Why is the CEO establishing a trading plan?

CEO Jerry A. Grundhofer is retiring on December 31, 2006. His stock options have specific expiration dates, and some would expire after his retirement. The Rule 10b5-1(c) plan allows him to exercise and sell these options in a structured, pre-determined manner before they expire, ensuring he can still benefit from them and avoiding potential forfeiture.

What is a Rule 10b5-1(c) plan?

A Rule 10b5-1(c) plan is a written trading plan established by an insider (like an executive officer) that allows for the purchase or sale of securities at a predetermined time or price, or based on a pre-set formula. These plans are designed to be non-discretionary, meaning the insider cannot exercise further control over the trades once the plan is in place. This protects the insider from accusations of trading based on material non-public information.

How many shares are involved, and what are the sale terms?

Mr. Grundhofer plans to exercise options for a total of 3,362,712 shares of U.S. Bancorp common stock. He will sell one-fifth of these shares (approximately 672,542 shares) each quarter for five successive quarters. The sales are scheduled to begin in the third quarter of 2006 and will take place over a three-day period shortly after the public release of the company's financial results.

What is the cost of exercising these options?

The exercise prices for the stock options range from $18.79 to $21.54 per share. A portion of the proceeds from the sale of the shares will be used to cover the costs of exercising these options.

US BANCORP \DE\ 8-K SEC Disclosure

Summary

This Form 8-K filing from U.S. Bancorp (USB) on August 3, 2006, primarily details a pre-arranged trading plan established by Chairman and CEO Jerry A. Grundhofer. Following his announced retirement effective December 31, 2006, Mr. Grundhofer has implemented a Rule 10b5-1(c) plan to exercise and sell a significant number of his stock options before they expire. This plan ensures an orderly liquidation of these options, preventing them from becoming worthless due to his departure and adhering to regulations designed to avoid insider trading. The plan involves exercising options for a total of 3,362,712 shares and selling one-fifth of these shares each quarter over five quarters, starting in Q3 2006. The sales will occur shortly after the company publicly releases its financial results. The exercise prices range from $18.79 to $21.54 per share, with a portion of the sale proceeds allocated to cover the exercise costs. This proactive measure by the CEO demonstrates responsible financial planning ahead of his retirement.

Key Highlights

1CEO Jerry A. Grundhofer is retiring on December 31, 2006.
2Mr. Grundhofer has established a Rule 10b5-1(c) trading plan to exercise and sell company stock options.
3The plan is designed for an orderly liquidation of options that would otherwise expire worthless after his retirement.
4A total of 3,362,712 shares will be acquired through option exercise under this plan.
5The shares will be sold in equal tranches of one-fifth per quarter over five consecutive quarters.
6Sales will commence in the third quarter of 2006, occurring three trading days after quarterly or annual financial results are released.
7Option exercise prices range from $18.79 to $21.54 per share.

US BANCORP \DE\ 8-K Report, Corporate Update (Aug 3, 2006)

Summary

Key Highlights

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