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C » Topics » Representations and Warranties and Covenants

This excerpt taken from the C 8-K filed Jun 10, 2009.
Representations and Warranties and Covenants:  The Exchange Agreements contain representations and warranties made by Citigroup, a number of which are qualified by materiality or the absence of a material adverse effect.  The Exchange Agreements contain a number of covenants made by Citigroup and the U.S. Treasury or the FDIC, as applicable.  The covenants include:
 
 
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Conduct of Business.  Citigroup has agreed to use its reasonable best efforts to carry on its business in the ordinary course of business and maintain and preserve its and any of its subsidiaries’ business and preserve its business relationships.
 
 
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Commercially Reasonable Efforts.  Citigroup and the U.S. Treasury and the FDIC have agreed to use their commercially reasonable efforts to consummate the U.S. Treasury Private Transaction, U.S. Treasury Public Transaction and USG TRUPS® Transaction, as applicable.
 
 
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Exchange Listing.  Citigroup has agreed to use its reasonable best efforts to cause the Interim Securities and common stock underlying the Interim Securities and warrants issued to U.S. Treasury to be approved for listing on the NYSE, subject to relevant listing requirements.
 
 
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Access, Information and Confidentiality.  Citigroup has agreed to provide the U.S. Treasury and the FDIC with access to corporate books and financial and accounting records until the U.S. Treasury’s or the FDIC’s, as applicable, ownership of Citigroup’s securities falls below a specified threshold.  Correspondingly, subject to certain limitations, the U.S. Treasury and the FDIC have agreed to use reasonable best efforts to hold such information confidential.
 
 
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Anti-takeover Provisions and Tax Benefits Preservation Plan.  Citigroup has agreed to exclude the U.S. Treasury and the FDIC from any plan or other anti-takeover measure that it adopts with regard to other potential investors in Citigroup.  However, subject to certain limitations, Citigroup may adopt a plan to retain certain tax benefits.  Under this type of plan, all holders of Citigroup’s securities will be treated in the same manner with respect to dispositions of such holder’s securities.
 
 
 
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Internal Controls.  Citigroup has agreed to establish internal protocols that monitor compliance with certain of Citigroup’s covenants under the Exchange Agreements.
 
 
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Depositary Shares.  Citigroup has agreed, upon the request of the U.S. Treasury, to enter into customary depositary arrangements to allow for the Interim Securities to be issued in the form of depositary shares.
 
 
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Registration Rights.  Citigroup has agreed to provide the U.S. Treasury and the FDIC with certain customary demand and “piggyback” registration rights covering the U.S. Treasury and the FDIC registrable securities.
 
 
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Preemptive Rights.  In the event Citigroup consummates a public or non-public offering of any common stock at a price less than $3.25 (or of securities convertible or exercisable into or exchangeable for common stock if the conversion, exercise or exchange price per share of common stock is less than $3.25) during the one year period commencing with the closing of the USG Private Transaction, Citigroup generally has agreed to provide the U.S. Treasury the right to purchase, on the same terms as in the offering, an amount of such securities that, in the aggregate, enables it to maintain its percentage ownership interest (assuming the exercise or conversion of all unexercised exchangeable convertible securities it owns) in Citigroup subject to certain terms and conditions.
 
 
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Executive Compensation.  Citigroup has agreed to (i) ensure that benefit plans comply with applicable compensation regulations; (ii) ensure that specified limitations on “golden parachute payments” are satisfied; (iii) ensure that specified limitations regarding bonus compensation payable to senior executive officers and senior leadership members are satisfied; (iv) maintain and implement lobbying and expense policies; (v) provide to Treasury an annual risk management report; and (vi) recoup payments made in contravention of executive compensation covenants to which it is subject.
 
 
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Bank Holding Company.  Citigroup has agreed to maintain its status as a Bank Holding Company for so long as the U.S. Treasury or the FDIC, as applicable, owns any debt or equity securities of Citigroup acquired pursuant to the Exchange Agreements.
 
 
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Restrictions on Dividends and Repurchases.  Subject to certain exceptions, until the date that the U.S. Treasury or the FDIC, as applicable, cease to own any debt or equity securities of Citigroup or an affiliate of Citigroup, Citigroup has agreed that, without the consent of the U.S. Treasury or the FDIC, as applicable, it will not (i) declare or pay any dividend or make any distribution on its common stock or (ii) redeem, purchase or acquire any shares of common stock or other capital stock or other equity securities of any kind of Citigroup, or any trust preferred securities issued by Citigroup or any of its affiliates.
 
 
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Voting of Warrant Shares.  The U.S. Treasury has agreed not to exercise any voting rights with respect to the warrant shares it will beneficially own as a result of the U.S. Treasury Private Transaction.
 
 
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Voting on Preferred Stock Amendments.  The U.S. Treasury and the FDIC have each agreed that they will vote their preferred stock and Interim Securities, as applicable, in the same proportion as all other shares of Citigroup’s preferred stock, whether such shares vote in the same class with or as a separate class from the U.S. Treasury or the FDIC preferred stock and Interim Securities, with respect to (1) an amendment to Citigroup’s charter to eliminate the requirement that dividends on outstanding shares of preferred stock be paid or declared and set apart for payment before any dividend may be paid or declared and set apart for payment on any outstanding shares of Citigroup’s common stock and (2) an amendment to Citigroup’s charter to increase the number of Citigroup’s authorized shares of preferred stock.
 
 
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Voting of Common Stock.  The U.S. Treasury has agreed that it will vote all of its common stock in the same proportion as all other shares of Citigroup's common stock are voted, with respect to each matter on which holders of Citigroup’s common stock are entitled to vote or consent other than with respect to the following matters:  (i) the election and removal of directors, (ii) the approval of any
 
 
 
 
merger, consolidation, statutory share exchange or similar transaction that requires the approval of Citigroup’s stockholders, (iii) the approval of a sale of all or substantially all of the assets or property of Citigroup, (iv) the approval of a dissolution of Citigroup, (v) the approval of any issuance of securities of Citigroup on which holders of Citigroup’s common Stock are entitled to vote and (vi) the approval of any amendment to the charter or bylaws of Citigroup on which holders of Citigroup’s common stock are entitled to vote.
 
 
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Mandatory Sale Date.  If the U.S. Treasury owns any common stock or warrants convertible into such common stock on the tenth anniversary of the closing date of the previously announced public exchange offers, then the U.S. Treasury agrees to use reasonable efforts to transfer to non-governmental entities on an annual basis at least 20% of the aggregate number of such shares owned by the U.S. Treasury until all of such shares are transferred.
 

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