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C » Topics » Item 5.02 Compensatory Arrangements of Certain Officers; Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.This excerpt taken from the C 8-K filed Jan 16, 2009. Item 5.02 Compensatory Arrangements
of Certain Officers; Item 5.03 Amendments to Articles of Incorporation or
Bylaws; Change in Fiscal Year.
On January
15, 2009, Citigroup Inc. (“Citigroup”), as part of the loss sharing program
previously announced on November 24, 2008, entered into a master agreement (the
“Master Agreement”) with the United States Department of the Treasury (the
“Treasury”), the Federal Reserve Bank of New York (the “Federal Reserve”) and
the Federal Deposit Insurance Corporation (the “FDIC”) relating to the loss
sharing by such government entities on $301 billion of Citigroup
assets. The loss sharing program will result in an estimated benefit
of 150 basis points to Citigroup’s Tier 1 capital ratio.
The assets that are the subject of the loss sharing program include loans and securities
backed by residential and
commercial real
estate, consumer
loans and other
assets as agreed between
Citigroup and the government entities. The loss coverage
period terminates in November 2013 with respect to Citigroup’s non-residential
assets and in November 2018 with respect to its residential
assets. The Master Agreement covers realized losses on the principal
amount of the covered assets (e.g., charge-offs, dispositions and failure to pay
principal, etc.). Pursuant to the Master Agreement, Citigroup will
assume first losses of $29 billion (as agreed on November 23, 2008), plus $1
billion in exchange for excluding benefits from hedges, plus the $9.5 billion
existing loan loss reserve, for a total Citigroup first loss position of $39.5
billion. Losses above that amount will be assumed as follows:
The
assumption of losses by the Treasury and the FDIC, and the extension of the loan
by the Federal Reserve, are subject to certain conditions, including, without
limitation, the accuracy of certain representations and warranties made by
Citigroup in all material respects, no “event of default” (as defined in the
Master Agreement) having occurred and be continuing and other customary
conditions. In addition, the Master Agreement provides for guidelines for
governance and asset management with respect to the covered asset pool,
including reporting requirements and notice and approval rights of the US
government
parties at
certain thresholds. If realized losses exceed $27 billion, the US
government parties have the right to change the asset manager for the covered
asset pool.
As consideration for the loss sharing and pursuant to a securities
purchase agreement (the
“Securities Purchase
Agreement”) dated January
15, 2009, Citigroup
issued $4.034 billion of perpetual preferred stock to the
Treasury, $3.025 billion of perpetual preferred stock to the
FDIC, and a warrant
to the Treasury to purchase
66,531,728 shares of common stock at a strike
price of $10.61. The Securities
Purchase Agreement and the preferred stock contain substantially the same
limitations on certain actions by Citigroup as those described in Citigroup’s
Current Report on Form 8-K filed on December 31, 2008.
The
composition of the covered asset pool, amount of Citigroup's first loss position
and fee for loss coverage are subject to final confirmation by the US government
parties of, among other things, qualification of assets, expected losses and
reserves.
On January
15, 2009, Citigroup filed a Certificate of Designations establishing the
designation, powers, preferences and rights of the shares of a new series of
Citigroup fixed rate cumulative perpetual preferred stock, Series G. The
Certificate of Designations amended Citigroup’s Restated Certificate of
Incorporation and was effective immediately upon filing.
You should
refer to the documents incorporated herein by reference for a complete
description of the terms of the Master Agreement, the Securities Purchase
Agreement, the preferred stock and the warrant. The Certificate of
Designations for the preferred stock is being filed as Exhibit 3.1 to this Form
8-K, the Warrant is being filed as Exhibit 4.1 to this Form 8-K, the Master
Agreement is being filed as Exhibit 10.1 to this Form 8-K, the Securities
Purchase Agreement is being filed as Exhibit 10.2 to this Form 8-K, the key
terms of the loss sharing program are being filed as Exhibit 99.1 to this Form
8-K, a description of the covered assets is being filed as Exhibit 99.2 to this
Form 8-K and a summary of the terms of the preferred stock and warrant is being
filed as Exhibit 99.3 to this Form 8-K. These documents are incorporated herein
by reference in their entirety.
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