Summary of Terms
Eligible Asset Guarantee
Eligible Assets: Asset pool consisting of loans and securities backed by residential real
estate and commercial real estate, and their associated hedges, as agreed,
and other such assets as the U.S. Government (USG) has agreed to
guarantee. Each specific asset must be identified on signing of guarantee
agreement. Assets will remain on the books of institution but will be
appropriately “ring-fenced.”
Size: Up to $306 bn in assets to be guaranteed (based on valuation agreed upon
between institution and USG).
Term of Guarantee: FDIC standard loss-sharing protocol: Guarantee is in place for 10 years
for residential assets, 5 years for non-residential assets.
Deductible: Institution absorbs all losses in portfolio up to $29 bn (in addition to
existing reserves)
Any losses in portfolio in excess of that amount are shared USG (90%)
and institution (10%).
USG share will be allocated as follows:
UST (via TARP) second loss up to $5 bn;
FDIC takes the third loss up to $10 bn;
Financing: Federal Reserve funds remaining pool of assets with a non-recourse loan,
subject to the institution’s 10% loss sharing, at a floating rate of OIS plus
300bp. Interest payments are with recourse to the institution.
Fee for Guarantee -
Preferred Stock: Institution will issue $7 bn of preferred stock with an 8% dividend rate
(under terms described below). $4 bn of preferred will be issued to UST.
$3 bn will be issued to the FDIC.
Management of
Assets: USG will provide institution with a template to manage guaranteed assets
This template will include the use of mortgage modification procedures
adopted by the FDIC, unless otherwise agreed.
Risk Weighting: Institution will retain the income stream from the guaranteed assets. Risk
weighting for assets will be 20%.
Dividends: Institution is prohibited from paying common stock dividends, in excess
of $.01 per share per quarter, for 3 years without UST/FDIC/FRB consent.
A factor taken into account for consideration of the USG’s consent is the
ability to complete a common stock offering of appropriate size.
Executive
Compensation: An executive compensation plan, including bonuses, that rewards long-
term performance and profitability, with appropriate limitations, must be
submitted to, and approved by, the USG
Corporate
Governance: Other matters as specified
Preferred Securities
Issuer: Citigroup (“Citi”)
Initial Holder: United States Department of the Treasury (“UST”).
Size: $20 billion
Security: Preferred, liquidation preference $1,000 per share. (Depending upon the
available authorized preferred shares, the UST may agree to purchase
preferred with a higher liquidation preference per share, in which case the
UST may require Citi to appoint a depositary to hold the Preferred and
issue depositary receipts.)
Ranking: Same terms as preferred issued in CPP.
Term: Perpetual life.
Dividend: The Preferred will pay cumulative dividends at a rate of 8% per annum.
Dividends will be payable quarterly in arrears on February 15, May 15,
August 15 and November 15 of each year.
Redemption: In stock or cash, as mutually agreed between UST and Citi. Otherwise,
redemption terms of CPP preferred terms apply.
Restrictions
on Dividends: Institution is prohibited from paying common stock dividends, in excess
of $.01 per share per quarter, for 3 years without UST consent. A factor
taken into account for consideration of the UST’s consent is the ability to
complete a common stock offering of appropriate size.
Repurchases: Same terms as preferred issued in CPP.
Voting rights: The Preferred shall be non-voting, other than class voting rights on (i) any
authorization or issuance of shares ranking senior to the Preferred, (ii) any
amendment to the rights of Preferred, or (iii) any merger, exchange or
similar transaction which would adversely affect the rights of the
Preferred.
If dividends on the Preferred are not paid in full for six dividend periods,
whether or not consecutive, the Preferred will have the right to elect 2
directors. The right to elect directors will end when full dividends have
been paid for (i) all prior dividend periods in the case of cumulative
Preferred or (ii) four consecutive dividend periods in the case of non-
cumulative Preferred.
Transferability: The Preferred will not be subject to any contractual restrictions on
transfer.
Executive
Compensation: An executive compensation plan, including bonuses, that rewards long-
term performance and profitability, with appropriate limitations, must be
submitted to, and approved by, the USG.
Summary of Warrant Terms
Warrant: Institution will issue a warrant to UST for an aggregate exercise value of
10% of the total preferred issued to USG (in both transactions) ($2.7 bn).
Exercise Price: The strike price will be equal to $10.61 per share (the 20 day trailing
average ending on November 21, 2008). The warrants issued to UST are
not subject to reduction based on additional offerings.
Term: Ten years, immediately exercisable, in whole or in part.
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