the Exchange Act.
You would not be able to exercise directly any remedy other than those
stated in the preceding paragraph which are available to the holders of the
junior subordinated debt securities unless there has been an event of default
under the trust agreement. See "Description of Capital Securities--Events of
Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The indenture states that we cannot consolidate with or merge into any
other person or convey, transfer or lease our properties and assets
substantially as an entirety to any person, and no person will consolidate with
or merge into us or convey, transfer or lease its properties and assets
substantially as an entirety to us, unless:
- the successor is organized under the laws of the United States or any
state or the District of Columbia, and expressly assumes all of our
obligations under the indenture;
- immediately after the transaction, no event of default, and no event
which, after notice or lapse of time or both, would become an event of
default, shall have occurred and be continuing;
- this transaction is permitted under the related trust agreement and the
related guarantee and does not give rise to any breach or violation of
the related trust agreement or the related guarantee; and
- some other conditions prescribed in the indenture are met.
The general provisions of the indenture do not afford protection to the
holders of the junior subordinated debt securities in the event of a highly
leveraged or other transaction involving us that may adversely affect the
holders.
SATISFACTION AND DISCHARGE
The indenture provides that when all junior subordinated debt securities
not previously delivered to the trustee for cancellation:
- have become due and payable; or
- will become due and payable within one year, and
-- we deposit with the trustee money sufficient to pay and discharge the
entire indebtedness on the junior subordinated debt securities;
-- we deliver to the trustee officers' certificates and opinions of
counsel; and
11
-- we comply with some other requirements under the indenture,
then the indenture will cease to be of further effect and we will be considered
to have satisfied and discharged the indenture.
CONVERSION OR EXCHANGE
If indicated in the applicable prospectus supplement, the junior
subordinated debt securities of any series may be convertible or exchangeable
into capital securities or other securities. The applicable prospectus
supplement will describe the specific terms on which the junior subordinated
debt securities of any series may be so converted or exchanged. The terms may
include provisions for conversion or exchange, either mandatory, at the option
of the holder, or at our option, in which case the number of shares of capital
securities or other securities to be received by the holders of junior
subordinated debt securities would be calculated as of a time and in the manner
stated in the applicable prospectus supplement.
SUBORDINATION
The indenture provides that any junior subordinated debt securities will be
subordinate and junior in right of payment to all Senior Debt.
Upon any payment or distribution of assets to creditors upon our
liquidation, dissolution, winding up, reorganization, whether voluntary or
involuntary, assignment for the benefit of creditors, marshaling of assets or
any bankruptcy, insolvency, debt restructuring or similar proceedings, the
holders of Senior Debt will first be entitled to receive payment in full of the
principal, premium, or interest due before the holders of junior subordinated
debt securities or, in the case of corresponding junior subordinated debt
securities, the property trustee, on behalf of the holders, will be entitled to
receive any payment or distribution.
In the event of the acceleration of the maturity of any junior subordinated
debt securities, the holders of all Senior Debt outstanding at the time of the
acceleration will first be entitled to receive payment in full of all amounts
due on the Senior Debt (including any amounts due upon acceleration) before the
holders of junior subordinated debt securities.
No payment, by or on our behalf, of principal, premium, if any, or
interest, on the junior subordinated debt securities shall be made if at the
time of the payment, there exists:
- a default in any payment on any Senior Debt, or any other default under
which the maturity of any Senior Debt has been accelerated; and
- any judicial proceeding relating to the defaults which shall be pending.
We are a non-operating holding company and almost all of our operating
assets are owned by our subsidiaries. We rely primarily on dividends from our
subsidiaries to meet our obligations to pay the principal of and interest on our
outstanding debt obligations and corporate expenses. We are a legal entity
separate and distinct from our banking and non-banking affiliates. Our principal
sources of income are dividends, interest and fees from U.S. Bank National
Association, Firstar Bank, National Association and our other banking and
non-banking affiliates. Our banking subsidiaries are subject to some
restrictions imposed by federal law on any extensions of credit to, and some
other transactions with, us and some other affiliates, and on investments in
stock or other securities. These restrictions prevent us and our other
affiliates from borrowing from our banking subsidiaries unless the loans are
secured by various types of collateral. Further, these secured loans, other
transactions and investments by any of our banking subsidiaries are generally
limited in amount for us and each of our other affiliates to 10% of our banking
subsidiaries' capital and surplus, and as to us and all of our other affiliates
to an aggregate of 20% of our banking subsidiaries' capital and surplus. In
addition, payment of dividends by our banking subsidiaries to us are subject to
ongoing review by banking regulators and to various statutory limitations and in
some circumstances requires approval by banking regulatory authorities. Because
we are a holding company, our right to participate in any distribution of assets
of any subsidiary upon the liquidation or reorganization or otherwise of our
subsidiary is subject to the prior claims of creditors of the subsidiary, unless
we can be recognized as a creditor of that subsidiary. Accordingly, the junior
subordinated debt securities will be effectively subordinated to all existing
and future liabilities of our banking subsidiaries, and holders of junior
subordinated debt securities should look only to our assets for payments on the
junior subordinated debt securities.
12
The indenture places no limitation on the amount of Senior Debt that we may
incur. We expect to incur from time to time additional indebtedness constituting
Senior Debt.
The indenture provides that these subordination provisions, as they relate
to any particular issue of junior subordinated debt securities, may be changed
before the issuance. The applicable prospectus supplement will describe any of
these changes.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless the applicable prospectus supplement specifies otherwise, we will
issue the junior subordinated debt securities in registered form only, without
coupons and, in the denominations specified in the prospectus supplement.
Holders can exchange junior subordinated debt securities of any series for other
junior subordinated debt securities:
- of the same issue and series;
- in any authorized denominations;
- in a like principal amount;
- of the same date of issuance and maturity; and
- bearing the same interest rate.
Subject to the terms of the indenture and the limitations applicable to
global securities stated in the applicable prospectus supplement, junior
subordinated debt securities will be presented for exchange or for registration
of transfer (duly endorsed or with the form of transfer duly endorsed, or a
satisfactory written instrument of transfer, duly executed) at the office of the
security registrar or at the office of any transfer agent designated by us for
that purpose.
Unless otherwise provided in the applicable prospectus supplement, no
service charge will be made for any registration of transfer or exchange, but we
may require payment of any taxes or other governmental charges. We have
appointed the trustee as security registrar for the junior subordinated debt
securities. Any transfer agent (in addition to the security registrar) initially
designated by us for any junior subordinated debt securities will be named in
the applicable prospectus supplement. We may at any time designate additional
transfer agents or rescind the designation of any transfer agent or approve a
change in the location through which any transfer agent acts, except that we
will be required to maintain a transfer agent in each place of payment for the
junior subordinated debt securities of each series.
If the junior subordinated debt securities of any series are to be
redeemed, neither the trustee nor us will be required to:
- issue, register the transfer of, or exchange any junior subordinated debt
securities of any series during a period beginning on the business day
that is 15 days before the day of mailing of notice of redemption of any
junior subordinated debt securities that is selected for redemption and
ending at the close of business on the day of mailing of the relevant
notice; or
- transfer or exchange any junior subordinated debt securities selected for
redemption, except, the unredeemed portion of any junior subordinated
debt securities being redeemed in part.
GLOBAL JUNIOR SUBORDINATED DEBT SECURITIES
We may issue, in whole or in part, the junior subordinated debt securities
of a series in the form of one or more global junior subordinated debt
securities that will be deposited with, or on behalf of, a depositary identified
in the applicable prospectus supplement relating to those series. The specific
terms of the depositary arrangements for a series of junior subordinated debt
securities will be described in the applicable prospectus supplement. See
"Book-Entry Issuance."
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable prospectus supplement, payment
of principal of and any premium and interest on junior subordinated debt
securities will be made at the office of the trustee in the City of New York or
at the office of the paying agent(s) designated by us, from time to time, in the
applicable prospectus supplement. However, we may make interest payment by:
- check mailed to the address of the person entitled to it at the address
appearing in the securities register (except in the case of global junior
subordinated debt securities); or
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- transfer to an account maintained by the person entitled to it as
specified in the securities register, so long as we receive proper
transfer instructions by the regular record date.
Unless otherwise indicated in the applicable prospectus supplement, payment
of the interest on junior subordinated debt securities on any interest payment
date will be made to the person in whose name the junior subordinated debt
securities are registered at the close of business on the regular record date
relating to the interest payment date, except in the case of defaulted interest.
We may at any time designate additional paying agents or cancel the
designation of any paying agent. We will at all times be required to maintain a
paying agent in each place of payment for each series of junior subordinated
debt securities.
Any money deposited with the trustee or any paying agent, or held by us in
trust, for the payment of the principal of and any premium or interest on any
junior subordinated debt securities that remains unclaimed for two years after
the principal, any premium or interest has become due and payable will, at our
request, be repaid to us and the holder of the junior subordinated debt
securities can then only look to us for payment.
INFORMATION ABOUT THE TRUSTEE
The Trust Indenture Act describes the duties and responsibilities of the
trustee. Subject to the provisions under the Trust Indenture Act, the trustee
has no obligation to exercise any of the powers vested in it by the indenture,
at the request of any holder of junior subordinated debt securities, unless the
holder offers reasonable indemnity against the costs, expenses and liabilities
that are incurred. The trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its duties
if it reasonably believes that repayment or adequate indemnity is not reasonably
assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBT SECURITIES
The corresponding junior subordinated debt securities are issued in one or
more series of junior subordinated debt securities under the indenture with
terms corresponding to the terms of a series of related capital securities.
Concurrently with the issuance of each trust's capital securities, the trust
will invest the proceeds and the consideration paid by us for the related common
securities in a series of corresponding junior subordinated debt securities.
Each series of corresponding junior subordinated debt securities will be in the
principal amount equal to the aggregate stated liquidation amount of the related
capital securities and the common securities of the trust and will rank equally
with all other series of junior subordinated debt securities. As a holder of the
related capital securities for a series of corresponding junior subordinated
debt securities, you will have rights in connection with modifications to the
indenture or at the occurrence of events of default under the indenture
described under "--Modification of Indenture" and "--Events of Default," unless
provided otherwise in the applicable prospectus supplement for these related
capital securities.
Unless otherwise specified in the applicable prospectus supplement, if a
Tax Event relating to a trust of related capital securities occurs and is
continuing, we have the option, and subject to prior approval by the Federal
Reserve (if required at the time under applicable capital guidelines or
policies), to redeem the corresponding junior subordinated debt securities at
any time within 90 days of the occurrence of the Tax Event, in whole but not in
part, at the redemption price. As long as the applicable trust is the holder of
all outstanding series of corresponding junior subordinated debt securities, the
trust will use the proceeds of the redemption to redeem the corresponding
capital securities and common securities in accordance with their terms. We may
not redeem a series of corresponding junior subordinated debt securities in
part, unless all accrued and unpaid interest has been paid in full on all
outstanding corresponding junior subordinated debt securities of the applicable
series.
We will covenant in the indenture that if and as long as:
- the trust of the related series of capital securities and common
securities is the holder of all the corresponding junior subordinated
debt securities;
- a Tax Event related to the trust has occurred and is continuing; and
- we have elected, and have not revoked our election to pay Additional Sums
for the capital securities and common securities,
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we will pay to the trust the Additional Sums.
We will also covenant, as to each series of corresponding junior
subordinated debt securities:
- to maintain directly or indirectly 100% ownership of the common
securities of the trust to which corresponding junior subordinated debt
securities have been issued, provided that some successors which are
permitted under the indenture, may succeed to our ownership of the common
securities;
- not to voluntarily terminate, wind-up or liquidate any trust, except:
-- with prior approval of the Federal Reserve if then so required under
applicable capital guidelines or policies of the Federal Reserve; and
-- in connection with a distribution of corresponding junior subordinated
debt securities to the holders of the capital securities in liquidation
of a trust, or in connection with some mergers, consolidations or
amalgamations permitted by the related trust agreement; and
- to use our reasonable efforts, consistent with the terms and provisions
of the related trust agreement, to cause the trust to remain classified
as a grantor trust and not as an association taxable as a corporation for
United States federal income tax purposes.
DESCRIPTION OF CAPITAL SECURITIES
GENERAL
This section describes the general terms and provisions of the capital
securities that are offered by this prospectus. The applicable prospectus
supplement will describe the specific terms of the series of the capital
securities offered under that prospectus supplement and any general terms
outlined in this section that will not apply to those capital securities.
The capital securities will be issued under the trust agreement. The trust
agreement will be qualified as an indenture under the Trust Indenture Act. The
forms of trust agreement and capital securities have been filed as an exhibit to
the registration statement.
The capital securities will have the terms described in the applicable
trust agreement or made part of the trust agreement by the Trust Indenture Act
or the Delaware Business Trust Act. The terms of the capital securities will
mirror the terms of the junior subordinated debt securities held by each trust.
This section summarizes the material terms and provisions of the trust
agreement and the capital securities. Because this is only a summary, it does
not contain all of the details found in the full text of the trust agreement and
the capital securities. If you would like additional information you should read
the form of trust agreement and the form of capital securities.
The trust agreement of each trust authorizes the administrative trustees to
issue on behalf of each trust one series of capital securities and one series of
common securities containing the terms described in the applicable prospectus
supplement. The proceeds from the sale of the capital securities and common
securities will be used by each trust to purchase a series of junior
subordinated debt securities from us. The junior subordinated debt securities
will be held in trust by the property trustee for your benefit and the benefit
of the holder of the common securities.
Under the guarantee, we will agree to make payments of distributions and
payments on redemption or liquidation of the capital securities, to the extent
that the related trust holds funds available for this purpose and has not made
such payments. See "Description of the Guarantee."
The assets of each trust available for distribution to you will be limited
to payments received from us under the corresponding junior subordinated debt
securities. If we fail to make a payment on the corresponding junior
subordinated debt securities, the property trustee will not have sufficient
funds to make related payments, including distributions, on the capital
securities.
Each guarantee, when taken together with our obligations under the
corresponding junior subordinated debt securities and the indenture, the
applicable trust agreement and the expense agreement, will provide a full and
unconditional guarantee of amounts due on the capital securities issued by each
trust.
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Each trust will redeem an amount of capital securities equal to the amount
of any corresponding junior subordinated debt securities redeemed.
Specific terms relating to the capital securities will be described in the
applicable prospectus supplement, including:
- the name of the capital securities;
- the dollar amount and number of capital securities issued;
- the annual distribution rate(s) (or method of determining this rate(s)),
the payment date(s) and the record dates used to determine the holders
who are to receive distributions;
- the date from which distributions shall be cumulative;
- the optional redemption provisions, if any, including the prices, time
periods and other terms and conditions for which the capital securities
shall be purchased or redeemed, in whole or in part;
- the terms and conditions, if any, under which the junior subordinated
debt securities are distributed to you by the trusts;
- any securities exchange on which the capital securities are listed;
- whether the capital securities are to be issued in book-entry form and
represented by one or more global certificates, and if so, the depositary
for the global certificates and the specific terms of the depositary
arrangements; and
- any other relevant rights, preferences, privileges, limitations or
restrictions of the capital securities.
The applicable prospectus supplement will also describe some U.S. federal
income tax considerations applicable to any offering of capital securities.
REDEMPTION OR EXCHANGE
MANDATORY REDEMPTION. If any corresponding junior subordinated debt
securities are repaid or redeemed in whole or in part, whether at maturity or
upon earlier redemption, the property trustee will use the proceeds from this
repayment or redemption to redeem a Like Amount of the capital securities and
common securities. The property trustee will give you at least 30 days notice,
but not more than 60 days notice, before the date of redemption. The capital
securities and (unless there is a default under the junior subordinated debt
securities) the common securities will be redeemed at the redemption price at
the concurrent redemption of the corresponding junior subordinated debt
securities. See "Description of the Junior Subordinated Debt
Securities--Redemption."
If less than all of any series of corresponding junior subordinated debt
securities are to be repaid or redeemed on a date of redemption, then the
proceeds from the repayment or redemption shall be allocated, pro rata, to the
redemption of the related capital securities and the common securities.
We may redeem any series of corresponding junior subordinated debt
securities:
- on or after the date as specified in the applicable prospectus
supplement, in whole at any time or in part from time to time;
- at any time, in whole (but not in part), on the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment; or
- as is otherwise specified in the applicable prospectus supplement.
DISTRIBUTION OF CORRESPONDING JUNIOR SUBORDINATED DEBT SECURITIES. We may
at any time terminate any trust and, after satisfaction of the liabilities of
creditors of the trust as provided by applicable law, cause the corresponding
junior subordinated debt securities relating to the capital securities and
common securities issued by the trust to be distributed to you and the holders
of the common securities in liquidation of the trust.
TAX EVENT, INVESTMENT COMPANY EVENT REDEMPTION OR CAPITAL TREATMENT
EVENT. If a Tax Event, Investment Company Event or Capital Treatment Event
relating to a series of capital securities and common securities shall occur and
be continuing, we may redeem the corresponding junior subordinated debt
securities in whole, but not in part. This will cause a mandatory redemption of
all of the related capital securities and common securities at the redemption
price within 90 days following the occurrence of the Tax Event, Investment
Company Event or Capital Treatment Event.
If a Tax Event, Investment Company Event or Capital Treatment Event
relating to a series of
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capital securities and common securities occurs and is continuing and we elect
not to redeem the corresponding junior subordinated debt securities or to
terminate the related trust and cause the corresponding junior subordinated debt
securities to be distributed to holders of the capital securities and common
securities as described above, those capital securities and common securities
will remain outstanding and Additional Sums may be payable on the corresponding
junior subordinated debt securities.
Like Amount means:
- for a redemption of any series of capital securities and common
securities, capital securities and common securities of the series having
a Liquidation Amount equal to that portion of the principal amount of
corresponding junior subordinated debt securities to be contemporaneously
redeemed. The Like Amount will be allocated to the common securities and
to the capital securities based upon their relative Liquidation Amounts.
The proceeds will be used to pay the redemption price of the capital
securities and common securities; and
- for a distribution of corresponding junior subordinated debt securities
to holders of any series of capital securities and common securities,
corresponding junior subordinated debt securities having a principal
amount equal to the Liquidation Amount of the related capital securities
and common securities.
- Liquidation Amount means, unless otherwise provided in the applicable
prospectus supplement, $25 per capital security and common security.
Once the liquidation date is fixed for any distribution of corresponding
junior subordinated debt securities for any series of capital securities:
- the series of capital securities will no longer be deemed to be
outstanding;
- The DTC, or its nominee, as the record holder of the series of capital
securities, will receive a registered global certificate or certificates
representing the corresponding junior subordinated debt securities to be
delivered upon the distribution; and
- certificates representing the series of capital securities not held by
DTC or its nominee will be deemed to represent the corresponding junior
subordinated debt securities. Those certificates will bear accrued and
unpaid interest in an amount equal to the accrued and unpaid
distributions on the series of capital securities until the certificates
are presented to the administrative trustees of the applicable trust or
their agent for transfer or reissuance.
We cannot assure you of the market prices for the capital securities or the
corresponding junior subordinated debt securities. Accordingly, the capital
securities that you may purchase, or the corresponding junior subordinated debt
securities that you may receive on dissolution and liquidation of a trust, may
trade at a discount of the price that you paid for the capital securities.
REDEMPTION PROCEDURES
Capital securities redeemed on date of redemption shall be:
- redeemed at the redemption price with the applicable proceeds from the
contemporaneous redemption of the corresponding junior subordinated debt
securities; and
- payable on each date of redemption only to the extent that the related
trust has funds on hand available for the payment of the redemption
price.
If notice of redemption is given, then, by 12:00 noon, New York City time,
on the date of redemption, to the extent funds are available, the property
trustee will deposit irrevocably with DTC funds sufficient to pay the applicable
redemption price and will give DTC irrevocable instructions and authority to pay
the redemption price to you. See "Book-Entry Issuance." If the capital
securities are no longer in book-entry form, the property trustee, to the extent
funds are available, will irrevocably deposit with the paying agent for the
capital securities, funds sufficient to pay the applicable redemption price and
will give the paying agent irrevocable instructions and authority to pay the
redemption price to you when you surrender your certificates evidencing the
capital securities.
Distributions payable on or before the date of redemption for any capital
securities called for redemption shall be payable to the holders on the
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relevant record dates for the related distribution dates.
If notice of redemption is given and funds deposited as required, all of
your rights will cease, except your right to receive the redemption price, and
the capital securities will cease to be outstanding.
If a date of redemption is not a business day, then payment of the
redemption price payable on the date of redemption will be made on the next
succeeding day which is a business day (and without any interest or other
payment for any delay). However, if the business day falls in the next calendar
year, then payment will be made on the immediately preceding business day.
If payment of the redemption price of the capital securities called for
redemption is improperly withheld or refused and not paid either by the trust or
by us under the guarantee, then distributions on the capital securities will
continue to accrue at the then applicable rate from the date of redemption to
the date that the redemption price is actually paid. In this case the actual
payment date will be the date of redemption for purposes of calculating the
redemption price.
Subject to applicable law (including, without limitation, federal
securities law), our subsidiaries or us may at any time and from time to time
purchase outstanding capital securities by tender offer, in the open market or
by private agreement.
Payment of the redemption price on the capital securities and any
distribution of corresponding junior subordinated debt securities to holders of
capital securities shall be payable to the holders on the relevant record date
as they appear on the register of capital securities. The record date shall be
one business day before the relevant date of redemption or liquidation date as
applicable. However, if the capital securities are not in book-entry form, the
relevant record date for the capital securities shall be at least 15 days before
the date of redemption or liquidation date.
If less than all of the capital securities and common securities issued by
a trust are to be redeemed on a redemption date, then the aggregate Liquidation
Amount of the capital securities and common securities to be redeemed shall be
allocated pro rata to the capital securities and the common securities based
upon the relative Liquidation Amounts of such classes. The property trustee will
select the capital securities to be redeemed on a pro rata basis not more than
60 days before the date of redemption, by a method deemed fair and appropriate
by it. The property trustee will promptly notify the registrar in writing of the
capital securities selected for redemption and, in the case of any capital
securities selected for partial redemption, the Liquidation Amount to be
redeemed.
You will receive notice of any redemption at least 30 days but not more
than 60 days before the date of redemption at your registered address. Unless we
default in the payment of the redemption price on the corresponding junior
subordinated debt securities, on and after the date of redemption, interest will
cease to accrue on the junior subordinated debt securities or portions of the
junior subordinated debt securities (and distributions will cease to accrue on
the related capital securities or portions of the capital securities) called for
redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the redemption price of, each trust's
capital securities and common securities, will be made pro rata based on the
liquidation amount of the capital securities and common securities. However, if
an event of default under the indenture shall have occurred and is continuing,
no payment may be made on any of the trust's common securities, unless all
unpaid amounts on each of the trust's outstanding capital securities shall have
been made or provided for in full.
If an event of default under the indenture has occurred and is continuing,
we, as holder of the trust's common securities, will be deemed to have waived
any right to act on the event of default under the applicable trust agreement
until the effect of all events of default relating to the capital securities
have been cured, waived or otherwise eliminated. Until the events of default
under the applicable trust agreement relating to the capital securities have
been so cured, waived or otherwise eliminated, the property trustee will act
solely on your behalf and not on our behalf as holder of the trust's common
securities, and only you and the other holders of capital securities will have
the right to direct the property trustee to act on your behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Each trust agreement states that each trust shall be automatically
terminated upon the expiration
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of the term of the trust and shall also be terminated on the first to occur of:
- our bankruptcy, dissolution or liquidation;
- the distribution of a Like Amount of the junior subordinated debt
securities directly to the holders of the capital securities and common
securities. For this distribution, we must give at least 30 days written
notice to the trustees;
- the redemption of all of the capital securities and common securities of
a trust; and
- a court order for the dissolution of a trust is entered.
If dissolution of a trust occurs as described in the first, second and
fourth bullets above, the applicable trustee shall liquidate the trust as
quickly as possible. After paying all amounts owed to creditors, the trustee
will distribute to the holders of the capital securities and the common
securities either:
- a Like Amount of junior subordinated debt securities; or
- if the distribution of the junior subordinated debt securities is
determined by the property trustee not to be practical, cash assets equal
to the aggregate Liquidation Amount per capital security and common
security specified in an accompanying prospectus supplement, plus
accumulated and unpaid distributions from that date to the date of
payment.
If a trust cannot pay the full amount due on its capital securities and
common securities because insufficient assets are available for payment, then
the amounts payable by the trust on its capital securities and common securities
shall be paid pro rata. However, if an event of default under the indenture has
occurred and is continuing, the total amounts due on the capital securities
shall be paid before any distribution on the common securities.
TRUST ENFORCEMENT EVENT
An event of default under the indenture constitutes an event of default
under the amended and restated trust agreement. We refer to such an event as a
"Trust Enforcement Event". For more information on events of default under the
indenture, see "Description of the Junior Subordinated Debt Securities--Events
of Default". Upon the occurrence and continuance of a Trust Enforcement Event,
the property trustee, as the sole holder of the junior subordinated debentures,
will have the right under the indenture to declare the principal amount of the
junior subordinated debentures due and payable. The amended and restated trust
agreement does not provide for any other events of default.
If the property trustee fails to enforce its rights under the junior
subordinated debentures, any holder of capital securities may, to the extent
permitted by applicable law, institute a legal proceeding against us to enforce
the property trustee's rights under the junior subordinated debentures and the
indenture without first instituting legal proceedings against the property
trustee or any other person. In addition, if a Trust Enforcement Event is due to
our failure to pay interest or principal on the junior subordinated debentures
when due, then the registered holder of capital securities may institute a
direct action on or after the due date directly against us for enforcement of
payment to that holder of the principal of or interest on the junior
subordinated debentures having a principal amount equal to the total liquidation
amount of that holder's capital securities. In connection with such a direct
action, we will have the right under the indenture to set off any payment made
to that holder by us. The holders of capital securities will not be able to
exercise directly any other remedy available to the holders of the junior
subordinated debentures.
Pursuant to the amended and restated trust agreement, the holder of the
common securities will be deemed to have waived any Trust Enforcement Event
regarding the common securities until all Trust Enforcement Events regarding the
capital securities have been cured, waived or otherwise eliminated. Until all
Trust Enforcement Events regarding the capital securities have been so cured,
waived or otherwise eliminated, the property trustee will act solely on behalf
of the holders of the capital securities and only the holders of the capital
securities will have the right to direct the enforcement actions of the property
trustee.
REMOVAL OF TRUSTEES
Unless an event of default under a trust agreement has occurred and is
continuing, we can remove and replace any trustee at any time. If an event of
default under a trust agreement has occurred and is continuing, the property
trustee and the Delaware trustee may be removed or replaced by the holders
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of at least a majority in Liquidation Amount of the outstanding capital
securities. We are the only one that have the right to remove or replace the
administrative trustees. No resignation or removal of any of the trustees and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee as described in the applicable trust
agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an event of default under a trust agreement has occurred and is
continuing, we, as the holder of the common securities, and the administrative
trustees shall have the power:
- to appoint one or more persons approved by the property trustee either to
act as co-trustee, jointly with the property trustee, of all or any part
of the trust property, or to act as a separate trustee of any trust
property, in either case with the powers as provided in the instrument of
appointment; and
- to vest in the person(s) any property, title, right or power deemed
necessary or desirable, subject to the provisions of the applicable trust
agreement.
If an event of default under a trust agreement has occurred and is
continuing, only the property trustee may appoint a co-trustee or separate
property trustee.
MERGER OR CONSOLIDATION OF TRUSTEES
If any of the trustees merge, convert, or consolidate with or into another
entity or sells its trust operations to another entity, the new entity shall be
the successor of the trustee under each trust agreement, provided that the
corporation or other entity shall be qualified and eligible to be a trustee.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
A trust may not merge with or into, consolidate, amalgamate, or be replaced
by or transfer or lease all or substantially all of its properties and assets to
any other entity (a merger event), except as described below. A trust may, at
our request, with the consent of the administrative trustees and without your
consent, merge with or into, consolidate, amalgamate or be replaced by another
trust provided that:
- the successor entity either:
-- expressly assumes all of the obligations of the trust relating to the
capital securities; or
-- substitutes for the capital securities other securities with terms
substantially similar to the capital securities (successor securities)
so long as the successor securities has the same rank as the capital
securities for distributions and payments upon liquidation, redemption
and otherwise;
- we expressly appoint a trustee of the successor entity who has the same
powers and duties as the property trustee of the trust as it relates to
the junior subordinated debt securities;
- the successor securities are listed or will be listed on the same
national securities exchange or other organization that the capital
securities are listed on;
- the merger event does not cause the capital securities or successor
securities to be downgraded by any national statistical rating
organization;
- the merger event does not adversely affect the rights, preferences and
privileges of the holders of the capital securities or successor
securities in any material way;
- the successor entity has a purpose substantially similar to that of the
trust;
- before the merger event, we have received an opinion of counsel stating
that:
-- the merger event does not adversely affect the rights of the holders
of the capital securities or any successor securities in any material
way; and
-- following the merger event, neither the trust nor the successor entity
will be required to register as an investment company under the
Investment Company Act; and
- we own all of the common securities of the successor entity and guarantee
the successor entity's obligations under the successor
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securities in the same manner provided by the related guarantee.
- The trusts and any successor entity must always be classified as grantor
trusts for U.S. federal income tax purposes unless all of the holders of
the capital securities approve otherwise.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
You have no voting rights except as discussed under "Description of the
Capital Securities--Mergers, Consolidations, Amalgamations or Replacements of
the Trust" and "Description of the Guarantee--Amendments and Assignment," and as
otherwise required by law and the applicable trust agreement. The property
trustee, the administrative trustees and us may amend each trust agreement
without your consent:
- to fix any ambiguity or inconsistency; or
- to modify, eliminate or add provisions to the applicable trust agreement
as shall be necessary to ensure that each trust shall at all times be
classified as a grantor trust for U.S. federal income tax purposes.
The administrative trustees and us may amend each trust agreement for any
other reason as long as the holders of at least a majority in aggregate
liquidation amount of the capital securities agree, and the trustees receive an
opinion of counsel which states that the amendment will not affect the
applicable trust status as a grantor trust for U.S. federal income tax purposes,
or its exemption from regulation as an investment company under the Investment
Company Act, except to:
- change the amount and/or timing or otherwise adversely affect the method
of payment of any distribution or Liquidation Amount on the capital
securities or common securities;
- restrict your right or the right of the common security holder to
institute suit for enforcement of any distribution or Liquidation Amount
on the capital securities or common securities;
The changes described in the two bullet points above require the approval
of each holder of the capital securities affected.
So long as the corresponding junior subordinated debt securities of a trust
are held by the property trustee of that trust, the trustees shall not:
- direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or executing any trust or power conferred
on the trustee relating to the corresponding junior subordinated debt
securities;
- waive any past default under Section 5.13 of the indenture;
- cancel an acceleration of the principal of the corresponding junior
subordinated debt securities; or
- agree to any change in the indenture or the corresponding junior
subordinated debt securities, where the trustees' approval is required,
without obtaining the prior approval of the holders of at least a
majority in the aggregate Liquidation Amount of all outstanding related
capital securities. However, if the indenture requires the consent of
each holder of corresponding junior subordinated debt securities that is
affected, then the property trustee must get approval of all holders of
capital securities.
The trustees cannot change anything previously approved by you without your
approval to make the change. The property trustee shall notify you of any notice
of default relating to the corresponding junior subordinated debt securities.
In addition, before taking any of the actions described above, the trustees
must obtain an opinion of counsel experienced in these matters, stating that the
trust will continue to be classified as a grantor trust for U.S. federal income
tax purposes.
As described in each trust agreement, the property trustee may hold a
meeting so that you may vote on a change or request that you approve the change
by written consent.
Your vote or consent is not required for the trust to redeem and cancel its
capital securities under the trust agreement.
If your vote is taken or a consent is obtained, any capital securities that
are owned by us, the trustees or any affiliate of either of us shall, for
purposes of the vote or consent, be treated as if they were not outstanding.
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GLOBAL CAPITAL SECURITIES
The capital securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, a depositary identified in the applicable prospectus supplement. The
specific terms of the depositary arrangements for a series of capital securities
will be described in the applicable prospectus supplement. See "Book-Entry
Issuance."
PAYMENT AND PAYING AGENTS
Payments regarding the capital securities shall be made to a depositary,
which shall credit the relevant accounts at the depositary on the applicable
distribution dates or, if any trusts capital securities are not held by a
depositary, the payments shall be made by check mailed to the address of the
holder entitled to it at the address listed in the register.
Unless otherwise specified in the applicable prospectus supplement, the
paying agent shall initially be the property trustee. The paying agent shall be
permitted to resign as paying agent with 30 days' written notice to the property
trustee and to us. If the property trustee shall no longer be the paying agent,
the administrative trustees shall appoint a successor (which shall be a bank or
trust company acceptable to the administrative trustees and to us) to act as
paying agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable prospectus supplement, the
property trustee will act as registrar and transfer agent for the capital
securities.
Registration of transfers of capital securities will be effected without
charge by or on behalf of each trust, after payment of any tax or other
governmental charges that are imposed in connection with any transfer or
exchange. No transfers of capital securities called for redemption will be
registered.
INFORMATION ABOUT THE PROPERTY TRUSTEE
The property trustee will perform only those duties that are specifically
stated in each trust agreement. If an event of default arises under a trust
agreement, the property trustee must use the same degree of care and skill in
the exercise of its duties as a prudent person would exercise or use in the
conduct of his or her own affairs. The property trustee is under no obligation
to exercise any of the powers given it by the applicable trust agreement at your
request unless it is offered reasonable security or indemnity against the costs,
expenses and liabilities that it might incur.
If no event of default under a trust agreement has occurred and is
continuing, and the property trustee is required to decide between alternative
courses of action, construe ambiguous provisions in applicable trust agreement
or is unsure of the application of any provisions of the applicable trust
agreement, and the matter is not one on which you are entitled to vote, then the
property trustee shall:
- take some action as directed by us; and
- if not so directed, shall take whatever action that the property trustee
deems advisable and in your best interests, and in the best interests of
the holders of the capital securities and common securities of the
applicable trust and will have no liability except for its own bad faith,
negligence or willful misconduct.
MISCELLANEOUS
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the trusts in the manner that:
- no trust will be deemed to be an investment company required to be
registered under the Investment Company Act or to fail to be classified
as a grantor trust for U.S. federal income tax purposes;
- the corresponding junior subordinated debt securities will be treated as
our indebtedness for U.S. federal income tax purposes.
In this connection, the administrative trustees and us are authorized to
take any action, consistent with applicable law or the certificate of trust of
each trust or each trust agreement, that we each determine in our discretion to
be necessary or desirable for these purposes.
You have no preemptive or similar rights. A trust may not borrow money,
issue Debt or mortgages, or pledge any of its assets.
22
DESCRIPTION OF THE GUARANTEE
GENERAL
We will execute a guarantee, for your benefit at the same time that a trust
issues the capital securities. The guarantee trustee will hold the guarantee for
your benefit. The guarantee will be qualified as an indenture under the Trust
Indenture Act. The form of guarantee has been filed as an exhibit to the
registration statement.
This section summarizes the material terms and provisions of the guarantee.
Because this is only a summary, it does not contain all of the details found in
the full text of the guarantee. If you would like additional information you
should read the form of guarantee agreement.
We will irrevocably agree to pay to you in full the Guarantee Payments as
and when due, regardless of any defense, right of set-off or counterclaim which
the trust may have or assert other than the defense of payment. The following
payments, to the extent not paid by a trust, will be subject to the guarantee:
- any accumulated and unpaid distributions required to be paid on the
capital securities, to the extent that the trust has applicable funds
available to make the payment;
- the redemption price and all accrued and unpaid distributions to the date
of redemption on the capital securities called for redemption, to the
extent that the trust has funds available to make the payment; or
- in the event of a voluntary or involuntary dissolution, winding up or
liquidation of the trust (other than in connection with a distribution of
corresponding junior subordinated debt securities to you or the
redemption of all the related capital securities), the lesser of:
-- the aggregate of the Liquidation Amount specified in the applicable
prospectus supplement for each capital security plus all accrued and
unpaid distributions on the capital securities to the date of payment;
and
-- the amount of assets of the trust remaining available for distribution
to you.
We can satisfy our obligation to make a guarantee payment by direct payment
to you of the required amounts or by causing the trust to pay those amounts to
the holders.
Each guarantee will be an irrevocable guarantee on a subordinated basis of
the related trust's obligations under the capital securities, but will apply
only to the extent that the related trust has funds sufficient to make the
payments, and is not a guarantee of collection.
No single document executed by us that is related to the issuance of the
capital securities will provide for its full, irrevocable and unconditional
guarantee of the capital securities. It is only the combined operation of the
applicable guarantee, the applicable trust agreement, the indenture and the
expense agreement that has the effect of providing a full, irrevocable and
unconditional guarantee of the trust's obligations under its capital securities.
STATUS OF GUARANTEES
Each guarantee will constitute an unsecured obligation of ours and will
rank subordinate and junior in right of payment to all of our Senior Debt; and
Each guarantee will rank equally with all other guarantees issued by us.
The guarantee will constitute a guarantee of payment and not of collection (in
other words you may sue us, or seek other remedies, to enforce your rights under
the guarantee without first suing any other person or entity). Each guarantee
will be held for your benefit. Each guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not previously paid by
the trust or upon distribution to you of the corresponding series of junior
subordinated debt securities. None of the guarantees places a limitation on the
amount of additional Senior Debt that we may incur. We expect to incur from time
to time additional indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except regarding any changes which do not adversely affect your rights in
any material respect (in which case your consent will not be required), the
guarantee may only be amended with the prior approval of the holders of at least
a majority in aggregate Liquidation Amount of the outstanding capital
securities. A description of the manner in
23
which approval may be obtained is described under "Description of the Capital
Securities--Voting Rights; Amendment of Each Trust Agreement." All guarantees
and agreements contained in each guarantee will be binding on our successors,
assigns, receivers, trustees and representatives and shall inure to the benefit
of the holders of the related capital securities then outstanding.
EVENTS OF DEFAULT
An event of default under each guarantee occurs if we fail to make any of
our required payments or perform our obligations under the guarantee. The
holders of at least a majority in aggregate Liquidation Amount of the related
capital securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee
relating to the guarantee or to direct the exercise of any trust or power given
to the guarantee trustee under the guarantee.
You may institute a legal proceeding directly against us to enforce your
rights under the guarantee without first instituting a legal proceeding against
the trust, the guarantee trustee or any other person or entity.
As guarantor, we are required to file annually with the guarantee trustee a
certificate stating whether or not we are in compliance with all the conditions
and covenants applicable to us under the guarantee.
INFORMATION ABOUT THE GUARANTEE TRUSTEE
The guarantee trustee, other than during the occurrence and continuance of
an event of default by us in the performance of any guarantee, will only perform
the duties that are specifically described in the guarantee. After an event of
default on any guarantee, the guarantee trustee will exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the guarantee trustee is under no
obligation to exercise any of its powers as described in the guarantee at your
request unless it is offered reasonable indemnity against the costs, expenses
and liabilities that it might incur.
TERMINATION OF CAPITAL SECURITIES GUARANTEES
Each guarantee will terminate once the related capital securities are paid
in full or upon distribution of the corresponding series of junior subordinated
debt securities to you. Each guarantee will continue to be effective or will be
reinstated if at any time you are required to restore payment of any sums paid
under the capital securities or the guarantee.
RELATIONSHIP AMONG THE CAPITAL
SECURITIES, THE CORRESPONDING
JUNIOR SUBORDINATED DEBT
SECURITIES AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of distributions and other amounts due on the capital securities
(to the extent the trust has funds available for the payments) will be
irrevocably guaranteed by us to the extent described under "Description of the
Guarantee." No single document executed by us in connection with the issuance of
the capital securities will provide for its full, irrevocable and unconditional
guarantee of the capital securities. It is only the combined operation of our
obligations under the related guarantee, the related trust agreement, the
corresponding series of junior subordinated debt securities, the indenture and
the expense agreement that has the effect of providing a full, irrevocable and
unconditional guarantee of the trust's obligations under the related series of
capital securities.
If we do not make payments on any series of corresponding junior
subordinated debt securities, the related trust will not pay distributions or
other amounts on the related capital securities. The guarantee does not cover
payments of distributions when the related trust does not have sufficient funds
to pay such distributions. If that occurs, your remedy is to sue us, or seek
other remedies, to enforce your rights under the guarantee without first
instituting a legal proceeding against the guarantee trustee.
SUFFICIENCY OF PAYMENTS
As long as we make payments of interest and other payments when due on each
series of corresponding junior subordinated debt securities, the payments will
be sufficient to cover the payment of distributions and other payments due on
the related capital securities, primarily because:
- the aggregate principal amount of each series of corresponding junior
subordinated debt securities will be equal to the sum of the aggregate
liquidation amount of the
24
related capital securities and common securities;
- the interest rate and interest and other payment dates on each series of
corresponding junior subordinated debt securities will match the
distribution rate and distribution and other payment dates for the
related capital securities;
- we shall pay for any and all costs, expenses and liabilities of a trust
except the trust's obligations to holders of its capital securities under
the capital securities; and
- each trust agreement provides that the trust will not engage in any
activity that is inconsistent with the limited purposes of the trust.
We have the right to set-off any payment we are otherwise required to make
under the indenture with and to the extent we have made, or are concurrently on
the date of the payment making, a payment under the related guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
You may institute a legal proceeding directly against us to enforce your
rights under the related guarantee without first instituting a legal proceeding
against the guarantee trustee, the related trust or any other person or entity.
A default or event of default under any of our Senior Debt would not
constitute a default or event of default under the trust agreements. However, in
the event of payment defaults under, or acceleration of, any of our Senior Debt,
the subordination provisions of the indenture provide that no payments will be
made regarding the corresponding junior subordinated debt securities until the
Senior Debt has been paid in full or any payment default on it has been cured or
waived. Failure to make required payments on any series of corresponding junior
subordinated debt securities would constitute an event of default under the
trust agreements.
LIMITED PURPOSE OF TRUSTS
Each trust's capital securities evidence a beneficial interest in the
respective trust, and each trust exists for the sole purpose of issuing its
capital securities and common securities and investing the proceeds in
corresponding junior subordinated debt securities. A principal difference
between the rights of a holder of a capital security and a holder of a
corresponding junior subordinated debt security is that a holder of a
corresponding junior subordinated debt security is entitled to receive from us
the principal amount of and interest accrued on corresponding junior
subordinated debt securities held, while a holder of capital securities is
entitled to receive distributions from the trust (or from us under the
applicable guarantee) if and to the extent the trust has funds available for the
payment of distributions.
RIGHTS UPON TERMINATION
In the event of any voluntary or involuntary termination winding up or
liquidation of any trust involving a liquidation of the corresponding junior
subordinated debt securities held by a trust, you will be entitled to receive,
out of assets held by that trust, the liquidation distribution in cash. See
"Description of the Capital Securities--Liquidation Distribution Upon
Termination." In the event of our voluntary or involuntary liquidation or
bankruptcy, the property trustee, as holder of the corresponding junior
subordinated debt securities, would be a subordinated creditor of ours,
subordinated in right of payment to all senior debt, but entitled to receive
payment in full of principal, premium, if any, and interest, before any of our
common stockholders receive payments or distributions. Since we are the
guarantor under each guarantee and have agreed to pay for all costs, expenses
and liabilities of each trust (other than the trust's obligations to you), your
position and the position of a holder of the corresponding junior subordinated
debt securities relative to other creditors and to our stockholders in the event
of our liquidation or bankruptcy are expected to be substantially the same.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the capital securities and
the junior subordinated debt securities, unless otherwise stated in the
applicable prospectus supplement. We will issue the capital securities and
junior subordinated debt securities only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). We will issue and deposit
with DTC one or more fully-registered global certificates for the capital
securities of each trust and junior subordinated debt securities representing in
the aggregate, the total number of the trust's capital securities or aggregate
25
principal balance of junior subordinated debt securities, respectively.
DTC is a limited purpose trust company organized under the New York Banking
Law, a banking organization under the meaning of the New York Banking Law, a
member of the Federal Reserve System, a clearing corporation under the meaning
of the New York Uniform Commercial Code, and a clearing agency registered under
the provisions of Section 17A of the Exchange Act. DTC holds securities that its
participants deposit with DTC. DTC also facilitates the settlement among
participants of securities transactions, like transfers and pledges, in
deposited securities through electronic computerized book-entry changes in the
participants' accounts, eliminating in this manner the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Others like securities brokers
and dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly, the
Indirect Participants, also have access to the DTC system. The rules applicable
to DTC and its participants are on file with the SEC.
Purchases of capital securities or junior subordinated debt securities
within the DTC system must be made by or through Direct Participants, who will
receive a credit for the capital securities or junior subordinated debt
securities on DTC's records. The ownership interest of each actual purchaser of
each capital security and each junior subordinated debt securities is in turn to
be recorded on the Direct and Indirect Participants' records. DTC will not send
written confirmation to Beneficial Owners of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participants through which the Beneficial Owners purchased capital
securities or junior subordinated debt securities. Transfers of ownership
interests in the capital securities or junior subordinated debt securities are
to be accomplished by entries made on the books of participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in capital securities or junior
subordinated debt securities, unless the book-entry system for the capital
securities of the trust or junior subordinated debt securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the capital
securities or junior subordinated debt securities. DTC's records reflect only
the identity of the Direct Participants to whose accounts the capital securities
or junior subordinated debt securities are credited, which may or may not be the
Beneficial Owners. The participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners,
subject to any statutory or regulatory requirements as is in effect from time to
time, will be governed by arrangements among them.
We will send redemption notices to Cede & Co. as the registered holder of
the capital securities or junior subordinated debt securities. If less than all
of a trust's capital securities or the junior subordinated debt securities are
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting on the capital securities or the junior subordinated debt
securities is limited to the holders of record of the capital securities or
junior subordinated debt securities, in those instances in which a vote is
required, neither DTC nor Cede & Co. will itself consent or vote on capital
securities or junior subordinated debt securities. Under its usual procedures,
DTC would mail an Omnibus Proxy to the relevant trustee as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to Direct Participants for whose accounts the capital securities
or junior subordinated debt securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
The relevant trustee will make distribution payments on the capital
securities or on the junior subordinated debt securities to DTC. DTC's practice
is to credit Direct Participants' accounts on the relevant payment date in
accordance with their
26
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payments on the payment date. Standing instructions and
customary practices will govern payments from participants to Beneficial Owners.
Subject to any statutory or regulatory requirements, participants, and not DTC,
the relevant trustee, trust or us will be responsible for the payment. The
relevant trustee is responsible for payment of distributions to DTC. Direct and
Indirect Participants are responsible for the disbursement of the payments to
the Beneficial Owners.
DTC may discontinue providing its services as securities depositary on any
of the capital securities or the junior subordinated debt securities at any time
by giving reasonable notice to the relevant trustee and to us. If a successor
securities depositary is not obtained, final capital securities or junior
subordinated debt securities certificates must be printed and delivered. We may
at our option decide to discontinue the use of the system of book-entry
transfers through DTC (or a successor depositary). After an event of default,
the holders of a majority in liquidation preference of capital securities or
aggregate principal amount of junior subordinated debt securities may
discontinue the system of book-entry transfers through DTC. In this case, final
certificates for the capital securities or junior subordinated debt securities
will be printed and delivered.
The trusts and us have obtained the information in this section about DTC
and DTC's book-entry system from sources that they believe to be accurate, but
the trusts and us assume no responsibility for the accuracy of the information.
Neither the trusts nor USB have any responsibility for the performance by DTC or
its participants of their respective obligations as described in this prospectus
or under the rules and procedures governing their respective operations.
PLAN OF DISTRIBUTION
We may sell the securities:
- through underwriters or dealers;
- directly to one or more purchasers; or
- through agents.
The applicable prospectus supplement will include the names of
underwriters, dealers or agents retained. The applicable prospectus supplement
will also include the purchase price of the securities, our proceeds from the
sale, any underwriting discounts or commissions and other items constituting
underwriters' compensation, and any securities exchanges on which the securities
are listed.
The underwriters will acquire the securities for their own account. They
may resell the securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The obligations of the underwriters to purchase the
securities will be subject to some conditions. The underwriters will be
obligated to purchase all the securities offered if any of the securities are
purchased. Any initial public offering price and any discounts or concessions
allowed or re-allowed or paid to dealers may be changed from time to time.
Underwriters, dealers, and agents that participate in the distribution of
the securities may be underwriters as defined in the Securities Act, and any
discounts or commissions received by them from us and any profit on the resale
of the securities by them may be treated as underwriting discounts and
commissions under the Securities Act.
We may have agreements with the underwriters, dealers, and agents to
indemnify them against some civil liabilities, including liabilities under the
Act, or to contribute to payments which the underwriters, dealers or agents may
be required to make.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our subsidiaries in the ordinary course of their
businesses.
We may authorize underwriters, dealers and agents to solicit offers by
certain specified institutions to purchase securities from us at the public
offering price stated in the applicable prospectus supplement on delayed
delivery contracts providing for payment and delivery on a specified date in the
future. These contracts will be subject only to the conditions included in the
applicable prospectus supplement, and the prospectus supplement will specify the
commission payable for solicitation of such contracts.
Unless the applicable prospectus supplement states otherwise, all
securities except for common stock will be new issues of securities with no
established trading market. Any underwriters who purchase securities from us for
public offering and sale may make a market in such securities, but such
underwriters will not be obligated to do so and may
27
discontinue any market making at any time without notice. We cannot assure you
that the trading market for any securities will be liquid.
U.S. Bancorp Piper Jaffray Inc., one of our dealers/underwriters, is an
affiliate of ours. Therefore, the securities are being offered pursuant to
Conduct Rule 2720 of the National Association of Securities Dealers, Inc. The
maximum commission or discount to be received by any dealer/underwriter will not
exceed eight (8) percent.
The dealers/underwriters do not intend to make sales of the capital
securities to accounts over which they exercise discretionary authority without
obtaining the prior written approval of the account holder.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable prospectus supplement, some
legal matters will be passed upon for us by Squire, Sanders & Dempsey L.L.P.
Cincinnati, Ohio, our counsel, and for the underwriters, by Simpson Thacher &
Bartlett, New York, New York. Richards, Layton & Finger, P.A., Wilmington,
Delaware, special Delaware counsel for the trusts, will pass on some legal
matters for the trusts. Squire, Sanders & Dempsey L.L.P. and Simpson, Thacher &
Bartlett will rely on the opinion of Richards, Layton & Finger, P.A.,
Wilmington, Delaware as to matters of Delaware law regarding the trusts.
EXPERTS
The consolidated financial statements of U.S. Bancorp as of December 31,
2000 and 1999 and for each of the three years in the period ended December 31,
2000, incorporated in this prospectus by reference to U.S. Bancorp's Current
Report on Form 8-K filed on April 17, 2001, have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
28
GLOSSARY
Below are abbreviated definitions of capitalized terms used in this
prospectus and in the applicable prospectus supplement. The applicable
prospectus supplement may contain a more complete definition of some of the
terms defined here and reference should be made to the applicable prospectus
supplement for a more complete definition of these terms.
"Additional Sums" refers to the additional amounts required to be paid so
that the amount of distributions due and payable by a trust on outstanding
capital securities and common securities shall not be reduced because of any
additional taxes, duties and other governmental charges to which a trustee is
subject because of a Tax Event.
"Beneficial Owner" refers to the ownership interest of each actual
purchaser of each debt security.
"Company" refers to U.S. Bancorp and its subsidiaries, unless otherwise
stated.
"Debt" means, for any person, whether recourse is to all or a portion of
the assets of the person and whether or not contingent:
- every obligation of the person for money borrowed;
- every obligation of the person evidenced by bonds, debt securities, notes
or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses;
- every reimbursement obligation of the person regarding letters of credit,
bankers' acceptances or similar facilities issued for the account of the
person;
- every obligation of the person issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business);
- every capital lease obligation of the person;
- all indebtedness of the person whether incurred on, before, or after the
date of the indenture, for claims relating to derivative products
including interest rate, foreign exchange rate and commodity forward
contracts, options and swaps and similar arrangements; and
- every obligation of the type referred to in the first through the sixth
bullet points above of another person and all dividends of another person
the payment of which, in either case, the person has guaranteed or is
responsible or liable, directly or indirectly, as obligor or otherwise.
"Depositary" refers to a bank or trust company selected by us, having its
principal office in the United States, and having a combined capital and surplus
of at least $50 million, and where we will deposit the shares of any series of
the preferred stock underlying the depositary shares under a separate deposit
agreement between us and that bank or trust company.
"Direct Participants" refers to securities brokers and dealers, banks,
trust companies, clearing corporations and other organizations who, with the New
York Stock Exchange, Inc., the American Stock Exchange Inc., and the National
Association of Securities Dealers, Inc., own DTC. Purchases of debt securities
within the DTC system must be made by or through Direct Participants who will
receive a credit for the debt securities on DTC's records.
"Guarantee Payments" refers to the following payments, to the extent not
paid by a trust, which will be subject to the guarantee:
- any accumulated and unpaid distributions required to be paid on the
capital securities, to the extent that the trust has applicable funds
available to make the payment;
- the redemption price and all accrued and unpaid distributions to the date
of redemption with respect to capital securities called for redemption,
to the extent that the trust has funds available to make the payment; or
29
- in the event of a voluntary or involuntary dissolution, winding up or
liquidation of the trust (other than in connection with a distribution of
corresponding junior subordinated debt securities to you or the
redemption of all the related capital securities), the lesser of:
-- the aggregate of the Liquidation Amount specified in the prospectus
supplement for each capital security plus all accrued and unpaid
distributions on the capital securities to the date of payment; and
-- the amount of assets of the trust remaining available for distribution
to you.
"Indirect Participants" refers to others, like securities brokers and
dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly, and who
also have access to the DTC system.
"Omnibus Proxy" refers to the omnibus proxy that DTC would mail under its
usual procedures to the relevant trustee as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
Direct Participants for whose accounts the debt securities are credited on the
record date.
"Senior Debt" means the principal of, premium, if any, and interest, if any
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us whether or not the claim for
post-petition interest is allowed in the proceeding) on, our Debt whether
incurred on, before or subsequent to the date of the indenture, unless, in the
instrument creating or evidencing the Debt or under which the Debt is
outstanding, it is provided that the obligations are not superior in right of
payment to the junior subordinated debt securities or to other Debt which ranks
equally with, or subordinated to the junior subordinated debt securities.
However, Senior Debt shall not include:
- any of our Debt which, when incurred and without regard to any election
under section 1111(b) of the Bankruptcy Code, was without recourse to us;
- any of our Debt to any of our banking subsidiaries;
- Debt to any of our employees; and
- any other debt securities issued under our indenture.
"Tier 1 Capital" refers to the sum of core capital elements, less goodwill
and other intangible assets. The core capital elements include: common
stockholders' equity, qualifying noncumulative perpetual preferred stock
(including related surplus), qualifying cumulative perpetual preferred stock
(including related surplus), and minority interest in the equity account of
consolidated subsidiaries.
30
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12,000,000 SECURITIES
USB CAPITAL V
% TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED BY
[U.S. BANCORP]
---------------------------------------------
PROSPECTUS SUPPLEMENT
---------------------------------------------
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
U.S. BANCORP PIPER JAFFRAY
BANC OF AMERICA SECURITIES LLC
MORGAN STANLEY
UBS WARBURG
, 2001
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