<PAGE>
Filed Pursuant to Rule 424(b)(2)
File No. 333-83643
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 23, 1999)
$1,800,000,000
[LOGO OF U.S. BANCORP]
MEDIUM-TERM NOTES, SERIES L (SENIOR)
MEDIUM-TERM NOTES, SERIES M (SUBORDINATED)
Due Nine Months or More From Date of Issue
--------------
U.S. Bancorp may at any time offer senior medium-term notes, series L, and
subordinated medium-term notes, series M. The specific terms of each note
offered will be included in a pricing supplement. The notes offered will
specify whether they are senior or subordinated notes, and unless the
applicable pricing supplement specifies otherwise, they will have the following
general terms:
. The notes will mature in nine (9) months or more from the date of issue.
. The notes will bear interest at either a fixed or floating rate or will be
zero coupon notes. Floating rate interest will be based on one or more of the
following base rates, plus or minus a spread or a spread multiplier, or both:
. commercial paper rate
. federal funds rate
. LIBOR
. prime rate
. CD rate
. treasury rate
. CMT rate
. any other rate specified in the applicable pricing supplement.
. Fixed rate interest will be paid on each February 1 and August 1 and at
maturity, or if applicable, at redemption.
. Floating rate interest will be paid on the dates stated in the notes and
pricing supplement.
. The notes will be denominated in U.S. dollars and have minimum denominations
of $1,000, or will be in any foreign currency we specify.
. We may redeem the notes if specified in the applicable pricing supplement.
. Zero coupon notes will not pay interest.
. Each note will be either held in a global form by The Depositary Trust
Company, or will be represented by a certificate issued in definitive form.
. The notes may be issued at a discount from the principal amount payable at
maturity and will constitute original issue discount notes.
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<TABLE>
<CAPTION>
Price to
Public Agents' Commissions Proceeds to U.S. Bancorp
-------- ------------------- ------------------------
<S> <C> <C> <C>
Per Note... 100% .125%-.750% 99.875%-99.250%
Total...... $1,800,000,000 $2,250,000-$13,500,000 $1,797,750,000-$1,786,500,000
</TABLE>
The notes are not deposits or other obligations of a bank and are not insured
by the Savings Association Insurance Fund or the Bank Insurance Fund of the
Federal Deposit Insurance Corporation or any other governmental agency. The
notes are not secured. The Securities and Exchange Commission and state
securities regulators have not approved or disapproved these securities, or
determined if this prospectus supplement or attached prospectus are truthful or
complete. Any representation to the contrary is a criminal offense.
Offers to purchase the notes are being solicited from time to time by the
agents listed below. The agents have agreed to use their reasonable efforts to
sell the notes. There is no established trading market for the notes and there
is no assurance that the notes will be sold and that a secondary market for the
notes will develop. Investing in the notes may involve risks that are described
under the caption "Foreign Currency Risks" beginning on page 19 of the
accompanying prospectus.
This prospectus supplement and the attached prospectus may be used by our
affiliates, including U.S. Bancorp Piper Jaffray Inc., in connection with
offers and sales of the notes in the secondary market. These affiliates may act
as principal or agent in those transactions. Secondary market sales by these
affiliates will be made at prices related to market prices at the time of sale.
The notes offered in this prospectus supplement are being offered pursuant to
Rule 2720 of the National Association of Securities Dealers Conduct Rules.
--------------
MORGAN STANLEY DEAN WITTER U.S. BANCORP PIPER JAFFRAY
BARCLAYS CAPITAL
CHASE SECURITIES INC.
DAIN RAUSCHER WESSELS
DONALDSON, LUFKIN & JENRETTE
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J. P. MORGAN & CO.
SALOMON SMITH BARNEY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes....................................................... S-3
United States Taxation--United States Holders.............................. S-15
United States Taxation--Foreign Holders.................................... S-22
Plan of Distribution of Notes.............................................. S-24
Validity of Securities..................................................... S-25
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
PROSPECTUS
About this Prospectus.................................................... 2
Where You Can Find More Information...................................... 2
About U.S. Bancorp....................................................... 3
Use of Proceeds.......................................................... 4
Ratios of Earnings to Fixed Charges and to Combined Fixed Charges and
Preferred Stock Dividends............................................... 4
Description of Debt Securities........................................... 5
Description of Preferred Stock........................................... 11
Description of Depository Shares......................................... 15
Description of Debt Warrants............................................. 18
Foreign Currency Risks................................................... 19
Book-entry Issuance...................................................... 20
Plan of Distribution..................................................... 21
Validity of Securities................................................... 22
Experts.................................................................. 22
Glossary................................................................. 23
</TABLE>
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the attached prospectus and any
pricing supplement. We have not authorized anyone else to provide you with
different or additional information. We are offering to sell these securities
and seeking offers to buy these securities only in jurisdictions where offers
and sales are permitted. You should not assume that the information contained
or incorporated by reference in this prospectus supplement or the attached
prospectus is accurate as of any date other than their respective dates.
In this prospectus supplement, the words "USB," "we," "us," and "our" refer
to U.S. Bancorp and its subsidiaries. If we have not defined certain terms in
this prospectus supplement, we have defined them in the glossary section of the
attached prospectus or, in the indentures described below.
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ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement sets forth certain terms of the notes that we may
offer, and it supplements the "Description of Debt Securities" contained in the
attached prospectus. This prospectus supplement supersedes the attached
prospectus to the extent that it contains information which differs from the
information in the attached prospectus.
Each time we issue notes, we will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the notes that we are offering and the terms of the offering.
The pricing supplement will supersede this prospectus supplement or the
attached prospectus to the extent that it contains information which differs
from the information contained in this prospectus supplement or the attached
prospectus.
In making your investment decision, it is important for you to read and
consider all information contained in this prospectus supplement and in the
attached prospectus and the applicable pricing supplement. You should also read
and consider the information contained in the documents identified under the
heading "Where You Can Find More Information" on page 2 of the attached
prospectus.
DESCRIPTION OF NOTES
The following description of the particular terms of the notes offered under
this prospectus supplement adds to, and to the extent it is inconsistent with
the prospectus, it replaces the description of the general terms and provisions
of the debt securities contained in the attached prospectus. The particular
terms of the notes sold under any pricing supplement will be described in that
pricing supplement. The terms and conditions stated in this section will apply
to each note unless the applicable pricing supplement indicates otherwise.
References to interest payments and interest-related information do not apply
to the zero coupon notes defined below. You should also carefully read the
section entitled "Description of Debt Securities" contained in the Prospectus.
General
At our option, we may issue the notes as medium-term notes, series L which
will represent the senior notes, or as medium-term notes, series M which will
represent the subordinated notes. The senior notes and the subordinated notes
are referred to as senior debt securities and subordinated debt securities in
the attached prospectus. We will issue the senior notes under a senior
indenture, dated October 1, 1991, as amended or supplemented from time to time,
between us and Citibank, N.A., as senior trustee. We will issue the
subordinated notes under a subordinated indenture dated October 1, 1991, as
amended by a first supplemental indenture dated April 1, 1993 between us and
Citibank, N.A., as subordinated trustee. In this prospectus supplement, the
senior indenture and the subordinated indenture are referred to as the
indentures, and the senior trustee and subordinated trustee are referred to as
the trustees.
The notes issued under either indenture will constitute one series under
that indenture. The notes will mature on a date that is nine (9) months or more
from the date of issue, as stated in the applicable pricing supplement. The
series L notes will represent senior, unsubordinated debt of USB and will rank
equally with all other unsecured and unsubordinated debt of USB. The series M
notes will represent subordinated debt of USB and will rank junior to, and be
subordinated to, all senior debt of USB. The notes offered by this prospectus
supplement will be limited to an aggregate principal amount of $1,800,000,000,
or the equivalent of that amount in one or more foreign currencies, subject to
reduction as a result of the sale by us of other securities referred to in the
attached prospectus.
Unless the applicable pricing supplement states otherwise:
. the notes will mature on a business day nine (9) months or more from the
date of issue, but a note payable at the commercial paper rate will
mature after at least nine months and one day from its date of issue;
. we will pay interest on fixed rate notes semi-annually;
. unless otherwise authorized by a resolution of our board of directors,
the series M notes will mature after at least one year and one day from
their date of issue;
. if the maturity date of any note or the interest payment date of any note
(other than a floating rate note) specified in the applicable
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pricing supplement for any note is a day that is not a business day,
interest, principal and premium, if any, will be paid on the next day that
is a business day with the same force and effect as if made on the
specified payment date, and no interest on that payment will accrue for
the period from and after that maturity date or the interest payment date,
as the case may be;
. we will issue the notes at 100% of their principal amount;
. holders will not be able to elect to have their notes repaid before the
maturity date;
. we will issue the notes, other than the foreign currency notes, in U.S.
dollars;
. we will issue the notes, other than the foreign currency notes, in fully
registered form and in authorized denominations of $1,000 or any amount
in excess of $1,000 which is an integral multiple of $1,000;
. the principal, premium, and interest, if any, payable at maturity or at
redemption on each note will be paid in immediately available funds when
the note is presented at the corporate trust office of the paying agent;
and
. we will issue the notes as global securities registered in the name of a
nominee of The Depository Trust Company, as depositary. We will refer to
these notes as global notes in this prospectus supplement. We can also
issue the notes in definitive registered form, without coupons, otherwise
known as a certificated note, as described in the applicable pricing
supplement.
The notes can be presented for payment of principal and interest, the
transfer of the notes can be registered and the notes can be exchanged at the
offices that we maintain for this purpose as described under "--Interest and
Principal Payments." However, global notes can be exchanged only in the manner
and to the extent described under the heading "--Book-Entry Notes" below.
The term business day means, and unless the applicable pricing supplement
specifies otherwise, any day that is not a Saturday or Sunday and that is not a
day that banking institutions in New York City are generally authorized or
obligated by law or executive order to close. For LIBOR notes, a business day,
with respect to any payment, is any day that is not a Saturday or Sunday and
that is not a day that banking institutions in New York City are generally
authorized or obligated by law or executive order to close, and is also a
London business day, and with respect to an interest determination date, is a
London business day. "London business day" means any day on which dealings in
United States dollars are transacted in the London interbank market.
The applicable pricing supplement relating to each note will describe the
following:
. whether the note is a senior note or a subordinated note;
. whether the note is being issued at a price other than 100% of its
principal amount;
. the principal amount of the note;
. the date on which the note will be issued;
. the date on which the note will mature;
. whether the note is a fixed rate note, a floating rate note, or a zero
coupon note;
. any additional terms applicable to any foreign currency note with respect
to the payment of principal and any premium or interest for that note;
. the annual rate at which the note will bear interest and the interest
payment date and regular record date, defined under the heading "--
Interest Rates" below, if different from those described below;
. whether the note is an original issue discount note, and if so, any
additional provisions relating to this feature of the note;
. whether the note may be redeemed at our option, and any provisions
relating to redemption of the note;
. whether the note will be represented by a certificated note and any
provisions relating to this feature of the note;
. the authorized denominations of foreign currency notes; and
. any other terms of the note consistent with the provisions of the
applicable indenture.
S-4
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Unless the applicable pricing supplement specifies otherwise, neither
indenture contains provisions specifically designed to protect holders in the
event of a highly leveraged transaction involving USB. Unless the applicable
pricing supplement indicates otherwise, the subordinated note indenture does
not provide for any right of acceleration of the payment of principal of the
series M notes if there is a default in the payment of principal or interest or
in the performance of any covenant or agreement in the series M notes or in the
subordinated note indenture.
Original Issue Discount Notes
We may issue notes as original issue discount notes. An original issue
discount note is a note, including a zero coupon note, offered at a discount
from the principal amount of the note due at its stated maturity, as specified
in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, the amount
payable at acceleration of maturity to the holder of an original issue discount
note will be the sum of:
. the amortized face amount of the note, and
. in the case of an interest-bearing note issued as an original issue
discount note, any accrued but unpaid qualified stated interest payments.
Unless otherwise specified in the applicable pricing supplement, the amount
payable upon redemption to the holder of an original issue discount note will
be the sum of:
. the applicable percentage of the amortized face amount of the note
specified in the applicable pricing supplement, and
. in the case of an interest-bearing note issued as an original issue
discount note, any accrued but unpaid qualified stated interest payments.
For purposes of computing the payments described in the foregoing paragraph,
the amortized face amount of an original issue discount note is equal to the
sum of:
. the issue price of the original issue discount note; and
. .the portion of the difference between the issue price and the principal
amount of the original issue discount note that has been amortized at the
stated yield of the original issue discount note, computed in accordance
with the rules set forth in the Internal Revenue Code, or "Code," and
applicable Treasury regulations, at the date as of which the amortized
face amount is calculated.
In no event can the amortized face amount exceed the principal amount of the
note due at its stated maturity date. As used in this paragraph, issue price
means the principal amount of the original issue discount note due at the
stated maturity of the note, less the original issue discount of the note
specified on its face and in the applicable pricing supplement. The term stated
yield of the original issue discount note means the yield to maturity specified
on the face of the note and in the applicable pricing supplement for the period
from the note's original issue date to its stated maturity date based on its
issue price and its stated redemption price at maturity.
Persons considering the purchase of original issue discount notes should
read the discussion set forth below under the heading "United States Taxation--
United States Holders--Original Issue Discount."
Interest and Principal Payments
Unless the applicable pricing supplement specifies otherwise, we will make
payments of principal, interest owed, and premium, if any, with respect to any
note, in U.S. dollars. Some notes may however be payable in foreign currencies
as specified in the applicable pricing supplement. Currently, U.S. facilities
and systems providing for payment of securities in currencies other than the
U.S. dollar are limited. Accordingly, unless alternative arrangements are made,
we will pay principal, premium, if any, and interest, if any, on notes that are
payable in a foreign currency to an account at a bank outside the United
States, which, in the case of a note payable in euro, will be made by credit or
transfer to a euro account specified by the payee in a country for which the
euro is the lawful currency.
Except as provided under the heading "--Book Entry Notes" below, we will pay
interest to the person in whose name a note, or any predecessor note, is
registered at the close of business on the regular record date next preceding
each interest payment date. Interest payable at maturity or upon redemption
will be payable to the person to whom the principal will be payable.
S-5
<PAGE>
The agent for payment, transfer and exchange of the notes, who will be
referred to in this prospectus supplement as the paying agent, is U.S. Bank
Trust National Association, one of our affiliates, acting through its corporate
trust office in New York City, New York. Unless the applicable pricing
supplement specifies otherwise, we will pay the principal, interest, and
premium, if any, at maturity or redemption in immediately available funds on
presentation of the note at the corporate trust office of the paying agent. But
we may at our option, pay interest on any certificated note, other than
interest at maturity or upon redemption, by mailing a check to the address of
the person or entity entitled to the payment shown on our security register at
the close of business on the regular record date related to the interest
payment date.
Unless the applicable pricing supplement specifies otherwise, holders of
U.S. $10,000,000 or more in aggregate principal amount of certificated notes
will receive payments of interest, other than interest at maturity or upon
redemption, by wire transfer of immediately available funds, if they have given
appropriate wire transfer instructions to the paying agent in writing not later
than the regular record date.
Except as provided under the heading "--Book Entry Notes" below, if the
original issue date of a note is between a regular record date and an interest
payment date, the initial interest payment will be made on the interest payment
date following the next succeeding regular record date. We will make the
interest payment to the registered holder on that next succeeding regular
record date.
We can change interest rates and base rates, as defined below, from time to
time but this change will not affect any note issued or note that we agreed to
issue. Unless the applicable pricing supplement specifies otherwise, the
interest payment dates and the regular record dates for fixed rate notes will
be as described below under the heading "--Fixed Rate Notes" and the interest
payment dates and the regular record dates for floating rate notes will be as
described below under the heading "--Floating Rate Notes."
Interest Rates
General.
The interest rate on the notes will be determined by either:
. in the case of fixed rate notes, a fixed rate; or
. in the case of floating rate notes, a floating rate determined by one or
more base rates, which may be adjusted by any spread and/or spread
multiplier.
A floating rate note may also have either or both, of the following:
. a maximum interest rate limitation, or ceiling, on the rate of interest
which may accrue during any interest period; and
. a minimum interest rate limitation, or floor, on the rate of interest
which may accrue during any interest period.
Each note that bears interest will bear interest from and including its date
of issue or from and including the most recent interest payment date to which
interest has been paid or duly provided:
. at the fixed rate per annum applicable to the related interest period; or
. at the rate per annum determined pursuant to the base rate applicable to
the related interest period or interest periods, in each case as
specified in the note and in the applicable pricing supplement, until the
principal is paid or made available for payment. Interest will be payable
on each interest payment date and at maturity or upon redemption.
The interest rate on a note for any interest period will in no event be
higher than the maximum rate permitted by New York law as this law may be
modified by United States law of general application. Under present New York
law, the maximum rate of interest is 25% per year on a simple interest basis.
This limit may not apply to notes in which $2,500,000 or more has been
invested.
The applicable pricing supplement will specify the following with respect to
each note that bears interest:
. the issue price, interest payment dates and regular record dates;
. for any fixed rate note, the interest rate;
. for any floating rate note:
--the initial interest rate, as defined below;
--the method, which may vary from interest period to interest period, of
calculating the
S-6
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interest rate applicable to each interest period including, if
applicable, the fixed rate per annum applicable to one or more interest
periods;
--the index maturity, which means the period to maturity of any
instrument on which the base rate for any interest period is predicated;
--any spread or spread multiplier, as defined below;
--the interest determination dates, as defined below;
--the interest reset dates, as defined below; and
--any minimum or maximum interest rate limitations;
--whether the note is an original issue discount note; and
--any other terms related to interest on the notes.
Fixed Rate Notes
How Interest Accrues
Each fixed rate note will bear interest from the date of issue at the annual
rate stated on its face and in the applicable pricing supplement. Unless the
applicable pricing supplement specifies otherwise, interest payments for fixed
rate notes will be the amount of interest accrued to, but excluding the
relevant interest payment date.
When Interest Is Paid
Unless the applicable pricing supplement states otherwise, the interest
payment dates for fixed rate notes will be February 1 and August 1 of each year
and at maturity or, if applicable, upon redemption. The regular record dates
for fixed rate notes will be the day, whether or not a business day, fifteen
calendar days preceding each interest payment date.
How Interest Is Calculated
Interest on fixed rate notes will be computed and paid on the basis of a
360-day year of twelve 30-day months.
If a Payment Date Is Not a Business Day
If any interest payment date on a fixed rate note is not a business day, the
interest payment will be made on the next day that is a business day, and no
interest will accrue during the period from and after the scheduled interest
payment date.
Floating Rate Notes
General
Each floating rate note will bear interest at a floating rate determined by
reference to an interest rate basis or formula, which we refer to as the base
rate.
The applicable pricing supplement may designate one or more of the following
base rates as applicable to each floating rate note:
. the commercial paper rate;
. the federal funds rate;
. LIBOR;
. the prime rate;
..the CD rate;
.the treasury rate;
. the CMT rate; or
. one or more other base rates specified in the applicable pricing
supplement.
The interest rate on each floating rate note for each interest period will
be determined by reference to the applicable base rate specified in the
applicable pricing supplement for that interest period, plus or minus the
applicable spread, if any, and/or multiplied by the applicable spread
multiplier, if any.
The spread is the number of basis points, or one-hundredth of a percentage
point, specified in the applicable pricing supplement to be added or subtracted
from the base rate for that floating rate note. For example, if a note bears
interest at LIBOR plus .01% and the calculation agent determines that LIBOR is
5.00% per annum, the note will bear interest at 5.01% per annum until the next
interest reset date. The spread multiplier is the percentage specified in the
applicable pricing supplement to be applied to the base rate for a floating
rate note. For example, if a note bears interest at 90% of LIBOR, and the
calculation agent determines that LIBOR is 5.00% per annum, the note will bear
interest at 4.50% per annum until the next interest reset date.
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When Interest on Floating Rate Notes is Paid
Unless the applicable pricing supplement specifies otherwise and except as
provided below, we will pay interest on floating rate notes on the following
interest payment dates:
. in the case of floating rate notes with a daily, weekly or monthly
interest reset date, on the third Wednesday of each month of each year;
. in the case of floating rate notes with a quarterly interest reset date,
on the third Wednesday of March, June, September and December of each
year;
. in the case of floating rate notes with a semi-annual interest reset
date, on the third Wednesday of the two months of each year specified in
the applicable pricing supplement; and
. in the case of floating rate notes with an annual interest reset date, on
the third Wednesday of the month of each year specified in the applicable
pricing supplement.
We will also pay interest, in the case of all floating rate notes, at maturity
or upon redemption.
Unless the applicable pricing supplement specifies otherwise, the regular
record dates for the floating rate notes will be the day, whether or not a
business day, fifteen calendar days preceding each interest payment date.
If a Payment Date Is Not a Business Day
If any interest payment date for a floating rate note is a day that is not a
business day, the interest payment date for the floating rate note will be
postponed to the next day that is a business day, except that in the case of a
LIBOR note, if that business day is in the next calendar month, the interest
payment date will be the immediately preceding business day.
How Floating Interest Rates Are Reset
The rate of interest on each floating rate note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually, as specified in the applicable
pricing supplement. The date on which the floating rate note is reset is called
the interest reset date.
Unless the applicable pricing supplement specifies otherwise, the interest
reset date will be as follows:
. in the case of floating rate notes which are reset daily, each business
day;
. in the case of floating rate notes, other than treasury rate notes, which
are reset weekly, the Wednesday of each week;
. in the case of treasury rate notes which are reset weekly, the Tuesday of
each week, except if the auction date falls on a Tuesday, then the next
business day, as provided below;
. in the case of floating rate notes which are reset monthly, the third
Wednesday of each month;
. in the case of floating rate notes which are reset quarterly, the third
Wednesday of March, June, September and December of each year;
. in the case of floating rate notes which are reset semi-annually, the
third Wednesday of the two months of each year specified in the
applicable pricing supplement; and
. in the case of floating rate notes which are reset annually, the third
Wednesday of the month of each year specified in the applicable pricing
supplement.
The applicable pricing supplement will indicate the interest rate in effect
from the date of issue to the first interest reset date with respect to a
floating rate note, which we will refer to as the initial interest rate. If any
interest reset date for a floating rate note is a day that is not a business
day, the interest reset date will be postponed to the next day that is a
business day, except that in the case of a LIBOR note, if the next business day
is in the next succeeding calendar month, the interest reset date will be the
immediately preceding business day.
Date Interest Rate Is Determined
Unless the applicable pricing supplement specifies otherwise, the interest
rate determined for any interest determination date will become effective on
the next succeeding interest reset date. The interest determination date is the
date that the calculation agent will refer to, when determining the new
interest rate at which a floating rate will reset.
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Unless the applicable pricing supplement states otherwise, the interest
determination date for any interest reset date will be:
. for commercial paper rate notes, federal funds rate notes, prime rate
notes, CD rate notes, and CMT rate notes, the second business day before
that interest reset date;
. for LIBOR notes, the second London business day before the interest reset
date;
. for treasury rate notes, the day of the week in which the interest reset
date falls and on which treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is normally held on the
following Tuesday, but the auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is held on the preceding Friday,
that Friday will be the interest determination date for the interest reset
date for treasury rate notes occurring in the next week. If an auction falls
on a day that is an interest reset date for a treasury rate note, the interest
reset date will be the following business day.
The interest determination date for a floating rate note, which interest
rate is determined by two or more base rates, will be the latest business day
that is at least two business days prior to the interest reset date for the
floating rate note on which each base rate can be determined.
How Interest On Floating Rate Notes Is Calculated
Interest on floating rate notes will accrue from and including the most
recent interest payment date on which interest is paid or duly provided for,
or, if no interest is paid or duly provided for, the date will be from and
including the issue date or any other date specified in the pricing supplement
on which interest begins to accrue. Interest will accrue to, but excluding,
the next interest payment date, or if earlier, the date on which the principal
is paid or duly made available for payment. Accrued interest for a floating
rate note will be calculated by multiplying the principal amount of the
floating rate note by an accrued interest factor. The accrued interest factor
will be the sum of the interest factors calculated for each day in the period
for which the interest is being paid.
Unless the applicable pricing supplement states otherwise, the interest
factor for each day is computed by dividing the annual interest rate,
expressed as a decimal, applicable to that day:
. by 360, for commercial paper rate notes, federal funds rate notes, LIBOR
notes, prime rate notes, and CD rate notes; or
. by the actual number of days in the year, in the case of treasury rate
notes and CMT rate notes.
Unless the applicable pricing supplement states otherwise, all percentages
resulting from any calculation for the floating rate notes will be rounded, if
necessary, to the nearest one-hundred thousandth of a percentage point, with
five one-millionths of a percentage point rounded upwards. For example,
9.876545% or .09876545, will be rounded to 9.87655%, or .0987655, and
9.876544% or .09876544, will be rounded to 9.87654% or .0987654. All
calculations of the accrued interest factor for any day on floating rate notes
will be rounded, if necessary, to the nearest one hundred-millionth, with five
one-billionths rounded upward, for example, .098765455 being rounded to
.09876546 and .098765454 being rounded to .09876545. All dollar amounts used
in or resulting from any of these calculations will be rounded to the nearest
cent, with one-half cent being rounded upwards.
The interest rate in effect on each day will be:
. if the day is an interest reset date, the interest rate for the interest
determination date related to the interest reset date; or
. if the day is not an interest reset date, the interest rate for the
interest determination date related to the next preceding interest reset
date, subject in either case to any maximum or minimum interest rate
referred to in the applicable pricing supplement.
Unless the applicable pricing supplement specifies otherwise, U.S. Bank
Trust National Association, one of our affiliates, will be the calculation
agent for any issue of floating rate notes. On or before each calculation
date, the calculation agent will determine the interest rate as described
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below and notify the paying agent. The paying agent will determine the accrued
interest factor applicable to the floating rate note. The paying agent will, at
the request of the holder of a floating rate note, provide the interest rate
then in effect and the interest rate that will become effective as a result of
a determination made on the most recent interest determination date for the
floating rate note. The determinations of interest rates made by the
calculation agent are conclusive and binding, and neither the trustee nor the
paying agent have the duty to verify them.
Unless the applicable pricing supplement specifies otherwise, the
calculation date, if applicable, related to any interest determination date on
a floating rate note will be the earlier of:
. the tenth calendar day after the interest determination date, or, if that
day is not a business day, the following business day; and
. the business day before the applicable interest payment date, maturity
date or redemption date, as the case may be.
Base Rates
Commercial Paper Rate. Commercial paper rate notes will bear interest at the
interest rates, calculated with reference to the commercial paper rate and the
spread and/or spread multiplier, if any, specified in the commercial paper rate
notes and in the applicable pricing supplement. Commercial paper rate notes
will also be subject to the minimum and the maximum interest rate, if any.
Unless the applicable pricing supplement specifies otherwise, commercial
paper rate means, for any commercial paper interest determination date, the
money market yield, calculated as described below, of the rate on that date for
commercial paper having the index maturity specified in the applicable pricing
supplement as published in "Statistical Release H.15(519), Selected Interest
Rates" or any successor publication of the Board of Governors of the Federal
Reserve System, which we will refer to as H.15(519), under the heading
"Commercial Paper--Nonfinancial."
Unless the applicable pricing supplement states otherwise, the following
procedures will be followed if the commercial paper rate cannot be determined
as described above:
. If the rate is not published by 3:00 p.m., New York City time, on the
calculation date relating to the commercial paper interest determination
date, then the commercial paper rate will be the money market yield of
the rate on the commercial paper interest determination date for
commercial paper having the index maturity specified in the applicable
pricing supplement as set forth in the daily update of H.15(519),
available through the worldwide website of the Board of Governors of the
Federal Reserve System at http://www.bog.frb.fed.us/releases/ h15/update,
or any successor site or publication, which we will refer to as the H.15
Daily Update, under the heading "Commercial Paper--Nonfinancial."
. If by 3:00 p.m., New York City time, on the calculation date, the rate is
not published in either H.15(519) or the H.15 Daily Update, then the
calculation agent shall determine the commercial paper rate to be the
money market yield of the arithmetic mean of the offered rates as of
11:00 a.m., New York City time, on the commercial paper interest
determination date of three leading dealers of commercial paper in New
York City, selected by the calculation agent, after consultation with us,
for commercial paper having the index maturity specified in the
applicable pricing supplement placed for an industrial issuer whose bond
rating is "AA" or the equivalent, from a nationally recognized
statistical rating agency.
. If the dealers selected by the calculation agent are not quoting as
described in the previous bullet point, the commercial paper rate in
effect immediately before the commercial paper interest determination
date will not change and will remain the commercial paper rate in effect
on the commercial paper interest determination date.
Money market yield is a yield calculated under the following formula:
Money Market Yield = D X 360
X 100
360 - (D X M)
"D" refers to the applicable annual rate for commercial paper quoted on a
bank discount basis and expressed as a decimal and "M" refers to the
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actual number of days in the interest period for which the interest is being
calculated.
Federal Funds Rate. Federal funds rate notes will bear interest at the
interest rates, calculated with reference to the federal funds rate and the
spread and/or spread multiplier, if any, specified in the federal funds rate
notes and in the applicable pricing supplement. Federal funds rate notes will
be subject to the minimum and the maximum interest rate, if any.
Unless the applicable pricing supplement specifies otherwise, federal funds
rate means, for any federal funds interest determination date, the rate on
that date for federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)" as displayed on Bridge Telerate, Inc., or any
successor service, on page 120, or any other page as may replace the
applicable page on that service, which is commonly referred to as "Telerate
Page 120."
Unless the applicable pricing supplement states otherwise, the following
procedures will be followed if the federal funds rate cannot be determined as
described above:
. If the above rate is not published by 3:00 p.m., New York City time, on
the calculation date for the federal funds interest determination date,
the federal funds rate will be the rate published in H.15 Daily Update
under the heading "Federal Funds (Effective)."
. If neither of the above rates are published by 3:00 p.m., New York City
time, on the calculation date for the federal funds interest
determination date, the calculation agent will determine the federal
funds rate to be the arithmetic mean of the rates for the last
transaction in overnight U.S. dollar federal funds arranged by three
leading dealers of federal funds transactions in New York City, selected
by the calculation agent, after consultation with us, as of 3:00 p.m.,
New York City time, on the federal funds interest determination date.
. If the dealers selected by the calculation agent are not quoting as
described in the previous bullet point, the federal funds rate in effect
immediately before the federal funds interest determination date will not
change and will remain the federal funds rate in effect on the federal
funds interest determination date.
LIBOR. LIBOR notes will bear interest at the interest rates, calculated
with reference to the London interbank offered rate, commonly referred to as
LIBOR, and the spread and/or spread multiplier, if any, specified on the face
of the LIBOR notes and in the applicable pricing supplement. LIBOR notes will
be subject to the minimum and the maximum interest rate, if any.
Unless otherwise specified in the applicable pricing supplement, the
calculation agent will determine LIBOR for each interest determination date
relating to a LIBOR note as follows:
. For any LIBOR interest determination date, LIBOR will be the rate for
deposits in U.S. dollars having the index maturity specified in the
applicable pricing supplement, on the second London business day before
the LIBOR interest reset date, that is displayed on Bridge Telerate,
Inc., or any other successor service, as of 11:00 a.m., London time, on
page 3750, or any other page as may replace the applicable page on that
service, which is commonly referred to as "Telerate Page 3750."
. If no rate appears, the calculation agent will request that the principal
London offices of each of four major banks in the London interbank
market, selected by the calculation agent, after consultation with us, at
approximately 11:00 a.m. London time on the LIBOR interest determination
date, provide the calculation agent with their offered quotation for
deposits in U.S. dollars having the index maturity designated in the
applicable pricing supplement on the second London business day before
the LIBOR interest reset date, and in a principal amount not less than
U.S. $1,000,000 that in the judgment of the calculation agent is
representative of a single transaction in the market at that time. If at
least two quotations are provided, LIBOR for the LIBOR interest
determination date will be the arithmetic mean of these quotations.
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. If fewer than two quotations are provided, LIBOR will be determined for
the applicable LIBOR interest determination date as the arithmetic mean
of the rates quoted at approximately 11:00 a.m. New York City time, by
three major banks in New York City selected by the calculation agent,
after consultation with us, for loans in U.S. dollars to leading European
banks, having the index maturity specified in the applicable pricing
supplement, on the second London business day before the LIBOR interest
reset date, and in a principal amount of not less than U.S. $1,000,000
that, in the judgment of the calculation agent is representative of a
single transaction in the market at that time.
. If the banks so selected by the calculation agent are not quoting as
described in the previous bullet point, LIBOR in effect immediately
before the LIBOR interest determination date will not change and will
remain the LIBOR in effect on such LIBOR interest determination date.
Prime Rate. Prime rate notes will bear interest at the interest rates,
calculated with reference to the prime rate and the spread and/or spread
multiplier, if any, specified in the prime rate notes and in the applicable
pricing supplement. Prime rate notes will be subject to the minimum and the
maximum interest rate, if any.
Unless the applicable pricing supplement specifies otherwise, prime rate
means, for any interest determination date, the rate on that date as published
in H.15(519) under the heading "Bank Prime Loan."
Unless otherwise specified in the applicable pricing supplement, the
following procedures will be followed if the prime rate cannot be determined
as described above:
. If the rate is not published prior to 9:00 a.m., New York City time, on
the calculation date, then the prime rate will be the rate on that prime
interest determination date as published in the H.15 Daily Update under
the heading "Bank Prime Loan."
. If the rate is not published prior to 3:00 p.m., New York City time, on
the calculation date in either H.15(519) or the H.15 Daily Update, then
the calculation agent will determine the prime rate to be the arithmetic
mean of the prime rates quoted on the basis of the actual number of days
in the year divided by 360 as of the close of business on that interest
determination date by at least three major banks in New York City
selected by the calculation agent, after consultation with us.
. If the banks selected are not quoting as mentioned in the previous
bullet, the prime rate will remain the prime rate for the immediately
preceding interest reset period, or if there was no interest reset
period, the rate of interest payable will be the initial interest rate.
CD Rate. CD Rate Notes will bear interest at the interest rates, calculated
with reference to the CD rate and the spread and/or spread multiplier, if any,
specified in the CD rate notes and in the applicable pricing supplement. CD
rate notes will be subject to the minimum and the maximum interest rate, if
any.
Unless the applicable pricing supplement specifies otherwise, CD rate
means, for any CD interest determination date, the rate on that date for
negotiable certificates of deposit having the index maturity stated in the
applicable pricing supplement as this rate is published in H.15(519) under the
heading "CD's (secondary market)."
Unless otherwise specified in the applicable pricing supplement, the
following procedures will be followed if the CD rate cannot be determined as
described above:
. If by 3:00 p.m., New York City time, on the calculation date related to
the CD interest determination date, this rate is not published in
H.15(519), the CD rate will be the rate on the CD interest determination
date for negotiable certificates of deposit of the index maturity
specified in the applicable pricing supplement and published in the H.15
Daily Update under the heading "CD (secondary market)."
. If by 3:00 p.m., New York City time, on the calculation date, the rate is
not published in either H.15(519) or the H.15 Daily Update, the
calculation agent will calculate the CD
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rate to be the arithmetic mean of the secondary market offered rates as of
3:00 p.m., New York City time, on the CD interest determination date, of
three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in New York City, selected by the calculation agent, after
consultation with us, for negotiable certificates of deposit of major
United States money market banks which are rated A-1+ by Standard & Poor's
Ratings Group and P-1 by Moody's Investors Service, and with a remaining
maturity closest to the index maturity
specified in the applicable pricing supplement in denominations of
$5,000,000.
. If the dealers selected by the calculation agent are not quoting as
described in the previous bullet point, the CD rate in effect immediately
before that CD interest determination date will not change and will
remain the CD rate in effect on that CD interest determination date.
Treasury Rate. Treasury rate notes will bear interest at the interest rates,
calculated with reference to the treasury rate and the spread and/or spread
multiplier, if any, specified in the treasury rate notes and in the applicable
pricing supplement. Treasury rate notes will be subject to the minimum and the
maximum interest rate, if any.
Unless the applicable pricing supplement specifies otherwise, treasury rate
means for any treasury interest determination date, the rate for the most
recent auction of direct obligations of the United States, commonly referred to
as treasury bills, having the index maturity specified in the applicable
pricing supplement as this rate is displayed on Bridge Telerate, Inc., or any
successor service under the caption "Investment Rate:"
. on page 56 or 57, or any other page as may replace the applicable page on
that service, which is commonly referred to as "Telerate Page 56" or
"Telerate Page 57," as the case may be; or
. if not published on Bridge Telerate, Inc. by 3:00 p.m., New York City
time, on the calculation date for the treasury interest determination
date, the rate published in H.15 Daily Update under the heading "U.S.
Government Securities/ Treasury Bills/Auction High."
Unless the applicable pricing supplement states otherwise, the following
procedures will be followed if the treasury rate cannot be determined as
described above:
. If not published in H.15(519) by 3:00 p.m., New York City time, on the
calculation date for the treasury interest determination date, the
treasury rate will be the bond equivalent yield of the auction rate of
the applicable treasury bills on the treasury interest determination date
as announced by the U.S. Department of the Treasury.
. If by 3:00 p.m., New York City time on the calculation date, the results
of the auction of treasury bills having the index maturity designated in
the applicable pricing supplement are not otherwise as provided above or
if no auction is held in a particular week, then the calculation agent
will calculate the treasury rate to be a yield to maturity (expressed as
a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of 3:30 p.m., New York City time, on the
treasury interest determination date, of three leading primary U.S.
government securities dealers selected by the calculation agent, after
consultation with us, for the issue of treasury bills with a remaining
maturity closest to the index maturity designated in the applicable
pricing supplement;
. If the dealers selected by the calculation agent are not quoting as
described in the previous bullet point, the treasury rate in effect
immediately before the treasury determination date will not change and
will remain the treasury rate in effect on that treasury interest
determination date.
CMT Rate. CMT rate notes will bear interest at the interest rates calculated
with reference to the CMT rate and the spread and/or spread multiplier, if any,
specified in the CMT rate notes and in the applicable pricing supplement. CMT
rate notes will be subject to the minimum and the maximum interest rate, if
any.
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Unless the applicable pricing supplement specifies otherwise, CMT rate
means, for any CMT interest determination date, the rate reported on Bridge
Telerate, Inc., or any successor service, under the heading "Daily Treasury
Constant Maturities and Money Markets/Federal Reserve Board Release H.15
Monday's Approx. 3:45 p.m. EDT," on page 7051, or any other page as may replace
the applicable page on that service, which is commonly referred to as "Telerate
Page 7051."
The following procedures will be followed if the CMT rate cannot be
determined as described above:
. If the rate is not available by 3:00 p.m., New York City time, on the
applicable calculation date, the calculation agent will calculate the CMT
rate for the CMT interest determination date which will be the bond
equivalent yield to maturity of the arithmetic mean of the secondary
market bid rates, as of 3:00 p.m., New York City time, on the applicable
CMT interest determination date, reported, according to their written
records, by three leading primary U.S. government securities dealers in
New York City selected by the calculation agent, after consultation with
us, for the most recently issued direct noncallable fixed rate treasury
bills with an original maturity approximately equal to the applicable
index maturity;
. If fewer than three reference dealers selected by the calculation agent
are quoting as described in the previous bullet point, the CMT rate in
effect immediately before the CMT interest determination date will not
change and will remain the CMT rate in effect on that CMT interest
determination date.
Zero Coupon Notes
We may issue notes in the form of original issue discount notes that do not
provide any periodic payments of interest. The applicable pricing supplement
will provide the specific terms of any zero coupon notes.
Book-Entry Notes
At the time of issuance, one or more global notes will represent all fixed
rate notes of the same series, having the same interest rate, if any, issue
date, redemption date, maturity date, and other terms, if any.
Except as set forth in the attached prospectus under "Book-Entry Issuance,"
you may not exchange book-entry notes or interests in book-entry notes for
certificated notes.
Each global note will be deposited with, or on behalf of, The Depositary
Trust Company, as depositary, and registered in the name of a nominee of the
depositary. These global notes name the depositary or its nominee as the owner
of the notes. The depositary maintains a computerized system that will reflect
the interests held by its participants in the global notes. An investor's
beneficial interest will be reflected in the records of the depositary's direct
or indirect participants through an account maintained by the investor with its
broker/dealer, bank, trust company or other representative. A further
description of the depositary's procedures for global notes representing book-
entry notes is set forth in the attached prospectus under "Book-Entry
Issuance." The depositary has confirmed to us, the agents and each trustee who
intend to follow these procedures.
Redemption
The applicable pricing supplement will indicate the terms of our option to
redeem the notes prior to maturity. Unless the pricing supplement provides
otherwise, in the case of notes other than zero coupon notes or certain
interest bearing notes issued as original issue discount notes, the redemption
price will be a specified percentage of the principal amount of the note,
together with accrued interest, if any, to the date of redemption. Unless the
pricing supplement provides otherwise, in the case of zero coupon notes or
certain interest bearing notes issued as original issue discount notes, the
redemption price will be a specified percentage of the amortized face amount of
the note, together with accrued interest, if any, to the date of redemption.
Unless the applicable pricing supplement specifies otherwise, we may redeem any
of the notes which are redeemable and remain outstanding either in whole or in
part, at any time, with 30 to 60 days' notice mailed by us to the registered
holder of the note. Unless the applicable pricing supplement specifies
otherwise, we will not be obligated to redeem or purchase notes subject to a
sinking fund or analogous provision or at the option of any holder. If less
than all of the notes
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with similar terms are to be redeemed, the trustee will select the notes to be
redeemed by a method that the trustee deems fair and appropriate. If we redeem
less than all of the principal of a note prior to maturity, we will issue a new
note with similar terms and of an authorized denomination representing the
unredeemed portion of the note to the registered holder.
Foreign Currency Notes
If we issue notes denominated in a currency other than U.S. dollars or euro
we will not sell those notes in, or to residents of the country that issues the
currency in which those notes are denominated. This prospectus supplement is
directed to prospective purchasers who are U.S. residents. Prospective
purchasers who are residents of countries other than the United States should
consult their own financial and legal advisors with regard to the purchase of
the notes, and should review the section entitled "Foreign Currency Risks" in
the attached prospectus.
UNITED STATES TAXATION--UNITED STATES HOLDERS
The following is a summary of the principal federal income tax consequences
to a U.S. holder, which for purposes of this discussion refers to a holder of
notes who is:
.a citizen or resident of the United States;
. a corporation, partnership or other entity treated as a corporation or a
partnership for U.S. federal income tax purposes created or organized in
or under the laws of the United States, any of its states or the District
of Columbia;
. an estate whose income is subject to U.S. federal income tax regardless
of its source; or
. a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust.
Notwithstanding the preceding sentence, to the extent provided in applicable
regulations, certain trusts in existence on August 20, 1996, and treated as
U.S. persons prior to that date, that elect to continue to be treated as U.S.
persons will also be U.S. holders. This summary is based on the Code and
existing and proposed Treasury regulations, revenue rulings and judicial
decisions.
The following summary deals only with notes held as capital assets by
initial purchasers who are U.S. holders and not with special classes of
holders, such as dealers in securities or currencies, financial institutions,
life insurance companies, persons holding notes as a hedge against or which are
hedged against currency risks and persons whose functional currency is not the
U.S. dollar. A person considering the purchase of notes should consult his or
her own tax advisor concerning these matters and concerning tax treatment under
foreign, state and local tax laws and regulations.
General
As a general rule, interest paid or accrued on the notes, as well as
original issue discount notes, if any, will be treated as ordinary income to
U.S. holders. A U.S. holder using the accrual method of accounting for federal
income tax purposes must include interest paid or accrued on the notes in
ordinary income as the interest accrues, while a U.S. holder using the cash
receipts and disbursements method of accounting for federal income tax purposes
must include interest in ordinary income when payments are received or made
available for receipt by the holder, except as described below under the
heading "Original Issue Discount."
In the event that any of the notes are determined to be applicable high
yield discount obligations under the provisions of the Code, additional
information regarding the federal income tax consequences associated with those
notes will be provided as part of the pricing supplement for those notes.
Original Issue Discount
The notes may be issued with original issue discount. In general, in the
hands of the original holder of a note, original issue discount is the
difference between the stated redemption price at maturity of the note and its
issue price. The original issue discount with respect to a note will be
considered to be zero if it is less than one quarter of one percentage point of
the note's stated redemption price at maturity multiplied by the number of
complete years from the date of issue of the note to
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its stated maturity date. This amount is referred to in this discussion as de
minimis OID. In addition, special rules described below apply to notes having a
fixed maturity date not more than one year from the date of issue.
The stated redemption price at maturity of a note generally will be equal to
the sum of all payments, whether principal or interest, to be made with respect
to the note other than qualified stated interest payments. Pursuant to
applicable regulations, qualified stated interest payments are interest
payments based on a single fixed rate of interest or, under certain
circumstances, a variable rate tied to an objective index, that are actually
and unconditionally payable at fixed periodic intervals of one year or less
during the entire term of the note. In general, the issue price of a note is
the initial offering price to the public at which a substantial amount of notes
are sold, ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers.
Under applicable regulations, if a note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
the note (for example, notes with teaser rates or interest holidays), and if
the greater of either the resulting foregone interest on the note or any true
discount on the note (i.e., the excess of the note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the note would be treated as original issue discount rather
than qualified stated interest.
It is possible that notes which are not denominated as original issue
discount notes may nevertheless be treated as issued at an original issue
discount for federal income tax purposes. For example, floating rate notes
providing for one or more qualified floating rates of interest, a single fixed
rate and one or more qualified floating rates, a single rate based on one or
more qualified floating rates or a single rate based on the yield of actively
traded personal property (referred to as an objective rate), or a single fixed
rate and a single objective rate that is a qualified inverse floating rate will
also be deemed to have original issue discount unless the interest is
unconditionally payable at least annually during the term of the note at a
single qualified floating rate or a single objective rate within the meaning of
the regulations.
If a floating rate note provides for two or more qualified floating rates
that can reasonably be expected to have approximately the same values
throughout the term of the note, the qualified floating rates together
constitute a single qualified floating rate. If interest on a debt instrument
is stated at a fixed rate for an initial period of one year or less followed by
a variable rate that is either a qualified floating rate or an objective rate
for a subsequent period, and the value of the variable rate on the issue date
is intended to approximate the fixed rate, the fixed rate and the variable rate
together constitute a single qualified floating rate or objective rate. Two or
more rates will be conclusively presumed to meet the requirements of the
preceding sentences if the values of the applicable rates on the issue date are
within 1/4 of 1 percent of each other.
Special tax considerations, including possible original issue discount, may
arise with respect to floating rate notes providing for:
. one base rate followed by one or more base rates,
. a single fixed rate followed by a qualified floating rate, or
. a spread multiplier.
Purchasers of floating rate notes with any of these features should
carefully examine the applicable pricing supplement and should consult their
tax advisors with respect to that feature since the tax consequences will
depend, in part, on the particular terms of the purchased note. Special rules
may apply if a floating rate note bears interest at an objective rate and it is
reasonably expected that the average value of the rate during the first half of
the note's term will be either significantly less than or significantly greater
than the average value of the rate during the final half of the note's term.
Special rules may also apply if a floating rate note is subject to a cap,
floor, governor or similar restriction that is not fixed throughout the term of
the note and is reasonably expected as of the issue date to cause the yield on
the note to be significantly less or more than the expected yield determined
without the restriction.
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In the case of a note issued with de minimis OID, the U.S. holders generally
must include the de minimis OID in income as stated principal payments on the
notes are made in proportion to the amount of principal paid. Any amount of de
minimis OID that has been included in income will be treated as capital gain.
In the case of notes that are determined to be issued with original issue
discount for federal income tax purposes, a U.S. holder must generally include
the original issue discount in ordinary income for federal income tax purposes
as it accrues in advance of the receipt of any cash attributable to the income.
The amount of original issue discount, if any, required to be included in a
U.S. holder's ordinary income for federal income tax purposes in any taxable
year will be computed in accordance with Section 1272(a) of the Code and
applicable regulations. Under these rules, original issue discount accrues on a
daily basis under a constant yield method that takes into account the
compounding of interest. The daily portions of original issue discount are
determined by allocating to each day in any accrual period a pro rata portion
of the original issue discount for that period.
Accrual periods may be of any length and may vary in length over the term of
the notes, provided that each accrual period is not longer than one year and
each scheduled payment of principal or interest occurs either on the final day
of an accrual period or on the first day of an accrual period. Original issue
discount for any accrual period will be the excess of:
. the product of the note's adjusted issue price at the beginning of the
accrual period and its yield to maturity over
. any qualified stated interest payments for that accrual period.
The adjusted issue price of a note at the start of any accrual period is the
sum of the issue price and the accrued original issue discount for each prior
accrual period (determined without regard to the amortization of any
acquisition or bond premium, as described below), reduced by any payments made
on the note, other than qualified stated interest, on or before the first day
of the accrual period. One effect of this method is that U.S. holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
In the case of an original issue discount note that is a floating rate note,
both the yield to maturity and qualified stated interest will be determined
solely for purposes of calculating the accrual of original issue discount as
though the note will bear interest in all periods at a fixed rate generally
equal to the rate that would be applicable to interest payments on the note on
its date of issue or, in the case of certain floating rate notes, the rate that
reflects the yield to maturity that is reasonably expected for the note.
Additional rules may apply if interest on a floating rate note is based on more
than one base rate. Persons considering the purchase of floating rate notes
should carefully examine the applicable pricing supplement and should consult
their own tax advisors regarding the U.S. federal income tax consequences of
the ownership and disposition of these notes.
If a floating rate note does not qualify as a variable rate debt instrument
under the original issue discount regulations, then the floating rate note
would be treated as a contingent payment debt instrument. In general,
regulations applicable to contingent payment debt instruments may cause the
timing and character of income, gain or loss reported on a contingent payment
debt instrument to differ substantially from the timing and character of
income, gain or loss reported on a contingent payment debt instrument under
general principles of current U.S. federal income tax law. Specifically, these
regulations may require the U.S. holders of the instrument to include future
contingent and non-contingent interest payments in income as the interest
accrues based upon a projected payment schedule. Moreover, under these
regulations, any gain recognized by a U.S. holder on the sale, exchange, or
retirement of a contingent payment debt instrument may be treated as ordinary
income and all or a portion of any loss realized may be treated as ordinary
loss as opposed to capital loss, depending upon the circumstances. The proper
U.S. federal income tax treatment of floating rate notes that are treated as
contingent payment debt instruments will be more fully described in the
applicable pricing supplement. Furthermore, any other special U.S. federal
income tax considerations, not otherwise discussed in this prospectus
supplement, which are applicable to any particular issue of notes will be
discussed in the applicable pricing supplement.
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Under applicable regulations, a holder may elect to include in gross income
all interest that accrues on a note (including stated interest, acquisition
discount, original issue discount, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium) in accordance with the constant yield method
described above, taking into account the compounding of interest. The election
may only be made during the taxable year in which the U.S. holder acquires the
note, and may not be revoked without the consent of the IRS. U.S. holders
should consult their own tax advisors about this election.
The original issue discount provisions described above do not apply to
short-term notes having a fixed maturity date not more than one year from the
date of issue. Under applicable regulations, this type of short-term note will
be treated as having been issued at an original issue discount equal to the
excess of the total principal and interest payments on the note over its issue
price. An individual or other holder using the cash receipts and disbursements
method of tax accounting will not be required to include original issue
discount on the short-term note in ordinary income for federal income tax
purposes on a daily basis unless the holder elects to do so. Holders of short-
term notes who report income under the accrual method of tax accounting and
certain other holders are required to include original issue discount in income
on a daily basis pursuant to a straight-line method, unless these holders make
an election to accrue original issue discount under the constant yield method
described above by taking into account daily compounding. In the case of
holders of short-term notes not required and not electing to include original
issue discount in income currently, any gain realized on the sale, exchange or
maturity of the short-term notes will be ordinary income to the extent of the
original issue discount accrued on a straight-line basis (or, if elected on a
constant yield method, based on daily compounding), reduced by any interest
received, to the date of sale, exchange or maturity. Holders of short-term
notes not required and not electing to include the original issue discount in
income currently will be required to defer deductions for interest on
indebtedness incurred or continued to purchase or carry the short-term notes in
an amount not exceeding the deferred income until the deferred income is
realized.
The regulations contain aggregation rules stating that in certain
circumstances if more than one type of note is issued as part of the same
issuance of securities to a single holder, some or all of those notes may be
treated together as a single debt instrument with a single issue price,
maturity date, yield to maturity and stated redemption price at maturity for
purposes of calculating and accruing any original issue discount. Unless
otherwise provided in the related pricing supplement, we do not expect to treat
any of the notes as being subject to the aggregation rules for purposes of
computing original issue discount.
Optional Redemption
Under applicable regulations, if we have an option to redeem a note prior to
its stated maturity date, this option will be presumed to be exercised if, by
utilizing any date on which the note may be redeemed as the maturity date and
the amount payable on that date in accordance with the terms of the note as the
stated redemption price at maturity, the yield on the note would be lower than
its yield to stated maturity. If this option is not in fact exercised when
presumed to be exercised, the note would be treated solely for original issue
discount purposes as if it were redeemed, and a new note were issued, on the
presumed exercise date for an amount equal to the note's adjusted issue price
on that date.
Market Discount
A note (other than a short-term note with a fixed maturity date not more
than one year from the issue date) will be treated as issued at a market
discount if the amount for which a U.S. holder purchased the note is less than
the note's stated redemption price at maturity or, in the case of a note issued
with original issue discount, the note's original issue price plus any accrued
original issue discount, unless, in either case, this difference is less than a
specified de minimis amount.
In general, any partial payment of principal or any gain recognized on the
maturity or disposition of a market discount note will be treated as ordinary
income to the extent that the gain does not exceed the accrued market discount
on the note.
If the note is disposed of in a nontaxable transaction (other than as
provided in Code Section
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1276(c) and (d)), accrued market discount will be includible as ordinary income
to the U.S. holder as if the holder had sold the note at its then fair market
value. Generally, the accrued market discount will be the total market discount
on a note multiplied by a fraction, the numerator of which is the number of
days the U.S. holder held the note and the denominator of which is the number
of days from the date the U.S. holder acquired the note until its maturity
date. A U.S. holder may elect, however, to determine accrued market discount
under the constant-yield method.
Limitations imposed by the Code that are intended to match deductions with
the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
note with accrued market discount. A U.S. holder may elect to include market
discount in gross income as it accrues, and a U.S. holder who makes this
election is exempt from these limitations. An election to include market
discount in income currently, once made, applies to all market discount
obligations acquired during or after the first taxable year to which the
election applies and may not be revoked without the consent of the IRS. The
adjusted basis of a note subject to this election will be increased to reflect
market discount included in income, thereby reducing any gain or increasing any
loss on a sale or taxable disposition.
Acquisition Premium; Amortizable Bond Premium
A U.S. holder that purchases a note for an amount that is greater than its
adjusted issue price but equal to or less than the sum of all amounts payable
on the note after the purchase date other than payments of qualified stated
interest will be considered to have purchased the note at an acquisition
premium. Under the acquisition premium rules, the amount of original issue
discount that the holder must include in its gross income with respect to the
note for any taxable year will be reduced by the portion of acquisition premium
properly allocable to that year.
If a U.S. holder purchases a note for an amount in excess of the amount
payable at maturity, the U.S. holder will be considered to have purchased the
note with amortizable bond premium equal in amount to that excess, and may
elect to amortize this premium over the remaining term of the note, based on
the U.S. holder's yield to maturity with respect to the note as determined
under the bond premium rules. A U.S. holder may generally use the amortizable
bond premium allocable to an accrual period to offset qualified stated interest
required to be included in the U.S. holder's income with respect to the note in
that accrual period. Under applicable regulations, if the amortizable bond
premium allocable to an accrual period exceeds the amount of qualified stated
interest allocable to the accrual period, the excess would be allowed as a
deduction for the accrual period, but only to the extent of the U.S. holder's
prior interest inclusions on the note. Any excess is generally carried forward
and allocable to the next accrual period. A U.S. holder who elects to amortize
bond premium must reduce his tax basis in the note as described below under
"Sale, Exchange or Retirement of Notes." An election to amortize bond premium
applies to all taxable debt obligations held by the U.S. holder on or after the
beginning of the first taxable year to which the election applies and may be
revoked only with the consent of the IRS. Applicable regulations provide
limited automatic consent for a U.S. holder to change its method of accounting
for bond premium to the constant yield method if the change is made for the
first taxable year (by a statement on the relevant return) for which the U.S.
holder must account for a bond under those regulations.
If a U.S. holder makes a constant yield election for a note with amortizable
bond premium (or market discount), the holder will generally be deemed to make
the election described above to amortize bond premium (or accrue market
discount) for all of the holder's debt instruments with amortizable bond
premium (or market discount). This election may be revoked only with the
permission of the IRS.
Sale, Exchange or Retirement of Notes
Upon the sale, exchange, retirement or other disposition of a note, a U.S.
holder will recognize gain or loss equal to the difference between the amount
realized from the sale, exchange, retirement or other disposition and the
holder's adjusted basis in the note or applicable portion of the adjusted
basis. The holder's adjusted basis generally will equal the cost of the note to
the holder, increased by any original issue discount and market discount
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includible in the holder's ordinary income with respect to the note and reduced
by any principal payments on the note previously received by the holder
(including any other payments on the note that are not qualified stated
interest payments) and by any amortizable bond premium used to offset qualified
stated interest and certain other amortizable bond premium allowed as a
deduction under the regulations described above under the heading "Acquisition
Premium; Amortizable Bond Premium." Except as discussed above under the heading
"Original Issue Discount" with respect to short-term notes and as discussed
below under the heading "Foreign Currency Notes," or to the extent cash
received is attributable to accrued qualified stated interest, any gain or loss
recognized upon a sale, exchange, retirement or other disposition of a note
will be capital gain or loss and will be long-term capital gain or loss if the
note was held for more than one year.
Withholding Taxes and Reporting Requirements
For each calendar year in which the notes are outstanding, we will report to
U.S. holders and the IRS interest payments, accrual of original issue discount
and payments of principal and any premium with respect to a note to the extent
required by the Code. These amounts will ordinarily not be subject to
withholding of U.S. federal income tax. However, a backup withholding tax at a
rate of 31% will apply to the payments if a U.S. holder fails to supply us or
our agent with the holder's taxpayer identification number or to report all
interest and dividends required to be shown on its federal income tax returns.
FOREIGN CURRENCY NOTES
The following summary relates to notes that are denominated in a currency or
currency unit other than the U.S. dollar. For purposes of this discussion,
these notes are referred to as foreign currency notes.
A U.S. holder who uses the cash method of accounting and who receives
interest, other than original issue discount, in a foreign currency with
respect to a foreign currency note will be required to include in income the
U.S. dollar value of the interest received determined on the date of receipt,
regardless of whether the interest payment is in fact converted to U.S. dollars
at that time. This U.S. dollar value will be the U.S. holder's tax basis in the
foreign currency.
To the extent the above paragraph does not apply, a U.S. holder who uses the
cash method of accounting and accrues original issue discount, or who uses the
accrual method of accounting will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue
discount, but reduced by amortizable bond premium to the extent applicable)
that has accrued and is otherwise required to be taken into account with
respect to a foreign currency note during an accrual period.
The U.S. dollar value of this accrued income will be determined by
translating the income at the average rate of exchange for the accrual period
or, with respect to an accrual period that spans two taxable years, at the
average rate for the partial period within each taxable year. The U.S. holder
will recognize ordinary income or loss with respect to accrued interest income
on the date the income is actually received. The amount of ordinary income or
loss recognized will equal the difference between the U.S. dollar value of the
foreign currency payment received (determined on the date the payment is
received) in respect of the accrual period and the U.S. dollar value of
interest income that has accrued during the accrual period (as determined
above).
A U.S. holder may elect to translate interest income (including original
issue discount) into U.S. dollars at the spot rate on the last day of the
interest accrual period (or, in the case of a partial accrual period, the spot
rate on the last day of the taxable year) or, if the date of receipt is within
five business days of the last day of the interest accrual period, the spot
rate on the date of receipt. A U.S. holder that makes this election must apply
it consistently to all debt instruments from year to year and cannot change the
election without the consent of the IRS. A U.S. holder should consult a tax
advisor before making this election.
Original issue discount and amortizable bond premium on a foreign currency
note are to be determined in the relevant foreign currency.
The amount of market discount on foreign currency notes includible in income
will generally be determined by translating the market discount determined in
the foreign currency into U.S. dollars
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at the spot rate on the date the foreign currency note is retired or otherwise
disposed of. If the U.S. holder has elected to accrue market discount
currently, then the amount which accrues is determined in the foreign currency
and then translated into U.S. dollars on the basis of the average exchange
rate in effect during the accrual period. A U.S. holder will recognize
exchange gain or loss with respect to market discount which is accrued
currently using the approach applicable to the accrual of interest income as
described above.
Any loss realized on the sale, exchange or retirement of a foreign currency
note with amortizable bond premium by a U.S. holder who has not elected to
amortize the bond premium under Section 171 of the Code will be a capital loss
to the extent of the bond premium. If an election to amortize is made,
amortizable bond premium taken into account under the applicable rules
described above under "Acquisition Premium; Amortizable Bond Premium" will
reduce interest income in units of the relevant foreign currency. Exchange
gain or loss is realized on the amortized bond premium with respect to any
period by treating the bond premium amortized in that period as a return of
principal.
A U.S. holder's tax basis in a foreign currency note, and the amount of any
subsequent adjustment to the holder's tax basis, will be the U.S. dollar value
of the foreign currency amount paid for the foreign currency note, or of the
foreign currency amount of the adjustment, determined on the date of the
purchase or adjustment. A U.S. holder who purchases a foreign currency note
with previously owned foreign currency will recognize ordinary income or loss
in an amount equal to the difference, if any, between the U.S. holder's tax
basis in the foreign currency and the U.S. dollar fair market value of the
foreign currency note on the date of purchase.
Gain or loss realized on the sale, exchange or retirement of a foreign
currency note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be treated as interest income
or expense. Gain or loss attributable to fluctuations in exchange rates will
equal the difference between:
. the U.S. dollar value of the foreign currency principal amount of the
note as determined pursuant to Code Section 988 and, for accrual basis
U.S. holders, any payment with respect to accrued interest, determined on
the date the payment is received or the note is disposed of, and
. the U.S. dollar value of the foreign currency principal amount of the
note, determined on the date the U.S. holder acquired the note, and, for
accrual basis U.S. holders, the U.S. dollar value of the accrued interest
received, determined by translating the interest at the average exchange
rate for the accrual period or at a spot rate as described above.
This foreign currency gain or loss will be recognized only to the extent of
the total gain or loss realized by a U.S. holder on the sale, exchange or
retirement of the foreign currency note. The source of foreign currency gain
or loss will be determined by reference to the residence of the holder or the
qualified business unit of the holder on whose books the note is properly
reflected. Any gain or loss realized by a holder in excess of foreign currency
gain or loss will be capital gain or loss (except to the extent of any accrued
market discount or, in the case of a short-term note, to the extent of any
original issue discount not previously included in the holder's income).
A U.S. holder will have a tax basis in any foreign currency received on the
sale, exchange or retirement of a foreign currency note equal to the U.S.
dollar value of the foreign currency, determined at the time of sale, exchange
or retirement.
Regulations issued under Section 988 of the Code provide a special rule for
purchases and sales of publicly traded foreign currency notes by a cash method
taxpayer under which units of foreign currency paid or received are translated
into U.S. dollars at the spot rate on the settlement date of the purchase or
sale. Accordingly, no exchange gain or loss will result from currency
fluctuations between the trade date and the settlement date of the purchase or
sale. An accrual method taxpayer may elect the same treatment required of cash
method taxpayers with respect to the purchase and sale of publicly traded
foreign currency notes provided the election is applied consistently. This
election cannot be changed without the consent of the IRS. Any gain or loss
realized by a U.S. holder on a sale or other disposition of foreign currency
(including its exchange for U.S. dollars or its use to purchase foreign
currency notes) will be ordinary income or loss.
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UNITED STATES TAXATION--FOREIGN HOLDERS
The following summary describes the principal U.S. federal income and estate
tax consequences of purchase, ownership and disposition of the notes by a
foreign holder. As used in this prospectus supplement, the term "foreign
holder" means a beneficial owner of a note that is not a U.S. holder. This
summary is based on the Code and existing and proposed Treasury regulations,
revenue rulings and judicial decisions. This summary does not discuss all of
the tax consequences that may be relevant to holders in light of their
particular circumstances or to holders subject to special rules, such as
nonresident alien individuals who have lost their U.S. citizenship or who have
ceased to be treated as resident aliens, corporations that are treated as
foreign or domestic personal holding companies, controlled foreign corporations
or passive foreign investment companies and foreign holders that are owned or
controlled by U.S. holders. Persons considering the purchase of notes should
consult their own tax advisors regarding the application of U.S. federal income
and estate tax laws to their particular situations, as well as any tax
consequences arising under the laws of any state, local or foreign tax
jurisdiction or under an applicable tax treaty.
Under present U.S. federal income and estate tax law, and subject to the
discussion below concerning backup withholding:
. Payments of principal, interest (including original issue discount, if
any) and premium on the notes by us or by any of our paying agents to any
foreign holder will not be subject to U.S. federal withholding tax,
provided that, in the case of interest:
--the holder does not own, actually or constructively, 10 percent or more
of the total combined voting power of all classes of our stock entitled
to vote, is not a controlled foreign corporation related, directly or
indirectly, to us through stock ownership, and is not a bank receiving
interest described in Section 881(c)(3)(A) of the Code; and
--the beneficial owner of the note fulfills the statement requirement set
forth in Section 871(h) or Section 881(c) of the Code (described below).
. A foreign holder will not be subject to U.S. federal income tax on gain
realized on the sale, exchange or other disposition of a note, unless:
--the holder is an individual who is present in the United States for 183
days or more in the taxable year of disposition, and either (1) the
individual has a "tax home" (as defined in Code Section 911(d)(3)) in
the United States (unless the gain is attributable to a fixed place of
business in a foreign country maintained by the individual and has been
subject to foreign tax of at least 10%), or (2) the gain is attributable
to an office or other fixed place of business maintained by the
individual in the United States; or
--the gain is effectively connected with the conduct by the holder of a
trade or business in the United States.
. A note held by an individual who is not treated as a citizen or resident
of the United States at the time of his death will not be subject to U.S.
federal estate tax as a result of the individual's death, provided that
the individual does not own, actually or constructively, 10 percent or
more of the total combined voting power of all classes of our stock
entitled to vote and, at the time of the individual's death, payments
with respect to the note would not have been effectively connected to the
conduct by that individual of a trade or business in the United States.
Sections 871(h) and 881(c) of the Code require that, in order to obtain the
portfolio interest exemption from withholding tax described in paragraph (a)
above in the case of a note issued in registered form, either the beneficial
owner of the note or a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business (referred to in this discussion as a financial
institution) and that is holding the note on behalf of the beneficial owner,
files a statement with the withholding agent to the effect that the beneficial
owner of the note is not a U.S. person. Under temporary U.S. Treasury
regulations, this requirement will be satisfied if the beneficial owner of a
note certifies on IRS Form W-8, under penalties of perjury, that it is not a
U.S. person and provides
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its name and address, and any financial institution holding the note on behalf
of the beneficial owner files a statement with the withholding agent to the
effect that it has received the required statement from the holder and
furnishes the withholding agent with a copy of the statement. IRS Form W-8 is
valid for the calendar year in which filed and the two succeeding calendar
years.
With respect to notes held by a foreign partnership, under current law, the
foreign partnership may provide the Form IRS W-8. However, for interest
(including original issue discount) and disposition proceeds paid with respect
to a note after December 31, 2000, unless the foreign partnership has entered
into a withholding agreement with the IRS or filed a statement with the IRS
certifying that payments of the note are effectively connected with a U.S.
trade or business of the partnership, a foreign partnership will be required,
in addition to providing a partnership withholding certificate furnished on IRS
Form W-8, to attach an appropriate certification by each partner. Prospective
investors, including foreign partnerships and their partners, should consult
their tax advisers regarding possible additional reporting requirements.
Alternatively, payments to foreign holders which do not meet the
requirements of the first bullet on page S-22 above and which are therefore
subject to withholding of U.S. federal income tax may nevertheless be exempt
from withholding or subject to withholding at a reduced rate if the beneficial
owner of the note, or his agent, provides the withholding agent with a properly
executed IRS Form 1001 (or successor form) claiming an exemption from
withholding or reduced withholding rate under the benefit of a tax treaty. IRS
Form 1001 is valid for the calendar year in which filed and the two succeeding
calendar years.
If a foreign holder is engaged in a trade or business in the United States,
and if interest (including original issue discount and market discount) on the
note or gain realized on its sale, exchange or other disposition is effectively
connected with the conduct of this trade or business, the foreign holder,
although exempt from the withholding tax discussed in the preceding paragraph,
will generally be subject to regular U.S. income tax on interest (including
original issue discount and market discount) and on any gain realized on the
sale, exchange or other disposition of a note in the same manner as if it were
a U.S. holder. See "United States Taxation, United States Holders" above. In
lieu of the IRS Form W-8 described above, such a holder will be required to
provide to the withholding agent a properly executed IRS Form 4224 (or, after
December 31, 2000, an IRS Form W-8 ECI) in order to claim an exemption from
withholding tax. In addition, if the foreign holder is a foreign corporation,
it may be subject to a branch profits tax equal to 30%, or a lower rate
provided by an applicable treaty, of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For purposes of the
branch profits tax, interest (including original issue discount and market
discount) on, and any gain recognized on the sale, exchange or other
disposition of, a note will be included in the effectively connected earnings
and profits of the foreign holder if the interest or gain, as the case may be,
is effectively connected with the conduct by the foreign holder of a trade or
business in the United States. IRS Form 4224 is valid solely for the calendar
year in which filed.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current U.S. federal income tax law, a 31% backup withholding tax and
information reporting requirements generally apply to specified payments of
principal, premium and interest (including original issue discount) made to,
and to the proceeds of sale before maturity by, non-corporate U.S. persons.
Under current Treasury regulations, backup withholding will not apply to
payments made on a note if the holder certifies that it is not a U.S. person or
otherwise establishes an exemption, provided that we or our paying agent do not
have actual knowledge that the holder is a U.S. person.
Under current regulations, payments on the sale, exchange or other
disposition of a note made to or through a foreign office of a broker generally
will not be subject to information reporting or backup withholding. However,
information reporting, but not backup withholding, may apply to those payments
if the broker is one of the following:
. a U.S. person;
. a controlled foreign corporation for U.S. federal income tax purposes;
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. a foreign person 50 percent or more of whose gross income is effectively
connected with a U.S. trade or business for a specified three-year
period; or
. in the case of payments made after December 31, 2000, a foreign
partnership with certain connections to the U.S.
In the above circumstances, information reporting will be required unless
the broker has in its records documentary evidence that the beneficial owner is
not a U.S. person and other conditions are met, or the beneficial owner
otherwise establishes an exemption. Backup withholding may apply to any payment
that the broker is required to report if the broker has actual knowledge that
the payee is a U.S. person.
Payment of the proceeds of a sale of a note to or through the U.S. office of
a U.S. or foreign broker will be subject to backup withholding and information
reporting unless the holder certifies, under penalties of perjury, that it is
not a U.S. person (and the payor does not have actual knowledge that the
beneficial owner is a U.S. person) or otherwise establishes an exemption.
Foreign holders should consult their tax advisors regarding the application
of information reporting and backup withholding in their particular situations,
the availability of an exemption from withholding or reporting, and the
procedure for obtaining an exemption, if available. Any amounts withheld from a
payment to a foreign holder under the backup withholding rules will be allowed
as a credit against that holder's U.S. federal income tax liability and may
entitle the holder to a refund, provided that the holder furnishes the required
information to the IRS.
NEW WITHHOLDING RULES IN 2001
Effective January 1, 2001, new withholding tax regulations will take effect
with respect to interest payments and certain other categories of payments made
to foreign holders. Among other things, these regulations provide presumptions
under which a foreign holder is subject to information reporting and backup
withholding unless we or our paying agents receive certification from the
holder regarding its non-United States status. In addition, these regulations
generally will require any foreign holder that seeks the protection of an
income tax treaty with respect to the imposition of U.S. withholding tax to
obtain a taxpayer identification number from the IRS in advance and provide
verification that the holder is entitled to the protection of the relevant
income tax treaty. Tax-exempt foreign holders will generally be required to
provide verification of their tax-exempt status. Foreign holders are urged to
consult with their tax advisors with respect to these new withholding rules.
PLAN OF DISTRIBUTION
We are offering the medium term notes on a continuing basis exclusively
through Morgan Stanley & Co. Incorporated, U.S. Bancorp Piper Jaffray Inc.,
Barclays Capital Inc., Chase Securities Inc., Dain Rauscher Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Goldman, Sachs & Co., J.P.
Morgan Securities Inc., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Salomon Smith Barney Inc., which we refer to
individually as an "agent" and, together, as the "agents," who have agreed to
use reasonable efforts to solicit offers to purchase these securities. We will
have the sole right to accept offers to purchase these securities and may
reject any offer in whole or in part. Each agent may reject, in whole or in
part, any offer it solicited to purchase securities. Unless otherwise specified
in the applicable pricing supplement, we will pay an agent, in connection with
sales of these securities resulting from a solicitation that an agent made or
an offer to purchase that an agent received, a commission ranging from .125% to
.750% of the initial offering price of the securities to be sold, depending
upon the maturity of the securities. We and the agent will negotiate
commissions for securities with a maturity of 30 years or greater at the time
of sale.
We may also sell these securities to an agent as principal for its own
account at discounts to be agreed upon at the time of sale. That agent may
resell these securities to investors and other purchasers at a fixed offering
price or at prevailing market prices, or prices related thereto at the time of
resale or otherwise, as that agent determines and as we will specify in the
applicable pricing supplement. An agent may offer the securities it has
purchased as principal to other dealers. That agent may sell the
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securities to any dealer at a discount and, unless otherwise specified in the
applicable pricing supplement, the discount allowed to any dealer will not be
in excess of the discount that agent will receive from us. After the initial
public offering of securities that an agent is to resell on a fixed public
offering price basis, the agent may change the public offering price,
concession and discount.
Each of the agents may be deemed to be an "underwriter" within the meaning
of the Securities Act. We and the agents have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments made in respect of those liabilities. We have also
agreed to reimburse the agents for specified expenses.
We estimate that we will spend approximately $100,000 for printing, rating
agency, trustee's and legal fees and other expenses allocable to the offering.
Unless otherwise provided in the applicable pricing supplement, we do not
intend to apply for the listing of these securities on a national securities
exchange, but the agents have advised us that they intend to make a market in
these securities, as applicable laws and regulations permit. The agents are not
obligated to do so, however, and the agents may discontinue making a market at
any time without notice. No assurance can be given as to the liquidity of any
trading market for these securities.
To facilitate the offering of these securities, the agents may engage in
transactions that stabilize, maintain or otherwise affect the price of these
securities. Specifically, the agents may overallot in connection with any
offering of these securities, creating a short position in these securities for
their own accounts. In addition, to cover overallotments or to stabilize the
price of these securities, the agents may bid for, and purchase, these
securities in the open market. Finally, in any offering of these securities
through a syndicate of underwriters, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing
these securities in the offering if the syndicate repurchases previously
distributed securities in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of these securities above independent market
levels. The agents are not required to engage in these activities, and may end
any of these activities at any time.
U.S. Bancorp Piper Jaffray Inc., one of our agents, is an affiliate of USB.
This prospectus supplement and the related prospectus may be used by direct or
indirect wholly owned subsidiaries of USB, including U.S. Bancorp Piper Jaffray
Inc., in connection with offers and sales related to secondary market
transactions in the notes. These subsidiaries may act as principal or agent in
these transactions. The sales will be made at prices related to prevailing
market prices at the time of sale. The notes offered in this prospectus
supplement are being offered under Rule 2720 of the National Association of
Securities Dealers Conduct Rules.
In the course of their respective businesses, our agents and certain of
their affiliates, have engaged and may in the future engage in commercial
banking transactions with us and with our affiliates. Some of the agents and
their affiliates may also be customers of, engage in transactions with and
perform services for us, including our subsidiaries, in the ordinary course of
business.
Concurrently with the offering of these securities through the agents, we
may issue other debt securities under the indentures referred to in this
prospectus supplement. Any debt securities issued by us under the indentures
will reduce the aggregate offering price of the notes that may be offered under
this prospectus supplement, any pricing supplement and the accompanying
prospectus.
VALIDITY OF SECURITIES
The validity of the notes has been passed upon for us by Dorsey & Whitney
LLP, Pillsbury Center South, 220 South Sixth Street, Minneapolis, Minnesota
55402-1498. The validity of the notes has been passed upon for our agents, by
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Davis
Polk & Wardwell has relied as to all matters governed by Minnesota law on the
opinion of Dorsey & Whitney LLP, and Dorsey & Whitney LLP has relied as to all
matters governed by New York law on the opinion of Davis Polk & Wardwell. The
opinions of Dorsey & Whitney LLP
S-25
<PAGE>
and Davis Polk & Wardwell are conditioned on, and subject to certain
assumptions regarding future action that the trustee and us are required to
take in connection with the issuance and sale of any particular note, the
specific terms of notes, and other matters which may affect the validity of the
notes but which cannot be ascertained on the date of these opinions. Dorsey &
Whitney LLP and certain of its members are indebted to, and have other banking
and trust relationships with certain of our banking subsidiaries.
S-26
<PAGE>
PROSPECTUS
[LOGO]
U.S. Bancorp
601 Second Avenue South
Minneapolis, Minnesota 55402
(612) 973-1111
$2,300,000,000
U.S. Bancorp
Debt Securities, Preferred Stock,
Depositary Shares and
Debt Warrants
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and the applicable prospectus
supplement carefully before you invest.
----------------
The securities will be our equity securities or our unsecured obligations
and will not be savings accounts, deposits or other obligations of any bank or
non-bank subsidiary of ours and are not insured by the Federal Deposit
Insurance Corporation, the Bank Insurance Fund or any other government agency.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus may not be used to sell securities unless accompanied by the
applicable prospectus supplement.
The date of this Prospectus is July 23, 1999.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we, along with the
trusts, USB Capital III, USB Capital IV and USB Capital V, filed with the SEC
using a shelf registration process. Under this shelf process, we may sell:
.debt securities;
.preferred stock;
.depositary shares; and
.debt warrants
and the trusts may sell:
. capital securities (representing undivided beneficial interests in the
trusts) to the public; and
. common securities to us in one or more offerings.
The trusts will use the proceeds from the sales of the securities to buy a
series of our junior subordinated debt securities with terms that correspond to
the capital securities.
We:
. will pay principal and interest on our junior subordinated debt
securities, subject to the payment of our more senior debt;
. may choose to distribute our junior subordinated debt securities pro-rata
to the holders of the related capital securities and common securities if
we terminate a trust; and
. will fully and unconditionally guarantee the capital securities based on:
--our obligations to make payments on our junior subordinated debt
securities;
--our obligations under our guarantee (our payment obligations are
subject to payment on all of our general liabilities); and
--our obligations under the trust agreements.
This prospectus provides you with a general description of the debt
securities, preferred stock, depositary shares and debt warrants. The
description of the capital securities, the junior subordinated debt securities
and the guarantee will be included in a separate prospectus in this
registration statement. Each time we sell debt securities, preferred stock,
depositary shares and debt warrants, we will provide an applicable prospectus
supplement that will contain specific information about the terms of that
offering. The applicable prospectus supplement may also add, update or change
information in this prospectus. You should read this prospectus and the
applicable prospectus supplement together with the additional information
described under the heading "Where You Can Find More Information."
The registration statement that contains this prospectus (including the
exhibits to the registration statement) has additional information about us and
the securities offered under this prospectus. That registration statement can
be read at the SEC web site or at the SEC offices mentioned under the heading
"Where You Can Find More Information."
The words "USB," "Company," "we," "our," "ours," and "us" refer to U.S.
Bancorp and its subsidiaries, unless otherwise stated. We have also defined
terms in the glossary section, at the back of this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document that we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public from the SEC's web site at http://www.sec.gov. Our SEC filings
are also available at the offices of the New York Stock Exchange. For further
information on obtaining copies of our public filings at the New York Stock
Exchange, you should call (212) 656-5060.
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update
2
<PAGE>
and supersede this information. We incorporate by reference the following
documents listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act, until we or any underwriters
sell all of the securities:
. Annual Report on Form 10-K for the year ended December 31, 1998;
. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999; and
. Current Report on Form 8-K filed on January 20, 1999.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
U.S. Bancorp
601 Second Avenue South
Minneapolis, Minnesota 55402
Attn: Investor Relations Department
(612) 973-2263
You should rely only on the information incorporated by reference or
provided in this prospectus or any applicable prospectus supplement. We have
not authorized anyone else to provide you with different information. We are
not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
applicable prospectus supplement is accurate as of any date other than the date
on the front of those documents.
Unless otherwise indicated, currency amounts in this prospectus and in any
applicable prospectus supplement are stated in U.S. dollars.
Notice to North Carolina purchasers: the Commissioner of Insurance of the
State of North Carolina has not approved or disapproved this offering nor has
the Commissioner determined if this prospectus is truthful or complete.
ABOUT U.S. BANCORP
We are a regional, multi-state bank holding company headquartered in
Minneapolis, Minnesota. We are registered under the Bank Holding Company Act,
and are subject to the supervision of, and regulation by, the Board of
Governors of the Federal Reserve System. We were formerly known as First Bank
System, Inc., and we are the organization created by the acquisition by First
Bank System, Inc. of U.S. Bancorp of Portland, Oregon. We are the 13th largest
U.S. bank holding company. We operate 4 banks and 11 trust companies having
approximately 1,000 banking offices in 17 Midwestern and Western states. We
offer full-service brokerage services at approximately 100 offices through our
wholly owned subsidiary. We also have various nonbank subsidiaries engaged in
financial services. At March 31, 1999, we had consolidated assets of $76
billion, consolidated deposits of $49 billion, and shareholders' equity of $6
billion.
Our banking subsidiaries are engaged in the general commercial banking
business, principally in domestic markets. They range in size from less than $1
million to $48 billion in deposits and provide a wide variety of services to
individuals, businesses, industry, institutional organizations, governmental
entities and other financial institutions. Depository services include checking
accounts, savings accounts and time certificates of deposit. Ancillary services
such as treasury management and receivable lockbox collection are provided for
corporate customers. Our banking and trust company subsidiaries provide a full
range of fiduciary activities for individuals, estates, foundations, business
corporations and charitable organizations.
We provide banking services through our subsidiary banks to both domestic
and foreign customers and correspondent banks. These services include consumer
banking, commercial lending, financing of import/export trade, foreign
exchange, and investment services. We provide, through our subsidiaries,
services in trust, commercial and agricultural finance, data processing,
leasing, and brokerage services.
On May 1, 1998, we completed our acquisition of Piper Jaffray Companies
Inc., a full-service investment banking and securities brokerage firm, in a
cash transaction. The acquisition was accounted for as a purchase. On July 15,
1999, we completed our acquisition of San Diego-based Bank of Commerce, one of
the largest U.S. Small Business Administration lenders. On May 19, 1999, we
3
<PAGE>
announced an agreement to acquire Newport Beach California-based Western
Bancorp. With $2.5 billion in assets at March 31, 1999, Western Bancorp has 31
branches in southern California in Los Angeles, Orange and San Diego counties.
The acquisition is pending regulatory and Western Bancorp shareholder
approvals, and is expected to close in the fourth quarter of 1999.
We were incorporated under Delaware law in 1929 and have functioned as a
multi-bank holding company since that time. Our principal executive offices are
located at 601 Second Avenue South, Minneapolis, Minnesota 55402-4302, and our
telephone number is (612) 973-1111.
If you would like to know more about us, see our documents incorporated by
reference in this prospectus as described under the section "Where You Can Find
More Information."
USE OF PROCEEDS
Unless the applicable prospectus supplement states otherwise, we anticipate
that the net proceeds from the sale of the offered securities will be used for
general corporate purposes, including:
.repayment of debt;
.financing acquisitions; and
.investments in and loans to our subsidiaries.
When we offer a particular series of securities, the applicable prospectus
supplement may not state how the proceeds will be allocated, even though we
would have determined that funds are needed in anticipation of our future
funding. The time that we will take to allocate these proceeds will depend on
the amount of proceeds we need, on whether other funds are available and on how
much those funds cost. If we do not use the net proceeds immediately, we will
temporarily invest them to reduce our short-term indebtedness.
RATIOS OF EARNINGS TO FIXED CHARGES AND TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The ratios of earnings to fixed charges and to combined fixed charges and
preferred stock dividends of USB for each of the periods indicated are as
follows:
<TABLE>
<CAPTION>
Three Months
Ended Year Ended December 31,
-------------- ------------------------
March 31, 1999 1998 1997 1996 1995 1994
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding interest on deposits:..... 3.13 3.09 2.64 3.60 2.95 2.64
Including interest on deposits:..... 1.99 1.87 1.61 1.89 1.66 1.53
Ratios of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends:
Excludes interest on deposits:...... 3.13 3.09 2.58 3.46 2.83 2.47
Includes interest on deposits:...... 1.99 1.87 1.60 1.86 1.64 1.50
</TABLE>
The ratio of earnings to fixed charges is computed by dividing income from
continuing operations before income taxes and fixed charges (excluding
capitalized interest), as adjusted for some equity method investments, by fixed
charges. Fixed charges consist of interest on debt (including capitalized
interest), amortization of debt discount, and expense and a portion of rentals
determined to be representative of interest. To compute the ratio of earnings
to combined fixed charges and preferred stock dividends, fixed charges is then
combined with preferred stock dividend requirements, adjusted to a pretax basis
on the outstanding preferred stock of USB.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of the debt
securities (other than the junior subordinated debt securities) that are
offered by this prospectus. The applicable prospectus supplement will describe
the specific terms of the series of debt securities offered under that
applicable prospectus supplement and any general terms outlined in this section
that will not apply to those debt securities.
The senior debt securities will be issued under an indenture dated October
1, 1991 between us and Citibank, N.A., as trustee. The subordinated debt
securities will be issued under an indenture dated October 1, 1991, as amended
by a first supplemental indenture dated April 1, 1993 between us and Citibank,
N.A., as trustee. The indentures will be qualified under the Trust Indenture
Act. The forms of the indentures have been filed as exhibits to the
registration statement.
This section summarizes the material terms and provisions of the indentures
and the debt securities. Because this is only a summary, it does not contain
all the details found in the full text of the indentures and the debt
securities. If you would like additional information, you should read the forms
of indentures and the forms of debt securities.
General
We can issue the debt securities from time to time in one or more series.
Our board of directors will determine by a resolution, the terms of each series
of debt securities as provided in an officers' certificate or a supplemental
indenture. The applicable prospectus supplement will describe the specific
terms of the debt securities offered.
Because we are a holding company, our rights and the rights of our
creditors, including the holders of the debt securities offered in this
prospectus, to participate in the assets of any subsidiary during its
liquidation or reorganization, will be subject to the prior claims of the
subsidiary's creditors, unless we are ourselves a creditor with recognized
claims against the subsidiary. Any capital loans that we make to any of our
banking subsidiaries would be subordinate in right of payment to deposits and
to other indebtedness of these banking subsidiaries. Claims from creditors
(other than us), on the subsidiaries, may include long-term and medium-term
debt and substantial obligations related to deposit liabilities, federal funds
purchased, securities sold under repurchase agreements, and other short-term
borrowings.
The indentures do not limit the aggregate principal amount of debt
securities that we may issue under them, nor the amount of other debt that we
may issue.
The debt securities will be unsecured and those issued under the senior
indenture will rank equally with all of our other unsecured and unsubordinated
indebtedness. The subordinated notes will be subordinated as described under
the section "Subordination of Subordinated Notes."
Unless the applicable prospectus supplement indicates otherwise, we will
issue the debt securities of any series only in denominations of $1,000 or
multiples of $1,000. (Section 302) We may issue these debt securities in the
form of one or more global securities, as described below under the section
"Global Securities."
There will be no service charge for any transfer or exchange of the debt
securities but we may require you to pay a sum sufficient to cover any tax or
other governmental charge due in connection with a transfer or exchange of the
debt securities, and wemay require you to furnish appropriate endorsements and
transfer documents. (Section 305)
We may issue debt securities as original issue discount securities to be
sold at a substantial discount below their principal amount. If a debt security
is an original issue discount security, that means that an amount less than the
principal amount of the debt security will be due and payable if there is a
declaration of acceleration of the maturity of the debt security under the
indentures. The applicable prospectus supplement will describe the U.S. federal
income tax consequences and other special factors applicable to any debt
securities which should be considered before purchasing any original issue
discount securities.
Unless the applicable prospectus supplement indicates otherwise, we will pay
the principal of and any premium and interest on the debt securities, and
5
<PAGE>
you can register the transfer of the debt securities at the principal corporate
trust office of the applicable trustee. In addition, unless the applicable
prospectus supplement indicates otherwise, we have the option to pay interest
by check mailed to registered holders of the debt securities at their
registered addresses. (Sections 301, 305, 1001 and 1002)
The applicable prospectus supplement will describe the terms of the offered
debt securities, including some or all of the following:
.the title of the offered debt securities;
. whether the offered debt securities are senior or subordinated;
. any limit on the aggregate principal amount of the offered debt
securities;
. the price(s) (expressed as a percentage of the aggregate principal
amount) at which the offered debt securities will be issued;
. the date(s) on which the offered debt securities will mature and any
rights of extension;
. the annual rate(s), if any (which may be fixed or variable), at which the
offered debt securities will bear interest, if any, or the formula by
which this rate(s) will be determined, and the date from which this
interest will accrue;
. the dates on which the interest on the offered debt securities will be
payable and the regular related record dates;
. any mandatory or optional sinking fund or analogous provisions;
. the period(s), if any, within which and the price(s) at which the offered
debt securities may be redeemed, under any redemption provisions, at our
or your option, and other detailed terms of the optional redemption
provision;
. the currency, including euro, for the payment of principal and any
premium and interest payable on the offered debt securities, if other
than in United States dollars;
. the place(s) where the principal and any premium and interest on the
offered debt securities will be payable;
. any other event(s) of default related to the offered debt securities in
addition to or in lieu of those described under the section "events of
default;"
. the denominations in which any offered debt securities will be issuable,
if other than denominations of $1,000 or any amount in excess of it which
is an integral multiple of $1,000;
. whether we may issue debt securities in whole or in part in the form of
one or more global securities and, if so, the identity of the depositary
for these global securities and the circumstances under which you may
exchange these global securities for securities registered in the name of
a person other than the depositary or its nominee, and transferred to a
person other than the depositary or its nominee; and
. any other terms of the offered debt securities consistent with the
provisions of the indentures.
Global Securities
We can issue the debt securities of a series in whole or in part in the form
of one or more global securities that will be deposited with, or on behalf of,
a depositary identified in the applicable prospectus supplement. Unless the
applicable prospectus supplement indicates otherwise, we will issue these
global securities in registered form. (Section 305). The applicable prospectus
supplement will describe the specific terms of the depositary arrangements
relating to a series of debt securities.
Subordination of Subordinated Debt Securities
The payment of the principal and interest on the subordinated debt
securities will, when stated in the subordinated indenture, be subordinate in
right of payment to the prior payment in full of all of our senior
indebtedness. (Section 1301) In some cases of insolvency, payment of principal
of and interest on the subordinated debt securities will, if stated in the
subordinated indenture, be also subordinated in right of payment to the prior
payment in full of all general obligations. A holder of subordinated debt
securities cannot demand or receive payment on the subordinated debt securities
unless all amounts of
6
<PAGE>
principal of, any premium, and interest due on all of our senior indebtedness
have been paid in full or duly provided for and, at the time of this payment or
immediately after this payment is effective:
. no event of default exists permitting the holders of the senior
indebtedness to accelerate the maturity of the senior indebtedness; or
. any event which, with notice or lapse of time or both, would become an
event of default. (Section 1302)
If our assets are paid or distributed in connection with a dissolution,
winding-up, liquidation or reorganization, the holders of our senior
indebtedness will be entitled to receive payment in full of principal, and any
premium and interest under the terms of the senior indebtedness before any
payment is made on the subordinated debt securities. (Section 1303) If:
. after giving effect to the subordination provisions in favor of the
holders of the senior indebtedness, and
. after paying or distributing assets to creditors,
any amount of cash, property or securities remains, and if, at that time,
creditors of general obligations have not received full payment on all amounts
due or to become due on these general obligations, this excess will first be
applied to pay in full all general obligations, before paying or distributing
on the subordinated debt securities. (Section 1314)
The subordinated indenture defines senior indebtedness as the principal of,
premium, if any, and interest on:
. all of our indebtedness for money borrowed, whether outstanding on the
date of execution of the subordinated indenture, or created, assumed or
incurred after that date (including any senior debt securities under the
senior indenture). Indebtedness does not include indebtedness that is
expressly stated to rank junior or equal in right of payment to the
subordinated debt securities;
. any deferrals, renewals or extensions of senior indebtedness.
The subordinated indenture defines general obligations as all of our
obligations to pay claims of general creditors, other than:
. obligations on senior indebtedness; and
. obligations on subordinated debt securities and our indebtedness for
money borrowed ranking equally or subordinate to the subordinated debt
securities. If however, the Board of Governors of the Federal Reserve
System (or other competent regulatory agency or authority) promulgates
any rule or issues any interpretation that defines general creditor(s)
the main purpose of which is to establish a criteria for determining
whether the subordinated debt of a bank holding company is to be included
in its capital, then the term general obligations will mean obligations
to general creditors as described in that rule or interpretation.
The term claim when used in the previous definition has the meaning stated
in section 101(5) of the Bankruptcy Code.
The term indebtedness for money borrowed means any obligation of ours or any
obligation guaranteed by us to repay money borrowed, whether or not evidenced
by bonds, debt securities, notes or other written instruments, and any deferred
obligation to pay the purchase price of property or assets. (Section 101)
Due to the subordination described above, if we experience bankruptcy,
insolvency or reorganization, the holders of senior indebtedness can receive
more, ratably, and holders of the subordinated debt securities can receive
less, ratably, than our creditors who are not holders of senior indebtedness or
of the subordinated debt securities. This subordination will not prevent any
event of default on the subordinated debt securities from occurring. Unless the
applicable prospectus supplement(s) indicates otherwise, the subordinated
indenture does not provide any right to accelerate the payment of the principal
of the subordinated debt securities if payment of the principal or interest, or
performance of any agreement in the subordinated debt securities or
subordinated indenture is in default. See "Events of Default" below.
7
<PAGE>
The subordination provisions of the subordinated indenture described in this
prospectus are provided to holders of senior indebtedness and are not intended
for creditors of general obligations. The trustee and us can amend the
subordinated indenture to reduce or eliminate the rights of creditors of
general obligations without their consent or the consent of the holders of
subordinated debt securities. The provisions of the subordinated indenture
stating that the subordinated debt securitieswill be subordinated in favor of
creditors of general obligations will be immediately and automatically
terminated if the following arises:
. the Board of Governors of the Federal Reserve System (or other competent
regulatory agency or authority) promulgates any rule or regulation, or
issues any interpretation that:
--permits us to include the subordinated debt securities in our capital
if the debt securities were subordinated in right of payment to senior
indebtedness without regard to any of our other obligations;
--eliminates the requirement that subordinated debt of a bank holding
company must be subordinated in right of payment to its "general
creditors" to be included in capital; or
--causes the subordinated debt securities to be excluded from capital,
without regard to the subordination provisions described above; or
. an event that results in us no longer being subject to the capital
requirements of bank regulatory authorities. (Section 1315)
Restrictive Covenants
Subject to the provisions described under the section "Consolidation, Merger
and Sale of Assets," the senior indenture prohibits:
. the issue, sale or other disposition of shares of or securities
convertible into, or options, warrants or rights to subscribe for or
purchase shares of, voting stock of a principal subsidiary bank;
. the merger or consolidation of a principal subsidiary bank with or into
any other corporation; or
. the sale or other disposition of all or substantially all of the assets
of a principal subsidiary bank if,
after giving effect to the transaction and issuing the maximum number of shares
of voting stock that can be issued after the conversion or exercise of the
convertible securities, options, warrants or rights, we would own, directly or
indirectly, 80% or less of the shares of voting stock of the principal
subsidiary bank or of the successor bank which acquires the assets. (Section
1007)
In the senior indenture, we also agreed that we will not create, assume,
incur or cause to exist any pledge, encumbrance or lien, as security for
indebtedness for money borrowed on:
. any shares of or securities convertible into voting stock of a principal
subsidiary bank that we own directly or indirectly; or
. options, warrants or rights to subscribe for or purchase shares of,
voting stock of a principal subsidiary bank that we own directly or
indirectly,
without providing that the senior debt securities of all series will be equally
secured if, after treating the pledge, encumbrance or lien as a transfer to the
secured party, and after giving effect to the issuance of the maximum number of
shares of voting stock issuable after conversion or exercise of the convertible
securities, options, warrants or rights, we would own, directly or indirectly
80% or less of the shares of voting stock of the principal subsidiary bank.
(Section 1008)
The indentures define the term principal subsidiary bank as First Bank
National Association and any successor. Immediately following the acquisition
by First Bank System, Inc. of U. S. Bancorp, we reorganized First Bank National
Association and changed its name to U.S. Bank National Association.
Unless the applicable prospectus supplement indicates otherwise, the
subordinated indenture does not contain either of the restrictive covenants
stated above, nor does it contain any other provision which restricts us from:
. incurring or becoming liable on any secured or unsecured senior
indebtedness or general obligations; or
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. paying dividends or making other distributions on our capital stock; or
. purchasing or redeeming our capital stock; or
. creating any liens on our property for any purpose.
Unless the applicable prospectus supplement indicates otherwise, neither
indenture contains covenants specifically designed to protect holders from a
highly leveraged transaction in which we are involved.
Events of Default
Unless otherwise provided in any supplemental indenture or officers'
certificate relating to a specific series of debt securities, the only events
defined in the senior indenture as events of default for any series of senior
debt securities, are:
. our failure to pay any interest on any senior debt securities of a series
when due, which failure continues for 30 days;
. our failure to pay any principal of or premium on any senior debt
securities of a series when due;
. our failure to make any sinking fund payment, when due, for any senior
debt securities of a series;
. our failure to perform any other covenant in the senior indenture (other
than a covenant included in the senior indenture solely for the benefit
of a series of senior debt securities other than that series), which
failure continues for 60 days after written notice;
. default in the payment of indebtedness for money borrowed under any
indenture or instrument under which we have or a principal subsidiary
bank has outstanding indebtedness in an amount in excess of $5,000,000
which has become due and has not been paid, or whose maturity has been
accelerated and the default has not been cured or acceleration annulled
within 60 days after written notice;
. some events of bankruptcy, insolvency or reorganization which involve us
or a principal subsidiary bank; and
. any other event of default related to the senior debt securities of that
series.
Unless otherwise provided, the only events defined in the subordinated
indenture as events of default for any series of subordinated debt securities,
are:
. some events of bankruptcy, insolvency or reorganization which involve us;
. some events involving the receivership, conservatorship or liquidation of
a principal subsidiary bank; and
. any other event of default provided for the subordinated debt securities
of that series. (Section 501)
If an event of default occurs and is continuing on any series of debt
securities outstanding under either indenture, then either the applicable
trustee or the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series may declare the principal amount
(or, if any of the debt securities of that series are original issue discount
debt securities, the lesser portion of the principal amount of those debt
securities) of all of the debt securities of that series to be due and payable
immediately, by notice as provided in the applicable indenture. At any time
after a declaration of acceleration has been made on the debt securities of any
series, but before the applicable trustee has obtained a judgment for payment,
the holders of a majority in aggregate principal amount of the outstanding debt
securities of that series may, under some circumstances, rescind and annul this
acceleration. (Section 502)
Subject to provisions in each indenture relating to the duties of the
trustee during a default, no trustee will be under any obligation to exercise
any of its rights or powers under the applicable indenture at the request or
direction of any of the holders of any series of debt securities then
outstanding under that indenture, unless the holders offer to the trustee
reasonable indemnity. (Sections 601, 603) The holders of a majority in
aggregate principal amount of the outstanding debt securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the applicable trustee, or exercising
any trust or power conferred on the trustee. (Section 512)
We must furnish to each trustee, annually, a statement regarding our
performance on some of our
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obligations under the applicable indenture and any default in our performance.
(Section 704)
Modification and Waiver
Except as otherwise specifically provided in the applicable indenture,
modifications and amendments of an indenture generally will be permitted only
with the consent of the holders of at least a majority in aggregate principal
amount of the outstanding debt securities of each series affected by the
modification or amendment. However, none of the following modifications are
effective against any holder without the consent of the holders of each
outstanding debt security affected by the modification or amendment:
. changing the stated maturity of the principal of or any installment of
principal or interest on any debt security;
. reducing the principal amount of, or premium or interest on any debt
security;
. changing any of our obligations to pay additional amounts;
. reducing the amount of principal of an original issue discount debt
security that would be due and payable at declaration of acceleration of
its maturity;
. changing the place for payment where, or coin or currency in which, any
principal of, or premium or interest on, any debt security is payable;
. impairing the right to take legal action to enforce any payment of or
related to any debt security;
. reducing the percentage in principal amount of outstanding debt
securities of any series required to modify, amend, or waive compliance
with some provisions of the indenture or to waive some defaults;
. modifying the provisions of the subordinated indenture in a manner
adverse to the holders; or
. modifying any of the above provisions. (Section 902).
The holders of at least a majority in aggregate principal amount of the
outstanding debt securities of each series can waive, as far as that series is
concerned, our compliance with some restrictive provisions of the applicable
indenture. (Section 1009).
The holders of at least a majority in aggregate principal amount of the
outstanding debt securities of each series may waive any past default under the
applicable indenture, except:
. a default in the payment of principal of, or premium, or interest on any
senior debt security; or
. a default in a covenant or provision of the applicable indenture which
cannot be modified or amended without the consent of the holder of each
outstanding debt security of the series affected. (Section 513)
Each indenture provides that, in determining whether holders of the
requisite principal amount of the outstanding debt securities have given any
request, demand, authorization, direction, notice, consent or waiver, or
whether a quorum is present at a meeting of holders of debt securities:
. the principal amount of an original issue discount debt security
considered to be outstanding will be the amount of the principal of that
original issue discount debt security that would be due and payable as of
the date that the principal is determined at declaration of acceleration
of the maturity of that original issue discount debt security; and
. the principal amount of a debt security denominated in a foreign currency
or currency unit that is deemed to be outstanding will be the U.S. dollar
equivalent, determined on the date of original issuance for that debt
security, of the principal amount (or, in the case of an original issue
discount debt security, the U.S. dollar equivalent, determined on the
date of original issuance for that debt security, of the amount
determined as provided in the bullet point above). (Section 101)
Consolidation, Merger and Sale of Assets
Without the consent of the holders of any outstanding debt securities, we
cannot consolidate with or merge into another corporation, partnership
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or trust, or convey, transfer or lease substantially all of our properties and
our assets, to a corporation, partnership or trust organized or validly
existing under the laws of any domestic jurisdiction unless:
. the successor entity assumes our obligations on the debt securities and
under the indentures;
. immediately after the transaction, we would not be in default under the
indentures and no event which, after notice or the lapse of time, would
become an event of default under the indentures, shall have occurred and
be continuing; and
.other conditions are met. (Section 801)
Regarding Citibank, N.A.
Some of our subsidiaries and us maintain deposits with and conduct other
banking transactions with Citibank, N.A. in the ordinary course of business.
DESCRIPTION OF PREFERRED STOCK
This prospectus describes the general terms and provisions of the preferred
stock that are offered by this prospectus. The applicable prospectus supplement
will describe the specific terms of the series of the preferred stock offered
under that prospectus supplement and any general terms outlined in this section
that will not apply to that series of preferred stock.
We have filed a form of certificate of designation, preferences and rights
of preferred stock as an exhibit to the registration statement.
This section summarizes the material terms and provisions of the preferred
stock. Because this is a summary, it does not contain all of the details found
in the full text of the certificate of designation and our restated certificate
of incorporation. If you would like additional information, you should read the
certificate of designation and our restated certificate of incorporation.
General
Our restated certificate of incorporation, provides that our board of
directors can issue, without stockholder action, a maximum of 50,000,000 shares
of preferred stock. This amount includes shares issued or reserved for
issuance, in one or more series and with those terms, times and consideration
as the board of directors determines. Our board of directors can determine the
following:
. the number of shares and their designation or title;
. rights as to dividends;
. whether and on what terms the shares are redeemable;
. whether and on what terms the shares shall have a purchase, retirement or
sinking fund;
. whether and on what terms the shares are convertible;
. the voting rights, if any, of the preferred stock being offered;
. restrictions, if any, on the issue or reissue of any additional preferred
stock;
. the rights of holders on our dissolution, or distribution of our assets;
and
. any other preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions of the
series.
On March 31, 1999, we had 56,539 shares of preferred stock outstanding and
an additional 12,750 shares authorized and reserved for issuance.
As described under the section "Description of Depositary Shares," we may
choose to offer depositary shares evidenced by depositary receipts, each
representing a fractional interest in a share of the particular series of the
preferred stock issued and deposited with a depositary.
Under interpretations adopted by the Federal Reserve Board, if the holders
of any series of preferred stock become entitled to vote for the election of
directors because dividends on that series are in arrears as described under
the section "Voting Rights" below, that series may then be considered a class
of voting securities. A holder of 25% or more of a series, or a holder of 5% or
more of a series may if it otherwise exercises a controlling influence over us,
may then be subject to regulation as a bank holding company under the Bank
Holding Company Act. In addition, at the time that the series are
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deemed a class of voting securities, any other bank holding company may be
required to obtain the prior approval of the Federal Reserve Board in order to
acquire 5% or more of that series, and any person other than a bank holding
company may be required to obtain the prior approval of the Federal Reserve
Board to acquire 10% or more of that series.
The preferred stock will have the dividend, liquidation, redemption and
voting rights stated in this section unless the applicable prospectus
supplement indicates otherwise. You should read the applicable prospectus
supplement relating to the particular series of the preferred stock being
offered for specific terms, including:
. the title, stated value and liquidation preferences of the preferred
stock and the number of shares offered;
. the initial public offering price at which the preferred stock will be
issued;
. the dividend rate(s) (or method of calculation), the dividend periods,
the dates on which dividends shall be payable and whether these dividends
will be cumulative or noncumulative and, if cumulative, the dates at
which the dividends shall begin to cumulate;
. any redemption or sinking fund provisions;
. whether we have elected to offer depositary shares as described under the
section "Description of Depositary Shares;" and
. any additional dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions.
When we issue shares of preferred stock, the series will be fully paid and
nonassessable, meaning, the full purchase price of the outstanding shares of
preferred stock will have been paid and the holders of the shares will not be
assessed any additional monies for the shares. Unless the applicable prospectus
supplement indicates otherwise, each series of the preferred stock will rank
equally with any outstanding shares of our preferred stock and each other
series of the preferred stock, and will rank senior to our junior preferred
stock described below. The preferred stock will have no preemptive rights to
subscribe for any additional securities which are issued by us, meaning, the
holders of shares of preferred stock will have no right to buy any portion of
the issued securities. Unless the applicable prospectus supplement indicates
otherwise, First Chicago Trust Company of New York will be the transfer agent
and registrar for the preferred stock and any depositary shares.
Dividends
The holders of the preferred stock of each series will be entitled to
receive cash dividends out of funds legally available, when, as and if,
declared by the board of directors or a duly authorized committee of the board
of directors, at the rates and on the dates stated in the applicable prospectus
supplement. These rates may be fixed, or variable, or both. If the dividend
rate is variable, the applicable prospectus supplement will describe the
formula used to determine the dividend rate for each dividend period. We will
pay dividends to the holders of record as they appear on our stock books on the
record dates determined by our board of directors or authorized committee.
Unless the applicable prospectus supplement indicates otherwise, dividends on
any series of preferred stock will be cumulative.
Our board of directors will not declare and pay a dividend on any of our
stock ranking as to dividends, equal with or junior to the preferred stock
unless full dividends on the preferred stock have been declared and paid (or
declared and sufficient money was set aside for payment).
Until dividends are paid in full or declared and set aside for payment on
any series of preferred stock and ranking equal with the preferred stock as to
dividends:
. we will declare all dividends pro rata among the preferred stock of each
series, so that the amount of dividends declared per share on each series
will have the same relationship to each other that accrued dividends per
share on each series of preferred stock and other preferred stock bear to
each other;
. other than the pro rata dividends, we will not declare or pay or set
aside for payment dividends, or declare or make any other distribution on
any security ranking junior to or equal with the preferred stock offered
under this prospectus as to dividends or at liquidation (except dividends
or distributions
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paid for in shares of, or options, warrants or rights to subscribe or
purchase shares of securities ranking junior to or equal with the
preferred stock as to dividends and at liquidation);
. we will not redeem, purchase or otherwise acquire for any consideration
(or any monies be paid to or set aside in a sinking fund) any securities
ranking junior to or equal with the preferred stock as to dividends or at
liquidation (except by conversion into or exchange for our stock which
ranks junior to the preferred stock as to dividends and at liquidation).
We will not pay interest, or money in lieu of interest, for any dividend
payment(s) on any series of the preferred stock that are in arrears.
Voting Rights
Unless the applicable prospectus supplement indicates otherwise, or unless
required by law, holders of preferred stock will not have any voting rights.
If, at the time of any annual meeting of shareholders for the election of
directors, the amount of accrued but unpaid dividends on any of our preferred
stock is equal to at least six quarterly dividends on that series of preferred
stock, we will increase the number of directors by two and the holders of all
outstanding series of our preferred stock (excluding the Series 1990A preferred
stock described below under "Description of Outstanding Preferred Stock"),
voting as a single class, without regard to series, will be entitled to elect
two additional directors until all dividends in default on all of our preferred
stock have been paid or declared and set aside for payment.
The affirmative vote or consent of holders of at least two-thirds of the
outstanding shares of any series of our preferred stock, voting as a class, is
required for any amendment to our restated certificate of incorporation
(including any certificate of designation or similar document relating to any
series of preferred stock) which will adversely affect the powers, preferences,
privileges or rights of the series of preferred stock. The affirmative vote or
consent of holders of at least two-thirds of the outstanding shares of any
series of preferred stock, voting as a single class without regard to the
series, is required to issue, authorize, or increase the authorized amount of,
or issue or authorize any obligation or security convertible into or evidencing
a right to purchase the additional class or series of stock ranking prior to
the series of preferred stock as to dividends or upon liquidation.
Redemption
A series of the preferred stock may be redeemable, in whole or in part, at
our option, and may be subject to mandatory redemption under a sinking fund or
otherwise as described in the applicable prospectus supplement. The preferred
stock that we redeem will be restored to the status of authorized but unissued
shares of preferred stock which we may issue in the future.
If a series of preferred stock is subject to mandatory redemption, the
applicable prospectus supplement will specify the number of shares that we will
redeem in each year and the redemption price per share together with an amount
equal to all accrued and unpaid dividends on those shares to the redemption
date. The applicable prospectus supplement will state whether the redemption
price can be paid in cash or other property. If the redemption price is to be
paid only from the net proceeds of issuing our capital stock, the terms of the
series of preferred stock may provide that, if the capital stock has not been
issued or if the net proceeds are not sufficient to pay the full redemption
price then due, the shares relating to series of the preferred stock shall
automatically and mandatorily be converted into shares of our capital stock
under the conversion provisions of the applicable prospectus supplement.
If fewer than all of the outstanding shares of any series of the preferred
stock are to be redeemed, our board of directors will determine the number of
shares to be redeemed. We will redeem those shares pro rata from the holders of
record in proportion to the number of shares held by holders (with adjustments
to avoid redemption of fractional shares).
Even though the terms of a series of preferred stock may permit redemption
of the preferred stock in whole or in part, if any dividends, including
accumulated dividends, on that series are past due,
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we will not redeem any preferred stock of that series unless we simultaneously
redeem all outstanding preferred stock of that series, and we do not purchase
or otherwise acquire any preferred stock of that series. This does not prohibit
the purchase or acquisition of preferred stock under a purchase or exchange
offer if this offer is made to all holders of the series of the preferred stock
on the same terms.
We will give notice of a redemption between 30 to 60 days before the date
fixed for redemption. We will mail the notice to each record holder of the
shares to be redeemed, at their address as it appears on our stock books. Each
notice will state:
. the redemption date;
. the number of shares and series of the preferred stock to be redeemed;
. the redemption price;
. the place(s) where a holder can surrender the certificates for the
preferred stock for payment of the redemption price; and
. that dividends on the shares to be redeemed will cease to accrue on the
redemption date.
If we redeem fewer than all shares of any series of the preferred stock held
by any holder, we will also specify in the notice the number of shares to be
redeemed from the holder.
If we have provided notice of redemption, then beginning on the redemption
date for the shares of the series of the preferred stock called for redemption
(unless we default in providing money for payment of the redemption price):
. dividends on the shares of preferred stock called for redemption will
cease to accrue;
. those shares will no longer be considered outstanding; and
. the holders will no longer have any rights as stockholders except to
receive the redemption price.
When the holders properly surrender the redeemed shares, we will pay the
redemption price mentioned above out of funds provided by us. If we redeem
fewer than all of the shares represented by any certificate, we will issue a
new certificate representing the unredeemed shares without cost to the holder.
Conversion and Exchange
If any series of offered preferred stock is convertible into or exchangeable
for any other class or series of our capital stock, the applicable prospectus
supplement relating to that series will include the terms and conditions
governing the conversions and exchanges.
Rights at Liquidation
If we voluntarily or involuntarily liquidate, dissolve or wind up our
business, the holders of shares of each series of preferred stock and any other
securities that have rights equal to that series of preferred stock under these
circumstances, will be entitled to receive out of our assets that are available
for distribution to stockholders:
. liquidation distributions in the amount stated in the applicable
prospectus supplement; and
. all accrued and unpaid dividends (whether or not earned or declared),
before any distribution to holders of common stock or of any securities ranking
junior to the series of preferred stock.
Neither the sale of all or any part of our property and business, nor our
merger into or consolidation with any other corporation nor the merger or
consolidation of any other corporation with or into us, will be deemed to be a
dissolution, liquidation or winding up.
If our assets are insufficient to pay all amounts to which holders of
preferred stock are entitled, we will make no distribution on the preferred
stock or on any other securities ranking equal to the preferred stock unless we
make a pro rata distribution to those holders. After we pay the full amount of
the liquidation distribution to which the holders are entitled, the holders
will have no right or claim to any of our remaining assets.
Description of Outstanding Preferred Stock
Series 1990 A Preferred Stock. In connection with our sale of 37,800,000
shares of our common stock and accompanying periodic stock purchase rights and
risk event warrants in a private placement in July 1990, we may under certain
circumstances be obligated to issue up to 12,750 shares of series 1990A
preferred stock.
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The shares of our series 1990A preferred stock would, if issued, provide for
a liquidation preference of $100,000 per share.
The dividend rate would be adjusted quarterly and would be determined at the
time of issuance.
If, at the time of any annual meeting of stockholders for the election of
directors, the amount of accrued but unpaid dividends on our series 1990A
preferred stock is equal to at least six quarterly dividends, then we would
increase the number of directors by one and the holders of the series, voting
as a separate class, would be entitled to elect one additional director who
would continue to serve the full term for which he or she would have been
elected, notwithstanding the declaration or payment of any dividends on our
series 1990A preferred stock. Holders of our series 1990A preferred stock would
not have any other voting rights, except as described under the section "Voting
Rights" above.
Term Participating Preferred Stock. In connection with an acquisition, we
established a series of preferred stock, the term participating preferred
stock, par value $1.00 per share. Holders of the term participating preferred
stock will have the right to receive our common stock in exchange for their
preferred stock. The number of shares of term participating preferred stock as
of March 31, 1999, is 56,539.
Holders of the term participating preferred stock are entitled to cumulative
dividends, when declared by our board of directors.
In the event of our voluntary or involuntary liquidation, distribution or
sale of our assets, or our dissolution or winding up, the holders of
outstanding term participating preferred stock will be entitled to receive the
distribution amount, plus accrued and unpaid dividends, if any.
The shares of term participating preferred stock are not redeemable. Holders
of shares of term participating preferred stock shall have no voting rights,
except as required by law.
DESCRIPTION OF DEPOSITARY SHARES
This section describes the general terms and provisions of the depositary
shares. The applicable prospectus supplement will describe the specific terms
of the series of the depositary shares offered under that applicable prospectus
supplement and any general terms outlined in this section that will not apply
to those depositary shares.
We have filed a form of deposit agreement, including the form of depositary
receipt, as an exhibit to the registration statement.
This section summarizes the material terms and provisions of the deposit
agreement, the depositary shares and the depositary receipts. Because this is a
summary it does not contain all of the details found in the full text of the
deposit agreement, the depositary shares and the depositary receipts. If you
would like additional information, you should read the form of deposit
agreement, the form of the depositary shares and the form of depositary
receipts relating to the applicable series of preferred stock.
General
We may offer fractional, rather than full shares of preferred stock. If we
exercise this option, we will provide for the issuance by a depositary to the
public of depositary receipts evidencing depositary shares, each of which will
represent a fractional interest (to be stated in the applicable prospectus
supplement relating to a particular series of the preferred stock) in a share
of a particular series of the preferred stock.
We will deposit the shares of any series of the preferred stock underlying
the depositary shares under a separate deposit agreement between us and a bank
or trust company selected by us, known as a Depositary, having its principal
office in the United States, and having a combined capital and surplus of at
least $50 million. The applicable prospectus supplement will provide the name
and address of the Depositary. Subject to the terms of the deposit agreement,
each owner of a depositary share will have a fractional interest in all the
rights and preferences of the preferred stock underlying the depositary share.
These rights include any dividend, voting, redemption, conversion and
liquidation rights.
While the final depositary receipts are being prepared, we may order the
Depositary, in writing, to issue temporary depositary receipts substantially
identical to the final depositary receipts although not
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in final form. This will entitle the holders to all the rights relating to the
final depositary receipts. Final depositary receipts will be prepared without
unreasonable delay, and the holders of the temporary depositary receipts can
exchange them for the final depositary receipts at our expense.
Withdrawal of Preferred Stock
If you surrender depositary receipts at the principal corporate trust office
of the Depositary (unless the related depositary shares have previously been
called for redemption), you are entitled to receive at that office, should you
so request, the number of shares of preferred stock and any money or other
property represented by the depositary shares. We will not issue partial shares
of preferred stock. If you deliver a number of depositary receipts evidencing a
number of depositary shares that represent more than a whole number of
depositary shares of preferred stock to be withdrawn, the Depositary will issue
you a new depositary receipt evidencing the excess number of depositary shares
at the same time that the preferred stock is withdrawn. Holders of preferred
stock will no longer be entitled to deposit these shares under the deposit
agreement or to receive depositary shares in exchange for those withdrawn
shares of preferred stock. We cannot assure you that a market will exist for
the withdrawn preferred stock.
Dividends and Other Distributions
The Depositary will distribute all cash dividends or other cash
distributions received for the preferred stock (less any taxes required to be
withheld) to the record holders of depositary shares representing the preferred
stock in proportion to the number of depositary shares that the holders own on
the relevant record date. The Depositary will distribute only the amount that
can be distributed without attributing to any holder of depositary shares a
fraction of one cent. The balance not distributed will be added to and treated
as part of the next sum that the Depositary receives for distribution to record
holders of depositary shares.
If there is a distribution other than in cash, the Depositary will
distribute property to the record holders of depositary shares that are
entitled to it, unless the Depositary determines that it is not feasible to
make this distribution. If this occurs, the Depositary may, with our approval,
sell the property and distribute the net proceeds from the sale to the holders
of depositary shares.
The deposit agreement will also contain provisions relating to the manner in
which any subscription or similar rights that we offer to holders of the
preferred stock will be made available to holders of depositary shares.
Conversion and Exchange
Unless the applicable prospectus supplement indicates otherwise, the series
of preferred stock underlying the depositary shares will not be convertible or
exchangeable into any other class or series of our capital stock.
Redemption of Deposited Preferred Stock
If a series of preferred stock underlying the depositary shares is subject
to redemption, we will redeem the depositary shares from the redemption
proceeds received by the Depositary, in whole or in part, on the series of
preferred stock held by the Depositary. The Depositary will mail notice of
redemption between 30 and 60 days before the date fixed for redemption to the
record holders of the depositary shares to be redeemed at the address appearing
in the Depositary's records. The redemption price per depositary share will
bear the same relationship to the redemption price per share of preferred stock
that the depositary share bears to the underlying preferred stock. When we
redeem preferred stock held by the Depositary, the Depositary will redeem as of
the same redemption date, the number of depositary shares representing the
preferred stock redeemed. If less than all the depositary shares are to be
redeemed, the depositary shares to be redeemed will be selected by lot or pro
rata as we may determine.
From and after the date fixed for redemption, the depositary shares called
for redemption will no longer be outstanding. When the depositary shares are no
longer outstanding, all rights of the holders of depositary shares will cease,
except the right to receive money or property that the holders of the
depositary shares were entitled to receive on redemption. The payments will be
made when holders surrender their depositary receipts to the Depositary.
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Voting of Deposited Preferred Stock
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the Depositary will mail the information contained
in the notice to the record holders of the depositary shares relating to the
preferred stock. Each record holder of the depositary shares on the record date
(which will be the same date as the record date for the preferred stock) will
be entitled to instruct the Depositary on how the preferred stock underlying
the holder's depositary shares should be voted. The Depositary will try, if
practicable, to vote the number of shares of preferred stock underlying the
depositary shares according to the instructions received, and we will take all
action that the Depositary may consider necessary to enable the Depositary to
do so. The Depositary will not vote any preferred stock if it does not receive
specific instructions from the holders of depositary shares relating to the
preferred stock.
Taxation
Owners of depositary shares will be treated for U.S. federal income tax
purposes as if they were owners of the preferred stock represented by the
depositary shares. Accordingly, for U.S. federal income tax purposes, they will
have the income and deductions to which they would have been entitled if they
were holders of the preferred stock. In addition:
. no gain or loss will be recognized for federal income tax purposes when
preferred stock is withdrawn in exchange for depositary shares as
provided in the deposit agreement;
. the tax basis of each share of preferred stock to an exchanging owner of
depositary shares will, at the exchange, be the same as the aggregate tax
basis of the depositary shares exchanged; and
. the holding period for the preferred stock in the hands of an exchanging
owner of depositary shares who held the depositary shares as a capital
asset at the time of the exchange, will include the period during which
the person owned the depositary shares.
Amendment and Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may be amended at any time by an agreement
between us and the Depositary. However, any amendment that materially and
adversely alters the rights of the existing holders of depositary shares will
not be effective unless approved by the record holders of at least a majority
of the depositary shares then outstanding. A deposit agreement may be
terminated by either the Depositary or us only if:
. all outstanding depositary shares relating to the deposit agreement have
been redeemed; or
. there has been a final distribution on the preferred stock of the
relevant series in connection with our liquidation, dissolution or
winding up and the distribution has been distributed to the holders of
the related depositary receipts evidencing the depositary shares.
Charges of Depositary
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will pay charges
of the Depositary associated with the initial deposit and any redemption of the
preferred stock. Holders of depositary shares will pay transfer and other taxes
and governmental charges, and any other charges that are stated to be their
responsibility in the deposit agreement.
Resignation and Removal of Depositary
The Depositary may resign at any time by delivering notice to us. We may
also remove the Depositary at any time. Resignations or removals will be
effective when a successor Depositary is appointed, and when the successor
accepts the appointment. The successor Depositary must be appointed within 60
days after delivery of the notice of resignation or removal and must be a bank
or trust company having its principal office in the United States and a
combined capital and surplus of at least $50 million.
Miscellaneous
The Depositary will forward to the holders of depositary shares all reports
and communications that it receives from us, and that we are required to
furnish to the holders of the preferred stock.
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Neither the Depositary nor us will be liable if the Depositary is prevented
or delayed by law or any circumstance beyond its control in performing its
obligations under the deposit agreement. Our obligations and that of the
Depositary under the deposit agreement will be limited to performance in good
faith of the duties described in the deposit agreement. Neither the Depositary
nor us will be obligated to prosecute or defend any legal proceeding connected
with any depositary shares or preferred stock unless satisfactory indemnity is
furnished to the Depositary and us. The Depositary and us may rely on written
advice of counsel or accountants, or information provided by persons presenting
preferred stock for deposit, holders of depositary shares or other persons
believed to be competent and on documents believed to be genuine.
DESCRIPTION OF DEBT WARRANTS
This section describes the general terms and provisions of the warrants. The
applicable prospectus supplement will describe the specific terms of the
warrants offered under that applicable prospectus supplement and any general
terms outlined in this section that will not apply to those warrants.
We have filed a form of warrant agreement, including the form of warrant
certificate, as an exhibit to the registration statement.
This section summarizes the material terms and provisions of the warrants.
Because this is a summary, it does not contain all of the details found in the
full text of the warrant agreement and the warrant certificate. If you would
like additional information you should read the form of warrant agreement and
the warrant certificate relating to the applicable series of debt securities.
We may issue warrants independently or, together with debt securities. The
warrants will be issued under warrant agreements between us and a bank or trust
company, as warrant agent, all as stated in the applicable prospectus
supplement. The warrant agent will act solely as our agent in connection with
the warrants and will not assume any obligation or relationship of agency or
trust for or with any holders or beneficial owners of warrants.
General
The applicable prospectus supplement will describe the terms of the warrants
offered in this prospectus, including the following, if applicable:
. the offering price;
. the currencies in which the warrants are being offered;
. the title of the warrants;
. the designation, aggregate principal amount and terms of the debt
securities for which the warrants are exercisable and the procedures and
conditions relating to the exercise of those warrants;
. the designation and terms of any related debt securities with which the
warrants are to be issued and the number of the warrants offered with
each debt security;
. the date, if any, on and after which the holder of the warrants can
transfer them separately from the related debt securities;
. the principal amount of debt securities that can be purchased if a holder
exercises each warrant and the price at which the principal amount can be
purchased upon exercise;
. the date on which the right to exercise the warrants will commence and
the date on which this right will expire;
. if the debt securities that can be purchased at the exercise of a warrant
are original issue discount debt securities, a discussion of the
applicable U.S. federal income tax consequences; and
. whether the warrant certificates representing the warrants will be issued
in registered or bearer form, and if registered, where they are
transferred and registered.
The holder can exchange warrant certificates for new warrant certificates of
different authorized denominations, and can exercise his or her warrants at the
corporate trust office of the warrant agent or any other office indicated in
the applicable prospectus supplement. Holders of warrants will not have any of
the rights of holders of the debt securities that can be purchased if a holder
exercises the warrant and will not be entitled to payments of principal of, and
any premium or interest on the underlying debt securities before they exercise
their warrants.
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Exercise of Debt Warrants
Each warrant entitles the holder of that warrant to purchase the principal
amount of debt securities at the price stated, or determinable in the
applicable prospectus supplement. A holder can exercise warrants during the
period(s) stated in the applicable prospectus supplement. After the close of
business on the expiration date, unexercised warrants will become void.
A holder can exercise warrants as stated in the applicable prospectus
supplement relating to the warrants. We will, as soon as practicable, forward
to you the debt securities purchased upon exercise. If less than all of the
warrants represented by the warrant certificates are exercised, a new warrant
certificate will be issued for the remaining warrants.
FOREIGN CURRENCY RISKS
General
We can denominate the securities of a series in, and the principal of, and
any interest or premium on these securities can be payable in any foreign
currencies that we may designate at the time of offering. The applicable
prospectus supplement will describe the material risks relating to a particular
series of foreign currency securities.
Exchange Rates and Exchange Controls
An investment in foreign currency securities entails significant risks that
are not associated with a similar investment in a security denominated in U.S.
dollars. These risks include, without limitation:
. the possibility of significant changes in the rate of exchange between
the United States dollar and the currency or currency unit specified in
the applicable prospectus supplement; and
. the possibility of the imposition or modification of foreign exchange
controls by either the United States or foreign governments.
These risks generally depend on economic and political events over which we
have no control. In recent years, rates of exchange between the U.S. dollar and
some foreign currencies have been highly volatile and this volatility can be
expected in the future. Fluctuations in any particular exchange rate that have
occurred in the past do not necessarily indicate fluctuations in the rate that
may occur during the term of any foreign currency security.
Depreciation of the specified currency applicable to a foreign currency
security against the United States dollar would result in a decrease in:
. the U.S. dollar-equivalent yield of the security (or the debt security
purchasable at the time of exercise of any warrant);
. the U.S. dollar-equivalent value of the principal repayable at maturity
of the security (or the debt security purchasable at the time of exercise
of a warrant); and
. the U.S. dollar-equivalent market value of the security.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or before the maturity of a
foreign currency security (or the maturity of the debt security issuable at the
time of exercise of a warrant). Even if there are no exchange controls, it is
possible that the specified currency for any particular foreign currency
security will not be available at the maturity of the debt security (or the
maturity of the debt security issuable at the time of exercise of a warrant)
due to circumstances beyond our control.
Judgments
If an action based on foreign currency securities was commenced in a court
of the United States, it is likely that the court would grant judgment relating
to those securities only in U.S. dollars. It is not clear, however, whether, in
granting this judgment, the rate of conversion into U.S. dollars would be
determined with reference to the date of default, the date the judgment is
rendered, or some other date. Under current New York law, a state court in the
State of New York that gives a judgment on a foreign currency security would be
required to give the judgment in the specified currency in which the foreign
currency security is denominated, and this judgment would be converted into
U.S. dollars at the exchange rate prevailing on the date of entry of the
judgment. Holders of foreign currency securities would bear the risk of
exchange rate fluctuations
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between the time the amount of the judgment is calculated and the time that the
applicable trustee converts U.S. dollars to the specified currency for payment
of the judgment.
Limited Facilities for Conversion
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. In addition, banks
generally do not offer non-U.S. dollar denominated checking or savings account
facilities in the United States. Accordingly, payments on foreign currency
securities will, unless otherwise specified in the applicable prospectus
supplement, be made from an account with a bank located in the country issuing
the specified currency or, for foreign currency securities, denominated in
euro, Brussels.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the debt securities, unless
otherwise stated in the applicable prospectus supplement. We will issue the
debt securities only as fully-registered securities registered in the name of
Cede & Co. (DTC's nominee). We will issue and deposit with DTC one or more
fully-registered global certificates for the debt securities representing in
the aggregate, the total number of the debt securities.
DTC is a limited purpose trust company organized under the New York Banking
Law, a banking organization under the meaning of the New York Banking Law, a
member of the Federal Reserve System, a clearing corporation under the meaning
of the New York Uniform Commercial Code, and a clearing agency registered under
the provisions of Section 17A of the Exchange Act. DTC holds securities that
its participants deposit with DTC. DTC also facilitates the settlement among
participants of securities transactions, like transfers and pledges, in
deposited securities through electronic computerized book-entry changes in the
participants' accounts, eliminating in this manner the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Others like securities brokers
and dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly also have
access to the DTC system. The rules applicable to DTC and its participants are
on file with the SEC.
Purchases of debt securities within the DTC system must be made by or
through Direct Participants, who will receive a credit for the debt securities
on DTC's records. The ownership interest of each actual purchaser of each debt
security is in turn to be recorded on the Direct and Indirect Participants'
records. DTC will not send written confirmation to Beneficial Owners of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased debt securities. Transfers of ownership interests in the debt
securities are to be accomplished by entries made on the books of participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in debt securities, unless
the book-entry system for the debt securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the debt securities.
DTC's records reflect only the identity of the Direct Participants to whose
accounts the debt securities are credited, which may or may not be the
Beneficial Owners. The participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners,
subject to any statutory or regulatory requirements as is in effect from time
to time, will be governed by arrangements among them.
We will send redemption notices to Cede & Co. as the registered holder of
the debt securities. If less than all of the debt securities are redeemed,
DTC's
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current practice is to determine by lot the amount of the interest of each
Direct Participant to be redeemed.
Although voting on the debt securities is limited to the holders of record
of the debt securities, in those instances in which a vote is required, neither
DTC nor Cede & Co. will itself consent or vote on debt securities. Under its
usual procedures, DTC would mail an omnibus proxy to the relevant trustee as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to Direct Participants for whose accounts the debt
securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
The relevant trustee will make distribution payments on the debt securities
to DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payments on the payment date. Standing instructions and customary practices
will govern payments from participants to Beneficial Owners. Subject to any
statutory or regulatory requirements, participants, and not DTC, the relevant
trustee, trust or us, will be responsible for the payment. The relevant trustee
is responsible for payment of distributions to DTC. Direct and Indirect
Participants are responsible for the disbursement of the payments to the
Beneficial Owners.
DTC may discontinue providing its services as securities depositary on any
of the debt securities at any time by giving reasonable notice to the relevant
trustee and to us. If a successor securities depositary is not obtained, final
debt securities certificates must be printed and delivered. We may, at our
option, decide to discontinue the use of the system of book-entry transfers
through DTC (or a successor depositary). After an event of default, the holders
of an aggregate principal amount of debt securities may discontinue the system
of book-entry transfers through DTC. In this case, final certificates for the
debt securities will be printed and delivered.
We have obtained the information in this section about DTC and DTC's book-
entry system from sources that we believe to be accurate, and we assume no
responsibility for the accuracy of the information. We have no responsibility
for the performance by DTC or its participants of their respective obligations
as described in this prospectus or under the rules and procedures governing
their respective operations.
PLAN OF DISTRIBUTION
We may sell the securities:
.through underwriters or dealers;
.directly to one or more purchasers; or
.through agents.
The applicable prospectus supplement will include the names of underwriters,
dealers or agents retained. The applicable prospectus supplement will also
include the purchase price of the securities, our proceeds from the sale, any
underwriting discounts or commissions and other items constituting
underwriters' compensation, and any securities exchanges on which the
securities are listed.
The underwriters will acquire the securities for their own account. They may
resell the securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The obligations of the underwriters to purchase the
securities will be subject to some conditions. The underwriters will be
obligated to purchase all the securities offered if any of the securities are
purchased. Any initial public offering price and any discounts or concessions
allowed or re-allowed or paid to dealers may be changed from time to time.
Underwriters, dealers, and agents that participate in the distribution of
the securities may be underwriters as defined in the Securities Act, and any
discounts or commissions received by them from us and any profit on the resale
of the securities by them may be treated as underwriting discounts and
commissions under the Securities Act.
We may have agreements with the underwriters, dealers, and agents to
indemnify them against some civil liabilities, including liabilities under the
Securities Act, or to contribute to payments which the underwriters, dealers or
agents may be required to make.
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Underwriters, dealers and agents may engage in transactions with, or perform
services for, us or our subsidiaries in the ordinary course of their
businesses.
We may authorize underwriters, dealers and agents to solicit offers by some
specified institutions to purchase securities from us at the public offering
price stated in the applicable prospectus supplement under delayed delivery
contracts providing for payment and delivery on a specified date in the future.
These contracts will be subject only to those conditions included in the
applicable prospectus supplement, and the applicable prospectus supplement will
state the commission payable for solicitation of these contracts.
Unless the applicable prospectus supplement states otherwise, all
securities, except for common stock, will be new issues of securities with no
established trading market. Any underwriters who purchase securities from us
for public offering and sale may make a market in those securities, but these
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. We cannot assure you that the liquidity of
the trading market for any securities will be liquid.
VALIDITY OF SECURITIES
Validity of the securities will be passed upon for us by Dorsey & Whitney
LLP, Minneapolis, Minnesota, and for any underwriters or agents, by Davis Polk
& Wardwell, New York, New York. Davis Polk & Wardwell will rely as to all
matters governed by Minnesota law on the opinion of Dorsey & Whitney LLP, and
Dorsey & Whitney LLP will rely as to all matters governed by New York law on
the opinion of Davis Polk & Wardwell. Dorsey & Whitney LLP and some of its
members are indebted to and have other banking and trust relationships with
some of our banking subsidiaries.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report (Form 10-K) for the year
ended December 31, 1998, as stated in their report which is incorporated by
reference in this prospectus. Our consolidated financial statements are
incorporated in this prospectus by reference in reliance on Ernst & Young's
report given on their authority as experts in accounting and auditing.
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GLOSSARY
Below are abbreviated definitions of capitalized terms used in this
prospectus and in the applicable prospectus supplement. The applicable
prospectus supplement may contain a more complete definition of some of the
terms defined here and reference should be made to the applicable prospectus
supplement for a more complete definition of these terms.
"Beneficial owner" refers to the ownership interest of each actual purchaser
of each debt security.
"Company" refers to U.S. Bancorp and its subsidiaries, unless otherwise
stated.
"Debt" refers to, for any person, whether recourse is to all or a portion of
the assets of the person and whether or not contingent:
. every obligation of the person for money borrowed;
. every obligation of the person evidenced by bonds, debt securities,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses;
. every reimbursement obligation of the person regarding letters of
credit, bankers' acceptances or similar facilities issued for the
account of the person;
. every obligation of the person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of
business);
. every capital lease obligation of the person;
. all indebtedness of the person whether incurred on, before, or after the
date of the indenture, for claims relating to derivative products
including interest rate, foreign exchange rate and commodity forward
contracts, options and swaps and similar arrangements; and
. every obligation of the type referred to in the first through the sixth
bullet points above of another person and all dividends of another
person the payment of which, in either case, the person has guaranteed
or is responsible or liable, directly or indirectly, as obligor or
otherwise.
"Depositary" refers to a bank or trust company selected by us, having its
principal office in the United States, and having a combined capital and
surplus of at least $50 million, and where we will deposit the shares of any
series of the preferred stock underlying the depositary shares under a separate
deposit agreement between us and that bank or trust company.
"Direct Participants" refers to securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations who, with the New York
Stock Exchange, Inc., the American Stock Exchange Inc., and the National
Association of Securities Dealers, Inc., own DTC. Purchases of debt securities
within the DTC system must be made by or through Direct Participants who will
receive a credit for the debt securities on DTC's records.
"Indirect Participants" refers to others, like securities brokers and
dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly, and who
also have access to the DTC system.
"Omnibus Proxy" refers to the omnibus proxy that DTC would mail under its
usual procedures to the relevant trustee as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
Direct Participants for whose accounts the debt securities are credited on the
record date.
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"Our" refers to U.S. Bancorp and its subsidiaries, unless otherwise stated.
"Ours" refers to U.S. Bancorp and its subsidiaries, unless otherwise stated.
"Us" refers to U.S. Bancorp and its subsidiaries, unless otherwise stated.
"We" refers to U.S. Bancorp and its subsidiaries, unless otherwise stated.
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[LOGO OF U.S. BANCORP]
