Recitals
Exhibit 99.1
Replacement Capital Covenant, dated as of March 17, 2008 (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, the Corporation is issuing 20,000 shares of its “Series D
Non-Cumulative Perpetual Preferred Stock”, or the “Shares”, having a liquidation preference of
$25,000 per Share.
B. This Replacement Capital Covenant is the “Replacement Capital Covenant” referred to in the
Prospectus Supplement, dated March 10, 2008, relating to the Shares.
C. The Corporation, in entering into this Replacement Capital Covenant 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.
D. 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 Repurchase of Shares. The Corporation hereby
promises and covenants to and for the benefit of each Covered Debtholder that neither the
Corporation nor any Subsidiary shall redeem or repurchase any of the Shares prior to the
Termination Date except to the extent that (a) the Corporation has obtained the prior approval of
the Federal Reserve if such approval is then required under the Federal Reserve’s capital
guidelines applicable to bank holding companies and (b) the applicable redemption or repurchase
price does not exceed the sum of the following amounts:
(i) 133.33% of the aggregate amount of (a) net cash proceeds received by the
Corporation or its Subsidiaries from the issuance and sale of Common Stock and
rights to acquire Common Stock (including Common Stock or rights to acquire Common
Stock issued pursuant to the Corporation’s dividend reinvestment plan or employee
benefit plans); and (b) the Market Value of any Common Stock that the Corporation
or its Subsidiaries have (x) delivered to
persons other than the Corporation and its Subsidiaries as consideration for
property or assets in an arm’s-length transaction or (y) issued to Persons other
than the Corporation or its Subsidiaries in connection with the conversion or
exchange of any convertible or exchangeable securities, other than securities for
which the Corporation or any of its Subsidiaries has received equity credit from any
NRSRO; plus
(ii) 100% of the aggregate net cash proceeds received by the Corporation and
its Subsidiaries from the issue and sale of Debt Exchangeable for Common Equity,
Debt Exchangeable for Preferred Equity, Mandatorily Convertible Preferred Stock,
REIT Preferred Securities, Qualifying Capital Securities and Qualifying Preferred
Stock,
in each case since the most recent Measurement Date (without double counting proceeds received in
any prior Measurement Period); provided the provisions of this Replacement Capital Covenant
shall not apply to:
(a) the purchase of the Shares or any portion thereof by any Subsidiary in connection
with the distribution thereof or market-making or other secondary market activities, or
(b) the exchange of any of the Shares for Common Stock having a Market Value, or
Qualifying Preferred Stock having an aggregate liquidation preference, not less than the
liquidation preference of such Shares.
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 upcoming Redesignation Date;
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(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 procedures in this Section 3(b) and such series
shall become the Covered Debt on the upcoming 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 current report on 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
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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;
(iv) if, and only if, the Corporation ceases to be a reporting company under
the Securities Exchange Act, the Corporation shall (A) 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 (B) cause a notice of
the execution of this Replacement Capital Covenant to be posted on the Bloomberg
screen for the Covered Debt or any successor Bloomberg screen and each similar
third-party vendor’s screen the Corporation reasonably believes is appropriate (each
an “Investor Screen”) and cause a hyperlink to a definitive copy of this
Replacement Capital Covenant to be included on the Investor Screen for each series
of Covered Debt, in each case to the extent permitted by Bloomberg or such similar
third-party vendor, as the case may be; and
(v) promptly upon request by any Holder of Covered Debt, the Corporation shall
provide such Holder with a conformed copy of this Replacement Capital Covenant.
(e) The Corporation agrees that, if at any time the Covered Debt is held by a trust
(for example, where the Covered Debt is part of an issuance of trust preferred securities),
a holder of the securities issued by such trust may enforce (including by instituting legal
proceedings) this Replacement Capital Covenant directly against the Corporation as though
such holder owned Covered Debt directly, and such trust securities shall be deemed to be
“Covered Debt” for purposes of this Replacement Capital Covenant for so long as the
indebtedness held by such trust remains Covered Debt hereunder.
SECTION 4. Term. (a) The covenants of the Corporation pursuant to this Replacement Capital
Covenant shall remain in full force and effect until the earliest date (the “Termination Date”) to
occur of (i) the date, if any, on which the Holders of a majority in principal amount of the
then-effective Covered Debt consent or agree in writing to the termination of this Replacement
Capital Covenant and the obligations of the Corporation hereunder, (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 (b) of
the definition of each such term) and (iii) the date
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that is ten years after the date hereof or, if earlier, when all of the Shares have been
redeemed or repurchased in full in compliance with this Replacement Capital Covenant. From and
after the Termination Date, the obligations of the Corporation pursuant to this Replacement Capital
Covenant shall be of no further force and effect with respect to such Holders, or otherwise.
(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 in 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) such amendment or supplement eliminates
Common Stock, Debt Exchangeable for Common Stock, rights to acquire Common Stock, and/or
Mandatorily Convertible Preferred Stock as a Replacement Capital Security, if after the date
of this Replacement Capital Covenant, the Corporation has been advised in writing by a
nationally recognized independent accounting firm or an accounting standard or interpretive
guidance of an existing accounting standard issued by an organization or regulator that has
responsibility for establishing or interpreting accounting standards in the United States
becomes effective such that there is more than an insubstantial risk that failure to
eliminate Common Stock, Debt Exchangeable for Common Stock, rights to acquire Common Stock
and/or Mandatorily Convertible Preferred Stock as a Replacement Capital Security would
result in a reduction in the Corporation’s earnings per share as calculated in accordance
with generally accepted accounting principles in the United States, (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 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, (iii) the effect of such amendment or supplement is
solely to impose additional restrictions on, or eliminate certain of, the types of
securities qualifying as Replacement Capital Securities (other than the securities covered
by clause (i) above), and an officer of the Corporation has 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
to that effect or (iv) the effect of such amendment or supplement is to postpone the
termination of this Replacement Capital Covenant. For this purpose, an amendment or
supplement that adds new types of securities qualifying as Replacement Capital Securities,
modifies the requirements of securities qualifying as Replacement Capital Securities or
postpones the termination of this Replacement Capital Covenant will not be deemed materially
adverse to the Holders of the then-effective series of Covered Debt if, following such
amendment or supplement, the Replacement Capital Covenant would satisfy clause (b) of the
definition of Qualifying Replacement Capital Covenant.
(c) For purposes of Section 4(a) and 4(b), the Holders whose consent or agreement is
required to amend or terminate the covenants in this Replacement Capital
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Covenant shall be the Holders of the then-effective 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 to amend this Replacement Capital Covenant or cause the covenants in
Section 2 to be of no further force and effect.
SECTION 5. Miscellaneous. (a) This Replacement Capital Covenant shall be governed by and
construed in accordance with the laws of the State of New York without regard to choice of law
principles.
(b) This Replacement Capital Covenant shall be binding upon the Corporation and its
successors and assigns (provided that, in the event the Corporation sells, conveys,
transfers or otherwise disposes of all or substantially all its assets to any person and (i)
such person assumes all the obligations of the Corporation under the indenture governing the
then applicable Covered Debt and the Indenture, (ii) such person assumes all the obligations
of the Corporation under the Replacement Capital Covenant and (iii) the Corporation is
released from its obligations under the indenture governing the then applicable Covered Debt
and the Indenture, the Corporation shall be released from all its obligations hereunder) 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 acquires or holds Covered Debt shall retain its status as a Covered
Debtholder for so long as the series of long-term indebtedness for borrowed money owned by
such Person is Covered Debt and, if 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 post on its website as the address
for notices under this Replacement Capital Covenant:
U.S. Bancorp
000 Xxxxxxxx Xxxx
000 Xxxxxxxx Xxxx
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Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Treasury Department
Facsimile No: (000) 000-0000
Attention: Treasury Department
Facsimile No: (000) 000-0000
(d) Each reference in this Replacement Capital Covenant to a Commission form includes
any successor form that may be adopted by the Commission.
[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 |
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| By: | ||||
| Name | ||||
| Title: | ||||
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SCHEDULE I
DEFINITIONS
“Alternative Payment Mechanism” means, with respect to any Qualifying Capital Securities,
provisions in the related transaction documents permitting the Corporation, in its sole discretion,
or in response to a directive or order from the Federal Reserve, to defer or skip in whole or in
part payment of Distributions on such Qualifying Capital Securities for one or more consecutive
Distribution Periods up to ten years and 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 Qualifying Capital Securities and
apply the proceeds to pay unpaid Distributions on such Qualifying Capital 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 Qualifying Capital Securities and (y) the fifth
anniversary of the commencement of such deferral period, and that:
(a) define “eligible proceeds” to mean, 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 APM Qualifying 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 in the case of APM
Qualifying Securities that are Qualifying Preferred Stock or Mandatorily Convertible
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;
(c) include a Repurchase Restriction;
(d) notwithstanding clause (b) of this definition, if the Federal Reserve disapproves
the Corporation’s issuance and sale of APM Qualifying Securities or the use of the proceeds
thereof to pay deferred Distributions, may (if the Corporation elects to so provide in the
terms of such Qualifying Capital Securities) permit the Corporation to pay deferred
Distributions from any source or, if the Federal Reserve 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 Qualifying Capital Securities) permit the Corporation to use such
proceeds for other purposes and to continue to defer Distributions, without a breach of its
obligations under the transaction documents;
(e) may include a provision that, for purposes of paying deferred interest, limits the
ability of the Corporation to sell shares of Common Stock and/or Qualifying Warrants above a
Maximum Share Number;
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(f) limit the obligation of the Corporation to issue (or use Commercially Reasonable
Efforts to issue) APM Qualifying Securities that are Common Stock and Qualifying Warrants to
settle deferred Distributions pursuant to the Alternative Payment Mechanism either (A)
during the first five years of any deferral period or (B) before an anniversary of the
commencement of any deferral period that is not earlier than the fifth such anniversary and
not later than the ninth such anniversary (as designated in the terms of such Qualifying
Capital Securities) with respect to deferred Distributions attributable to the first five
years of such deferral period, either:
(i) to an aggregate amount of such securities, the net proceeds from the
issuance of which is equal to 2% of the product of the average of the Market Value
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; or
(ii) to a number of shares of Common Stock and shares purchasable upon exercise
of Qualifying Warrants, in the aggregate, not in excess of 2% of the outstanding
number of shares of Common Stock as of the date of the Corporation’s most recent
publicly available consolidated financial statements (the “Common Cap”);
(g) limit the right of the Corporation to issue APM Qualifying Securities that are
Qualifying Preferred Stock and Mandatorily Convertible Preferred Stock to settle deferred
Distributions pursuant to the Alternative Payment Mechanism to an aggregate amount of
Qualifying Preferred Stock and still-outstanding Mandatorily Convertible Preferred Stock,
the net proceeds from the issuance of which with respect to all deferral periods is equal to
25% of the liquidation or principal amount of such Qualifying Capital Securities (the
“Preferred Cap”);
(h) in the case of Qualifying Capital Securities other than non-cumulative perpetual
preferred stock, include a Bankruptcy Claim Limitation Provision; and
(i) permit the Corporation, at its option, to provide that if it is involved in a
merger, consolidation, amalgamation, binding share exchange or conveyance, transfer or lease
of assets substantially as an entirety to any other person or a similar transaction (a
“Business Combination”) where immediately after the consummation of the Business Combination
more than 50% of the surviving or resulting entity’s voting stock is owned by the
shareholders of the other party to the Business Combination, then clauses (a) through (c) of
this definition will not apply to any deferral period that is terminated on the next
Distribution Date following the date of consummation of the Business Combination (or if
later, at any time within 90 days following the date of consummation of the Business
Combination);
provided (and it being understood) that:
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(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, Maximum Share Number and Preferred Cap, as
applicable; and
(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 up to the Common Cap, Maximum Share Number and the Preferred Cap, as
applicable, in proportion to the total amounts that are due on such securities, or on such
other basis as the Federal Reserve may approve.
“APM Qualifying Securities” means, with respect to an Alternative Payment Mechanism or any
Mandatory Trigger Provision, one or more of the following (as designated in the transaction
documents for any Qualifying Capital Securities that include an Alternative Payment Mechanism or a
Mandatory Trigger Provision, as applicable):
| (a) | Common Stock; | ||
| (b) | Qualifying Warrants; | ||
| (c) | Mandatorily Convertible Preferred Stock; or | ||
| (d) | Qualifying Preferred Stock; |
provided (and it being understood) that (i) if the APM Qualifying Securities for any Alternative
Payment Mechanism or Mandatory Trigger Provision include both Common Stock and Qualifying Warrants,
such Alternative Payment Mechanism or Mandatory Trigger Provision may permit, but need not require,
the Corporation to issue Qualifying Warrants and (ii) such Alternative Payment Mechanism or
Mandatory Trigger Provision may permit, but need not require, the Corporation to issue Mandatorily
Convertible Preferred Stock.
“Bankruptcy Claim Limitation Provision” means, with respect to any Qualifying Capital
Securities that have an Alternative Payment Mechanism or a Mandatory Trigger Provision, provisions
that, upon any liquidation, dissolution, winding up or reorganization or in connection with any
insolvency, receivership or proceeding under any bankruptcy law with respect to the issuer, limit
the claim of the holders of such securities to Distributions that accumulate during (a) any
deferral period, in the case of securities that have an Alternative Payment Mechanism or (b) any
period in which the issuer fails to satisfy one or more financial tests set forth in the terms of
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such securities or related transaction agreements, in the case of securities that have a
Mandatory Trigger Provision, to:
(i) in the case of Qualifying Capital Securities that have an Alternative Payment
Mechanism or Mandatory Trigger Provision with respect to which the APM Qualifying Securities
do not include Qualifying Preferred Stock or Mandatorily Convertible Preferred Stock, 25% of
the stated or principal amount of such Qualifying Capital Securities then outstanding; and
(ii) in the case of any other Qualifying Capital Securities, an amount not in excess of
the sum of (x) the first two years of accumulated and unpaid Distributions and (y) an amount
equal to the excess, if any, of the Preferred Cap over the aggregate amount of net proceeds
from the issuance and sale of Qualifying Preferred Stock and Mandatorily Convertible
Preferred Stock that is still outstanding that the issuer has applied to pay such
Distributions pursuant to the Alternative Payment Mechanism or the Mandatory Trigger
Provision; provided that the holders of such Qualifying Capital Securities are deemed to
agree that, to the extent the remaining claim exceeds the amount set forth in clause (x),
the amount they receive in respect of such excess shall not exceed the amount they would
have received if the claim for such excess ranked pari passu with the interests of the
holders, if any, of Qualifying Preferred Stock.
“Business Day” means each day other than (a) a Saturday or Sunday, or (b) a day on which
banking institutions in New York City are authorized or required by law or executive order to be
closed.
“Common Cap” has the meaning specified in clause (f) of the definition of Alternative Payment
Mechanism.
“Commercially Reasonable Efforts” means, for purposes of selling APM Qualifying Securities,
commercially reasonable efforts to complete the offer and sale of APM Qualifying Securities to
third parties that are not Subsidiaries of the Corporation in public offerings or private
placements. The Corporation shall not be considered to have made Commercially Reasonable Efforts
to effect a sale of APM Qualifying Securities if it determines not to pursue or complete such sale
due to pricing, coupon, dividend rate or dilution considerations.
“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 sold pursuant to the Corporation’s dividend reinvestment plan and
employee benefit plans).
“Corporation” has the meaning specified in the introduction to this instrument.
“Covered Debt” means (a) at the date of this Replacement Capital Covenant and continuing to
but not including the first Redesignation Date, the Initial Covered Debt and (b) thereafter,
commencing with each Redesignation Date and continuing to but not including the
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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 or holds long-term indebtedness for money borrowed of
the Corporation or U.S. Bank during the period that such long-term indebtedness for money borrowed
is Covered Debt.
“Debt Exchangeable for Common Equity” means a security or combination of securities (together
in this definition, “such securities”) that:
(a) gives the holder a beneficial interest in (i) subordinated debt securities of the
Corporation (in this definition, the “Issuer”) permitting the Issuer to defer Distributions
in whole or in part on such subordinated debt securities for one or more Distribution
Periods up to at least five years without any remedies other than Permitted Remedies and
that are junior subordinated debt of the Issuer (or rank pari passu with or junior to junior
subordinated debt of the Issuer) and (ii) a fractional interest in a stock purchase contract
that obligates the holder to acquire a beneficial interest in a number of shares of Common
Stock to be within a range established at the time of issuance of the subordinated debt
securities, subject to customary anti-dilution adjustments; provided, that such
stock purchase contracts shall not be terminable prior to the stock purchase date other than
upon the insolvency of the Corporation;
(b) provides that the holders 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 Common Stock pursuant to such stock purchase
contracts;
(c) includes a remarketing feature pursuant to which the subordinated debt of the
Issuer is remarketed to new investors commencing not later than the first Distribution Date
that is at least three years after the date of issuance of such securities;
(d) provides for the proceeds raised in the remarketing to be used to purchase Common
Stock under the stock purchase contracts and, if there has not been a successful remarketing
by the first Distribution Date that is one year after the earliest regularly scheduled stock
purchase date, provides that the stock purchase contracts will be settled by the Corporation
exercising its rights as a secured creditor with respect to such subordinated debt
securities or other collateral directly or indirectly pledged by investors in the Debt
Exchangeable for Common Equity; and
(e) after the issuance of such Common Stock, provides the holder with a beneficial
interest in such Common Stock.
“Debt Exchangeable for Preferred Equity” means a security or combination of securities
(together in this definition, “such securities”) that:
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(a) gives the holder a beneficial interest in (i) subordinated debt securities of the
Corporation or one of its Subsidiaries (in this definition, the “Issuer”) permitting the
Issuer to defer Distributions in whole or in part on such subordinated debt securities for
one or more Distribution Periods up to seven years without any remedies other than Permitted
Remedies and that are junior subordinated debt of the Issuer (or rank pari passu with or
junior to junior subordinated debt of the Issuer) and (ii) an interest in a stock purchase
contract that obligates the holder to acquire a beneficial interest in Qualifying Preferred
Stock;
(b) provides that the holders directly or indirectly grant to the Issuer 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 Qualifying Preferred Stock pursuant to such stock purchase
contracts;
(c) includes a remarketing feature pursuant to which the subordinated debt of the
Issuer is remarketed to new investors commencing not later than the first Distribution Date
that is at least five years after the date of issuance of such securities or, if the Federal
Reserve so requires as a condition to treating such securities as Tier 1 capital under its
risk-based guidelines applicable to bank holding companies, earlier in the event of an early
settlement event based on (i) the capital ratios of the Corporation, (ii) the capital ratios
of the Corporation as anticipated by the Federal Reserve, or (iii) the dissolution of the
issuer of such Debt Exchangeable for Preferred Equity;
(d) provides for the proceeds raised in the remarketing to be used to purchase
Qualifying Preferred Stock 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 exercising its rights as a secured creditor with respect to such
subordinated debt securities or other collateral directly or indirectly pledged by investors
in the Debt Exchangeable for Preferred Equity;
(e) includes a Qualifying Replacement Capital Covenant that will apply to such
securities and to any Qualifying Preferred Stock issued pursuant to the stock purchase
contracts; provided that such Qualifying Replacement Capital Covenant will not include Debt
Exchangeable for Common Equity or Debt Exchangeable for Preferred Equity as “Replacement
Capital Securities”; and
(f) after the issuance of such Qualifying Preferred Stock, provides the holder with a
beneficial interest in such Qualifying Preferred Stock.
“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 periodic Distributions on such securities are scheduled to be made.
I-6
“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
payments or other income distributions to the holders thereof that are not Subsidiaries of the
Corporation.
“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
unsecured long-term indebtedness for money borrowed of such issuer that (a) upon a bankruptcy,
liquidation, dissolution or winding up of the issuer, ranks most senior among the issuer’s then
outstanding classes of unsecured indebtedness for money borrowed, (b) is then assigned a rating by
at least one NRSRO (provided that this clause (b) 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 (a), (c) and (d) that is then assigned a rating by at least
one NRSRO), (c) has an outstanding principal amount of not less than $100,000,000, (d) 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 (e) if issued by a
Depository Institution Subsidiary, is fully and unconditionally guaranteed by the Corporation on
(I) a subordinated basis or (II) if on the relevant Redesignation Date there is no outstanding debt
of a Depository Institution Subsidiary meeting the other requirements set forth above and
guaranteed by the Corporation on a subordinated basis but there is outstanding debt of a Depository
Institution Subsidiary 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 that 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.
“Eligible Subordinated Debt” means, at any time in respect of any issuer, each series of the
issuer’s then-outstanding unsecured long-term indebtedness for money borrowed that (a) upon a
bankruptcy, liquidation, dissolution or winding up of the issuer, ranks subordinate to the issuer’s
most senior outstanding series of unsecured indebtedness for money borrowed, (b) is then assigned a
rating by at least one NRSRO (provided that this clause (b) 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 (a), (c) and (d) that is then assigned a rating
by at least one NRSRO), (c) has an outstanding principal amount of not less than $100,000,000,
(d) 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 (e) if issued
by a Depository Institution Subsidiary, is fully and unconditionally guaranteed by the Corporation
on (I) a subordinated basis or (II) if on the relevant Redesignation Date there is no outstanding
debt of a Depository Institution Subsidiary meeting the other requirements set forth above and
guaranteed by the Corporation on a
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subordinated basis but there is outstanding debt of a Depository Institution Subsidiary
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
that 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.
“Federal
Reserve” means the Board of Governors of the Federal Reserve System, and any regional
Federal Reserve Bank in which the Corporation owns stock or their successor as the Corporation’s
primary federal banking regulator, or the staff thereof.
“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 Corporation with respect to
such Covered Debt.
“Initial Covered Debt” means 5.875% junior subordinated debentures due 2035, underlying the
5.875% trust preferred securities of USB Capital VII (CUSIP No. 000000000).
“Intent-Based Replacement Disclosure” means, as to any Qualifying Preferred Stock or
Qualifying Capital 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 or any Subsidiary of the
issuer will repay, redeem or purchase such securities only with the proceeds of replacement capital
securities that have terms and provisions at the time of repayment, redemption or purchase that are
as or more equity-like than the securities then being repaid, redeemed or purchased, raised within
180 days prior to the applicable redemption or purchase date. Notwithstanding the use of the term
“Intent-Based Replacement Disclosure” in the definitions of “Qualifying Capital Securities” and
“Qualifying 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 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 (a) no prepayment obligation on the part of the issuer thereof, whether at the election of the
holders or otherwise and (b) 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, subject to customary
anti-dilution adjustments.
“Mandatory Trigger Provision” means, as to any Qualifying Capital Securities, provisions in
the terms thereof or of the related transaction agreements that:
(a) require the issuer of such securities to make payment of Distributions on
such securities only pursuant to the issue and sale of APM
I-8
Qualifying Securities within two years of a failure of the issuer 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 require the application
of the net proceeds of such sale to pay such unpaid Distributions,
provided that (i)
if the Mandatory Trigger Provision does not require the issuance and sale within one
year of such failure, the amount of Common Stock and/or Qualifying Warrants the net
proceeds of which the issuer must apply to pay such Distributions pursuant to such
provision may not exceed the Common Cap and (ii) the amount of Qualifying Preferred
Stock and still outstanding Mandatorily Convertible Preferred Stock the net proceeds
of which the issuer may apply to pay such Distributions pursuant to such provision
may not exceed the Preferred Cap;
(b) if the provisions described in clause (a) do not require such issuance and
sale within one year of such failure, include a Repurchase Restriction;
(c) include a Bankruptcy Claim Limitation Provision; and
(d) prohibit the issuer of such securities from repaying, redeeming or
purchasing any of its securities ranking upon the liquidation, dissolution or
winding up of the Corporation junior to or pari passu with any APM Qualifying
Securities the proceeds of which were used to settle deferred interest during the
relevant deferral period prior to the date six months after the issuer applies the
net proceeds of the sales described in clause (a) above to pay such deferred
Distributions in full (subject to the exceptions set forth in clauses (i) through
(iii) of the definition of Repurchase Restrictions);
provided (and it being understood) that:
(a) the issuer will 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 issuer 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 issuer 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
(c) if the issuer has outstanding more than one class or series of securities
under which it is obligated to sell a type of APM Qualifying Securities and applies
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 issuer from those
sales and available for payment of deferred Distributions on
I-9
such
securities shall be applied to such securities on a pro rata basis up to
the Common Cap and the Preferred Cap, as applicable, in proportion to the total
amounts that are due on such securities.
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 Qualifying Capital Securities as a result of
the issuer’s failure to pay Distributions because of the Mandatory Trigger Provision until
Distributions have been deferred for one or more consecutive 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) 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 such consent or
approval has not yet been obtained notwithstanding the Corporation’s commercially reasonable
efforts to obtain such consent or approval or the Federal Reserve instructs the Corporation
not to sell or offer for sale APM Qualifying Securities or not to use the proceeds of such a
sale to pay deferred Distributions under an Alternative Payment Mechanism at such time;
(b) trading in securities generally (or in the Corporation’s Common Stock or preferred
stock specifically) on the New York Stock Exchange or any other national securities exchange
or over-the-counter market on which the Common Stock and/or the Corporation’s preferred
stock is then listed or traded shall have been suspended or the settlement of such trading
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 any other
regulatory body or governmental body 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, APM Qualifying Securities;
(c) a banking moratorium shall have been declared by the federal or state authorities
of the United States and such moratorium materially disrupts or otherwise has a material
adverse effect on trading in, or the issuance and sale of, the APM Qualifying Securities;
(d) a material disruption shall have occurred in commercial banking or securities
settlement or clearance services in the United States and such disruption materially
disrupts or otherwise has a material adverse effect on trading in, or the issuance and sale
of, the APM Qualifying Securities;
(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
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declaration of a national emergency or war by the United States or there shall have
occurred any other national or international calamity or crisis and such event materially
disrupts or otherwise has a material adverse effect on trading in, or the issuance and sale
of, the APM Qualifying Securities;
(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, and such change materially disrupts or otherwise has a
material adverse effect on trading in, or the issuance and sale of, the APM Qualifying
Securities;
(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 reasonable judgment of the
Corporation, 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 (i) the disclosure of that event at such time, in the reasonable judgment of the
Corporation, is not otherwise required by law and would have a material adverse effect on
the business of the Corporation or (ii) the disclosure relates to a previously undisclosed
proposed or pending material business transaction, the disclosure of which would impede the
ability of the Corporation 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 such 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 Replacement 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, shall be limited to circumstances affecting markets where the Corporation’s preferred stock
trades or where a listing for its trading is being sought.
“Market Value” means, on any date, the closing sale price per share of Common Stock (or if no
closing sale price is reported, the average of the bid and ask prices or, if more than one in
either case, the average of the average bid and the average ask prices) on that date as reported in
composite transactions by the New York Stock Exchange or, if the Common Stock is not then listed on
the New York Stock Exchange, as reported by the principal U.S. securities exchange on which the
Common Stock is traded or quoted; if the Common Stock is not either listed or quoted on any U.S.
securities exchange on the relevant date, the market price will be the average of the
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mid-point of the bid and ask prices for the Common Stock on the relevant date submitted by at
least three nationally recognized independent investment banking firms selected for this purpose by
the Board of Directors of the Corporation or a committee thereof.
“Maximum Share Number” means, with respect to any Qualifying Capital Securities, a limit on
the total number of shares of Common Stock that may be issued by the Corporation pursuant to the
Alternative Payment Mechanism with respect to such Qualifying Capital Securities or on the total
number of shares of Common Stock underlying all Qualifying Warrants that may be issued by the
Corporation pursuant to such Alternative Payment Mechanism, provided that the product of such
Maximum Share Number and the Market Value of the Common Stock as of the date of issuance of such
Qualifying Capital Securities shall not represent a lower proportion of the aggregate principal or
liquidation amount, as applicable, of such Qualifying Capital Securities than the product of the
Maximum Share Number applicable to the Shares multiplied by the Market Value of the Common Stock as
of the date of issuance of such Shares represents of the aggregate liquidation amount of such
Shares.
“Measurement Date” means, with respect to any repayment, redemption or purchase of securities,
the date six months prior to the delivery of notice of such repayment, redemption or the date of
such purchase.
“Measurement Period” means the period from a Measurement Date to the related notice date or
purchase date.
“Non-Cumulative” means, as to any security, that the terms of such security provide for
Distributions that are non-cumulative and may be skipped by the issuer for any number of
Distribution Periods without any remedy arising 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, other than Permitted Remedies.
“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 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, or memorandum of understanding with, the Federal
Reserve, 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.
“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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“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) of up to five years or, if a Market Disruption Event is
continuing, up to a total of ten years, without any remedy other than Permitted Remedies
and (ii) such securities are subject to an Alternate Payment Mechanism (provided that such
Alternate Payment Mechanism need not apply during the first five years of any deferral
period and need not include a Common Cap, Preferred Cap, Bankruptcy Claims Limitation
Provision or Repurchase Restriction); 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.
“Permitted Remedies” means, as to any security or combination of securities, one or more of
the following remedies:
(a) 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
(b) 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.
“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.
“Preferred Cap” has the meaning specified in clause (g) of the definition of Alternative
Payment Mechanism.
“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.
“Prospectus Supplement” has the meaning specified in Recital B.
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“Qualifying Capital Securities” means securities (other than Common Stock, rights to acquire
Common Stock, Debt Exchangeable for Common Equity, Debt Exchangeable for Preferred Equity or
Mandatorily Convertible Preferred 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:
(a) securities issued by the Corporation or any Subsidiary that (i) rank junior upon
the liquidation, dissolution or winding up of the Corporation to all debt of the Corporation
for borrowed money, other than trade payables and any junior subordinated debt that is
expressly made pari passu with such securities in the instrument creating the same,
(ii) have no maturity or a maturity of at least 51 years and (iii) either:
(x) are Non-Cumulative or have a No Payment Provision and are subject to a
Qualifying Replacement Capital Covenant, or
(y) have an Optional Deferral Provision and a Mandatory Trigger Provision and
are subject to Intent-Based Replacement Disclosure;
(b) securities issued by the Corporation or any Subsidiary that (i) rank junior upon
the liquidation, dissolution or winding up of the Corporation to all debt of the Corporation
for borrowed money, other than trade payables and any junior subordinated debt that is
expressly made pari passu with such securities in the instrument creating the same,
(ii) have no maturity or a maturity of at least 31 years and are subject to a Qualifying
Replacement Capital Covenant and (iii) have an Optional Deferral Provision and a Mandatory
Trigger Provision; or
(c) preferred stock of the Corporation or any Subsidiary (i) that has no prepayment
obligation on the part of the issuer thereof, whether at the election of the holders or
otherwise, (ii) that has no maturity or a maturity of at least 51 years, (iii) that either
(x) is subject to a Qualifying Replacement Capital Covenant or (y) is subject to
Intent-Based Replacement Disclosure and has a provision that prohibits the Corporation from
paying any dividends thereon upon its failure to satisfy one or more financial tests set
forth therein, and (iv) as to which the transaction documents provide for no remedies as a
consequence of non-payment of dividends other than Permitted Remedies.
“Qualifying Preferred Stock” means preferred stock of the Corporation that (a) is
Non-Cumulative, (b) ranks pari passu with or junior to all other outstanding preferred stock of the
Corporation, (c) is perpetual and (d) is subject to either a replacement capital covenant
substantially similar to this Replacement Capital Covenant or a 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.
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“Qualifying Replacement Capital Covenant” means a replacement capital covenant that is
substantially similar to this Replacement Capital Covenant or a replacement capital covenant, as
identified by the Corporation’s Board of Directors acting in its reasonable discretion and
reasonably construing the definitions and other terms of this Replacement Capital Covenant, (a)
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 (b) that restricts the related issuer from
repaying, redeeming or purchasing identified securities except to the extent of the applicable
percentage of the net proceeds from the issuance of specified replacement capital securities that
have terms and provisions at the time of redemption, repayment or purchase that are as or more
equity-like than the securities then being repaid, redeemed or purchased within the 180-day period
prior to the applicable redemption, repayment or purchase date.
“Qualifying Warrants” means net share settled warrants to purchase Common Stock that (a) have
an exercise price greater than the current stock market price (as defined below) of the Common
Stock as of the date the Corporation agrees to issue the warrants, and (b) the Corporation is not
entitled to redeem for cash and the holders of which are not entitled to require it to repurchase
for cash in any circumstances. The Corporation intends that any Qualifying Warrants issued in
accordance with an Alternative Payment Mechanism will have exercise prices at least 10% above the
current stock market price of its Common Stock on the date of issuance. The “current stock market
price” means, with respect to Common Stock on any date, (a) the closing sale price per share (or if
no closing sale price is reported, the average of the bid and ask prices or, if more than one in
either case, the average of the average bid and the average ask prices) on that date as reported in
composite transactions by the New York Stock Exchange or if Common Stock is not then listed on the
New York Stock Exchange, as reported by the principal U.S. securities exchange on which Common
Stock is traded or quoted on the relevant date, (b) if Common Stock is not listed on any U.S.
securities exchange on the relevant date the last quoted bid price for Common Stock in the
over-the-counter market on the relevant date as reported by the National Quotation Bureau or
similar organization, or (iii) if Common Stock is not so quoted the average of the mid-point of the
last bid and ask prices for Common Stock on the relevant date from each of at least three
nationally recognized independent investment banking firms selected by the Corporation for this
purpose.
“Redesignation Date” means, as to the then-effective Covered Debt, the earliest of (a) the
date that is two years prior to the final maturity date of such Covered Debt, (b) if the
Corporation or any of its Subsidiaries elects to repay or redeem, or the Corporation or any of its
Subsidiaries elects to purchase, such Covered Debt either in whole or in part with the consequence
that after giving effect to such repayment, redemption or repurchase the outstanding aggregate
principal amount of such Covered Debt is less than $100,000,000, the applicable repayment,
redemption or purchase date and (c) 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
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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;
(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 a Qualifying Replacement Capital Covenant.
“Replacement Capital Covenant” has the meaning specified in the introduction to this
instrument.
“Replacement Capital Securities” means Common Stock, rights to acquire Common Stock, Debt
Exchangeable for Common Equity, Debt Exchangeable for Preferred Equity, Mandatorily Convertible
Preferred Stock, REIT Preferred Securities or Qualifying Capital Securities.
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“Repurchase Restriction” means, with respect to any Qualifying Capital Securities that include
an Alternative Payment Mechanism or a Mandatory Trigger Provision, provisions that require the
Corporation and its Subsidiaries not to repay, redeem or purchase any of its securities ranking
junior to or pari passu with any APM Qualifying Securities the proceeds of which were used to
settle deferred interest during the relevant deferral period until at least one year after all
deferred Distributions have been paid, except where non-payment would cause the Corporation to
breach the terms of the relevant instrument, other than the following (none of which shall be
restricted or prohibited by a Repurchase Restriction):
(a) purchases of such Securities by Subsidiaries in connection with the distribution
thereof or market-making or other secondary market activities;
(b) purchases, redemptions or other acquisitions of shares of Common Stock in
connection with any employment contract, benefit plan or other similar arrangement with or
for the benefit of employees, officers, directors or consultants; or
(c) purchases of shares of Common Stock pursuant to a contractually binding requirement
to buy Common Stock entered into prior to the beginning of the related deferral period,
including under a contractually binding stock repurchase plan.
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Shares” has the meaning specified in Recital A.
“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.
“Termination
Date” has the meaning specified in Section 4(a).
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