Recitals
Exhibit 99.1
Replacement Capital Covenant, dated as of December 22, 2006 (this “Replacement Capital
Covenant”), by U.S. Bancorp, a Delaware corporation (together with its successors and assigns, the
“Corporation”), in favor of and for the benefit of each Covered Debtholder (as defined below).
Recitals
A. On the date hereof, USB Realty Corp. (the “Company”), a Delaware corporation and an
indirect subsidiary of U.S. Bank, a national banking association and an indirect subsidiary of the
Corporation, is issuing 5,000 shares of its Fixed-to-Floating Rate Exchangeable Non-cumulative
Perpetual Series A Preferred Stock, liquidation preference $100,000 per security and $500,000,000
in the aggregate (the “Series A Preferred Securities”) to investors pursuant to an Offering
Circular dated December 18, 2006 (the “Offering Circular”).
B. If an “Exchange Event,” as defined and described in the Offering Circular, occurs, and the
OCC (as defined hereinafter) so directs, then the Series A Preferred Securities will be
automatically exchanged for a like amount of Series C Fixed-to-Floating Rate Non-cumulative
Perpetual Preferred Stock of the Corporation (the “Series C Preferred Stock”).
C. This Replacement Capital Covenant is the “Replacement Capital Covenant” referred to in the
Offering Circular.
D. The Corporation, in entering into and disclosing the content of this Replacement Capital
Covenant in the manner provided below, is doing so with the intent that the covenants provided for
in this Replacement Capital Covenant be enforceable by each Covered Debtholder and the Corporation
be estopped from disregarding the covenants in this Replacement Capital Covenant, in each case to
the fullest extent permitted by applicable law.
E. The Corporation acknowledges that reliance by each Covered Debtholder upon the covenants in
this Replacement Capital Covenant is reasonable and foreseeable by the Corporation and that, were
the Corporation to disregard its covenants in this Replacement Capital Covenant, each Covered
Debtholder would have sustained an injury as a result of its reliance on such covenants.
NOW, THEREFORE, the Corporation hereby covenants and agrees as follows in favor of and for the
benefit of each Covered Debtholder.
SECTION 1. Definitions. Capitalized terms used in this Replacement Capital Covenant
(including the Recitals), have the meanings set forth in Schedule I hereto.
SECTION 2. Limitations on Redemption and Purchase of Securities. The Corporation hereby
promises and covenants to and for the benefit of each Covered Debtholder that the Corporation or
any Subsidiary of the Corporation will redeem or purchase any Series A Preferred Securities or
Series C Preferred Stock only (a) if and to the extent that the total redemption or purchase price
therefor is equal to or less than the sum of:
(A) 133.33% of the aggregate amount of net cash proceeds received by the Corporation
and its Subsidiaries since the most recent Measurement Date from the
issuance and sale of Common Stock and rights to purchase Common Stock to Persons other
than the Corporation and its Subsidiaries, plus
(B) 100% of the aggregate amount of net cash proceeds received by the Corporation and
its Subsidiaries since the most recent Measurement Date from the issuance and sale of
Mandatorily Convertible Preferred Stock, Debt Exchangeable for Equity, Qualifying
Non-Cumulative Perpetual Preferred Stock, REIT Preferred Securities and Qualifying Capital
Securities to Persons other than the Corporation and its Subsidiaries;
and (b) if the Corporation has obtained the prior approval of the OCC, in the case of the Series A
Preferred Securities, or of the Federal Reserve, in the case of the Series C Preferred Stock, if
such approval is then required.
SECTION 3. Covered Debt.
(a) The Corporation represents and warrants that the Initial Covered Debt is Eligible
Debt.
(b) On or during the 30-day period immediately preceding any Redesignation Date with
respect to the Covered Debt then in effect, the Corporation shall identify the series of
Eligible Debt that will become the Covered Debt on and after such Redesignation Date in
accordance with the following procedures:
(i) the Corporation shall identify each series of its then outstanding long-term
indebtedness for money borrowed that is Eligible Debt;
(ii) if only one series of the Corporation’s then outstanding long-term indebtedness
for money borrowed is Eligible Debt, such series shall become the Covered Debt commencing on
the related Redesignation Date;
(iii) if the Corporation has more than one outstanding series of long-term indebtedness
for money borrowed that is Eligible Debt, then the Corporation shall identify the series
that has the latest occurring final maturity date as of the date the Corporation is applying
the procedures in this Section 3(b) and such series shall become the Covered Debt on the
related Redesignation Date;
(iv) if the Corporation has no outstanding series of long-term indebtedness for money
borrowed that is Eligible Debt but U.S. Bank is a Subsidiary of the Corporation and U.S.
Bank has only one outstanding series of long-term indebtedness for money borrowed that is
Eligible Debt, such series shall become the Covered Debt commencing on the related
Redesignation Date;
(v) if the Corporation has no outstanding series of long-term indebtedness for money
borrowed that is Eligible Debt, but U.S. Bank is a Subsidiary of the Corporation and U.S.
Bank has more than one outstanding series of long-term indebtedness for money borrowed that
is Eligible Debt, then the Corporation shall identify the series that has the latest
occurring final maturity date as of the date the Corporation is applying the
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procedures in this Section 3(b) and such series shall become the Covered Debt on the
related Redesignation Date;
(vi) the series of outstanding long-term indebtedness for money borrowed that is
determined to be Covered Debt pursuant to clause (ii), (iii), (iv) or (v) above shall be the
Covered Debt for purposes of this Replacement Capital Covenant for the period commencing on
the related Redesignation Date and continuing to but not including the Redesignation Date as
of which a new series of outstanding long-term indebtedness is next determined to be the
Covered Debt pursuant to the procedures set forth in this Section 3(b); and
(vii) in connection with such identification of a new series of Covered Debt, the
Corporation shall give the notice provided for in Section 3(d) within the time frame
provided for in such section.
(c) Notwithstanding any other provisions of this Replacement Capital Covenant, if on
any Redesignation Date the Corporation has then outstanding one or more series of Eligible
Subordinated Debt, a series of Eligible Subordinated Debt shall be identified as Covered
Debt in accordance with Section 3(b) and no Eligible Senior Debt shall then be Covered Debt.
(d) Notice. In order to give effect to the intent of the Corporation described in
Recital D, the Corporation covenants that
(i) simultaneously with the execution of this Replacement Capital Covenant or as soon
as practicable after the date hereof, the Corporation shall (A) give notice to the Holders
of the Initial Covered Debt, in the manner provided in the indenture relating to the Initial
Covered Debt, of this Replacement Capital Covenant and the rights granted to such Holders
hereunder and (B) file a copy of this Replacement Capital Covenant with the Commission as an
exhibit to a Form 8-K under the Securities Exchange Act;
(ii) so long as the Corporation is a reporting company under the Securities Exchange
Act, the Corporation shall include in each annual report filed with the Commission on Form
10-K under the Securities Exchange Act a description of the covenant set forth in Section 2
and identify the series of long-term indebtedness for borrowed money that is Covered Debt as
of the date such Form 10-K is filed with the Commission;
(iii) if a series of the Corporation’s or U.S. Bank’s long-term indebtedness for money
borrowed (A) becomes Covered Debt or (B) ceases to be Covered Debt, the Corporation shall
give notice of such occurrence within 30 days to the holders of such long-term indebtedness
for money borrowed in the manner provided for in the indenture, fiscal agency agreement or
other instrument under which such long-term indebtedness for money borrowed was issued and
report such change in a current report on Form 8-K including or incorporating by reference
this Replacement Capital Covenant, and in the Corporation’s next quarterly report on Form
10-Q or annual report on Form 10-K, as applicable;
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(iv) if, and only if, the Corporation ceases to be a reporting company under the
Securities Exchange Act, the Corporation shall post on its website the information otherwise
required to be included in Securities Exchange Act filings pursuant to clauses (ii) and
(iii) of this Section 3(d); and
(v) promptly upon request by any Holder of Covered Debt, the Corporation shall provide
such Holder with an executed copy of this Replacement Capital Covenant.
SECTION 4. Termination, Amendment and Waiver.
(a) The obligations of the Corporation pursuant to this Replacement Capital Covenant
shall remain in full force and effect until the earlier date (the “Termination Date”) to
occur of (i) the date, if any, on which the Holders of a majority by principal amount of the
then-effective series of Covered Debt consent or agree in writing to the termination of this
Replacement Capital Covenant and the obligations of the Corporation hereunder and (ii) the
date on which neither the Corporation nor U.S. Bank has any series of outstanding Eligible
Senior Debt or Eligible Subordinated Debt (in each case without giving effect to the rating
requirement in clause (ii) of the definition of each such term). From and after the
Termination Date, the obligations of the Corporation pursuant to this Replacement Capital
Covenant shall be of no further force or effect.
(b) This Replacement Capital Covenant may be amended or supplemented from time to time
by a written instrument signed by the Corporation with the consent of the Holders of a
majority by principal amount of the then-effective series of Covered Debt, provided that
this Replacement Capital Covenant may be amended or supplemented from time to time by a
written instrument signed only by the Corporation (and without the consent of the Holders of
the then-effective series of Covered Debt) if (i) the effect of such amendment or supplement
is solely to impose additional restrictions on the ability of the Corporation or any
Subsidiary of the Corporation to repay, redeem or purchase any Series A Preferred Securities
or Series C Preferred Stock in any circumstance or (ii) such amendment or supplement is not
adverse to the Holders of the then-effective series of Covered Debt and an officer of the
Corporation has delivered, or caused to be delivered, to the Holders of the then-effective
series of Covered Debt in the manner provided for in the indenture, fiscal agency agreement
or other instrument with respect to such Covered Debt a written certificate stating that, in
his or her determination, such amendment or supplement is not adverse to the Holders of the
then-effective series of Covered Debt.
(c) For purposes of Sections 4(a) and 4(b), the Holders whose consent or agreement is
required to terminate, amend or supplement the obligations of the Corporation under this
Replacement Capital Covenant shall be the Holders of the then-effective series of Covered
Debt as of a record date established by the Corporation that is not more than 30 days prior
to the date on which the Corporation proposes that such termination, amendment or supplement
becomes effective.
SECTION 5. Miscellaneous.
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(a) This Replacement Capital Covenant shall be governed by and construed in accordance
with the laws of the State of New York.
(b) This Replacement Capital Covenant shall be binding upon the Corporation and its
successors and assigns and shall inure to the benefit of the Covered Debtholders as they
exist from time-to-time (it being understood and agreed by the Corporation that any Person
who is a Covered Debtholder at the time such Person initiates a claim or proceeding to
enforce its rights under this Replacement Capital Covenant after the Corporation has
violated its covenants in Section 2 and before the series of long-term indebtedness for
money borrowed held by such Person is no longer Covered Debt, such Person’s rights under
this Replacement Capital Covenant shall not terminate by reason of such series of long-term
indebtedness for money borrowed no longer being Covered Debt). Except as specifically
provided herein, this Replacement Capital Covenant shall have no other beneficiaries and no
other Persons are entitled to rely on this Replacement Capital Covenant.
(c) All demands, notices, requests and other communications to the Corporation under
this Replacement Capital Covenant shall be deemed to have been duly given and made if in
writing and (i) if served by personal delivery upon the Corporation, on the day so delivered
(or, if such day is not a Business Day, the next succeeding Business Day), (ii) if delivered
by registered post or certified mail, return receipt requested, or sent to the Corporation
by a national or international courier service, on the date of receipt by the Corporation
(or, if such date of receipt is not a Business Day, the next succeeding Business Day), or
(iii) if sent by telecopier, on the day telecopied, or if not a Business Day, the next
succeeding Business Day, provided that the telecopy is promptly confirmed by telephone
confirmation thereof, and in each case to the Corporation at the address set forth below, or
at such other address as the Corporation may thereafter notify the Covered Debtholders or
post on its website as the address for notices under this Replacement Capital Covenant:
U.S. Bancorp
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Treasury Department
Facsimile No: (000) 000-0000
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Treasury Department
Facsimile No: (000) 000-0000
{remainder of page left intentionally blank; signature page follows}
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IN WITNESS WHEREOF, the Corporation has caused this Replacement Capital Covenant to be
executed by its duly authorized officer, as of the day and year first above written.
| U.S. Bancorp |
||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Senior Vice President | |||
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SCHEDULE I
DEFINITIONS
“Alternative Payment Mechanism” means, with respect to any securities or combination of
securities (together in this definition, “such securities”), provisions in the related
transaction documents requiring the Corporation to issue (or use commercially reasonable
efforts to issue) one or more types of APM Qualifying Securities raising eligible proceeds
at least equal to the deferred Distributions on such securities and apply the proceeds to
pay unpaid Distributions on such securities, commencing on the earlier of (x) the first
Distribution Date after commencement of a deferral period on which the Corporation pays
current Distributions on such securities and (y) the fifth anniversary of the commencement
of such deferral period, and that
(a) provide that “eligible proceeds” include, for purposes of such Alternative Payment
Mechanism, the net proceeds (after underwriters’ or placement agents’ fees, commissions or
discounts and other expenses relating to the issuance or sale of the relevant securities,
where applicable, and including the fair market value of property received by the
Corporation or any of its Subsidiaries as consideration for such securities) that the
Corporation has received during the 180 days prior to the related Distribution Date from the
issuance of APM Qualifying Securities, up to the Preferred Cap (as defined in paragraph (f),
below) in the case of APM Qualifying Securities that are Qualifying Non-Cumulative Perpetual
Preferred Stock;
(b) permit the Corporation to pay current Distributions on any Distribution Date out of
any source of funds but (x) require the Corporation to pay deferred Distributions only out
of eligible proceeds and (y) prohibit the Corporation from paying deferred Distributions out
of any source of funds other than eligible proceeds, unless (if the Corporation elects to so
provide in the terms of such securities) the Primary Federal Bank Regulatory Agency directs
otherwise;
(c) if deferral of Distributions continues for more than one year, require the
Corporation not to redeem or repurchase any securities of the Corporation that on a
bankruptcy or liquidation of the Corporation rank pari passu with or junior to such
securities until at least one year after all deferred Distributions have been paid;
(d) notwithstanding the foregoing provision, if the Primary Federal Bank Regulatory
Agency disapproves the issuer’s sale of APM Qualifying Securities, may (if the Corporation
elects to so provide in the term of such securities) permit the Corporation to pay deferred
Distributions from any source without a breach of its obligations under the transaction
documents;
(e) if the Primary Federal Bank Regulatory Agency does not disapprove the Corporation’s
issuance and sale of APM Qualifying Securities but disapproves the use of the proceeds
thereof to pay deferred Distributions, may (if the Corporation elects to so provide in the
terms of such securities) permit the Corporation to use such proceeds for
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other purposes and to continue to defer Distributions without a breach of its
obligations under the transaction documents; and
(f) with respect to “caps” on the Corporation’s obligation or right to issue (or use
commercially reasonable efforts to issue) APM Qualifying Securities to settle deferred
Distributions:
(i) limit the obligation of the Corporation to issue Common Stock or rights to purchase
Common Stock pursuant to the Alternative Payment Mechanism (including at any point in time
from all prior issuances thereof pursuant to the Alternative Payment Mechanism for the
relevant deferral period) to settle deferred Distributions attributable to the first five
years of any deferral period to an amount not exceeding 2% of the product of the average of
the current stock market prices of the Common Stock on the ten consecutive trading days
ending on the fourth trading day immediately preceding the date of issuance multiplied by
the total number of issued and outstanding shares of Common Stock as of the date of the
Corporation’s most recent publicly available consolidated financial statements (the “Common
Cap”), provided (and it being understood) that (x) once the Corporation reaches the Common
Cap, until the Common Cap ceases to apply the Corporation will not be required to issue more
Common Stock or rights to purchase Common Stock under the Alternative Payment Mechanism with
respect to deferred Distributions attributable to the first five years of a deferral period
even if the amount referred to in this subclause (i) subsequently increases because of a
subsequent increase in the current market price of Common Stock or
the number of outstanding shares of Common Stock, and (y) the Common Cap shall cease to apply to such deferral period
by a date (as specified in the related transaction documents) which shall be not later than
the ninth anniversary of the commencement of such deferral period; and
(ii) limit the obligation or right of the Corporation to issue Qualifying
Non-Cumulative Perpetual Preferred Stock pursuant to the Alternative Payment Mechanism
(including at any point in time from all prior issuances thereof pursuant to such
Alternative Payment Mechanism) to settle deferred Distributions to an amount not exceeding
25% of the initial principal or stated amount of the securities that are the subject of the
related Alternative Payment Mechanism (the “Preferred Cap”);
provided (and it being understood) that:
(a) the Corporation shall not be obligated to issue (or use commercially reasonable
efforts to issue) APM Qualifying Securities for so long as a Market Disruption Event has
occurred and is continuing;
(b) if, due to a Market Disruption Event or otherwise, the Corporation is able to raise
and apply some, but not all, of the eligible proceeds necessary to pay all deferred
Distributions on any Distribution Date, the Corporation will apply any available eligible
proceeds to pay accrued and unpaid Distributions on the applicable Distribution Date in
chronological order subject to the Common Cap and Preferred Cap, as applicable; and
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(c) if the Corporation has outstanding more than one class or series of securities
under which it is obligated to sell a type of APM Qualifying Securities and apply some part
of the proceeds to the payment of deferred Distributions, then on any date and for any
period the amount of net proceeds received by the Corporation from those sales and available
for payment of deferred Distributions on such securities shall be applied to such securities
on a pro rata basis in proportion to the total amounts that are due on such securities, or
on such other basis as the Primary Federal Bank Regulatory Agency may approve.
“APM Qualifying Securities” means, with respect to an Alternative Payment Mechanism,
one or more of the following (as designated in the transaction documents for the Qualifying
Capital Securities that include an Alternative Payment Mechanism or Debt Exchangeable for
Equity):
(A) Common Stock;
(B) rights to purchase Common Stock; or
(C) Qualifying Non-Cumulative Perpetual Preferred Stock;
provided (and it being understood) that if the APM Qualifying Securities for
any Alternative Payment Mechanism include both Common Stock and rights to purchase Common
Stock, such Alternative Payment Mechanism may permit, but need not require, the Corporation
to issue rights to purchase Common Stock.
“Business Day” means each day other than (i) a Saturday or Sunday or (ii) a day on
which banking institutions in the City of New York are authorized or obligated by law,
regulation or executive order to close.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means common stock of the Corporation (including treasury shares of
common stock and shares of common stock issued pursuant to the Corporation’s dividend
reinvestment plan and employee benefit plans).
“Company” has the meaning specified in Recital A.
“Corporation” has the meaning specified in the introduction to this instrument.
“Covered Debt” means (i) at the date of this Replacement Capital Covenant and
continuing to but not including the first Redesignation Date, the Initial Covered Debt and
(ii) thereafter, commencing with each Redesignation Date and continuing to but not including
the next succeeding Redesignation Date, the Eligible Debt identified pursuant to Section
3(b) as the Covered Debt for such period.
“Covered Debtholder” means each Person (whether a Holder or a beneficial owner holding
through a participant in a clearing agency) that buys, holds or sells long-term indebtedness
for money borrowed of the Corporation or U.S. Bank during the period
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that such long-term indebtedness for money borrowed is Covered Debt; provided that a
Person who has sold or disposed of all its right, title and interest in Covered Debt shall
cease to be a Covered Debtholder at the time of such sale or disposition if, while such
Person was an owner of Covered Debt, the Corporation has not breached or repudiated, or
threatened to breach or repudiate, its obligations hereunder; and provided further that if
the Corporation has breached or repudiated, or threatened to breach or repudiate, its
obligation hereunder while such Person was an owner of Covered Debt, such Person shall
continue to be a Covered Debtholder until the later of (i) one year after any such sale or
other disposition or (ii) the termination of any legal proceeding brought by such Person
before the date in clause (i) to enforce the obligations of the Corporation hereunder.
“Debt Exchangeable For Equity” means a security or combination of securities (together
in this definition, “such securities”) that:
(i) gives the holder a beneficial interest in (a) subordinated debt securities of the
Corporation that include a provision requiring the Corporation to issue (or use commercially
reasonable efforts to issue) one or more types of APM Qualifying Securities raising proceeds
at least equal to the deferred Distributions on such subordinated debt securities commencing
not later than two years after initial issuance of such securities and that are the most
junior subordinated debt of the Corporation (or rank pari passu with the most junior
subordinated debt of the Corporation) and (b) a fractional interest in a stock purchase
contract for a share of Qualifying Non-Cumulative Perpetual Preferred Stock (in this
definition, “preferred stock” of the Corporation);
(ii) provides that the investors directly or indirectly grant to the Corporation a
security interest in such subordinated debt securities and their proceeds (including any
substitute collateral permitted under the transaction documents) to secure the investors’
direct or indirect obligation to purchase preferred stock of the Corporation pursuant to
such stock purchase contracts;
(iii) includes a remarketing feature pursuant to which the subordinated debt of the
Corporation is remarketed to new investors commencing not later than the first Distribution
Date that is five years after the date of issuance of the security or earlier in the event
of an early settlement event based on (a) the capital ratios of the Corporation, (b) the
capital ratios of the Corporation as anticipated by the Primary Federal Bank Regulatory
Agency, or (c) the dissolution of the issuer of such Debt Exchangeable for Equity;
(iv) provides for the proceeds raised in the remarketing to be used to purchase
preferred stock of the Corporation under the stock purchase contracts and, if there has not
been a successful remarketing by the first Distribution Date that is six years after the
date of issuance of such securities, provides that the stock purchase contracts will be
settled by the Corporation foreclosing on its subordinated debt securities or other
collateral directly or indirectly pledged by investors in the Debt Exchangeable for Equity;
(v) includes a replacement capital covenant substantially similar to this Replacement
Capital Covenant that will apply to such securities and to the preferred
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stock of the Corporation, but will not include Debt Exchangeable for Equity in the
definition of “Qualifying Capital Securities”; and
(vi) after the issuance of such preferred stock of the Corporation, provides the holder
of the security with a beneficial interest in such preferred stock of the Corporation.
“Depository Institution Subsidiary” means any Subsidiary of the Corporation that is a
depository institution within the meaning of 12 C.F.R. § 204.2(m) and includes U.S. Bank.
“Distribution Date” means, as to any securities or combination of securities, the dates
on which Distributions on such securities are scheduled to be made.
“Distribution Period” means, as to any securities or combination of securities, each
period from and including a Distribution Date for such securities to but not including the
next succeeding Distribution Date for such securities.
“Distributions” means, as to a security or combination of securities, dividends,
interest or other income distributions to the holders thereof that are not Subsidiaries of
the Corporation. For the avoidance of doubt, if the terms of any security or combination of
securities provide for the accrual of declared but unpaid, or deferred, Distributions, such
accrued amounts will be considered to be included within the term “Distributions”.
“Eligible Debt” means, at any time, Eligible Subordinated Debt or, if no Eligible
Subordinated Debt is then outstanding, Eligible Senior Debt.
“Eligible Senior Debt” means, at any time in respect of any issuer, each series of
outstanding long-term indebtedness for money borrowed of such issuer that (i) upon a
bankruptcy, liquidation, dissolution or winding up of the issuer, ranks most senior among
the issuer’s then outstanding classes of indebtedness for money borrowed, (ii) is then
assigned a rating by at least one NRSRO (provided that this clause shall apply on a
Redesignation Date only if on such date the issuer has outstanding senior long-term
indebtedness for money borrowed that satisfies the requirements of clauses (i), (iii) and
(iv) that is then assigned a rating by at least one NRSRO), (iii) has an outstanding
aggregate principal amount of not less than $100,000,000, (iv) was issued through or with
the assistance of a commercial or investment banking firm or firms acting as underwriters,
initial purchasers or placement or distribution agents, and (v) if issued by U.S. Bank, is
fully and unconditionally guaranteed by the Corporation on (A) a subordinated basis or (B)
if on the relevant Redesignation Date there is no outstanding debt of U.S. Bank meeting the
other requirements set forth above and guaranteed by the Corporation on a subordinated basis
but there is outstanding debt of U.S. Bank meeting such requirements and guaranteed on a
senior basis, a senior basis. For purposes of this definition as applied to securities with
a CUSIP number, each issuance of long-term indebtedness for money borrowed that has (or, if
such indebtedness is held by a trust or other intermediate entity established directly or
indirectly by the issuer, the securities of such intermediate entity have) a separate CUSIP
number shall be deemed to be a series of
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the issuer’s long-term indebtedness for money borrowed that is separate from each other
series of such indebtedness.
“Eligible Subordinated Debt” means, at any time in respect of any issuer, each series
of the issuer’s then outstanding long-term indebtedness for money borrowed that (i) upon a
bankruptcy, liquidation, dissolution or winding up of the issuer, ranks subordinate to the
issuer’s then outstanding series of indebtedness for money borrowed that ranks most senior,
(ii) is then assigned a rating by at least one NRSRO (provided that this clause (ii) shall
apply on a Redesignation Date only if on such date the issuer has outstanding subordinated
long-term indebtedness for money borrowed that satisfies the requirements in clauses (i),
(iii) and (iv) that is then assigned a rating by at least one NRSRO), (iii) has an
outstanding aggregate principal amount of not less than $100,000,000, and (iv) was issued
through or with the assistance of a commercial or investment banking firm or firms acting as
underwriters, initial purchasers or placement or distribution agents, and (v) if issued by
U.S. Bank, is fully and unconditionally guaranteed by the Corporation on (A) a subordinated
basis or (B) if on the relevant Redesignation Date there is no outstanding debt of U.S. Bank
meeting the other requirements set forth above and guaranteed by the Corporation on a
subordinated basis but there is outstanding debt of U.S. Bank meeting such requirements and
guaranteed on a senior basis, a senior basis. For purposes of this definition as applied to
securities with a CUSIP number, each issuance of long-term indebtedness for money borrowed
that has (or, if such indebtedness is held by a trust or other intermediate entity
established directly or indirectly by the issuer, the securities of such intermediate entity
have) a separate CUSIP number shall be deemed to be a series of the issuer’s long-term
indebtedness for money borrowed that is separate from each other series of such
indebtedness.
“Exchange Event” has the meaning specified in Recital B.
“Existing Junior Subordinated Debentures” means the Corporation’s 6.600% junior
subordinated debentures due 2066, underlying the 6.660% trust preferred securities of USB
Capital XI (CUSIP No. 000000000).
“Holder” means, as to the Covered Debt then in effect, each holder of such Covered Debt
as reflected on the securities register maintained by or on behalf of the issuer with
respect to such Covered Debt.
“Initial Covered Debt” means 6.600% junior subordinated debentures due 2066, underlying
the 6.660% trust preferred securities of USB Capital XI (CUSIP No. 000000000).
“Intent-Based Replacement Disclosure” means, as to any security or combination of
securities, that the issuer has publicly stated its intention, either in the prospectus or
other offering document under which such securities were initially offered for sale or in
filings with the Commission made by the issuer under the Securities Exchange Act prior to or
contemporaneously with the issuance of such securities, that the issuer will redeem or
purchase such securities only with the proceeds of specified replacement capital securities
that have terms and provisions at the time of redemption or purchase that are as
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or more equity-like than the securities then being redeemed or purchased, raised since
the most recent Measurement Date. Notwithstanding the use of the term “Intent-Based
Replacement Disclosure” in the definitions of “Qualifying Capital Securities” and
“Qualifying Non-Cumulative Perpetual Preferred Stock”, the requirement in each such
definition that a particular security or the related transaction documents include
Intent-Based Replacement Disclosure shall be disregarded and given no force or effect if and
for so long as the Corporation is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended.
Mandatorily Convertible Preferred Stock” means cumulative or non-cumulative preferred
stock with (i) no prepayment obligation on the part of the issuer thereof, whether at the
election of the holders or otherwise, and (ii) a requirement that the preferred stock
convert into Common Stock of the Corporation within three years from the date of its
issuance at a conversion ratio within a range established at the time of issuance of the
preferred stock.
“Mandatory Trigger Provision” means, as to any security or combination of securities
(together, in this definition, “securities”), provisions in the terms thereof or of the
related transaction agreements that:
(A) require, or at its option in the case of Qualifying Non-Cumulative Perpetual
Preferred Stock permit, the issuer of such securities to make payment of Distributions on
such securities only pursuant to the issue and sale of APM Qualifying Securities, within two
years of a failure to satisfy one or more financial tests set forth in the terms of such
securities or related transaction agreements, in amount such that the net proceeds of such
sale are at least equal to the amount of unpaid Distributions on such securities (including
without limitation all deferred and accumulated amounts) and in either case require the
application of the net proceeds of such sale to pay such unpaid Distributions, provided that
(i) the amount of the net proceeds of Qualifying Non-Cumulative Perpetual Preferred Stock
which the issuer may apply to pay such Distributions pursuant to such provision may not
exceed 25% of the initial liquidation or principal amount of such securities, and (ii) if
the Mandatory Trigger Provision does not permit the use of the proceeds of the issuance and
sale of Qualifying Non-Cumulative Perpetual Preferred Stock to pay such Distributions and
does not require the issuance and sale of Common Stock and/or rights to purchase Common
Stock and the application of the net proceeds thereof to the payment of such Distributions
within one year of such failure, then the amount of the net proceeds of the issuance and
sale of Common Stock and/or rights to purchase Common Stock which the issuer may apply to
pay such Distributions pursuant to such provision may not exceed 2% of the Company’s market
capitalization,
(B) if the APM Qualifying Securities are Common Stock or rights to purchase Common
Stock, prohibit the issuer from repurchasing any Common Stock prior to the date six months
after the issuer applies the net proceeds of the sales described in clause (A) to pay such
unpaid Distributions in full, and
(C) upon any liquidation, dissolution, winding up, reorganization or in connection with
any insolvency, receivership or proceeding under any bankruptcy law with respect
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to the issuer, limit the claim of the holders of such securities (other than Qualifying
Non-Cumulative Perpetual Preferred Stock) for Distributions that accumulate during a period
in which the issuer fails to satisfy one or more financial tests set forth in the terms of
such securities or related transaction agreements to (x) 25% of the principal amount of such
securities then outstanding in the case of securities not permitting the issuance and sale
pursuant to the provisions described in clause (A) above of securities other than Common
Stock or rights to purchase Common Stock or (y) two years of accumulated and unpaid
Distributions (including compounded amounts thereon) in all other cases. No remedy other
than Permitted Remedies will arise by the terms of such securities or related transaction
agreements in favor of the holders of such securities as a result of the issuer’s failure to
pay Distributions because of the Mandatory Trigger Provision or as a result of the issuer’s
exercise of its right under an Optional Deferral Provision until Distributions have been
deferred for one or more Distribution Periods that total together at least ten years. It is
acknowledged that as of the date hereof the Board of Governors of the Federal Reserve System
has not approved a Mandatory Trigger Provision in securities issued by a bank holding
company and treated as Tier 1 capital for the bank holding company.
“Market Disruption Event” means the occurrence or existence of any of the following
events or sets of circumstances:
(a) trading in securities generally on the New York Stock Exchange or any other
national securities, futures or options exchange or over-the-counter market on which the
Common Stock, rights to purchase Common Stock and/or the Corporation’s preferred stock is
then listed or traded shall have been suspended or the settlement of such trading activity
generally shall have been materially disrupted or minimum prices shall have been established
on any such exchange or market by the Commission, by the relevant exchange or by another
regulatory body or governmental authority having jurisdiction, and the establishment of such
minimum prices materially disrupts or otherwise has a material adverse effect on trading in,
or the issuance and sale of, Common Stock, rights to purchase Common Stock and/or the
Corporation’s preferred stock;
(b) the Corporation would be required to obtain the consent or approval of its
shareholders or a regulatory body (including, without limitation, any securities exchange)
or governmental authority to issue or sell APM Qualifying Securities and the Corporation
fails to obtain that consent or approval notwithstanding the Corporation’s commercially
reasonable efforts to obtain that consent or approval or the Primary Federal Bank Regulatory
Agency instructs the Corporation not to sell or offer for sale APM Qualifying Securities at
such time;
(c) a banking moratorium shall have been declared by the federal or state authorities
of the United States such that market trading in the Common Stock or rights to purchase
Common Stock and/or the Corporation’s preferred stock has been materially disrupted;
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(d) a material disruption shall have occurred in commercial banking or securities
settlement or clearance services in the United States such that market trading in the Common
Stock, rights to purchase Common Stock and/or the Corporation’s preferred stock has been
materially disrupted;
(e) the United States shall have become engaged in hostilities, there shall have been
an escalation in hostilities involving the United States, there shall have been a
declaration of a national emergency or war by the United States or there shall have occurred
any other national or international calamity or crisis such that market trading in the
Common Stock, rights to purchase Common Stock and/or the Corporation’s preferred stock has
been materially disrupted;
(f) there shall have occurred such a material adverse change in general domestic or
international economic, political or financial conditions, including without limitation as a
result of terrorist activities, such that market trading in the Common Stock, rights to
purchase Common and/or the Corporation’s preferred stock has been materially disrupted;
(g) an event occurs and is continuing as a result of which the offering document for
such offer and sale of APM Qualifying Securities would, in the Corporation’s reasonable
judgment, contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not misleading and
either (a) the disclosure of that event at such time, in the Corporation’s reasonable
judgment, is not otherwise required by law and would have a material adverse effect on the
Corporation’s business or (b) the disclosure relates to a previously undisclosed proposed or
pending material business transaction and the Corporation has a bona fide reason for keeping
the same confidential or its disclosure would impede the Corporation’s ability to consummate
such transaction, provided that no single suspension period contemplated by this paragraph
(g) shall exceed 90 consecutive days and multiple suspension periods contemplated by this
paragraph (g) shall not exceed an aggregate of 180 days in any 360-day period; or
(h) the Corporation reasonably believes, for reasons other than those referred to in
paragraph (g) above, that the offering document for the offer and sale of APM Qualifying
Securities would not be in compliance with a rule or regulation of the Commission and the
Corporation is unable to comply with such rule or regulation or such compliance is unduly
burdensome, provided that no single suspension period contemplated by this paragraph (h)
shall exceed 90 consecutive days and multiple suspension periods contemplated by this
paragraph (h) shall not exceed an aggregate of 180 days in any 360-day period.
The definition of “Market Disruption Event” as used in any securities or combination of
securities that constitute Qualifying Capital Securities may include less than all of the
paragraphs outlined above, as determined by the Corporation at the time of issuance of such
securities, and in the case of clauses (a), (b), (c) and (d), as applicable to a
circumstance where the Corporation would otherwise endeavor to issue preferred stock,
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shall be limited to circumstances affecting markets where the Corporation’s preferred
stock trades or where a listing for its trading is being sought.
“Measurement Date” means, with respect to any redemption or purchase of securities, the
date six months prior to the delivery of notice of such redemption or the date of such
purchase.
“No Payment Provision” means a provision or provisions in the transaction documents for
securities (referred to in this definition as “such securities”) that include the following:
(a) an Alternative Payment Mechanism; and
(b) an Optional Deferral Provision modified and supplemented from the general
definition of that term to provide that:
(i) the issuer of such securities may, in its sole discretion, or (if the issuer elects
to so provide in the terms of such securities) shall in response to a directive or order
from the Primary Federal Bank Regulatory Agency, defer in whole or in part payment of
Distributions on such securities for one or more consecutive Distribution Periods of up to
five years or, if a Market Disruption Event has occurred and is continuing, ten years,
without any remedy other than Permitted Remedies and the obligations (and limitations on
obligations) described in the definition of “Alternative Payment Mechanism” applying; and
(ii) if the issuer becomes subject to a bankruptcy, insolvency, receivership or similar
proceeding prior to the redemption or repayment of such securities, the holders of such
securities will have no claim to any deferred and unpaid Distributions exceeding (x) if the
APM Qualifying Securities include only Common Stock or rights to purchase Common Stock and
do not include Qualifying Non-Cumulative Perpetual Preferred Stock, 25% of the principal or
stated amount of such securities then outstanding and (y) if the APM Qualifying Securities
include Qualifying Non-Cumulative Perpetual Preferred Stock, two years of Distributions on
such securities; provided, however, that if the APM Qualifying Securities include Qualifying
Non-Cumulative Perpetual Preferred Stock and, accordingly, clause (y) applies, holders of
such securities may have an additional preferred equity claim in respect of deferred and
unpaid distributions which are in excess of two years of Distributions that is senior to the
Corporation’s common stock and is or would be pari passu with any Qualifying Non-Cumulative
Preferred Stock up to the amount equal to their pro rata shares of any unused portion of the
Preferred Cap (as defined in the definition of “Alternative Payment Mechanism”).
“Non-Cumulative” means, with respect to any securities, that the issuer thereof may
elect not to make any number of periodic Distributions or interest payments without any
remedy arising under the terms of the securities or related agreements in favor of the
holders, other than one or more Permitted Remedies.
“NRSRO” means a nationally recognized statistical rating organization within the
meaning of Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act.
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“OCC” means the Office of the Comptroller of the Currency.
“Offering Circular” has the meaning specified in Recital A.
“Optional Deferral Provision” means, as to any security or combination of securities, a
provision in the terms thereof or of the related transaction agreements to the effect of
either (a) or (b) below:
(a)(i) the issuer of such securities may, in its sole discretion, or in response to a
directive order from a Primary Federal Bank Regulatory Agency, defer or skip in whole or in
part payment of Distributions on such securities for one or more Distribution Periods
(whether or not consecutive) for up to five years or, if a Market Disruption Event is
continuing, ten years, without any remedy other than Permitted Remedies and (ii) if the
issuer of such securities has exhausted its right to defer Distributions and no Market
Disruption Event is continuing, the issuer will be obligated to issue and sell Common Stock
and/or Qualifying Non-Cumulative Perpetual Preferred Stock in an amount such that the net
proceeds of such sale equal or exceed the amount of unpaid Distributions on such securities
(including without limitation all deferred and accumulated amounts) and to apply the net
proceeds of such sale to pay such unpaid Distributions in full or;
(b) the issuer of such securities may, in its sole discretion, or in response to a
directive order from a Primary Federal Bank Regulatory Agency, defer or skip in whole or in
part payment of Distributions on such securities for one or more Distribution Periods
(whether or not consecutive) for up to ten years, without any remedy other than Permitted
Remedies.
“Other Qualifying Replacement Capital Covenant” means a replacement capital covenant,
as identified by the Corporation’s Board of Directors reasonably construing the definitions
of this Replacement Capital Covenant, (i) entered into by a company that at the time it
enters into such replacement capital covenant is a reporting company under the Securities
Exchange Act and (ii) that restricts the related issuer from redeeming or purchasing
identified securities that at the time of initial issuance were rated by at least two NRSROs
except out of the proceeds of specified replacement capital securities that have terms and
provisions at the time of redemption or purchase that are as or more equity-like than the
securities then being redeemed or purchased, raised since the most recent Measurement Date
(and, if the replacement capital securities are Common Stock or rights to purchase Common
Stock, with the Corporation being deemed to receive the applicable percentage (which,
depending upon the equity-like characteristics being redeemed or repurchased as of the date
of redemption or repurchase will be 133.33% if such securities are perpetual or have a
remaining term to maturity of more than 50 years, 200% if such securities have a remaining
term to maturity of 50 years or less but more than 30 years, and 400% if such securities
have a remaining term to maturity of 30 years or less but more than 20 years) of the
proceeds actually received).
“Permitted Remedies” means, as to any security or combination of securities, one or
more of the following remedies:
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(i) rights in favor of the holders thereof permitting such holders to elect one or more
directors of the Corporation or a Subsidiary of the Corporation (including any such rights
required by the listing requirements of any stock or securities exchange on which such
securities may be listed or traded); and
(ii) complete or partial prohibitions on the Corporation or a Subsidiary of the
Corporation paying Distributions on or purchasing or redeeming Common Stock or other
securities that rank pari passu with or junior as to Distributions to such securities for so
long as Distributions on such securities, including deferred Distributions, have not been
paid in full or to such lesser extent as may be specified in the terms of such securities.
“Person” means any individual, corporation, partnership, joint venture, trust, limited
liability company or corporation, unincorporated organization or government or any agency or
political subdivision thereof.
“Primary Federal Bank Regulatory Agency” means, as to the Corporation or any of its
Subsidiaries at any time, the Federal bank regulatory agency that has primary regulatory
authority with respect to the Corporation or such Subsidiary.
“Qualifying Capital Securities” means securities (other than Common Stock, rights to
purchase Common Stock and securities convertible into Common Stock) that, in the
determination of the Corporation’s Board of Directors, or the relevant committee thereof,
reasonably construing the definitions and other terms of this Replacement Capital Covenant,
meet one of the following criteria:
(i) securities issued by the Corporation or its Subsidiaries that (1) rank (or would
rank if the Existing Junior Subordinated Debentures remained outstanding) pari passu with or
junior to the Existing Junior Subordinated Debentures upon a liquidation, dissolution or
winding up of the Corporation, (2) have a No Payment Provision, (3) have no maturity or a
legal final maturity of at least 60 years and (4) either (x) are subject to a replacement
capital covenant substantially similar to this Replacement Capital Covenant or an Other
Qualifying Replacement Capital Covenant or (y) have a Mandatory Trigger Provision and are
subject to Intent-Based Replacement Disclosure; or
(ii) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu
with or junior to other preferred stock of the issuer, (2) have no maturity or a legal final
maturity of at least 40 years, (3) are subject to a replacement capital covenant
substantially similar to this Replacement Capital Covenant or an Other Qualifying
Replacement Capital Covenant, (4) have an Optional Deferral Provision and (5) have a
Mandatory Trigger Provision.
Additionally, and notwithstanding the foregoing, any securities or combinations of
securities if issued to any Subsidiary of the Corporation, without the contemporaneous
issuance of any security by such Subsidiary to a Person other than the Corporation or a
Subsidiary of the Corporation, shall not qualify as Qualifying Capital Securities (it being
understood and agreed for the avoidance of doubt that persons covered by the
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Corporation’s dividend reinvestment plan and employee benefit plans shall not be deemed
to be affiliates of the Corporation for this purpose).
Qualifying Non-Cumulative Perpetual Preferred Stock” means preferred or preference
stock of the Corporation that (i) is Non-Cumulative, (ii) ranks pari passu with or junior to
all other outstanding preferred stock of the Corporation, (iii) is perpetual and (iv) is
subject to either a replacement capital covenant substantially similar to this Replacement
Capital Covenant or an Other Qualifying Replacement Capital Covenant or provides for
mandatory deferral tied to the breach of certain financial triggers and is subject to
Intent-Based Replacement Disclosure, and in each case as to which the transaction documents
provide for no remedies as a consequence of non-payment of Distributions other than
Permitted Remedies.
“Redesignation Date” means, as to the then-effective Covered Debt, the earliest of (i)
the date that is two years prior to the final maturity date of such Covered Debt, (ii) if
the Corporation or any of its Subsidiaries elects to redeem, or the Corporation or any of
its Subsidiaries elects to repurchase, such Covered Debt either in whole or in part with the
consequence that after giving effect to such redemption or repurchase the outstanding
aggregate principal amount of such Covered Debt is less than $100,000,000, the applicable
redemption or repurchase date and (iii) if such Covered Debt is not Eligible Subordinated
Debt, the date on which the Corporation or U.S. Bank issues long-term indebtedness for money
borrowed that is Eligible Subordinated Debt.
“REIT Preferred Securities” means Non-Cumulative perpetual preferred stock of a
Subsidiary of a Depository Institution Subsidiary, which may or may not be a “real estate
investment trust” (“REIT”) within the meaning of Section 856 of the Internal Revenue Code of
1986, as amended, that is exchangeable for Non-Cumulative perpetual preferred stock of the
Corporation and satisfies the following requirements:
(a) such Non-Cumulative perpetual preferred stock of a Subsidiary of a Depository
Institution Subsidiary and the related Non-Cumulative perpetual preferred stock of the
Corporation for which it may be exchanged qualifies as Tier 1 or core capital of a
Depository Institution Subsidiary under the risk-based capital guidelines of the appropriate
Primary Federal Bank Regulatory Agency and related interpretive guidance (for example, in
the case of the Office of the Comptroller of the Currency, Corporate Decision 97-109);
(b) such Non-Cumulative perpetual preferred stock of a Subsidiary of a Depository
Institution Subsidiary must be exchangeable automatically into Non-Cumulative perpetual
preferred stock of the Corporation in the event that the appropriate Primary Federal Bank
Regulatory Agency directs such Depository Institution Subsidiary in writing to make a
conversion because such Depository Institution Subsidiary is (i) undercapitalized under the
applicable prompt corrective action regulations (which, for example, in the case of the
Office of the Comptroller of the Currency and applicable to national banks, are at 12 C.F.R.
6.4(b)), (ii) placed into conservatorship or receivership, or (iii) expected to become
undercapitalized in the near term;
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(c) if such Subsidiary of the Depositary Institution Subsidiary is a REIT, the
transaction documents include provisions that would require the Subsidiary to declare
“consent dividends” (to the maximum extent permitted by Internal Revenue Code Sections 565
and 562(c)) if it were to stop paying Distributions on its Non-Cumulative perpetual
preferred stock, as is necessary to maintain its status as a REIT;
(d) such Non-Cumulative perpetual preferred stock of the Corporation issued upon
exchange for the Non-Cumulative perpetual preferred stock of a Subsidiary of a Depository
Institution Subsidiary, issued as part of such transaction, ranks pari passu or junior to
other preferred stock of the Corporation; and
(e) such Non-Cumulative perpetual preferred stock of a Subsidiary of a Depository
Institution Subsidiary and Non-Cumulative perpetual preferred stock of the Corporation for
which it may be exchanged are subject to a replacement capital covenant substantially
similar to this Replacement Capital Covenant or an Other Qualifying Replacement Capital
Covenant.
“Replacement Capital Covenant” has the meaning specified in the introduction to this
instrument.
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Subsidiary” means, at any time, any Person the shares of stock or other ownership
interests of which having ordinary voting power to elect a majority of the board of
directors or other managers of such Person are at the time owned, or the management or
policies of which are otherwise at the time controlled, directly or indirectly through one
or more intermediaries (including other Subsidiaries) or both, by another Person.
“U.S. Bank” means U.S. Bank National Association.
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