Current Report — Form 8-K Filing Table of Contents
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This
summary contains basic information about us and this offering and questions
and
answers that highlight selected information from the description of securities
to help you understand the Upper DECS and the capital securities.
Unless
otherwise stated or the context otherwise requires, references in this document
to:
·
“Citigroup,”“we,”“our,” or “us” refer to Citigroup Inc. consolidated with our direct
and indirect subsidiaries;
·
“Citigroup
Inc.” refer only to the holding company on an unconsolidated
basis;
·
“series A
trust” refer to Citigroup Capital XXIXand
“series A stock purchase date” refer
to:
·
March 15,2010if
the capital securities of the series A trust have been successfully
remarketed prior to such date,
·
June 15,2010if
the capital securities of the series A trust have been successfully
remarketed prior to such date,
·
September 15,2010if
the capital securities of the series A trust have been successfully
remarketed prior to such date,
·
December 15,2010if
the capital securities of the series A trust have been successfully
remarketed prior to such date,
provided,
however,
that if
any such date is not a business day, the series D stock purchase date shall
occur on the next business day;
·
the
first, second, third or fourth stock purchase date refer to the series
A
stock purchase date, series B stock purchase date, series C stock
purchase
date or series D stock purchase date in the order in which they actually
occur (it being understood that multiple stock purchase dates may
occur
simultaneously); and
·
“our
common stock” refer to the common stock, par value $0.01 per share, of
Citigroup Inc.
The
Trusts
Each
of
the series A trust, the series B trust, the series C trust and the series D
trust (referred to together with the series A trust, the series B trust and
the series C trust as the “trusts”) is a Delaware statutory trust. Their
principal place of business is c/o Citigroup Inc., 399 Park Avenue, New York,
NY10043, and their telephone number is (212) 559-1000.
2
All
of
the common securities of each trust will be owned by Citigroup Inc. The series
A
trust will use the proceeds from the sale of the series A capital securities
and
its common securities to buy a series of 6.320% junior subordinated deferrable
interest debentures due March 15, 2041(referred
to in this document as the “series A junior subordinated debt securities”) from
Citigroup with the same financial terms as the series A capital securities.
The
series B trust will use the proceeds from the sale of the series B capital
securities and its common securities to buy a series of 6.455% junior
subordinated deferrable interest debentures due September 15,
2041(referred
to in this document as the “series B junior subordinated debt securities”) from
Citigroup with the same financial terms as the series B capital securities.
The
series C trust will use the proceeds from the sale of the series C capital
securities and its common securities to buy a series of 6.700% junior
subordinated deferrable interest debentures due March 15, 2042(referred
to in this document as the “series C junior subordinated debt securities”) from
Citigroup with the same financial terms as the series C capital securities.
The
series D trust will use the proceeds from the sale of the series C capital
securities and its common securities to buy a series of 6.935% junior
subordinated deferrable interest debentures due September 15,
2042(referred
to in this document as the “series D junior subordinated debt securities”) from
Citigroup with the same financial terms as the series D capital
securities.
The
Offering
What
are the Normal DECS?
Each
Normal DECS will have an initial stated amount of $100, which will reduce by
$25
on each stock purchase date on which we sell you shares of our common stock
pursuant to the terms set forth in this document, and will consist
of:
·
a
stock purchase contract under which you will agree to purchase, and
we
will agree to sell to you, for $25, shares of our common stock on
each of
four stock purchase dates. The stock purchase dates are expected
to be at
six-month intervals beginning on March 15, 2010, but each may be
deferred for up to four successive quarterly
periods;
·
prior
to the series A stock purchase date or, if earlier, the remarketing
settlement date for the series A capital securities, a 1/40, or 2.5%,
undivided beneficial ownership interest in a series A capital
security of the series A trust with a liquidation amount of $1,000;
·
prior
to the series B stock purchase date or, if earlier, the remarketing
settlement date for the series B capital securities, a 1/40, or 2.5%,
undivided beneficial ownership interest in a series B capital
security of the series B trust with a liquidation amount of $1,000;
·
prior
to the series C stock purchase date or, if earlier, the remarketing
settlement date for the series C capital securities, a 1/40, or 2.5%,
undivided beneficial ownership interest in a series C capital
security of the series C trust with a liquidation amount of $1,000;
·
prior
to the remarketing settlement date for the series D capital securities,
a
1/40, or 2.5%, undivided beneficial ownership interest in a series D
capital security of the series D trust with a liquidation amount of
$1,000; and
3
·
after
the remarketing settlement date for any series of capital securities
and
prior to the applicable stock purchase date, an undivided beneficial
ownership interest in an interest-bearing deposit with Citibank,
N.A.
purchased with the net proceeds of the
remarketing.
The
deferral of any stock purchase date will not necessarily result in the deferral
of any other stock purchase date and, accordingly, multiple stock purchase
dates
may occur simultaneously. Your ownership interest in each series of capital
securities initially will be pledged to the collateral agent for our benefit
to
secure your obligations under the stock purchase contract to purchase our common
stock on the stock purchase date for such series (the “applicable stock purchase
date”). We refer to the stock purchase contracts, together with the applicable
pledged capital securities, as the “Normal DECS.” At your option, you may elect
to create “Stripped DECS” by substituting pledged treasury securities for the
pledged ownership interests in the capital securities. Unless otherwise
indicated, the term “Upper DECS” will include both Normal DECS and Stripped
DECS.
If
any
applicable stock purchase date is not a business day (as defined herein), then
settlement for such applicable stock purchase date will occur on the next
succeeding business day and references to such applicable stock purchase date
in
this document shall include such next succeeding business day.
The
stock
purchase contract underlying an Upper DECS will obligate you to purchase, and
us
to sell, for $25, on each of four stock purchase dates, a variable number of
newly issued or treasury shares of our common stock per Upper DECS equal to
the
applicable settlement rate. Each settlement rate will be calculated based on
the
VWAP of our common stock (as defined under “Description
of the Stock Purchase Contracts—
Purchase
of Common Stock”
below)
during a specified period preceding the applicable stock purchase date, as
described below.
We
will
pay you quarterly contract payments on the stock purchase
contracts:
·
from
and including the issue date to but excluding the series A stock
purchase
date, at the annual rate of 4.680% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series A stock purchase date;
·
from
and including the issue date to but excluding the series B stock
purchase
date, at the annual rate of 4.545% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series B stock purchase date;
·
from
and including the issue date to but excluding the series C stock
purchase
date, at the annual rate of 4.300% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series C stock purchase date;
and
·
from
and including the issue date to but excluding the series D stock
purchase
date, at the annual rate of 4.065% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series D stock purchase date.
4
We
may
defer the contract payments as described below. If we defer any of these
payments, we will accrue additional amounts on the deferred amounts at the
annual rate of 11.0% until paid, to the extent permitted by law.
What
are the capital securities?
The
series A capital securities, the series B capital securities, the
series C capital securities and the series D capital securities represent
undivided beneficial ownership interests in the assets of the series A
trust, the series B trust, the series C trust and the series D trust,
respectively. The property trustee of each trust will hold legal title to the
assets of such trust. The series A trust’s assets consist solely of our
6.320% Junior Subordinated Debt Securities, Series A, due 2041, which we
refer to as the “series A junior subordinated debt securities,” the
series B trust’s assets consist solely of our 6.455% Junior Subordinated
Debt Securities, Series B, due 2041, which we refer to as the
“series B junior subordinated debt securities,” the series C trust’s
assets consist solely of our 6.700% Junior Subordinated Debt Securities,
Series C, due 2042, which we refer to as the “series C junior
subordinated debt securities,” and the series D trust’s assets consist
solely of our 6.935% Junior Subordinated Debt Securities, Series D, due
2042, which we refer to as the “series D junior subordinated debt
securities” and, together with the series A junior subordinated debt
securities, the series B junior subordinated debt securities and the
series C junior subordinated debt securities, as the “junior subordinated
debt securities.” Because each holder has an “undivided” beneficial interest in
each trust’s assets, the holder has a proportional interest in the collective
assets of each trust, rather than in any specific junior subordinated debt
security.
The
junior subordinated debt securities of each series will have terms that are
substantially similar to the terms of the corresponding series of capital
securities, thus providing the relevant trust with the payment streams required
to fund the distributions on such capital securities.
The
series A trust will pay quarterly cumulative distributions on the
series A capital securities fixed initially at an annual rate of 6.320% on
the liquidation amount of $1,000 per capital security. The series B trust
will pay quarterly cumulative distributions on the series B capital
securities fixed initially at an annual rate of 6.455% on the liquidation amount
of $1,000 per capital security. The series C trust will pay quarterly
cumulative distributions on the series C capital securities fixed initially
at an annual rate of 6.700% on the liquidation amount of $1,000 per capital
security. The series D trust will pay quarterly cumulative distributions on
the series D capital securities fixed initially at an annual rate of 6.935%
on the liquidation amount of $1,000 per capital security. We have the right
to
defer distributions on any series of capital securities. From and after the
relevant remarketing settlement date for any series of capital securities,
the relevant trust will make distributions on such series of capital securities
semi-annually at the rate established in connection with the remarketing of
such
capital securities as described below.
Upon
payment of each series of junior subordinated debt securities issued by us
to
the relevant trust on their maturity date, such trust will use the cash proceeds
from the repayment to redeem the corresponding series of capital securities
at
their aggregate liquidation amount plus any accrued and unpaid distributions,
which will be payable in cash only.
What
are Stripped DECS and how can I create Stripped DECS from Normal
DECS?
You
may
consider it beneficial either to hold capital securities directly or to realize
proceeds from their sale. These investment choices are facilitated by creating
Stripped DECS. At your option, you may elect to create Stripped DECS by
substituting, as pledged securities, the qualifying treasury securities
described under “Description of the Upper DECS — Creating Stripped DECS —
Qualifying Treasury Securities” for the ownership interest in the capital
securities pledged to secure your obligations under the stock purchase
contracts, so long as such capital securities have not been successfully
remarketed. The pledged capital securities will then be released from the pledge
agreement and delivered to you. Because the capital securities of each
series are issued in integral multiples of $1,000, you may make the
substitution only in integral multiples of 40 Normal DECS.
5
Each
Stripped DECS so created will have an initial stated amount of $100 prior to
the
first stock purchase date, which will reduce by $25 on each stock purchase
date,
and will consist of:
an
undivided beneficial ownership interest in a qualifying treasury
security
with a principal amount at maturity of $1,000. This will be a 10%
interest
at all times prior to the first stock purchase date, a 7.5% interest
at
all times on or after the first stock purchase date and prior to
the
second stock purchase date, a 5% interest at all times on or after
the
second stock purchase date and prior to the third stock purchase
date and
a 2.5% interest at all times on or after the third stock purchase
date and
prior to the fourth stock purchase date. We refer to the percentage
interest applicable at any time as the “applicable
percentage.”
If
you
hold Stripped DECS, you will receive quarterly contract payments. If you hold
capital securities separated from the Upper DECS you will receive only the
quarterly distributions on the capital securities. There will also be quarterly
distributions in respect of qualifying treasury securities underlying Stripped
DECS consisting of the amounts by which the principal amount of those qualifying
treasury securities exceed the amount required to purchase replacement
qualifying treasury securities.
After
you
have created Stripped DECS, you may recreate Normal DECS, as described under
“Description of the Upper DECS — Recreating Normal DECS,” only in integral
multiples of 40 Normal DECS, by substituting, as pledged securities, applicable
capital securities for the qualifying treasury securities underlying the
Stripped DECS. If you elect to create Stripped DECS, or recreate Normal DECS,
you will be responsible for any related fees or expenses.
What
is the settlement rate?
We
refer
to the number of newly issued or treasury shares of our common stock per Upper
DECS that we are obligated to sell, and you are obligated to purchase under
a
stock purchase contract, on each of the four stock purchase dates, as the
“settlement rate.” The settlement rate for each stock purchase date is an amount
equal to the sum of the “daily amounts” calculated for each of the 20 trading
days beginning 23 scheduled trading days prior to the applicable stock purchase
date, in each case regardless of whether the applicable stock purchase date
is
deferred. For each of those 20 trading days, a formula will be applied to that
day’s VWAP of our common stock to determine a daily amount, and the sum of the
20 daily amounts will determine the total number of shares of our common stock
that you will receive on the applicable stock purchase date. The daily amount
for each trading day in the 20 trading day period described above is equal
to,
subject to certain anti-dilution adjustments:
·
for
each trading day on which the VWAP of our common stock is less than
or
equal to the reference price, a fraction of a share of our common
stock
per Upper DECS equal to: 1/20 times $25 divided by the reference
price;
·
for
each trading day on which the VWAP of our common stock is greater
than the
reference price but less than the threshold appreciation price, a
fraction
of a share of our common stock per Upper DECS equal to: 1/20 times
$25
divided by the VWAP of our common stock on such trading day;
and
6
·
for
each trading day on which the VWAP of our common stock is greater
than or
equal to the threshold appreciation price, a fraction of a share
of our
common stock per Upper DECS equal to: 1/20 times $25 divided by the
threshold appreciation price.
As
a
result, for each of the 20 trading days you will receive 85.47% of the
appreciation in the price of our common stock above the threshold appreciation
price, you will not share in any appreciation in the price of our common stock
between the reference price and the threshold appreciation price and you will
bear the risk of any decline in the applicable market price of our common stock
below the reference price. The amount of our common stock that you will receive
on each stock purchase date is subject to adjustment as set forth in
“Description of the Stock Purchase Contracts — Anti-Dilution
Adjustments.”
The
reference price is equal to $31.83 per share. The threshold appreciation price
is equal to $37.24 per share, and represents a 17.0% appreciation over the
reference price.
What
distributions or payments will be made to holders of the Normal DECS, Stripped
DECS and capital securities?
Normal
DECS.
If you
hold Normal DECS, you will be entitled to receive payments consisting of the
quarterly distributions on each series of capital securities that were included
in the Normal DECS as of the immediately preceding March 15, June 15,
September 15 or December 15(or
the
issue date of the Normal DECS, if none were outstanding on such immediately
preceding date), or in the case of any series of capital securities that have
been successfully remarketed since such date, a pro
rata
portion
of the interest-bearing depositwith
Citibank, N.A. corresponding to the payment that would have been made had such
series of capital securities not been successfully remarketed and the interest
rate on the related series of junior subordinated debt securities not been
reset, as well as the quarterly contract payments described under “What are the
stock purchase contracts” above. All of these payments are subject to the
deferral provisions described below.
Stripped
DECS.
If you
hold Stripped DECS, you will receive the quarterly contract payments described
under “What are the stock purchase contracts” above. There will also be
quarterly distributions in respect of qualifying treasury securities underlying
Stripped DECS consisting of the amounts by which the principal amount of those
qualifying treasury securities exceed the amount required to purchase
replacement qualifying treasury securities.
Capital
securities.
If you
hold capital securities separate from the Upper DECS, you will receive only
the
quarterly distributions on the capital securities described above, at the annual
rate of 6.320% on the liquidation amount of $1,000 per series A capital
security, of 6.455% on the liquidation amount of $1,000 per series B
capital security, 6.700% on the liquidation amount of $1,000 per series C
capital security and 6.935% on the liquidation amount of $1,000 per
series D capital security, in each case from and including the issue date.
From and after the applicable remarketing settlement date for each series of
capital securities, the relevant trust will make distributions on such series
of
capital securities semi-annually at the rate established in connection with
the
remarketing of such capital securities as described below.
Each
trust must pay distributions on its capital securities on the payment dates
to
the extent that it has funds available for distribution. Each trust’s funds
available for distribution to you as a holder of the relevant capital securities
will be limited to payments received from us on the underlying series of junior
subordinated debt securities. We will guarantee the payment of distributions
on
each series of capital securities out of funds held by the relevant trust to
the
extent of available trust funds.
7
What
are the contract payment dates and distribution
dates?
Subject
to the deferral provisions described below, contract payments and distributions
on each series of capital securities will be paid quarterly in arrears on
March 15, June 15, September 15 and December 15 of each year,
commencing on March 15, 2008 and ending on the applicable stock purchase
date. As used herein, “applicable stock purchase date” means, when used in
connection with any series of capital securities, the March 15,
June 15, September 15 or December 15 immediately following the remarketing
settlement date for such series of capital securities, or if no remarketing
is
successful during any of the first four remarketing periods (as those terms
are
defined under “What is a remarketing?” below) with respect to such series,
immediately following the final remarketing period with respect to such series.
From and after the March 15, June 15, September 15 or December 15
immediately following the applicable remarketing settlement date, the relevant
trust will make distributions semi-annually on March 15 or September 15, or
June 15 or December 15, of each year, as applicable, with the first such
semi-annual payment, if any, occurring on the payment date that is six months
after the applicable remarketing settlement date. If any March 15,
June 15, September 15 or December 15is
not a
business day, payment shall be made on the next business day, without
adjustment.
When
can we defer contract payments and distributions?
Stock
purchase contracts.
We may,
at our option, and will at the direction of the Federal Reserve Board or the
Federal Reserve Bank of New York (collectively referred to as “Federal Reserve
Board”), upon prior written notice to the holders of the Upper DECS and the
stock purchase contract agent, defer contract payments on the stock purchase
contracts until no later than September 15, 2012. We may elect, and will
elect if so directed by the Federal Reserve Board, to defer payments on more
than one occasion, but in no event may we defer payments beyond the fourth
stock
purchase date. Deferred contract payments will accrue additional amounts until
paid, compounded quarterly, at the annual rate of 11.0%, to the extent permitted
by law. If we elect to defer the payment of contract payments on the stock
purchase contracts, to the extent the stock purchase contracts have not been
terminated then we will pay the deferred contract payments in either shares
of
common stock or unsecured junior subordinated notes (which will be subordinate
and rank junior in right of payment to all of our existing and future secured
and senior debt on the same basis as the contract payments), in our sole
discretion. As used in this document, the term “senior debt” shall have the
meaning of “senior indebtedness” set forth under “Description of the Junior
Subordinated Debt Securities — Subordination.”
Capital
securities.
We may,
at our option, and will at the direction of the Federal Reserve Board upon
prior
written notice to the trustee, defer the interest payments due on a series
of
junior subordinated debt securities at any time and from time to time. We may
elect and will elect, if so directed by the Federal Reserve Board, to defer
interest payments on more than one occasion. If we defer interest payments
on a
series of junior subordinated debt securities, the trust holding such securities
will defer distributions on the capital securities issued by it. Deferred
distributions to which you are entitled will accrue additional distributions,
compounded quarterly prior to the applicable remarketing settlement date, and
semi-annually thereafter, from the relevant payment date for distributions
during any deferral period, at the rate borne by the applicable series of
capital securities at such time, to the extent permitted by applicable law.
We
may not defer interest payments on a series of junior subordinated debt
securities for any period of time that exceeds five years with respect to any
deferral period or that extends beyond its maturity date.
8
Restrictions
resulting from a deferral.
Subject
to certain exceptions, during any period in which we defer contract payments
or
interest payments on a series of junior subordinated debt securities, in general
we cannot:
·
declare
or pay any dividends on, or make any distributions relating to, or
redeem,
purchase, acquire or make a liquidation payment relating to, any
shares of
our capital stock, or make any guarantee payments with respect
thereto;
·
make
any payment of interest, principal or premium on, or repay, purchase
or
redeem, the other series of junior subordinated debt securities or
any of
our other debt securities or guarantees that rank equally with or
junior
to such series of junior subordinated debt securities;
or
·
make
any payment under any guarantee that ranks equal or junior to the
guarantee related to a series of capital securities, including any
payment
on the guarantee for the other series of capital
securities.
During
any deferral period, interest will continue to accrue and holders of junior
subordinated debt securities and holders of the related capital securities
that
are outstanding will be required to accrue such deferred interest income on
a
constant-yield basis (in the form of original issue discount) for United States
federal income tax purposes prior to the receipt of cash attributable to such
income, regardless of the method of accounting used by the holders.
What
is a remarketing?
If
you
hold Normal DECS, to provide you with the proceeds necessary to be applied
in
the settlement of your stock purchase contract obligations on each applicable
stock purchase date, the capital securities of the applicable series will be
remarketed, unless you elect not to participate in that remarketing. Each
remarketing will take place during a ten business day period (a “remarketing
period”) beginning 12 business days prior to the applicable remarketing
settlement date, subject to deferral in the event that a remarketing is not
successful during such remarketing period. The “remarketing settlement date” for
any successful remarketing will be the date three months prior to the applicable
stock purchase date, or if any such day is not a business day, the immediately
succeeding business day.
The
cash
proceeds from a successful remarketing, net of any remarketing fee, will be
used
to purchase an interest-bearing deposit of Citibank, N.A. on the applicable
remarketing settlement date that, on the applicable stock purchase date, will
equal the aggregate liquidation amount of the capital securities included in
such remarketing plus the distribution that would be payable thereon on the
applicable stock purchase date assuming for this purpose, even if not true,
that
the distribution rate on such capital securities remains the same as the
distribution rate in effect prior to the remarketing settlement date and all
accrued and unpaid distributions are paid in cash on such date, and any
remaining proceeds (net of any remarketing fee) will be remitted to you (we
refer to the initial amount of each such deposit in this document as the
“remarketing value”). The Citibank, N.A. deposit will be used to satisfy your
obligation to purchase common stock on the applicable stock purchase date,
and
to pay you an amount equal to the distribution that would have been payable
on
the remarketed capital securities on the applicable stock purchase date had
they
still formed part of the Upper DECS. If you hold capital securities separately
and not as part of the Upper DECS, you may elect to participate in remarketings
as described below. The rate of interest on the Citibank, N.A. deposit made
with
the proceeds of each series of capital securities will be determined on an
arm’s
length basis immediately prior the beginning of the applicable remarketing
period.
9
For
each
remarketing, we will enter into a remarketing agreement with a nationally
recognized investment banking firm, which may be one of our affiliates. The
investment banking firm will agree to use its commercially reasonable efforts
as
remarketing agent to sell the applicable series of capital securities included
in the remarketing at a price that results in proceeds, net of any remarketing
fee, of at least the remarketing value. To obtain that price, the remarketing
agent may reset the distribution rate on the applicable series of capital
securities, as described below. There will be a maximum of five attempted
remarketings for each series of capital securities. If a remarketing is
successful, settlement for the remarketing will occur on the applicable
remarketing settlement date.
You
may
elect not to participate in a remarketing, and to retain the capital securities
of the corresponding series underlying your Upper DECS in the event such
remarketing is successful. To do this you must deliver the qualifying treasury
security, in the principal amount of $1,000 per capital security you elect
to
retain, to the collateral agent on or prior to 5:00 p.m., New York City time,
on
the business day immediately preceding the first day of the applicable
remarketing period as described in “Description of the Stock Purchase Contracts
— Notice to Settle with Treasury Securities.” Because the capital securities of
each series are issued in integral multiples of $1,000, you may make this
election only in integral multiples of 40 Normal DECS.
In
connection with an attempted remarketing of a series of capital securities,
the
remarketing agent may reset the rate on such series of capital securities.
If
the remarketing is successful and the rate is reset, the reset rate will apply
to all outstanding capital securities of that series, whether or not the holders
participated in such remarketing, and will become effective on the applicable
remarketing settlement date.
The
reset
rate on each series of capital securities will be the rate such that the
proceeds from such remarketing, net of any remarketing fee, will be at least
equal to the remarketing value; provided,
however,
that for
each of the first four attempted remarketings of each series of capital
securities, the reset rate may not exceed the reset cap. For this purpose,
the
“reset cap” is the prevailing market yield per
annum,
as
determined by the remarketing agent, of the benchmark U.S. treasury security
having a remaining maturity that most closely corresponds to the period until
the maturity date of the applicable junior subordinated debt securities or,
if
earlier, the earliest date on which we have the option to redeem such junior
subordinated debt securities, plus 350 basis points.
What
happens if a remarketing is not successful?
If
the
remarketing agent cannot successfully remarket a series of capital securities
on
the terms described above, then, unless there has been a final failed
remarketing (as described below):
·
the
distribution rate on that series of capital securities will not be
reset;
and
·
the
remarketing agent will thereafter attempt to establish a new reset
rate
meeting the requirements described above and remarket such capital
securities during subsequent remarketing periods as
follows:
-
There
will be five potential remarketing periods for each series of capital
securities. The first four remarketings will be subject to the reset
cap,
and the last remarketing will be
uncapped.
-
The
first potential remarketing period for the series A capital
securities, the series B capital securities, the series C capital
securities and the series D capital securities will begin 12 business
days
prior to December 15, 2009, June 15, 2010,
December 15,2010or
June 15, 2011, respectively. The first remarketing for each series
will be subject to the reset cap.
10
-
If
any of these remarketings is not successful, the second potential
remarketing period for the relevant series of capital securities will
begin three months after the first potential remarketing period for
such
series; the third potential remarketing settlement date for the relevant
series of capital securities will begin six months after the first
potential remarketing period for such series and the fourth potential
remarketing period for the relevant series of capital securities will
begin nine months after the first potential remarketing period for
such
series. These remarketings will be subject to the reset
cap.
-
If
the fourth remarketing for any series is not successful, the fifth
and
final potential remarketing periods for the series A capital
securities, the series B capital securities, the series C capital
securities and the series D capital securities will begin 12 business
days
prior to December 15, 2010, June 15, 2011,
December 15,2011or
June 15, 2012, respectively. The fifth remarketing for each series
will not be subject to the reset
cap.
Any
remarketing of capital securities will settle (if successful) on the applicable
remarketing settlement date. Any such remarketings will be subject to the
conditions and procedures described above and under “Description of the Capital
Securities — Remarketing.”
What
happens if the final remarketing of a series of capital securities is not
successful?
The
remarketing agent will attempt to remarket each series of capital securities
a
maximum of five times. If the remarketing agent’s fifth attempt to remarket a
series of capital securities is unsuccessful, a “final failed remarketing” will
be deemed to have occurred with respect to such series, and the distribution
rate on the applicable series of capital securities will not be reset. In the
event of a final failed remarketing, we may shorten the stated maturity of
the
underlying junior subordinated debt securities and, accordingly, the mandatory
redemption date of the corresponding capital securities would be accelerated;
provided,
however,
that if
we are deferring interest on the applicable series of underlying junior
subordinated debt securities at the time of a remarketing, any new stated
maturity date and mandatory redemption date may not be earlier than five years
after commencement of the deferral period.
Capital
securities held in Normal DECS.
If a
final failed remarketing for a series of capital securities occurs with respect
to each Normal DECS, we will exercise our rights as a secured party and, subject
to applicable law, retain the applicable series of capital securities pledged
as
collateral under the pledge agreement or sell them in one or more private sales
and apply the liquidation amount or proceeds from the sale of such capital
securities against your obligations under the stock purchase contract. In either
case, your obligation to purchase stock on the applicable stock purchase date
under the stock purchase contract would be satisfied in full. We will issue
a
junior subordinated note (which will be subordinate and rank junior in right
of
payment to all of our existing and future secured and senior debt) to the stock
purchase contract agent for delivery to you, payable on September 15,2013or,
if we
are deferring interest on the corresponding series of junior subordinated debt
securities, on the date that is five years after commencement of the deferral
period (whichever is later), and bearing interest at the annual rate of 6.320%
for the series A capital securities, the annual rate of 6.455% for the
series B capital securities, the annual rate of 6.700% for the
series C capital securities and the annual rate of 6.935% for the
series D capital securities, in each case in an amount equal to any accrued
and unpaid distributions (together with any interest on accrued and unpaid
amounts) on the applicable series of capital securities as of the applicable
stock purchase date.
11
Qualifying
treasury securities held in Stripped DECS.
If a
final failed remarketing for a series of capital securities occurs, with respect
to each Stripped DECS, we will apply the principal amount at maturity of your
qualifying treasury securities pledged as collateral to satisfy in full your
obligation to us under your stock purchase contracts.
Capital
securities not held in Normal DECS.
If a
final failed remarketing for a series of capital securities occurs, you will
have the right, at your option, to require the relevant trust to redeem all
or a
portion of those capital securities in exchange for the liquidation amount
of
$1,000 per capital security in cash, plus a junior subordinated note (which
will
be subordinate and rank junior in right of payment to all of our existing and
future secured and senior debt), payable September 15, 2013or,
if we
are deferring interest on the corresponding series of junior subordinated debt
securities, on the date that is five years after commencement of the deferral
period (whichever is later) and bearing interest at the annual rate of 6.320%
for the series A capital securities, at the annual rate of 6.455% for the
series B capital securities, the annual rate of 6.700% for the
series C capital securities and the annual rate of 6.935% for the
series D capital securities, in each case in an amount equal to any accrued
and unpaid distributions (together with any interest on accrued and unpaid
amounts) as of the applicable stock purchase date.
If
I hold my capital securities separately from the Upper DECS, may I still
participate in a remarketing?
Holders
of capital securities that are not held as part of Normal DECS may elect to
have
their relevant capital securities included in a remarketing and remarketed
in
the same manner and at the same price as capital securities underlying Normal
DECS. See “Description of the Capital Securities — Optional Remarketing of the
Capital Securities Not Included in Normal DECS.”
If
I do not participate in a remarketing, how can I satisfy my related obligations
under the stock purchase contract?
You
may
also satisfy your obligations under the stock purchase contract as
follows:
·
if
you hold Stripped DECS, the proceeds of the qualifying treasury security
in the amount of the purchase price will be applied automatically
to
satisfy in full your obligation to purchase common stock under your
stock
purchase contracts on the applicable stock purchase date and you
will not
be required to deliver any additional cash to satisfy your
obligation;
·
if
you hold Normal DECS and have elected not to participate in a remarketing,
by delivering the applicable qualifying treasury security, in the
principal amount of $1,000 per capital security of the series to
be
remarketed in increments of 40 Normal DECS, prior to the commencement
of
the applicable remarketing period, as described in “Description of the
Stock Purchase Contracts — Notice to Settle with Treasury
Securities”;
·
if
we are involved in a merger in which at least 10% of the consideration
for
our outstanding common stock consists of cash or cash equivalents,
through
an early settlement of the stock purchase contract as described in
“Description of the Stock Purchase Contracts — Early Settlement upon Cash
Merger”; and
·
you
may settle the stock purchase contracts early, at your option, as
described in “Description of the Stock Purchase Contracts — Early
Settlement.”
12
What
happens to the stock purchase contracts in the event of our bankruptcy,
insolvency or reorganization?
The
stock
purchase contracts, our related rights and obligations and those of the holders
of the Upper DECS under the stock purchase contracts, including the right and
obligation to purchase our common stock and the right to receive accrued
contract payments, automatically will terminate, without any further action,
upon the occurrence of particular events of our bankruptcy, insolvency or
reorganization.
What
is the maturity of the capital securities? When must the capital securities
be
redeemed?
The
capital securities of each series have no stated maturity but must be redeemed
upon the maturity of the corresponding series of junior subordinated debt
securities or their earlier redemption. The series A junior subordinated
debt securities are initially scheduled to mature on March 15, 2041, the
series B junior subordinated debt securities are initially scheduled to
mature on September 15, 2041, the series C junior subordinated debt
securities are initially scheduled to mature on March 15, 2042and
the
series D junior subordinated debt securities are initially scheduled to
mature on September 15, 2042. However, we may elect at any time but on one
occasion only with respect to each series of junior subordinated debt
securities, in our sole discretion, to change the stated maturity of such series
of junior subordinated debt securities to any date:
·
not
earlier than March 15, 2013and
not later than March 15, 2041for
the series A junior subordinated debt securities,
·
not
earlier than September 15, 2013and
not later than September 15, 2041for
the series B junior subordinated debt securities,
·
not
earlier than March 15, 2014and
not later than March 15, 2042for
the series C junior subordinated debt securities, or
·
not
earlier than September 15, 2014and
not later than September 15, 2042for
the series D junior subordinated debt securities
and
to
specify a date:
·
not
earlier than March 15, 2013for
the series A junior subordinated debt securities,
·
not
earlier than September 15, 2013 for the series B junior
subordinated debt securities,
·
not
earlier than March 15, 2014for
the series C junior subordinated debt securities, and
·
not
earlier than September 15, 2014for
the series D junior subordinated debt securities,
on
and
after which such series of junior subordinated debt securities will be
redeemable at our option; provided,
however,
that if
we are deferring interest on such series of junior subordinated debt securities
at the time of such remarketing, we may not elect a maturity date or specify
an
optional redemption date that is earlier than five years after commencement
of
the deferral period. The redemption price per capital security will equal the
liquidation amount per capital security plus accumulated and unpaid
distributions, if any, to, but excluding, the redemption date and any additional
amount we may agree to pay upon redemption when we specify an optional
redemption date (although we are under no obligation to agree to pay any such
additional amounts). The redemption price of each such junior subordinated
debt
security will be the principal amount, plus accrued and unpaid interest, if
any,
to, but excluding, the redemption date plus, if we have agreed to pay additional
amounts upon redemption, an amount equal to such additional amounts. We will
give not less than 30 days’ nor more than 60 days’ notice of redemption by mail
to holders of the junior subordinated debt securities.
13
We
may
not redeem the junior subordinated debt securities in part if the principal
amount has been accelerated and such acceleration has not been rescinded, or
unless all accrued and unpaid interest has been paid in full on all outstanding
junior subordinated debt securities for all interest periods terminating on
or
before the redemption date.
What
is the ranking of my claims against Citigroup, either for payment of the
quarterly contract payments under the stock purchase contracts or, through
the
capital securities, for interest or principal on the junior subordinated debt
securities, if Citigroup were to become insolvent?
Your
claims against Citigroup directly for quarterly contract payments or indirectly
through the capital securities for payments of principal and interest on the
junior subordinated debt securities, are junior subordinated claims as described
under “Description of the Junior Subordinated Debt Securities — Subordination.”
In addition, as mentioned above, your right to receive accrued contract payments
will terminate automatically upon the occurrence of particular bankruptcy,
insolvency or reorganization events involving Citigroup Inc.
We
may
elect at any time, but on one occasion only with respect to each series of
junior subordinated debt securities, that our obligations under such series
of
junior subordinated debt securities and under the guarantee of the applicable
series of capital securities shall be senior obligations instead of subordinated
obligations.
When
may we dissolve the trusts?
We,
as
the holder of all the common securities of each trust, have the right to
dissolve each trust at any time in our sole discretion.
If
we
dissolve any trust, you will receive, after satisfaction of liabilities of
creditors of such trust, the underlying series of junior subordinated debt
securities having a principal amount equal to the liquidation amount of the
corresponding series of capital securities that you hold. In this case, such
capital securities will no longer be deemed to be outstanding, and Normal DECS
that had included 1/40 of an interest in such capital securities would
thereafter include 1/40 of an interest in a junior subordinated debt security
of
that series. If your interest in the capital securities is pledged at that
time
to secure your obligations under your stock purchase contracts, the interest
in
the junior subordinated debt securities you receive will be pledged in
substitution for your interest in the capital securities to secure those
obligations.
Following
dissolution, the distributed junior subordinated debt securities would be
subject to the remarketing and other provisions of the capital
securities.
What
is the extent of our guarantees?
In
respect of each series of capital securities, we will irrevocably guarantee,
on
a junior subordinated basis, the payment in full of the following:
·
any
accumulated and unpaid distributions required to be paid on such
series of
capital securities, to the extent the relevant trust has funds available
to make the payment;
14
·
the
redemption price for any capital securities of the applicable series
called for redemption, to the extent the relevant trust has funds
available to make the payment; and
·
upon
a voluntary or involuntary dissolution, winding-up or liquidation
of the
applicable trust, other than in connection with a distribution of
the
related series of junior subordinated debt securities to the holders
of
such series of capital securities, the lesser
of:
(1)
the
aggregate of the liquidation amount and all accumulated and unpaid
distributions on such series of capital securities to the date of
payment,
if any, to the extent such trust has funds available to make the
payment;
and
(2)
the
amount of assets of the applicable trust remaining available for
distribution to holders of such capital securities upon liquidation
of
such trust.
Our
obligations under the guarantee related to a series of capital securities are
unsecured, are subordinated to and junior in right of payment to all of our
existing and future secured and senior debt, and shall rank equal in right
of
payment with the guarantee related to the other series of capital securities
and
with all other similar guarantees issued by us.
The
capital securities, the guarantees and the junior subordinated debt securities
do not limit our ability or the ability of our subsidiaries to incur additional
indebtedness, including indebtedness that ranks senior to or equal in right
of
payment with the junior subordinated debt securities and the guarantees.
Each
guarantee, when taken together with our obligations under the applicable series
of junior subordinated debt securities and the applicable junior indenture
(as
used in this document, the term “junior indenture” shall have the meaning set
forth under “Description of the Junior Subordinated Debt Securities”) and our
obligations under the trust agreement for the applicable trust, including our
obligations to pay costs, expenses, debts and liabilities of such trust, other
than with respect to the applicable series of capital securities, has the effect
of providing a full and unconditional guarantee of all amounts due on such
capital securities.
Will
the Upper DECS be listed on a stock exchange?
We
do not
intend to list any of the securities described in this document on any stock
exchange.
15
DESCRIPTION
OF THE UPPER DECS
This
summary, together with the summary of some of the provisions of the related
documents described below, contains a description of the material terms of
the
Upper DECS but is not necessarily complete.
We
will
issue the Upper DECS under the stock purchase contract agreement between us
and
●, which we refer to as the “stock purchase contract agent.” The Upper DECS may
be either Normal DECS or Stripped DECS. Unless indicated otherwise, “Upper DECS”
will include both Normal DECS and Stripped DECS. The Upper DECS initially will
consist of 75,000,000 Normal DECS, each with an initial stated amount of $100,
which will reduce by $25 on each stock purchase date.
Normal
DECS
Each
Normal DECS will have an initial stated amount of $100 prior to the first stock
purchase date, a stated amount of $75 on and after the first stock purchase
date
and prior to the second stock purchase date, a stated amount of $50 on and
after
the second stock purchase date and prior to the third stock purchase date,
and
$25 thereafter, and will consist of:
you
will agree to purchase from us, and we will agree to sell to you,
on each
of four stock purchase dates originally set at six-month intervals
beginning on March 15, 2010, for $25 in cash, a variable number of
newly issued or treasury shares of our common stock per Upper DECS
equal
to the settlement rate described under “Description of the Stock Purchase
Contracts — Purchase of Common Stock,” subject to anti-dilution
adjustments. Each stock purchase date may be deferred for up to four
successive quarterly periods; and
from
and including the issue date to but excluding the series A stock
purchase
date, at the annual rate of 4.680% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series A stock purchase date;
·
from
and including the issue date to but excluding the series B stock
purchase
date, at the annual rate of 4.545% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series B stock purchase date;
·
from
and including the issue date to but excluding the series C stock
purchase
date, at the annual rate of 4.300% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series C stock purchase date;
and
·
from
and including the issue date to but excluding the series D stock
purchase
date, at the annual rate of 4.065% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series D stock purchase date;
16
(b)
prior
to the series A stock purchase date or, if earlier, the remarketing
settlement date for the series A capital securities, a 1/40, or 2.5%,
undivided beneficial ownership interest in a series A capital
security of the series A trust with a liquidation amount of $1,000;
(c)
prior
to the series B stock purchase date or, if earlier, the remarketing
settlement date for the series B capital securities, a 1/40, or 2.5%,
undivided beneficial ownership interest in a series B capital
security of the series B trust with a liquidation amount of $1,000;
(d)
prior
to the series C stock purchase date or, if earlier, the remarketing
settlement date for the series C capital securities, a 1/40, or 2.5%,
undivided beneficial ownership interest in a series C capital
security of the series C trust with a liquidation amount of $1,000;
(e)
prior
to the remarketing settlement date for the series D capital securities,
a
1/40, or 2.5%, undivided beneficial ownership interest in a series D
capital security of the series D trust with a liquidation amount of
$1,000; and
(f)
after
the remarketing settlement date for any series of capital securities
and
the applicable stock purchase date, an interest in an interest-bearing
deposit with Citibank, N.A. purchased with the net proceeds of the
remarketing.
Each
capital security represents an undivided beneficial ownership interest in the
assets of the relevant trust. The property trustee of each trust will hold
legal
title to the assets of such trust. Each trust’s assets consist solely of a
series of our junior subordinated debt securities.
From
and
including the issue date to but excluding the applicable stock purchase date,
or
if earlier the applicable remarketing settlement date, we will make quarterly
interest payments on each series of junior subordinated debt securities at
the applicable annual rate, and the relevant trust will pass through such
interest payments when received as distributions on the corresponding capital
securities. From and including the applicable stock purchase date, or if earlier
the applicable remarketing settlement date, we will make semi-annual interest
payments on each series of junior subordinated debt securities and distributions
on the corresponding series of capital securities at a reset rate as
described below. The initial annual rates for the series A junior subordinated
debt securities, the series B junior subordinated debt securities, the series
C
junior subordinated debt securities and the series D junior subordinated debt
securities are 6.320%, 6.455%, 6.700% and 6.935%, respectively.
The
purchase price of each Normal DECS will be allocated between the stock purchase
contract and the related ownership interest in the capital securities in
proportion to their respective fair market values at the time of issuance.
We
expect that, at the time of issuance, the fair market value of each ownership
interest in each series of capital securities (or more precisely in the
corresponding series of junior subordinated debt securities) will be $25
and the fair market value of the stock purchase contract will be $0. This
position generally will be binding on each beneficial owner of each Upper DECS
but not on the Internal Revenue Service and by purchasing the Upper DECS you
will be deemed to have agreed to take this position for United States federal
income tax purposes.
As
long
as an Upper DECS is in the form of a Normal DECS, your applicable ownership
interest in the capital securities forming a part of the Normal DECS will be
pledged to us through the collateral agent to secure your obligation to purchase
common stock under your stock purchase contracts.
17
Creating
Stripped DECS
You
will
have the right, other than during (i) any period beginning on the business
day immediately preceding the first day of any remarketing period (as defined
below) for any series of capital securities and ending on the last day of such
remarketing period or the relevant stock purchase date, if a successful
remarketing occurs during such remarketing period or (ii) any period beginning
on the record and ending on the related payment date for the Upper DECS, in
accordance with the procedures described below, to create Stripped DECS by
substituting for the capital securities of each series held by the collateral
agent qualifying treasury securities (as described below), in a total principal
amount at maturity equal to the aggregate liquidation amount of such capital
securities for which substitution is being made. Because the capital securities
of each series are issued in integral multiples of $1,000, you may make
this substitution only in integral multiples of 40 Normal DECS. Each of these
substitutions will create Stripped DECS, and the ownership interest in the
capital securities will be released to you and be separately tradeable from
the
Stripped DECS. We refer to the periods during which you are not permitted to
make this substitution as “blackout periods.”
For
each
integral multiple of 40 Normal DECS, you must substitute $1,000 principal amount
of qualifying treasury securities for each series of capital securities then
underlying the Normal DECS that are being made into Stripped DECS. The
qualifying treasury securities substituted for the capital securities of each
series must be purchased in the open market at your expense unless otherwise
owned by you. If you elect to substitute qualifying treasury securities for
your
capital securities, thereby creating Stripped DECS, you will be responsible
for
any fees or expenses payable in connection with the substitution.
Qualifying
Treasury Securities
In
order
to determine what U.S. Treasury security is the qualifying treasury security
at
any time, the stock purchase contract agent shall, for each March 15,
June 15, September 15 and December 15, commencing on March 15,2008 and ending on the fourth stock purchase date or the earlier termination
of
the stock purchase contracts, identify:
·
the
13-week treasury bill that matures at least one but not more than
six
business days prior to that March 15, June 15, September 15 or
December 15; or
·
if
no 13-week treasury bill that matures at least one but not more than
six
business days prior to that March 15, June 15, September 15 or
December 15is
or is scheduled to be outstanding on the immediately preceding
March 15, June 15, September 15 or December 15, the 26-week
treasury bill that matures at least one but not more than six business
days prior to that March 15, June 15, September 15 or December
15; or
·
if
neither of such treasury bills is or is scheduled to be outstanding
on the
immediately preceding March 15, June 15, September 15 or
December 15, any other treasury security (which may be a zero coupon
treasury security) that is outstanding on the immediately preceding
March 15, June 15, September 15 or December 15, is highly
liquid and matures at least one business day prior to such March 15,
June 15, September 15 or December 15; provided,
however,
that any treasury security identified pursuant to this clause shall
be
selected in a manner intended to minimize the cash value of the security
selected.
18
The
stock
purchase contract agent shall use commercially reasonable efforts to identify
the security meeting the foregoing criteria for each March 15,
June 15, September 15 and December 15promptly
after the Department of the Treasury makes the schedule for upcoming auctions
of
U.S. treasury securities publicly available and shall, to the extent that a
security previously identified with respect to any March 15, June 15,
September 15 or December 15 is no longer expected to be outstanding on the
immediately preceding March 15, June 15, September 15 or
December 15, identify another security meeting the foregoing criteria for
such March 15, June 15, September 15 or December 15. The security most
recently identified by the stock purchase contract agent with respect to any
March 15, June 15, September 15 or December 15shall
be
the “qualifying treasury security” with respect to the period from and including
its date of issuance (or if later, the date of maturity of the qualifying
treasury security with respect to the immediately preceding March 15,
June 15, September 15 or December 15) to but excluding its date of
maturity, and the stock purchase contract agent’s identification of a security
as a qualifying treasury security for such period shall be final and binding
for
all purposes absent manifest error. You will be able to obtain the issue date,
the maturity date and, when available, the CUSIP number of the treasury bills
or
other U.S. treasury securities that are qualifying treasury securities for
the
current period from the stock purchase contract agent by calling ●. Since this
information is subject to change from time to time, holders should confirm
this
information prior to purchasing or delivering U.S. treasury securities in
connection with creating any Stripped DECS.
Stripped
DECS
Each
Stripped DECS will have an initial stated amount of $100, which will reduce
by
$25 on each stock purchase date, and will consist of:
you
will agree to purchase from us, and we will agree to sell to you,
no later
than each of the first, second, third and fourth stock purchase dates,
for
$25 in cash, a variable number of newly issued or treasury shares
of our
common stock per Upper DECS equal to the applicable settlement rate
described under “Description of the Stock Purchase Contracts — Purchase of
Common Stock,” subject to anti-dilution adjustments;
and
(2)
we
will pay you quarterly contract payments on the stock purchase
contracts:
·
from
and including the issue date to but excluding the series A stock
purchase
date, at the annual rate of 4.680% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series A stock purchase date;
·
from
and including the issue date to but excluding the series B stock
purchase
date, at the annual rate of 4.545% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series B stock purchase date;
·
from
and including the issue date to but excluding the series C stock
purchase
date, at the annual rate of 4.300% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series C stock purchase date;
and
·
from
and including the issue date to but excluding the series D stock
purchase
date, at the annual rate of 4.065% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series D stock purchase date;
19
(b)
an
undivided beneficial ownership interest in a qualifying treasury
security
with a principal amount at maturity of $1,000. This will be a 10%
interest
at all times prior to the first stock purchase date, a 7.5% interest
at
all times on or after the first stock purchase date and prior to
the
second stock purchase date, a 5% interest at all times on or after
the
second stock purchase date and prior to the third stock purchase
date and
a 2.5% interest at all times on or after the third stock purchase
date and
prior to the fourth stock purchase date. We refer to the percentage
interest applicable at any time as the “applicable
percentage.”
To
the
extent any Stripped DECS are outstanding on the maturity date of the related
qualifying treasury securities and the applicable stock purchase date will
not
occur within the next six business days, the stock purchase contract agent
will
apply the principal amount paid at maturity of all such qualifying treasury
securities to purchase a like principal amount of qualifying treasury securities
maturing not more than six or less than one business day prior to the next
March 15, June 15, September 15 or December 15and
promptly remit the excess, if any, of such principal amount paid over the
purchase price to the holders of record of the Stripped DECS on such date
pro
rata
in
accordance with the stated amount of Stripped DECS they then held.
For
a
description of the potential remarketing periods for each series of capital
securities, see “Description of the Stock Purchase Contracts —
Remarketing.”
To
create
40 Stripped DECS, you must:
·
deposit
with the collateral agent the applicable qualifying treasury security
that
has a principal amount at maturity of $1,000 for each remaining stock
purchase date; and
·
transfer
40 Normal DECS to the stock purchase contract agent accompanied by
a
notice stating that you have deposited the required principal amount
of
qualifying treasury securities with the collateral agent and requesting
the release to you of the capital securities relating to the 40 Normal
DECS.
Upon
such
deposit and receipt of an instruction from the stock purchase contract agent,
the collateral agent will release the related capital securities from the pledge
under the pledge agreement, free and clear of our security interest, to the
stock purchase contract agent. The stock purchase contract agent then
will:
·
cancel
the 40 Normal DECS;
·
transfer
the related series of capital securities that are part of the Normal
DECS as of such date; and
·
deliver
40 Stripped DECS to you.
The
qualifying treasury securities will be substituted for the capital securities
and will be pledged to us through the collateral agent to secure your obligation
to purchase common stock under your stock purchase contracts. The related
capital securities released to you thereafter will trade separately from the
resulting Stripped DECS.
20
Recreating
Normal DECS
You
will
have the right, at any time other than during a blackout period for any series
of capital securities in accordance with the procedures described below, to
recreate a Normal DECS from a Stripped DECS by substituting each series of
capital securities that then forms part of a Normal DECS for the qualifying
treasury securities then held by the collateral agent. No Upper DECS may be
recreated during a blackout period. Because qualifying treasury securities
and
the capital securities of each series are issued in integral multiples of
$1,000, you may recreate Normal DECS only in integral multiples of 40. Each
applicable series of capital securities substituted for qualifying treasury
securities must be purchased in the open market at your expense unless otherwise
owned by you. If you elect to substitute capital securities for your qualifying
treasury securities, thereby recreating Normal DECS, you will be responsible
for
any fees or expenses payable in connection with the substitution.
Thus,
if
you hold Stripped DECS, you will have the right at any time, other than during
the blackout periods described above, for each 40 Stripped DECS that you hold,
to substitute $1,000 liquidation amount of each series of capital
securities then forming part of a Normal DECS for an equal principal amount
of
qualifying treasury securities.
Each
of
these substitutions will recreate Normal DECS, and the qualifying treasury
securities will be released to the holder and be separately tradeable from
the
Normal DECS.
To
create
40 Normal DECS, you must:
·
if
recreating Normal DECS prior to the series A stock purchase date,
deposit with the collateral agent a series A capital security with a
$1,000 liquidation amount;
·
if
recreating Normal DECS prior to the series B stock purchase date,
deposit with the collateral agent a series B capital security with a
$1,000 liquidation amount;
·
if
recreating Normal DECS prior to the series C stock purchase date,
deposit with the collateral agent a series C capital security with a
$1,000 liquidation amount;
·
if
recreating Normal DECS prior to the series D stock purchase date,
deposit with the collateral agent a series D capital security with a
$1,000 liquidation amount; and
·
transfer
40 Stripped DECS to the stock purchase contract agent accompanied
by a
notice stating that you have deposited the required number of capital
securities with the collateral agent and requesting the release to
you of
the pledged qualifying treasury securities relating to the Stripped
DECS.
Upon
such
deposit and receipt of an instruction from the stock purchase contract agent,
the collateral agent will release the related qualifying treasury securities
from the pledge under the pledge agreement, free and clear of our security
interest, to the stock purchase contract agent. The stock purchase contract
agent will then:
·
cancel
the 40 Stripped DECS;
·
transfer
the related qualifying treasury securities to you;
and
·
deliver
40 Normal DECS to you.
21
The
substituted applicable ownership interest in the capital securities will be
pledged to us through the collateral agent to secure your obligation to purchase
common stock under the stock purchase contracts.
Current
Payments
Holders
of Normal DECS will be entitled to receive quarterly distributions consisting
of
the quarterly distributions on each series of capital securities that were
included in the Normal DECS as of the immediately preceding March 15,
June 15, September 15 or December 15, or in the case of any series of
capital securities that have been successfully remarketed since such date,
a
pro
rata
portion
of the interest-bearing depositwith
Citibank, N.A. corresponding to the payment that would have been made had such
series of capital securities not been successfully remarketed and the interest
rate on the related series of junior subordinated debt securities not been
reset, as well as the quarterly contract payments described under “— Normal
DECS” above. These will consist of:
·
from
and including the issue date to but excluding the series A stock
purchase
date, cumulative distributions calculated at the annual rate of 6.320%
per
year on your 1/40 interest in a series A capital security with a
liquidation amount of $1,000, and at the annual rate of 4.680% on
the $25
portion of the stated amount of a stock purchase contract corresponding
to
your obligation to purchase our common stock on the series A stock
purchase date;
·
from
and including the issue date to but excluding the series B stock
purchase
date, cumulative distributions calculated at the annual rate of 6.455%
per
year on your 1/40 interest in a series B capital security with a
liquidation amount of $1,000, and at the annual rate of 4.545% on
the $25
portion of the stated amount of a stock purchase contract corresponding
to
your obligation to purchase our common stock on the series B stock
purchase date;
·
from
and including the issue date to but excluding the series C stock
purchase
date, cumulative distributions calculated at the annual rate of 6.700%
per
year on your 1/40 interest in a series C capital security with a
liquidation amount of $1,000, and at the annual rate of 4.300% on
the $25
portion of the stated amount of a stock purchase contract corresponding
to
your obligation to purchase our common stock on the series C stock
purchase date; and
·
from
and including the issue date to but excluding the series D stock
purchase
date, cumulative distributions calculated at the annual rate of 6.935%
per
year on your 1/40 interest in a series D capital security with a
liquidation amount of $1,000, and at the annual rate of 4.065% on
the $25
portion of the stated amount of a stock purchase contract corresponding
to
your obligation to purchase our common stock on the series D stock
purchase date;
Holders
of Stripped DECS will be entitled to receive quarterly contract payments payable
by us as follows:
·
from
and including the issue date to but excluding the series A stock
purchase
date, at the annual rate of 4.680% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series A stock purchase date;
·
from
and including the issue date to but excluding the series B stock
purchase
date, at the annual rate of 4.545% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series B stock purchase date;
22
·
from
and including the issue date to but excluding the series C stock
purchase
date, at the annual rate of 4.300% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series C stock purchase date;
and
·
from
and including the issue date to but excluding the series D stock
purchase
date, at the annual rate of 4.065% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series D stock purchase date.
If
an
early settlement date due to a cash merger early settlement occurs as described
in “Description of the Stock Purchase Contracts — Early Settlement upon Cash
Merger,” cash payments will cease to accrue on the early settlement date. If any
other early settlement of the stock purchase contracts occurs (in the case
of an
early settlement other than upon a cash merger as described in “Description of
the Stock Purchase Contracts — Early Settlement”), cash payments will cease to
accrue on the most recent quarterly payment date on or before such other early
settlement. There will also be quarterly distributions in respect of qualifying
treasury securities underlying Stripped DECS consisting of the amounts by which
the principal amount of those qualifying treasury securities exceed the amount
required to purchase replacement qualifying treasury securities.
We
may
defer the contract payments until no later than September 15, 2012, as
described below under “Description of the Stock Purchase Contracts — Option to
Defer Contract Payments.” Any such deferred payments will accrue additional
amounts, compounded quarterly, at the annual rate of 11.0% until paid, to the
extent permitted by law. We may also defer payments of interest on each series
of junior subordinated debt securities, resulting in a corresponding deferral
of
distributions on the corresponding series of capital securities, in which case
we will accrue additional interest or, as applicable, accrue distributions
on
the deferred amounts at the applicable rate then borne by such series of capital
securities, to the extent permitted by law. We may not defer interest payments
on a series of junior subordinated debt securities for any period of time that
exceeds five years with respect to any deferral period or that extends beyond
the maturity date for such series of junior subordinated debt securities. During
any period that we are deferring contract payments or interest on any series
of
junior subordinated debt securities (and, accordingly, distributions on the
corresponding capital securities are deferred), we will be restricted from
making certain payments, including declaring or paying any dividends or making
any distributions on, or redeeming, purchasing, acquiring or making a
liquidation payment with respect to, shares of our capital stock as described
under “Description of the Junior Subordinated Debt Securities — Restrictions on
Certain Payments, Including on Deferral of Interest.”
Our
obligation to pay contract payments will be subordinate and junior in right
of
payment to all our existing and future secured and senior debt, as described
in
this document under “Description of the Junior Subordinated Debt Securities —
Subordination.” In addition, your right to receive accrued contract payments
will terminate automatically upon the occurrence of specified bankruptcy,
insolvency or reorganization events involving Citigroup Inc. The ability of
each
trust to make the distributions on its capital securities is dependent entirely
upon the receipt of corresponding payments from us on the related series of
junior subordinated debt securities. Our obligations under the junior
subordinated debt securities are similarly subordinate and junior in right
of
payment to all our existing and future secured and senior debt.
23
Absence
of Voting and Certain Other Rights
Holders
of the stock purchase contracts forming part of the Normal DECS or Stripped
DECS, in their capacities as such, will have no voting or other rights in
respect of our common stock.
No
Listing of the Securities
We
do not
intend to list the securities on any stock exchange.
Miscellaneous
We
or our
affiliates may from time to time purchase any of the securities described in
this document that are then outstanding by tender, in the open market or by
private agreement.
This
section summarizes some of the terms of the stock purchase contract agreement,
the stock purchase contracts and the pledge agreement.
Purchase
of Common Stock
The
stock
purchase contract underlying each Upper DECS, unless earlier terminated or
earlier settled at your option or upon a cash merger, will obligate you to
purchase, and us to sell, for an amount in cash equal to $25, on each of the
four stock purchase dates, a variable number of newly issued or treasury shares
of our common stock per Upper DECS equal to the applicable settlement rate.
The
settlement rate for:
The
settlement rate for each stock purchase date is an amount equal to the sum
of
the “daily amounts” calculated for each of the 20 trading days beginning 23
scheduled trading days prior to the applicable stock purchase date, in each
case
regardless of whether the applicable stock purchase date is deferred. For each
of those 20 trading days, a formula will be applied to that day’s VWAP of our
common stock to determine a daily amount, and the sum of the 20 daily amounts
will determine the total number of shares of our common stock that you will
receive on the applicable stock purchase date.
The
daily
amount is equal to, for each trading day in the 20 trading day period described
above, subject to adjustment under certain circumstances as described under
“—
Anti-dilution Adjustments” below:
·
for
each of those 20 trading days on which the VWAP of our common stock
is
less than or equal to the reference price, a fraction of a share
of our
common stock per Upper DECS equal to: 1/20 times $25 divided by the
reference price (the “maximum daily settlement
rate”);
·
for
each of those 20 trading days on which the VWAP of our common stock
is
greater than the reference price but less than the threshold appreciation
price, a fraction of a share of our common stock per Upper DECS equal
to:
1/20 times $25 divided by the VWAP of our common stock on such trading
day; and
·
for
each of those 20 trading days on which the VWAP of our common stock
is
greater than or equal to the threshold appreciation price, a fraction
of a
share of our common stock per Upper DECS equal to: 1/20 times $25
divided
by the threshold appreciation price (the “minimum daily settlement
rate”).
As
a
result, on each of the applicable stock purchase dates you will receive a total
of between 0.6713 of one share and 0.7854 of one share of our common stock
for
each Upper DECS you own. We refer to the minimum daily settlement rate and
the
maximum daily settlement rate as the “fixed daily settlement
rates.”
The
reference price is equal to $31.83 per share. The threshold appreciation price
is equal to $37.24 per share, and represents a 17.0% appreciation over the
reference price.
For
purposes hereof, the volume-weighted average price of Citigroup common stock,
or
“VWAP” means, for the relevant measurement day, the per share volume-weighted
average price as displayed under the heading Bloomberg VWAP on Bloomberg page
C
UN <equity> AQR (or its equivalent successor if such page is not
available) in respect of the period from the scheduled open of trading on the
relevant trading day until the scheduled close of trading on the relevant
trading day (or if such volume-weighted average price is unavailable, the market
price of one share of Citigroup common stock on such trading day determined,
using a volume-weighted average method, by a nationally recognized independent
investment banking firm retained for this purpose by Citigroup).
25
No
fractional shares of our common stock will be issued by Citigroup Inc. pursuant
to the stock purchase contracts. In lieu of fractional shares otherwise
issuable, you will be entitled to receive an amount in cash equal to the
fraction of a share of our common stock, calculated on an aggregate basis in
respect of the stock purchase contracts you are settling, multiplied by the
closing price of our common stock on the trading day immediately preceding
the
applicable stock purchase date.
The
“closing price” of our common stock on any date of determination means the
closing sale price or, if no closing sale price is reported, the last reported
sale price of our common stock on the New York Stock Exchange on that date.
If
our common stock is not listed for trading on the New York Stock Exchange on
any
date of determination, the closing price of our common stock on such date of
determination means the closing sale price as reported in the composite
transactions for the principal U.S. securities exchange on which our common
stock is listed, or if our common stock is not so listed on a U.S. securities
exchange, as reported by the Nasdaq Stock Market, or, if our common stock is
not
so reported, the last quoted bid price for our common stock in the
over-the-counter market as reported by PinkSheets LLC (formerly known as the
National Quotation Bureau) or similar organization, or, if that bid price is
not
available, the market value of our common stock on that date as determined
by a
nationally recognized independent investment banking firm retained by Citigroup
Inc. for this purpose.
A
“trading day” means, for purposes of determining a VWAP or closing price, a
business day on which the relevant exchange or quotation system is scheduled
to
be open for business and a day on which there has not occurred or does not
exist
a market disruption event. A “market disruption event” is defined as any of the
following events that has occurred:
·
any
suspension of, or limitation imposed on, trading by the relevant
exchange
or quotation system during the one-hour period prior to the close
of
trading for the regular trading session on the exchange or quotation
system (or for purposes of determining VWAP any period or periods
aggregating one half hour or longer) and whether by reason of movements
in
price exceeding limits permitted by the relevant exchange or quotation
system or otherwise relating to our common stock or in futures or
option
contracts relating to our common stock on the relevant exchange or
quotation system;
·
any
event (other than a failure to open or a closure as described below)
that
disrupts or impairs the ability of market participants during the
one-hour
period prior to the close of trading for the regular trading session
on
the exchange or quotation system (or for purposes of determining
VWAP any
period or periods aggregating one half hour or longer) in general
to
effect transactions in, or obtain market values for, our common stock
on
the relevant exchange or quotation system or futures or options contracts
relating to our common stock on any relevant exchange or quotation
system;
or
·
the
failure to open of the exchange or quotation system on which futures
or
options contracts relating to our common stock are traded or the
closure
of such, exchange or quotation system prior to its respective scheduled
closing time for the regular trading session on such day (without
regard
to after hours or other trading outside the regular trading session
hours)
unless such earlier closing time is announced by such exchange or
quotation system at least one hour prior to the earlier of the actual
closing time for the regular trading session on such day and the
submission deadline for orders to be entered into such, exchange
or
quotation system for execution at the actual closing time on such
day.
26
If
a
market disruption event occurs during a day that would otherwise constitute
one
of the 20 trading days for determining the daily amounts, we will notify
investors on the calendar day on which such event occurs.
If
20
trading days for our common stock have not occurred prior to the third business
day immediately prior to the applicable stock purchase date, all remaining
trading days will be deemed to occur on that third business day and the VWAP
of
our common stock for each of the remaining trading days will be the VWAP of
our
common stock on such third business day or if such day is not a trading day,
the
closing price as determined in its reasonable discretion by a nationally
recognized independent investment banking firm retained by Citigroup Inc. for
this purpose.
Settlement
on a Stock Purchase Date
On
the
applicable stock purchase date in connection with a successful remarketing,
unless:
·
you
have settled the stock purchase contracts prior to the applicable
stock
purchase date through the early delivery of cash to the stock purchase
contract agent in the manner described under “— Early Settlement” or “—
Early Settlement upon Cash Merger”;
or
·
an
event described under “— Termination” has
occurred,
then
the
settlement of the stock purchase contracts will occur as follows on such stock
purchase date:
·
if
you hold Normal DECS and there has been a successful remarketing
of the
applicable series of capital securities, (i) a portion of the
proceeds of the interest-bearing Citibank, N.A. deposit purchased
with the
net proceeds from such remarketing equal to your pro
rata
share of the liquidation amount of the remarketed series of capital
securities will automatically be applied to satisfy in full your
obligation to purchase common stock on the applicable stock purchase
date
under your stock purchase contracts and (ii) a portion of the proceeds
of
the interest-bearing Citibank, N.A. deposit purchased with the net
proceeds from such remarketing equal to the amount of the distribution
you
would have received on your capital securities of the relevant series
had
they not been sold in the remarketing, assuming for this purpose,
even if
not true, that the distribution rate on such capital securities remains
the same as the distribution rate in effect prior to the remarketing
and
all accrued and unpaid distributions are paid in cash on such
date;
·
if
you hold Normal DECS and you elected not to participate in the
remarketing, as described below, the proceeds of the qualifying treasury
securities you deposited will be applied to satisfy in full your
obligation to purchase common stock on the applicable stock purchase
date
under your stock purchase
contracts;
·
if
you hold Stripped DECS, the cash proceeds, when paid at maturity,
of your
ownership interest in the qualifying treasury securities you substituted
for the series of capital securities that was remarketed (or that
were purchased with the proceeds at maturity of qualifying treasury
securities you substituted for such series) will automatically be
applied
to satisfy in full your obligation to purchase common stock on the
applicable stock purchase date under your stock purchase contracts;
and
27
·
if
you hold Normal DECS in which the related series of capital
securities remain a part of the Normal DECS because of a final failed
remarketing, we will exercise our rights as a secured party in accordance
with applicable law, including, without limitation, disposition of
that
series of capital securities or applying that series of capital
securities against your obligation to purchase common stock on the
applicable stock purchase date under your stock purchase
contracts.
In
any
event, common stock will then be issued and delivered to you or your designee,
upon presentation and (on or after the fourth stock purchase date) surrender
of
the certificate evidencing the Upper DECS and payment by you of any transfer
or
similar taxes payable in connection with the issuance of common stock to any
person other than you.
By
acceptance of the Upper DECS, you will be deemed to have:
·
irrevocably
agreed to be bound by the terms and provisions of the stock purchase
contracts and the pledge agreement and to have agreed to perform
your
obligations thereunder for so long as you remain a holder of the
Upper
DECS; and
·
duly
appointed the stock purchase contract agent as your attorney-in-fact
to
enter into and perform the stock purchase contracts and pledge agreement
on your behalf and in your name.
In
addition, as a beneficial owner of the Upper DECS, by acceptance of the
beneficial interest therein, you will be deemed to have agreed to treat for
all
United States federal income tax purposes:
·
yourself
as the owner of the stock purchase contracts and the related ownership
interest in the capital securities or the qualifying treasury securities,
as the case may be;
·
the
junior subordinated debt securities as our
indebtedness;
·
each
trust as a grantor trust; and
·
as
of the time of issuance, the fair market value of each ownership
interest
in each series of capital securities (or more precisely in the
corresponding series of junior subordinated debt securities) as $25
and the fair market value of the stock purchase contract as
$0.
Remarketing
The
remarketing agent will attempt to remarket the capital securities underlying
the
Normal DECS in remarketings, unless you elect not to participate in such
remarketings by following the procedures described below under “— Notice to
Settle with Treasury Securities.” If you participate in a successful
remarketing, the cash proceeds from that remarketing, net of any remarketing
fee, will be used to purchase an interest-bearing deposit with Citibank, N.A.,
the proceeds of which at the relevant stock purchase date will be used satisfy
your obligation to purchase common stock on such applicable stock purchase
date
and to make a portion of the quarterly distribution on the Normal DECS, and
any
remaining proceeds will be remitted to you.
The
“remarketing period” for any series of capital securities will be the ten
business day period that begins 12 business days prior to the applicable
remarketing settlement date for that series of capital securities (or if any
such day is not a business day, the immediately preceding business day), in
each
case, subject to deferral in the event that a remarketing is not successful,
with a maximum of five remarketings per series of capital securities. The
“remarketing settlement date” for any successful remarketing will be the date
three months prior to the applicable stock purchase date, or if any such day
is
not a business day, the immediately succeeding business day.
28
The
remarketing agent will use its commercially reasonable efforts to obtain a
price
for the capital securities to be remarketed that results in proceeds, net of
any
remarketing fee, of at least the amount necessary to purchase an
interest-bearing deposit with Citibank, N.A. on the applicable remarketing
settlement date that, on the applicable stock purchase date, will equal to
the
aggregate liquidation amount of the capital securities included in such
remarketing plus the distribution that would be payable thereon on the
applicable stock purchase date assuming for this purpose, even if not true,
that
the distribution rate on such capital securities remains the same as the
distribution rate in effect prior to the remarketing (we refer to the initial
amount of each such deposit as the “remarketing value”). To obtain that price,
the remarketing agent may reset the distribution rate on the capital securities,
as described below and under “Description of the Capital Securities —
Remarketing.” If the remarketing is successful and the rate is reset, the reset
rate will apply to all outstanding capital securities of the series being
remarketed, whether or not you participated in the remarketing, and will become
effective on the applicable remarketing settlement date. The interest rate
on
the series of junior subordinated debt securities underlying such series of
capital securities automatically will be reset to equal the distribution rate
on
such capital securities as and when the distribution rate on such capital
securities is reset. In addition, the interest payment dates on such junior
subordinated debt securities will change, in which case the distribution payment
dates of the related capital securities will automatically change as well.
Such
changes, as well as other information relevant to the remarketing, will be
announced as described below prior to the remarketing. The rate of interest
on
the Citibank, N.A. deposit made with the proceeds of each series of capital
securities will be determined on an arm’s length basis immediately prior the
beginning of the applicable remarketing period.
If
the
remarketing agent cannot successfully remarket a series of capital securities
during a remarketing period at a price that results in proceeds, net of any
remarketing fee, equal to at least the remarketing value, then, unless
there has been a final failed remarketing (as described below),
·
the
applicable stock purchase date will be deferred until after the next
applicable remarketing period for that series of capital securities
as
described below;
·
the
proceeds received upon maturity of the qualifying treasury securities
pledged as collateral for any Stripped DECS will be reinvested in
the next
qualifying treasury securities and any remaining cash proceeds will
be
remitted to the holders of the Stripped
DECS;
·
the
distribution rate on that series of capital securities will not be
reset;
and
·
the
remarketing agent will thereafter attempt to establish a new reset
rate
meeting the requirements described above and remarket that series
of
capital securities during subsequent remarketing periods, as described
below.
There
will be five potential remarketing periods for each series of capital
securities. The first four remarketings will be subject to the reset cap, and
the last remarketing will be uncapped.
·
The
first potential remarketing periods for the series A capital
securities, the series B capital securities, the series C capital
securities and the series D capital securities will begin 12 business
days
prior to December 15, 2009, June 15, 2010, December 15,2010 or June 15, 2011, respectively. These remarketings will be
subject to the reset cap.
29
·
If
any of these remarketings is not successful, the second potential
remarketing period for the relevant series of capital securities will
begin three months after the beginning of the first potential remarketing
period for such series; the third potential remarketing period for
the
relevant series of capital securities will begin six months after the
beginning of the first potential remarketing period for such series
and
the fourth potential remarketing period for the relevant series of
capital securities will begin nine months after the beginning of
the first
potential remarketing settlement date for such series. These remarketings
will be subject to the reset cap.
·
If
the fourth remarketing is not successful, the fifth and final potential
remarketing settlement date for the series A capital securities, the
series B capital securities, the series C capital securities and
the
series D capital securities will begin 12 business days prior to
December 15, 2010, June 15, 2011, December 15,2011or
June 15, 2012, respectively. These remarketings will not be subject
to the reset cap.
On
any
day other than the last day of a remarketing period, we will have the right,
in
our absolute discretion and without prior notice to the holders of the Upper
DECS, to postpone the remarketing until the following business day. Any
remarketing of capital securities will settle (if successful) on the applicable
remarketing settlement date. Any such remarketings will be subject to the
conditions and procedures described above and under “Description of the Capital
Securities — Remarketing,” and you will have the right to elect not to
participate in any subsequent remarketings.
The
first
remarketing period is expected to occur from November 27, 2009through
December 11, 2009. Assuming that a successful remarketing occurs during the
first remarketing period with respect to the series A capital securities, the
remarketing settlement date will take place on December 15,2009andthe
first
stock purchase date will take place on March 15, 2010. The remarketing of
each successive series of capital securities will begin on the indicated dates
whether or not the remarketing of any previous series of capital securities
has
succeeded. As a result, multiple stock purchase dates may coincide if more
than
one series of capital securities is successfully remarketed during the same
remarketing period.
The
remarketing agent will attempt to remarket each series of capital securities
a
maximum of five times. If the remarketing agent’s fifth attempt to remarket a
series of capital securities is unsuccessful, a “final failed remarketing” will
be deemed to have occurred with respect to such series. In that
case:
·
the
distribution rate on the applicable series of capital securities
will not
be reset.
·
if
you hold Normal DECS, we will exercise our rights as a secured party
and,
subject to applicable law, retain your capital securities of the
applicable series pledged as collateral under the relevant pledge
agreement or sell them in one or more private sales and apply the
liquidation amount or proceeds from the sale of such capital securities
against your obligations under the stock purchase contract. In either
case, your obligations with respect to the relevant portion of your
stock
purchase contracts would be satisfied in full. We will issue a junior
subordinated note (which will be subordinate and rank junior in right
of
payment to all of our existing and future secured and senior debt)
to the
stock purchase contract agent for delivery to you, payable on
September 15, 2013 or, if we are deferring interest on the
corresponding series of junior subordinated debt securities, on the
date
that is five years after commencement of the deferral period (whichever
is
later), and bearing interest at the annual rate of 6.320% for the
series A capital securities, at the annual rate of 6.455% for the
series B capital securities, the annual rate of 6.700% for the
series C capital securities and the annual rate of 6.935% for the
series D capital securities, in each case in the amount of any
accrued and unpaid distributions on those capital securities as of
the
applicable stock purchase date.
30
·
if
you hold Stripped DECS, we will apply the principal amount paid at
maturity of your qualifying treasury securities pledged as collateral
under the pledge agreement in respect of your obligations on the
applicable stock purchase date to satisfy in full your obligation
to us
under your stock purchase
contracts.
·
if
you hold capital securities that are not a part of Normal DECS and
you
elected to participate in the remarketing, your capital securities
will be
returned to you, and you will have the right, at your option, to
require
the relevant trust to purchase all or a portion of those capital
securities in exchange for the liquidation amount of $1,000 per capital
security in cash, plus a junior subordinated note (which will be
subordinate and rank junior in right of payment to all of our existing
and
future secured and senior debt), payable on September 15,2013or,
if we are deferring interest on the corresponding series of junior
subordinated debt securities, on the date that is five years after
commencement of the deferral period (whichever is later) and bearing
interest at the annual rate of 6.320% for the series A capital
securities, at the annual rate of 6.455% for the series B capital
securities, the annual rate of 6.700% for the series C capital
securities and the annual rate of 6.935% for the series D capital
securities, in each case in an amount equal to any distributions
that are
accrued and unpaid as of the applicable stock purchase
date.
We
will
cause notice of any unsuccessful remarketings and of any final failed
remarketings to be published in a press release and on Bloomberg Business
News.
We
will
appoint a nationally recognized investment banking firm as remarketing agent
and
enter into a remarketing agreement with that firm at least 30 calendar days
prior to the commencement of any applicable remarketing period. We will covenant
in the stock purchase contract agreement to use our commercially reasonable
efforts to effect remarketing of each series of capital securities as described
in this document. If in the judgment of our counsel or counsel to the
remarketing agent a registration statement is required to effect remarketing
of
a series of capital securities, we will use our commercially reasonable efforts
to ensure that a registration statement covering the full liquidation amount
of
the capital securities to be remarketed will be effective in a form that will
enable the remarketing agent to rely on it in connection with the remarketing
process or we will effect such remarketing pursuant to Rule 144A under the
Securities Act or any other available exemption from applicable registration
requirements under the Securities Act.
For
additional terms and conditions of the remarketing, see “Description of the
Capital Securities — Remarketing.”
Early
Settlement
Subject
to the conditions described below, other than a blackout period for any series
of capital securities, you may settle your stock purchase contracts in their
entirety in cash by presenting and surrendering the certificate representing
your related Upper DECS, if in certificated form, at the offices of the stock
purchase contract agent with the form of “Election to Settle Early” on the
reverse side of the certificate completed and executed as indicated. You may
settle early only in integral multiples of 40 Upper DECS. The “Election to
Settle Early” form must be accompanied by payment to us in immediately available
funds of an amount equal to:
·
the
then current stated amount times the number of stock purchase contracts
being settled; plus
31
·
if
the delivery is made with respect to any stock purchase contract
during
the period from the close of business on any record date next preceding
any payment date to the opening of business on such payment date,
an
amount equal to the contract payments payable on the payment date
with
respect to the number of stock purchase
contracts.
You
may
settle early only in integral multiples of 40 Upper DECS.
So
long
as the Upper DECS are evidenced by one or more global security certificates
deposited with the depositary, procedures for early settlement will also be
governed by standing arrangements between the depositary and the stock purchase
contract agent. The early settlement right is also subject to the condition
that, if required under the U.S. federal securities laws, we have a registration
statement in effect under the Securities Act covering the shares of common
stock
and other securities, if any, deliverable upon settlement of a stock purchase
contract. We have agreed that, if required under the U.S. federal securities
laws, we will use commercially reasonable efforts to have a registration
statement in effect covering those shares of common stock and other securities
to be delivered in respect of the stock purchase contracts being
settled.
Upon
early settlement of the stock purchase contracts:
·
except
as described below in “— Early Settlement upon Cash Merger,” you will
receive a number of newly issued or treasury shares of our common
stock
per Upper DECS equal to the minimum settlement rate, subject to adjustment
under the circumstances described under “— Anti-Dilution Adjustments,”
accompanied by an appropriate prospectus, if required by
law;
·
the
capital securities, or the treasury securities, as the case may be,
relating to the Upper DECS will be transferred to you free and clear
of
our security interest;
·
your
right to receive future contract payments and any accrued and unpaid
contract payments for the period since the most recent quarterly
payment
date will terminate; and
·
no
adjustment will be made to or for you on account of any accrued and
unpaid
contract payments referred to in the previous
bullet.
If
the
stock purchase contract agent receives a certificate evidencing the applicable
Upper DECS, if in certificated form, accompanied by the completed “Election to
Settle Early” and the required cash payment from you by 5:00 p.m., New York City
time, on a business day and all conditions to early settlement have been
satisfied, that day will be considered the settlement date.
If
the
stock purchase contract agent receives the above after 5:00 p.m., New York
City
time, on a business day or at any time on a day that is not a business day,
the
next business day will be considered the settlement date. Upon early settlement
of your stock purchase contracts in the manner described above, presentation
and
surrender of the certificate evidencing the related Upper DECS, if in
certificated form, and payment of any transfer or similar taxes payable by
you
in connection with the issuance of the related common stock to any person other
than you, we will cause the shares of common stock being purchased to be issued,
and the related shares of the series of capital securities, or the treasury
securities, as the case may be, securing the stock purchase contracts to be
released from the pledge under the pledge agreement described in “— Pledged
Securities and the Pledge Agreement” and transferred, within three business days
following the settlement date, to you or your designee.
32
Notice
to Settle with Treasury Securities
If
you
hold Normal DECS, you may elect not to participate in a remarketing and to
settle the applicable portion of the stock purchase contracts by delivering
qualifying treasury securities with a principal amount of $1,000 per capital
security of each series to be remarketed in increments of 40 Normal DECS, prior
to the applicable remarketing period. To do so, you must notify the stock
purchase contract agent by presenting and (if after the fourth stock purchase
date) surrendering the certificate evidencing the applicable Normal DECS, if in
certificated form, at the offices of the stock purchase contract agent with
the
form of “Notice to Settle by Separate Treasury Securities” on the reverse side
of the certificate completed and executed as indicated by 5:00 p.m., New York
City time, on the second business day immediately preceding the first day of
the
applicable remarketing period and delivering the required qualifying treasury
securities to the collateral agent by 5:00 p.m., New York City time, on the
business day immediately preceding the first day of the applicable remarketing
period.
So
long
as the Upper DECS are evidenced by one or more global security certificates
deposited with the depositary, procedures for settlement by separate treasury
securities will also be governed by standing arrangements between the depositary
and the stock purchase contract agent.
If
you
have given notice of your intention to settle all or a portion of your stock
purchase contracts with separate treasury securities but fail to deliver the
securities to the collateral agent on the business day immediately preceding
the
first day of the applicable remarketing period as described above, your capital
securities of the applicable series will be included in the attempted
remarketing of the applicable series of capital securities occurring during
the
applicable remarketing period.
If
you
have given notice and delivered the securities but a remarketing is
unsuccessful, the collateral agent will promptly return the securities to you,
and your capital securities of the applicable series will remain pledged to
secure your obligations under the stock purchase contracts.
If
a
final failed remarketing is deemed to have occurred, we will exercise our rights
as a secured party with respect to your capital securities of the applicable
series that have been pledged to secure your obligation under the stock purchase
contracts, and your obligation under the stock purchase contracts will be deemed
to be satisfied in full.
Early
Settlement upon Cash Merger
Prior
to
the fourth stock purchase date, if we are involved in a merger that is scheduled
to close no later than five business days prior to a scheduled stock purchase
date in which at least 10% of the consideration for our outstanding common
stock
consists of cash or cash equivalents, which we refer to as a “cash merger,” then
following the cash merger, you will have the right to accelerate and settle
your
stock purchase contracts early at the settlement rate in effect immediately
prior to the closing of the cash merger (calculated as described below),
provided that at such time, if so required under the U.S. federal securities
laws, there is in effect a registration statement covering common stock and
other securities, if any, to be delivered in respect of the stock purchase
contracts being settled. We refer to this right as the “merger early settlement
right.”
We
will
provide notice of the completion of a cash merger within five business days
thereof. The notice will specify an early settlement date, which shall be at
least ten business days after the date of the notice but no later than 20
business days after the date of such notice and in no event later than five
business days prior to the next scheduled stock purchase date, by which your
merger early settlement right must be exercised. The notice will also set forth,
among other things, the applicable settlement rate and the amount of the cash,
securities and other consideration receivable by you upon settlement. To
exercise the merger early settlement right, you must deliver to the stock
purchase contract agent, three business days before the early settlement date,
the certificate evidencing your Upper DECS, if they are held in certificated
form, and payment of the applicable purchase price in immediately available
funds.
33
So
long
as the Upper DECS are evidenced by one or more global security certificates
deposited with the depositary, procedures for early settlement upon a cash
merger will also be governed by standing arrangements between the depositary
and
the stock purchase contract agent.
If
you
exercise the merger early settlement right, we will deliver to you on the early
settlement date the kind and amount of securities, cash or other property that
you would have been entitled to receive if you had settled the stock purchase
contract immediately before the cash merger in the full stated amount in effect
at the time and at the settlement rate in effect at such time in addition to
accrued and unpaid contract payments, if any. The settlement rate then in effect
will be calculated based on the daily amounts, as described under “— Purchase of
Common Stock” above, for the each of the trading days in the 20 consecutive
trading-day period ending on the third trading day immediately preceding the
closing of the cash merger. You will also receive the capital securities
underlying your Normal DECS, or treasury securities underlying your Stripped
DECS, as the case may be. If you do not elect to exercise your merger early
settlement right, your Upper DECS will remain outstanding and subject to normal
settlement on the settlement date. We have agreed that, if required under the
U.S. federal securities laws, we will use commercially reasonable efforts to
have in effect a registration statement covering the shares of our common stock
and other securities, if any, to be delivered in respect of the stock purchase
contracts being settled.
You
may
exercise the merger early settlement right only in integral multiples of 40
Upper DECS.
from
and including the issue date to but excluding the series A stock
purchase
date, at the annual rate of 4.680% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series A stock purchase date;
·
from
and including the issue date to but excluding the series B stock
purchase
date, at the annual rate of 4.545% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series B stock purchase date;
·
from
and including the issue date to but excluding the series C stock
purchase
date, at the annual rate of 4.300% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series C stock purchase date;
and
·
from
and including the issue date to but excluding the series D stock
purchase
date, at the annual rate of 4.065% on the $25 portion of the stated
amount
of a stock purchase contract corresponding to your obligation to
purchase
our common stock on the series D stock purchase date.
34
Contract
payments payable for any period will be computed on the basis of a 360-day
year
consisting of twelve 30-day months. Contract payments will accrue from the
issue
date of the Normal DECS and will be payable quarterly in arrears on
March 15, June 15, September 15 or December 15 of each year,
commencing on March 15, 2008and
ending on the fourth stock purchase date.
Contract
payments will be payable to the holders of stock purchase contracts as they
appear on the books and records of the stock purchase contract agent at the
close of business on the relevant record dates, which will be the first day
of
the month in which the relevant payment date falls. These distributions will
be
paid through the stock purchase contract agent, who will hold amounts received
in respect of the contract payments for the benefit of the holders of the Upper
DECS.
If
any
date on which contract payments are to be made on the stock purchase contracts
is not a business day, then payment of the contract payments payable on that
date will be made on the next succeeding business day, and no interest or
payment will be paid in respect of the delay. However, if that business day
is
in the next succeeding calendar year that payment will be made on the
immediately preceding business day, in each case with the same force and effect
as if made on that payment date. A business day means any day other than a
Saturday, Sunday or any other day on which banking institutions and trust
companies in New York City are permitted or required by any applicable law
to
close.
Our
obligations with respect to contract payments will be subordinate and junior
in
right of payment to our obligations under any of our existing or future secured
or senior indebtedness. The stock purchase contracts do not limit the incurrence
by us of other indebtedness, including secured or senior indebtedness. No
contract payments may be made if there shall have occurred and be continuing
a
default in any payment with respect to senior indebtedness or an event of
default with respect to any senior indebtedness resulting in the acceleration
of
the maturity thereof, or if any judicial proceedings are pending with respect
to
any such default. Additionally, your right to receive accrued contract payments
automatically will terminate upon the occurrence of particular events of
Citigroup’s bankruptcy, insolvency or reorganization.
We
may,
at our option, and will at the direction of the Federal Reserve Board, upon
prior written notice to the holders of Upper DECS and the stock purchase
contract agent, defer contract payments on the stock purchase contracts. We
may
elect to defer contract payments on more than one occasion, but in no event
may
we defer contract payments beyond September 15, 2012. Any such deferred
contract payments will accrue additional amounts at an annual rate of 11.0%,
compounded quarterly on each succeeding payment date, until paid, to the extent
permitted by law. If the stock purchase contracts are terminated upon the
occurrence of certain events of bankruptcy, insolvency or reorganization with
respect to us, the right to receive deferred contract payments also will
terminate.
If
we
elect or are directed by the Federal Reserve Board to defer the payment of
contract payments on the stock purchase contracts, then we will pay the deferred
contract payments in either shares of our common stock or unsecured junior
subordinated notes, in our sole discretion.
If
we pay
deferred contract payments in shares of our common stock, the number of shares
of our common stock that you will be entitled to receive will be equal
to:
·
the
aggregate amount of deferred contract payments payable to you, divided
by
·
in
the case of contract payments payable on or before the first stock
purchase date, the greater of
35
·
the
closing price of our common stock on the trading day immediately
preceding
the first stock purchase date) and
·
$10.61,
·
in
the case of contract payments payable after the first stock purchase
date
and on or before the second stock purchase date, the greater
of
·
the
closing price of our common stock on the trading day immediately
preceding
the second stock purchase date) and
·
$10.61,
·
in
the case of contract payments payable after the second stock purchase
date
and on or before the third stock purchase date, the greater
of
·
the
closing price of our common stock on the trading day immediately
preceding
the third stock purchase date) and
·
$10.61,
·
in
the case of contract payments payable after the third stock purchase
date,
the greater of
·
the
closing price of our common stock on the trading day immediately
preceding
the fourth stock purchase date) and
·
$10.61,
subject,
in each case, to anti-dilution adjustments.
If
we
elect to pay deferred contract payments in unsecured junior subordinated notes,
the junior subordinated notes you will receive will:
·
have
a principal amount equal to the aggregate amount of deferred contract
payments payable to you,
·
mature
on September 15, 2013 or, if we are deferring interest on the
corresponding series of junior subordinated debt securities, on the
date
that is five years after commencement of the deferral period (whichever
is
later),
·
bear
interest at an annual rate equal to the then market rate of interest
for
similar instruments (not to exceed 10%), as determined by a nationally
recognized investment banking firm selected by
us,
·
be
subordinate and rank junior in right of payment to all of our existing
and
future secured and senior debt on the same basis as the contract
payments,
·
provide
for optional deferral on the same basis as the junior subordinated
debt
securities, and
·
not
be redeemable by us prior to their stated
maturity.
36
We
will
not issue any fractional shares of our common stock with respect to the payment
of deferred contract payments. In lieu of fractional shares that we would
otherwise have to issue to you, you will receive an amount in cash equal to
the
applicable fraction of a share multiplied by the closing sale price of our
common stock on the trading day immediately preceding the applicable stock
purchase date.
If
we
elect or are directed by the Federal Reserve Board to defer contract payments,
then until the deferred contract payments have been paid, we will not take
any
of the actions that we would be prohibited from taking during a deferral of
interest payments on the junior subordinated debt securities as described under
“Description of the Junior Subordinated Debt Securities — Restrictions on
Certain Payments, Including on Deferral of Interest.”
Anti-Dilution
Adjustments
Each
fixed settlement rate will be adjusted, without duplication, if certain events
occur:
(1)
the
issuance of our common stock as a dividend or distribution to all
holders
of our common stock, or a subdivision or combination of our common
stock,
in which event each fixed settlement rate will be adjusted based
on the
following formula:
SR1
=
SR0
x
(OS1 ÷
OS0)
where,
SR0
=
the fixed settlement rate in effect at the close
of
business on the record date
SR1
=
the fixed settlement rate in effect immediately
after the
record date
OS0
=
the
number of shares of our common stock outstanding at the close of
business
on the record date prior to giving effect to such
event
OS1
=
the
number of shares of our common stock that would be outstanding immediately
after, and solely as a result of, such
event
(2)
the
issuance to all holders of our common stock of certain rights or
warrants
entitling them for a period expiring 60 days or less from the date
of
issuance of such rights or warrants to purchase shares of our common
stock
(or securities convertible into our common stock) at less than (or
having
a conversion price per share less than) the current market price
of our
common stock as of the record date, in which event each fixed settlement
rate will be adjusted based on the following
formula:
SR1
=
SR0
x
(OS0
+
X) ÷
(OS0
+
Y)
where,
SR0
=
the fixed settlement rate in effect at the close
of
business on the record date
SR1
=
the fixed settlement rate in effect immediately
after the
record date
OS0
=
the
number of shares of our common stock outstanding at the close of
business
on the record date
X
=
the
total number of shares of our common stock issuable pursuant to such
rights (or upon conversion of such
securities)
Y
=
the
aggregate price payable to exercise such rights (or the conversion
price
for such securities paid upon conversion) divided by the average
of the
VWAP of our common stock over each of the ten consecutive trading
days
prior to the business day immediately preceding the announcement
of the
issuance of such rights
37
However,
each fixed settlement rate will be readjusted to the extent that any such rights
or warrants are not exercised prior to their expiration.
(3)
the
dividend or other distribution to all holders of our common stock
of
shares of our capital stock (other than common stock) or evidences
of our
indebtedness or our assets (excluding any dividend, distribution
or
issuance covered by clauses (1) or (2) above or (4) or (5) below)
in which
event each fixed settlement rate will be adjusted based on the following
formula:
SR1
=
SR0
x
SP0 ÷
(SP0
-
FMV)
where,
SR0
=
the
fixed settlement rate in effect at the close of business on the record
date
SR1
=
the
fixed settlement rate in effect immediately after the record
date
SP0
=
the
current market price as of the record
date
FMV
=
the
fair market value (as determined by our board of directors), on the
record
date, of the shares of capital stock, evidences of indebtedness or
assets
so distributed, expressed as an amount per share of our common
stock
However,
if the transaction that gives rise to an adjustment pursuant to this clause
(3)
is one pursuant to which the payment of a dividend or other distribution on
our
common stock consist of shares of capital stock of, or similar equity interests
in, a subsidiary or other business unit of ours, (i.e., a spin-off) that are,
or, when issued, will be, traded on a U.S. securities exchange or quoted on
the
Nasdaq Small Cap Market, then each fixed settlement rate will instead be
adjusted based on the following formula:
SR1
=
SR0
x
(FMV0
+
MP0) ÷
MP0
where,
SR0
=
the
fixed settlement rate in effect at the close of business on the record
date
SR1
=
the
fixed settlement rate in effect immediately after the record
date
FMV0
=
the
average of the VWAP of the capital stock or similar equity interests
distributed to holders of our common stock applicable to one share
of our
common stock over each of the 10 consecutive trading days commencing
on
and including the third trading day after the date on which
“ex-distribution trading” commences for such dividend or distribution on
the NYSE or such other national or regional exchange or market on
which
our common stock is then listed or
quoted
MP0
=
the
average of the VWAP of our common stock over each of the 10 consecutive
trading days commencing on and including the third trading day after
the
date on which “ex-distribution trading” commences for such dividend or
distribution on the NYSE or such other national or regional exchange
or
market on which our common stock is then listed or
quoted
38
(4)
we
make a distribution consisting exclusively of cash to all holders
of our
common stock, excluding (a) any cash dividend on our common stock
to the
extent that the aggregate cash dividend per share of our common stock
does
not exceed (i) $0.54 in any fiscal quarter in the case of a quarterly
dividend or (ii) $2.16 in the prior twelve months in the case of
an annual
dividend (each such number, the “dividend threshold amount”), (b) any cash
that is distributed as part of a distribution referred to in clause
(3)
above, and (c) any consideration payable in connection with a tender
or
exchange offer made by us or any of our subsidiaries referred to
in clause
(5) below, in which event, each fixed settlement rate will be adjusted
based on the following formula:
SR1
=
SR0
x
SP0 ÷
(SP0 –
C)
where,
SR0
=
the
fixed settlement rate in effect at the close of business on the record
date
SR1
=
the
fixed settlement rate in effect immediately after the record
date
SP0
=
the
current market price as of the record
date
C
=
the
amount in cash per share we distribute to holders or pay in connection
with a tender or exchange offer of our common stock less, in the
event of
a regular quarterly or annual dividend, the dividend threshold
amount
The
dividend threshold amount is subject to adjustment on an inversely proportional
basis whenever the fixed settlement rates are adjusted, provided that no
adjustment will be made to the dividend threshold amount for any adjustment
made
to the fixed settlement rates pursuant to this clause (4).
(5)
we
or one or more of our subsidiaries make purchases of our common stock
pursuant to a tender offer or exchange offer by us or one of our
subsidiaries for our common stock to the extent that the cash and
value of
any other consideration included in the payment per share of our
common
stock validly tendered or exchanged exceeds the VWAP per share of
our
common stock on the trading day next succeeding the last date on
which
tenders or exchanges may be made pursuant to such tender or exchange
offer
(the “expiration date”), in which event each fixed settlement rate will be
adjusted based on the following
formula:
SR1
=
SR0
x
[(FMV
+ (SP1
x
OS1)] ÷
(SP1
x
OS0)
where,
SR0
=
the
fixed settlement rate in effect at the close of business on the expiration
date
SR1
=
the
fixed settlement rate in effect immediately after the expiration
date
FMV
=
the
fair market value (as determined by our board of directors), on the
expiration date, of the aggregate value of all cash and any other
consideration paid or payable for shares validly tendered or exchanged
and
not withdrawn as of the expiration date (the “purchased
shares”)
OS1
=
the
number of shares of our common stock outstanding as of the last time
tenders or exchanges may be made pursuant to such tender or exchange
offer
(the “expiration time”) less any purchased
shares
OS0
=
the
number of shares of our common stock outstanding at the expiration
time,
including any purchased shares
SP1
=
the
average of the VWAP of our common stock over each of the ten consecutive
trading days commencing with the trading day immediately after the
expiration date.
39
In
addition, in no event will we adjust the fixed settlement rate to the extent
that the adjustment would reduce the conversion price below the par value per
share of our common stock.
“Current
market price” of our common stock on any day, means the average of the VWAP of
our common stock over each of the 10 consecutive trading days ending on the
earlier of the day in question and the day before the “ex-date” with respect to
the issuance or distribution requiring such computation. For purposes of this
paragraph, “ex-date” means the first date on which the shares of our common
stock trade on the applicable exchange or in the applicable market, regular
way,
without the right to receive such issuance or distribution.
“Record
date” means, for purpose of this section, with respect to any dividend,
distribution or other transaction or event in which the holders of our common
stock have the right to receive any cash, securities or other property or in
which our common stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other property, the date
fixed for determination of holders of our common stock entitled to receive
such
cash, securities or other property (whether such date is fixed by our board
of
directors or by statute, contract or otherwise).
Except
as
stated above or as otherwise agreed, the fixed settlement rates will not be
adjusted for the issuance of our common stock or any securities convertible
into
or exchangeable for our common stock or carrying the right to purchase any
of
the foregoing or for the repurchase of our common stock.
To
the
extent that we have a rights plan in effect upon settlement of a purchase
contract, you will receive, in addition to our common stock, the rights under
the rights plan, unless, prior to the settlement of a purchase contract, the
rights have separated from the common stock, in which case each fixed settlement
rate will be adjusted at the time of separation as if we made a distribution
to
all holders of our common stock as described in clause (4)
above.
In
the
event of certain consolidations, mergers, sales or transfers of assets, share
exchanges or other reorganization events, pursuant to which our common stock
is
converted into the right to receive other securities, cash or property, each
holder of Normal DECS or Stripped DECS will receive on the purchase contract
settlement date or any cash merger early settlement date, in lieu of each share
of our common stock you would otherwise receive, the kind and amount of
securities, cash or property receivable upon any such transaction by the holder
of one share of common stock, multiplied by the applicable settlement rate.
In
the event holders of our common stock have the opportunity to elect the form
of
consideration to be received in such transaction, the type and amount of
consideration that holders of the Normal DECS or Stripped DECS would have been
entitled to receive will be deemed to be the weighted average of the types
and
amounts of consideration received by the holders of our common stock that
affirmatively make an election. We will agree in the purchase contract and
pledge agreement not to become a party to any such transaction unless its terms
are consistent with the foregoing.
In
the
event of a taxable distribution to holders of shares of our common stock that
results in an adjustment of each fixed settlement rate or an increase in each
fixed settlement rate in our discretion, holders of Normal DECS and Stripped
DECS may, in certain circumstances, be deemed to have received a distribution
subject to U.S. federal income tax as a dividend. In addition, non-U.S. holders
of Normal DECS and Stripped DECS may, in certain circumstances, be deemed to
have received a distribution subject to U.S. federal withholding tax
requirements.
40
In
addition, we may make such increases in each fixed settlement rate as we deem
advisable. We may only make such a discretionary adjustment if we make the
same
proportionate adjustment to each fixed settlement rate. No adjustment in the
settlement rate will be required unless such adjustment would require an
increase or decrease of at least one percent; provided, however, that any such
minor adjustments that are not required to be made will be carried forward
and
taken into account in any subsequent adjustment, and provided further that
any
such adjustment of less than one percent that has not been made shall be made
(x) upon the end of the issuer’s fiscal year and (y) upon the purchase contract
settlement date or any early settlement date.
Adjustments
to each fixed settlement rate will be calculated to the nearest 1/10,000th
of a
share.
Whenever
the fixed settlement rates are adjusted, we must deliver to the purchase
contract agent a certificate setting forth each fixed settlement rate, detailing
the calculation of each fixed settlement rate and describing the facts upon
which the adjustment is based. In addition, we must notify the holders of Normal
DECS and Stripped DECS of the adjustment within ten business days of any event
requiring such adjustment and describe in reasonable detail the method by which
each fixed settlement rate was adjusted.
Each
adjustment to the fixed settlement rates will result in a corresponding
adjustment to the number of shares of our common stock issuable upon early
settlement of a purchase contract.
If
an
adjustment is made to the fixed settlement rates, an adjustment also will be
made to the reference price and the threshold appreciation price on an inversely
proportional basis solely to determine which of the clauses of the definition
of
settlement rate will be applicable on the purchase contract settlement date
or
any cash merger early settlement date and to the prices used to determine the
number of shares deliverable in respect of deferred contract payments as
described under “— Option
to
Defer Contract Payments.”
Termination
The
stock
purchase contracts, as well as our rights and obligations and the rights and
obligations of the holders of Upper DECS under the stock purchase contracts,
including the right and obligation to purchase shares of our common stock and
the right to receive accrued contract payments, will immediately and
automatically terminate, without any further action, upon the termination of
the
stock purchase contracts as a result of our bankruptcy, insolvency or
reorganization. In the event of a termination of the stock purchase contracts
as
a result of our bankruptcy, insolvency or reorganization, holders of the stock
purchase contracts will not have a claim in bankruptcy under the stock purchase
contracts with respect to our issuance of shares of our common stock or the
right to receive contract payments.
Upon
any
termination, the collateral agent will release the capital securities or the
treasury securities, as the case may be, held by it to the stock purchase
contract agent for distribution to the holders. Upon any termination, however,
the release and distribution may be subject to the automatic stay under
Section 362 of the U.S. Bankruptcy Code, and claims arising out of the
capital securities, like all other claims in bankruptcy proceedings, will be
subject to the equitable jurisdiction and powers of the bankruptcy court. In
the
event that we become the subject of a case under the Bankruptcy Code, the delay
may occur as a result of the automatic stay under the Bankruptcy Code and
continue until the automatic stay has been lifted. We expect any such delay
to
be limited. The automatic stay will not be lifted until such time as the
bankruptcy court agrees to lift it and return your pledged securities to
you.
41
If
your
stock purchase contract is terminated as a result of our bankruptcy, insolvency
or reorganization, you will have no right to receive any accrued contract
payments.
Pledged
Securities and the Pledge Agreement
Your
ownership interest in each series of capital securities underlying Normal DECS
and the treasury securities underlying Stripped DECS, which are also referred
to
as the “pledged securities,” will be pledged to the collateral agent for our
benefit pursuant to a single pledge agreement to secure your obligations to
purchase shares of our common stock under your stock purchase contracts. Your
right to your pledged securities will be subject to our security interest
created by the pledge agreement.
You
will
not be permitted to withdraw the pledged securities related to the Upper DECS
from the pledge arrangement except:
·
to
substitute qualifying treasury securities for capital securities
as
provided for under “Description of the Upper DECS — Creating Stripped
DECS” or “— Notice to Settle with Treasury
Securities”;
·
to
substitute capital securities for qualifying treasury securities,
as
provided for under “Description of the Upper DECS — Recreating Normal
DECS”; or
·
upon
the termination or early settlement of your stock purchase
contracts.
Subject
to the security interest and the terms of the pledge agreement, each holder
of
Normal DECS will be entitled through the stock purchase contract agent and
the
collateral agent to all of the proportional rights of holders of each series
of
capital securities, including voting and redemption rights. Each holder of
Stripped DECS will retain beneficial ownership of the treasury securities
pledged in respect of the stock purchase contracts. We will have no interest
in
the pledged securities other than our security interest.
Except
as
described in “Certain Provisions of the Stock Purchase Contracts, the Stock
Purchase Contract Agreement and the Pledge Agreement — General,” the collateral
agent will, upon receipt, if any, of payments on the pledged capital securities,
distribute the payments to the stock purchase contract agent, which will in
turn
distribute those payments, together with contract payments received from us,
to
the persons in whose names the related Normal DECS are registered at the close
of business on the record date immediately preceding the date of
payment.
42
CERTAIN
PROVISIONS OF THE STOCK PURCHASE CONTRACTS, THE STOCK PURCHASE CONTRACT
AGREEMENT AND THE PLEDGE AGREEMENT
This
section summarizes some of the other provisions of the stock purchase contracts,
the stock purchase contract agreement and the pledge agreement.
General
Payments
on the Upper DECS will be made, stock purchase contracts (and documents relating
to the Upper DECS and stock purchase contracts) will be settled, and transfers
of the Upper DECS will be registrable, at the office of the stock purchase
contract agent in the Borough of Manhattan, New York City. In addition, payment
on the Upper DECS may be made, at our option, by check mailed to the address
of
the holder entitled to payment as shown on the security register or by a wire
transfer to the account designated by the holder in a prior written
notice.
Shares
of
our common stock will be delivered on the applicable stock purchase date (or
earlier upon early settlement), or, if the stock purchase contracts have
terminated, the related pledged securities will be delivered (potentially after
a delay as a result of an automatic stay under the Bankruptcy Code, as described
under “Description of the Stock Purchase Contracts — Termination”) at the office
of the stock purchase contract agent upon presentation and (in the case of
the
fourth stock purchase date) surrender of the applicable
certificate.
If
you
fail to present and surrender (in the case of the fourth stock purchase date)
the certificate evidencing the Upper DECS to the stock purchase contract agent
on or prior to the applicable stock purchase date, the shares of our common
stock issuable upon settlement of the stock purchase contract will be registered
in the name of the stock purchase contract agent. The shares, together with
any
distributions, will be held by the stock purchase contract agent, as agent
for
your benefit, until the certificate is presented and surrendered (in the case
of
the fourth stock purchase date) or you provide satisfactory evidence that the
certificate has been destroyed, lost or stolen, together with any indemnity
that
may be required by the stock purchase contract agent and us.
If
the
stock purchase contracts terminate prior to the applicable stock purchase date,
the related pledged securities are transferred to the stock purchase contract
agent for distribution to the holders, and you fail to present and surrender
the
certificate evidencing your Upper DECS to the stock purchase contract agent,
the
related pledged securities delivered to the stock purchase contract agent and
payments on the pledged securities will be held by the stock purchase contract
agent as agent for your benefit until the applicable certificate is presented
and surrendered or you provide the evidence and indemnity described
above.
The
stock
purchase contract agent will have no obligation to invest or to pay interest
on
any amounts held by the stock purchase contract agent pending payment to any
holder.
No
service charge will be made for any registration of transfer or exchange of
the
Upper DECS, except for any tax or other governmental charge that may be imposed
in connection with a transfer or exchange.
Modification
The
stock
purchase contract agreement and the pledge agreement will contain provisions
permitting us, the stock purchase contract agent or the collateral agent, as
the
case may be, to modify the stock purchase contract agreement or the pledge
agreement without the consent of the holders for any of the following
purposes:
43
·
to
evidence the succession of another person to our
obligations;
·
to
add to the covenants for the benefit of holders or to surrender any
of our
rights or powers under those
agreements;
·
to
evidence and provide for the acceptance of appointment of a successor
stock purchase contract agent or a successor collateral agent or
securities intermediary;
·
to
make provision with respect to the rights of holders pursuant to
adjustments in the settlement rate due to consolidations, mergers
or other
reorganization events;
·
to
cure any ambiguity, to correct or supplement any provisions that
may be
inconsistent; and
·
to
make any other provisions with respect to such matters or questions,
provided that such action shall not adversely affect the interest
of the
holders in any material respect.
The
stock
purchase contract agreement and the pledge agreement will contain provisions
permitting us and the stock purchase contract agent, and in the case of the
pledge agreement, the collateral agent, with the consent of the holders of
not
less than a majority of the stock purchase contracts at the time outstanding,
to
modify the terms of the stock purchase contracts, the stock purchase contract
agreement or the pledge agreement. However, no such modification may, without
the consent of the holder of each outstanding stock purchase contract affected
by the modification:
·
change
any payment date;
·
change
the amount or type of pledged securities related to the stock purchase
contract, impair the right of the holder of any pledged securities
to
receive distributions on the pledged securities or otherwise adversely
affect the holder’s rights in or to the pledged
securities;
·
change
the place or currency of payment or reduce any contract
payments;
·
impair
the right to institute suit for the enforcement of the stock purchase
contract or payment of any contract
payments;
·
reduce
the number of shares of our common stock to be purchased under the
stock
purchase contracts, increase the price to purchase shares of our
common
stock upon settlement of the stock purchase contracts, change the
stock
purchase date, the right to early settlement or the holder’s merger early
settlement right or otherwise adversely affect the holder’s rights under
the stock purchase contracts; or
·
reduce
the above-stated percentage of outstanding stock purchase contracts
the
consent of the holders of which is required for the modification
or
amendment of the provisions of the stock purchase contracts, the
stock
purchase contract agreement or the pledge
agreement.
If
any
amendment or proposal referred to above would adversely affect only the Normal
DECS or only the Stripped DECS, then only the affected class of holders will
be
entitled to vote on the amendment or proposal, and the amendment or proposal
will not be effective except with the consent of the holders of not less than
a
majority of the affected class or of all of the holders of the affected class,
as applicable.
44
No
Consent to Assumption
Each
holder of Upper DECS, by acceptance of these securities, will under the terms
of
the stock purchase contract agreement and the Upper DECS, as applicable, be
deemed expressly to have withheld any consent to the assumption (i.e.,
affirmance) of the stock purchase contracts by us or our trustee if we become
the subject of a case under the Bankruptcy Code or other similar state or
federal law provision for reorganization or liquidation.
Consolidation,
Merger, Sale or Conveyance
We
will
covenant in the stock purchase contract agreement that we will not merge with
and into, consolidate with or convert into any other entity or sell, assign,
transfer, lease or convey all or substantially all of our properties and assets
to any person or entity, unless:
·
the
successor entity is a corporation organized and existing under the
laws of
the United States of America or a U.S. state or the District of Columbia
and that entity expressly assumes our obligations under the stock
purchase
contracts, the stock purchase contract agreement, the pledge agreement,
the trust agreements and the remarketing agreement;
and
·
the
successor entity is not, immediately after the merger, consolidation,
conversion, sale, assignment, transfer, lease or conveyance, in default
of
its payment obligations under the stock purchase contracts, the stock
purchase contract agreement, the pledge agreement, the trust agreements
or
the remarketing agreement or in material default in the performance
of any
other covenants under these
agreements.
Title
We,
the
stock purchase contract agent and the collateral agent may treat the registered
owner of any Upper DECS as the absolute owner of such Upper DECS for the purpose
of making payment and settling the stock purchase contracts and for all other
purposes.
Replacement
of Upper DECS Certificates
In
the
event that physical certificates have been issued, any mutilated Upper DECS
certificate will be replaced by us at the expense of the holder upon surrender
of the certificate to the stock purchase contract agent. Upper DECS certificates
that become destroyed, lost or stolen will be replaced by us at the expense
of
the holder upon delivery to us and the stock purchase contract agent of evidence
of their destruction, loss or theft satisfactory to us and the stock purchase
contract agent. In the case of a destroyed, lost or stolen Upper DECS
certificate, an indemnity satisfactory to the stock purchase contract agent
and
us may be required at the expense of the holder of the Upper DECS evidenced
by
the certificate before a replacement will be issued.
Notwithstanding
the foregoing, we will not be obligated to issue any Upper DECS certificates
on
or after the business day immediately preceding the fourth stock purchase date
(or after early settlement) or after the stock purchase contracts have
terminated. The stock purchase contract agreement will provide that, in lieu
of
the delivery of a replacement Upper DECS certificate following the fourth stock
purchase date, the stock purchase contract agent, upon delivery of the evidence
and indemnity described above, will deliver the shares of common stock issuable
pursuant to the stock purchase contracts included in the Upper DECS evidenced
by
the certificate or, if the stock purchase contracts have terminated prior to
the
fourth stock purchase date, transfer the pledged securities included in the
Upper DECS evidenced by the certificate.
45
Governing
Law
The
stock
purchase contract agreement, the pledge agreement and the stock purchase
contracts will be governed by, and construed in accordance with, the laws of
the
State of New York.
Information
Concerning the Stock Purchase Contract Agent
●
initially will be the stock purchase contract agent. The stock purchase contract
agent will act as the agent for the holders of the Upper DECS from time to
time.
The stock purchase contract agreement will not obligate the stock purchase
contract agent to exercise any discretionary actions in connection with a
default under the terms of the Upper DECS or the stock purchase contract
agreement.
The
stock
purchase contract agreement will contain provisions limiting the liability
of
the stock purchase contract agent. The stock purchase contract agreement will
contain provisions under which the stock purchase contract agent may resign
or
be replaced. Any such resignation or replacement would be effective upon the
acceptance of appointment by a successor.
Information
Concerning the Collateral Agent
●
initially will be the collateral agent and securities intermediary for each
series of capital series. The collateral agent will act solely as our agent
and
will not assume any obligation or relationship of agency or trust for or with
any of the holders of the Upper DECS except for the obligations owed by a
pledgee of property to the owner of the property under the pledge agreement
and
applicable law.
The
pledge agreement will contain provisions limiting the liability of the
collateral agent. The pledge agreement will contain provisions under which
the
collateral agent may resign or be replaced. Any such or replacement would be
effective upon the acceptance of appointment by a successor.
Miscellaneous
Should
you elect to substitute the related pledged securities, create Stripped DECS
or
recreate Normal DECS, you shall be responsible for any fees or expenses payable
in connection with that substitution, as well as any commissions, fees or other
expenses incurred in acquiring the pledged securities to be substituted, and
we
shall not be responsible for any of those fees or expenses.
46
DESCRIPTION
OF THE CAPITAL SECURITIES
This
summary contains a description of all of the material terms of the capital
securities but is not necessarily complete.
The
series A capital securities, series B capital securities and the
series C capital securities each will be issued pursuant to an Amended and
Restated Declaration of Trust, which we collectively refer to as the “trust
agreements.” The series A capital securities will represent remarketable
preferred securities of Citigroup Capital XXIX, which we refer to as the
“series A trust.” The series B capital securities will represent
remarketable preferred securities of Citigroup Capital XXX, which we refer
to as
the “series B trust.” The series C capital securities will represent
remarketable preferred securities of Citigroup Capital XXXI, which we refer
to
as the “series C trust.” The series D capital securities will
represent remarketable preferred securities of Citigroup Capital XXXII, which
we
refer to as the “series D trust” and, together with the series A
trust, the series B trust and the series C trust, as the “trusts.” The capital
securities will have a liquidation amount of $1,000 per capital security and
will be mandatorily redeemable for their liquidation amount upon the maturity
of
the related series of junior subordinated debt securities (initially
March 15, 2041, in the case of the series A junior subordinated debt
securities, September 15, 2041, in the case of the series B junior
subordinated debt securities, March 15, 2042, in the case of the
series C junior subordinated debt securities and September 15, 2042,
in the case of the series D junior subordinated debt securities, in each
case, subject to change as described below under “Description
of the Junior Subordinated Debt Securities—
Interest
Rate and Maturity”).
Each
trust agreement will be qualified as an indenture under the Trust Indenture
Act.
The property trustee for each trust agreement, ●, will act as indenture trustee
for each series of capital securities under the relevant trust agreement for
purposes of compliance with the provisions of the Trust Indenture Act. The
terms
of each series of capital securities will include those stated in the relevant
trust agreement, including any amendments thereto, those made part of the
relevant trust agreement by the Trust Indenture Act and the Delaware Statutory
Trust Act and those that are stated in such capital securities.
Each
trust agreement authorizes the relevant administrative trustees to issue, on
behalf of such trust, the trust securities, consisting of the relevant series
of
capital securities and the common securities of such trust. These trust
securities represent undivided beneficial ownership interests in the assets
of
such trust. We will own, directly or indirectly, all of the common securities
of
each trust. None of the trust agreements permits the trust to issue any
securities other than the common securities and corresponding series of capital
securities or to incur any indebtedness. Each trust’s common securities will
rank equal in right of payment, and payments upon redemption, liquidation or
otherwise will be made on a proportionate basis with, the corresponding series
of capital securities. During the continuance of an event of default under
the
junior indenture for the corresponding series of junior subordinated debt
securities, the rights of the holders of such common securities to receive
periodic distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the corresponding series
of
capital securities.
Under
each trust agreement, the relevant property trustee will own the series A
junior subordinated debt securities, the series B junior subordinated debt
securities, the series C junior subordinated debt securities or the
series D junior subordinated debt securities, as applicable, purchased by
such trust for the benefit of the holders of the series A capital
securities, series B capital securities, series C capital securities
and series D capital securities, respectively. With respect to each trust,
the payment of distributions out of money held by such trust, and payments
upon
redemption of the corresponding series of capital securities or liquidation
of
such trust, are guaranteed by us to the extent described under “Description of
the Guarantees.” Such guarantees, when taken together with our obligations under
the applicable series of junior subordinated debt securities, the applicable
junior indentures and our obligations under the applicable trust agreement,
including our obligations to pay costs, expenses, debts and liabilities of
the
applicable trust, other than with respect to the common securities and the
capital securities of the applicable trust, have the effect of providing a
full
and unconditional guarantee of all amounts due on such capital securities.
●, as
the guarantee trustee under each guarantee, will hold such guarantee for the
benefit of the holders of the applicable series of capital securities. None
of
the guarantees covers payment of distributions when the applicable trust does
not have sufficient available funds to pay those distributions. In that case,
except in the limited circumstances in which each holder of the capital
securities of the applicable series may take direct action, the remedy of a
holder of such capital securities is to vote to direct the relevant property
trustee to enforce such property trustee’s rights under the corresponding series
of junior subordinated debt securities.
47
Distributions
Distributions
on each series of capital securities will be cumulative and will be fixed
initially at:
·
an
annual rate of 6.320% on the liquidation amount of $1,000 per capital
security of the series A capital
securities,
·
an
annual rate of 6.455% on the liquidation amount of $1,000 per capital
security of the series B capital
securities,
·
an
annual rate of 6.700% on the liquidation amount of $1,000 per capital
security of the series C capital
securities,
·
an
annual rate of 6.935% on the liquidation amount of $1,000 per capital
security of the series D capital
securities,
We
will
have the right to defer distributions on each series of capital securities.
The
rate on each series of capital securities will be reset in connection with
a
successful remarketing of that series as described below under “—
Remarketing.” Distributions on each series will accrue from the issue date of
the Normal DECS and will be payable quarterly in arrears on March 15,
June 15, September 15 and December 15 of each year, subject to the deferral
provisions described below, commencing March 15, 2008, when, as and if
funds are available for distributions. From and after the first stock purchase
date for the series A capital securities, the second stock purchase date
for the series B capital securities, the third stock purchase date for the
series C capital securities and the fourth stock purchase date for the
series D capital securities, distributions, if any, on such series will be
payable semi-annually on March 15 or September 15 of each year or June 15 or
December 15 of each year, as applicable, with the first such semi-annual
payment, if any, occurring on the payment date that is not more than six months
after the applicable stock purchase date. Distributions will be made by the
relevant trust, except as otherwise provided below.
We
have
the right to defer the payment of interest on any series of junior subordinated
debt securities at any time and from time to time. As a consequence, the
relevant trust will defer distributions on the corresponding series of capital
securities during the deferral period. Deferred distributions to which you
are
entitled will accrue interest, compounded quarterly prior to the applicable
stock purchase date and semi-annually thereafter, from the relevant payment
date
for distributions during any deferral period, at the rate borne by such capital
securities at such time, to the extent permitted by applicable law. We may
not
defer interest payments on a series of junior subordinated debt securities
that
we are otherwise obligated to pay in cash for any period of time that exceeds
five years with respect to any deferral period or that extends beyond the
maturity date of such junior subordinated debt securities.
48
Each
trust must make distributions on the applicable series of capital securities
on
the payment dates, to the extent that it has funds available in the property
account therefor. Each trust’s funds available for distribution to you as a
holder of such capital securities will be limited to payments received from
us
on the corresponding series of junior subordinated debt securities. With respect
to each trust, we will guarantee the payment of distributions on the applicable
series of capital securities out of funds held by such trust to the extent
of
available trust funds, as described under “Description of the
Guarantees.”
Distributions
on the capital securities will be payable to holders, including the collateral
agent, as they appear on the books and records of the relevant trust on the
relevant record dates. For each series of capital securities, the relevant
administrative trustee will have the right to select relevant record dates,
which will be more than one business day but less than 60 business days prior
to
the relevant payment dates.
If
any
date on which distributions on the capital securities are to be made is not
a
business day, distributions payable on that date will be made on the next
succeeding business day without any interest or other payment in respect of
any
delay, but if that business day is in the next succeeding calendar year the
distribution shall be made on the immediately preceding business day, in each
case with the same force and effect as if made on that payment
date.
Mandatory
Redemption of Capital Securities and Maturity of Junior Subordinated Debt
Securities
The
capital securities of each series have no stated maturity but must be redeemed
upon the maturity of the corresponding series of junior subordinated debt
securities or their earlier redemption. The series A junior subordinated
debt securities will mature on March 15, 2041, the series B junior
subordinated debt securities will mature on September 15, 2041, the
series C junior subordinated debt securities will mature on March 15,
2042and
the
series D junior subordinated debt securities will mature on
September 15, 2042, or, in each case, on such earlier date as we may elect
as described below under “Description
of the Junior Subordinated Debt Securities—
Interest
Rate and Maturity“
or
in
connection with a final failed remarketing, as described under “Description
of the Stock Purchase Contracts—
Remarketing”
(the
“mandatory redemption date”); provided,
however,
that if
we are deferring interest on a series of junior subordinated debt securities
at
the time we make such election, any new stated maturity date and mandatory
redemption date may not be earlier than five years after commencement of the
deferral period. The redemption price per capital security will equal the total
liquidation amount per capital security plus accumulated and unpaid
distributions, if any, to but excluding the redemption date.
Special
Event Redemption
“Tax
event” means that the administrative trustees of any trust will have received an
opinion of a nationally recognized independent tax counsel experienced in such
matters which states that, as a result of any:
·
amendment
to, or change (including any announced prospective change) in, the
laws or
associated regulations of the United States or any political subdivision
or taxing authority of the United States;
or
·
amendment
to, or change in, an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or
regulatory authority, including the enactment of any legislation
and the
publication of any judicial decision, regulatory determination or
administrative pronouncement on or after the date we agree to issue
the
Upper DECS;
49
there
is
more than an insubstantial risk that:
·
the
relevant trust would be subject to United States federal income tax
relating to interest accrued or received on the junior subordinated
debt
securities held by such trust;
·
interest
payable to the relevant trust on the junior subordinated debt securities
held by such trust would not be deductible, in whole or in part,
by
Citigroup Inc. for United States federal income tax purposes; or
·
the
relevant trust would be subject to more than a minimal amount of
other
taxes, duties or other governmental charges.
“Investment
company event” means that the administrative trustees of any trust will have
received an opinion of a nationally recognized independent counsel experienced
in such matters which states that, as a result of the occurrence of a change
in
law or regulation or a written change in interpretation or application of law
or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the relevant trust
is
or will be considered an “investment company” which is required to be registered
under the Investment Company Act of 1940 (the “1940 Act”).
“Regulatory
capital event” means that if Citigroup determines, based on an opinion of
counsel experienced in such matters, who may be an employee of Citigroup or
any
of its affiliates, that, as a result of
·
any
amendment to, clarification of or change (including any announced
prospective change) in applicable laws or regulations or official
interpretations thereof or policies with respect thereto or
·
any
official administrative pronouncement or judicial decision interpreting
or
applying such laws or regulations,
there
is
more than an insubstantial risk that, at any time prior to the applicable
remarketing settlement date, the Upper DECS, or a portion thereof, will no
longer constitute Tier 1 capital of Citigroup or any bank holding company of
which Citigroup is a subsidiary for purposes of the capital adequacy guidelines
or policies of the Federal Reserve; provided,
however,
that the
distribution of the junior subordinated debt securities in connection with
the
liquidation of a trust shall not in and of itself constitute a regulatory
capital event unless such liquidation shall have occurred in connection with
a
tax event or an investment company event.
This
document refers to a tax event, an investment company event or a regulatory
capital event as a “special event.” Provided that Citigroup obtains any required
regulatory approval, if a special event occurs and continues with respect to
any
trust, Citigroup may, upon not less than 30 nor more than 60 days’ notice,
redeem the junior subordinated debt securities, in whole or in part, for cash
within 90 days following the occurrence of such Special Event. Following such
redemption, trust securities with an aggregate liquidation amount equal to
the
aggregate principal amount of the junior subordinated debt securities so
redeemed shall be redeemed by the relevant trust at the redemption price on
a
ratable basis. If, however, at the time there is available to Citigroup or
the
relevant trust the opportunity to eliminate, within such 90-day period, the
special event by taking some ministerial action, such as filing a form or making
an election or pursuing some other similar reasonable measure that will have
no
adverse effect on the relevant trust, Citigroup or the holders of the Upper
DECS
and the capital securities, then Citigroup or the relevant trust will pursue
such measure instead of redemption. The redemption price per $1,000 liquidation
amount of capital securities shall be (i) in the case of a redemption prior
to the earlier of the remarketing settlement date of a successful remarketing
and the applicable stock purchase date, an amount equal to the amount necessary
to purchase (x) $1,000 principal amount of the outstanding zero coupon treasury
security that has the latest maturity date occurring prior to the applicable
stock purchase date and (y) a fractional interest in a portfolio of zero coupon
treasury securities (1.5800% in the case of a redemption of the series A capital
securities, 1.61375% in the case of the series B capital securities, 1.67500%
in
the case of the series C capital securities and 1.73375% in the case of the
series D capital securities) maturing on or prior to each distribution date
occurring after the redemption date and on or prior to the applicable stock
purchase date and (ii) in the case of a redemption after the earlier of the
remarketing settlement date of a successful remarketing and the applicable
stock
purchase date, $1,000, in each case plus accrued and unpaid distributions
through the redemption date. In the case of a redemption prior to the applicable
stock purchase date, in the case of capital securities held as part of Normal
DECS, such amount shall be applied by the stock purchase contract agent to
purchase the relevant zero coupon treasury securities. The $1,000 principal
amount of the zero coupon treasury securities will be substituted for the
capital securities under the pledge to secure your obligation to purchase our
common stock on the applicable stock purchase date, and the stock purchase
contract agent will hold the additional portfolio of zero coupon treasury
securities and pay, on each distribution date with respect to the Normal DECS,
an amount that equals the distribution that would have been made on the relevant
capital securities forming a part of such Normal DECS had they not been
redeemed. Holders of separate capital securities will receive the redemption
price in cash on the redemption date.
50
Remarketing
The
remarketing agent will attempt to remarket your capital securities of each
series underlying Normal DECS in remarketings, unless you elect not to
participate in such remarketings. If you hold the capital securities separately
and not as part of Upper DECS, you may elect to participate in a remarketing
as
described below under “— Optional Remarketing of the Capital Securities Not
Included in Normal DECS.”
The
“remarketing period” for any series of capital securities will be the ten
business day period beginning 12 business days before the applicable remarketing
settlement date for that series of capital securities. If the remarketing is
successful, settlement will occur on the applicable remarketing settlement
date
for that series of capital securities.
The
remarketing agent will use its commercially reasonable efforts to obtain the
remarketing value for the capital securities to be remarketed described under
“Description
of the Stock Purchase Contracts—
Remarketing.”
To
obtain the remarketing value, the remarketing agent may reset the rate on the
capital securities as described below. If the remarketing is successful, the
reset rate will apply to all outstanding capital securities of the series,
whether or not you participated in the remarketing, and will become effective
on
the applicable remarketing settlement date. The interest rate on the series
of
junior subordinated debt securities underlying such series of capital securities
automatically will be reset to equal the distribution rate on such capital
securities as of and when the distribution rate on such capital securities
is
reset. Following a successful remarketing of a series of capital securities,
distributions will be made semi-annually at the reset rate. The reset rate
on a
series of capital securities will be the rate such that the proceeds from the
remarketing of such series of capital securities, net of any remarketing fee,
will be at least the remarketing value; provided,
however,
that in
connection with the first four remarketings of any series of capital securities,
the reset rate may not exceed the reset cap. For this purpose, the “reset cap”
is the prevailing market yield per
annum,
as
determined by the remarketing agent, of the benchmark U.S. treasury security
having a remaining maturity that most closely corresponds to the period until
the maturity date of the applicable junior subordinated debt securities or,
if
earlier, the earliest date on which we have the option to redeem such junior
subordinated debt securities, plus 350 basis points.
51
If
there
is a fifth and final potential remarketing of a series of capital securities,
the reset rate will not be subject to the reset cap.
The
stock
purchase contract agent will give holders of Upper DECS, and each property
trustee will give holders of separate capital securities of the relevant series,
notice of remarketing at least 21 business days prior to the first day of any
remarketing period. Such notice will set forth:
(1) the
distribution dates and record dates for distributions on the capital securities
of the series to be remarketed that will apply after the applicable remarketing
settlement date;
(2) the
stated maturity of the series of junior subordinated debt securities underlying
the capital securities of the series to be remarketed and, if applicable, the
date on and after which the relevant trust will have the right to redeem such
capital securities and the redemption price or the manner in which it will
be
determined;
(3) whether
or not the series of junior subordinated debt securities underlying the capital
securities of the series to be remarketed, and our guarantee of such capital
securities, are subordinated to our senior debt;
(4) the
procedures you must follow if you hold the capital securities of the series
to
be remarketed as a component of Upper DECS to elect not to participate in the
remarketing and the date by which such election must be made as described under
“Description
of the Stock Purchase Contracts—
Notice
to
Settle with Treasury Securities”;
(5) the
procedures you must follow if you hold the capital securities of the series
to
be remarketed separately to elect to participate in the remarketing as described
below under “— Optional Remarketing of the Capital Securities not Included in
Normal DECS”; and
(6) only
in
the case of the fifth and final remarketing of a series of capital securities,
the procedures you must follow in the event of a final failed remarketing if
you
hold the capital securities of the series to be remarketed separately to
exercise your right to require the trust to purchase such capital
securities.
The
remarketing agent will deduct its fee from the proceeds of the remarketing
(which, net of any such fee, must be at least 100% of the remarketing
value) and apply the remaining proceeds to purchase the interest-bearing
Citibank, N.A. deposit.
If
the
remarketing agent cannot remarket a series of capital securities such that
the
proceeds, net of any remarketing fee, are at least 100% of the remarketing
value, then:
·
the
distribution rate on that series of capital securities will not be
reset;
·
that
series of capital securities will continue to bear quarterly distributions
at an initial annual rate of 6.320% for the series A capital
securities, an initial annual rate of 6.455% for the series B capital
securities, an initial annual rate of 6.700% for the series C capital
securities and an initial annual rate of 6.935% for the series D
capital securities; and
52
·
the
remarketing agent will attempt to establish a reset rate meeting
the
requirements described above and remarket that series of capital
securities on the next applicable remarketing settlement
date.
On
any
day other than the last day of a remarketing period, we will have the right,
in
our absolute discretion and without prior notice to the holders of the Upper
DECS, to postpone the remarketing until the following business day. Any
remarketing will be subject to the conditions and procedures described above,
and will settle (if successful) on the applicable remarketing settlement
date.
If
the
remarketing agent is unable to remarket a series of capital securities for
settlement on or before the settlement date for the fifth and final remarketing
of a series of capital securities, a “final failed remarketing” will be deemed
to have occurred with respect to such series. In the event of a final failed
remarketing:
·
the
distribution rate on that series of capital securities will not be
reset.
In the event of a final failed remarketing of a series of capital
securities, we may shorten the stated maturity of the series of junior
subordinated debt securities corresponding to that series of capital
securities and, accordingly, the mandatory redemption date of that
series
of capital securities.
·
if
you hold those capital securities as a component of Normal DECS,
we will
exercise our rights as a secured party and, subject to applicable
law,
retain those capital securities pledged as collateral under the pledge
agreement or sell them in one or more private sales and apply the
liquidation amount or proceeds from the sale of the capital securities
against your obligations under the stock purchase contracts. In either
case, your obligations under the stock purchase contracts would be
satisfied in full. We will issue a junior subordinated note to the
stock
purchase contract agent for delivery to you, payable on September 15,2013 or, if we are deferring interest on the corresponding series
of
junior subordinated debt securities, on the date that is five years
after
commencement of the deferral period (whichever is later), and bearing
interest at the annual rate of 6.320% for the series A capital
securities, the annual rate of 6.455% for the series B capital
securities, the annual rate of 6.700% for the series C capital
securities and the annual rate of 6.935% for the series D capital
securities, in each case in an amount equal to any accrued and unpaid
distributions (and accrued and unpaid interest thereon) on those
capital
securities as of the applicable stock purchase
date.
·
if
you hold Stripped DECS, we will apply the principal amount at maturity
of
your treasury securities pledged as collateral under the pledge agreement
and apply them against your obligation to us under the stock purchase
contract on the applicable stock purchase date. In either case, your
obligations under the stock purchase contracts with respect to the
applicable stock purchase date would be satisfied in
full.
·
if
you hold capital securities that are not a part of Normal DECS and
you
elected to participate in the remarketing, your capital securities
will be
returned to you, and you will have the right, at your option, to
require
the trust to purchase all or a portion of those capital securities
in
exchange for the liquidation amount of $1,000 per capital security
in
cash, plus a junior subordinated note, payable on September 15,2013or,
if we are deferring interest on the corresponding series of junior
subordinated debt securities, on the date that is five years after
commencement of the deferral period (whichever is later) and bearing
interest at the annual rate of 6.320% for the series A capital
securities, the annual rate of 6.455% for the series B capital
securities, the annual rate of 6.700% for the series C capital
securities and the annual rate of 6.935% for the series D capital
securities, in each case in an amount equal to any distributions
that are
accrued and unpaid (and accrued and unpaid interest thereon) as of
the
applicable stock purchase date.
53
We
will
cause a notice of any unsuccessful remarketings and of any failed remarketings
to be published in a press release and on Bloomberg Business News.
We
will
appoint a nationally recognized investment banking firm as remarketing agent
and
enter into a remarketing agreement with such firm at least 30 calendar days
prior to the commencement of any remarketing period. We will covenant in the
stock purchase contract agreement to use our commercially reasonable efforts
to
effect the remarketing of each series of capital securities as described in
this
document. If in the judgment of our counsel or counsel to the remarketing agent
a registration statement is required to effect the remarketing of a series
of
capital securities, we will use our commercially reasonable efforts to ensure
that a registration statement covering the full liquidation amount of the
capital securities to be remarketed will be effective in a form that will enable
the remarketing agent to rely on it in connection with the remarketing process
or we will effect such remarketing pursuant to Rule 144A under the Securities
Act or any other available exemption from applicable registration requirements
of the Securities Act.
Optional
Remarketing of the Capital Securities Not Included in Normal
DECS
Under
the
remarketing agreement, on or prior to the business day immediately preceding
the
first day of any remarketing period, holders of the capital securities of the
series being remarketed that are not held as part of Normal DECS may elect
to have those capital securities included in such remarketing and remarketed
in
the same manner and at the same price as the capital securities of that series
that are held as part of Normal DECS by delivering those capital securities
along with a notice to the collateral agent. The collateral agent will hold
those capital securities in an account separate from the collateral account
in
which the securities pledged to secure the holders’ obligations under the stock
purchase contracts will be held. Holders of the capital securities electing
to
have those capital securities remarketed will also have the right to withdraw
that election on or prior to the business day immediately preceding the first
day of any remarketing period.
If
the
remarketing is successful, after deducting any applicable remarketing fee,
the
remarketing agent will remit to the collateral agent the remaining portion
of
the proceeds for payment to such participating holders.
If
the
remarketing agent cannot remarket that series of capital securities during
that
remarketing period, the remarketing agent will promptly return those capital
securities to the collateral agent for release to the holders.
Redemption
at Our Option
We
may
elect at any time but on one occasion only with respect to each series of junior
subordinated debt securities, in our sole discretion, that such series of junior
subordinated debt securities, and therefore the corresponding capital
securities, will be redeemable at our option, in whole or in part, on or after
a
specified date not earlier than the later of (i) March 15, 2013for
the
series A preferred securities, September 15, 2013for
the
series B capital securities, March 15, 2014for
the
series C capital securities or September 15, 2014for
the
series D capital securities or (ii) five years after commencement of any
deferral period then in effect. We may redeem some or all of the junior
subordinated debt securities of one series without redeeming any of the junior
subordinated debt securities of the other series. The redemption price of each
junior subordinated debt security will be the principal amount, plus accrued
and
unpaid interest, if any, to but excluding the redemption date plus, if we have
agreed, at the time of such election, to pay additional amounts upon redemption,
an amount equal to such additional amounts. We will give not less than 30 days’
nor more than 60 days’ notice of redemption by mail to holders of the junior
subordinated debt securities.
54
We
may
not redeem a series of junior subordinated debt securities in part if the
principal amount has been accelerated and such acceleration has not been
rescinded or unless all accrued and unpaid interest has been paid in full on
all
outstanding junior subordinated debt securities of that series for all interest
periods terminating on or prior to the redemption date.
In
the
event of a final failed remarketing, the capital securities provide that we
may
apply the liquidation amount of the capital securities pledged to us against
your obligations under the stock purchase contracts. This remedy has the effect
similar to an automatic redemption of the capital securities, but we do not
have
to give you prior notice or follow any of the other redemption
procedures.
Redemption
Procedures
You
will
receive at least 30 days’, but not more than 60 days’, written notice before any
redemption of the capital securities.
If
(1)
any trust gives an irrevocable notice of redemption of the relevant series
of
capital securities, and (2) we have paid to the relevant property trustee a
sufficient amount of cash in connection with the related redemption or maturity
of the corresponding series of junior subordinated debt securities, then, on
the
redemption date, such property trustee will pay the redemption amount in
immediately available funds to the holders of such capital securities.
Distributions to be paid on or before the redemption date for any capital
securities called for redemption will be payable to the holders on the record
dates for the related dates of distribution.
Once
notice of redemption is given and funds are irrevocably deposited, distributions
on the capital securities of that series to be redeemed will cease to accumulate
immediately prior to the close of business on the redemption date and all rights
of the holders of such capital securities called for redemption will cease,
except for the right to receive the redemption amount (but without interest
on
such redemption amount).
If
any
redemption date is not a business day, then the redemption amount will be
payable on the next business day (and without any interest or other payment
in
respect of any such delay). However, if payment on the next business day causes
payment of the redemption amount to be in the next calendar year, then payment
will be on the immediately preceding business day, in each case with the same
force and effect as if made on that payment date.
If
payment of the redemption amount for any junior subordinated debt securities
of
a series called for redemption is improperly withheld or refused and not paid
either by the relevant trust or by us under the applicable guarantee, then
interest on such junior subordinated debt securities will continue to accrue
and
distributions on the corresponding series of capital securities will continue
to
accumulate at the applicable rate then borne by such capital securities from
the
original redemption date scheduled to the actual date of payment. In this case,
the actual payment date will be considered the redemption date for purposes
of
calculating the redemption amount.
55
If
less
than all of the junior subordinated debt securities of a series, and therefore,
less than all of the capital securities of the corresponding series, are
redeemed, such capital securities will be redeemed pro
rata.
For
federal income tax purposes, unless otherwise prevented, we and the trusts
intend to treat such partial redemption, and in purchasing the Normal DECS
or
the capital securities, the holders agree to treat such partial redemption,
as
an in kind distribution of the junior subordinated debt securities to the
holders of the capital securities in redemption of the capital securities chosen
to be redeemed by the applicable trustee immediately followed by a cash
redemption by us of the junior subordinated debt securities held by such
holders.
Enforcement
of Certain Rights by Holders of Capital Securities
If
an
event of default occurs, and is continuing, under the declaration of any of
the
trusts, the holders of the capital securities would typically rely on the
property trustee to enforce its rights as a holder of the related junior
subordinated debt securities against us. Additionally, those who together hold
a
majority of the liquidation amount of the capital securities will have the
right
to:
·
direct
the time, method and place of conducting any proceeding for any remedy
available to the property trustee;
or
·
direct
the exercise of any trust or power that the property trustee holds
under
the declaration of trust, including the right to direct the property
trustee to exercise the remedies available to it as a holder of our
junior
subordinated debt securities.
If
the
property trustee fails to enforce its rights under the applicable series of
junior subordinated debt securities, to the fullest extent permitted by law,
a
holder of capital securities of such trust may institute a legal proceeding
directly against us to enforce the property trustee’s rights under the
applicable series of junior subordinated debt securities without first
instituting any legal proceeding against the property trustee or any other
person or entity.
Notwithstanding
the foregoing, if an event of default occurs and the event is attributable
to
our failure to pay interest or principal on the junior subordinated debt
securities when due, including any payment on redemption, and this debt payment
failure is continuing, a holder of capital securities may directly institute
a
proceeding for the enforcement of this payment. Such a proceeding will be
limited, however, to enforcing the payment of this principal or interest only
up
to the value of the aggregate liquidation amount of the holder’s capital
securities as determined after the due date specified in the applicable series
of junior subordinated debt securities.
56
DESCRIPTION
OF THE JUNIOR SUBORDINATED DEBT SECURITIES
This
summary contains a description of the material terms of each series of junior
subordinated debt securities, in which the relevant trust will invest the
proceeds from the issuance and sale of corresponding series of capital
securities, but is not necessarily complete.
Each
series of junior subordinated debt securities will be issued pursuant to the
indenture, dated as of ●, between us and ● (the “subordinated debt trustee”), as
indenture trustee, and a related supplemental indenture for such series, to
be
dated the issue date of such series, between us and the subordinated debt
trustee. We refer to the indenture, as supplemented for each series, as a
“junior indenture” and to the subordinated debt trustee under each junior
indenture or its successor, as indenture trustee, as the “trustee.” Each junior
indenture is qualified as an indenture under the Trust Indenture Act. The
subordinated debt trustee will act as the indenture trustee under each junior
indenture for the purposes of compliance with the provisions of the Trust
Indenture Act. The terms of the junior indenture will be those provided in
the
junior indenture and those made part of the junior indenture by the Trust
Indenture Act.
The
statements and descriptions in this document regarding provisions of the junior
indentures and junior debt securities are summaries thereof, do not purport
to
be complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the junior indentures and the junior debt
securities, including the definitions therein of certain terms.
General
Each
series of junior subordinated debt securities will be unsecured and will rank
equal in right of payment with the other series and with all of our other
junior subordinated debt securities, other than those underlying our Enhanced
Trust Preferred Securities, and, together with such other series and such
other junior subordinated debt securities, will be subordinated and junior
in
right of payment to all of our existing and future secured and senior debt.
Each
series of junior subordinated debt securities will be limited in aggregate
principal amount to $1,875 million.
We
will
not be able to redeem the junior subordinated debt securities except as
described above under “Description of the Capital Securities — Redemption at Our
Option.”
We
will
have the right at any time to dissolve any or all trusts and cause the relevant
series of junior subordinated debt securities to be distributed to the holders
of the corresponding series of capital securities. Upon dissolution of a trust,
we may specify that the relevant series of junior subordinated debt securities
will no longer be subordinate to our senior debt. If junior subordinated debt
securities of a series are distributed to holders of the corresponding
series of capital securities in liquidation of the holders’ interests in the
relevant trust, those junior subordinated debt securities initially will be
represented by one or more global security certificates. Unless such trust
is
dissolved and such junior subordinated debt securities are distributed to
holders of such capital securities, the relevant property trustee will continue
to hold legal title to such junior subordinated debt securities for the benefit
of the holders of such capital securities.
Each
series of junior subordinated debt securities will have terms substantially
similar to the terms of the corresponding series of capital securities, except
that the junior subordinated debt securities will not be remarketed at any
time
(unless the junior subordinated debt securities are distributed directly to
holders of the capital securities). Instead, upon a remarketing, as described
under “Description of the Stock Purchase Contracts — Remarketing,” the coupon on
the related junior subordinated debt securities will be correspondingly reset
to
match the corresponding distribution rate on the series of capital securities
that have been remarketed.
57
Interest
Rate and Maturity
The
interest payment provisions for each series of junior subordinated debt
securities correspond to the distribution provisions of the corresponding series
of capital securities described under “Description of the Capital Securities —
Distributions.”
The
series A junior subordinated debt securities will mature on March 15,
2041, the series B junior subordinated debt securities will mature
September 15, 2041, the series C junior subordinated debt securities
will mature March 15, 2042 and the series D junior subordinated debt
securities will mature September 15, 2042. However, we may elect at any
time but on one occasion only with respect to each series of junior subordinated
debt securities, in our sole discretion, to change the stated maturity of such
series of junior subordinated debt securities to any date:
·
not
earlier than March 15, 2013and
not later than March 15, 2041for
the series A junior subordinated debt securities,
·
not
earlier than September 15, 2013and
not later than September 15, 2041for
the series B junior subordinated debt securities,
·
not
earlier than March 15, 2014and
not later than March 15, 2042for
the series C junior subordinated debt securities, and
·
not
earlier than September 15, 2014and
not later than September 15, 2042for
the series D junior subordinated debt
securities;
and
to
specify a date:
·
not
earlier than March 15, 2013for
the series A junior subordinated debt securities,
·
not
earlier than September 15, 2013for
the series B junior subordinated debt securities,
·
not
earlier than March 15, 2014for
the series C junior subordinated debt securities or
·
not
earlier than September 15, 2014for
the series D junior subordinated debt securities,
on
and
after which such series of junior subordinated debt securities will be
redeemable at our option; provided,
however,
that if
we are deferring interest on such series of junior subordinated debt securities
at the time of such remarketing, we may not elect a maturity date or specify
an
optional redemption date that is earlier than five years after commencement
of
the deferral period.
The
series A junior subordinated debt securities will initially bear interest
at the rate of 6.320% per year, the series B junior subordinated debt
securities will initially bear interest at the rate of 6.455% per year, the
series C junior subordinated debt securities will initially bear interest
at the rate of 6.700% per year and the series D junior subordinated debt
securities will initially bear interest at the rate of 6.935% per year, in
each
case, payable quarterly in arrears on March 15, June 15, September 15
and December 15 of each year, commencing March 15, 2008, and ending on the
first remarketing settlement date, in the case of the series A junior
subordinated debt securities, the second remarketing settlement date, in the
case of the series B junior subordinated debt securities, the third
remarketing settlement date, in the case of the series C junior
subordinated debt securities and the fourth remarketing settlement date, in
the
case of the series D junior subordinated debt securities, subject to the
deferral provisions described below. From and after the applicable remarketing
settlement date, the principal amount of the series of subordinated debt
securities that corresponds to the relevant series of capital securities
will bear cash interest at a rate equal to the distribution rate on the
corresponding series of capital securities, payable semi-annually on the
distribution date of such capital securities.
58
The
amount of interest payable for any period will be computed on the basis of
a
360-day year consisting of twelve 30-day months. In the case that any date
on
which interest is payable on the junior subordinated debt securities is not
a
business day, then payment of the interest payable on that date will be made
on
the next succeeding business day, and no interest or other payment shall be
paid
in respect of the delay, but if that business day is in the next succeeding
calendar year, then that payment shall be made on the immediately preceding
business day, with the same force and effect as if made on that
date.
Option
to Defer Interest Payment
We
will
have the right under each of the junior indentures to defer the payment of
interest on the applicable junior subordinated debt securities issued thereunder
at any time or from time to time. Each junior indenture provides that while
a
deferral period is in effect with respect to the series of junior subordinated
debt securities that it governs we may not, among other things, make interest
payments on the other series of junior subordinated debt securities. As a
result, we will not defer interest payments on one series of junior subordinated
debt securities without also deferring interest payments on the other series.
We
may not defer interest payments on any series of junior subordinated debt
securities for any period of time that exceeds five years with respect to any
deferral period or that extends beyond the applicable maturity date. Any
deferral period must end on an interest payment date. Deferred payments of
interest to which you are entitled will accrue additional interest, compounded
quarterly prior to the series A stock purchase date in the case of the
series A capital securities, the series B stock purchase date in the case
of the series B capital securities, the series C stock purchase date in the
case of the series C capital securities or the series D stock purchase date
in the case of the series D capital securities, and semi-annually
thereafter, from the relevant payment date for payments of interest during
any
deferral period, at the rate borne by the applicable series of junior
subordinated debt securities at such time, to the extent permitted by applicable
law. At the end of a deferral period, we must pay all interest then accrued
and
unpaid, together with interest on the accrued and unpaid interest, to the extent
permitted by applicable law. During any deferral period, interest will continue
to accrue and holders of junior subordinated debt securities or of capital
securities of the corresponding series that are outstanding will be required
to
accrue such deferred interest income on a constant-yield basis (in the form
of
original issue discount) for United States federal income tax purposes prior
to
the receipt of cash attributable to such income, regardless of the method of
accounting used by the holders.
Prior
to
the termination of any deferral period, we may extend such deferral period,
provided that such extension does not:
·
cause
such extended deferral period to exceed the maximum deferral
period;
·
end
on a date other than an interest payment date;
or
·
extend
beyond the applicable maturity date of the relevant series of junior
subordinated debt securities.
59
Upon
the
termination of any deferral period, or any extension of the related deferral
period, and the payment of all amounts then due, we may begin a new deferral
period, subject to the limitations described above. No interest shall be due
and
payable during a deferral period except at the end thereof. We must give the
trustee notice of our election to begin or extend a deferral period with respect
to a series of junior subordinated debt securities at least five business days
prior to the earlier of:
·
the
date distributions on the related capital securities would have been
payable except for the election to begin or extend the deferral period;
or
·
the
date the relevant trust is required to give notice to any stock exchange
or any other applicable self-regulatory organization or to holders
of the
corresponding capital securities of the record date or the date
distributions are payable,
and
in
any event not less than five business days prior to such record date; provided
that in no event shall such notice of our election be sent more than 15 business
days prior to the date on which payment of all amounts then due is scheduled
to
occur.
The
relevant trustee shall give notice of our election to begin or extend a deferral
period with respect to a series of junior subordinated debt securities to the
holders of the corresponding series of capital securities. Subject to the
foregoing limitations, there is no limitation on the number of times that we
may
begin or extend a deferral period.
As
described under “— Restrictions on Certain Payments, Including on Deferral of
Interest,” during any such deferral period we will be restricted from making
certain payments, including declaring or paying any dividends or making any
distributions on, or redeeming, purchasing, acquiring or making a liquidation
payment with respect to, shares of our capital stock.
Additional
Interest
If
at any
time any trust is required to pay any taxes, duties, assessments or governmental
charges of whatever nature, other than withholding taxes, imposed by the United
States or any other taxing authority, then Citigroup will be required to pay
additional interest on the relevant junior subordinated debt securities. The
amount of any additional interest will be an amount sufficient so that the
net
amounts received and retained by the relevant trust after paying any such taxes,
duties, assessments or other governmental charges will be not less than the
amounts such trust would have received had no such taxes, duties, assessments
or
other governmental charges been imposed. This means that each trust will be
in
the same position it would have been if it did not have to pay such taxes,
duties, assessments or other charges.
Restrictions
on Certain Payments, Including on Deferral of Interest
If:
·
there
shall have occurred and be continuing a default with respect to a
series
of junior subordinated debt
securities;
·
a
series of junior subordinated debt securities is held by the relevant
trust and we shall be in default relating to our payment of any
obligations under the relevant guarantee;
or
·
we
shall have given notice of our election to defer payments of interest
on a
series of junior subordinated debt securities and such period, or
any
extension of such period, shall be
continuing;
60
then:
·
Citigroup
Inc. and its subsidiaries shall not declare or pay any dividend on,
make
any distributions relating to, or redeem, purchase, acquire or make
a
liquidation payment relating to, any of its capital stock or make
any
guarantee payment with respect thereto other than
·
purchases,
redemptions or other acquisitions of shares of capital stock of Citigroup
Inc. in connection with any employment contract, benefit plan or
other
similar arrangement with or for the benefit of employees, officers,
directors or consultants;
·
purchases
of shares of common stock of Citigroup Inc. pursuant to a contractually
binding requirement to buy stock existing prior to the commencement
of the
extension period, including under a contractually binding stock repurchase
plan;
·
as
a result of an exchange or conversion of any class or series of Citigroup
Inc.’s capital stock for any other class or series of Citigroup Inc.’s
capital stock;
·
the
purchase of fractional interests in shares of Citigroup Inc.’s capital
stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; or
·
purchase
of Citigroup’s capital stock in connection with the distribution thereof;
and
·
Citigroup
Inc. and its subsidiaries shall not make any payment of interest,
principal or premium on, or repay, purchase or redeem, any debt securities
or guarantees issued by Citigroup Inc. that rank equally with or
junior to
the junior subordinated debt securities, other than
·
any
payment of current or deferred interest on securities that rank equally
with the junior subordinated debt securities that is made pro rata
to the
amounts due on such securities (including the junior subordinated
debt
securities), and
·
any
payments that, if not made, would cause us to violate the terms of
the
instrument governing such debt securities or
guarantees.
These
restrictions, however, will not apply to any stock dividends paid by Citigroup
Inc. where the dividend stock is the same stock as that on which the dividend
is
being paid.
Subordination
Our
obligations to pay interest on, premium (if any), and principal of the junior
subordinated debt securities are subordinate and junior in right of payment
to
all our existing and future “senior indebtedness.” In this document, the term
“senior indebtedness” means any obligation of Citigroup to its creditors,
whether now outstanding or subsequently incurred, including the
following:
·
the
principal, premium, if any, and interest in respect of (a) indebtedness
for money borrowed and (b) indebtedness evidenced by securities,
notes,
debentures, bonds or other similar instruments issued by Citigroup
Inc.
including all indebtedness (whether now or hereafter outstanding)
issued
under the senior debt indenture, dated as of March 15, 1987, between
Citigroup Inc. and The Bank of New York, as trustee, in case as the
same
may be amended, modified, or supplemented from time to time, and
the
subordinated debt indenture, dated as of April 12, 2001, between
Citigroup
Inc. and J.P. Morgan Trust Company, National Association, as trustee,
in
case as the same may be amended, modified or supplemented from time
to
time;
61
·
all
capital lease obligations of Citigroup
Inc.;
·
all
obligations of Citigroup Inc. issued or assumed as the deferred purchase
price of property, all conditional sale obligations of Citigroup
Inc. and
all obligations of Citigroup Inc. under any conditional sale or title
retention agreement, but excluding trade accounts payable arising
in the
ordinary course of business;
·
all
obligations, contingent or otherwise, of Citigroup Inc. in respect
of any
letters of credit, bankers acceptance, security purchase facilities
or
similar credit transactions;
·
all
obligations of Citigroup Inc. in respect of interest rate swap, cap
or
other agreements, interest rate future or option contracts, currency
swap
agreements, currency future or option contracts and other similar
agreements;
·
all
obligations of the type referred to above of other persons for the
payment
of which Citigroup Inc. is responsible or liable as obligor, guarantor
or
otherwise; and
·
all
obligations of the type referred to above of other persons secured
by any
lien on any property or asset of Citigroup Inc., whether or not such
obligation is assumed by Citigroup;
except
that senior indebtedness will not include:
·
any
other indebtedness (whether now or hereafter outstanding) issued
to a
Citigroup Trust under this
indenture;
·
any
indebtedness issued to a Citigroup Trust under the indenture, dated
as of
October 7, 1996, between Citigroup Inc. and JPMorgan Chase Bank,
as
trustee, as the same has been or may be amended, modified or supplemented
from time to time (the “prior junior subordinated debt
indenture”);
·
any
indebtedness issued to a Citigroup Trust under the indenture, dated
as of
June 30, 2006, between Citigroup Inc. and JPMorgan Chase Bank, National
Association, as trustee, as the same has been or may be amended,
modified
or supplemented from time to time (the “First ETruPS
junior subordinated debt
indenture”);
·
any
indebtedness (whether now or hereafter outstanding) issued to a Citigroup
Trust under the indenture, dated as of June 28, 2007, between Citigroup
Inc. and The Bank of New York, as trustee, as the same has been or
may be
amended, modified or supplemented from time to time (together with
the
First ETruPS
junior subordinated debt indenture, the “ETruPS
junior subordinated debt
indentures”);
·
any
guarantee entered into by Citigroup Inc. in respect of any preferred
securities, capital securities or preference stock of a Citigroup
Trust to
which Citigroup Inc. issued any indebtedness under this indenture,
the
prior junior subordinated debt indenture or the ETruPS
junior subordinated debt indentures;
62
·
any
indebtedness or any guarantee that is by its terms subordinated to,
or
ranks equally with, the junior subordinated debt securities and the
issuance of which does not at the time of issuance prevent the junior
subordinated debt securities from qualifying for Tier 1 capital treatment
(irrespective of any limits on the amount of Citigroup’s Tier 1 capital)
under the applicable capital adequacy guidelines, regulations, policies,
published interpretations, or the concurrence or approval of the
Federal
Reserve; and
·
trade
accounts payable and other accrued liabilities arising in the ordinary
course of business.
“Citigroup
Trust” means each of Citigroup Capital II, Citigroup Capital III, Citigroup
Capital VII, Citigroup Capital VIII, Citigroup Capital IX, Citigroup Capital
X,
Citigroup Capital XI, Citigroup Capital XII, Citigroup Capital XIII, Citigroup
Capital XIV, Citigroup Capital XV, Citigroup Capital XVI, Citigroup Capital
XVII, Citigroup Capital XVIII, Citigroup Capital XIX and Citigroup Capital
XX or
any other similar trust created for the purpose of issuing preferred securities
or enhanced trust preferred securities (ETruPS)
in
connection with the issuances of junior subordinated debt securities under
the
indenture, the prior junior subordinated debt indenture or the ETruPS
junior
subordinated debt indentures.
Such
Senior Indebtedness shall continue to be Senior Indebtedness and be entitled
to
the benefits of these subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
The
junior subordinated debt securities will rank senior to all of Citigroup’s
equity securities, including preferred stock, all of Citigroup’s indebtedness
(whether now or hereafter outstanding) issued under the ETruPS
junior
subordinated debt indentures and any indebtedness that is by its terms
subordinated to, or ranks equally with, the indebtedness under the ETruPS
junior
subordinated debt indentures.
The
indenture does not limit the aggregate amount of Senior Indebtedness that may
be
issued by Citigroup. The junior subordinated debt securities are also
subordinate and junior in liquidation, and in the priority of periodic payments
of interest or premium (if any), to any non-deferrable debt of Citigroup Inc.
As
of September 30, 2007, the outstanding secured and senior debt of Citigroup
Inc.
with respect to money borrowed was approximately $● million, excluding all of
the liabilities of our subsidiaries. All liabilities of our subsidiaries
including trade accounts payable and accrued liabilities arising in the ordinary
course of business are structurally senior to our junior subordinated debt
securities.
If
we
default in the payment of any principal or premium (if any) or interest on
any
senior debt when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise, then, unless and until
such
default is cured or waived or ceases to exist, Citigroup Inc. will make no
direct or indirect payment (in cash, property, securities, by set-off or
otherwise) in respect of the principal of, or interest on, the junior
subordinated debt securities or in respect of any redemption, retirement or
purchase of any of the junior subordinated debt securities.
In
the
event of the acceleration of the maturity of any junior subordinated debt
securities, the holders of all senior debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due on the senior debt before the holders of the junior subordinated debt
securities will be entitled to receive any payment of principal of, or interest
on, the junior subordinated debt securities.
63
If
any of
the following events occurs, we will pay in full all principal of (or premium,
if any), or interest on any senior debt before it makes any payment or
distribution under the junior subordinated debt securities, whether in cash,
securities or other property, to any holder of junior subordinated debt
securities:
·
any
dissolution or winding-up or liquidation or reorganization of Citigroup,
whether voluntary or involuntary or in bankruptcy, insolvency or
receivership; or
·
any
general assignment by Citigroup Inc. for the benefit of
creditors.
In
such
event, any payment or distribution under the junior subordinated debt
securities, whether in cash, securities or other property, which would otherwise
(but for the subordination provisions) be payable or deliverable in respect
of
the junior subordinated debt securities, will be paid or delivered directly
to
the holders of senior debt in accordance with the priorities then existing
among
such holders until all senior debt has been paid in full. If any payment or
distribution under a series of junior subordinated debt securities is received
by the trustee in contravention of any of the terms of the applicable junior
indenture and before all the senior debt has been paid in full, such payment
or
distribution or security will be received in trust for the benefit of, and
paid
over or delivered and transferred to, the holders of the senior debt at the
time
outstanding in accordance with the priorities then existing among such holders
for application to the payment of all senior debt remaining unpaid to the extent
necessary to pay all such senior debt in full.
We
may
elect at any time that we have not deferred interest on the junior subordinated
debt securities that our obligations under any or all series of junior
subordinated debt securities and under our guarantee of the corresponding series
of capital securities shall become senior obligations instead of subordinated
obligations. We will not be entitled to defer distributions on any junior
subordinated securities as to which we have made such election.
Events
of Default, Waiver and Notice
An
“event
of default,” when used in a junior indenture with respect to the applicable
series of junior subordinated debt securities, means any of the
following:
·
failure
to pay in full interest accrued on any junior subordinated debt security
of such series upon the conclusion of a period consisting of 20
consecutive quarters commencing with the earliest quarter for which
interest (including interest accrued on deferred payments) has not
been
paid in full and continuance of such failure to pay for a period
of 30
days; or
·
specified
events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator or trustee of Citigroup Inc.
If
an
event of default under a junior indenture occurs and continues with respect
to a
series of junior subordinated debt securities, the trustee or the holders of
at
least 25% in aggregate principal amount of the outstanding junior subordinated
debt securities of that series may declare the entire principal of and all
accrued but unpaid interest on the outstanding junior subordinated debt
securities of that series to be due and payable immediately. If the trustee
or
the holders of the junior subordinated debt securities of that series do not
make such declaration and that series of junior subordinated debt securities
is
held by the relevant trust, the relevant property trustee or the holders of
at
least 25% in aggregate liquidation amount of the corresponding series of capital
securities shall have such right.
64
If
such a
declaration occurs, the holders of a majority of the aggregate principal amount
of the outstanding junior subordinated debt securities of that series can,
subject to certain conditions (including, if that series of junior subordinated
debt securities is held by the relevant trust, the consent of the holders of
at
least a majority in aggregate liquidation amount of the corresponding series
of
capital securities), rescind the declaration. If the holders of junior
subordinated debt securities of such series do not so rescind such declaration
and such junior subordinated debt securities are held by a trust or trustee
of
such trust, the holders of at least a majority in aggregate liquidation amount
of the corresponding series of capital securities shall have such
right.
The
holders of a majority in aggregate principal amount of the outstanding junior
subordinated debt securities of a series may, on behalf of all holders of the
outstanding junior subordinated debt securities of such series, waive any past
default with respect to such series, except:
·
a
default in payment of principal or interest;
or
·
a
default under any provision of the applicable junior indenture which
itself cannot be modified or amended without the consent of the holder
of
each outstanding junior subordinated debt security of such
series.
If
junior
subordinated debt securities of a series as to which an event of default
has occurred and is continuing are held by the relevant trust, any such waiver
shall require a consent of the holders of at least a majority in aggregate
liquidation amount of the corresponding series of capital securities. If the
holders of the junior subordinated debt securities of such series do not waive
such default, the holders of a majority in aggregate liquidation amount of
the
corresponding series of capital securities shall have such right.
The
holders of a majority in principal amount of the affected junior subordinated
debt securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee under the
junior indenture.
We
are
required to file an officers’ certificate with the trustee each year that
states, to the knowledge of the certifying officer, whether or not any defaults
exist under the terms of any junior indenture.
If
junior
subordinated debt securities are held by the relevant trust, a holder of the
corresponding series of capital securities may institute a direct action if
we
fail to make interest or other payments on such junior subordinated debt
securities when due, taking into account any extension period. A direct action
may be brought without first:
·
directing
the relevant property trustee to enforce the terms of such junior
subordinated debt securities; or
·
suing
us to enforce the relevant property trustee’s rights under such junior
subordinated debt securities.
This
right of direct action cannot be amended in a manner that would impair the
rights of the holders of the corresponding series of capital securities
thereunder without the consent of all holders of the affected series of capital
securities.
Consolidation,
Merger and Sale of Assets
Each
junior indenture provides that we will not consolidate or merge with another
corporation or convey, transfer or lease our assets substantially as an entirety
unless:
65
·
the
successor is a corporation organized in the United States and expressly
assumes the due and punctual payment of the principal of, and premium,
if
any, and interest on all junior subordinated debt securities issued
thereunder and the performance of every other covenant of the indenture
on
the part of Citigroup; and
·
immediately
thereafter no default and no event which, after notice or lapse of
time,
or both, would become a default, shall have happened and be
continuing.
Upon
any
such consolidation, merger, conveyance or transfer, the successor corporation
shall succeed to and be substituted for Citigroup under the indenture.
Thereafter the predecessor corporation shall be relieved of all obligations
and
covenants under the junior indenture and the junior subordinated debt
securities.
Modification
and Waiver
We
and
the trustee may modify any junior indenture in a manner that affects the
interests or rights of the holders of junior debt securities with the consent
of
the holders of at least a majority in aggregate principal amount of the
outstanding junior debt securities of each affected series issued under the
junior indenture. No such modification may, without the consent of the holder
of
each security so affected:
·
change
the fixed maturity of any such
securities;
·
except
as expressly provided herein in connection with a successful remarketing,
reduce the rate of interest on such
securities;
·
reduce
the principal amount of such securities or the premium, if any, on
such
securities;
·
reduce
the amount of the principal of any securities issued originally at
a
discount;
·
change
the currency in which any such securities are payable;
·
modify
the subordination of the subordinated debt securities issued under
that
indenture in a manner adverse to the holders of the subordinated
debt
securities; or
·
impair
the right to sue for the enforcement of any such payment on or after
the
maturity of such securities.
In
addition, no such modification may:
·
reduce
the percentage of securities referred to above whose holders need
to
consent to the modification without the consent of such holders;
or
·
change,
without the written consent of the trustee, the rights, duties or
immunities of the trustee.
If
junior
subordinated debt securities are held by a trust or a trustee of a trust, a
supplemental indenture that affects the interests or rights of the holders
of
debt securities will not be effective until the holders of not less than a
majority in liquidation preference of the capital securities and common
securities of the applicable trust, collectively, have consented to the
supplemental indenture; provided, further, that if the consent of the holder
of
each outstanding junior subordinated debt security is required, the supplemental
indenture will not be effective until each holder of the capital securities
and
the common securities of the applicable trust has consented to the supplemental
indenture.
66
The
junior indentures permit the holders of at least a majority in aggregate
principal amount of the outstanding junior subordinated debt securities of
any
series issued under the junior indenture that is affected by the modification
or
amendment to waive our compliance with certain covenants contained in the junior
indentures.
Payment
and Paying Agents
If
junior
subordinated debt securities of a series are distributed to holders of the
corresponding series of capital securities in liquidation of the holders’
interests in the relevant trust, we will appoint a paying agent from whom
holders of such capital securities can receive payment of the principal,
interest or premium on the junior subordinated debt securities. Notwithstanding
the foregoing, at our option, payment of any interest may be made by check
mailed to the address of the person entitled thereto as such address appears
in
the security register.
All
moneys paid by us to a paying agent for the payment of the principal, interest
or premium on any debt security that remain unclaimed at the end of two years
after such principal, interest or premium has become due and payable will be
repaid to us upon request, and the holder of such debt security thereafter
may
look only to us for payment thereof.
Denominations
The
junior subordinated debt securities will be issued only in registered form,
without coupons, in denominations of $1,000 and integral multiples of $1,000
thereafter.
Governing
Law
The
junior indentures and debt securities will be governed by, and construed in
accordance with, the internal laws of the State of New York, without regard
to
its principles of conflicts of laws.
67
DESCRIPTION
OF THE GUARANTEES
This
summary contains a description of the material terms of the guarantees but
is
not necessarily complete.
We
will
execute and deliver a guarantee for the benefit of the holders of each of the
series of trust preferred securities. Each guarantee will be held by the
guarantee trustee for the benefit of holders of the trust preferred securities
to which it relates.
In
respect of each trust, the following payments on its capital securities, also
referred to as the “guarantee payments,” if not fully paid by such trust, will
be paid by us under the applicable guarantee, without duplication:
·
any
accumulated and unpaid distributions required to be paid on such
capital
securities, to the extent such trust has funds available to make
the
payment;
·
the
redemption price for any of such capital securities called for redemption,
to the extent such trust has funds available to make the payment;
and
·
upon
a voluntary or involuntary dissolution, winding-up or liquidation
of such
trust, other than in connection with a distribution of the relevant
series
of junior subordinated debt securities to the holders of such capital
securities, the lesser of:
(1)
the
aggregate of the liquidation amount and all accumulated and unpaid
distributions on such series of capital securities to the date of
payment,
to the extent such trust has funds available to make the payment;
and
(2)
the
amount of assets of such trust remaining available for distribution
to
holders of such capital securities upon liquidation of such
trust.
Our
obligation to make a guarantee payment may be satisfied by direct payment of
the
required amounts by us to the holders of the applicable series of capital
securities or by causing the relevant trust to pay the amounts to the
holders.
If
we do
not make a required payment on a series of junior subordinated debt securities,
the relevant trust will not have sufficient funds to make the related payment
on
the corresponding series of capital securities. The guarantee related to a
series of capital securities does not cover payments on such series of capital
securities when the relevant trust does not have sufficient funds to make these
payments. If we do not pay any amounts on a series of junior subordinated debt
securities when due, holders of the capital securities of the corresponding
series will have to rely on the enforcement by the relevant property trustee
of
such trustee’s rights as registered holder of such junior subordinated debt
securities, or proceed directly against us for payment of any amounts due on
such junior subordinated debt securities.
Our
obligations under the guarantee related to a series of capital securities are
unsecured and are subordinate to and junior in right of payment to all of our
existing and future secured and senior debt, and rank equal in right of payment
with the guarantee for the other series of capital securities and with all
other
similar guarantees issued by us.
Each
guarantee will be qualified as an indenture under the Trust Indenture Act.
●
will be the guarantee trustee under each guarantee for purposes of the Trust
Indenture Act. Each guarantee will constitute a guarantee of payment with
respect to the related trust preferred securities from the time of issuance
of
the trust preferred securities.
68
Effect
of Obligations under a Series of Junior Subordinated Debt Securities and the
Related Guarantee
As
provided in each trust agreement, the sole purpose of each trust is to issue
the
relevant trust securities evidencing undivided beneficial interests in the
assets of such trust, and to invest the proceeds from the issuance and sale
in
the relevant series of junior subordinated debt securities and engage in only
those activities that are necessary or incidental to the foregoing.
As
long
as payments of interest and other payments are made when due on a series of
junior subordinated debt securities, those payments will be sufficient to cover
distributions and payments due on the corresponding series of trust securities
because of the following factors:
·
the
aggregate principal amount of such junior subordinated debt securities
will be equal to the sum of the aggregate liquidation amount of such
trust
securities;
·
the
interest rate and the interest and other payment dates on such junior
subordinated debt securities will match the distribution rate and
distribution and other payment dates for such trust
securities;
·
we
shall pay, and the relevant trust shall not be obligated to pay,
directly
or indirectly, any costs, expenses, debts and obligations of such
trust,
other than with respect to such trust securities;
and
·
each
trust agreement further provides that the relevant trustee shall
not take
or cause or permit the relevant trust to, among other things, engage
in
any activity that is not consistent with the purposes of such
trust.
Distributions,
to the extent funds are available, and other payments due on each series of
capital securities, to the extent funds are available, are guaranteed by us
as
and to the extent described below. If we do not make interest payments on a
series of junior subordinated debt securities purchased by a trust, such trust
will not have sufficient funds to pay distributions on the corresponding series
of capital securities. The guarantee of such capital securities does not apply
to any payment of distributions unless and until such trust has sufficient
funds
for the payment of such distributions.
Notwithstanding
the above, if an event of default under a trust agreement has occurred and
is
continuing and that event is attributable to our failure to pay interest on
or
principal of the relevant series of junior subordinated debt securities on
the
date that interest or principal is otherwise payable, then a holder of capital
securities of the corresponding series may directly institute a proceeding
against us for payment. We, under the guarantee of the applicable series of
capital securities, acknowledge that the guarantee trustee shall enforce such
guarantee on behalf of the holders of the applicable series of capital
securities. If we fail to make payments under the guarantee of the applicable
series of capital securities, such guarantee provides a mechanism enabling
the
holders of the applicable series of capital securities to direct the guarantee
trustee to enforce its rights under such guarantee. Notwithstanding the above,
if we fail to make a payment under the guarantee of a series of capital
securities, any holder of the applicable series of capital securities may
institute a legal proceeding directly against us to enforce its rights under
such guarantee without first instituting a legal proceeding against the relevant
trust, the guarantee trustee, or any other person or entity.
69
The
guarantee of a series of capital securities, when taken together with our
obligations under the applicable junior indenture and the applicable trust’s
obligations under the relevant trust agreement, including the obligations to
pay
costs, expenses, debts and liabilities of such trust, other than with respect
to
its trust securities, has the effect of providing a full and unconditional
guarantee of all amounts due on the applicable series of capital
securities.
We
will
also agree separately, through guarantees of the common securities, to
irrevocably and unconditionally guarantee the obligations of the trusts with
respect to the common securities to the same extent as guarantees of the
preferred securities. However, upon an event of default under the applicable
junior indenture, holders of capital securities will have priority over holders
of common securities with respect to distributions and payments on liquidation,
redemption or otherwise.
Subordination
Our
obligation under each guarantee to make the guarantee payments will be an
unsecured obligation of Citigroup Inc. and will rank:
·
subordinate
and junior in right of payment to all of our other liabilities, including
the junior subordinated debt securities, except those obligations
or
liabilities ranking equal or subordinate to the guarantees by their
terms;
·
equally
with any other securities, liabilities or obligations that may have
equal
ranking by their terms; and
·
senior
to all of our common stock.
The
terms
of the capital securities provide that each holder of capital securities, by
accepting the capital securities, agrees to the subordination provisions and
other terms of the guarantee related to subordination.
Each
guarantee will constitute a guarantee of payment and not of collection. This
means that the holder of capital securities may institute a legal proceeding
directly against Citigroup Inc. to enforce its rights under the guarantee
without first instituting a legal proceeding against any other person or
entity.
Each
guarantee will be unsecured and, because Citigroup is principally a holding
company, will be effectively subordinated to all existing and future liabilities
of Citigroup’s subsidiaries. The guarantees do not limit the incurrence or
issuance of other secured or unsecured debt by Citigroup
Amendment
and Assignment
For
any
changes that materially and adversely affect the rights of holders of the
related capital securities, each guarantee may be amended only if there is
prior
approval of the holders of more than 50% in liquidation amount of the
outstanding capital securities issued by the applicable trust. All guarantees
and agreements contained in each guarantee will bind the successors, assigns,
receivers, trustees and representatives of ours and will inure to the benefit
of
the holders of the related capital securities of the applicable trust then
outstanding.
70
Termination
Each
guarantee will terminate and will have no further force and effect as to the
related capital securities upon:
·
distribution
of junior subordinated debt securities to the holders of all capital
securities of the applicable trust; or
·
full
payment of the amounts payable upon liquidation of the applicable
trust.
Each
guarantee will continue to be effective or will be reinstated, as the case
may
be, if at any time any holder of the related capital securities must restore
payment of any sums paid with respect to the capital securities or under the
guarantee.
Events
of Default
Each
guarantee provides that an event of default under a guarantee occurs upon our
failure to perform any of our obligations under the applicable guarantee. The
holders of a majority or more in liquidation amount of the capital securities
to
which any guarantee relates may direct the time, method and place of conducting
any proceeding for any remedy available to the guarantee trustee with respect
to
the guarantee or may direct the exercise of any trust or power conferred upon
the guarantee trustee in respect of the guarantee.
If
the
guarantee trustee fails to enforce the guarantee, any holder of the related
capital securities may institute a legal proceeding directly against us to
enforce the holder’s rights under such guarantee without first instituting a
legal proceeding against the trust, the guarantee trustee or any other person
or
entity.
Furthermore,
if we fail to make a guarantee payment, a holder of capital securities may
directly institute a proceeding against us for enforcement of the capital
securities guarantee for such payment.
The
holders of a majority or more in liquidation amount of capital securities of
any
series may, by vote, on behalf of the holders of all the capital securities
of
the series, waive any past event of default and its consequences.
Information
Concerning the Guarantee Trustee
Prior
to
an event of default with respect to any guarantee and after the curing or
waiving of all events of default with respect to the guarantee, the guarantee
trustee may perform only the duties that are specifically set forth in the
guarantee.
Once
a
guarantee event of default has occurred and is continuing, the guarantee trustee
is to exercise, with respect to the holder of the capital securities of the
series, the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Unless the guarantee trustee is offered
reasonable indemnity against the costs, expenses and liabilities that may be
incurred by the guarantee trustee by a holder of the related capital securities,
the guarantee trustee is not required to exercise any of its powers under any
guarantee at the request of the holder. Additionally, the guarantee trustee
is
not required to expend or risk its own funds or otherwise incur any financial
liability in the performance of its duties if the guarantee trustee reasonably
believes that it is not assured repayment or adequate indemnity.
71
Governing
Law
Each
guarantee will be governed by, and construed in accordance with, the internal
laws of the State of New York, without regard to its principles of conflicts
of
laws.
72
Dates Referenced Herein and Documents Incorporated by Reference