Document:

Unassociated Document

    FEDERAL
DEPOSIT INSURANCE CORPORATION

    

    WASHINGTON,
D.C.

    

    
      
        
          
            	 
      	
                    )

                  	 
      
	
                    In
      the Matter of

                  	
                    )

                  	 
      
	 
      	
                    )

                  	 
      
	
                    SOUTHERN
      COMMUNITY BANK AND

                  	
                    )

                  	
                    CONSENT ORDER

                  
	
                    TRUST

                  	
                    )

                  	 
      
	
                    WINSTON-SALEM,
      NORTH CAROLINA

                  	
                    )

                  	
                    FDIC-10-823b

                  
	 
      	
                    )

                  	 
      
	
                    (Insured
      State Nonmember Bank)

                  	
                    )

                  	 
      
	 
      	
                    )

                  	 
      

          

        

      

    

    

    The
Federal Deposit Insurance Corporation (“FDIC”) is the appropriate Federal
banking agency for Southern Community Bank and Trust, Winston-Salem, North
Carolina (“Bank”) under 12 U.S.C. § 1813(q).

     

    The Bank,
by and through its duly elected and acting Board of Directors (“Board”), has
executed a “Stipulation to the Issuance of a Consent Order” (“Stipulation”),
dated February 16, 2011, that is accepted by the FDIC and the North Carolina
Commissioner of Banks (the “Commissioner”).  The Commissioner may
issue an order pursuant to the provisions of N.C. Gen. Stat. § 53-107.1
(2005).

     

    With the
Stipulation, the Bank has consented, without admitting or denying any charges of
unsafe or unsound banking practices or violations of law or regulation relating
to weaknesses in capital, asset quality, management, earnings, and liquidity, to
the issuance of this Consent Order (“ORDER”) by the FDIC and the
Commissioner.

     

    Having
determined that the requirements for issuance of an order under 12 U.S.C. §
1818(b) and section 53-107.1 of the North Carolina General Statutes have been
satisfied, the FDIC and the Commissioner hereby order that:

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    BOARD OF
DIRECTORS

     

    1.       
    (a)          Beginning
with the effective date of this ORDER, the Board shall increase its
participation in the affairs of the Bank, assuming full responsibility for the
approval of sound policies and objectives and for the supervision of all of the
Bank's activities, consistent with the role and expertise commonly expected for
directors of banks of comparable size.  This participation shall
include meetings to be held no less frequently than monthly at which, at a
minimum, the following areas shall be reviewed and approved:  reports
of income and expenses; new, overdue, renewal, insider, charged-off, and
recovered loans; investment activity; operating policies; and individual
committee actions.  Board minutes shall document these reviews and
approvals, including the names of any dissenting directors.

     

    (b)         Within
30 days from the effective date of this ORDER, the Board shall establish a Board
committee (“Directors’ Committee”), consisting of at least five members, to
oversee the Bank’s compliance with the ORDER.  Three of the members of
the Directors’ Committee shall not be officers of the Bank.  The
Directors’ Committee shall receive from Bank management monthly reports
detailing the Bank’s actions with respect to compliance with the
ORDER.  The Directors’ Committee shall present a report detailing the
Bank’s adherence to the ORDER to the Board at each regularly scheduled Board
meeting.  Such report shall be recorded in the appropriate minutes of
the Board’s meeting and shall be retained in the Bank’s
records.  Establishment of this committee does not in any way diminish
the responsibility of the entire Board to ensure compliance with the provisions
of this ORDER.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    MANAGEMENT

     

    2.            Within
120 days from the effective date of this ORDER, the Bank shall have and retain
qualified management.

     

    (a)          Each
member of management shall have the qualifications and experience commensurate
with his or her assigned duties and responsibilities at the
Bank.  Management shall include the chief executive officer, chief
credit officer, and chief financial officer with supervisory experience levels
for the Bank’s risk profile.  Each member of management shall be
provided appropriate written authority from the Board to implement the
provisions of this ORDER.

     

    (b)          The
qualifications of management shall be assessed on its ability to:

     

    (i)           Comply
with the requirements of this ORDER;

     

    (ii)          Operate
the Bank in a safe and sound manner;

     

    (iii)         Comply
with applicable laws and regulations; and

     

    (iv)         Restore
all aspects of the Bank to a safe and sound condition, including, but not
limited to, asset quality, capital adequacy, earnings, management effectiveness,
risk management, liquidity, and sensitivity to market risk.

     

    (c)          Within
30 days from the effective date of this ORDER, the Board shall engage an
independent third party acceptable to the Regional Director of the FDIC's
Atlanta Regional Office ("Regional Director") and the Commissioner
(collectively, “Supervisory Authorities”) that possesses appropriate expertise
and qualifications to analyze and assess the Bank's Board, management, staffing
performance, and staffing needs.  The engagement shall require that
the analysis and assessment shall be summarized in a written report to the Board
(“Management Report”).  Within 30 days of receipt of the Management
Report, the Board will conduct a full and complete review of the Management
Report, which review shall be recorded in the minutes of the meeting of the
Board.  The analysis and assessment shall be developed by an outside
consultant reporting to the Bank’s Board.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    (d)          The
Bank shall provide the Supervisory Authorities with a copy of the proposed
engagement letter or contract with the third party for review before it is
executed.  The contract or engagement letter, at a minimum, shall
include:

     

    (i)           a
description of the work to be performed under the contract or engagement letter,
the fees for each significant element of the engagement, and the aggregate
fee;

     

    (ii)          the
responsibilities of the firm or individual;

     

    (iii)         an
identification of the professional standards covering the work to be
performed;

     

    (iv)         identification
of the specific procedures to be used when carrying out the work to be
performed;

     

    (v)          the
qualifications of the employee(s) who are to perform the work;

     

    (vi)         the
time frame for completion of the work;

     

    (vii)        any
restrictions on the use of the reported findings;

     

    (viii)       a
provision for unrestricted examiner access to workpapers; and

     

    (ix)         a
certification that the firm or individual is not affiliated in any manner with
the Bank.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (e)          Within
60 days of receipt of the Management Report, the Board will develop a written
Management Plan that incorporates the findings of the report, a plan of action
in response to each recommendation contained in the Management Report, and a
time frame for completing each action. At a minimum, the Management Plan
shall:

     

    (i)           contain
a recitation of the recommendations included in the Management Report or
otherwise communicated to the Bank, along with a copy of any other report(s)
prepared for the Board by the outside consultant(s);

     

    (ii)          identify
the type and number of officer positions needed to manage and supervise the
affairs of the Bank, detailing any vacancies or additional needs and giving
appropriate consideration to the size and complexity of the Bank;

     

    (iii)         identify
the type and number of key staff positions needed to carry out the Bank’s
strategic plan, detailing any vacancies or additional needs;

     

    (iv)         identify
the authorities, responsibilities, and accountabilities attributable to each
position, as well as the appropriateness of the authorities, responsibilities,
and accountabilities, giving due consideration to the relevant knowledge,
skills, abilities, and experience of the incumbent (if any) and the existing or
proposed compensation;

     

    (v)          present
a clear and concise description of the relevant knowledge, skills, abilities,
and experience necessary for each position, including delegations of authority
and performance objectives;

     

    (vi)         identify
the appropriate level of current and deferred compensation to each officer and
key staff position, including executive officer positions;

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    (vii)        evaluate
the current and past performance of all existing Bank officers, including
directors, executive officers, and key staff members, indicating whether the
individuals are competent and qualified to perform present and anticipated
duties, adhere to the Bank’s established policies and practices, and operate the
Bank in a safe and sound manner;

     

    (viii)       establish
requirements and methodologies to periodically evaluate each individual's job
performance;

     

    (ix)          identify
and establish Bank committees needed to provide guidance and oversight to
management;

     

    (x)           establish
a plan to terminate, rotate, or reassign officers and key staff as necessary, as
well as recruit and retain qualified personnel consistent with the Board's
analysis and assessment of the Bank's staffing needs;

     

    (xi)          identify
training and development needs, and incorporate a plan to provide such training
and development;

     

    (xii)         establish
procedures to periodically review and update the Management Plan, as well as
periodically review and assess the performance of each officer and key staff
member;

     

    (xiii)        contain
a current organizational chart that identifies all existing and proposed key
staff and officer positions, delineates related lines of authority and
accountability, and establishes a written plan for addressing any identified
needs; and

     

    (xiv)       contain
a current management succession plan.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    (f)           A
copy of the Management Report and Management Plan and any subsequent
modification thereto shall be submitted to the Supervisory Authorities for
review and comment.  Within 30 days from receipt of any comment, and
after consideration of such comment, the Board shall approve the Management Plan
and the approval shall be recorded in the minutes of the meeting of the
Board.  Thereafter, the Bank and its directors, officers and employees
shall implement and follow the Management Plan and any modifications
thereto.  It shall remain the responsibility of the Board to fully
implement the plan within the specified time frames.  In the event the
plan, or any portion thereof, is not implemented, the Board shall immediately
advise the Supervisory Authorities, in writing, of specific reasons for
deviating from the Management Plan.

     

    (g)         Within
30 days from the effective date of this ORDER, the Bank's Board shall develop
and adopt an educational program for periodic training for each member of the
Board.  The educational program shall include, at a
minimum:

     

    (i)           specific
training in the areas of lending, operations, and compliance with laws, rules
and regulations applicable to banks chartered in the state of North Carolina;
and,

     

    (ii)          specific
training in the duties and responsibilities of the Board in connection with the
safe and sound operation of the Bank.

     

    Upon
adoption of the educational program, it shall be submitted to the Regional
Director of the FDIC's Atlanta Regional Office ("Regional Director") and the
Commissioner (collectively, "Supervisory Authorities") for review and
comment.  The Board shall document the training activities in the
minutes of the next Board meeting following completion of the
training.  The Board's actions as required by this paragraph shall be
satisfactory to the Supervisory Authorities as determined at subsequent
examinations.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    (h)           During
the life of this ORDER, the Bank shall notify the Supervisory Authorities in
writing when it proposes to add any individual to the Bank’s Board or employ any
individual as a senior executive officer.  The notification must be
received at least 30 days before such addition or employment is intended to
become effective and should include a description of the background and
experience of the individual or individuals to be added or
employed.  The Bank may not add any individual to its Board or employ
any individual as a senior executive officer if the Regional Director issues a
notice of disapproval pursuant to Section 32 of the Act, 12 U.S.C. §
1831i.

     

    (i)           During
the life of this ORDER, the Bank shall notify the Supervisory Authorities in
writing within ten days when any Board member or executive officer resigns or is
terminated.

     

    CAPITAL

     

    3.            (a)         Within
120 days from the effective date of this ORDER, the Bank shall have Tier 1
capital in such an amount as to equal or exceed eight (8%) percent of the Bank's
total assets and total risk-based capital in such an amount as to equal or
exceed eleven (11%) percent of the Bank’s total risk-weighted
assets.  The Bank shall maintain these levels during the life of this
ORDER.  In the event this ratio falls below the established minimum,
the Bank shall notify the Supervisory Authorities and shall increase capital in
an amount sufficient to comply with this paragraph within 90 days.

     

    (b)         Within
60 days from the effective date of this ORDER, the Bank shall develop and adopt
a plan for achieving and maintaining the capital levels required by paragraph
3(a) during the life of this ORDER.  The plan shall be submitted to
the Supervisory Authorities for review and approval.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

    (c)          The
level of Tier 1 capital and total risk-based capital to be maintained during the
life of this ORDER pursuant to paragraph 3(a) shall be in addition to a fully
funded allowance for loan and lease losses (“ALLL”), the adequacy of which shall
be satisfactory to the Supervisory Authorities as determined at subsequent
examinations and/or visitations.

     

    (d)          Any
increase in Tier 1 capital necessary to meet the requirements of paragraph 3 of
this ORDER may be accomplished by the following:

     

    (i)           The
sale of common stock;

    

    (ii)     
    The sale of non-cumulative perpetual preferred
stock;

     

    (iii)         The
direct contribution of cash by the Board, shareholders, and/or parent holding
company;

    

    (iv)         Any
other means acceptable to the Supervisory Authorities; or

     

    (v)          Any
combination of the above means.

     

    (e)          Any
increase in Tier 1 capital necessary to meet the requirements of paragraph 3 of
this ORDER may not be accomplished through a deduction from the Bank’s
ALLL.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (f)           If
all or part of the increase in Tier 1 capital required by paragraph 3 of this
ORDER is accomplished by the sale of new securities, the Board shall adopt and
implement a plan for the sale of such additional securities, including the
voting of any shares owned or proxies held or controlled by them in favor of the
plan.  Should the implementation of the plan involve a public
distribution of the Bank's securities (including a distribution limited only to
the Bank's existing shareholders), the Bank shall prepare offering materials
fully describing the securities being offered, including an accurate description
of the financial condition of the Bank and the circumstances giving rise to the
offering, and any other material disclosures necessary to comply with the
applicable securities laws.  Prior to the implementation of the plan
involving the public distribution of the Bank’s securities and, in any event,
not less than 20 days prior to the dissemination of such materials, the plan and
any materials used in the public distribution of the Bank’s securities shall be
submitted to the FDIC, Division of Supervision and Consumer Protection,
Accounting and Securities Disclosure Section, 550 17th Street,
N.W., Room F-6066, Washington, D.C. 20429 and to the North Carolina Office of
the Commissioner of Banks, 4309 Mail Service Center, Raleigh, North Carolina
27699.  Any changes requested to be made in the plan or materials
shall be made prior to their dissemination.

     

    (g)          In
complying with the provisions of paragraph 3 of this ORDER, the Bank shall
provide to any subscriber and/or purchaser of the Bank's securities, a written
notice of any planned or existing development or other changes, which are
materially different from the information reflected in any offering materials
used in connection with the sale of Bank securities.  The written
notice required by this paragraph shall be furnished within 10 days from the
date such material development or change was planned or occurred, whichever is
earlier, and shall be furnished to every subscriber and/or purchaser of the
Bank's securities who received or was tendered the information contained in the
Bank's original offering materials.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    (h)           For
the purposes of this ORDER, the terms “Tier 1 capital,” “total risk-based
capital,” and “total assets” shall have, the meanings ascribed to them in Part
325 of the FDIC Rules and Regulations, 12 C.F.R. Part 325.

     

    LIQUIDITY AND FUNDS
MANAGEMENT POLICY

     

    4.     
      (a)          Within
60 days from the effective date of this ORDER, the Bank shall adopt and
implement a written plan addressing liquidity, contingency funding, interest
rate risk, and asset liability management, which plan shall include, at a
minimum, revisions to address all items of criticism in the Report of
Examination dated as of June 30, 2010 (“Report”).

     

    (b)          The
plan shall incorporate the guidance contained in Financial Institution Letter
(“FIL”) 84-2008, dated August 26, 2008, entitled Liquidity Risk
Management.  The plan shall provide restrictions on the use of
brokered and internet deposits consistent with safe and sound banking
practices.

     

    (c)          A
copy of the plan shall be submitted to the Supervisory Authorities upon its
completion for review and comment.  Within 30 days from the receipt of
any comments from the Supervisory Authorities, the Bank shall incorporate those
recommended changes.  Thereafter, the Bank shall implement and follow
the plan.

     

    (d)          Beginning
with the effective date of this ORDER, the Bank’s management shall review its
liquidity position to ensure that the Bank has sufficient liquid assets or
sources of liquidity to meet current and anticipated liquidity
needs.  This review shall include an analysis of the Bank’s sources
and uses of funds (cash flow analysis).  The results of this review
shall be presented to the Board for review each month, with the review noted in
the minutes of the Board meeting.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    REDUCTION OF CLASSIFIED
ASSETS

     

    5.           (a)           Within
60 days from the effective date of this ORDER, the Bank shall formulate a
written plan to reduce the Bank’s risk exposure in each asset or relationship in
excess of $250,000 classified “Substandard” or “Doubtful” in the
Report.  For purposes of this paragraph, “reduce” means to collect,
charge off, or improve the quality of an asset so as to warrant its removal from
adverse classification by Supervisory Authorities.  In developing the
plan mandated by this paragraph, the Bank shall, at a minimum, and with respect
to each adversely classified loan or lease, review, analyze, and document the
financial position of the borrower, including source of repayment, repayment
ability, and alternative repayment sources, as well as the value and
accessibility of any pledged or assigned collateral, and any possible actions to
improve the Bank’s collateral position.

     

    (b)          In
addition, the written plan mandated by this paragraph shall also include, but
not be limited to, the following:

     

    (i)           A
quarterly schedule for reducing the outstanding dollar amount of adversely
classified assets;

     

    (ii)          A
schedule showing, on a quarterly basis, the expected consolidated balance of all
adversely classified assets, and the ratio of the consolidated balance to the
Bank’s projected Tier 1 capital plus the ALLL;

     

    (iii)         A
provision for the Bank’s submission of monthly written progress reports to its
Board; and

     

    (iv)         A
provision mandating Board review of the progress reports, with a notation of the
review recorded in the minutes of the Board meeting.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

    (c)           The
plan mandated by this paragraph shall further require a reduction in the
aggregate balance of assets classified “Substandard” and “Doubtful” in the
Report in accordance with the following schedule.  For purposes of
this paragraph, “number of days” means number of days from the effective date of
this ORDER.

     

    (i)           Within
180 days, a reduction of fifteen percent (15%) in the balance of assets
classified “Substandard” or “Doubtful.”

     

    (ii)          Within
360 days, a reduction of thirty-five percent (35%) in the balance of assets
classified “Substandard” or “Doubtful.”

     

    (iii)         Within
540 days, a reduction of sixty percent (60%) in the balance of assets classified
“Substandard” or “Doubtful.”

     

    (iv)         Within
720 days, a reduction of seventy-five percent (75%) in the balance of assets
classified “Substandard” or “Doubtful.”

     

    (d)          The
requirements of this paragraph do not represent standards for future operations
of the Bank.  Following compliance with the above reduction schedule,
the Bank shall continue to reduce the total volume of adversely classified
assets.  The plan may include a provision for increasing Tier 1
capital when necessary to achieve the proscribed ratio.

     

    (e)          Within
60 days from the effective date of this ORDER, the Bank shall submit the written
reduction plan to the Supervisory Authorities for review and
comment.  Within 30 days from receipt of any comment from the
Supervisory Authorities, and after due consideration of any recommended changes,
the Bank shall approve the plan, which approval shall be recorded in the minutes
of the meeting of the Board.  Thereafter, the Bank shall implement and
fully comply with the plan.  Such plans shall be monitored and
progress reports thereon shall be submitted to the Supervisory Authorities at
90-day intervals concurrently with the other reporting requirements set forth in
this ORDER.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

    ALLOWANCE FOR LOAN AND LEASE
LOSSES

     

    6.           (a)          Immediately
upon the entry of this ORDER, the Board shall make a provision to replenish the
ALLL which is underfunded as set forth in the Report.

     

    (b)         Within
60 days from the effective date of this ORDER, the Board shall review the ALLL
and establish a comprehensive policy for determining the adequacy of the
ALLL.  For the purpose of this determination, the adequacy of the ALLL
shall be determined after the charge-off of all loans or other items classified
"Loss".  The policy shall provide for a review of the ALLL at least
once each calendar quarter.  Said review shall be completed in time to
properly report the ALLL in the quarterly Reports of Condition and of
Income.  The review shall focus on the results of the Bank's internal
loan review, loan and lease loss experience, trends of delinquent and
non-accrual loans, an estimate of potential loss exposure of significant
credits, concentrations of credit, and present and prospective economic
conditions.  The review should include a review of compliance with FAS
114 currently codified as 310-10-35, Receivables—Overall—Subsequent Measurement,
including separate identification of and the appropriate value for both
collateral dependent loans and loans not collateral dependent.  The
policy shall adhere to the guidance set forth in the Interagency Policy Statement on the
Allowance for Loan and Lease Losses.  A deficiency in the ALLL
shall be remedied in the calendar quarter it is discovered, prior to submitting
the Reports of Condition and Income, by a charge to current operating
earnings.  The minutes of the Board meeting at which such review is
undertaken shall indicate the results of the review.  The Bank's
policy for determining the adequacy of the ALLL and its implementation shall be
satisfactory to the Supervisory Authorities.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    

    REDUCTION OF CONCENTRATIONS
OF CREDIT

    

    7.        
   Within 30 days from the effective date of this ORDER, the Bank
shall perform a risk segmentation analysis with respect to the Concentrations of
Credit listed on the Concentration page of the Report and any other
concentration deemed important by the Bank.  Concentrations should be
identified by product type, geographic distribution, underlying collateral or
other asset groups, which are considered economically related and, in the
aggregate, represent a large portion of the Bank’s Tier 1
capital.  The Bank shall provide a copy of this analysis to the
Supervisory Authorities, and the Board agrees to develop a plan to reduce any
segment of the portfolio which the Supervisory Authorities deem to be an undue
concentration of credit in relation to the Bank’s Tier 1 Capital.  The
plan and its implementation shall be in a form and manner acceptable to the
Supervisory Authorities as determined at subsequent examinations or
visitations.

     

    CHARGE-OFF

     

    8.     
      (a)          Within
30 days from the effective date of this ORDER, the Bank shall eliminate from its
books, by charge-off or collection, all assets or portions of assets classified
"Loss" and 50 percent of those assets classified "Doubtful" in the Report that
have not been previously collected or charged-off.  Elimination of any
of these assets through proceeds of other loans made by the Bank is not
considered collection for purposes of this paragraph.

     

    (b)         Additionally,
while this ORDER remains in effect, the Bank shall, within 30 days from the
receipt of any official Report of Examination of the Bank from the FDIC or the
Commissioner, eliminate from its books, by collection, charge-off, or other
proper entries, the remaining balance of any asset classified “Loss” and 50
percent of the those classified “Doubtful” unless otherwise approved in writing
by the Supervisory Authorities.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    NO ADDITIONAL
CREDIT

     

    9.       
    (a)           As
of the effective date of this ORDER, the Bank shall not extend, directly or
indirectly, any additional credit to, or for the benefit of, any borrower who
has a loan or other extension of credit from the Bank that has been charged off
or classified, in whole or in part, "Loss" or "Doubtful" and is
uncollected.  The requirements of this paragraph shall not prohibit
the Bank from renewing (after collection in cash of interest due from the
borrower) any credit already extended to any borrower.

     

    (b)          Additionally,
during the life of this ORDER, the Bank shall not extend, directly or
indirectly, any additional credit to, or for the benefit of, any borrower who
has a loan or other extension of credit from the Bank that has been classified,
in whole or part, "Substandard” and is uncollected.

     

    (c)          Paragraph
9(b) shall not apply if the Bank’s failure to extend further credit to a
particular borrower would be detrimental to the best interests of the
Bank.  Prior to the extending of any additional credit pursuant to
this paragraph, either in the form of a renewal, extension, or further advance
of funds, such additional credit shall be approved by a majority of the Board or
a designated committee thereof, who shall certify in writing:

     

    (i)           why
the failure of the Bank to extend such credit would be detrimental to the best
interests of the Bank;

     

    (ii)          why
the Bank’s position would be improved thereby, including an explanatory
statement of how the Bank’s position would be improved; and

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    

    (iii)         that
an appropriate workout plan has been developed and will be implemented in
conjunction with the additional credit to be extended.

     

    (d)          The
signed certification shall be made a part of the minutes of the Board or its
designated committee and a copy of the signed certification shall be retained in
the borrower’s credit file.

     

    LENDING AND COLLECTION
POLICIES

     

    10.          (a)          Within
90 days from the effective date of this ORDER, the Bank shall revise, adopt, and
implement written lending and collection policies to provide effective guidance
and control over the Bank’s lending function.

     

    (b)          The
initial revisions to the Bank's written lending and collection policies,
required by this paragraph, at a minimum, shall include the
following:

     

    (i)           provisions
which require complete loan documentation, realistic repayment terms and current
credit information adequate to support the outstanding indebtedness of the
borrower.  Such documentation shall include current financial
information, profit and loss statements or copies of tax returns and cash flow
projections;

     

    (ii)          provisions
which incorporate limitations on the amount that can be loaned in relation to
established collateral values;

     

    (iii)         provisions
which specify the circumstances and conditions under which real estate
appraisals must be conducted by an independent third party;

     

    (iv)         provisions
which establish officer lending limits;

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    

    (v)          provisions
that require proper supervision of construction loans and that adequate
procedures are in place to monitor construction in relation to construction loan
advances;

     

    (vi)         provisions
which require the preparation of a loan "watch list," which shall include
relevant information on all loans in excess of $100,000 that are classified
"Substandard" and "Doubtful" in the Report and by the Supervisory Authorities in
subsequent Reports of Examination and all other loans in excess of $100,000 that
warrant individual review and consideration by the Board as determined by the
Loan Committee or active management of the Bank.  The loan "watch
list" shall be presented to the Board for review at least monthly with such
review noted in the minutes; and

     

    (vii)        provisions
to ensure compliance with FASB Statement of Financial Accounting Standards No.
114, Accounting by Creditors
for Impairment of a Loan.

     

    (c)          The
Bank shall also within 90 days from the effective date of this ORDER submit a
copy of the revised written lending and collection policies to the Supervisory
Authorities for review and comment.  Within 30 days from the receipt
of any comments from the Supervisory Authorities, the Bank shall incorporate
those recommended changes.  Thereafter, the Bank shall implement and
follow the plan.

     

    (d)          The
Board shall adopt procedures whereby loan officer compliance with the revised
written lending and collection policies are monitored and responsibility for
exceptions thereto assigned.  The procedures adopted shall be
reflected in the minutes of a Board meeting at which all members are present and
the vote of each is noted.

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    

    INTERNAL LOAN
REVIEW

     

    11.          Within
90 days from the effective date of this ORDER, the Bank shall adopt an effective
internal loan review and grading system to provide for the periodic review of
the Bank's loan portfolio in order to identify and categorize the Bank's loans,
and other extensions of credit which are carried on the Bank's books as loans,
on the basis of credit quality.  Such system and its implementation
shall be satisfactory to the Supervisory Authorities as determined at their
initial review and at subsequent examinations and/or visitations.  At
a minimum, the grading system shall provide for the following:

     

    (a)           Specification
of standards and criteria for assessing the credit quality of the Bank's
loans;

     

    (b)           Application
of loan grading standards and criteria to the Bank's loan
portfolio;

     

    (c)           Categorization
of the Bank's loans into groupings based on the varying degrees of credit and
other risks that may be presented under the applicable grading standards and
criteria, but in no case, will a loan be assigned a rating higher than that
assigned by examiners at the last examination of the Bank without prior written
notification to the Supervisory Authorities;

     

    (d)           Assessment
of the likelihood that each loan exhibiting credit and other risks will not be
repaid according to its terms and conditions;

     

    (e)           Identification
of any loan that is not in conformance with the Bank's loan policy;

     

    (f)           Identification
of any loan which presents any unsafe or unsound banking practice or condition
or is otherwise in violation of any applicable State or Federal law, regulation,
or statement of policy;

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

    (g)           Requirement
of a written report to be made to the Board and Audit Committee, not less than
quarterly after the effective date of this ORDER.  The report shall
identify the status of those loans that exhibit credit and other risks under the
applicable grading standards/criteria and the prospects for full collection
and/or strengthening of the quality of any such loans; and

     

    (h)           Specific
policies governing Bank charge-offs of loans and underlying collateral taken to
repay loans.

     

    WRITTEN STRATEGIC
PLAN

     

    12.          Within
120 days from the effective date of this ORDER, the Bank shall prepare and
submit to the Supervisory Authorities its written strategic plan consisting of
long-term goals designed to improve the condition of the Bank and its viability
and strategies for achieving those goals.  The plan shall be in a form
and manner acceptable to the Supervisory Authorities, but at a minimum shall
cover three years and provide specific objectives for asset growth, market
focus, earnings projections, capital needs, and liquidity position.

     

    BUDGET

     

    13.          (a)          Within
90 days from the effective date of this ORDER, the Bank shall formulate and
fully implement a written plan and a comprehensive budget for all categories of
income and expense for the calendar year ending 2011.  The plan and
budget required by this paragraph shall include formal goals and strategies,
consistent with sound banking practices and taking into account the Bank’s other
written policies, to improve the Bank’s net interest margin, increase interest
income, reduce discretionary expenses, control overhead, and improve and sustain
earnings of the Bank.  The plan shall include a projected balance
sheet and a description of the operating assumptions that form the basis for and
adequately support major projected income and expense
components.  Thereafter, the Bank shall formulate such a plan and
budget by December 15 preceding each subsequent budget year.

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    

    (b)          The
plan and budget and any subsequent modification thereto shall be submitted to
the Supervisory Authorities for review and comment.  Within 30 days
after the receipt of any comment from the Supervisory Authorities, the Board
shall approve the plan and budget or subsequent modification thereto, which
approval shall be recorded in the minutes of the meeting of the
Board.

     

    (c)          Following
the end of each calendar quarter, the Board shall evaluate the Bank’s actual
performance in relation to the plan and budget and shall record the results of
the evaluation, and any actions taken by the Bank, in the minutes of the Board
meeting at which such evaluation is undertaken.

     

    BROKERED
DEPOSITS

    

    14.           (a)          Throughout
the effective life of this ORDER, the Bank shall not accept, renew, rollover any
brokered deposit, as defined by 12 C.F.R. § 337.6(a)(2), unless it is in
compliance with the requirements of 12 C.F.R. § 337.6(b), governing solicitation
and acceptance of brokered deposits by insured depository
institutions.

     

    (b)          The
Bank shall comply with the restrictions on the effective yields on deposits as
described in 12 C.F.R. § 337.6.

     

    RESTRICTIONS ON CERTAIN
PAYMENTS

     

    15.           (a)         While
this ORDER is in effect, the Bank shall not declare or pay dividends or bonuses
without the prior written approval of the Supervisory
Authorities.  All requests for prior approval shall be received at
least 30 days prior to the proposed dividend declaration date or bonus payment
(at least 5 days with respect to any request filed within the first 30 days
after the date of this ORDER) and shall contain, but not be limited to, an
analysis of the impact such dividend or bonus payment would have on the Bank's
capital, income, and/or liquidity positions.

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    

    (b)          During
the term of this ORDER, the Bank shall not make any distributions of interest,
principal or other sums on subordinated debentures, if any, without the prior
written approval of the Supervisory Authorities.

     

    REDUCTION OF ADVERSELY
CLASSIFIED LOANS TO INSIDERS

     

    16.           (a)          Within
60 days after the effective date of this ORDER, the Bank shall prepare and
submit to the Supervisory Authorities for review and comment a written plan to
eliminate the amount of loans or other extensions of credit advanced, directly
or indirectly, to or for the benefit of Bank directors, executive officers,
principal shareholders, or their related interests which were adversely
classified in the Report.  For purposes of the plan, these terms shall
be defined pursuant to Section 215.2 of Regulation O, 12 C.F.R. §
215.2.  No new loans or other extensions of credit shall be granted to
or for the benefit of such obligors without first providing the Supervisory
Authorities 30 days prior written notification of the anticipated
action.  Such plan shall include, but not be limited to:

     

    (i)           Dollar
levels to which the Bank shall reduce each extension of credit within 3 months
after the effective date of this ORDER; and

     

    (ii)          Provisions
for the submission of monthly written progress reports to the Bank’s board of
directors for review and notation in minutes of the meetings of the board of
directors.  As used in this paragraph, “reduce” means to:

     

    
      	
               
      

            	
              a.

            	
              Charge-off

            

    

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              b.

            	
              Collect,
      or

            

    

    
      
        	 	 	 
	
                 
      

              	
                c.

              	
                Improve
      the quality of such assets so as to warrant removal of any adverse
      classification by the FDIC and the
State.

              

      

    

     

    (b)         After
the Supervisory Authorities have responded to the plan, the Bank’s board of
directors shall adopt the plan as amended or modified by the Supervisory
Authorities.  The plan will be implemented immediately to the extent
that such provisions are not already in effect at the Bank.

     

    VIOLATIONS OF LAW
AND

    CONTRAVENTIONS OF STATEMENTS
OF POLICY

    

    17.           Within
60 days from the effective date of this ORDER, the Bank shall eliminate and/or
correct all violations of law and regulation as well as all contraventions of
statements of policy that are contained in the Report.  In addition,
the Bank shall take all necessary steps to ensure future compliance with all
applicable laws, regulations, and statements of policy.

     

    NO MATERIAL GROWTH WITHOUT
PRIOR NOTICE

    

    18.           During
the life of this ORDER, the Bank shall notify the Supervisory Authorities at
least 60 days prior to undertaking asset growth to 10 percent (10%) or more per
annum or initiating material changes in asset or liability
composition.  In no event shall asset growth result in noncompliance
with the capital maintenance provisions of this ORDER unless the Bank receives
prior written approval of the Supervisory Authorities.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    PROGRESS
REPORTS

     

    19.           Within
30 days from the end of the first quarter following the effective date of this
ORDER, and within 30 days of the end of each quarter thereafter, the Bank shall
furnish written progress reports to the Supervisory Authorities detailing the
form and manner of any actions taken to secure compliance with this ORDER and
the results thereof.  Such reports shall include a copy of the Bank's
Reports of Condition and of Income.  Such reports may be discontinued
when the corrections required by this ORDER have been accomplished and the
Supervisory Authorities have released the Bank in writing from making further
reports.  All progress reports and other written responses to this
ORDER shall be reviewed by the Board and made a part of the minutes of the
appropriate Board meeting.

     

    DISCLOSURE

    

    20.           Following
the issuance of this ORDER, the Bank shall provide to its shareholders or
otherwise furnish a description of this ORDER in conjunction with the Bank's
next shareholder communication or in conjunction with its notice or proxy
statement preceding the Bank's next shareholder meeting.  The
description shall fully describe the ORDER in all material
respects.  The description and any accompanying communication,
statement, or notice shall be sent to the FDIC, Division of Supervision and
Consumer Protection, Accounting and Securities Disclosure Section, 550 17th Street,
N.W., Room F-6066, Washington, D.C. 20429 and to the North Carolina Office of
the Commissioner of Banks, 4309 Mail Service Center, Raleigh, North Carolina
27699-4309, to review at least twenty (20) days prior to dissemination to
shareholders.  The Bank shall make any changes required by the
Supervisory Authorities prior to dissemination of the description,
communication, notice, or statement.

     

    The
provisions of this ORDER shall not bar, estop, or otherwise prevent the FDIC,
the Commissioner, or any other federal or state agency or department from taking
any other action against the Bank or any of the Bank’s current or former
institution-affiliated parties.

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    

    This ORDER shall be effective on the
date of issuance.

     

    The
provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns
thereof.

     

    The
provisions of this ORDER shall remain effective and enforceable except to the
extent that and until such time as any provision has been modified, terminated,
suspended, or set aside in writing.

     

    Issued
Pursuant to Delegated Authority.

     

    Dated
this 16th day of
February, 2011.

     

    
      
        
          	 
      	
                  /s/ Thomas J. Dujenski

                
	 
      	
                  Thomas
      J. Dujenski

                
	 
      	
                  Regional
      Director

                
	 
      	
                  Division
      of Risk Management Supervision

                
	 
      	
                  Atlanta
      Region

                
	 
      	
                  Federal
      Deposit Insurance
Corporation

                

        

      

    

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    

    The North
Carolina Commissioner of Banks having duly approved the foregoing ORDER, and the
Bank, through its Board, agree that the issuance of the said ORDER by the
Federal Deposit Insurance Corporation shall be binding as between the Bank and
the Commissioner to the same degree and legal effort that such ORDER would be
binding on the Bank if the Commissioner had issued a separate ORDER that
included and incorporated all of the provisions of the foregoing ORDER pursuant
to the provisions of N.C. Stat. § 53-107.1(2005).

     

    Dated
this 16th day of
February, 2011.

    

    
      
        	 
      	
                /s/ Joseph A. Smith, Jr.

              
	 
      	
                Joseph
      A. Smith, Jr.

              
	 
      	
                Commissioner
      of Banks

              
	 
      	
                State
      of North Carolina

              

      

    

    
      
         

      

      
        26Unassociated Document

     

    EXHIBIT 4.01

     

    
      This Note is a Global Security within
the meaning of the Indenture hereinafter referred to and is registered in the
name of the Depository named below or a nominee of the
Depository.  This Note is not exchangeable for Notes registered in the
name of a Person other than the Depository or its nominee except in the limited
circumstances described herein and in the Indenture, and no transfer of this
Note (other than a transfer of this Note as a whole by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository) may be registered except in the limited
circumstances described herein.

      

      Unless this certificate is presented
by an authorized representative of The Depository Trust Company, a New York
corporation (the "Depository"), to the Company or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of the Depository (and any payment is made to Cede & Co. or
to such other entity as is requested by an authorized representative of the
Depository), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co., has an interest herein.

      

      CITIGROUP
INC.

      Floating
Rate Notes due February 15, 2013

      
        	 	 
	
                REGISTERED

              	
                REGISTERED

              
	 
      	 
      
	 
      	
                CUSIP:
      172967 FM 8

              
	 
      	
                ISIN:
      US172967FM80

              
	 
      	
                Common
      Code: 059264630

              
	 
      	 
      
	
                No.
      R-________

              	
                $______________

              

      

      

      CITIGROUP INC., a Delaware
corporation (the "Company", which term includes any successor Person under the
Indenture), for value received, hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of $____________ on February 15, 2013 and
to pay interest thereon from and including February 16, 2011 or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, monthly, on the fifteenth day of each February, May, August and November,
commencing May 15, 2011, at the rate per annum for each Interest Period of
three-month LIBOR, determined as provided herein, plus 0.85% until the principal
hereof is paid or made available for payment.  The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in the Indenture, be paid to the Person in whose name this
Note is registered at the close of business on the Record Date for such
interest, which shall be the Business Day immediately preceding such Interest
Payment Date.

      

      Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the holder on
such Record Date and may either be paid to the Person in whose name this Note is
registered at the close of business on a subsequent Record Date, such subsequent
Record Date to be not less than five days prior to the date of payment of such
defaulted interest, notice whereof shall be given to holders of Notes of this
series not less than 15 days prior to such subsequent Record Date, or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in the Indenture.

       

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      Interest
hereon will be calculated on the basis of the actual number of days elapsed in
an Interest Period and a 360-day year.  Dollar amounts resulting from
such calculation will be rounded to the nearest cent, with one-half cent being
rounded upward.  An "Interest Period" shall be the period from and
including an Interest Payment Date (or from February 16, 2011 in the case of the
first Interest Payment Date) to and including the day immediately preceding the
next Interest Payment Date.

      

      If an
Interest Payment Date falls on a day that is not a Business Day, such Interest
Payment Date will be the next succeeding Business Day.  If the
Maturity of the Notes falls on a day that is not a Business Day, the payment due
on Maturity will be postponed to the next succeeding Business Day, and no
further interest will accrue in respect of such postponement.  If a
date for payment of interest or principal on the Notes falls on a day that is
not a business day in the place of payment, such payment will be made on the
next succeeding business day in such place of payment as if made on the date the
payment was due.  No interest will accrue on any amounts payable for
the period from and after the due date for payment of such principal or
interest.

      

      For these purposes, “Business Day”
means any day which is a day on which commercial banks settle payments and are
open for general business in The City of New York.

      

      Payment of the principal of and
interest on this Note will be made at the office or agency of the Trustee
maintained for that purpose in The City of New York.

      

      Reference is hereby made to the
further provisions of this Note set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set forth at this
place.

      

      Unless the certificate of
authentication hereon has been executed by the Trustee or by an authenticating
agent on behalf of the Trustee by manual signature, this Note shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.

       

      
        
           

        

        
          - 2
-

          
            

          

        

        
           

        

      

       

       

      IN WITNESS WHEREOF, the Company has
caused this instrument to be duly executed under its corporate
seal.

      

      Dated:  February
16, 2011

      

      CITIGROUP
INC.

       

       

      By: 
_________________________________

      Title:  Treasurer

      

      

      

      ATTEST:

       

       

      By: 
___________________________

      Title:  Assistant
Secretary

       

       

      
        
           

        

        
          - 3
-

          
            

          

        

        
           

        

      

      

      

      

      This is one of the Notes of the
series issued under the within-mentioned Indenture.

      

      Dated:  February
16, 2011

      

      THE BANK
OF NEW YORK MELLON,

      as
Trustee

       

       

      By: 
_________________________________

      Name:

      Title:

       

       

      -or-

       

       

      CITIBANK,
N.A.,

      as
Authenticating Agent

       

       

      By: 
_________________________________

      Name:

      Title:

       

       

      
        
           

        

        
          - 4
-

          
            

          

        

        
           

        

      

      

      

      This Note is one of a duly authorized
issue of Securities of the Company (the "Notes"), issued and to be issued in one
or more series under the Indenture, dated as of March 15, 1987 (as amended and
supplemented to date, the "Indenture"), between the Company and The Bank of New
York Mellon, formerly known as The Bank of New York, as Trustee (the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the holders of the Notes and of the
terms upon which the Notes are, and are to be, authenticated and
delivered.  This Note is one of the series designated on the face
hereof, initially limited in aggregate principal to $1,250,000,000.

      

      This Note will bear interest for each
Interest Period at a rate determined by Citibank, N.A., acting as Calculation
Agent.  The interest rate on this Note for a particular Interest
Period will be a per annum rate equal to three-month LIBOR as determined on the
related Interest Determination Date, plus 0.85%.  The Interest
Determination Date for an Interest Period will be the second London business day
preceding such Interest Period.  The Interest Determination Date for
the first Interest Period was February 14, 2011.  Promptly upon
determination, the Calculation Agent will inform the Trustee and the Company of
the interest rate for the next Interest Period.  Absent manifest
error, the determination of the interest rate by the Calculation Agent shall be
binding and conclusive on the holders of Notes, the Trustee and the
Company.

      

      A London business day is a day on which
dealings in deposits in U.S. dollars are transacted in the London interbank
market.

      

      On any Interest Determination Date,
LIBOR will be equal to the offered rate for deposits in U.S. dollars having an
index maturity of six months for the next Interest Period, in amounts of at
least $1,000,000, as such rate appears on Reuters Screen LIBOR01 at
approximately 11:00 a.m., London time, on such Interest Determination
Date.  If the Reuters Screen LIBOR01 is replaced by another service or
ceases to exist, the Calculation Agent will use the replacing service or such
other service that may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits.

      

      If no offered rate appears on Reuters
Screen LIBOR01 on an Interest Determination Date at approximately 11:00 a.m.,
London time, then the Calculation Agent (after consultation with the Company)
will select four major banks in the London interbank market and shall request
each of their principal London offices to provide a quotation of the rate at
which six-month deposits in U.S. dollars in amounts of at least $1,000,000 are
offered by it to prime banks in the London interbank market, on that date and at
that time, that is representative of single transactions at that
time.  If at least two quotations are provided, LIBOR will be the
arithmetic average of the quotations provided.  Otherwise, the
Calculation Agent will select three major banks in New York City and shall
request each of them to provide a quotation of the rate offered by them at
approximately 11:00 a.m., New York City time, on the Interest Determination Date
for loans in U.S. dollars to leading European banks having an index maturity of
six months for the applicable Interest Period in an amount of at least
$1,000,000 that is representative of single transactions at that
time.  If three quotations are provided, LIBOR will be the arithmetic
average of the quotations provided.  Otherwise, the rate of LIBOR for
the next Interest Period will be set equal to the rate of LIBOR for the current
Interest Period.

       

      
        
           

        

        
          - 5
-

          
            

          

        

        
           

        

      

      

      The Luxembourg Stock Exchange shall be
notified of the interest rate, the amount of the interest payment and the
Interest Payment Date for a particular Interest Period not later than the first
day of such Interest Period.  Upon request from any Noteholder, the
Calculation Agent will provide the interest rate in effect on this Note for the
current Interest Period and, if it has been determined, the interest rate to be
in effect for the next Interest Period.

      

      If an event of default (as defined in
the Indenture) with respect to Notes of this series shall occur and be
continuing, the principal of the Notes of this series may be declared due and
payable in the manner and with the effect provided in the
Indenture.

      

      The Indenture contains provisions for
defeasance at any time of the entire indebtedness of this Note upon compliance
by the Company with certain conditions set forth in Sections 11.03 and 11.04
thereof, which provisions apply to this Note.

      

      The Indenture contains provisions
permitting the Company and the Trustee, without the consent of the holders of
the Securities, to establish, among other things, the form and terms of any
series of Securities issuable thereunder by one or more supplemental indentures,
and, with the consent of the holders of not less than 66 2/3% in aggregate
principal amount of Securities at the time outstanding which are affected
thereby, to modify the Indenture or any supplemental indenture or the rights of
the holders of Securities of such series to be affected, provided that no such
modification will (i) extend the fixed maturity of any Securities, reduce the
rate or extend the time of payment of interest thereon, reduce the principal
amount thereof or the premium, if any, thereon, reduce the amount of the
principal of Original Issue Discount Securities payable on any date, change the
currency in which Securities are payable, or impair the right to institute suit
for the enforcement of any such payment on or after the maturity thereof,
without the consent of the holder of each Security so affected, or (ii) reduce
the aforesaid percentage of Securities of any series the consent of the holders
of which is required for any such modification without the consent of the
holders of all Securities of such series then outstanding, or (iii) modify,
without the written consent of the Trustee, the rights, duties or immunities of
the Trustee.

      

      No reference herein to the Indenture
and no provision of this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and interest on this Note at the times, place and rate, and in the
coin or currency, herein prescribed.

      

      This Note is a Global Security
registered in the name of a nominee of the Depository.  This Note is
exchangeable for Notes registered in the name of a person other than the
Depository or its nominee only in the limited circumstances hereinafter
described.  Unless and until it is exchanged in whole or in part for
definitive Notes in certificated form, this Note may not be transferred except
as a whole by the Depository to a nominee of the Depository or by a nominee of
the Depository to the Depository or another nominee of the
Depository.

       

       

      
        
           

        

        
          - 6
-

          
            

          

        

        
           

        

      

      

      The Notes represented by this Global
Security are exchangeable for definitive Notes in certificated form of like
tenor as such Notes in denominations of $1,000 and whole multiples of $1,000 in
excess thereof only if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for the Notes or (ii) the
Depository ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended, or (iii) the Company in its sole discretion
decides to allow the Notes to be exchanged for definitive Notes in registered
form.  Any Notes that are exchangeable pursuant to the preceding
sentence are exchangeable for certificated Notes issuable in authorized
denominations and registered in such names as the Depository shall
direct.  As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of definitive Notes in certificated
form is registrable in the register maintained by the Company in The City of New
York for such purpose, upon surrender of the definitive Note for registration of
transfer at the office or agency of the registrar, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the registrar duly executed by, the holder thereof or his attorney
duly authorized in writing, and thereupon one or more new Notes of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or
transferees.  Subject to the foregoing, this Note is not exchangeable,
except for a Global Security or Global Securities of this issue of the same
principal amount to be registered in the name of the Depository or its
nominee.

      

      No service charge shall be made for any
such registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.

      

      Prior to due presentment of this Note
for registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.

      

      The Company will pay additional amounts
("Additional Amounts") to the beneficial owner of any Note that is a non-United
States person in order to ensure that every net payment on such Note will not be
less, due to payment of U.S. withholding tax, than the amount then due and
payable.  For this purpose, a "net payment" on a Note means a payment
by the Company or a paying agent, including payment of principal and interest,
after deduction for any present or future tax, assessment or other governmental
charge of the United States. These Additional Amounts will constitute additional
interest on the Note.

       

       

      
        
           

        

        
          - 7
-

          
            

          

        

        
           

        

      

      

      The Company will not be required to pay
Additional Amounts, however, in any of the circumstances described in items (1)
through (13) below.

      

      
        	
                 
      

              	
                (1)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any tax, assessment or other governmental charge that is imposed or
      withheld solely by reason of the beneficial
  owner:

              

      

       

      
        	
                 
      

              	
                (a)

              	
                having
      a relationship with the United States as a citizen, resident or
      otherwise;

              

      

      
        	
                 
      

              	
                (b)

              	
                having
      had such a relationship in the past
or

              

      

      
        	
                 
      

              	
                (c)

              	
                being
      considered as having had such a
relationship.

              

      

      

      
        	
                 
      

              	
                (2)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any tax, assessment or other governmental charge that is imposed or
      withheld solely by reason of the beneficial
  owner:

              

      

      

      
        	
                 
      

              	
                (a)

              	
                being
      treated as present in or engaged in a trade or business in the United
      States;

              

      

      
        	
                 
      

              	
                (b)

              	
                being
      treated as having been present in or engaged in a trade or business in the
      United States in the past or

              

      

      
        	
                 
      

              	
                (c)

              	
                having
      or having had a permanent establishment in the United
    States.

              

      

      

      
        	
                 
      

              	
                (3)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any tax, assessment or other governmental charge that is imposed or
      withheld in whole or in part by reason of the beneficial owner being or
      having been any of the following (as such terms are defined in the
      Internal Revenue Code of 1986, as
amended):

              

      

      

      
        	
                 
      

              	
                (a)

              	
                personal
      holding company;

              

      

      
        	
                 
      

              	
                (b)

              	
                foreign
      personal holding company;

              

      

      
        	
                 
      

              	
                (c)

              	
                foreign
      private foundation or other foreign tax-exempt
    organization;

              

      

      
        	
                 
      

              	
                (d)

              	
                passive
      foreign investment company;

              

      

      
        	
                 
      

              	
                (e)

              	
                controlled
      foreign corporation or

              

      

      
        	
                 
      

              	
                (f)

              	
                corporation
      which has accumulated earnings to avoid United States federal income
      tax.

              

      

      

      
        	
                 
      

              	
                (4)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any tax, assessment or other governmental charge that is imposed or
      withheld solely by reason of the beneficial owner owning or having owned,
      actually or constructively, 10 percent or more of the total combined
      voting power of all classes of stock of the Company entitled to vote or by
      reason of the beneficial owner being a bank that has invested in a Note as
      an extension of credit in the ordinary course of its trade or
      business.

              

      

      

      For
purposes of items (1) through (4) above, "beneficial owner" means a fiduciary,
settlor, beneficiary, member or shareholder of the holder if the holder is an
estate, trust, partnership, limited liability company, corporation or other
entity, or a person holding a power over an estate or trust administered by a
fiduciary holder.

       

       

      
        
           

        

        
          - 8
-

          
            

          

        

        
           

        

      

       

      

      
        	
                 
      

              	
                (5)

              	
                Additional
      Amounts will not be payable to any beneficial owner of a Note that is
      a:

              

      

      

      
        	
                 
      

              	
                (a)

              	
                fiduciary;

              

      

      
        	
                 
      

              	
                (b)

              	
                partnership;

              

      

      
        	
                 
      

              	
                (c)

              	
                limited
      liability company or

              

      

      
        	
                 
      

              	
                (d)

              	
                other
      fiscally transparent entity

              

      

      

      
        	
                 
      

              	
                or
      that is not the sole beneficial owner of the Note, or any portion of the
      Note. However, this exception to the obligation to pay Additional Amounts
      will only apply to the extent that a beneficiary or settlor in relation to
      the fiduciary, or a beneficial owner or member of the partnership, limited
      liability company or other fiscally transparent entity, would not have
      been entitled to the payment of an Additional Amount had the beneficiary,
      settlor, beneficial owner or member received directly its beneficial or
      distributive share of the payment.

              

      

      

      
        	
                 
      

              	
                (6)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any tax, assessment or other governmental charge that is imposed or
      withheld solely by reason of the failure of the beneficial owner or any
      other person to comply with applicable certification, identification,
      documentation or other information reporting requirements. This exception
      to the obligation to pay Additional Amounts will only apply if compliance
      with such reporting requirements is required by statute or regulation of
      the United States or by an applicable income tax treaty to which the
      United States is a party as a precondition to exemption from such tax,
      assessment or other governmental
charge.

              

      

      

      
        	
                 
      

              	
                (7)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any tax, assessment or other governmental charge that is collected or
      imposed by any method other than by withholding from a payment on a Note
      by the Company or a paying agent.

              

      

      

      
        	
                 
      

              	
                (8)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any tax, assessment or other governmental charge that is imposed or
      withheld by reason of a change in law, regulation, or administrative or
      judicial interpretation that becomes effective more than 15 days after the
      payment becomes due or is duly provided for, whichever occurs
      later.

              

      

      

      
        	
                 
      

              	
                (9)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any tax, assessment or other governmental charge that is imposed or
      withheld by reason of the presentation by the beneficial owner of a Note
      for payment more than 30 days after the date on which such payment becomes
      due or is duly provided for, whichever occurs
  later.

              

      

      

      
        	
                 
      

              	
                (10)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any:

              

      

      

      
        	
                 
      

              	
                (a)

              	
                estate
      tax;

              

      

      
        	
                 
      

              	
                (b)

              	
                inheritance
      tax;

              

      

      
        	
                 
      

              	
                (c)

              	
                gift
      tax;

              

      

      
        	
                 
      

              	
                (d)

              	
                sales
      tax;

              

      

      
        	
                 
      

              	
                (e)

              	
                excise
      tax;

              

      

      
        	
                 
      

              	
                (f)

              	
                transfer
      tax;

              

      

      
        	
                 
      

              	
                (g)

              	
                wealth
      tax;

              

      

      
        	
                 
      

              	
                (h)

              	
                personal
      property tax or

              

      

      
        	
                 
      

              	
                (i)

              	
                any
      similar tax, assessment, withholding, deduction or other governmental
      charge.

              

      

       

       

      
        
           

        

        
          - 9
-

          
            

          

        

        
           

        

      

      
 

      
        	
                 
      

              	
                (11)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any tax, assessment, or other governmental charge required to be
      withheld by any paying agent from a payment of principal or interest on a
      Note if such payment can be made without such withholding by any other
      paying agent.

              

      

      

      
        	
                 
      

              	
                (12)

              	
                Additional
      amounts will not be payable if a payment on a Note is reduced as a result
      of any tax, assessment or other governmental charge that is required to be
      made pursuant to any European Union directive on the taxation of savings
      income or any law implementing or complying with, or introduced to conform
      to, any such directive.

              

      

      

      
        	
                 
      

              	
                (13)

              	
                Additional
      Amounts will not be payable if a payment on a Note is reduced as a result
      of any combination of items (1) through (12)
  above.

              

      

      

      Except as specifically provided herein,
the Company will not be required to make any payment of any tax, assessment or
other governmental charge imposed by any government or a political subdivision
or taxing authority of such government.

      

      As used in this Note, "United States
person" means:

      

      
        	
                 
      

              	
                (a)

              	
                any
      individual who is a citizen or resident of the United
    States;

              

      

      
        	
                 
      

              	
                (b)

              	
                any
      corporation, partnership or other entity created or organized in or under
      the laws of the United States;

              

      

      
        	
                 
      

              	
                (c)

              	
                any
      estate if the income of such estate falls within the federal income tax
      jurisdiction of the United States regardless of the source of such income
      and

              

      

      
        	
                 
      

              	
                (d)

              	
                any
      trust if a United States court is able to exercise primary supervision
      over its administration and one or more United States persons have the
      authority to control all of the substantial decisions of the
      trust.

              

      

      

      Additionally, "non-United States
person" means a person who is not a United States person, and "United States"
means the states of the United States of America and the District of Columbia,
but excluding its territories and its possessions.

       

       

      
        
           

        

        
          - 10
-

          
            

          

        

        
           

        

      

      

      Except as provided below, the Notes may
not be redeemed prior to maturity.

      

      (1)           The
Company may, at its option, redeem the Notes if:

      

      
        	
                 
      

              	
                (a)

              	
                the
      Company becomes or will become obligated to pay Additional Amounts as
      described above;

              

      

      
        	
                 
      

              	
                (b)

              	
                the
      obligation to pay Additional Amounts arises as a result of any change in
      the laws, regulations or rulings of the United States, or an official
      position regarding the application or interpretation of such laws,
      regulations or rulings, which change is announced or becomes effective on
      or after February 9, 2011 and

              

      

      
        	
                 
      

              	
                (c)

              	
                the
      Company determines, in its business judgment, that the obligation to pay
      such Additional Amounts cannot be avoided by the use of reasonable
      measures available to it, other than substituting the obligor under the
      Notes or taking any action that would entail a material cost to the
      Company.

              

      

      

      
        	
                 
      

              	
                (2)

              	
                The
      Company may also redeem the Notes, at its option,
  if:

              

      

      

      
        	
                 
      

              	
                (a)

              	
                any
      act is taken by a taxing authority of the United States on or after
      February 9, 2011, whether or not such act is taken in relation to the
      Company or any affiliate, that results in a substantial probability that
      the Company will or may be required to pay Additional Amounts as described
      above;

              

      

      
        	
                 
      

              	
                (b)

              	
                the
      Company determines, in its business judgment, that the obligation to pay
      such Additional Amounts cannot be avoided by the use of reasonable
      measures available to it, other than substituting the obligor under the
      Notes or taking any action that would entail a material cost to the
      Company and

              

      

      
        	
                 
      

              	
                (c)

              	
                the
      Company receives an opinion of independent counsel to the effect that an
      act taken by a taxing authority of the United States results in a
      substantial probability that the Company will or may be required to pay
      the Additional Amounts described above, and delivers to the Trustee a
      certificate, signed by a duly authorized officer, stating that based on
      such opinion the Company is entitled to redeem the Notes pursuant to their
      terms.

              

      

      

      Any
redemption of the Notes as set forth in clauses (1) or (2) above shall be in
whole, and not in part, and will be made at a redemption price equal to 100% of
the principal amount of the Notes Outstanding plus accrued interest thereon to
the date of redemption.  Holders shall be given not less than 30 days’
nor more than 60 days’ prior notice by the Trustee of the date fixed for such
redemption.

      

      All terms used in this Note which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.  The Notes are governed by the laws of the State of New
York.

       

       

      - 11
-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00184-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00184-of-00352.parquet"}]]