8-KLeadership ChangesMaterial AgreementsSecurities & Listing+3

STATE STREET CORP 8-K Report, Material Agreement (Oct 31, 2008)

Filed October 31, 2008For Securities:STTSTT-PG

Summary

State Street Corporation (STT) filed an 8-K on October 31, 2008, detailing its participation in the U.S. Department of the Treasury's Troubled Asset Relief Program (TARP) Capital Purchase Program. The company entered into a definitive purchase agreement on October 26, 2008, and closed the transaction on October 28, 2008, receiving $2 billion in capital from the Treasury. This investment was structured through the issuance of preferred stock and a warrant to purchase common stock. Key terms include the issuance of $2 billion in Series B fixed-rate cumulative perpetual preferred stock, which qualifies as tier 1 regulatory capital and carries a dividend rate of 5% for the first five years, increasing to 9% thereafter. Additionally, the Treasury received a warrant to purchase approximately 5.6 million shares of State Street's common stock at an exercise price of $53.80 per share, subject to anti-dilution adjustments and a potential reduction based on future equity offerings. The filing also addresses necessary amendments to State Street's corporate governance and executive compensation practices to comply with TARP requirements.

Key Highlights

  • 1State Street Corporation received a $2 billion capital investment from the U.S. Department of the Treasury under the TARP Capital Purchase Program.
  • 2The investment consists of $2 billion in Series B fixed-rate cumulative perpetual preferred stock, which counts as Tier 1 regulatory capital.
  • 3The preferred stock carries a 5% annual dividend for the first five years, increasing to 9% thereafter.
  • 4The Treasury received a warrant to purchase 5,576,208 shares of State Street common stock at an exercise price of $53.80 per share.
  • 5The warrant's terms include anti-dilution adjustments and a provision for a reduction in shares if State Street raises $2 billion in qualified equity offerings by December 31, 2009.
  • 6State Street amended its articles of organization to designate the Series B preferred stock and updated executive compensation and benefit plans to comply with TARP regulations.
  • 7The preferred stock and warrant were issued in a private placement exempt from registration, with registration rights for the Treasury and future holders.

Frequently Asked Questions

The $2 billion investment is part of the U.S. Department of the Treasury's Troubled Asset Relief Program (TARP) Capital Purchase Program, designed to strengthen the capital base of financial institutions during a period of economic stress.

State Street issued $2 billion of Series B fixed-rate cumulative perpetual preferred stock. This stock qualifies as Tier 1 regulatory capital and pays a cumulative dividend of 5% per annum for the first five years, and 9% per annum thereafter. The preferred stock is non-voting, with specific class voting rights and provisions for electing directors if dividends are not paid.

The Treasury received a warrant to purchase 5,576,208 shares of State Street common stock at an exercise price of $53.80 per share. The warrant has a 10-year term, is immediately exercisable, and is subject to anti-dilution adjustments. The number of shares issuable may be reduced if State Street raises at least $2 billion from qualifying equity offerings by December 31, 2009.

State Street amended its compensation, bonus, incentive, and other benefit plans to comply with Section 111(b) of the Emergency Economic Stability Act of 2008. This includes preventing certain 'golden parachute' payments and implementing clawback provisions for bonuses and incentive compensation based on inaccurate financial statements or performance metrics, applicable during the period the Treasury holds State Street securities.