Document:

Unassociated Document

     

    EMPLOYMENT
AGREEMENT

    WITH

    MICHAEL
J. HARTNETT

     

    This
Employment Agreement (the “Employment Agreement”) is dated effective as of this
4th day of April, 2010 (the “Commencement Date”) and made between RBC Bearings
Incorporated, a Delaware corporation (“Employer” or the “Company”) and Michael
J. Hartnett Ph.D. (“Employee”). Prior to and through the time of their entry
into this Agreement, Employee has served as Employer’s President, Chief
Executive Officer and Chairman of its Board of Directors pursuant to an
Employment Agreement dated July 1, 2005 (“Prior Employment Agreement”). Both
parties wish to continue this employment relationship under the terms reflected
in this Agreement.

     

    Therefore,
Employer hereby employs Employee and Employee hereby accepts employment, on the
terms and conditions hereinafter set forth.

     

    
      	
              1. 

            	
              DEFINITIONS.

            

    

    
      
      

    

     

    As used
in this Agreement, and unless the context requires a different meaning, the
following terms shall be defined as follows:

     

    
      “Change
in Control” is as defined in the RBC 2005 Long-Term Equity Incentive Plan as
amended.

    

    

    “Competing
Business” means any business (including, without limitation, research and
development) that is carried on by Employer in any material respect, and with
which Employee is actively involved, during the Term.

     

    “EBITDA”
shall mean the income of the Employer increased by interest, taxes, depreciation
and amortization, calculated in a manner consistent with the calculation of the
Plan.

    

    “Good
Reason” shall mean for the 24 month period following a Change in Control any of
the following which occur subsequent to the Commencement Date without your
express written consent:

    

    (i)           
a substantial reduction in the Employee’s title, position, duties,
responsibilities and status with the Company inconsistent with the Employee’s
title, duties, responsibilities and status immediately prior to a change in the
Employee’s titles or offices, or any removal of the Employee from or any failure
to reelect the Employee to any of such positions, except in connection with the
termination of his employment for disability, retirement or Cause or by the
Employee other than for Good Reason;

     

    (ii)          
a relocation of Employee’s principal work location without his consent to a
location more than 25 miles from the Company’s headquarters at Oxford,
Connecticut;

     

    (iii)         
any material breach by the Company of any provision of this Agreement; or
(iv) any failure by the Company to obtain the assumption of this Agreement
by any successor or assign of the Company.

    

    “Plan”
shall mean the operating plan established by the Employee, in his status as CEO
of Employer and as approved by the Board within thirty (30) days following the
beginning of each fiscal year, as applicable to Employer and as applicable to
the determination of bonuses payable to others of Employer’s employees to the
extent such bonuses are calculated by reference to operating
results.

      

    “Person”
means any natural person, partnership, corporation, trust, company or other
entity.

     

    “Territory”
means the geographical area in which the Employer engages in any business (other
than an insignificant amount of business), with which Employee is actively
involved, during the Term.

    

    “Equity
Vesting Triggering Event” means the occurrence of any of the
following:

    

    (i) the expiration of the Term of this
Agreement pursuant to Section 2;

     

    
      
        
        

      

      
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    (ii) the
termination of this Agreement pursuant to Section 8(a) upon Employee’s death or
Total Disability;

    

    (iii) the
termination of this Agreement by the Employer pursuant to Section 8(c) without
Cause; or

    

    (iv) the
termination of this Agreement by the Employee pursuant to Section 8(d) for other
than Good Reason.

     

    
      
        	
                2. 

              	
                TERM.

              

      

    

    
      
      

    

     

    Subject
to the terms and conditions of this Agreement, the Company shall employ Employee
as its President, Chief Executive Officer, and Chairman of its Board of
Directors for a term commencing on the Commencement Date hereof and continuing
until March 31, 2012 or until earlier terminated pursuant to the provisions of
Section 8 hereof  (the “Initial Term”). Upon expiration of the
Initial Term, this Agreement will automatically renew for additional one (1)
year periods (each a “Renewal Term”) unless either party notifies the other of
its intent not to so renew within ninety (90) days prior to the expiration of
the Initial Term or any Renewal Term. (The Initial Term and all Renewal Terms
shall collectively be referred to as the “Term”).

     

    
      	
              3.      

            	
              DUTIES.

            

    

    
      	
               
      

            	
               

            

    

    (a)           During
the Term, Employee agrees to serve Employer as its President, Chief Executive
Officer and Chairman of its Board of Directors (the “Board”) reporting to the
Board, and in such other executive capacities as may be agreed from time to time
by the Board (or a duly authorized committee thereof) and Employee; provided
that (i) Employee’s duties shall at all times be limited to those
commensurate with the foregoing offices, and (ii) Employee shall not be
obligated, without his consent, to relocate his principal office location from
Oxford, Connecticut (or the surrounding reasonable commuting area), although the
foregoing limitation is not intended to limit Employee’s requirement, in the
normal course of business, to travel to the Employer’s other business locations.
Employee shall serve, if elected, as a director of, and if agreed by Employee
and the board of directors of the organization in question, shall serve as an
officer and render appropriate services to, corporations directly or indirectly
controlled by Employer (“Employer’s Affiliates”) as Employer may from time to
time reasonably request (but only such services as shall be consistent with the
duties Employee is to perform for Employer and with Employee’s stature and
experience). All duties and services contemplated by this Section 3 are
hereinafter referred to as the “Services.”

    
      	
               
      

            	
               

            

    

    (b)          During
the Term, Employee will devote his full business time and attention to, and use
his good faith efforts to advance, the business and welfare of Employer;
provided that the foregoing shall not restrict Employee’s rights to engage in
passive investment activities, to serve on the boards of directors of other
entities (so long as such activities are not violative of Section 4 below),
or to engage in civic, charitable and other similar activities.

    
      	
               
      

            	
               

            

    

    
      	
              4. 

            	
              CONFIDENTIAL
      INFORMATION AND COVENANT NOT TO
COMPETE.

            

    

     

    
      
      

    

    (a)            Employee
hereby agrees that, during the Term and thereafter, he will not disclose to any
Person, or otherwise use or exploit in competition with Employer or Employer’s
Affiliates, any of the proprietary or confidential information or knowledge
treated by the Employer or Employer’s Affiliates as confidential, including
without limitation, trade secrets, processes, records of research, information
included in proposals, reports, methods, processes, techniques, computer
software or programming, or budgets or other financial information, regarding
Employer or Employer’s Affiliates, its or their business, properties or affairs
obtained by him at any time (i) during the Term or (ii) during any
employment of Employee with the Employer or any of Employer’s Affiliates prior
to the Commencement Date (“Prior Employment”), except to the extent required to
perform the Services; PROVIDED that the foregoing shall not apply to:
(A) information in the public domain other than by reason of a violation of
this Agreement by Employee, or (B) information that Employee is compelled
to disclose by operation of law or legal process (so long as Employee provides
Employer with prior notice of any such compelled disclosure and an opportunity
to defend against such disclosure), or (C) information generally known to
Employee by reason of his particular expertise that is not specific to the
Employer.

     

    
      
        
        

      

      
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    (b)            Employee
hereby agrees that during the Term and for a period of two years thereafter (the
“Non-Compete Term”), he will not (i) engage in or carry on, directly or
indirectly, any Competing Business in any Territory in which such Competing
Business is then engaged in by the Employer, (ii) allow his name to be used
by any Person engaged in any Competing Business, (iii) invest in, directly
or indirectly, any Person engaged in any Competing Business, or (iv) serve
as an officer or director, employee, agent, associate or consultant of any
Person engaged in a Competing Business (other than Employer or any Employer’s
Affiliate). Notwithstanding the foregoing, the Non-Compete Term shall be only
for the Term hereof in the event Employee’s employment hereunder is terminated
by the Employer hereunder without Cause (as provided in
Section 8(c) below) and shall be for a period of twelve (12) months
following such termination by the Employee with Good Reason (as provided in
Section 8(d) below). Subject to Section 3 (b) hereof,
nothing herein shall prohibit the Employee from (A) investing in any
business that is not a Competing Business or (B) investing in a
publicly-held entity if such investment (individually or as part of a group) is
limited to not more than five percent (5%) of the outstanding equity issue of
such entity.

    
      	
               
      

            	
               

            

    

    (c)            All
intellectual properties developed by Employee during the Term or during any
Prior Employment and that is related to the business (or foreseeable business
prospects) of the Employer with which Employee is actively involved shall be for
the account of the Employer. Employee agrees to enter into such agreements
(including transfer documents) as may be reasonably required by Employer to
confirm the foregoing.

    
      	
               
      

            	
               

            

    

    (d)            Employee
shall not, during the Non-Compete Term, directly or indirectly, solicit or
induce or attempt to solicit or induce any affiliate, director, agent, or
employee of Employer or contractor then under contract to the Employer, to
terminate his, her or its employment or other relationship with Employer for the
purpose of entering into a similar relationship with any Employer’s competitors
or for any other purpose or no purpose. Employee shall not, during the
Non-Compete Term, directly or indirectly, solicit or induce or attempt to
solicit or induce any customer or supplier of Employer to terminate his, her or
its relationship with Employer for the purpose of entering into a similar
relationship with any competitors of Employer or Employer’s Affiliates or for
any other purpose or no purpose.

    
      	
               
      

            	
               

            

    

    (e)            Employee
agrees that the remedy at law for any breach by him of any of any of the
covenants and agreements set forth in this Section 4 will be inadequate and
will cause immediate and irreparable injury to Employer and that in the event of
any such breach, Employer, in addition to the other remedies which may be
available to it at law, shall be entitled to seek injunctive relief prohibiting
him from the breach of such covenants and agreements.

    
      	
               
      

            	
               

            

    

    (f)           
The parties hereto intend that the covenants and agreements contained in this
Section 4 shall be deemed to include a series of separate covenants and
agreements, one for each and every county of the states in which the Employer
does business. If, in any judicial proceeding, the duration or scope of any
covenant or agreement of Employee contained in this Section 4 shall be
adjudicated to be invalid or unenforceable, the parties agree that this
Agreement shall be deemed amended to reduce such duration or scope to the extent
necessary to permit enforcement of such covenant or agreement.

    
      	
               
      

            	
               

            

    

    5.             
INDEMNIFICATION.

    
      	
               
      

            	
               

            

    

    Employer
hereby agrees to indemnify Employee to the maximum extent permitted by Delaware
law at the time of the assertion, against any liability against Employee arising
out of or relating to his status as an employee, officer or director acting
within the course and scope of employment, office or director responsibility of
Employer or any Employer’s Affiliate at any time during the Term, whether such
liability is asserted during or after the Term.

     

    
      	
              6.    

            	
              COMPENSATION
      AND BENEFITS.

            

    

    
      	
               
      

            	
               

            

    

    (a)            During
the Term, Employer shall pay Employee a salary at the rate of sixty
thousand  five hundred and thirty one dollars ($60,531) per month
payable at least as frequently as monthly and subject to payroll deductions as
may be necessary or customary in respect of Employer’s salaried employees (“Base
Salary”). The Base Salary will be subject to an automatic annual increase
effective December 1 of each year during the Term in a percentage amount
equal to the greater of (i) five percent (5%) or (ii) the annual
percentage increase in the All-Items Consumer Price Index for All Urban
Consumers for such year as determined for the month of August.

     

    
      
        
        

      

      
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    (b)           During
the term, Employee shall also be entitled to receive the benefits set forth in
Schedule A hereto (the “Additional Benefits”) as well as any normal
executive benefits of Employer not enumerated in that Schedule.

    
      	
               
      

            	
               

            

    

    (c)           During
the Term, Employee shall also be entitled to receive annual-performance bonuses
in amounts and at times as follows:

    
      	
               
      

            	
               

            

    

    Employee
shall be entitled to an annual performance bonus with respect to each fiscal
year of the Employer during which Employee remains an employee of the Company
beginning with the fiscal year ending April 1, 2011, in an amount determined as
a percentage of Employee’s Base Salary, based on the following
criteria:

     

    
      
        
          	
                  Percentage
      of Actual EBITDA to Plan

                	 
      	
                  Amount
      of Bonus

                	 
      
	
                  Less
      than 90%

                	 
      	
                  Discretion
      of Board of Directors

                	 
      
	
                  90%
      to 99.9%

                	 
      	
                  100%
      of Base Salary

                	 
      
	
                  100%
      to 109.9%

                	 
      	
                  150%
      of Base Salary

                	 
      
	
                  110%
      or higher

                	 
      	
                  200%
      of Base Salary

                	 
      

        

      

    

     

    The
amount payable under this formula, if any, shall be paid to Employee within
fifteen (15) days following the publication of the Company’s financial
statements for each fiscal year of the Employer during the Term, but in no event
later than one hundred twenty (120) days following the end of such fiscal
year.

    

    (d)           Upon
execution of this Agreement, the Company shall pay Employee a signing bonus in
the amount of  $500,000  and will grant Employee as of the
Commencement Date 25,000  shares of Restricted Stock which shall vest
over a three (3) year period on each subsequent anniversary of the Commencement
Date.

     

    
      	
              7.     

            	
              EXPENSES.

            

    

    
      	
               
      

            	
               

            

    

    Employer
will pay or reimburse Employee for such reasonable travel, entertainment,
educational and other expenses as he may incur on behalf of Employer during the
Term in connection with the performance of his duties hereunder.

     

    
      	
              8.  

            	
              TERMINATION
      OF EMPLOYMENT.

            

    

    
      	
               
      

            	
               

            

    

    Notwithstanding
Section 1 hereof, the Initial Term may be terminated prior to March 31,
2012, and any Renewal Term may be terminated under the following
circumstances:

     

    (a)           DEATH
OR TOTAL DISABILITY. The Term shall automatically and immediately terminate upon
Employee’s death or “Total Disability.” For purposes of this Agreement,
“Total Disability” shall mean Employee’s physical or mental incapacitation or
disability that renders Employee unable to perform the Services as performed
prior to such incapacitation or disability for the period of twenty-six (26)
consecutive weeks or during anyone hundred fifty (150) business days (whether or
not consecutive) during any twelve (12) month period during the
Term.

    
      	
               
      

            	
               

            

    

    (b)           TERMINATION
BY EMPLOYER FOR CAUSE. Employer, at its election, shall have the right to
terminate the Term, by written notice to Employee to that effect, for “Cause”.
The term “Cause” shall mean:

    
      	
               
      

            	
               

            

    

     

    
      	
            	
              (i) 

            	
              any
      act of fraud, embezzlement, theft or conviction of a crime involving moral
      turpitude;

            

    

     

    
      
        
          	
                	
                  (ii) 

                	
                  any
      material breach by Employee of any material covenant, condition, or
      agreement in this Agreement (“Employee’s Material Breach”);
    or

                

        

      

    

     

    
      
        
          	
                	
                  (iii) 

                	
                  any
      chemical dependency by Employee (other than in connection with medicines
      prescribed for
Employee).

                

        

      

    

     

    To
terminate the Term pursuant to this Section 8(b), Employer shall give
written notice (“Cause Notice”) to the Employee specifying the claimed Cause. If
Employee fails to cure the same within thirty (30) days after the receipt of the
applicable Cause Notice (or such longer period as may be reasonably required if
such actions are subject to cure), the Term shall terminate at the end of such
thirty (30) day period or such longer reasonable period, as the case may be.
Notwithstanding anything that may be interpreted to the contrary, it is
expressly agreed that no act of the type contemplated by or described in
Section 8(b)(i) shall be capable of being cured by Employee and the
Employer may terminate Employee immediately without the requirement for such
cure period.

     

    
      
        
        

      

      
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    (c)           TERMINATION
BY EMPLOYER WITHOUT CAUSE. Employer shall have the right, at its election, to
terminate the Term at any time for any reason other than “Cause” upon not less
than sixty (60) days prior written notice to Employee.

    
      	
               
      

            	
               

            

    

    (d)           TERMINATION
BY EMPLOYEE. Employee shall have the right, at his election, to terminate the
Term at any time by written notice to Employer upon not less than one hundred
and twenty (120) days prior written notice; provided, however, that
(i) such notice period shall be thirty (30) days in the case of a
termination for “Good Reason”; and (ii) if such termination is other than
for Good Reason the Non-Compete Term, for purposes of Section 4(b) and
(d), shall continue through March 31, 2012.

     

    (e)           
SALARY AND BENEFITS IN EVENT OF TERMINATION. Upon termination of the Term, the
following shall be applicable, notwithstanding anything to the contrary
elsewhere herein:

     

    (i)           
If the Term is terminated by Employer for Cause pursuant to Section 8
(b) or by Employee pursuant to Section 8 (d) other than for Good
Reason, Employee shall thereafter be entitled to the Base Salary and all
benefits, including the Special Benefits for six months following the effective
date of such termination, unless otherwise agreed by Employer.

     

    (ii)          
If the Initial Term is terminated (A) due to Employee’s death or Total
Disability pursuant to Section 8 (a) hereof, or (B) by the
Employer without Cause pursuant to Section 8
(c) hereof,  (x) Employer shall pay to Employee on the date of
termination the Base Salary due to Employee for the then remainder of the period
ending March 31, 2012, net of any benefits paid to  Employee pursuant
to any policy of disability insurance maintained by Employer, plus a PRO RATA
portion of the Employee’s annual bonus for the fiscal year of the Employer in
which such termination occurs  (provided that in the case of
Employee’s death or Total Disability such payment and benefits shall extend for
no longer than for the then remainder of the period ending March 31, 2012), and
(y) Employee shall be entitled to all benefits including the Special Benefits
described in Section 6 (b) hereof for the then remainder of the period
ending March 31, 2012.

    

    (iii)           If
a Renewal Term is terminated (A) pursuant to Employee’s death or Total
Disability pursuant to Section 8 (a) hereof, or (B) by the
Employer without Cause pursuant to Section 8
(c) hereof,  (x) Employer shall pay to Employee (or Employee’s
estate or designated beneficiaries) on the date of termination the Base Salary
due to Employee for the then remainder of the Renewal Term, net of any benefits
paid to  Employee pursuant to any policy of disability insurance
maintained by Employer, plus a PRO RATA portion of the Employee’s annual bonus
for the fiscal year of the Employer in which such termination
occurs  (provided that in the case of Employee’s death or Total
Disability such payment and benefits shall extend for no longer then remainder
of the Renewal Term), and (y) Employee shall be entitled to all benefits
including the Special Benefits described in Section 6 (b) hereof for
the than remainder of the Renewal Term.

    

    (iv)           If
a Change in Control occurs and if within 24 months after a Change in Control,
Employee’s employment is either terminated by the Company without Cause or by
Employee for Good Reason, Employee shall be entitled to the compensation and
benefits set forth in Schedule B, Change in Control Provisions.

    

     (v)           
If an Equity Vesting Triggering Event occurs, all restricted stock and stock
option awards that have been granted to Employee shall immediately and fully
vest and all stock options grants shall be exercisable by Employee on or before
the day which is thirty nine (39) months from the initial grant date, in the
case of stock option grants with three (3) year vesting, and on or before the
day which is sixty three (63) months from the initial grant date in the case of
stock option grants with five (5) year vesting. Approval of this Agreement by
the Company’s Board Compensation Committee shall be deemed approval of the
amendments of the restricted stock and stock option grants as provided in the
immediately preceding sentence for all purposes under the RBC 2005 Long-Term
Equity Incentive Plan as amended. The vesting provisions contained in this
subsection (v) shall take precedent over any vesting provisions contained in
Schedule B.

     

    
      
        
        

      

      
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    (f)            DELIVERY
OF RECORDS UPON TERMINATION. Upon termination of the Term, Employee will deliver
to Employer all records of research, proposals, reports, memoranda, computer
software and programming, budgets and ether financial information, and ether
materials or records (including any copies thereof) made, used or obtained by
Employee in connection with his employment by Employer and/or any Employer’s
Affiliate.

    
      	
               
      

            	
               

            

    

    9.            
MISCELLANEOUS.

    
      	
               
      

            	
               

            

    

    (a)           
MODIFICATION AND WAIVER OF BREACH. No. waiver or modification of this
Employment Agreement shall be binding unless it is in writing signed by the
parties hereto and expressly stating that it is intended to modify this
Agreement. No waiver of a breach hereof shall be deemed to constitute a
waiver of a future breach, whether of a similar or dissimilar
nature.

     

    (b)  
        NOTICES. All notices and other
communications required or permitted under this Employment Agreement shall be in
writing, served personally on, or made by certified or registered United States
mail to, the party to be charged with receipt thereof.  Notices and
other communications served in person shall be deemed delivered when so served.
Notices and other communications served by mail shall be deemed delivered
hereunder 72 hours after deposit of such notice or communication in the United
States Post Office as certified or registered mail with postage prepaid and duly
addressed to whom such notice or communications is to be given, in the case
of

    
      	
               
      

            	
               

            

    

    (i)           Employer:

    RBC
Bearings Incorporated

    One
Tribology Center

    Oxford,
CT 06478

    ATTN :
Chief Financial Officer

     

    (ii)          
Employee:

    Michael
J. Hartnett

    385 South
Street

    Middlebury,
Connecticut 06762

     

    Any party
may change said party’s address for purposes of this Section by giving to
the party intended to be bound thereby, in the manner provided herein, a written
notice of such change.

     

    (c)           COUNTERPARTS.
This instrument may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same Employment Agreement.

    
      	
               
      

            	
               

            

    

    (d)           GOVERNING
LAW. Except as otherwise expressly provided herein, this Employment Agreement
shall be construed in accordance with, and governed by, the internal laws of the
State of Connecticut applicable to agreements executed and to be performed in
such state without regard to principles of choice of law or conflicts of
laws.

    
      	
               
      

            	
               

            

    

    (e)          
 COMPLETE EMPLOYMENT AGREEMENT. This Employment Agreement and its Exhibits
and Schedules, together contain the entire agreement between the parties hereto
with respect to the subject matter of this Employment Agreement and supersedes
all prior and contemporaneous oral and written negotiations, commitments,
writings, and understandings with respect to the subject matter of Employee’s
relationship with Employer, including Prior Employment Agreement which is
terminated effective as of the Commencement Date.

    
      	
               
      

            	
               

            

    

    (f)            
NON-TRANSFERABILITY OF EMPLOYEE’S INTEREST. None of the rights of Employee to
receive any form of compensation payable pursuant to this Employment Agreement
shall be assignable or transferable. Any attempted assignment, transfer,
conveyance, or other disposition of any interest in the rights of Employee
hereunder shall be void.

     

    
      
        
        

      

      
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    In
WITNESS WHEREOF, the undersigned have executed this Employment Agreement on the
day and year first above written.

     

    
      	 
      	
              EMPLOYEE:

            
	 
      	 
      
	 
      	
              /s/
      Michael J. Hartnett

            	 
      
	 
      	 
      
	 
      	
              MICHAEL
      J. HARTNETT

               

               

               EMPLOYER:

            
	 
      	 
      
	 
      	
              RBC
      BEARINGS INCORPORATED

            
	 
      	 
      
	 
      	
              By:

            
	 
      	 
      
	 
      	
               /s/
      Richard Crowell

            	 
      
	 
      	 
      
	 
      	
              RICHARD
      CROWELL

               Chairman

              Compensation
      Committee

            
	 
      	 
      	 
      	 
      

    

     

    
      
        
        

      

      
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    SCHEDULE A
TO EMPLOYMENT AGREEMENT BETWEEN MICHAEL J.

    HARTNETT
AND RBC BEARINGS INCORPORATED, APRIL 4, 2010

     

    SPECIAL
BENEFITS

     

    1.
Employee shall be reimbursed by Employer, as valued, determined and approved by
the Vice President and Chief Financial Officer, for personal expenses up to a
total of $50,000 in any fiscal year. Such personal expenses may include, but not
be limited to, use of the Employer’s aircraft facility.

     

     

    2.            At
Employer’s expense,

     

    Executive
Medical Coverage ($10,000 per year supplemental coverage).

     

    Dental
insurance.

     

    Prescription
drug coverage.

     

    The above
medical, dental and prescription drug coverage benefits are subject to change at
any time at the discretion of the Board of Directors of Employer; provided that
such coverages provided to Employee shall at all times be at least as beneficial
to Employee as are the coverages provided to other of Employer’s executive
employees and shall always be fully paid by the Employer.

     

    The above
medical, dental and prescription drug coverage shall be in addition to
Employee’s participation in any medical, hospitalization of related coverage
maintained by Employer for the benefit of all its employees.

     

    3. At
Employer’s expense, disability insurance at least as beneficial to Employee as
the disability provided for Employee immediately preceding the Commencement Date
of this Agreement, provided that within that limitation, such insurance may be
modified from time to time at the discretion of the Board of Directors of
Employer.

     

    4. The
Employer shall maintain an appropriate apartment or other dwelling in Los
Angeles for use by the Employee throughout the Term. The parties acknowledge
that “appropriate” shall mean of at least the quality and convenience of the
dwelling maintained for this purpose immediately preceding the Commencement date
of the Agreement. .

     

    5.
Employee shall be provided six weeks of paid vacation for each twelve month
period during the Term, to accrue PRO RATA during the course of each such twelve
month period; and payable at Employee’s then- effective base salary rate on
termination if not used during the Term.

     

    6.
Employee shall have unrestricted use of an appropriate automobile throughout the
Term at the Employer’s expense, including without limitation, fuel, insurance,
maintenance and repair. When the Agreement expires or otherwise terminates,
Employee shall have the option to assume the lease or purchase the vehicle for
its book value as of the Termination date, such option to be exercised within
two months of said Termination date. The parties acknowledge that “appropriate”
shall mean of at least the quality and convenience of the automobile used for
this purpose immediately preceding the Commencement date of the
Agreement.

    

    7. During
the Initial term, Employee shall have the option of purchasing the condominium
owned by the Company at 22432 Manacor in Mission Viejo, California for a price
equal to the Company’s then current book value.

     

    
      
        
        

      

      
        Page 8 of
10

        
          

        

      

      
        
        

      

    

     

    SCHEDULE B
TO EMPLOYMENT AGREEMENT BETWEEN MICHAEL J.

    HARTNETT
AND RBC BEARINGS INCORPORATED, APRIL 4, 2010

    

    CHANGE OF
CONTROL PROVISIONS

     

      

    1.          (a)           If
a Change in Control occurs and if within 24 months after a Change in Control,
your employment is either terminated by the Company without Cause or by you for
Good Reason , the Company will pay you on your date of termination a single lump
sum cash payment equal to the sum of:

    

    
      	
               
      

            	
              ·

            	
              The
      base salary, unused vacation and any annual bonus applicable to a
      completed fiscal year, which have not yet been paid to you through the
      date of termination;

            

    

    

    
      	
               
      

            	
              ·

            	
              A
      bonus equal to your annual base salary applicable to you on your
      termination date, multiplied by your maximum target bonus percentage then
      in effect and prorated to account for the number of days you were employed
      by the Company during the Fiscal Year in which you were
      terminated.

            

    

    

    
      	
               
      

            	
              ·

            	
              A
      severance payment equal to the sum of (i) 250% of your annual base salary,
      and (ii) 250% of your Target Bonus in effect on such
      date.  “Target Bonus” shall mean the amount payable under all
      annual incentive compensation plans of the Company in which you
      participate, waiving any condition precedent to the payment to you and
      assuming that the performance goals for the period were achieved at the
      100% level.

            

    

    

    
      	
               
      

            	
              ·

            	
              A
      reimbursement for all documented expenses, up to $15,000, actually
      incurred by you for professional outplacement services within 3 months
      after your termination.

            

    

    

                (b)           For
the 18 month period following the termination of the your employment, the
Company (or the subsidiary that employed you) will continue to provide coverage
and participation to you at the same participation, coverage and benefit levels
(or will provide their equivalent) and pay the full cost of coverage and
participation under the employee health and other welfare plans maintained by
the Company and applicable to you on your termination date.

     

                (c)           Immediately
prior to a Change in Control, you will completely vest in all restricted stock
and stock options that have been granted to you. Approval of this Agreement by
the Company’s Board Compensation Committee shall be deemed approval of the
vesting of restricted stock and stock options as provided in the immediately
preceding sentence for all purposes under the RBC 2005 Long-Term Equity
Incentive Plan as amended.  All stock options that have been granted
to you will additionally be exercisable by you for a period of 18 months
following the termination of your employment.

     

                (d)           All
amounts paid under these Change in Control provisions shall be subject to
applicable tax withholding.

     

                (e)           In
exchange for and prior to receipt of these benefits you agree to execute and
deliver to the Company its general release agreement applicable to severed
employees.

     

    2.           You
agree that in the event a third party (a) begins a tender or exchange
offer;  (b) circulates a proxy to stockholders; or  (c)
takes other steps to effect a Change in Control, you will not voluntarily
terminate employment with the Company (or the subsidiary that employs you)
unless you provide at least 3 months prior written notice to the Board of
Directors of  the Company, and you will continue to render the
services expected of your position, and you will represent the best interests of
the stockholders of the Company until the third party has abandoned or
terminated the efforts to effect a Change in Control or until a Change in
Control has occurred and your employment has been terminated.

    

    3.           If
you die prior to the time all payments due to you under these Change in Control
provisions have been made, then as soon as practicable after your death (but in
no event later than one month after), the Company shall pay in a lump sum all
sums not paid to you prior to your death. Payment shall be made to your
designated beneficiary or beneficiaries named under the 401(k) plan maintained
by the Company on the date of your death. If no such beneficiary is named, such
sums shall be paid to your estate.

     

    
      
        
        

      

      
        Page 9 of
10

        
          

        

      

      
        
        

      

    

     

    4.                      Payments
made pursuant to these Change in Control provisions are intended to be exempt
from Code §409A as separation pay to the greatest extent possible. Accordingly,
all provisions herein shall be construed and interpreted consistent with that
intent, but that, to the extent necessary the Company  shall amend any
such provision pertaining to such payment to comply with Code §409A, and the
regulations thereunder,  in the least restrictive manner necessary
without any diminution in the value of the payments to you.

    

    

    
      
        
        

      

      
        Page 10
of 10EXECUTION
VERSION

       

    

     

     

    Citigroup
Inc.

     

    Common
Stock, $0.01 par value

     

     

    

     

    

     

    

     

    EQUITY
DISTRIBUTION AGREEMENT

     

     

     

     

     

     

     

     

     

    April 26,
2010

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    April 26,
2010

     

    
      To Morgan
Stanley & Co. Incorporated

    

    
      	
               
      

            	
              1585
      Broadway

            

    

    
      	
               
      

            	
              New
      York, New York 10036

            

    

     

    Ladies and Gentlemen:

     

    The
United States Department of the Treasury (the “Selling Stockholder”) proposes
to sell through or to Morgan Stanley & Co. Incorporated, as sales agent
and/or principal (the “Manager”), on the terms set
forth in this equity distribution agreement (this “Agreement”), up to
7,692,307,692 shares of common stock, par value $0.01, of Citigroup Inc., a
Delaware corporation (the “Company”) (said shares to be
sold by the Selling Stockholder being hereinafter referred to as the “Shares”).  The
shares of common stock, par value $0.01, of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the “Common
Stock”.

     

    The
Company has filed with the Securities and Exchange Commission (the “Commission”) a registration
statement (File No. 333-157459), including a prospectus, on Form S-3, relating
to the securities (the “Shelf
Securities”), including the Shares, to be offered and sold from time to
time.  The registration statement as of its most recent effective
date, including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A or
Rule 430B under the Securities Act of 1933, as amended (the “Securities Act”), is
hereinafter referred to as the “Registration Statement”, and
the related prospectus covering the Shelf Securities and filed as part of the
Registration Statement, together with any amendments or supplements thereto as
of the most recent effective date of the Registration Statement, is hereinafter
referred to as the “Basic
Prospectus”.  “Prospectus Supplement” means
the final prospectus supplement, relating to the Shares, filed by the Company
with the Commission pursuant to Rule 424(b) under the Securities Act on or
before the second business day after the date hereof, in the form furnished by
the Company to the Manager in connection with the offering of the
Shares.  Except where the context otherwise requires, “Prospectus” means the Basic
Prospectus, as supplemented by the Prospectus Supplement and the most recent
Interim Prospectus Supplement (as defined in Section 5(c) below), if
any.  For purposes of this Agreement, “free writing prospectus” has
the meaning set forth in Rule 405 under the Securities Act.  “Permitted Free Writing
Prospectuses” means the documents listed on Schedule I hereto or
otherwise approved in writing by the Manager in accordance with Section 5(b),
and “broadly available road
show” means a “bona fide electronic road show” as defined in Rule
433(h)(5) under the Securities Act that has been made available without
restriction to any person.  As used herein, the terms “Registration
Statement”, “Basic Prospectus”, “Prospectus Supplement”, “Interim Prospectus
Supplement” and “Prospectus” shall include the documents, if any, incorporated
by reference therein.  The terms “supplement”, “amendment” and “amend” as used herein with
respect to the Registration Statement, the Basic Prospectus, the Prospectus
Supplement, any Interim Prospectus Supplement, the Prospectus or any free
writing prospectus shall include all documents subsequently filed by the Company
with the Commission pursuant to the Securities Exchange Act of 1934, as amended
(the “Exchange Act”),
that are deemed to be incorporated by reference therein (the “Incorporated
Documents”).

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    1.    Representations and
Warranties.

     

    (a)   The Company represents
and warrants to and agrees with the Manager that:

     

    (i)    The
Registration Statement has become effective; no stop order suspending the
effectiveness of the Registration Statement is in effect; and no proceedings for
such purpose are pending before or threatened by the Commission.  If
the Registration Statement is an automatic shelf registration statement as
defined in Rule 405 under the Securities Act, the Company is a well-known
seasoned issuer (as defined in Rule 405 under the Securities Act) eligible to
use the Registration Statement as an automatic shelf registration statement, and
the Company has not received notice that the Commission objects to the use of
the Registration Statement as an automatic shelf registration
statement.

     

    (ii)           (A)
(1) At the respective times the Registration Statement and each amendment
thereto became effective, (2) at each deemed effective date with respect to the
Manager pursuant to Rule 430B(f)(2) under the Securities Act (each, a “Deemed Effective Time”), (3)
as of each time (each, a “Time
of Sale”) Shares are sold pursuant to this Agreement or any Terms
Agreement (as defined below), (4) at each Settlement Date (as defined below) and
(5) at all times during which a prospectus is required by the Securities Act to
be delivered (whether physically or through compliance with Rule 172 under the
Securities Act or any similar rule) in connection with any sale of Shares (the
“Delivery Period”), the
Registration Statement complied and will comply in all material respects with
the requirements of the Securities Act and the rules and regulations under the
Securities Act; (B) the Basic Prospectus complied, or will comply, at the
time it was, or will be filed, with the Commission, complies as of the date
hereof (if filed with the Commission on or prior to the date hereof) and, as of
each Time of Sale and at all times during the Delivery Period, will comply in
all material respects with the rules and regulations under the Securities Act;
(C) each of the Prospectus Supplement, any Interim Prospectus Supplement
and the Prospectus will comply, as of the date that such document is filed with
the Commission, as of each Time of Sale, as of each Settlement Date and at all
times during the Delivery Period, in all material respects with the rules and
regulations under the Securities Act; and (D) the Incorporated Documents,
when they were filed with the Commission, conformed in all material respects to
the requirements of the Exchange Act and the rules and regulations of the
Commission thereunder, and any further Incorporated Documents so filed and
incorporated by reference, when they are filed with the Commission, will conform
in all material respects to the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    (iii)          (A)
As of the date hereof, at the respective times the Registration Statement and
each amendment thereto became effective and at each Deemed Effective Time, the
Registration Statement did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (B) as of each Time of
Sale, the Prospectus (as amended and supplemented at such Time of Sale) and any
Permitted Free Writing Prospectus then in use, considered together
(collectively, the “General
Disclosure Package”), did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; (C) as of its date, the Prospectus did not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and (D) at any Settlement Date, the
Prospectus (as amended and supplemented at such Settlement Date) did not and
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statement or omission made in
reliance upon and in conformity with information furnished in writing to the
Company by the Manager expressly for use in the Prospectus or in the General
Disclosure Package.

     

    (iv)          Any
free writing prospectus that the Company is required to file pursuant to Rule
433(d) under the Securities Act has been, or will be, filed with the Commission
in accordance with the requirements of the Securities Act and the applicable
rules and regulations of the Commission thereunder.  Each free writing
prospectus that the Company has filed, or is required to file, pursuant to Rule
433(d) under the Securities Act or that was prepared by or on behalf of or used
or referred to by the Company complies or will comply in all material respects
with the requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder.  Each free writing
prospectus, as of its issue date and at all subsequent times through the
completion of the public offer and sale of the Shares or until any earlier date
that the Selling Stockholder notified or notifies the Company and the Manager,
did not, does not and will not include any material information that conflicted,
conflicts or will conflict with the information contained in the Registration
Statement or the Prospectus.  Each broadly available road show, if
any, when considered together with the General Disclosure Package, does not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.  Except for the Permitted
Free Writing Prospectuses, if any, and electronic road shows, if any, furnished
to and approved by the Manager in accordance with Section 5(b), the Company has
not prepared, used or referred to, and will not prepare, use or refer to, any
free writing prospectus.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    (v)           (A)(1) At
the time of filing of the Registration Statement, (2) at the time of the
most recent amendment thereto for the purposes of complying with Section
10(a)(3) of the Securities Act (whether such amendment was by post-effective
amendment, incorporated report filed pursuant to Section 13 or 15(d) of the
Exchange Act or form of prospectus) and (3) at the time the Company or any
person acting on its behalf (within the meaning, for this clause only, of Rule
163(c)) made any offer relating to the Shelf Securities in reliance on the
exemption of Rule 163 under the Securities Act, the Company was not an
“ineligible issuer” as defined in Rule 405 of the Securities Act; and
(B)(1) at the time of filing of the Registration Statement, (2) at the
earliest time thereafter that the Company or another offering participant made a
bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act)
of the Shares and (3) at the date hereof, the Company was not and is not an
“ineligible issuer” as defined in Rule 405 under the Securities
Act.

     

    (vi)          The
execution and delivery of, and the performance by the Company of its obligations
under, this Agreement have been duly and validly authorized by the Company, and
this Agreement has been duly executed and delivered by the Company.

     

    (vii)         The
Shares have been duly authorized and are validly issued, fully paid and
non-assessable; the holders of outstanding shares of Common Stock are not
entitled to preemptive or other rights to subscribe for the Shares; and, except
as set forth in the General Disclosure Package and the Prospectus or otherwise
disclosed to the Manager, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or rights to convert any obligations
into or exchange any securities for, shares of Common Stock or ownership
interest in the Company are outstanding.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    (viii)        The
Shares have been approved for listing on the Exchange.

     

    (ix)           Neither
the Company nor any of its subsidiaries nor, to the Company’s knowledge, any
affiliate, director, officer, employee, agent or representative of the Company
or of any of its subsidiaries or affiliates (other than, if applicable, the
Selling Stockholder), has taken or will take any action in furtherance of an
offer, payment, promise to pay, or authorization or approval of the payment or
giving of money, property, gifts or anything else of value, directly or
indirectly, to any “government official” (including any officer or employee of a
government or government-owned or controlled entity or of a public international
organization, or any person acting in an official capacity for or on behalf of
any of the foregoing, or any political party or party official or candidate for
political office) to influence official action or secure an improper advantage;
and the Company and its subsidiaries and affiliates (other than, if applicable,
the Selling Stockholder) have conducted their businesses in compliance with
applicable anti-corruption laws and have instituted and maintain and will
continue to maintain policies and procedures designed to promote and achieve
compliance with such laws and with the representation and warranty contained
herein.

     

    (x)            The
operations of the Company and its subsidiaries are and have been conducted at
all times in material compliance with all applicable financial recordkeeping and
reporting requirements, including those of the Bank Secrecy Act, as amended by
Title III of the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT
Act), and the applicable anti-money laundering statutes of jurisdictions where
the Company and its subsidiaries conduct business, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines issued,
administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”),
and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to
the best knowledge of the Company, threatened.

     

    (xi)           (A)
The Company represents that neither the Company nor any of its subsidiaries
(collectively, the “Entity”) or, to the knowledge
of the Entity, any director, officer, employee, agent, affiliate (other than, if
applicable, the Selling Stockholder) or representative of the Entity, is an
individual or entity (“Person”) that is, or is owned
or controlled by a Person that is:

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

    (1)           the
subject of any sanctions administered or enforced by the U.S. Department of
Treasury’s Office of Foreign Assets Control (“OFAC”) or other relevant
sanctions authority (collectively, “Sanctions”), nor

     

    (2)           located,
organized or resident in a country or territory that is the subject of Sanctions
(including, without limitation, Burma/Myanmar, Cuba, Iran, North Korea, Sudan
and Syria).

     

    
      (B)
The
Entity represents and covenants that, except as detailed in Schedule II,
for the past 5 years, it has not knowingly engaged in, is not now knowingly
engaged in, and will not engage in, any dealings or transactions with any
Person, or in any country or territory, that at the time of the dealing or
transaction is or was the subject of Sanctions.

    

     

    (xii)          There
has not occurred any material adverse change, or any development involving a
prospective material adverse change, in the condition, financial or otherwise,
or in the earnings, business or operations of the Company and its subsidiaries,
taken as a whole, from that set forth in the General Disclosure
Package.

     

    (xiii)         Subsequent
to the respective dates as of which information is given in each of the
Registration Statement, the Prospectus and the General Disclosure Package, (A)
the Company and its subsidiaries have not incurred any material liability or
obligation, direct or contingent, nor entered into any material transaction; (B)
the Company has not purchased any of its outstanding capital stock, except as
otherwise disclosed to the Manager, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock other than ordinary
and customary dividends; and (C) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company and its
subsidiaries, except in each case as described in each of the Registration
Statement, the Prospectus and the General Disclosure Package,
respectively.

     

    (xiv)         On
the date hereof, the Company’s earnings blackout period is from the first day of
the month after a calendar quarter until 24 hours after the filing of the
earnings release relating to such quarter.  If the Company’s earnings
blackout policy is revised, resulting in a change to the earnings blackout
period, the Company shall promptly notify the Selling Stockholder and the
Manager.

     

    (b)           The
Selling Stockholder represents and warrants to and agrees with the Manager
that:

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    (i)             The
Selling Stockholder now has and at a Settlement Date will have good and
marketable title to the Shares to be sold by it, free and clear of any liens,
encumbrances, equities and claims, and full right, power and authority to effect
the sale and delivery of the Shares; and upon the delivery of, against payment
for, the Shares pursuant to this Agreement or any Terms Agreement, and assuming
a purchaser or the Manager, as applicable, does not have notice of any adverse
claim (within the meaning of the Uniform Commercial Code as in effect in the
State of New York), such purchaser or the Manager, as applicable, will acquire
good and marketable title thereto, free and clear of any liens, encumbrances,
equities and claims.

     

    (ii)            The
Selling Stockholder has full right, power and authority to execute and deliver
this Agreement and to perform its obligations hereunder, and this Agreement has
been duly authorized, executed and delivered by or on behalf of the Selling
Stockholder.

     

    (iii)           No
consent, approval or waiver is required under any instrument or agreement to
which the Selling Stockholder is a party or by which the Selling Stockholder is
bound in connection with the offering, sale or purchase by the Manager of any of
the Shares which may be sold by the Selling Stockholder under this Agreement or
any Terms Agreement or the consummation by the Selling Stockholder of any of the
other transactions contemplated hereby.

     

    2.            
Sale of
Securities.  On the basis of the representations, warranties
and agreements herein contained, but subject to the terms and conditions set
forth in this Agreement or any Terms Agreement, as applicable, the Company, the
Selling Stockholder and the Manager agree that the Selling Stockholder may from
time to time seek to sell Shares through the Manager, acting as sales agent, or
directly to the Manager, acting as principal, as follows:

     

    (a)            The
Selling Stockholder will provide instructions to the Manager with respect to the
manner of distribution of the Shares (the “Disposition
Guidelines”).  The Disposition Guidelines may be terminated at
any time by the Selling Stockholder and shall become effective immediately upon
receipt by the Manager (each such date of receipt, an “Instruction
Date”).  

     

    (b)            Subject
to the terms and conditions hereof and in accordance with the Disposition
Guidelines then in effect, the Manager shall use its commercially reasonable
efforts to sell the Shares on behalf of the Selling Stockholder as sales agent
or as principal; provided however the Manager
shall be under no obligation to purchase the Shares on a principal basis, and
the Selling Stockholder shall be under no obligation to sell the Shares to the
Manager on a principal basis, pursuant to this Agreement.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    (c)            If
the Selling Stockholder agrees to sell the Shares directly to the Manager as
principal in respect of a book-built block trade (a “Principal Purchase”), the
Company, the Selling Stockholder and the Manager shall enter into a separate
agreement (each, a “Terms
Agreement”), in substantially the form of Exhibit A hereto unless
otherwise agreed, relating to such sale.

     

    (d)            At
each Time of Sale, Settlement Date and Representation Date (as defined below),
the Company shall be deemed to have affirmed each of its representations and
warranties contained in this Agreement.  At each Instruction Date, the
Selling Stockholder shall be deemed to have affirmed each of its representations
and warranties contained in this Agreement.  Any obligation of the
Manager to use its commercially reasonable efforts to sell the Shares on behalf
of the Selling Stockholder as sales agent shall be subject to the continuing
accuracy of the representations and warranties of the Company and the Selling
Stockholder herein, to the performance by the Company and the Selling
Stockholder of their obligations hereunder and to the continuing satisfaction of
the additional conditions specified in Section 4 of this Agreement.

     

    (e)            Notwithstanding
any other provision of this Agreement, the Company, the Selling Stockholder and
the Manager agree that no sales of Shares shall take place, the Selling
Stockholder shall not request the sales of any Shares that would be sold and the
Manager shall not be obligated to sell or offer to sell, during any period in
which the Company’s earnings blackout period policy, as it exists from time to
time, would prohibit the sale of Common Stock by the Company, or during any
other period in which the Company is in possession of material non-public
information.  The Company shall notify the Selling Stockholder and the
Manager, in accordance with Section 5(f), when it is or could be deemed to be in
possession of material non-public information.

     

    3.            
Payment, Delivery and Other
Obligations.  Settlement for sales of the Shares pursuant to
this Agreement or any Terms Agreement will occur on the third Trading Day (as
defined herein) (or such earlier day as is industry practice for regular-way
trading) following the date on which such sales are made (each such day, a
“Settlement
Date”).  On or prior to each Settlement Date, the Shares sold
through or to the Manager for settlement on such date shall be delivered by the
Selling Stockholder to an account designated by the Manager against payment of
the gross proceeds from the sale of such Shares.  Settlement for all
such Shares shall be effected by free delivery of the Shares by the Selling
Stockholder to the Manager’s account or its designee’s account (provided that the Manager
shall have given the Selling Stockholder written notice of such designee prior
to the Settlement Date) at The Depository Trust Company or by such other means
of delivery as may be mutually agreed upon by the parties hereto, which in all
cases shall be freely tradable, transferable, registered shares in good
deliverable form, in return for payment in same day funds delivered to the
account designated by the Selling Stockholder.  As used herein, “Trading Day” shall mean any
trading day on the New York Stock Exchange (the “Exchange”), other than a day
on which the Exchange is scheduled to close prior to its regular weekday closing
time.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    4.            
Conditions to the Manager’s
Obligations.  The obligations of the Manager are subject to the
following conditions:

     

    (a)            The
Manager shall have received on each date specified in Section 5(l) a certificate
of the Company, dated such date and signed, in the case of the Company, by the
Chairman, any Vice Chairman, the President, any Vice President, the Chief
Financial Officer, the Chief Accounting Officer, the General Counsel, the
Controller or any Deputy Controller and by the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company, to the
effect that the signers of such certificate have carefully examined the
Registration Statement, the General Disclosure Package and this Agreement or any
Terms Agreement and that (i) the representations and warranties of the Company
in this Agreement are true and correct on and as of such date with the same
effect as if made on such date and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such date; (ii) no stop order suspending the
effectiveness of the Registration Statement or any notice objecting to its use
has been issued and no proceedings for that purpose have been instituted or, to
their knowledge, threatened; (iii) since the date of the most recent financial
statements included or incorporated by reference in the Prospectus, there has
been no material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its subsidiaries,
whether or not arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the General Disclosure Package and the
Prospectus; (iv) as of such date and as of each Time of Sale, if any, subsequent
to the immediately preceding Representation Date, the Registration Statement did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and (v) as of such date and as of each Time of Sale, if
any, subsequent to the immediately preceding Representation Date, the General
Disclosure Package did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that no such
certificate shall apply to any statements or omissions made in reliance upon and
in conformity with information furnished in writing to the Company by the
Manager expressly for use in the General Disclosure Package.

     

    (b)            The
Manager shall have received on each date specified in Section 5(m), an opinion
of Michael J. Tarpley, Associate General Counsel—Capital Markets of the Company,
dated such date and addressed to the Manager, with respect to the sale of the
Shares, the Registration Statement, the Prospectus, the General Disclosure
Package and other related matters as the Manager may reasonably require.

     

    (c)            The
Manager shall have received on each date specified in Section 5(n), such opinion
or opinions of Cleary Gottlieb Steen & Hamilton LLP, counsel for the
Manager, dated such date and addressed to the Manager, with respect to the sale
of the Shares, the Registration Statement, the Prospectus, the General
Disclosure Package and other related matters as the Manager may reasonably
require, and the Company shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such
matters.  

     

    
      
        
        

      

      
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    (d)            The
Company shall have requested and caused KPMG LLP to have furnished to the
Manager, on each date specified in Section 5(o), customary “comfort letters”
dated such date that are satisfactory in content and form to the
Manager.

     

    (e)            Within
24 hours after the beginning of each period specified in Section 5(p), the
Manager shall have received a certificate signed by the Chief Financial Officer
of the Company using a form substantially similar to that attached hereto as
Exhibit B.

     

    (f)             All
filings with the Commission required by Rule 424 under the Securities Act to
have been filed by each Time of Sale or related Settlement Date shall have been
made within the applicable time period prescribed for such filing by Rule 424
(without reliance on Rule 424(b)(8)); any other material required to be filed by
the Company pursuant to Rule 433(d) under the Securities Act shall have been
filed with the Commission within the applicable time periods prescribed for such
filings by Rule 433; and no stop order suspending the effectiveness of the
Registration Statement or any notice objecting to its use shall have been issued
and no proceedings for that purpose shall have been instituted or
threatened.

     

    (g)            The
Common Stock shall be an “actively-traded security” excepted from the
requirements of Rule 101 of Regulation M under the Exchange Act by subsection
(c)(1) of such rule.

     

    (h)            If,
between the Time of Sale of any Shares and the corresponding settlement of the
sale of such Shares on the scheduled Settlement Date, the Company would be
unable to deliver the certificate contemplated by Section 4(a), then the Manager
may cause the Selling Stockholder to cancel the sale by the Selling Stockholder
to any purchaser thereof or the purchase by the Manager as principal of all or a
portion of such Shares, and each of the Manager and the Selling Stockholder
shall be released from any of its obligations under Section 3 with respect to
such Shares.  The Company shall hold the Manager and the Selling
Stockholder harmless against any loss, claim, damage or expense (including
reasonable legal fees and expenses), as incurred, arising out of or in
connection with the cancellation of any sale pursuant to this Section
4(h).

     

    (i)             Prior
to any Settlement Date, the Company shall have furnished to the Manager such
further information, certificates and documents as the Manager may reasonably
request.

     

    5.        
    Covenants of the
Company.  The Company covenants with the Manager as
follows:

     

    (a)            To
furnish to the Manager and the Selling Stockholder copies of the Registration
Statement (excluding exhibits) and copies of the Prospectus (or the Prospectus
as amended or supplemented) in such quantities as the Manager or the Selling
Stockholder may from time to time reasonably request.  In case the
Manager is required to deliver, under the Securities Act (whether physically or
through compliance with Rule 172 under the Securities Act or any similar rule),
a prospectus relating to the Shares after the nine-month period referred to in
Section 10(a)(3) of the Securities Act, or after the time a post-effective
amendment to the Registration Statement is required pursuant to Item 512(a) of
Regulation S-K under the Securities Act, upon the request of the Manager, and at
its own expense, the Company shall prepare and deliver to the Manager as many
copies as the Manager may request of an amended Registration Statement or
amended or supplemented prospectus complying with Item 512(a) of Regulation S-K
or Section 10(a)(3) of the Securities Act, as the case may be.

     

    
      
        
        

      

      
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    (b)            Before
amending or supplementing the Registration Statement or the Prospectus, to
furnish to the Manager and the Selling Stockholder a copy of each such proposed
amendment or supplement and not to file any such proposed amendment or
supplement to which the Manager or the Selling Stockholder reasonably objects
(other than any prospectus supplement relating to the offering of Shelf
Securities other than the Shares).  To furnish to the Manager and the
Selling Stockholder a copy of each proposed free writing prospectus to be
prepared by or on behalf of, used by, or referred to by the Company and not to
use or refer to any proposed free writing prospectus to which the Manager
reasonably objects.  Not to take any action that would result in the
Manager, the Selling Stockholder or the Company being required to file with the
Commission pursuant to Rule 433(d) under the Securities Act a free writing
prospectus prepared by or on behalf of the Manager or the Selling Stockholder
that the Manager or the Selling Stockholder otherwise would not have been
required to file thereunder.

     

    (c)            To
file, subject to Section 5(b) above, promptly all reports and any definitive
proxy or information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of the Prospectus Supplement and for the duration of
the Delivery Period.  For the duration of the Delivery Period, to
prepare a prospectus supplement (each, an “Interim Prospectus
Supplement”) with a summary detailing, for the period since the later of
the Prospectus Supplement or the most recent Interim Prospectus Supplement, (i)
the number of Shares sold through or to the Manager pursuant to this Agreement
or any Terms Agreement and (ii) the compensation paid by the Selling Stockholder
to the Manager with respect to such sales through the Manager as sales agent
and, once a quarter and subject to Section 5(b) above, file such Interim
Prospectus Supplement pursuant to Rule 424(b) under the Securities Act (and
within the time periods required by Rule 424(b) and Rules 430A, 430B
or 430C under the Securities Act).

     

    (d)            To
file any Permitted Free Writing Prospectus to the extent required by
Rule 433 under the Securities Act and to provide copies of the Prospectus
and such Prospectus Supplement and each Permitted Free Writing Prospectus (to
the extent not previously delivered or filed on the Commission’s Electronic Data
Gathering, Analysis and Retrieval system or any successor system thereto) to the
Manager and the Selling Stockholder via electronic mail in “.pdf” format on such
filing date to an electronic mail account designated by the Manager or the
Selling Stockholder and, at the Manager’s request, to also furnish copies of the
Prospectus and such Prospectus Supplement to the Exchange and each other
exchange or market on which sales of the Shares were effected, in each case, as
may be required by the rules or regulations of the Exchange or such other
exchange or market.

     

    
      
        
        

      

      
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    (e)            During
the Delivery Period to promptly advise the Manager and the Selling Stockholder
(i) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any notice objecting to its
use or the institution or threatening of any proceeding for that purpose and
(ii) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any jurisdiction or
the institution or threatening of any proceeding for such
purpose.  The Company will use its best efforts to prevent the
issuance of any such stop order or the occurrence of any such suspension or
objection to the use of the Registration Statement and, upon such issuance,
occurrence or notice of objection, to obtain as soon as possible the withdrawal
of such stop order or relief from such occurrence or objection, including, if
necessary, by filing an amendment to the Registration Statement or a new
registration statement and using its best efforts to have such amendment or new
registration statement declared effective as soon as practicable.

     

    (f)             If,
after the date hereof and during the Delivery Period, any event occurs as a
result of which the Prospectus or the General Disclosure Package would include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the circumstances under
which they were made at such time not misleading, the Company will (i) notify
promptly the Selling Stockholder and the Manager so that any use of the
Prospectus or the General Disclosure Package may cease until it is amended or
supplemented; (ii) amend or supplement the Prospectus or the General Disclosure
Package, subject to Section 5(b) above, to correct such statement or omission;
and (iii) supply any amendment or supplement to the Manager and the Selling
Stockholder in such quantities as the Manager or the Selling Stockholder may
reasonably request.

     

    (g)            To
arrange, if necessary, for the qualification of the Shares for sale under the
laws of such jurisdictions within the United States as the Manager reasonably
may designate, will maintain such qualifications in effect so long as required
for the distribution of the Shares and will pay any fee of the Financial
Industry Regulatory Authority (“FINRA”), if any, in connection
with its review of the offering; provided that in no event
shall the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action that would subject it to
service of process in suits, other than those arising out of the offering or
sale of the Shares, in any jurisdiction where it is not now so
subject.

     

    (h)            As
soon as practicable, to make generally available to its security holders and to
the Manager a consolidated earnings statement or statements of the Company and
its subsidiaries which will satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158.

     

    
      
        
        

      

      
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    (i)             Whether
or not the transactions contemplated in this Agreement or any Terms Agreement
are consummated or this Agreement or any Terms Agreement is terminated, to pay
or cause to be paid all expenses incident to the performance of its obligations
under this Agreement or any Terms Agreement, including:  (i) the fees,
disbursements and expenses of the Company’s accountants in connection with the
registration of the Shares under the Securities Act and all other fees or
expenses in connection with the preparation and filing of the Registration
Statement, any Prospectus Supplement, the Prospectus, any free writing
prospectus prepared by or on behalf of, used by, or referred to by the Company
and amendments and supplements to any of the foregoing, including the filing
fees payable to the Commission relating to the Shares (within the time required
by Rule 456(b)(1), if applicable), all printing costs associated therewith,
and the mailing and delivering of copies thereof to the Manager and the Selling
Stockholder, in the quantities hereinabove specified, (ii) the cost of printing
or producing any Blue Sky or Legal Investment memorandum in connection with the
offer and sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale under state
securities laws as provided in Section 5(g) above, including filing fees in
connection with such qualification and in connection with the Blue Sky or Legal
Investment memorandum, (iii) all filing fees in connection with the offering
contemplated by this Agreement, including, without limitation, FINRA filing
fees, if any, (iv) all costs and expenses incident to listing the Shares on the
Exchange, (v) the costs and charges of any transfer agent, registrar or
depositary, and (vi) all other costs and expenses incident to the performance of
the obligations of the Company under this Agreement or any Terms Agreement for
which provision is not otherwise made in this Section.  It is
understood, however, that except as provided in this Section 5 and
Section 8, the Manager will pay all of its costs and expenses, including
any advertising expenses connected with any offers the Manager may
make.

     

    (j)             If
the third anniversary of the initial effective date of the Registration
Statement occurs before all the Shares have been sold, prior to such third
anniversary, to file, subject to Section 5(b), a new shelf registration
statement and to take any other action necessary to permit the public offering
of the Shares to continue without interruption (references herein to the
Registration Statement shall include the new registration statement declared
effective by the Commission).

     

    (k)            To
use its commercially reasonable efforts to maintain the listing of the Shares
for trading on the Exchange.

     

    (l)             Upon
commencement of the offering of the Shares under this Agreement (and upon the
recommencement of the offering of the Shares under this Agreement following the
termination of a suspension of sales hereunder), and (i) each time that the
Registration Statement or the Prospectus is amended or supplemented (other than
(1) in connection with the filing of a prospectus supplement that contains
solely the information required by the second sentence of Section 5(c), (2) in
connection with the filing of any report or other document under Section 13, 14
or 15(d) of the Exchange Act or (3) by a prospectus supplement relating solely
to the offering of Shelf Securities other than the Shares), (ii) each time there
is filed with the Commission any document incorporated by reference into the
Prospectus (other than a Current Report on Form 8-K, unless the Manager shall
otherwise reasonably request), (iii) each time the Shares are delivered to the
Manager as principal on a Settlement Date, or (iv) on such other dates or
occasions as may be reasonably requested by the Manager (including but not
limited to any agented block transactions) (such commencement date (and any such
recommencement date, if applicable) and each such date or occasion referred to
in (i), (ii), (iii) and (iv) above, a “Representation Date”), to
furnish or cause to be furnished to the Manager forthwith a certificate dated
and delivered as of such date, in form reasonably satisfactory to the Manager,
to the effect that the statements contained in the certificate referred to in
Section 4(a) of this Agreement are true and correct as of such Representation
Date, as though made at and as of such time modified as necessary to relate to
the Registration Statement and the Prospectus as amended and supplemented to the
time of delivery of such certificate.

     

    
      
        
        

      

      
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    (m)           On
each Representation Date, the Company shall cause to be furnished to the
Manager, dated as of such date, in form and substance satisfactory to the
Manager, the written opinion of Michael J. Tarpley, Associate General
Counsel—Capital Markets of the Company, as described in Section 4(b),
modified as necessary to relate to the Registration Statement and the Prospectus
as amended and supplemented to the time of delivery of such
opinion.

     

    (n)            On
each Representation Date, Cleary Gottlieb Steen & Hamilton LLP, counsel to
the Manager, shall furnish to the Manager a written opinion, dated as of such
date in form and substance reasonably satisfactory to the Manager.

     

    With
respect to Sections 5(m) and 5(n) above, in lieu of delivering such an
opinion for dates subsequent to the commencement of the offering of the Shares
under this Agreement such counsel may furnish the Manager with a letter (a
“Reliance Letter”) to
the effect that the Manager may rely on a prior opinion delivered under Section
5(m) or Section 5(n), as the case may be, to the same extent as if it were dated
the date of such letter (except that statements in such prior opinion shall be
deemed to relate to the Registration Statement and the Prospectus as amended or
supplemented as of such subsequent date).

     

    (o)            Upon
commencement of the offering of the Shares under this Agreement (and upon the
recommencement of the offering of the Shares under this Agreement following the
termination of a suspension of sales hereunder) and each time that (i) the
Registration Statement or the Prospectus is amended or supplemented to include
additional financial information, (ii) the Company files an annual report on
Form 10-K or quarterly report on Form 10-Q, (iii) there is filed with the
Commission any document (other than an annual report on Form 10-K or quarterly
report on Form 10-Q) incorporated by reference into the Prospectus that contains
additional or amended financial information, (iv) the Shares are delivered to
the Manager as principal on a Settlement Date or (v) on such other dates or
occasions as may be reasonably requested by the Manager (including but not
limited to any agented block transactions), KPMG LLP, independent public
accountants of the Company, shall deliver to the Manager the comfort letter(s)
as described in Section 4(d).

     

    
      
        
        

      

      
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    (p)            Each
time the Company announces its annual or quarterly earnings, as applicable, and
until the Company files an annual report on Form 10-K or quarterly report on
Form 10-Q, as applicable, for such year or quarter, as applicable, the Company
shall (i) allow the Manager to conduct additional due diligence review and
calls, as described in the Due Diligence Protocol attached hereto on Schedule
III and (ii) to the extent the earnings data is not covered in the comfort
letter(s) referred to in Section 4(d), furnish or cause to be furnished to the
Manager a certificate signed by the Chief Financial Officer of the Company, as
described in Section 4(e), in each case within 24 hours of such
announcement.

     

    (q)            To
comply with the Due Diligence Protocol attached hereto on Schedule III and
any other due diligence review or call reasonably requested by the
Manager.

     

    (r)             That
it consents to the Manager trading in the Common Stock for the Manager’s own
account and for the account of its clients at the same time as sales of the
Shares occur pursuant to this Agreement or any Terms Agreement.

     

    (s)            Not
to sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant
any option to sell or otherwise dispose of or agree to dispose of, directly or
indirectly, any shares of the Common Stock or securities convertible into or
exchangeable or exercisable for the Common Stock or warrants or other rights to
purchase the Common Stock or any other securities of the Company that are
substantially similar to the Common Stock or permit the registration under the
Securities Act of any shares of the Common Stock, except for (i) the
registration of the Shares and the sales through or to the Manager pursuant to
this Agreement or any Terms Agreement, (ii) the registration and sales of Common
Stock representing the tax withholding obligations from stock compensation
received by certain employees of the Company in April 2010, (iii) any shares of
Common Stock issued by the Company upon the exercise of an option or warrant or
the conversion of a security outstanding on the date hereof and referred to in
the Prospectus, (iv) any shares of Common Stock issued or options to purchase
Common Stock granted pursuant to employee benefit plans of the Company,
including the sales of such securities by the employees through broker-dealer
affiliates of the Company or (v) any shares of Common Stock issued pursuant to
any non-employee director stock plan, dividend reinvestment plan or stock
purchase plan of the Company, during the Delivery Period, without giving the
Manager at least three (3) business days’ prior written notice specifying the
nature of the proposed sale and the date of such proposed sale.

     

    6.           
 Covenants of the Selling
Stockholder.  The Selling Stockholder covenants and agrees with
the Manager that it will not prepare or have prepared on its behalf or use,
distribute or refer to any free writing prospectus without the prior approval of
the Manager.

     

    
      
        
        

      

      
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    7.          
  Covenants of the
Manager.  The Manager covenants with the Company not to take
any action that would result in the Company being required to file with the
Commission under Rule 433(d) a free writing prospectus prepared by or on behalf
of the Manager that otherwise would not be required to be filed by the Company
thereunder, but for the action of the Manager.

     

    8.        
    Indemnity and
Contribution.  (a) The Company agrees to indemnify and hold
harmless the Manager, the directors, officers, employees, agents of the Manager
and each person, if any, who controls the Manager within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act and
each affiliate of the Manager within the meaning of Rule 405 under the
Securities Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, the Prospectus, the
Prospectus Supplement (including any Interim Prospectus Supplement), the General
Disclosure Package, any free writing prospectus that the Company has filed, or
is required to file, pursuant to Rule 433(d) under the Securities Act, or any
amendment or supplement thereto, or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to the Manager furnished to the Company in writing by the Manager expressly for
use therein.

     

    (b)           The
Manager agrees to indemnify and hold harmless the Company, its directors, its
officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to the Manager, but only with reference to
information relating to the Manager furnished to the Company in writing by the
Manager expressly for use in the Registration Statement, the Prospectus, the
Prospectus Supplement (including any Interim Prospectus Supplement), the General
Disclosure Package, any free writing prospectus that the Company has filed, or
is required to file, pursuant to Rule 433(d) under the Securities Act, or any
amendment or supplement thereto.

     

    (c)           In
case any proceeding (including any governmental investigation) shall be
instituted involving any person in respect of which indemnity may be sought
pursuant to Section 8(a) or 8(b), such person (the “indemnified party”) shall
promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in
writing, and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding.  In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them.  It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and that all such fees and expenses
shall be reimbursed as they are incurred.  Such firm shall be
designated in writing by the Manager, in the case of parties indemnified
pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b).  The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.  Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement.  No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.

     

    
      
        
        

      

      
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    (d)           To
the extent the indemnification provided for in Section 8(a) or 8(b) is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then each indemnifying party
under such paragraph, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company, on the
one hand, and the Manager, on the other hand, from the offering of the Shares or
(ii) if the allocation provided by Section 8(d)(i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in Section 8(d)(i) above but also the
relative fault of the Company, on the one hand, and of the Manager, on the other
hand, in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations.  The relative benefits received by the Company, on the
one hand, and the Manager, on the other hand, in connection with the offering of
the Shares shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Shares (before deducting expenses) received by
the Selling Stockholder bear to the total commissions received by the
Manager.  The relative fault of the Company, on the one hand, and the
Manager, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Manager and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.  

     

    
      
        
        

      

      
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    (e)           The
Company and the Manager agree that it would not be just or equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to in Section 8(d).  The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in Section 8(d) shall be deemed to include, subject
to the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim.  Notwithstanding the provisions of this
Section 8, the Manager shall not be required to contribute any amount in
excess of the amount by which the total price at which the Shares sold by it
were offered to the public exceeds the amount of any damages that the Manager
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.  The remedies provided
for in this Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.

     

    (f)           The
indemnity and contribution provisions contained in this Section 8 and the
representations, warranties and other statements of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of the Manager, any person controlling the Manager or any affiliate of
the Manager or by or on behalf of the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Shares.

     

    (g)           The
provisions of this Section 8 shall not be deemed to supersede or otherwise
affect provisions of Section 4.6(g) of the Exchange Agreement dated June 9, 2009
between the Company and the Selling Stockholder with respect to the rights
(including the rights of their respective agents) and obligations of each of
them to the other pursuant thereto.

     

    9.            
Effectiveness.  This
Agreement shall become effective upon the execution and delivery hereof by the
parties hereto.

     

    10.           Termination.  (a)
The Selling Stockholder shall have the right, by giving written notice as
hereinafter specified, to terminate this Agreement in its sole discretion at any
time.  Any such termination shall be without liability of any party to
any other party, except that (i) with respect to any sale through the
Manager for the Selling Stockholder for which the related Time of Sale occurred
prior to the Manager’s receipt of such written notice, the obligations of the
Selling Stockholder, including, but not limited to, its obligations under
Section 3 above, shall remain in full force and effect notwithstanding such
termination; and (ii) the provisions of Section 1 and Section 8
of this Agreement shall remain in full force and effect notwithstanding such
termination.

     

    
      
        
        

      

      
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    (b)           This
Agreement shall remain in full force and effect until the earliest to occur of
the following: (i) this Agreement is terminated pursuant to Section 10(a)
above, (ii) such time as all Shares have been sold pursuant to the terms of this
Agreement, or (iii) this Agreement is otherwise terminated by mutual agreement
of the parties; provided that any such
termination by mutual agreement or pursuant to this clause (b) shall in all
cases be deemed to provide that Section 1 and Section 8 of this
Agreement shall remain in full force and effect.

     

    (c)           Any
termination of this Agreement shall be effective on the date specified in such
notice of termination; provided that such
termination shall not be effective until the close of business on the date of
receipt of such notice by the Company and the Manager.  If such
termination shall occur prior to the Settlement Date for any sale of Shares,
such sale shall settle in accordance with the provisions of
Section 3.

     

    (d)           In
the case of a Principal Purchase pursuant to a Terms Agreement, the Manager may
terminate such Terms Agreement by notice given by the Manager to the Company and
the Selling Stockholder, if after the execution and delivery of the Terms
Agreement and prior to the related Settlement Date:

     

    (i)    there have
been any decrease in the rating of any of the Company’s debt securities by any
“nationally recognized statistical rating organization” (as defined for purposes
of Rule 436(g) under the Securities Act) or any notice given of any intended or
potential decrease in any such rating or of a possible change in any such rating
that does not indicate the direction of the possible change;

     

    (ii)           there
have been (A) any change or decrease specified in the letter or letters referred
to in Section 4(d) or (B) any change, or any development involving a prospective
change, in or affecting the condition (financial or otherwise), earnings,
business, operations or properties of the Company and its subsidiaries, taken as
a whole, from the respective dates of the Registration Statement, the
Prospectus, the General Disclosure Package and the prospectus supplement related
to such Principal Purchase that, in the Manager’s judgment, is material and
adverse and that makes it, in the Manager’s judgment, impracticable to proceed
with the offer, sale or delivery of the Shares on the terms and in the manner
contemplated in the Prospectus and the prospectus supplement related to such
Principal Purchase; or

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

       

    

    (iii)          (A)
trading generally shall have been suspended or materially limited on, or by, as
the case may be, any of the Exchange, the NASDAQ Global Market, the Chicago
Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of
Trade or other relevant exchanges, (B) trading of any securities of the Company
shall have been suspended on any exchange or in any over-the-counter market, (C)
a material disruption in securities settlement, payment or clearance services in
the United States shall have occurred, (D) any moratorium on commercial banking
activities shall have been declared by Federal or New York State authorities or
(E) there shall have occurred any outbreak or escalation of hostilities, or any
change in financial markets or any calamity or crisis that, in your judgment, is
material and adverse and which, singly or together with any other event
specified in this Section 10(d), makes it, in the Manager’s judgment,
impracticable or inadvisable to proceed with the offer, sale or delivery of the
Shares on the terms and in the manner contemplated in the Prospectus and the
prospectus supplement related to such Principal Purchase.

     

    If such
Terms Agreement is terminated pursuant this Section 10(d), then the Manager may
cause the Selling Stockholder to cancel the purchase by the Manager as principal
of all or a portion of such Shares, and each of the Manager and the Selling
Stockholder shall be released from any of its obligations under Section 3 with
respect to such Shares.  The Company shall hold the Manager and the
Selling Stockholder harmless against any loss, claim, damage or expense
(including reasonable legal fees and expenses), as incurred, arising out of or
in connection with the cancellation of any purchase pursuant to this Section
10(d).

     

    11.            Entire
Agreement.  (a) This Agreement, including the schedules and
exhibits attached hereto, represents the entire agreement between the Company
and the Manager with respect to the preparation of any Registration Statement,
Prospectus Supplement or the Prospectus, the conduct of the offering and the
sale and distribution of the Shares.

     

    (b)           The
Company acknowledges that in connection with the offering of the
Shares:  (i) the Manager has acted and will act at arm’s length and
owes no fiduciary duties to the Company, (ii) the Manager owes the Company only
those duties and obligations set forth in this Agreement and prior written
agreements (to the extent not superseded by this Agreement), if any, and (iii)
the Manager may have interests that differ from those of the
Company.  The Company waives to the full extent permitted by
applicable law any claims they may have against the Manager arising from an
alleged breach of fiduciary duty in connection with the sale and distribution of
the Shares.

     

    12.            Counterparts.  This
Agreement and any Terms Agreement may be signed in two or more counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

       

    

    13.            Applicable
Law.  This Agreement and any Terms Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York;
provided that all
rights and obligations of the Selling Stockholder under this Agreement and any
Terms Agreement shall be governed by and construed in accordance with the
federal law of the United States of America.

     

    14.            Headings.  The
headings of the sections of this Agreement and any Terms Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement or any Terms Agreement.

     

    15.            Notices.  All
communications hereunder shall be in writing and effective only upon receipt and
if to the Manager shall be delivered, mailed, telefaxed or sent to Morgan
Stanley & Co. Incorporated, 1585 Broadway, New York, NY 10036, facsimile
number: (212) 761-0316 (Attn: Equity Capital Markets Syndicate Desk) with a copy
to Cleary Gottlieb Steen & Hamilton LLP, One Liberty Plaza, New York, NY
10006, facsimile number: (212) 225-3999 (Attn: Jeffrey D. Karpf); if to the
Selling Stockholder shall be delivered, mailed, telefaxed or sent to United
States Department of the Treasury, 1500 Pennsylvania Avenue, NW, Washington,
D.C. 20220, with a copy to Chief Counsel, Office of Financial Stability,
OFSChiefCounselNotice@do.treas.gov, facsimile number: 202-927-9219, a copy to
CPP Management, CPPManagement@do.treas.gov  and a copy to Simpson
Thacher & Bartlett LLP, 425 Lexington Avenue, New York, NY 10017, facsimile
number: (212) 455-2502 (Attn: Andrew R. Keller); and if to the Company shall be
delivered, mailed, telefaxed or sent to Citigroup Inc.—Treasury Department, 153
E. 53rd Street, 6th Floor, New York, NY 10043, facsimile number: (212) 793-5629,
with a copy to Citigroup Inc., One Court Square, 45th Floor, Long Island City,
NY 11120 (Attn: Associate General Counsel—Capital Markets), facsimile number:
(718) 248-2705.

     

    16.            Successors and
Assigns.  This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents, affiliates and controlling persons
referred to in Section 8 hereof, and no other person will have any right or
obligation hereunder.

     

    [Signature page
follows]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    
      	
              Very
      truly yours,

               

              CITIGROUP
      INC.

            
	 
	 
	
              By:

            	
              /s/
      John C. Gerspach

            
	 
      	
              Name:

            	
              John
      C. Gerspach

            
	 
      	
              Title:

            	
              Chief
      Financial Officer

            

    

    

     

    
      	
              UNITED
      STATES DEPARTMENT OF THE TREASURY

            
	 
	 
	
              By:

            	/s/
      Herbert M. Allison, Jr.
	 
      	
              Name:

            	Herbert
      M. Allison, Jr.
	 
      	
              Title:

            	Assistant
      Secretary for Financial Stability and Counselor to the
  Secretary

    

    

     

    
      	
              Accepted
      as of the date first written above

               

              MORGAN
      STANLEY & CO. INCORPORATED

            
	 
	 
	
              By:

            	
              /s/
      Kenneth G. Pott

            
	 
      	
              Name:

            	
              Kenneth
      G. Pott

            
	 
      	
              Title:

            	
              Managing
      Director

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    SCHEDULE
I

     

    Permitted
Free Writing Prospectuses

     

    
      
        
        

      

      
        I-1

        
          

        

      

      
        
        

      

       

    

    SCHEDULE
II

     

    Transactions
Subject to Sanctions

    

    None.

    

    
      
        
        

      

      
        II-1

        
          

        

      

      
        
        

      

       

    

    SCHEDULE
III

     

    Due
Diligence Protocol

    

    Set forth below are guidelines for use
by the Company, the Selling Stockholder and the Manager in connection with the
Manager’s continuous due diligence efforts in connection with the sale and
distribution of the Shares pursuant to the Agreement.  For the
avoidance of doubt, the Company and the Selling Stockholder have agreed that no
sales under the Agreement will be requested or made at any time the Company is
in possession of material non-public information with respect to the
Company.

    

    
      	
               
      

            	
              1.

            	
              On
      or immediately prior to each Representation Date, in addition to the
      documents provided pursuant to Sections 5(l), (m), (n) and (o) of the
      Agreement, the Manager expects to conduct a due diligence call with the
      appropriate business, financial and legal representatives of the
      Company.

            

    

     

    
      	
               
      

            	
              2.

            	
              Within
      24 hours after the beginning of each period set forth in Section 5(p), the
      Manager expects to conduct additional due diligence review and calls with
      the appropriate business, financial and legal representatives of the
      Company.

            

    

     

    
      	
               
      

            	
              3.

            	
              For
      each month, the Manager expects to conduct bi-weekly due diligence calls
      with the appropriate business, financial, accounting and legal
      representatives of the Company.  One of the bi-weekly due
      diligence calls shall take place on the date of or promptly after the
      Company’s management report becomes available for a given month (but no
      later than the last business day of the immediately succeeding month), and
      the Company shall provide the certificate referred to in Section 4(a)
      of the Agreement.

            

    

     

    The
foregoing is an expression of current intent only, and shall not in any manner
limit the Manager’s rights under the Agreement, including the Manager’s right to
require such additional due diligence procedures and document review as the
Manager may reasonably request pursuant to the Agreement

    

    
      
        
        

      

      
        III-1

        
          

        

      

      
        
        

      

    

     

    Exhibit
A

     

    Common
Stock

     

    

     

    FORM OF TERMS
AGREEMENT

    

    
    

     

    
      	 	

              ______,
      20__

            

    

     

    

    Morgan
Stanley & Co. Incorporated

    1585
Broadway

    New York,
New York 10036

     

    Dear
Sirs:

     

    The
United States Department of the Treasury (the “Selling Stockholder”)
proposes, subject to the terms and conditions stated herein and in the Equity
Distribution Agreement, dated April 26, 2010 (the “Distribution Agreement”),
among Citigroup Inc. (the “Company”), the Selling
Stockholder and Morgan Stanley & Co. Incorporated (the “Manager”), to sell to the
Manager the securities specified in the Schedule I hereto (the “Purchased Shares”), and solely
for the purpose of covering over-allotment options, to grant to the Manager the
option to purchase the additional securities specified in the Schedule I hereto
(the “Additional
Shares”).  Capitalized terms not defined herein shall have the
meaning assigned thereto in the Distribution Agreement.

     

    The
Manager shall have the right to purchase from the Selling Stockholders all or a
portion of the Additional Shares as may be necessary to cover over-allotments
made in connection with the offering of the Purchased Shares, at the same
purchase price per share to be paid by the Manager to the Selling Stockholder
for the Purchased Shares.  This option may be exercised by the Manager
at any time (but not more than once) on or before the thirtieth day following
the date hereof, by written notice to the Company and the Selling
Stockholder.  Such notice shall set forth the aggregate number of
shares of Additional Shares as to which the option is being exercised, and the
date and time when the Additional Shares are to be delivered (such date and time
being herein referred to as the “Option Settlement Date”);
provided, however, that the Option
Settlement Date shall not be earlier than the Time of Delivery (as set forth in
the Schedule I hereto) nor earlier than the second business day after the date
on which the option shall have been exercised nor later than the fifth business
day after the date on which the option shall have been
exercised.  Payment of the purchase price for the Additional Shares
shall be made at the Option Settlement Date in the same manner as the payment
for the Purchased Shares.

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

       

    

    Each of
the provisions of the Distribution Agreement not specifically related to offers
and sales of Shares by the Manager as an agent is incorporated herein by
reference in its entirety, and shall be deemed to be part of this Terms
Agreement to the same extent as if such provisions had been set forth in full
herein.  Each of the representations and warranties set forth therein
shall be deemed to have been made at and as of the date of this Terms Agreement,
at the related Settlement Date and any Option Settlement Date.

     

    A
supplement to the Prospectus relating to the Purchased Shares and the Additional
Shares, in the form heretofore delivered to the Manager shall be filed with the
Securities and Exchange Commission.  Any use of the term “Prospectus”
in the Distribution Agreement shall be deemed to include the supplement for
purposes of this Terms Agreement.

     

    Subject
to the terms and conditions set forth herein and in the Distribution Agreement
which are incorporated herein by reference, the Selling Stockholder agrees to
sell to the Manager and the latter agrees to purchase from the Selling
Stockholder the number of shares of the Purchased Shares at the time and place
and at the purchase price set forth in the Schedule I hereto.

     

    

     

    [Signature page
follows]

     

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

     

    If the
foregoing is in accordance with your understanding, please sign and return to us
a counterpart hereof, whereupon this Terms Agreement, including those provisions
of the Distribution Agreement incorporated herein by reference, shall constitute
a binding agreement among the Company, the Selling Stockholder and the
Manager.

    

     

    
      	
              Very
      truly yours,

               

              CITIGROUP
      INC.

            
	 
      	 
      
	
              By:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      

    

    

     

    
      	
              UNITED
      STATES DEPARTMENT OF THE TREASURY

            
	 
      	 
      
	
              By:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      

    

     

    ACCEPTED
as of the date

    first
written above.

     

    
      	
              MORGAN
      STANLEY & CO. INCORPORATED

            
	 
      	 
      
	
              By:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      

    

    

    
      
        
        

      

      
        A-3

        
          

        

      

      
        
        

      

       

    

    Schedule
I to the Terms Agreement

     

    
      	
              Title
      of Purchased Shares:

            	 
      
	
              Common Stock, par value $0.01 per
      share

            	 
      
	 
      	 
      
	
              Number
      of Shares of Purchased Shares:

            	 
      
	 
      	 
      
	
              Price
      to Public:

            	 
      
	 
      	 
      
	
              Purchase
      Price by the Manager:

            	 
      
	 
      	 
      
	
              Method
      of and Specified Funds for Payment of Purchase Price:

            
	 
      	
              By
      wire transfer to a bank account specified by the Selling Stockholder in
      same day funds.

            
	 
      	 
      
	
              Method
      of Delivery:

            
	 
      	
              Free
      delivery of the Shares to the Manager’s account at The Depository Trust
      Company in return for payment of the purchase price.

            
	 
      	 
      
	
              Time
      of Delivery:

            	 
      
	 
      	 
      
	
              Settlement
      Location:

            	 
      
	 
      	 
      
	
              Documents
      to be Delivered:

            	 
      
	 
      	 
      
	 
      	
              The
      following documents referred to in the Distribution Agreement shall be
      delivered as a condition to the closing at the relevant Settlement
      Date:

              (1)  The certificate
      referred to in Section 4(a).

              (2)  The opinion
      referred to in Section 4(b).

              (3)  The opinion
      referred to in Section 4(c).

              (4)  The accountants’
      letter referred to in Section 4(d).

              (5)  Such other
      documents as the Manager shall reasonably
  request.

            

    

    

    
      
        
        

      

      
        A-4

        
          

        

      

      
        
        

      

    

     

    Exhibit
B

     

    Form of Chief Financial
Officer’s Certificate

    

    In
connection with the offering by the United States Department of the Treasury
(the “Selling
Stockholder”) of shares of common stock, par value $0.01 per share (the
“Common Stock”), of
Citigroup Inc. (the “Company”) through Morgan
Stanley & Co. Incorporated as sales agent (the “Manager”), I, John C.
Gerspach, the Chief Financial Officer of the Company, have been asked to deliver
this certificate to the Manager pursuant to Section 4(e) of the Equity
Distribution Agreement dated April 26, 2010 among the Company, the Selling
Stockholder and the Manager.

    

    Based on
my examination of the Company financial records and schedules undertaken by
myself or members of my staff who are responsible for the Company’s financial
accounting matters, I hereby certify that:

    

    
      	
               
      

            	
              1.

            	
              I
      have reviewed (a) the unaudited consolidated statement of income of the
      Company for the period ended [Quarter End Date], 2010
      and (b) the unaudited consolidated balance sheet of the Company as of
      [Quarter End
      Date], 2010, each attached as an exhibit to the Current Report on
      Form 8-K dated [Date of
      Earnings Report] of the Company (together, the “Interim Financial
      Statements”).

            

    

    

    
      	
               
      

            	
              2.

            	
              The
      Interim Financial Statements are derived from the internal accounting
      records of the Company.

            

    

    

    
      	
               
      

            	
              3.

            	
              To
      the best of my knowledge, the Interim Financial Statements present fairly,
      in all material respects, the financial position of the Company at [Quarter End Date], 2010
      and the results of its operations for the [three]/[six]/[nine] months
      ended [Quarter End
      Date], 2010.

            

    

    

    I am
aware that this certificate is to assist the Manager in conducting and
documenting their investigation of the affairs of the Company in connection with
the Selling Stockholder’s offering of the Company’s Common Stock.

    

    

    [Signature page
follows]

     

    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

       

    

    IN
WITNESS WHEREOF, I have hereunto signed my name on this ___ day of
_____________.

    

    
      	 
      	 
      
	 
      	 
      
	 
      	
              Name:  John
      C. Gerspach

            
	 
      	
              Title:   Chief
      Financial Officer

            
	 
      	 
      

    

     

     

    
      
        
        

      

      
        B-2

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