PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED JUNE 19, 1998)
9,000,000 SECURITIES
CITICORP CAPITAL III
7.10% TRUST PREFERRED SECURITIES (TRUPS(R))
(LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY
[CITICORP LOGO (R)]
----------
The 7.10% Trust Preferred Securities (TRUPS(R)) (the "Capital Securities")
offered hereby represent preferred undivided beneficial interests in the assets
of Citicorp Capital III, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"). Citicorp, a Delaware corporation ("Citicorp" or
the "Company"), will own all the common securities (the "Common Securities" and,
together with the Capital Securities, the "Trust Securities") representing
undivided beneficial interests in the assets of the Trust. The Trust exists for
the sole purpose of issuing the Trust Securities, investing the proceeds thereof
in an equivalent amount of 7.10% Junior Subordinated Deferrable Interest
Debentures due August 15, 2028 (the "Subordinated Debt Securities") of Citicorp
and engaging in those activities necessary or incidental thereto. The
Subordinated Debt Securities and the Capital Securities in respect of which this
Prospectus Supplement is being delivered are referred to herein as the "Offered
Securities."
The Capital Securities have been approved for listing on the New York Stock
Exchange, Inc. (the "NYSE"), subject to official notice of issuance. Trading of
the Capital Securities on the NYSE is expected to commence within a 30-day
period after the initial delivery of the Capital Securities. See "Underwriting."
(continued on next page)
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
<TABLE>
<CAPTION>
==================================================================================================================
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) COMMISSION (2) TRUST (3)(4)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Capital Security .............................. $25 (3) $25
- ------------------------------------------------------------------------------------------------------------------
Total ............................................. $225,000,000 (3) $225,000,000
==================================================================================================================
</TABLE>
(1) Plus accrued distributions, if any, from June 26, 1998.
(2) The Trust and Citicorp have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) Because the proceeds of the sale of the Capital Securities will be invested
in the Subordinated Debt Securities, Citicorp has agreed to pay to the
Underwriters as compensation (the "Underwriters' Compensation") for their
arranging the investment therein of such proceeds $0.7875 per Capital
Security (or $7,087,500 in the aggregate). See "Underwriting."
(4) Expenses of the offering, which are payable by Citicorp, are estimated to
be $200,000.
----------
The Capital Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Capital Securities will be made only in book-entry form
through the facilities of The Depository Trust Company on or about June 26,
1998.
"TRUPS(R)" is a registered service mark of Salomon Brothers Inc.
SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
The date of this Prospectus Supplement is June 19, 1998.
<PAGE>
(continued from previous page)
The Subordinated Debt Securities will be unsecured obligations of Citicorp
and will be subordinate and junior in right of payment to all Senior
Indebtedness of Citicorp, as described herein. Upon an event of default under
the Declaration (as defined herein), the holders of Capital Securities will have
a preference over the holders of the Common Securities with respect to payments
in respect of distributions and payments upon redemption, liquidation and
otherwise. Payments of distributions on the Capital Securities may be deferred
at any time for up to 20 consecutive quarterly periods. In addition, Citicorp
will have the right to redeem the Subordinated Debt Securities at any time on or
after August 15, 2003 and, prior to that date, to redeem the Subordinated Debt
Securities or to cause the distribution of the Subordinated Debt Securities to
the holders of Capital Securities upon the occurrence of certain events. See
"Special Considerations" on page S-10.
Holders of the Capital Securities are entitled to receive cumulative cash
distributions at an annual rate of 7.10% of the liquidation amount of $25 per
Capital Security, accruing from the date of original issuance and payable
quarterly in arrears on February 15, May 15, August 15 and November 15 of each
year, commencing August 15, 1998 ("distributions"). The payment of distributions
out of moneys held by the Trust and payments on liquidation of the Trust or the
redemption of Capital Securities, as set forth below, are guaranteed by Citicorp
(the "Guarantee") to the extent described herein and under "Description of the
Capital Securities Guarantees" in the accompanying Prospectus. The Guarantee
covers payments of distributions and other payments on the Capital Securities
only if and to the extent that the Trust has funds available therefor, which
will not be the case unless Citicorp has made a payment of interest or principal
or other payments on the Subordinated Debt Securities held by the Trust as its
sole asset. The Guarantee, when taken together with Citicorp's obligations under
the Subordinated Debt Securities and the Indenture (as defined herein) and its
obligations under the Declaration (as defined herein), including its undertaking
to pay all costs, expenses, debts and other obligations of the Trust (other than
with respect to the Trust Securities), provide a full and unconditional
guarantee of amounts due on the Capital Securities. The obligations of Citicorp
under the Guarantee are subordinate and junior in right of payment to all other
liabilities of Citicorp and rank pari passu with the most senior preferred stock
issued from time to time, if any, by Citicorp.
The distribution rate and the distribution payment date and other payment
dates for the Capital Securities will correspond to the interest rate and
interest payment date and other payment dates on the Subordinated Debt
Securities, which will be the sole assets of the Trust. As a result, if
principal or interest is not paid on the Subordinated Debt Securities, no
amounts will be paid on the Capital Securities. If Citicorp does not make
principal or interest payments on the Subordinated Debt Securities, the Trust
will not have sufficient funds to make distributions on the Capital Securities,
in which event, the Guarantee will not apply to such distributions until the
Trust has sufficient funds available therefor.
So long as no Event of Default has occurred and is continuing under the
Indenture, Citicorp has the right to defer payments of interest on the
Subordinated Debt Securities by extending the interest payment period on the
Subordinated Debt Securities at any time and from time to time for up to 20
consecutive quarterly interest periods (each, an "Extension Period"), provided
that no Extension Period may extend beyond the Maturity Date (as defined below).
If interest payments are so deferred, distributions on the Capital Securities
will also be deferred. During such Extension Period, distributions will continue
to accrue with interest thereon (to the extent permitted by applicable law) at
an annual rate of 7.10% per annum compounded quarterly, and holders of Capital
Securities will be required to include deferred interest income in their gross
income for United States federal income tax purposes in advance of receipt of
the cash distributions with respect to such deferred interest payments. There
could be multiple Extension Periods of varying lengths of up to 20 consecutive
quarterly interest periods each throughout the term of the Subordinated Debt
Securities. See "Description of the Subordinated Debt Securities--Option to
Extend Interest Payment Period" and "United States Federal Income
Taxation--Interest and Original Issue Discount."
The Subordinated Debt Securities will mature on August 15, 2028. The
Subordinated Debt Securities are redeemable by Citicorp (i) in whole or in part,
from time to time, on or after August 15, 2003 or (ii) in whole but not in part
upon the occurrence of a Tax Event or a Regulatory Capital Event (each as
defined herein). Prior to any such redemption, Citicorp will obtain any required
regulatory approvals. If Citicorp redeems Subordinated Debt Securities, the
Trust must redeem Trust Securities having an aggregate liquidation amount equal
to the aggregate principal amount of the Subordinated Debt Securities so
redeemed at the Redemption Price (as defined herein). See
S-2
<PAGE>
"Description of the Capital Securities--Redemption." The Capital Securities will
be redeemed upon maturity of the Subordinated Debt Securities. See "Description
of the Capital Securities--Tax Event Redemption or Distribution" and
"--Regulatory Capital Event Redemption or Distribution."
Citicorp may disolve the Trust at any time and cause the Subordinated Debt
Securities to be distributed to the holders of the Trust Securities. Prior to
any such dissolution, Citicorp will obtain any required regulatory approvals. In
the event of the involuntary or voluntary dissolution, winding-up or termination
of the Trust, the holders of the Capital Securities will be entitled to receive
for each Capital Security, out of assets of the Trust available therefor, a
liquidation amount of $25 plus accrued and unpaid distributions thereon
(including interest thereon) to the date of payment, unless, in connection with
such dissolution, the Subordinated Debt Securities are distributed to the
holders of the Capital Securities. See "Description of the Capital
Securities--Liquidation Distribution Upon Dissolution."
The Capital Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Capital Securities will be shown on,
and transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described herein, Capital Securities will not be
issued in certificated form. See "Description of the Capital
Securities--Book-Entry Only Issuance--The Depository Trust Company."
----------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF
THE SECURITIES OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE
PURCHASE OF CAPITAL SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE
IMPOSITION OF PENALTY BIDS. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NYSE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SEE "UNDERWRITING."
S-3
<PAGE>
SUMMARY
The following information is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus (including the documents incorporated by reference
herein).
CITICORP
Citicorp, whose principal subsidiary is Citibank, N.A. ("Citibank"), is a
holding company incorporated under the laws of the State of Delaware on December
4, 1967. The principal office of Citicorp is located at 399 Park Avenue, New
York, New York 10043; its telephone number is (212) 559-1000. Through its
subsidiaries and affiliates, including Citibank, Citicorp is a global financial
services organization serving the financial needs of individuals, businesses,
governments and financial institutions in the United States and throughout the
world.
Citicorp is a legal entity separate and distinct from Citibank and its
other subsidiaries and affiliates. There are various legal limitations on the
extent to which Citicorp's bank subsidiaries may extend credit, pay dividends or
otherwise supply funds to Citicorp. The approval of the Office of the
Comptroller of the Currency is required if total dividends declared by a
national bank in any calendar year exceed net profits (as defined) for that year
combined with its retained net profits for the preceding two years. In addition,
dividends for such a bank may not be paid in excess of the bank's undivided
profits. State-chartered bank subsidiaries are subject to dividend limitations
imposed by applicable state law. In determining whether and to what extent to
pay dividends, each bank subsidiary must also consider the effect of dividend
payments on applicable risk-based capital and leverage ratio requirements as
well as policy statements of the federal regulatory agencies that indicate that
banking organizations should generally pay dividends out of current operating
earnings.
Citicorp also derives dividends from its non-bank subsidiaries. These
subsidiaries are not subject to regulatory restrictions on their payment of
dividends to Citicorp, except that the approval of the Office of Thrift
Supervision may be required if total dividends declared by a savings association
in any calendar year exceed amounts specified in that agency's regulations. In
addition, there are numerous governmental requirements and regulations that
affect the activities of Citicorp and its bank and non-bank subsidiaries.
Under longstanding policy of The Board of Governors of the Federal Reserve
System, a bank holding company is expected to act as a source of financial
strength for its subsidiary banks and to commit resources to support such banks.
As a result of that policy, Citicorp may be required to commit resources to its
subsidiary banks in circumstances where it might not otherwise do so.
Because Citicorp is a holding company, its rights and the rights of its
creditors and stockholders, including the holders of the Subordinated Debt
Securities and the Guarantee to participate in the assets of any subsidiary upon
the latter's liquidation or recapitalization will be subject to the prior claims
of the subsidiary's creditors, except to the extent that Citicorp may itself be
a creditor with recognized claims against the subsidiary.
On April 5, 1998, Citicorp and Travelers Group Inc. ("Travelers") entered
into an Agreement and Plan of Merger. The merger is subject to customary closing
conditions, including regulatory approvals and the affirmative vote of a
majority of the stockholders of each of Citicorp and Travelers. The combined
entity will be known as Citigroup Inc. ("Citigroup"). Such merger will be
effected by the merger of Citicorp with and into a newly-formed Delaware
corporation that is a wholly owned subsidiary of Travelers. Such corporation
will assume Citicorp's obligations under the Guarantee and the Declaration (as
defined herein) and will enter into a supplemental indenture with the
Institutional Trustee pursuant to which it will expressly assume all of
Citicorp's obligations under the Indenture (as defined herein) relating to the
Subordinated Debt Securities, including the due and punctual payment of
principal of and interest on the Subordinated Debt Securities. As used herein,
"Citicorp" refers to Citicorp or such corporation with which Citicorp may merge.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to a declaration of trust executed by Citicorp, as sponsor (the "Sponsor"), and
the trustees of the Trust (the "Trustees") and the filing of a certificate of
S-4
<PAGE>
trust with the Secretary of State of the State of Delaware. Such declaration
will be amended and restated in its entirety (as so amended and restated, the
"Declaration") before the issuance of the Capital Securities. The Declaration
will be qualified as an indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). Upon issuance of the Capital Securities,
the purchasers thereof will own all of the Capital Securities. See "Description
of the Capital Securities--Book Entry Only Issuance--The Depository Trust
Company." Citicorp will, directly or indirectly, acquire Common Securities in an
aggregate liquidation amount equal to approximately three percent of the total
capital of the Trust. The Trust exists for the exclusive purposes of issuing the
Trust Securities representing undivided beneficial interests in the assets of
the Trust, investing the gross proceeds of the Trust Securities in the
Subordinated Debt Securities and engaging in only those other activities
necessary or incidental thereto. See "The Trust."
Pursuant to the Declaration, the number of Trustees will initially be
three. Two of the trustees (the "Regular Trustees") will be persons who are
employees or officers of, or who are affiliated with, Citicorp. The third
trustee, which will be a financial institution that is unaffiliated with
Citicorp, will serve as institutional trustee under the Declaration and as
indenture trustee for the purposes of compliance with the provisions of the
Trust Indenture Act (the "Institutional Trustee"). Initially, Wilmington Trust
Company will be the Institutional Trustee until removed or replaced by the
holder of the Common Securities. For purposes of compliance with the provisions
of the Trust Indenture Act, Wilmington Trust Company will also act as trustee
(the "Guarantee Trustee") under the Guarantee and as Debt Trustee (as defined
herein) under the Indenture. Wilmington Trust Company will also act as Delaware
Trustee under the Declaration for purposes of compliance with the Delaware
Business Trust Act (the "Trust Act").
The rights of the holders of the Capital Securities, including economic
rights, rights to information and limited voting rights, are set forth in the
Declaration, the Trust Act and the Trust Indenture Act. See "Description of the
Capital Securities."
The principal place of business of the Delaware Trustee is c/o Wilmington
Trust Company, Rodney Square North, 1100 Market Street, Wilmington, Delaware
19890, Attention: Corporate Trust Administration. The principal place of
business of the Trust shall be c/o Citicorp, 399 Park Avenue, New York, New York
10043, and its telephone number is (212) 559-1000.
CAPITAL SECURITIES
<TABLE>
<CAPTION>
<S> <C>
General ............................ The Capital Securities represent preferred undivided beneficial interests in
the assets of the Trust, which will consist solely of the Subordinated Debt
Securities. The Subordinated Debt Securities, in which the proceeds of the sale
of the Capital Securities will be invested, mature on August 15, 2028 unless
redeemed by Citicorp prior to such maturity, as described under "Description of
Subordinated Debt Securities--Optional Redemption."
Distributions ...................... Distributions on the Capital Securities will be fixed at a rate per annum
of 7.10% of the stated liquidation amount of $25 per Capital Security, will be
cumulative, will accrue from June 26, 1998, the date of issuance of the Capital
Securities, and will be payable quarterly in arrears, on February 15, May 15,
August 15 and November 15 of each year, commencing August 15, 1998. See
"Description of the Capital Securities--Distributions."
Option to Extend Interest
Payment Period ................... Citicorp has the right, at any time, and from time to time, to defer payments of
interest on the Subordinated Debt Securities for a period not exceeding 20
consecutive quarterly interest periods; provided, that no Extension Period may
extend beyond the maturity date of the Subordinated Debt Securities. If Citicorp
extends the interest payment period,
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
quarterly distributions on the Capital Securities would be deferred (though such
distributions would continue to accrue with interest thereon compounded
quarterly, since interest would continue to accrue on the Subordinated Debt
Securities) during any such extended interest payment period. If Citicorp
exercises its right to extend an interest payment period, then (a) Citicorp shall
not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock and (b) Citicorp shall not make any payment of interest on or
principal of (or premium, if any, on) or repay, repurchase or redeem, any debt
securities issued by Citicorp or its subsidiaries which rank pari passu with or
junior to the Subordinated Debt Securities. The foregoing, however, will not
apply (i) to any stock dividends paid by Citicorp where the dividend stock is the
same stock as that on which the dividend is being paid or (ii) in certain other
limited circumstances. See "Description of the Subordinated Debt
Securities--Option to Extend Interest Payment Period ". Prior to the termination
of any Extension Period, Citicorp may further extend such Extension Period;
provided, that such Extension Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarterly interest periods. Upon
the termination of any Extension Period and the payment of all amounts then due,
Citicorp may commence a new Extension Period, subject to the foregoing
requirements.
See "Description of the Subordinated Debt Securities--Interest" and "--Option to
Extend Interest Payment Period."
Should an Extension Period occur, holders of Capital Securities will continue to
recognize interest income for United States federal income tax purposes. As a
result such holders will be required to include such interest in gross income for
United States federal income tax purposes in advance of the receipt of cash, and
such holders will not receive the cash from the Trust related to such income if
such holders dispose of such Capital Securities prior to the record date for
payment of distributions. See "United States Federal Income Taxation--United
States Holders--Interest Income and Original Issue Discount."
Redemption of Capital Securities ... The Capital Securities have no stated maturity date but will be redeemed upon the
maturity of the Subordinated Debt Securities or to the extent the Subordinated
Debt Securities are earlier redeemed. Subject to obtaining any required
regulatory approval, Citicorp will have the right to redeem the Subordinated Debt
Securities, (i) in whole or in part, at any time on or after August 15, 2003, or
(ii) in whole but not in part if a Tax Event or a Regulatory Capital Event shall
have occurred and be continuing. The "Redemption Price" for the Capital
Securities, in the case of any such redemption, will equal the stated liquidation
amount of $25 per Capital Security, plus accrued and unpaid distributions thereon
to the date fixed for redemption. See "Description of the Capital
Securities--Redemption," "--Tax Event Redemption" and "--Regulatory Capital Event
Redemption."
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Dissolution of Trust and
Distribution of Subordinated
Debt Securities ................... Subject to obtaining any required regulatory approval, Citicorp will have the right
at any time to dissolve the Trust and cause the Subordinated Debt Securities to
be distributed to the holders of the Trust Securities. See "Description of the
Capital Securities--Distribution of the Subordinated Debt Securities."
Voting Rights ...................... Generally, the holders of the Capital Securities will not have any voting rights.
See "Description of the Capital Securities--Voting Rights."
Subject to certain conditions, including that the Institutional Trustee obtain
the opinion of counsel described under "Description of the Capital
Securities--Voting Rights" prior to taking certain actions, the holders of a
majority in aggregate liquidation amount of the Capital Securities have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or direct the exercise of any trust or
power conferred upon the Institutional Trustee, under the Declaration including
the right to direct the Institutional Trustee as holder of the Subordinated Debt
Securities, to (i) exercise the remedies available under the Indenture with
respect to the Subordinated Debt Securities, (ii) waive any past Indenture Event
of Default (as defined herein) that is waivable under the Indenture, (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Subordinated Debt Securities shall be due and payable, or (iv) consent to any
amendment, modification or termination of the Indenture or the Subordinated Debt
Securities where such consent shall be required; provided, however, that where a
consent or action under the Indenture would require the consent or act of a
Super-Majority (as defined herein) of holders of the Subordinated Debt Securities
affected thereby, only the holders of at least such Super-Majority in aggregate
liquidation amount of the Capital Securities may direct the Institutional Trustee
to give such consent or take such action. See "Description of the Capital
Securities--Voting Rights."
Use of Proceeds .................... The proceeds from the sale of the Capital Securities offered hereby will be used
by the Trust to purchase the Subordinated Debt Securities issued by Citicorp.
Citicorp will use substantially all of the net proceeds of the sale of the
Subordinated Debt Securities to redeem, substantially concurrently with the
issuance of the Capital Securities, all of the $216,550,000 outstanding principal
amount of Subordinated Bank Adjustable Note Capital Securities issued by Citicorp
on December 9, 1986.
Listing ............................ The Capital Securities have been approved for listing on the NYSE, subject to
official notice of issuance. Trading of the Capital Securities on the NYSE is
expected to commence within a 30-day period after the initial delivery of the
Capital Securities.
</TABLE>
SPECIAL CONSIDERATIONS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus Supplement and the accompanying
Prospectus (including the documents incorporated by reference therein), the
matters set forth under the caption "Special Considerations" in this Prospectus
Supplement before purchasing the Capital Securities offered hereby.
S-7
<PAGE>
CITICORP SUMMARY FINANCIAL DATA
The following table sets forth, in summary form, certain financial data for
each of the years in the three-year period ended December 31, 1997 and for the
three months ended March 31, 1998 and March 31, 1997. This summary is qualified
in its entirety by the detailed information and financial statements included in
the documents incorporated herein by reference; this summary is not covered by
the Report of Independent Auditors incorporated herein by reference. See
"Incorporation of Certain Documents by Reference" in the Prospectus. The
consolidated financial data at and for the three months ended March 31, 1998 and
March 31, 1997 are derived from unaudited financial statements. The results for
the three months ended March 31, 1998 are not necessarily indicative of the
results for the full year or any other interim period.
<TABLE>
<CAPTION>
THREE MONTHS YEARS ENDED
ENDED MARCH 31, DECEMBER 31,
----------------- ---------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net Interest Revenue ........................................... $ 2,839 $ 2,804 $11,402 $10,940 $ 9,951
Fees, Commissions and Other Revenue ............................ 2,766 2,392 10,214 9,256 8,727
------- ------- ------- ------- -------
Total Revenue .................................................. 5,605 5,196 21,616 20,196 18,678
Provision for Credit Losses .................................... 507 423 1,907 1,926 1,991
Operating Expense .............................................. 3,394 3,169 13,987 12,197 11,102
------- ------- ------- ------- -------
Income Before Taxes ............................................ 1,704 1,604 5,722 6,073 5,585
Income Taxes ................................................... 639 609 2,131 2,285 2,121
------- ------- ------- ------- -------
Net Income ..................................................... $ 1,065 $ 995 $ 3,591 $ 3,788 $ 3,464
======= ======= ======= ======= =======
Income Applicable to Common Stock .............................. $ 1,033 $ 957 $ 3,451 $ 3,631 $ 3,126
======= ======= ======= ======= =======
Earnings Per Share (A):
Basic ......................................................... $ 2.28 $ 2.07 $ 7.53 $ 7.73 $ 7.60
Diluted ....................................................... 2.23 2.01 7.33 7.43 6.50
======= ======= ======= ======= =======
(IN BILLIONS)
Period End Balances:
Total Loans, Net (B) ......................................... $ 182.8 $ 166.7 $ 178.2 $ 169.1 $ 160.3
Total Assets ................................................. 330.4 290.4 310.9 281.0 256.9
Total Deposits ............................................... 214.7 188.8 199.1 185.0 167.1
Long-Term Debt ............................................... 20.2 18.8 19.8 18.9 18.5
Total Stockholders' Equity ................................... 21.5 20.8 21.2 20.7 19.6
</TABLE>
- ----------
(A) Reflects the adoption in 1997 of SFAS No. 128, "Earnings Per Share." Prior
periods have been restated.
(B) Net of unearned income and allowance for credit losses.
S-8
<PAGE>
CAPITALIZATION OF CITICORP
The following table sets forth the consolidated capitalization of Citicorp
as of March 31, 1998 (and as adjusted to give effect to the issuance of the
Capital Securities and the redemption of the Subordinated Bank Adjustable Note
Capital Securities issued by Citicorp on December 9, 1986).
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1998
OUTSTANDING AS ADJUSTED
-------------- --------------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Long-Term Debt:
Various Obligations With Original Maturities of
One Year or More ............................................................ $19,409 $19,192
Guaranteed Preferred Beneficial Interests in Citicorp
Subordinated Debt (a) ....................................................... 750 975
------- -------
Total Long-Term Debt .......................................................... $20,159 $20,167
------- -------
Stockholders' Equity:
Preferred Stock .............................................................. $ 1,600 $ 1,600
Authorized Shares: 50,000,000
Issued Shares:
1,250,000 of $100 per share, 5,400,000 of $250 per share
250,000 and of $500 per share
Common Stock ($1.00 par value)
Authorized Shares: 800,000,000 .............................................. 506 506
Issued Shares: 506,298,235
Surplus ...................................................................... 6,493 6,493
Retained Earnings ............................................................ 17,564 17,564
Accumulated Other Changes in Equity from Nonowner Sources (b) ................ 37 37
Common Stock in Treasury, at Cost ............................................ (4,729) (4,729)
Shares: 54,773,606
------- -------
Total Stockholders' Equity .................................................... $21,471 $21,471
------- -------
Total ......................................................................... $41,630 $41,638
======= =======
</TABLE>
- ----------
(a) The Guaranteed Preferred Beneficial Interests represent interests in
Citicorp Capital I, whose sole assets are $309 million aggregate
principal amount of Citicorp's 7.933% Junior Subordinated Deferrable
Interest Debentures due 2027 and interests in Citicorp Capital II, whose
sole assets are $464 million aggregate principal amount of Citicorp's
8.015% Junior Subordinated Deferrable Interest Debentures due 2027, and,
in the "As Adjusted" column, interests in Citicorp Capital III, a trust
whose sole asset will be $231.75 million aggregate principal amount of
Citicorp's 7.10% Junior Subordinated Deferrable Interest Debentures due
2028.
(b) Includes net unrealized gains on securities available for sale of $661
million and foreign currency translation of ($624) million.
S-9
<PAGE>
SPECIAL CONSIDERATIONS
Prospective purchasers of Capital Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following matters.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE SUBORDINATED
DEBT SECURITIES AND GUARANTEE
The obligations of Citicorp under the Subordinated Debt Securities are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of Citicorp, including all outstanding subordinated debt securities
issued by Citicorp (other than securities designated as Junior Subordinated
Deferrable Interest Debentures) prior to the issuance of the Subordinated Debt
Securities. Citicorp's obligations under the Guarantee are subordinate and
junior in right of payment to all liabilities of Citicorp and rank pari passu
with the most senior preferred stock issued from time to time, if any, by
Citicorp and with any other guarantee by Citicorp in respect of any preferred
stock or equity interest of any affiliate. There are no terms in the Capital
Securities, the Subordinated Debt Securities or the Guarantee that limit
Citicorp's ability to incur additional indebtedness, including indebtedness that
ranks senior to the Subordinated Debt Securities and the Guarantee. See
"Description of the Capital Securities Guarantees--Status of the Capital
Securities Guarantees" and "Description of the Subordinated Debt Securities" in
the accompanying Prospectus, and "Description of the Subordinated Debt
Securities--Subordination" herein.
RIGHTS UNDER THE GUARANTEE
If Citicorp were to default on its obligation to pay amounts payable on the
Subordinated Debt Securities or its other payment obligations to the Trust, the
Trust would lack available funds for the payment of distributions or amounts
payable on redemption of the Capital Securities or otherwise, and, in such
event, holders of the Capital Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, holders of the Capital
Securities would rely on the enforcement (i) by the Institutional Trustee of its
rights as registered holder of the Subordinated Debt Securities against Citicorp
pursuant to the terms of the Subordinated Debt Securities or (ii) by such
holders of their direct rights against Citicorp to enforce payments on the
Subordinated Debt Securities. See "Description of the Capital Securities
Guarantees" and "Description of the Subordinated Debt Securities" in the
accompanying Prospectus and "Description of the Capital Securities--Declaration
Events of Default" herein.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, the holders of Capital Securities would rely on the enforcement by
the Institutional Trustee of its rights as a holder of the Subordinated Debt
Securities against Citicorp. In addition, the holders of a majority in
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 Institutional Trustee or to direct the exercise of any trust or power
conferred upon the Institutional Trustee under the Declaration, including the
right to direct the Institutional Trustee to exercise the remedies available to
it as a holder of the Subordinated Debt Securities. If the Institutional Trustee
fails to enforce its rights under the Subordinated Debt Securities, a holder of
Capital Securities may institute a legal proceeding directly against Citicorp to
enforce the Institutional Trustee's rights under the Subordinated Debt
Securities without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of Citicorp to pay interest or
principal on the Subordinated Debt Securities on the date such interest or
principal is otherwise payable (or in the case of redemption, on the redemption
date), then a holder of Capital Securities may directly institute a proceeding
for enforcement of payment to such holder of the principal of or interest on the
Subordinated Debt Securities having a principal amount equal to the aggregate
liquidation amount of the Capital Securities of such holder (a "Direct Action")
on or after the respective due date specified in the Subordinated Debt
Securities. In connection with such Direct Action, Citicorp will be subrogated
to the rights of such holder of Capital Securities under the Declaration to the
extent of any payment made by Citicorp to such holder of Capital Securities in
such Direct Action. The holders of Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Subordinated
Debt Securities. See "Description of the Capital Securities--Declaration Events
of Default."
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OPTION TO EXTEND INTEREST PAYMENT PERIOD; FEDERAL INCOME TAX CONSEQUENCES
Citicorp has the right under the Indenture (as such term is defined in
"Description of the Subordinated Debt Securities" herein), so long as no
Indenture Event of Default (as defined herein) shall have occurred and be
continuing, to defer payments of interest on the Subordinated Debt Securities by
extending the interest payment period at any time, and from time to time, on the
Subordinated Debt Securities. As a consequence of such an extension, quarterly
distributions on the Capital Securities would be deferred (but would continue to
accrue, despite such deferral, with interest thereon compounded quarterly) by
the Trust during any such Extension Period. Such right to extend the interest
payment period for the Subordinated Debt Securities is limited to a period not
exceeding 20 consecutive quarterly interest periods. Prior to the termination of
any such Extension Period, Citicorp may further extend the interest payment
period; provided that such Extension Period, together with all such previous and
further extensions thereof, may not exceed 20 consecutive quarterly interest
periods or extend beyond the maturity of the Subordinated Debt Securities. Upon
the termination of any Extension Period and the payment of all amounts then due,
Citicorp may commence a new Extension Period, subject to the above requirements.
See "Description of the Capital Securities--Distributions" and "Description of
the Subordinated Debt Securities--Option to Extend Interest Payment Period."
Should Citicorp exercise its right to defer payments of interest by
extending the interest payment period, each holder of Capital Securities will be
required to accrue income (as original issue discount ("OID")) in respect of the
deferred interest allocable to its Capital Securities for United States federal
income tax purposes, even though such deferred interest is not distributed to
holders of Capital Securities. As a result, each such holder of Capital
Securities will recognize income for United States federal income tax purposes
in advance of the receipt of cash and will not receive the cash from the Trust
related to such income if such holder disposes of the Capital Securities prior
to the record date for the date on which distributions of such amounts are made.
Citicorp has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Subordinated Debt
Securities. However, should Citicorp determine to exercise such right in the
future, the market price of the Capital Securities is likely to be affected. A
holder that disposes of its Capital Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder that
continues to hold its Capital Securities. See "United States Federal Income
Taxation--Interest and Original Issue Discount."
REDEMPTION OR DISTRIBUTION OF SUBORDINATED DEBT SECURITIES
At any time after August 15, 2003, or upon the occurrence of a Tax Event or
a Regulatory Capital Event, in certain circumstances, Citicorp will have the
right to redeem the Subordinated Debt Securities. If Subordinated Debt
Securities are redeemed, the Trust will redeem an equivalent amount of Trust
Securities. See "Description of the Capital Securities--Redemption", "--Tax
Event Redemption" and "--Regulatory Capital Event Redemption."
Subject to obtaining any required regulatory approval, Citicorp will have
the right at any time to dissolve the Trust and cause the Subordinated Debt
Securities to be distributed to holders of the Capital Securities. Under current
United States federal income tax law, a distribution of Subordinated Debt
Securities upon the dissolution of the Trust would not be a taxable event to
holders of the Capital Securities, but a dissolution of the Trust in which
holders of the Capital Securities receive cash would be a taxable event to such
holders. See "United States Federal Income Taxation--Receipt of Subordinated
Debt Securities or Cash Upon Liquidation of the Trust or Redemption of the
Subordinated Debt Securities."
Because holders of Capital Securities may receive Subordinated Debt
Securities upon the dissolution of the Trust, prospective purchasers of Capital
Securities are also making an investment decision with regard to the
Subordinated Debt Securities and should carefully review all the information
regarding the Subordinated Debt Securities contained herein and in the
accompanying Prospectus. See "Description of the Capital
Securities--Distribution of Subordinated Debt Securities" and "Description of
the Subordinated Debt Securities."
LIMITED VOTING RIGHTS
Holders of Capital Securities will have limited voting rights and, subject
to certain exceptions as set forth in the Declaration, will not be entitled to
vote, appoint, remove or replace, or to increase or decrease the number of,
Trustees,
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which voting rights are vested exclusively in the holder of the Capital
Securities. See "Description of Capital Securities--Voting Rights."
TRADING PRICE
The Capital Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Subordinated
Debt Securities. A holder of Capital Securities who disposes of his or her
Capital Securities between record dates for payments of distributions thereon
will be required to treat part of the sales price as ordinary income, consisting
of accrued but unpaid interest on the Subordinated Debt Securities to the date
of disposition. To the extent the sale price is less than such holder's adjusted
tax basis (which will include accrued interest or OID), such holder will
recognize a capital loss. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States federal income tax
purposes. See "United States Federal Income Taxation--United States
Holders--Interest and Original Issue Discount" and "--Sales of Capital
Securities."
PENDING TAX LITIGATION
Recently, a taxpayer filed a petition in the United States Tax Court
contesting the proposed disallowance by the IRS (as defined below) of interest
deductions the taxpayer claimed in respect of securities issued in 1993 and 1994
that are, in some cases, comparable to the Capital Securities (Enron Corp. v.
Commissioner). It is possible that an adverse decision by the Tax Court
concerning the deductibility of such interest could give rise to a Tax Event.
Such Tax Event would give Citicorp the right to redeem the Subordinated Debt
Securities. See "Description of the Capital Securities--Tax Event Redemption."
PROPOSED TAX LAW CHANGES
In the past, the Clinton Administration proposed certain tax law changes
that would, among other things, generally deny interest deductions to a
corporate issuer if the debt instrument had a term exceeding 15 years (earlier
proposed tax law changes would have denied interest deductions if the debt
instrument had a term exceeding 20 years) and if such debt instrument was not
reflected as indebtedness on such issuer's consolidated balance sheet. As of the
date hereof no such proposal is pending. However, in the event similar tax law
changes are proposed and enacted in the future, and applied retroactively to the
Subordinated Debt Securities, such changes could give rise to a Tax Event, which
would permit Citicorp to cause a redemption of the Subordinated Debt Securities
and of the Capital Securities, as described more fully under "Description of the
Capital Securities--Tax Event Redemption" herein.
MARKET PRICES
There can be no assurance as to the market prices for the Capital
Securities or the Subordinated Debt Securities that may be distributed in
exchange for Capital Securities upon a liquidation of the Trust. Accordingly,
the Capital Securities that an investor may purchase, whether pursuant to the
offer made hereby or in the secondary market, or the Subordinated Debt
Securities that a holder of Capital Securities may receive upon a liquidation of
the Trust, may trade at a discount to the price that the investor paid to
purchase the Capital Securities offered hereby. As a result of the existence of
Citicorp's right to defer interest payments, the market price of the Capital
Securities (which represent undivided beneficial ownership interests in the
Trust, the assets of which consist solely of the Subordinated Debt Securities)
may be more volatile than the market prices of other securities that are not
subject to such optional deferrals.
USE OF PROCEEDS
The proceeds from the sale of the Capital Securities will be used by the
Trust to purchase the Subordinated Debt Securities issued by Citicorp. Citicorp
will use substantially all of the net proceeds of the sale of the Subordinated
Debt Securities to redeem, substantially concurrently with the issuance of the
Capital Securities, all of the $216,550,000 outstanding principal amount of
Subordinated Bank Adjustable Note Capital Securities issued by Citicorp on
December 9, 1986.
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ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with Citicorp's
financial statements, with the $225 million of Capital Securities included in
Citicorp's balance sheet as a component of Long-Term Debt. The sole assets of
the Trust will be $231.75 million aggregate principal amount of 7.10% Junior
Subordinated Deferrable Interest Debentures of Citicorp due 2028.
All future reports of Citicorp filed under the Securities Exchange Act of
1934 will (i) reflect the consolidation of the Trust into Citicorp's
consolidated financial statements, with the $225 million of Capital Securities
included in Citicorp's balance sheet as a component of Long-Term Debt, (ii)
include in the financial statement footnotes of Citicorp disclosure that the
sole assets of the wholly-owned Trust will be $231.75 million principal amount
of 7.10% Junior Subordinated Deferrable Interest Debentures of Citicorp due
2028, and (iii) include in a footnote to the audited financial statements
disclosure that each Citicorp Capital Trust is wholly owned, that the sole asset
of each Citicorp Capital Trust is the respective series of Junior Subordinated
Deferrable Interest Debentures (specifying as to each Trust the principal
amount, interest rate and maturity date of such Junior Subordinated Deferrable
Interest Debentures), and that the related Guarantee, taken together with
Citicorp's obligations under such Junior Subordinated Deferrable Interest
Debentures, the Indenture and the Declaration, provides a full and unconditional
guarantee on a subordinated basis by Citicorp of payments due on the preferred
securities issued by each Citicorp Capital Trust.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to a declaration of trust executed by Citicorp, as Sponsor, and the Trustees and
the filing of a certificate of trust with the Secretary of State of the State of
Delaware. Such Declaration will be amended and restated in its entirety before
the issuance of the Capital Securities. The Declaration will be qualified as an
indenture under the Trust Indenture Act. Upon issuance of the Capital
Securities, the purchasers thereof will own all of the Capital Securities. See
"Description of the Capital Securities--Book-Entry Only Issuance--The Depository
Trust Company." Citicorp will, directly or indirectly, acquire Common Securities
in an aggregate liquidation amount equal to approximately three percent of the
total capital of the Trust. The Trust exists for the exclusive purposes of
issuing the Trust Securities representing undivided beneficial interests in the
assets of the Trust, investing the gross proceeds of the Trust Securities in the
Subordinated Debt Securities and engaging in only those other activities
necessary or incidental thereto.
Pursuant to the Declaration, the number of Trustees will initially be
three. The two Regular Trustees will be persons who are employees or officers
of, or who are affiliated with, Citicorp. The third trustee will be the
Institutional Trustee. Initially, Wilmington Trust Company will be the
Institutional Trustee until removed or replaced by the holder of the Common
Securities. For purposes of compliance with the provisions of the Trust
Indenture Act, Wilmington Trust Company will also act as Guarantee Trustee under
the Guarantee and as Debt Trustee (as defined herein) under the Indenture (as
defined herein). Wilmington Trust Company will also act as Delaware Trustee
under the Declaration for purposes of compliance with the Trust Act.
The Institutional Trustee will hold title to the Subordinated Debt
Securities for the benefit of the holders of the Trust Securities and the
Institutional Trustee will have the power to exercise all rights, powers and
privileges under the Indenture as the holder of the Subordinated Debt
Securities. In addition, the Institutional Trustee will maintain exclusive
control of a segregated non-interest bearing bank account (the "Property
Account") to hold all payments made in respect of the Subordinated Debt
Securities for the benefit of the holders of the Trust Securities. The
Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities out
of funds from the Property Account. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Capital Securities. Citicorp, as
the direct or indirect holder of all the Common Securities, will have the right
to appoint, remove or replace any Trustee and to increase or decrease the number
of Trustees, subject to certain restrictions. Citicorp will pay all fees and
expenses related to the Trust and the offering of the Trust Securities. See
"Description of the Subordinated Debt Securities--Miscellaneous."
The rights of the holders of the Capital Securities, including economic
rights, rights to information and limited voting rights, are set forth in the
Declaration, the Trust Act and the Trust Indenture Act. See "Description of the
Capital Securities."
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DESCRIPTION OF THE CAPITAL SECURITIES
The following summary of certain terms and provisions of the Capital
Securities supplements the description of the terms and provisions of the
Capital Securities set forth in the accompanying Prospectus under the heading
"Description of the Capital Securities," to which description reference is
hereby made. The Capital Securities will be issued pursuant to the terms of the
Declaration, which has been qualified as an indenture under the Trust Indenture
Act. The Institutional Trustee will act as indenture trustee for the Capital
Securities under the Declaration for purposes of compliance with the provisions
of the Trust Indenture Act. The terms of the Capital Securities will include
those stated in the Declaration and those made part of the Declaration by the
Trust Indenture Act. The following summary of the material terms and provisions
of the Capital Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Declaration, the Trust Act and
the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities will be owned, directly or
indirectly, by Citicorp. The Common Securities rank pari passu, and payments
will be made thereon on a pro rata basis, with the Capital Securities, except
that upon the occurrence and during the continuance of a Declaration Event of
Default, the rights of the holders of the Common Securities to receive payment
of periodic distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the Capital
Securities. The Declaration does not permit the issuance by the Trust of any
securities other than the Trust Securities or the incurrence of any indebtedness
by the Trust. Pursuant to the Declaration, the Institutional Trustee will own
the Subordinated Debt Securities purchased by the Trust for the benefit of the
holders of the Trust Securities. The payment of distributions out of money held
by the Trust, and payments upon redemption of the Capital Securities or
liquidation of the Trust, are guaranteed by Citicorp to the extent described
under "Description of the Guarantee" and under "Description of the Capital
Securities Guarantees" in the accompanying Prospectus. The Guarantee will be
held by the Guarantee Trustee for the benefit of the holders of the Capital
Securities. The Guarantee does not cover payment of distributions when the Trust
does not have sufficient available funds to pay such distributions. In such
event, the remedy of a holder of Capital Securities is to vote to direct the
Institutional Trustee to enforce the Institutional Trustee's rights under the
Subordinated Debt Securities except in the limited circumstances in which the
holder may take Direct Action. See "--Voting Rights" and "--Declaration Events
of Default." Citicorp's obligations under the Guarantee, taken together with its
obligations under the Subordinated Debt Securities, the Indenture and the
Declaration, will provide a full and unconditional guarantee on a subordinated
basis by Citicorp of payments due on the Capital Securities.
DISTRIBUTIONS
Distributions on the Capital Securities will be fixed at a rate per annum
of 7.10% of the stated liquidation amount of $25 per Capital Security.
Distributions in arrears for more than one quarterly period will bear interest
thereon at the rate per annum of 7.10%, compounded quarterly. The term
"distribution" as used herein includes any such interest payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Capital Securities will be cumulative, will accrue
from June 26, 1998 and will be payable quarterly in arrears on February 15, May
15, August 15 and November 15 of each year, commencing August 15, 1998, when, as
and if available for payment. Distributions will be made by the Institutional
Trustee or its paying agent, except as otherwise described below.
Citicorp has the right under the Indenture to defer payments of interest on
the Subordinated Debt Securities by extending the interest payment period from
time to time on the Subordinated Debt Securities. If Citicorp were to exercise
such right, quarterly distributions on the Capital Securities during any such
extended interest payment period would be deferred (although such distributions
would continue to accrue with interest, compounded quarterly, because compound
interest would continue to accrue on the Subordinated Debt Securities). See
"Description of the Subordinated Debt Securities--Interest" and "-- Option to
Extend Interest Payment Period." If distributions are deferred, the deferred
distributions and accrued interest thereon shall be paid to holders of record of
the Capital
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Securities as they appear on the books and records of the Trust on
the record date next following the termination of such deferral period.
Distributions on the Capital Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Capital Securities will be limited to
payments received from Citicorp on the Subordinated Debt Securities. See
"Description of the Subordinated Debt Securities." The payment of distributions
out of moneys held by the Trust is guaranteed by Citicorp to the extent set
forth under "Description of the Guarantee" and under "Description of the Capital
Securities Guarantees" in the accompanying Prospectus.
Distributions on the Capital Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Capital Securities remain in book-entry only
form, will be one Business Day (as defined herein) prior to the relevant payment
dates. Such distributions will be paid by or on behalf of the Institutional
Trustee, which will hold amounts received in respect of the Subordinated Debt
Securities in the Property Account for the benefit of the holders of the Trust
Securities. Subject to any applicable laws and regulations and the provisions of
the Declaration, each such payment will be made as described under --"Book-Entry
Only Issuance--The Depository Trust Company" below. In the event that the
Capital Securities do not continue to remain in book-entry only form, the
Regular Trustees will have the right to select relevant record dates, which may
be more than one Business Day but not more than ten Business Days prior to the
relevant payment dates. In the event that any date on which distributions are to
be made on the Capital Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay). A "Business Day" shall mean any day other than Saturday, Sunday or
any other day on which banking institutions in New York City are permitted or
required by any applicable law to close.
REDEMPTION
The Capital Securities have no stated maturity date but will be redeemed
upon the maturity of the Subordinated Debt Securities or to the extent the
Subordinated Debt Securities are earlier redeemed. The Subordinated Debt
Securities will mature on August 15, 2028.
The Company has the right to redeem the Subordinated Debt Securities, (i)
in whole or in part, at any time on or after August 15, 2003 or (ii) in whole
but not in part if a Tax Event or a Regulatory Capital Event shall have occurred
and be continuing. The "Redemption Price" for the Capital Securities, in the
case of any such redemption, will equal the applicable stated liquidation amount
of $25 per Capital Security, plus accrued and unpaid distributions thereon to
but excluding the date fixed for redemption. The Trust's funds available for
payment of the Redemption Price will be limited to payments received from
Citicorp upon redemption of the Subordinated Debt Securities.
Upon the repayment of the Subordinated Debt Securities, whether at maturity
or upon redemption, the proceeds from such repayment or redemption will
simultaneously be applied to redeem, at the Redemption Price, Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Subordinated Debt Securities so repaid or redeemed; provided that holders
of Trust Securities shall be given not less than 30 nor more than 60 days'
notice of any redemption.
TAX EVENT REDEMPTION
"Tax Event" means that the Regular Trustees shall have received an opinion
(a "Dissolution Tax Opinion") of a nationally recognized independent tax counsel
experienced in such matters ("Tax Counsel") to the effect that, as a result of
(a) any amendment to, clarification of or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein or
(b) any amendment to, clarification of 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 or regulatory
determination on or after such date), there is more than an insubstantial risk
that (i) the Trust would be subject to United States federal income tax with
respect to income accrued or received on the Subordinated Debt Securities, (ii)
interest payable to the Trust on the Subordinated Debt Securities would not be
deductible by Citicorp for United States federal income tax purposes or (iii)
the Trust would be subject to
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more than a de minimis amount of other taxes, duties or other governmental
charges, provided that any such change, clarification or amendment becomes
effective on or after the date of this Prospectus Supplement.
Subject to obtaining any required regulatory approval, if a Tax Event shall
occur and be continuing, Citicorp may, within 90 days following the occurrence
of such Tax Event, redeem the Subordinated Debt Securities, in whole but not in
part, upon not less than 30 nor more than 60 days' notice, for cash, with the
result that, following such redemption, the Trust Securities having an aggregate
liquidation amount equal to the principal amount of the Subordinated Debt
Securities so redeemed will be redeemed by the Trust at the Redemption Price;
provided, however, that if at the time there is available to Citicorp or the
Trust the opportunity to eliminate, within such 90-day period, the Tax Event by
taking some ministerial action, such as filing a form or making an election or
pursuing some other similar reasonable measure that has no adverse effect on the
Trust, Citicorp or the holders of the Trust Securities, then Citicorp or the
Trust will pursue such measure in lieu of redemption of the Subordinated Debt
Securities.
REGULATORY CAPITAL EVENT REDEMPTION
"Regulatory Capital Event" means a determination by Citicorp, based on an
opinion of counsel experienced in such matters (who may be an employee of
Citicorp or any of its affiliates), that, as a result of (a) 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 (b) any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment, clarification, change, pronouncement or decision is announced or is
effective after the date of this Prospectus Supplement, there is more than an
insubstantial risk that the Capital Securities will no longer constitute Tier 1
Capital of Citicorp or any bank holding company of which Citicorp is a
subsidiary (or its equivalent) for purposes of the capital adequacy guidelines
or policies of the Board of Governors of the Federal Reserve System or its
successor as Citicorp's primary federal banking regulator.
Subject to obtaining any required regulatory approval, if a Regulatory
Capital Event shall occur and be continuing, Citicorp may, within 90 days
following the occurrence of such Regulatory Capital Event, redeem the
Subordinated Debt Securities, in whole but not in part, upon not less than 30
nor more than 60 days' notice, for cash, with the result that, following such
redemption, the Capital Securities will be redeemed by the Trust at the
applicable Redemption Price; provided, however, that if at the time there is
available to Citicorp or the Trust the opportunity to eliminate, within such
90-day period, the Regulatory Capital Event by taking some ministerial action,
such as filing a form or making an election or pursuing some other similar
reasonable measure that has no adverse effect on the Trust, Citicorp or the
holders of the Trust Securities, then Citicorp or the Trust will pursue such
measure in lieu of redemption of the Subordinated Debt Securities.
DISTRIBUTION OF SUBORDINATED DEBT SECURITIES
Subject to obtaining any required regulatory approval, Citicorp will have
the right at any time to dissolve the Trust, and after satisfaction of the
liabilities of creditors of the Trust as provided by applicable law, cause the
Subordinated Debt Securities to be distributed to the holders of the Trust
Securities.
If the Subordinated Debt Securities are distributed to the holders of the
Capital Securities, Citicorp will use its best efforts to cause the Subordinated
Debt Securities to be listed on the New York Stock Exchange or on such other
exchange as the Capital Securities are then listed.
After the date for any distribution of Subordinated Debt Securities upon
dissolution of the Trust, (i) the Capital Securities will no longer be deemed to
be outstanding, (ii) the Depositary (as defined herein) or its nominee, as the
record holder of the Capital Securities, will receive a registered global
certificate or certificates representing the Subordinated Debt Securities to be
delivered upon such distribution and (iii) any certificates representing Capital
Securities not held by the Depositary or its nominee will be deemed to represent
Subordinated Debt Securities having an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on, such Capital Securities until such certificates are
presented to Citicorp or its agent for transfer or reissuance.
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REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Capital
Securities unless all accrued and unpaid distributions have been paid on all
Capital Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Capital Securities
(which notice will be irrevocable), then, by noon, New York City time, on the
redemption date, provided that Citicorp has paid to the Institutional Trustee a
sufficient amount of cash in connection with the related redemption or maturity
of the Subordinated Debt Securities, the Trust will irrevocably deposit with the
Depositary funds sufficient to pay the applicable Redemption Price and will give
the Depositary irrevocable instructions and authority to pay the Redemption
Price to the holders of the Capital Securities. See "-- Book-Entry Only
Issuance--The Depository Trust Company." If notice of redemption shall have been
given and funds deposited as required, then, immediately prior to the close of
business on the date of such deposit, distributions will cease to accrue and all
rights of holders of such Capital Securities so called for redemption will
cease, except the right of the holders of such Capital Securities to receive the
Redemption Price (but without interest) on or after such redemption date, except
as described below. In the event that any date fixed for redemption of Capital
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day
(without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Capital Securities is improperly withheld or
refused and not paid, either by the Trust or by Citicorp pursuant to the
Guarantee, distributions on such Capital Securities will continue to accrue at
the then applicable rate from the original redemption date to the date of
payment, in which case the actual payment date will be considered the date fixed
for redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Capital Securities are
to be redeemed, the Capital Securities will be redeemed as described below under
"--Book-Entry Only Issuance--The Depository Trust Company."
Subject to the foregoing, applicable law (including, without limitation,
United States federal securities laws), and any other applicable restrictions,
Citicorp or its affiliates may at any time, and from time to time, purchase
outstanding Capital Securities by tender, in the open market or by private
agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Trust Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $25 per Trust
Security plus accrued and unpaid distributions thereon to the date of payment
(the "Liquidation Distribution"), unless, in connection with such Liquidation,
Subordinated Debt Securities in an aggregate stated principal amount equal to
the aggregate stated liquidation amount of, with an interest rate identical to
the distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on, the Trust Securities have been distributed on a pro
rata basis to the holders of the Trust Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Trust Securities shall be paid on a pro rata basis. The holders of
the Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the Capital Securities, except that if
a Declaration Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities with regard to
such distributions.
Pursuant to the Declaration, the Trust shall dissolve (i) on August 15,
2053, the expiration of the term of the Trust, (ii) upon the bankruptcy of
Citicorp, (iii) upon the filing of a certificate of dissolution or its
equivalent with respect to Citicorp, the consent of the holders of at least a
majority in liquidation amount of the Trust Securities affected thereby voting
together as a single class to file a certificate of cancellation with respect to
the Trust or the revocation of the charter of Citicorp and the expiration of 90
days after the date of revocation without a reinstatement thereof, (iv) upon
Citicorp, as Sponsor, giving written direction to the Institutional Trustee to
terminate the Trust and
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distribute the Subordinated Debt Securities to the holders of Capital Securities
and Common Securities (which direction is optional and wholly within the
discretion of Citicorp as Sponsor), (v) upon the entry of a decree of a judicial
dissolution of Citicorp (or an affiliate that is a subsequent holder of the
Common Securities) or the Trust or (vi) upon the redemption of all the Trust
Securities. Pursuant to the Declaration, as soon as practicable after the
dissolution of the Trust and upon completion of the winding up of the Trust, the
Trust shall terminate upon the filing of a certificate of cancellation.
DECLARATION EVENTS OF DEFAULT
An Event of Default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Capital Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Capital Securities have been so cured, waived, or otherwise
eliminated, the Institutional Trustee will be deemed to be acting solely on
behalf of the holders of the Capital Securities and only the holders of the
Capital Securities will have the right to direct the Institutional Trustee with
respect to certain matters under the Declaration, and therefore the Indenture.
If the Institutional Trustee fails to enforce its rights under the Subordinated
Debt Securities after a holder of Capital Securities has made a written request,
such holder of record of Capital Securities may institute a legal proceeding
against Citicorp to enforce the Institutional Trustee's rights under the
Subordinated Debt Securities without first instituting any legal proceeding
against the Institutional Trustee or any other person or entity. Notwithstanding
the foregoing, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of Citicorp to pay interest or
principal on the Subordinated Debt Securities on the date such interest or
principal is otherwise payable (or in the case of redemption, the redemption
date), then a holder of Capital Securities may institute a Direct Action for
payment to such holder directly of the principal of or interest on the
Subordinated Debt Securities having a principal amount equal to the aggregate
liquidation amount of the Capital Securities of such holder on or after the
respective due date specified in the Subordinated Debt Securities. In connection
with such Direct Action, Citicorp will be subrogated to the rights of such
holder of Capital Securities under the Declaration to the extent of any payment
made by Citicorp to such holder of Capital Securities in such Direct Action. The
holders of Capital Securities will not be able to exercise directly any other
remedy available to the holders of the Subordinated Debt Securities.
Citicorp and the Trust are each required to file annually with the
Institutional Trustee an officer's certificate as to its compliance with all
conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of the Capital Securities Guarantees--Modification of the
Capital Securities Guarantees; Assignment" in the accompanying Prospectus, and
as otherwise required by law and the Declaration, the holders of the Capital
Securities will have no voting rights.
Subject to the requirement of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee,
or direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration including the right to direct the Institutional
Trustee, as holder of the Subordinated Debt Securities, to (i) exercise the
remedies available to it under the Indenture as a holder of the Subordinated
Debt Securities, (ii) waive any past default that is waivable under the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debt Securities shall be due and payable or
(iv) consent to any amendment, modification or termination of the Indenture or
the Subordinated Debt Securities where such consent shall be required; provided,
however, that, where a consent or action under the Indenture would require the
consent or act of holders of more than a majority in principal amount of the
Subordinated Debt Securities (a "Super-Majority") affected thereby, only the
holders of at least a percentage equivalent to such Super-Majority in aggregate
liquidation amount of the Capital Securities may direct the Institutional
Trustee to give such consent or take such action. The
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Institutional Trustee shall notify all holders of the Capital Securities of any
notice of default received from the Debt Trustee with respect to the
Subordinated Debt Securities. Such notice shall state that such Indenture Event
of Default also constitutes a Declaration Event of Default. Except with respect
to directing the time, method and place of conducting a proceeding for a remedy,
the Institutional Trustee shall not take any of the actions described in clauses
(i), (ii), (iii) or (iv) above unless the Institutional Trustee has obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not fail to be classified as a grantor trust for United States federal
income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Subordinated Debt Securities, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the direction of the holders of the Trust Securities with
respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a majority
in liquidation amount of the Trust Securities voting together as a single class;
provided, however, that (i) where the taking of any such action under the
Indenture would require the consent of a Super-Majority, the Institutional
Trustee may only give such consent at the direction of the holders of at least
the proportion in liquidation amount of the Trust Securities which the relevant
Super-Majority represents of the aggregate principal amount of the Subordinated
Debt Securities outstanding and (ii) where the taking of such action would
require the consent of every holder of Subordinated Debt Securities, the consent
of all holders of Trust Securities shall be required. The Institutional Trustee
shall not take any such action in accordance with the directions of the holders
of the Trust Securities unless the Institutional Trustee has obtained an opinion
of tax counsel to the effect that the Trust will not be classified as other than
a grantor trust for United States federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Capital Securities may be
given at a separate meeting of holders of Capital Securities convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be mailed to
each holder of record of Capital Securities. Each such notice will include a
statement setting forth the following information: (i) the date of such meeting
or the date by which such action is to be taken; (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Capital Securities will be required for the Trust to redeem
and cancel Capital Securities or distribute Subordinated Debt Securities in
accordance with the Declaration.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned at such time by Citicorp or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, Citicorp, shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if such Capital Securities were
not outstanding, unless all of the Capital Securities are owned by Citicorp or
any such entity.
The procedures by which holders of Capital Securities may exercise their
voting rights are described below. See "--Book-Entry Only Issuance--The
Depository Trust Company" below.
Holders of the Capital Securities will have no rights to appoint or remove
the Trustees, who may be appointed, removed or replaced solely by Citicorp as
the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Institutional Trustee), subject to
certain conditions, provided that, if any proposed amendment provides for, or
the Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise or (ii)
the dissolution, winding-up or termination of the Trust other than pursuant to
the terms of the Declaration, then the holders of the outstanding Trust
Securities voting together as a single class will be entitled to
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vote on such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of at least a majority in liquidation amount
of the Trust Securities affected thereby; provided that, if any amendment or
proposal referred to in clause (i) above would adversely affect only the Capital
Securities or the Common Securities, then only the affected class will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of a majority in liquidation
amount of such class.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Institutional Trustee in contravention of the Trust Indenture Act or (iii)
cause the Trust to be deemed an "investment company" which is required to be
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. The Trust may, with the consent of the Regular Trustees and
without the consent of the holders of the Trust Securities or the Institutional
Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any State of the United States; provided,
that (i) if the Trust is not the survivor such successor entity either (x)
expressly assumes all of the obligations of the Trust under the Trust Securities
or (y) substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Securities (the "Successor
Securities"), so long as the Successor Securities rank the same as the Common
Securities and Capital Securities, respectively, rank with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii)
Citicorp expressly acknowledges a trustee of such successor entity possessing
the same powers and duties as the Institutional Trustee as the holder of the
Subordinated Debt Securities, (iii) the Capital Securities or any Successor
Securities are listed quoted, or any Successor Securities will be so upon
notification of issuance, on any national securities exchange or other
organization on which the Capital Securities are then listed or quoted, (iv)
such merger, consolidation, amalgamation or replacement does not cause the
Capital Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with respect to any
dilution of the holders' interest in the new entity), (vi) such successor entity
has a purpose identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation or replacement, Citicorp has received an opinion of
counsel to the Trust to the effect that (A) such merger, consolidation,
amalgamation or replacement does not adversely affect the rights, preferences
and privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect (other than with respect to any dilution of
the holders' interest in the new entity), (B) following such merger,
consolidation, amalgamation or replacement, neither the Trust nor such successor
entity will be required to register as an investment company under the 1940 Act
and (C) the Trust or successor entity will continue to be classified as a
grantor trust for United States federal income tax purposes and (viii) Citicorp
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee and the Common
Securities Guarantee. Notwithstanding the foregoing, the Trust shall not, except
with the consent of holders of 100 percent in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it, if such consolidation, amalgamation, merger or
replacement would cause the Trust or the successor entity to be classified as
other than a grantor trust for United States federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary (the
"Depositary") for the Capital Securities. The Capital Securities will be issued
only as fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Capital Securities certificates
("Global Certificates"), representing the total aggregate number of Capital
Securities, will be issued and will be deposited with DTC.
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in securities
represented by a global certificate deposited with DTC.
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DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Participants in DTC include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Participants and by the New
York Stock Exchange, the American Stock Exchange and the National Association of
Securities Dealers. Access to the DTC system is also available to others, such
as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Capital Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Capital Securities on
DTC's records. The ownership interest of each actual purchaser of each Capital
Security ("Beneficial Owner") is in turn to be recorded on the Participants' and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participants
through which the Beneficial Owners purchased Capital Securities. Transfers of
ownership interests in the Capital Securities are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in the Capital Securities, except in the event that use of the
book-entry system for the Capital Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Capital
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such Capital Securities are credited, which may or may not be
the Beneficial Owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Capital Securities represented thereby for all
purposes under the Declaration and the Capital Securities. No beneficial owner
of an interest in a Global Certificate will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Declaration.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Capital Securities (including the presentation of Capital
Securities for exchange as described below) only at the direction of one or more
Participants to whose account the DTC interests in the Global Certificates are
credited and only in respect of such portion of the aggregate liquidation amount
of Capital Securities as to which such Participant or Participants has or have
given such direction.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Capital Securities held in book-entry
form will be sent to Cede & Co. If less than all of the Capital Securities are
being redeemed, DTC will determine the amount of the interest of each
Participant to be redeemed in accordance with its procedures.
Although voting with respect to the Capital Securities is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to Capital Securities. Under its usual procedures, DTC
would mail an Omnibus Proxy to the Trust as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Participants to whose accounts the Capital Securities are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Distributions on the Capital Securities held in book-entry form will be
made to DTC in immediately available funds. DTC's practice is to credit
Participants' accounts on the relevant payment date in accordance with their
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respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payments on such payment date. Payments by Participants and
Indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participants and Indirect Participants and not of DTC, the Trust or the Company,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of distributions to DTC is the responsibility of the
Trust, disbursement of such payments to Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Capital
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Capital Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company, the Issuer
nor the Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants under the rules and procedures governing
DTC. DTC may discontinue providing its services as securities depositary with
respect to the Capital Securities at any time by giving notice to the Trust.
Under such circumstances, in the event that a successor securities depositary is
not obtained, Capital Security certificates are required to be printed and
delivered. Additionally, the Trust (with the consent of the Company) may decide
to discontinue use of the system of book-entry transfers through DTC (or a
successor depositary). In that event, certificates for the Capital Securities
will be printed and delivered.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities represented by the Global
Certificates will be made to DTC, which will credit the relevant accounts at DTC
on the applicable distribution dates, provided that, in the case of Certificated
Securities, such payments will be made by check mailed to the address of the
holder entitled thereto at its registered address. The paying agent will
initially be Citibank, N.A. The paying agent will be permitted to resign upon 30
days' written notice to the Institutional Trustee. In the event that Citibank,
N.A. shall no longer be the paying agent, the Institutional Trustee will appoint
a successor to act as Paying Agent (which shall be a bank or trust company).
REGISTRAR AND TRANSFER AGENT
Citibank, N.A. will act as registrar and transfer agent for the Capital
Securities. Registration of transfers of Capital Securities will be effected
without charge by or on behalf of the Trust, but upon payment (with the giving
of such indemnity as the Trust or the Company may reasonably require) in respect
of any tax or other government charges which may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Capital Securities after such Capital Securities have been called
for redemption.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with
respect to the Trust Securities and after the curing of any defaults that may
have occurred, undertakes to perform only such duties as are specifically set
forth in the Declaration and, after a default of which it has knowledge, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provisions, the Institutional
Trustee is under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Capital Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The holders of Capital Securities will not be
required to offer such indemnity in the event such holders, by exercising their
voting rights, direct the Institutional Trustee to take any action it is
empowered to take under the Declaration following a Declaration Event of
Default. The Institutional Trustee also serves as trustee under the Guarantee
and the Indenture.
GOVERNING LAW
The Declaration and the Capital Securities will be governed by, and
construed in accordance with, the laws of the State of Delaware.
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MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an "investment
company" under the 1940 Act or characterized as other than a grantor trust for
United States federal income tax purposes. Citicorp intends to conduct its
affairs so that the Subordinated Debt Securities will be treated as indebtedness
of Citicorp for United States federal income tax purposes. In this connection,
Citicorp and the Regular Trustees may take any action, not inconsistent with
applicable law, the certificate of trust of the Trust, the Declaration or the
certificate of incorporation of Citicorp, that each of Citicorp and the Regular
Trustees determine in their discretion to be necessary or desirable to achieve
such end, as long as such action does not adversely affect the interests of the
holders of the Capital Securities or vary the terms thereof.
Holders of the Capital Securities have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Pursuant to the Guarantee, Citicorp will irrevocably agree, to the extent
set forth therein, to pay in full to the holders of the Capital Securities
issued by the Trust, the Guarantee Payments (as defined in the accompanying
Prospectus) (except to the extent paid by the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust may
have or assert. The Guarantee will not apply to any payment except to the extent
the Trust shall have funds available therefor. The Company's obligation to make
a Guarantee Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of Capital Securities or by causing the Trust to
pay such amounts to such holders. The Guarantee will be qualified as an
indenture under the Trust Indenture Act. Wilmington Trust Company will act as
indenture trustee under the Guarantee (the "Guarantee Trustee"). The terms of
the Guarantee will be those set forth in such Guarantee and those made part of
such Guarantee by the Trust Indenture Act. The Guarantee will be held by the
Guarantee Trustee for the benefit of the holders of the Capital Securities. A
summary description of the Guarantee appears in the accompanying Prospectus
under the caption "Description of the Capital Securities Guarantees."
DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Subordinated
Debt Securities in which the Trust will invest the proceeds from the issuance
and sale of the Trust Securities. This description supplements the description
of the general terms and provisions of the Subordinated Debt Securities set
forth in the accompanying Prospectus under the caption "Description of the
Subordinated Debt Securities." The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the description in the accompanying Prospectus and the Indenture, dated as of
December 17, 1996, as supplemented by a Supplemental Indenture dated as of June
26, 1998 (the "Indenture"), between Citicorp and Wilmington Trust Company, as
Trustee (the "Debt Trustee").
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Tax Event or a Regulatory Capital Event,
Subordinated Debt Securities may be distributed to the holders of the Trust
Securities in liquidation of the Trust. See "Description of the Capital
Securities--Tax Event Redemption" and "--Regulatory Capital Event Redemption."
GENERAL
The Subordinated Debt Securities will be issued as unsecured debt under the
Indenture. The Subordinated Debt Securities will be limited in aggregate
principal amount to $231.75 million, such amount being the sum of the aggregate
stated liquidation amounts of the Capital Securities and the Common Securities.
The Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Subordinated Debt Securities will
mature and become due and payable, together with any accrued and unpaid interest
thereon including Compound Interest (as defined herein) and Additional Interest
(as defined herein), if any, on August 15, 2028.
If Subordinated Debt Securities are distributed to holders of Capital
Securities in liquidation of such holders' interests in the Trust, such
Subordinated Debt Securities will initially be issued as a Global Security (as
defined
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herein). As described herein, under certain limited circumstances, Subordinated
Debt Securities may be issued in certificated form in exchange for a Global
Security. See "--Book-Entry and Settlement" below. In the event that
Subordinated Debt Securities are issued in certificated form, such Subordinated
Debt Securities will be in denominations of $25 and integral multiples thereof
and may be transferred or exchanged at the offices described below. Payments on
Subordinated Debt Securities issued as a Global Security will be made to DTC, a
successor depositary or, in the event that no depositary is used, to a Paying
Agent for the Subordinated Debt Securities. In the event Subordinated Debt
Securities are issued in certificated form, principal and interest will be
payable, the transfer of the Subordinated Debt Securities will be registrable
and Subordinated Debt Securities will be exchangeable for Subordinated Debt
Securities of other denominations of a like aggregate principal amount at the
corporate trust office of the Debt Trustee in New York, New York; provided, that
payment of interest may be made at the option of Citicorp by check mailed to the
address of the holder entitled thereto or by wire transfer to an account
appropriately designated by the holder entitled thereto. Notwithstanding the
foregoing, so long as the holder of any Subordinated Debt Securities is the
Institutional Trustee, the payment of principal and interest on the Subordinated
Debt Securities held by the Institutional Trustee will be made at such place and
to such account as may be designated by the Institutional Trustee.
Citicorp does not intend to issue and sell the Subordinated Debt Securities
to any purchasers other than the Trust.
SUBORDINATION
The Indenture provides that the Subordinated Debt Securities are
subordinated and junior in right of payment to all Senior Indebtedness of
Citicorp, including all outstanding subordinated debt securities issued by
Citicorp prior to the issuance of the Subordinated Debt Securities. No payment
of principal (including redemption payments), premium, if any, or interest on
the Subordinated Debt Securities 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 proceeding shall be
pending with respect to any such default, unless and until such default shall
have been cured or waived or such proceeding shall be terminated. Upon any
distribution of assets of Citicorp to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or involuntary, or
in bankruptcy, insolvency, receivership or other proceedings, all principal,
premium, if any, and interest due or to become due on all Senior Indebtedness of
Citicorp must be paid in full before the holders of Subordinated Debt Securities
are entitled to receive or retain any payment. Notwithstanding the foregoing,
the holders of Senior Indebtedness shall not be entitled to receive payment of
any amounts which would otherwise (but for the subordination provisions of the
Indenture) be payable in respect of the Subordinated Debt Securities but for the
fact that any such Senior Indebtedness is by its terms subordinated in right of
payment to Trade Credit (as defined herein) and, as a result of which
subordination, amounts otherwise payable in respect of such Senior Indebtedness
are to be paid to holders of Trade Credit.
The term "Senior Indebtedness" means any obligation of Citicorp to its
creditors, whether outstanding or subsequently incurred, except for (w) any
other subordinated debt securities issued under the Indenture, (x) all other
debt securities, and guarantees in respect of those debt securities, issued to
any other trust, or a trustee of such trust, partnership or other entity
affiliated with Citicorp that is a financing vehicle of Citicorp (a "financing
entity") in connection with the issuance by such financing entity of equity
securities or other securities guaranteed by Citicorp pursuant to an instrument
that ranks pari passu with, or junior to, the Guarantee, (y) obligations
incurred or assumed by Citicorp in the ordinary course of business in connection
with the obtaining of materials or services, and all obligations of Citicorp in
respect of any guarantees of such obligations of subsidiaries of Citicorp
(provided that obligations described in this clause (y) ("Trade Credit") shall
not include traveler's checks or other unsubordinated financial instruments) and
(z) any other obligations as to which, in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that such
obligation is not Senior Indebtedness. Such Senior Indebtedness shall continue
to be Senior Indebtedness and be entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term of
such Senior Indebtedness. The Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued by Citicorp.
INTEREST
The Subordinated Debt Securities will bear interest at the rate of 7.10%
per annum from the original date of issuance, payable quarterly in arrears on
February 15, May 15, August 15 and November 15 of each year (each an
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"Interest Payment Date"), commencing August 15, 1998, to the persons in whose
name such Subordinated Debt Securities are registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event any Subordinated Debt Securities distributed
to holders of Capital Securities shall not continue to remain in book-entry only
form, Citicorp shall have the right to select record dates, which shall be not
less than one nor more than 15 Business Days prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed,
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the
Subordinated Debt Securities is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default shall have occurred and be continuing under
the Indenture, Citicorp shall have the right at any time, and from time to time,
during the term of the Subordinated Debt Securities to defer payments of
interest by extending the interest payment period for a period not exceeding 20
consecutive quarterly interest periods from the last interest payment date to
which interest was paid in full, at the end of which Extension Period, Citicorp
shall pay all interest then accrued and unpaid (including any Additional
Interest, as herein defined) together with interest thereon compounded quarterly
at the rate specified for the Subordinated Debt Securities to the extent
permitted by applicable law ("Compound Interest"); provided that during any such
Extension Period, (a) Citicorp shall not declare or pay dividends on, make any
distribution with respect to, or redeem, purchase, acquire for value or make a
liquidation payment with respect to any of its capital stock (other than (i)
purchases or acquisitions of shares of Citicorp common stock in connection with
the satisfaction by Citicorp of its obligations under any employee benefit plans
or any other contractual obligations of Citicorp (other than a contractual
obligation ranking pari passu with or junior in right of payment to the
Subordinated Debt Securities) entered into prior to the date of issuance of the
Subordinated Debt Securities, (ii) as a result of a reclassification of Citicorp
capital stock or the exchange or conversion of one class or series of Citicorp's
capital stock for another class or series of Citicorp capital stock or (iii) the
purchase of fractional interests in shares of Citicorp's capital stock pursuant
to the conversion or exchange provisions of such Citicorp capital stock or the
security being converted or exchanged) and (b) Citicorp shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by Citicorp that rank pari passu with or
junior in right of payment to the Subordinated Debt Securities. The foregoing,
however, will not apply to stock dividends paid by Citicorp where the dividend
stock is the same stock as that on which the dividend is being paid. Prior to
the termination of any such Extension Period, Citicorp may further defer
payments of interest by extending the interest payment period; provided,
however, that, such Extension Period, including all such previous and further
extensions, may not exceed 20 consecutive quarterly interest periods or extend
beyond the maturity of the Subordinated Debt Securities. Upon the termination of
any Extension Period and the payment of all amounts then due, Citicorp may
commence a new Extension Period, subject to the terms set forth in this section.
No interest shall be due and payable during an Extension Period, except at the
end thereof. Citicorp has no present intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debt Securities. If the Institutional Trustee is the sole holder of
the Subordinated Debt Securities, Citicorp shall give the Regular Trustees and
the Institutional Trustee notice of its selection of such Extension Period one
Business Day prior to the earlier of (i) the date distributions on the Capital
Securities are payable or (ii) the date the Regular Trustees are required to
give notice to any applicable self-regulatory organization or to holders of the
Capital Securities of the record date or the date such distribution is payable.
The Regular Trustees shall give notice of Citicorp's selection of such Extension
Period to the holders of the Capital Securities. If the Institutional Trustee is
not the sole holder of the Subordinated Debt Securities, Citicorp shall give the
holders of the Subordinated Debt Securities notice of its selection of such
Extension Period 10 Business Days prior to the earlier of (i) the Interest
Payment Date or (ii) the date upon which Citicorp is required to give notice to
any applicable self-regulatory organization or to holders of the Subordinated
Debt Securities of the record or payment date of such related interest payment.
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ADDITIONAL INTEREST
If at any time the Trust or the Institutional Trustee shall be 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, in any such case, Citicorp will pay as additional interest
("Additional Interest") such additional amounts as shall be required so that the
net amounts received and retained by the Trust and the Institutional Trustee
after paying any such taxes, duties, assessments or other governmental charges
will be not less than the amounts the Trust or the Institutional Trustee would
have received had no such taxes, duties, assessments or other governmental
charges been imposed.
OPTIONAL REDEMPTION
Subject to obtaining any required regulatory approval, Citicorp will have
the right to redeem the Subordinated Debt Securities, (i) in whole or in part,
from time to time, on or after August 15, 2003, or (ii) in whole but not in part
upon the occurrence of a Tax Event or a Regulatory Capital Event as described
under "Description of the Capital Securities--Tax Event Redemption" and
"--Regulatory Capital Event Redemption," upon not less than 30 nor more than 60
days' notice, at a redemption price equal to the principal amount to be redeemed
plus accrued and unpaid interest, including Additional Interest, if any, to the
redemption date; provided, however, that the Subordinated Debt Securities may
not be redeemed in part unless all unpaid interest, including Additional
Interest, accrued through the most recent quarterly interest period ending on or
prior to the date fixed for redemption shall have been paid. Before effecting
any optional redemption, Citicorp will obtain any approvals of regulatory
authorities then required by applicable law.
INDENTURE EVENTS OF DEFAULT
See "Description of the Subordinated Debt Securities--Events of Default,
Waiver and Notice" in the accompanying Prospectus for a description of Events of
Default under the Indenture. An Event of Default under the Indenture also
constitutes a Declaration Event of Default. The holders of Capital Securities in
certain circumstances have the right to direct the Institutional Trustee to
exercise its rights as the holder of the Subordinated Debt Securities. See
"Description of the Capital Securities--Declaration Events of Default" and
"--Voting Rights." Notwithstanding the foregoing, if an Event of Default under
the Indenture has occurred and is continuing and such event is attributable to
the failure of Citicorp to pay interest or principal on the Subordinated Debt
Securities on the date such interest or principal is otherwise payable, Citicorp
acknowledges that a holder of Capital Securities may then institute a Direct
Action for payment on or after the respective due date specified in the
Subordinated Debt Securities. Notwithstanding any payments made to such holder
of Capital Securities by Citicorp in connection with a Direct Action, Citicorp
shall remain obligated to pay the principal of or interest on the Subordinated
Debt Securities held by the Trust or the Institutional Trustee of the Trust, and
Citicorp shall be subrogated to the rights of the holder of such Capital
Securities with respect to payments on the Capital Securities to the extent of
any payments made by the Company to such holder in any Direct Action. The
holders of Capital Securities will not be able to exercise directly any other
remedy available to the holders of the Subordinated Debt Securities.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Capital Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust,
the Subordinated Debt Securities will be issued in the form of one or more
global certificates (each a "Global Security") registered in the name of the
Depositary or its nominee. Except under the limited circumstances described
below, Subordinated Debt Securities represented by the Global Security will not
be exchangeable for, and will not otherwise be issuable as, Subordinated Debt
Securities in definitive form. The Global Securities described above may not be
transferred except by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or to a successor depositary or its nominee.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated Debt
Securities in definitive form and will not be considered the holders (as defined
in the Indenture) thereof for any purpose under the Indenture, and no Global
Security representing Subordinated Debt
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Securities shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the Depositary or its
nominee or to a successor depositary or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of the Depositary or if such person
is not a Participant, on the procedures of the Participant through which such
person owns its interest to exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Subordinated Debt Securities are distributed to holders of Capital
Securities in liquidation of such holders' interests in the Trust, DTC will act
as securities depositary for the Subordinated Debt Securities. For a description
of DTC and the specific terms of the depositary arrangements, see "Description
of the Capital Securities--Book-Entry Only Issuance--The Depository Trust
Company." As of the date of this Prospectus Supplement, the description therein
of DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Capital Securities apply in
all material respects to any debt obligations represented by one or more Global
Securities held by Citicorp. Citicorp may appoint a successor to DTC or any
successor depositary in the event DTC or such successor depositary is unable or
unwilling to continue as a depositary for the Global Securities.
None of Citicorp, the Trust, the Institutional Trustee, any paying agent
and any other agent of Citicorp, or the Debt Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Subordinated Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Subordinated Debt Securities
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies Citicorp that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed, (ii) the Depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the Depositary
is required to be so registered to act as such depositary and no successor
depositary shall have been appointed, (iii) Citicorp, in its sole discretion,
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Event of Default with respect to such Subordinated Debt
Securities. Any Global Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for Subordinated Debt Securities registered in
such names as the Depositary shall direct. It is expected that such instructions
will be based upon directions received by the Depositary from its Participants
with respect to ownership of beneficial interests in such Global Security.
GOVERNING LAW
The Indenture and the Subordinated Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York.
MISCELLANEOUS
The Indenture will provide that Citicorp will pay all fees and expenses
related to (i) the offering of the Subordinated Debt Securities, (ii) the
organization, maintenance and dissolution of the Trust, (iii) the retention of
the Trustees and (iv) the enforcement by the Institutional Trustee of the rights
of the holders of the Capital Securities.
Citicorp will have the right at all times to assign any of its respective
rights or obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of Citicorp or any bank holding company of which Citicorp is a
subsidiary; provided that, in the event of any such assignment, Citicorp will
remain liable for all of their respective obligations. Subject to the foregoing,
the Indenture will be binding upon and inure to the benefit of the parties
thereto and their respective successors and assigns. The Indenture provides that
it may not otherwise be assigned by the parties thereto.
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UNITED STATES FEDERAL INCOME TAXATION
GENERAL
In the opinion of E. Noel Harwerth, Esq., Chief Tax Officer of Citibank,
N.A., the following discussion describes the material United States federal
income tax consequences applicable to holders of the Capital Securities. This
discussion deals only with Capital Securities held as capital assets by initial
holders and does not deal with special classes of holders, such as dealers in
securities or currencies, life insurance companies, tax-exempt organizations,
persons holding the Capital Securities as a hedge or hedged against currency
risks or as part of a straddle or conversion transaction or persons whose
functional currency is not the U.S. dollar. This discussion is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
thereunder, published rulings and court decisions, as currently in effect, all
of which are subject to change, possibly with retroactive effect.
Persons considering the purchase of Capital Securities should consult their
own tax advisors concerning the application of the United States federal income
tax laws to their particular situations, as well as the application of state or
local laws or the laws of any other taxing jurisdiction.
UNITED STATES HOLDERS
As used herein, "United States Holder" means a beneficial holder of Capital
Securities who or which is (i) a citizen or resident of the United States, (ii)
a corporation created or organized under the laws of the United States or any
political subdivision thereof (including the District of Columbia), or (iii) a
person otherwise subject to United States federal income taxation on a net
income basis in respect of Capital Securities.
Classification of the Subordinated Debt Securities
Assuming full compliance with the terms of the Indenture and the
Declaration, the Subordinated Debt Securities will be classified for United
States federal income tax purposes as indebtedness of Citicorp.
Classification of the Trust
Assuming full compliance with the terms of the Indenture and the
Declaration, the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Capital Securities generally will be considered the owner of an undivided
interest in the Subordinated Debt Securities, and each holder will be required
to include in its gross income interest and original issue discount ("OID"), if
any, accrued with respect to its allocable share of the Subordinated Debt
Securities.
Interest and Original Issue Discount
United States Holders (including cash basis United States Holders) of debt
instruments issued with OID must generally include such OID in income as it
accrues on a constant yield basis, generally before the receipt of cash
attributable to such income, and generally in increasingly greater amounts over
the life of the debt instrument. A debt instrument will generally be treated as
issued with OID if the excess of the instrument's "stated redemption price at
maturity" over its issue price is more than a specified de minimis amount. The
stated redemption price at maturity of an instrument is the total of all
payments provided by the instrument that are not payments of "qualified stated
interest." A qualified stated interest payment is generally any one of a series
of stated interest payments on an instrument that are unconditionally payable at
least annually at a single fixed rate (with certain exceptions for lower rates
paid during some periods) applied to the outstanding principal amount of the
debt instrument. In determining whether a debt instrument has been issued with
OID, remote contingencies as to the timely payment of stated interest are
ignored. In the case of the Subordinated Debt Securities, Citicorp has concluded
that the likelihood of its exercising its option to defer payment of interest is
remote because the exercise of such option would prevent Citicorp from declaring
dividends on any class of its stock. Accordingly, Citicorp intends to treat the
Subordinated Debt Securities as having been issued without OID and, therefore,
United States Holders of the Capital Securities will
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accrue interest income under their particular methods of accounting (e.g., cash
or accrual) rather than accruing OID on a constant yield basis.
If, however, Citicorp were to exercise its right to defer payments of
interest, under existing Treasury regulations, the Subordinated Debt Securities
will become OID instruments, and all United States Holders of the Capital
Securities will thereafter be required to accrue interest on a constant yield
basis during any Extension Period even though Citicorp will not pay the interest
in cash until the end of the Extension Period, and even though a United States
Holder may be on the cash method of accounting. Furthermore, if the Subordinated
Debt Securities become OID instruments because Citicorp has exercised its right
to defer payment of interest, they will be taxed as OID instruments for as long
as they remain outstanding, even after the expiration of the Extension Period
and the payment of all accrued and compounded interest.
The above conclusions are based on recently-promulgated Treasury
regulations, which have not been interpreted by any court decisions or addressed
in any rulings or other pronouncements of the Internal Revenue Service ("IRS"),
and its is possible that the IRS could take a position contrary to the
conclusions herein.
Corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
Market Discount and Bond Premium
Under certain circumstances, United States Holders of Capital Securities
other than initial holders may be considered to have acquired their undivided
interests in the Subordinated Debt Securities with market discount or bond
premium as such phrases are defined for United States federal income tax
purposes. Such holders are advised to consult their tax advisors as to the
income tax consequences of the acquisition, ownership and disposition of the
Capital Securities.
Receipt of Subordinated Debt Securities or Cash Upon Liquidation of the
Trust or Redemption of the Subordinated Debt Securities
As described under "Description of the Capital Securities--Distribution of
Subordinated Debt Securities," Citicorp has the right to dissolve the Trust and
to distribute Subordinated Debt Securities to holders in exchange for the
Capital Securities in liquidation of the Trust. Under current law, such a
distribution, for United States federal income tax purposes, would be treated as
a non-taxable event to each holder, and each holder would receive an aggregate
tax basis in the Subordinated Debt Securities equal to such holder's aggregate
tax basis in its Capital Securities. A holder's holding period in the
Subordinated Debt Securities so received in liquidation of the Trust would
include the period during which the Capital Securities were held by such holder.
If, however, the Trust is treated as an association taxable as a corporation at
the time of its liquidation, the distribution of Subordinated Debt Securities in
liquidation of the Trust would likely constitute a taxable event to the holders
of the Capital Securities.
On or after August 15, 2003 or upon the occurrence of a Tax Event or a
Regulatory Capital Event as described under "Description of the Capital
Securities--Tax Event Redemption" and "--Regulatory Capital Redemption", the
Subordinated Debt Securities may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Capital Securities.
Under current law, such a redemption would, for United States federal income tax
purposes, constitute a taxable disposition of the redeemed Capital Securities,
and a United States Holder would recognize gain or loss as if it sold such
redeemed Capital Securities for cash. See "United States Federal Income
Taxation--Sales of Capital Securities."
Sales of Capital Securities
A United States Holder that sells Capital Securities will recognize gain or
loss equal to the difference between its adjusted tax basis in the Capital
Securities and the amount realized on the sale of such Capital Securities.
Assuming Citicorp does not defer interest on the Subordinated Debt Securities by
extending the interest payment period, a holder's adjusted tax basis in the
Capital Securities generally will be its initial purchase price. Except to the
extent attributable to accrued but unpaid interest (which is taxable as ordinary
income ) and subject to the market discount rules described above, such gain or
loss generally will be a capital gain or loss.
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Long-term capital gain of an individual United States Holder is generally
subject to the maximum tax rate of 28% for property held for more than one year.
The maximum rate is generally reduced to 20% in the case of property held for
more than 18 months. The Capital Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid interest with respect to the
underlying Subordinated Debt Securities. If Citicorp exercises its right to
defer payments of interest, a United States Holder who disposes of his Capital
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Subordinated Debt
Securities through the date of disposition in income as ordinary income, and to
add such amount to his adjusted tax basis in his pro rata share of the
underlying Subordinated Debt Securities deemed disposed of. To the extent the
selling price is less than the United States Holder's adjusted tax basis (which
will include, in the form of OID, all accrued but unpaid interest) such holder
will recognize a capital loss. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United States federal
income tax purposes.
UNITED STATES ALIEN HOLDERS
Under present United States federal income tax law and subject to the
discussion of backup withholding below:
(a) payment of principal and interest (including any OID) by the Trust
or any of its paying agents to any United States Alien Holder (as defined
below) will not be subject to United States federal withholding tax,
provided that in the case of interest or OID, (1) the beneficial owner of
the Capital Securities does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of Citicorp
entitled to vote, (2) the beneficial owner of the Capital Securities is not
a controlled foreign corporation that is related to Citicorp through stock
ownership, (3) either (i) the beneficial owner of the Capital Securities
certifies to Citicorp or its agent, under penalties of perjury, that he is
not a United States person (as defined below) and provides his name and
address, or (ii) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary
course of its trade or business (a "financial institution") and holds the
Capital Securities on behalf of the beneficial owner certifies to Citicorp
or its paying agent under penalties of perjury that such statement has been
received from the beneficial owner by it or by a financial institution
between it and the beneficial owner and furnishes the payor a copy thereof,
and (4) the beneficial owner is not a bank as to which the Capital
Securities (or any portion thereof) is considered to be an extension of
credit made by a bank pursuant to a loan agreement entered into in the
ordinary course of the bank's trade or business;
(b) a United States Alien Holder will not be subject to United States
federal withholding tax on gain realized on the sale or other disposition
of Capital Securities.
As used herein, a "United States Alien Holder" is any holder of Capital
Securities who is a United States Alien (as defined below). As used herein, a
"United States Alien" means any person who, for United States federal income tax
purposes, is a foreign corporation, a non-resident alien individual, a
non-resident alien fiduciary of a foreign estate or trust, or a foreign
partnership to the extent that one or more of the members is, for United States
federal income tax purposes, a foreign corporation, a non-resident alien
individual or a non-resident alien fiduciary of a foreign estate or trust, in
each case not subject to United States federal income tax on a net income basis
in respect of Capital Securities. "United States person" means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of principal (including OID, if any) and any premium and interest
made within the United States by the Trust or any of its paying agents are
generally subject to information reporting and possibly to "backup withholding"
at a rate of 31%. Information reporting and backup withholding do not apply to
payments made on Capital Securities if the certification described in clause
(a)(3) under "United States Alien Holders" is received, provided, in each case,
that the payor does not have actual knowledge that the holder is a United States
person.
Payment of the proceeds from the sale of Capital Securities to or through a
foreign office of a broker will not be subject to information reporting or
backup withholding, except that if the broker is a United States person, a
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controlled foreign corporation for United States tax purposes or a foreign
person 50% or more of whose gross income is effectively connected with the
conduct of a trade or business within the United States for a specified
three-year period, information reporting will apply to such payments unless such
broker has documentary evidence in its files of the owner's foreign status and
has no actual knowledge to the contrary, or the owner otherwise establishes an
exemption. Payment of the proceeds from a sale of Capital Securities to or
through the United States office of a broker is subject to information reporting
and backup withholding unless the holder or beneficial owner certifies as to its
non-United States status or otherwise establishes an exemption from information
reporting and backup withholding.
Backup withholding will generally not apply to United States Holders other
than certain noncorporate Holders who fail to supply an accurate taxpayer
identification number or who fail to report all interest and dividend income
required to be shown on their federal income tax returns.
ERISA CONSIDERATIONS
Each of the Company (the obligor with respect to the Subordinated Debt
Securities held by the Trust) and its affiliates may be considered a "party in
interest" (within the meaning of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) or a "disqualified person" (within the meaning of
Section 4975 of the Code) with respect to certain employee benefit plans
("Plans") that are subject to ERISA. Any purchaser proposing to acquire Capital
Securities with assets of any Plan should consult with its counsel. The purchase
of Capital Securities by a Plan that is subject to the fiduciary responsibility
provisions of ERISA or the prohibited transaction provisions of Section 4975 of
the Code (including individual retirement arrangements and other plans described
in Section 4975(e)(1) of the Code) and with respect to which the Company or any
affiliate is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such Capital Securities are acquired
pursuant to and in accordance with an applicable exemption, such as Prohibited
Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), PTCE 95-60 (an exemption for
transactions involving certain insurance company general accounts) or PTCE 96-23
(an exemption for certain transactions determined by an in-house asset manager).
It is expected that the Capital Securities will meet the criteria of
"publicly-offered securities" under a regulation issued by the Department of
Labor and, accordingly, the assets of the Trust would not be considered "plan
assets" for ERISA purposes. The Underwriters expect that the Capital Securities
will be held by at least 100 independent investors at the conclusion of the
offering, there are no restrictions imposed on the transfer of the Capital
Securities and the Capital Securities will be sold as part of an offering
pursuant to an effective registration statement under the Securities Act of 1933
and then will be timely registered under the Securities Exchange Act of 1934.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
Underwriters named below, and each of the Underwriters for whom Smith Barney
Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, PaineWebber Incorporated and Prudential Securities Incorporated
are acting as representatives (the "Representatives") have severally agreed to
purchase the number of Capital Securities set forth opposite its name below. In
the Underwriting Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Capital Securities
offered hereby if any of the Capital Securities are purchased. In the event of
default by an Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the non-defaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
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NUMBER OF
CAPITAL
UNDERWRITERS SECURITIES
------------ ----------
Smith Barney Inc. ............................................ 1,505,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated ........... 1,505,000
Morgan Stanley & Co. Incorporated ............................ 1,505,000
PaineWebber Incorporated ..................................... 1,505,000
Prudential Securities Incorporated ........................... 1,505,000
A.G. Edwards & Sons, Inc. .................................... 75,000
Bear, Stearns & Co. Inc. ..................................... 75,000
BT Alex. Brown Incorporated .................................. 75,000
CIBC Oppenheimer Corp. ....................................... 75,000
Dain Rauscher Wessels ........................................ 75,000
Donaldson, Lufkin & Jenrette Securities Corporation .......... 75,000
EVEREN Securities, Inc. ...................................... 75,000
Goldman, Sachs & Co. ......................................... 75,000
J. C. Bradford & Co. ......................................... 75,000
Lehman Brothers Inc. ......................................... 75,000
Piper Jaffray Inc. ........................................... 75,000
Raymond James & Associates, Inc. ............................. 75,000
The Robinson-Humphrey Company, LLC ........................... 75,000
Advest, Inc. ................................................. 25,000
Cowen & Company .............................................. 25,000
Craigie Incorporated ......................................... 25,000
Fahenstock & Co. Inc. ........................................ 25,000
Fidelity Capital Markets, a division of National Financial
Services Corp. .............................................. 25,000
Gibraltar Securities Co. ..................................... 25,000
Gruntal & Co., L.L.C. ........................................ 25,000
Janney Montgomery Scott, Inc. ................................ 25,000
Utendahl Capital Partners, L.P. .............................. 25,000
Legg Mason Wood Walker, Incorporated ......................... 25,000
McDonald & Company Securities, Inc. .......................... 25,000
McGinn, Smith & Co., Inc. .................................... 25,000
Mesirow Financial Inc. ....................................... 25,000
Morgan Keegan & Company, Inc. ................................ 25,000
Olde Discount Corporation .................................... 25,000
Pryor, McClendon, Counts & Co., Inc. ......................... 25,000
Roney & Co., LLC ............................................. 25,000
Stephens Inc. ................................................ 25,000
Tucker Anthony Incorporated .................................. 25,000
Wheat, First Securities, Inc. ................................ 25,000
---------
Total .................................................... 9,000,000
=========
The Underwriters propose to offer the Capital Securities, in part, directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement, and, in part, to certain securities dealers at
such price less a concession of $0.50 per Capital Security. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $0.2875 per
Capital Security to certain brokers and dealers. After the Capital Securities
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by Citicorp Securities, Inc.
In view of the fact that the proceeds of the sale of the Capital Securities
will ultimately be used to purchase the Subordinated Debt Securities of
Citicorp, the Underwriting Agreement provides that Citicorp will pay as
compensation ("Underwriters' Compensation") to the Underwriters arranging the
investment therein of such proceeds, an amount in immediately available funds of
$0.7875 per Capital Security (or $7,087,500 in the aggregate) for the accounts
of the several Underwriters.
The Capital Securities have been approved for listing on the NYSE, subject
to official notice of issuance. Trading of the Capital Securities on the NYSE is
expected to commence within a 30-day period after the initial
S-32
<PAGE>
delivery of the Capital Securities. The Representatives have advised the Trust
and Citicorp that they intend to make a market in the Capital Securities prior
to the commencement of trading on the NYSE. The Representatives will have no
obligation to make a market in the Capital Securities, however, and may cease
market making activities, if commenced, at any time.
Prior to this offering there has been no public market for the Capital
Securities. In order to meet one of the requirements for listing the Capital
Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or
more Capital Securities to a minimum of 400 beneficial holders.
Until the distribution of the Capital Securities is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Capital Securities. As
an exception to these rules, the Representatives are permitted to engage in
certain transactions that stabilize the price of the Capital Securities. The
Representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids. Over-allotment involves
syndicate sales in excess of the offering size, which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the Capital
Securities so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the Capital Securities in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Representatives to reclaim a
selling concession from a syndicate member when the Capital Securities
originally sold by such syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. Such stabilizing transactions,
syndicate covering transactions and penalty bids may cause the market price of
the Capital Securities to be higher than it would otherwise be in the absence of
such transactions. Neither Citicorp nor any of the Underwriters makes any
representation that the Representatives will engage in such transactions or that
such transactions, if commenced, will not be discontinued without notice.
The Trust and Citicorp have agreed to indemnify the Underwriters against,
or contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act
of 1933, as amended.
This Prospectus Supplement and related Prospectus may be used by affiliates
of Citicorp in connection with offers and sales related to secondary market
transactions. Such affiliates may act as principal or agent in such
transactions. Such sales may be made at prices related to prevailing market
prices at the time of sale.
The participation of an affiliate of Citicorp in the offer and sale of the
Capital Securities will comply with the requirements of Rule 2720 of the Conduct
Rules of the National Association of Securities Dealers, Inc. ("Rule 2720")
regarding underwriting securities of the affiliate. Among other requirements,
the Underwriters may not confirm sales to any accounts over which they exercise
discretionary authority without the prior written approval of the transaction by
the customer.
On April 5, 1998, Citicorp and Travelers, of which Smith Barney Inc. is a
wholly owned subsidiary, agreed to merge (the "Merger"). The combined company
will be known as Citigroup. The Merger is subject to customary closing
conditions, including regulatory approvals and the affirmative vote of a
majority of the stockholders of each of Citicorp and Travelers. For purposes of
Rule 2720, Smith Barney Inc. may be deemed to be an "affiliate" of Citicorp.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, Citicorp and its subsidiaries in the ordinary
course of business.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Capital
Securities will be passed upon on behalf of the Trust by Morris, Nichols, Arsht
& Tunnell, Wilmington, Delaware, special Delaware counsel to the Trust. The
validity of the Subordinated Debt Securities and the Guarantee and certain
matters relating thereto will be passed upon for Citicorp by Stephen E. Dietz,
Associate General Counsel of Citibank, N.A. Mr. Dietz owns or has the right to
acquire a number of shares of Common Stock of Citicorp equal to less than 0.01%
of the outstanding Common Stock of Citicorp. The validity of the Capital
Securities, the Guarantee and the Subordinated Debt Securities will be passed
upon for the Underwriters by Sullivan & Cromwell, New York, New York. In
rendering their opinion, Sullivan & Cromwell will rely on the opinion of Morris,
Nichols, Arsht & Tunnell as to certain matters of Delaware law.
S-33
<PAGE>
PROSPECTUS
CITICORP
SUBORDINATED DEBT SECURITIES
----------
CITICORP CAPITAL III CITICORP CAPITAL IX
CITICORP CAPITAL IV CITICORP CAPITAL X
CITICORP CAPITAL V CITICORP CAPITAL XI
CITICORP CAPITAL VI CITICORP CAPITAL XII
CITICORP CAPITAL VII CITICORP CAPITAL XIII
CITICORP CAPITAL VIII CITICORP CAPITAL XIV
CAPITAL SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED BY
CITICORP
---------
Citicorp ("Citicorp" or the "Company"), a Delaware corporation, may from
time to time offer its subordinated debentures, notes or other evidence of
indebtedness (the "Subordinated Debt Securities") in one or more series and in
amounts, at prices and on terms to be determined at the time of the offering.
The Subordinated Debt Securities when issued will be unsecured obligations of
the Company. The Company's obligations under the Subordinated Debt Securities
will be subordinate and junior in right of payment to certain other
indebtedness, as may be described in an accompanying Prospectus Supplement (the
"Prospectus Supplement").
Each of the trusts identified above (each, a "Trust"), each a statutory
business trust formed under the laws of the State of Delaware, may offer, from
time to time, preferred securities, representing undivided beneficial interests
in the assets of the respective Trust ("Capital Securities"). The payment of
periodic cash distributions ("distributions") with respect to Capital Securities
of each of the Trusts out of moneys held by each of the Trusts, and payment on
liquidation, redemption or otherwise with respect to such Capital Securities,
will be guaranteed by Citicorp to the extent described herein (each a "Capital
Securities Guarantee"). See "Description of the Capital Securities Guarantees"
below. Citicorp's obligations under the Capital Securities Guarantees are
subordinate and junior in right of payment to all other liabilities of Citicorp
and rank pari passu with the most senior preferred stock, if any, issued from
time to time by Citicorp. Subordinated Debt Securities may be issued and sold
from time to time in one or more series to a Trust, or a trustee of such Trust,
in connection with the investment of the proceeds from the offering of Capital
Securities and Common Securities (as defined herein, together the "Trust
Securities") of such Trust. The Subordinated Debt Securities purchased by a
Trust may be subsequently distributed pro rata to holders of Capital Securities
and Common Securities in connection with the dissolution of such Trust upon the
occurrence of certain events as may be described in an accompanying Prospectus
Supplement. Citicorp's obligations under the Capital Securities Guarantees,
taken together with its obligations under the Subordinated Debt Securities, the
Indenture and the Declarations (each as defined herein), will provide a full and
unconditional guarantee on a subordinated basis by Citicorp of payments due on
the Capital Securities. The Subordinated Debt Securities and the Capital
Securities and the related Capital Securities Guarantees and other related
obligations of Citicorp are sometimes collectively referred to hereafter as the
"Offered Securities."
Specific terms of the Subordinated Debt Securities of any series or the
Capital Securities of any Trust, the terms of which will substantially mirror
the terms of the Subordinated Debt Securities held by the Trust, in respect of
which this prospectus (the "Prospectus") is being delivered will be set forth in
a Prospectus Supplement with respect to such securities, which will describe,
without limitation and where applicable, the following: (i) in the case of
Subordinated Debt Securities, the specific designation, aggregate principal
amount, denomination, maturity, premium, if any, any exchange, conversion,
redemption provisions, if any, interest rate (which may be fixed or variable),
if any, the time and method of calculating interest payments, if any, dates on
which premium, if any, and interest, if any, will be payable, the right of
Citicorp, if any, to defer payment of interest on the Subordinated Debt
Securities and the maximum length of such deferral period, the initial public
offering price, subordination terms, and any listing on a securities exchange
and other specific terms of the offering; and (ii) in the case of Capital
Securities, the designation, number of securities, liquidation preference per
security, initial public offering price, any listing on a securities exchange,
distribution rate (or method of calculation thereof), dates on which
distributions shall be payable and dates from which distributions shall accrue,
any voting rights, terms for any conversion or exchange into other securities,
any redemption, exchange or sinking fund provisions, any other rights,
preferences, privileges, limitations or restrictions relating to the Capital
Securities and the terms upon which the proceeds of the sale of the Capital
Securities shall be used to purchase a specific series of Subordinated Debt
Securities of Citicorp.
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering. The Prospectus Supplement relating to any
series of Offered Securities will contain information concerning the United
States federal income tax considerations applicable to purchasers of the Offered
Securities.
Citicorp and/or each of the Trusts may sell the Offered Securities
directly, through agents designated from time to time, or through underwriters
or dealers. See "Plan of Distribution" below. If any agents of Citicorp and/or
any Trust or any underwriters or dealers are involved in the sale of the Offered
Securities, the names of such agents, underwriters or dealers and any applicable
commissions and discounts will be set forth in any related Prospectus
Supplement.
This Prospectus and related Prospectus Supplements may be used by direct or
indirect subsidiaries of Citicorp in connection with offers and sales related to
secondary market transactions in the Offered Securities. Such subsidiaries may
act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale.
This Prospectus may not be used to consummate sales of securities unless a
Prospectus Supplement is also delivered. The delivery of this Prospectus
together with a Prospectus Supplement relating to particular offered Securities
shall not constitute an offer in any jurisdiction of any of the other Offered
Securities covered by this Prospectus.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
The date of this Prospectus is June 19, 1998
<PAGE>
FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a combined Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by Citicorp and the Trusts with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Offered Securities and other securities.
This Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission, although it does include a summary
of the material terms of the Indenture and the Declaration of Trust (each as
defined herein). Reference is made to such Registration Statement and to the
exhibits relating thereto for further information with respect to the Company,
the Trusts and the Offered Securities. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission or incorporated by
reference herein are not necessarily complete, and, in each instance, reference
is made to the copy of such document so filed for a more complete description of
the matter involved. Each such statement is qualified in its entirety by such
reference.
Citicorp is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information concerning Citicorp
can be inspected and copied at prescribed rates at the Commission's Public
Reference Room, Judiciary Plaza, 450 Fifth Street, Northwest, Washington, D.C.
20549, as well as the following Regional Offices of the Commission: 7 World
Trade Center, New York, New York 10048; and Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material may be obtained by mail
from the Commission's Public Reference Section at prescribed rates. If
available, such reports and other information may also be accessed through the
Commission's electronic data gathering, analysis and retrieval system ("EDGAR")
via electronic means, including the Commission's web site on the Internet
(http://www.sec.gov). Such reports, proxy statements and other information may
also be inspected at the offices of the New York Stock Exchange, the American
Stock Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange.
Certain of Citicorp's filings with the Commission are available to the public on
Citicorp's Internet site (http://www.citicorp.com).
No separate financial statements of any of the Trusts have been included
herein. Citicorp does not consider that such financial statements would be
material to holders of the Capital Securities because (i) all of the voting
securities of each of the Trusts will be owned, directly or indirectly, by
Citicorp, a reporting company under the Exchange Act, (ii) each of the Trusts
has no independent operations but exists for the sole purpose of issuing
securities representing undivided beneficial interests in the assets of such
Trust and investing the proceeds thereof in Subordinated Debt Securities issued
by Citicorp, and (iii) Citicorp's obligations described herein and in any
accompanying Prospectus Supplement to provide certain indemnities in respect of
and be responsible for certain costs, expenses, debts and liabilities of each
Trust under the Indenture and any supplemental indenture thereto and pursuant to
the Declarations of each Trust, the guarantee issued with respect to Capital
Securities issued by that Trust, the Subordinated Debt Securities purchased by
that Trust and the related Indenture, taken together, constitute a full and
unconditional guarantee of payments due on the Capital Securities. See
"Description of the Subordinated Debt Securities" and "Description of the
Capital Securities Guarantees."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Citicorp pursuant to
Section 13 of the Exchange Act are incorporated by reference in this Prospectus:
(a) Annual Report and Form 10-K for the fiscal year ended December 31,
1997;
(b) Financial Review and Form 10-Q for the quarter ended March 31,
1998; and
(c) Current Reports on Form 8-K dated January 20, 1998, April 5, 1998,
April 8, 1998, April 21, 1998 and June 18, 1998.
2
<PAGE>
All documents filed by Citicorp pursuant to Sections 13(a), 13(c), 14 or
15(d) of Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Offered Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in this Prospectus or
in a document incorporated or deemed to be incorporated by reference herein or
in any Prospectus Supplement shall be deemed to be modified or superseded for
purposes of this Prospectus or any Prospectus Supplement to the extent that a
statement contained herein or therein (or in any subsequently filed document
that also is or is deemed to be incorporated by reference herein or therein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus or any Prospectus Supplement.
Citicorp will provide without charge to each person to whom a copy of this
Prospectus has been delivered, upon the written or oral request of such person,
a copy of any or all of the documents referred to above which have been or may
be incorporated by reference herein (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference in such
documents). Requests for such copies should be directed to Citicorp, 399 Park
Avenue, New York, New York 10043, Attention: Investor Relations Department,
(212) 559-2718.
CITICORP
Citicorp, whose principal subsidiary is Citibank, N.A. ("Citibank"), is a
holding company incorporated under the laws of the State of Delaware on December
4, 1967. The principal office of Citicorp is located at 399 Park Avenue, New
York, New York 10043; its telephone number is (212) 559-1000. Through its
subsidiaries and affiliates, including Citibank, Citicorp is a global financial
services organization serving the financial needs of individuals, businesses,
governments and financial institutions in the United States and throughout the
world.
HOLDING COMPANY
Citicorp is a legal entity separate and distinct from Citibank and its
other subsidiaries and affiliates. There are various legal limitations on the
extent to which Citicorp's bank subsidiaries may extend credit, pay dividends or
otherwise supply funds to Citicorp. The approval of the Office of the
Comptroller of the Currency is required if total dividends declared by a
national bank in any calendar year exceed net profits (as defined) for that year
combined with its retained net profits for the preceding two years. In addition,
dividends for such a bank may not be paid in excess of the bank's undivided
profits. State-chartered bank subsidiaries are subject to dividend limitations
imposed by applicable state law. In determining whether and to what extent to
pay dividends, each bank subsidiary must also consider the effect of dividend
payments on applicable risk-based capital and leverage ratio requirements as
well as policy statements of the federal regulatory agencies that indicate that
banking organizations should generally pay dividends out of current operating
earnings.
Citicorp also derives dividends from its non-bank subsidiaries. These
subsidiaries are not subject to regulatory restrictions on their payment of
dividends to Citicorp, except that the approval of the Office of Thrift
Supervision may be required if total dividends declared by a savings association
in any calendar year exceed amounts specified in that agency's regulations. In
addition, there are numerous governmental requirements and regulations that
affect the activities of Citicorp and its bank and non-bank subsidiaries.
Under longstanding policy of The Board of Governors of the Federal Reserve
System, a bank holding company is expected to act as a source of financial
strength for its subsidiary banks and to commit resources to support such banks.
As a result of that policy, Citicorp may be required to commit resources to its
subsidiary banks in circumstances where it might not otherwise do so.
Because Citicorp is a holding company, its rights and the rights of its
creditors and stockholders, including the holders of the Subordinated Debt
Securities, to participate in the assets of any subsidiary upon the latter's
liquidation or recapitalization will be subject to the prior claims of the
subsidiary's creditors, except to the extent that Citicorp may itself be a
creditor with recognized claims against the subsidiary.
3
<PAGE>
CITICORP RATIOS OF INCOME TO FIXED CHARGES
For the fiscal years ended December 31, 1997, 1996, 1995, 1994 and 1993 and
the three months ended March 31, 1998, Citicorp's consolidated ratios of income
to fixed charges, computed as set forth below, were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ------------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Income to Fixed Charges:
Excluding Interest on Deposits .... 2.93 2.58 2.69 2.31 1.76 1.44
Including Interest on Deposits .... 1.49 1.43 1.48 1.42 1.31 1.18
</TABLE>
For purposes of computing the consolidated ratio of income to fixed
charges, income represents net income, before extraordinary items and cumulative
effects of accounting changes, plus income taxes and fixed charges. Fixed
charges, excluding interest on deposits, represent interest expense (except
interest paid on deposits) and the interest factor included in rents. Fixed
charges, including interest on deposits, represent all interest expense and the
interest factor included in rents.
USE OF PROCEEDS
Each Trust will use the proceeds of the sale of the Capital Securities to
acquire Subordinated Debt Securities from Citicorp. Citicorp intends to apply
the net proceeds from the sale of the Subordinated Debt Securities to its
general funds to be used by its management for corporate purposes, principally
to fund investments in, or extensions of credit to, banking and non-banking
subsidiaries. Except as otherwise described in a Prospectus Supplement, specific
allocations of the proceeds to such purposes will not have been made at the date
of the applicable Prospectus Supplement, although the management of Citicorp
will have determined that funds should be raised at that time in anticipation of
future funding requirements of the subsidiaries. The precise amount and timing
of such investments in and extensions of credit to the subsidiaries will depend
upon their funding requirements and the availability of other funds to Citicorp
and its subsidiaries. In considering whether Capital Securities should be
offered, and the amount of any offering, Citicorp will take into account
statements of the Board of Governors of the Federal Reserve System, Citicorp's
primary banking regulator, to the effect that such securities may qualify as
Tier I capital, as well as the federal income tax treatment of the Subordinated
Debt Securities and the Capital Securities and the cost of alternative sources
of Tier I capital and other funding.
THE TRUSTS
Each of the Trusts is a statutory business trust formed under Delaware law
pursuant to (i) a separate declaration of trust executed by the Company, as
sponsor for such trust (the "Sponsor") and the Trustees (as defined herein) for
such trust and (ii) the filing of a certificate of trust with the Delaware
Secretary of State. Each declaration will be amended and restated in its
entirety (each, as so amended and restated, a "Declaration") before the issuance
of the Capital Securities. Each Trust exists for the exclusive purposes of (i)
issuing the Capital Securities and common securities representing undivided
beneficial interests in the assets of such Trust (the "Common Securities" and,
together with the Capital Securities, the "Trust Securities"), (ii) investing
the gross proceeds of the Trust Securities in the Subordinated Debt Securities,
and (iii) engaging in only those other activities necessary or incidental
thereto. The Declaration will provide that no amendments that adversely affect
the holders of a class of Trust Securities may be effected without the consent
of a majority in liquidation amount of the outstanding Trust Securities of such
class. All of the Common Securities will be directly or indirectly owned by the
Company. The Common Securities will rank pari passu, and payments will be made
thereon pro rata, with the Capital Securities except that upon an event of
default under the Declaration, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Capital Securities. The Company will, directly or indirectly, acquire Common
Securities in an aggregate liquidation amount equal to approximately 3 percent
of the total capital of each Trust. Each Trust has a term of approximately 55
years, but may earlier terminate as provided in the Declaration. Each Trust's
business and affairs will be conducted by the trustees (the "Trustees")
appointed by the Company, as the direct or indirect holder of all the Common
Securities. The holder of the Common Securities will be entitled to appoint,
remove or replace any of, or increase or reduce the number of, the Trustees of a
Trust, subject to certain restrictions. The duties and obligations of the
Trustees shall be governed by the Declaration of such Trust. Each Trust will
have one or more Trustees who are employees or officers
4
<PAGE>
of or affiliated with the Company (the "Regular Trustees"). One Trustee of each
Trust will be a financial institution which will be unaffiliated with the
Company and which shall act as institutional trustee and as indenture trustee
for purposes of the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), pursuant to the terms set forth in a Prospectus Supplement (the
"Institutional Trustee"). In addition, unless the Institutional Trustee
maintains its principal place of business in the State of Delaware, and
otherwise meets the requirements of applicable law, one Trustee of each Trust
will have its principal place of business or reside in the State of Delaware
(the "Delaware Trustee"). The Company will pay all fees and expenses related to
the Trusts and the offering of Trust Securities, the payment of which will be
guaranteed by the Company. The office of the Delaware Trustee for each Trust in
the State of Delaware, and its principal place of business, is Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890.
DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Subordinated Debt Securities may be issued from time to time in one or more
series under an Indenture (the "Indenture"), between the Company and Wilmington
Trust Company, as Trustee (the "Debt Trustee"). As used herein, the term
"Indenture" includes any supplemental indenture under which a particular class
of Subordinated Debt Securities may be issued. The terms of the Subordinated
Debt Securities will include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act. The following summary
of the material terms does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference to,
the Indenture, which is filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, and the Trust Indenture Act. Whenever
particular provisions or defined terms in the Indenture are referred to herein,
such provisions or defined terms are incorporated by reference herein. Section
and Article references used herein are references to provisions of the Indenture
unless otherwise noted.
GENERAL
The Subordinated Debt Securities will be unsecured, subordinated
obligations of the Company. The Indenture does not limit the aggregate principal
amount of Subordinated Debt Securities which may be issued thereunder and
provides that the Subordinated Debt Securities may be issued from time to time
in one or more series. The Subordinated Debt Securities are issuable in one or
more series pursuant to an indenture supplemental to the Indenture or a
resolution of the Company's Board of Directors (each, a "Supplemental
Indenture").
In the event Subordinated Debt Securities are issued to a Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
such Trust, such Subordinated Debt Securities subsequently may be distributed
pro rata to the holders of such Trust Securities in connection with the
dissolution of such Trust upon the occurrence of certain events described in the
Prospectus Supplement relating to such Trust Securities. Only one series of
Subordinated Debt Securities will be issued to a Trust or a trustee of such
trust in connection with the issuance of Trust Securities by such Trust.
Reference is made to the Prospectus Supplement relating to the particular
Subordinated Debt Securities being offered thereby for the following terms: (1)
the designation of such Subordinated Debt Securities; (2) the aggregate
principal amount of such Subordinated Debt Securities; (3) the percentage of
their principal amount at which, and the denominations in which, such
Subordinated Debt Securities will be issued; (4) the date or dates on which such
Subordinated Debt Securities will mature and the right, if any, to extend or
shorten such date or dates; (5) the rate or rates, if any, per annum, at which
such Subordinated Debt Securities will bear interest, or the method of
determination of such rate or rates; (6) the date or dates from which such
interest shall accrue, the interest payment dates on which such interest will be
payable or the manner of determination of such interest payment dates and the
record dates for the determination of holders to whom interest is payable on any
such interest payment dates; (7) the right, if any, to extend the interest
payment periods and the maximum duration of such extension; (8) the period or
periods, if any, within which, the price or prices at which, and the terms and
conditions upon which such Subordinated Debt Securities may be redeemed,
converted or exchanged in whole or in part; (9) the form of such Subordinated
Debt Securities; and (10) any other specific terms of the Subordinated Debt
Securities. Principal, premium, if any, and interest, if any, will be payable,
and the Subordinated Debt Securities offered hereby will be transferable, at the
corporate trust office of the Debt Trustee in New York, New York, provided that
payment of interest, if any, may be made at the option of the Company by check
mailed to the address of the person entitled thereto as it appears in the
Security Register.
If a Prospectus Supplement specifies that a series of Subordinated Debt
Securities is denominated in a currency or currency unit other than United
States dollars, such Prospectus Supplement shall also specify the
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denomination in which such Subordinated Debt Securities will be issued and the
coin or currency in which the principal, premium, if any, and interest, if any,
on such Subordinated Debt Securities will be payable, which may be United States
dollars based upon the exchange rate for such other currency or currency unit
existing on or about the time a payment is due.
The covenants contained in the Indenture would not necessarily afford
protection to holders of the Subordinated Debt Securities in the event of a
decline in credit quality resulting from takeovers, recapitalization or similar
restructurings.
FORM, EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Subordinated Debt Securities will be issued in fully registered form without
coupons and in denominations of $1,000 and multiples of $1,000. No service
charge will be made for any transfer or exchange of the Subordinated Debt
Securities, but the Company or the Debt Trustee may require payment of a sum
sufficient to cover any tax or other government charge payable in connection
therewith.
Unless otherwise provided in the applicable Prospectus Supplement,
principal and premium, if any, or interest, if any, will be payable and the
Subordinated Debt Securities may be surrendered for payment or transferred at
the offices of the Debt Trustee as paying and authenticating agent, provided
that payment of interest on registered securities may be made at the option of
the Company by check mailed to the address of the person entitled thereto as it
appears in the Security Register.
BOOK-ENTRY SUBORDINATED DEBT SECURITIES
The Subordinated Debt Securities of a series may be issued in whole or in
part in the form of one or more global certificates ("Global Securities") that
will be deposited with, or on behalf of, a depositary (the "Global Depositary"),
or its nominee, identified in the Prospectus Supplement relating to such series.
In such a case, one or more Global Securities will be issued in a denomination
or aggregate denomination equal to the portion of the aggregate principal amount
of Outstanding Subordinated Debt Securities of the series to be represented by
such Global Security or Securities. Unless and until it is exchanged in whole or
in part for Subordinated Debt Securities in definitive registered form, a Global
Security may not be registered for transfer or exchange except as a whole by the
Global Depositary for such Global Security to a nominee for such Global
Depositary and except in the circumstances described in the applicable
Prospectus Supplement.
The terms of the depositary arrangement with respect to any portion of a
series of Subordinated Debt Securities to be represented by a Global Security
and a description of the Global Depositary will be provided in the applicable
Prospectus Supplement.
SUBORDINATION
The Subordinated Debt Securities will be unsecured obligations of the
Company and will be subordinated and junior in right of payment to certain other
indebtedness of the Company to the extent set forth in the applicable Prospectus
Supplement.
CERTAIN COVENANTS OF THE COMPANY
Securities Issued to a Trust. If Subordinated Debt Securities are issued to
a Trust or a trustee of such trust in connection with the issuance of Trust
Securities by such Trust and (i) there shall have occurred any event that would
constitute an Event of Default (as defined herein) or (ii) the Company shall be
in default with respect to its payment of any obligations under the related
Capital Securities Guarantee, then (a) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase,
acquire for value or make a liquidation payment with respect to, any of its
capital stock (other than (x) purchases or acquisitions of shares of Citicorp
Common Stock in connection with the satisfaction by Citicorp of its obligations
under any employee benefit plans or any other contractual obligation of Citicorp
(other than a contractual obligation ranking pari passu with or junior in right
of payment to the Subordinated Debt Securities) entered into prior to the
issuance of the Subordinated Debt Securities, (y) as a result of a
reclassification of Citicorp capital stock or the exchange or conversion of one
class or series of Citicorp capital stock for another class or series of
Citicorp capital stock or (z) the purchase of fractional
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interests in shares of Citicorp capital stock pursuant to the conversion or
exchange provisions of such Citicorp capital stock or the security being
converted or exchanged), and (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company that rank pari passu with or junior in
right of payment to such Subordinated Debt Securities.
If Subordinated Debt Securities are issued to a Trust or a trustee of such
trust in connection with the issuance of Trust Securities by such Trust and the
Company shall have given notice of its election to defer payments of interest on
such Subordinated Debt Securities by extending the interest payment period as
provided in the Indenture and such period, or any extension thereof, shall be
continuing, then (a) subject to certain limited exceptions, the Company shall
not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire for value or make a liquidation payment with respect
to, any of its capital stock, and (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company which rank pari passu with or junior in
right of payment to such Subordinated Debt Securities.
In the event Subordinated Debt Securities are issued to a Trust or a
trustee of such trust in connection with the issuance of Trust Securities of
such Trust, for so long as such Trust Securities remain outstanding, the Company
will covenant (i) to directly or indirectly maintain 100 percent ownership of
the Common Securities of such Trust; provided, however, that any permitted
successor of the Company under the Indenture may succeed to the Company's
ownership of such Common Securities, (ii) to use its reasonable efforts to cause
such Trust (a) to remain a statutory business trust, except in connection with
the distribution of Subordinated Debt Securities to the holders of Trust
Securities in liquidation of such Trust, the redemption of all of the Trust
Securities of such Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration of such Trust, and (b) to continue not to
be classified as an association taxable as a corporation or a partnership for
United States federal income tax purposes, (iii) to use its reasonable efforts
to cause each holder of Trust Securities to be treated as owning an undivided
beneficial interest in the Subordinated Debt Securities and (iv) if at any time
the Trust or the Institutional Trustee shall be 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,
to pay as additional interest such additional amounts as shall be required so
that the net amounts received and retained by the Trust or the Institutional
Trustee after paying any such taxes, duties, assessments or other governmental
charges will be not less than the amounts the Trust would have received had no
such taxes, duties, assessments or other governmental charges been imposed.
LIMITATION ON MERGERS AND SALES OF ASSETS
The Company shall not consolidate with, or merge into, any corporation or
convey or transfer its properties and assets substantially as an entirety to any
Person unless (a) the successor entity shall be a corporation organized under
the laws of any domestic or foreign jurisdiction and shall expressly assume the
obligations of the Company under the Indenture and (b) after giving effect
thereto, no Event of Default shall have occurred and be continuing under the
Indenture.
EVENTS OF DEFAULT, WAIVER AND NOTICE
The Indenture provides than any one or more of the following described
events which has occurred and is continuing constitutes an "Event of Default"
with respect to each series of Subordinated Debt Securities:
(a) default for 30 days in payment of any interest on the Subordinated
Debt Securities of that series, including any Additional Interest in
respect thereof, when due; provided, however, that a valid extension of the
interest payment period by the Company shall not constitute a default in
the payment of interest for this purpose; or
(b) default in payment of principal and premium, if any, on the
Subordinated Debt Securities of that series when due either at maturity,
upon redemption, by declaration or otherwise; provided, however, that a
valid extension of the maturity of such Subordinated Debt Securities shall
not constitute a default for this purpose; or
(c) default by the Company in the performance of any other of the
covenants or agreements in the Indenture which shall not have been remedied
for a period of 90 days after notice; or
(d) certain events of bankruptcy, insolvency or reorganization of the
Company; or
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(e) in the event Subordinated Debt Securities are issued to a Trust or
a trustee of such Trust in connection with the issuance of Trust Securities
by such Trust, the voluntary or involuntary dissolution, winding-up or
termination of such Trust, except in connection with the distribution of
Subordinated Debt Securities to the holders of Trust Securities in
liquidation of such Trust, the redemption of all of the Trust Securities of
such Trust, or certain mergers, consolidations or amalgamations, each as
permitted by the Declaration of such Trust.
The Indenture provides that the Debt Trustee may withhold notice to the
holders of a series of Subordinated Debt Securities (except in payment of
principal or of interest or premium on the Subordinated Debt Securities) if the
Trustee considers it in the interest of such holders to do so.
The Indenture provides that, (a) if an Event of Default due to the default
in the payment of principal, interest or premium, if any, on any series of
Subordinated Debt Securities shall have occurred and be continuing, either the
Debt Trustee or the holders of 25 percent in principal amount of the
Subordinated Debt Securities of all series affected thereby then outstanding may
declare the principal of all such Subordinated Debt Securities to be due and
payable immediately, and (b) if an Event of Default resulting from default in
the performance of any other of the covenants or agreements in the Indenture or
certain events of bankruptcy, insolvency and reorganization of the Company shall
have occurred and be continuing, either the Debt Trustee or the holders of 25
percent in principal amount of all Subordinated Debt Securities then outstanding
(treated as one class) may declare the principal of all Subordinated Debt
Securities to be due and payable immediately, but upon certain conditions such
declarations may be annulled and past defaults may be waived (except defaults in
payment of principal of or interest or premium on the Subordinated Debt
Securities) by the holders of a majority in principal amount of the Subordinated
Debt Securities of such series (or of all series, as the case may be) then
outstanding.
The holders of a majority in principal amount of the Subordinated Debt
Securities of any and all series affected and then outstanding shall have the
right, subject to certain restrictions, to direct the time, method and place of
conducting any proceeding for any remedy available to the Debt Trustee under the
Indenture, provided that the holders of the Subordinated Debt Securities shall
have offered to the Debt Trustee reasonable indemnity against expenses and
liabilities. The Indenture requires the annual filing by the Company with the
Debt Trustee of a certificate as to the absence of certain defaults under the
Indenture.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Debt
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Subordinated Debt Securities of all series affected by
such modification at the time outstanding, to modify the Indenture or any
supplemental indenture or the rights of the holders of the Subordinated Debt
Securities; provided that no such modification shall (i) extend the fixed
maturity of any Security, or reduce the principal amount thereof (including in
the case of a discounted Security the amount payable thereon in the event of
acceleration or the amount provable in bankruptcy) or any redemption premium
thereon, or reduce the rate or extend the time of payment of interest thereon,
or make the principal of, or interest or premium on, the Subordinated Debt
Securities payable in any coin or currency other than that provided in the
Subordinated Debt Securities, or impair or affect the right of any holder of
Subordinated Debt Securities to institute suit for the payment thereof or the
right of prepayment, if any, at the option of the holder, without the consent of
the holder of each Security so affected, or (ii) reduce the aforesaid percentage
of Subordinated Debt Securities the consent of the holders of which is required
for any such modification without the consent of the holders of each Security
affected.
DEFEASANCE AND DISCHARGE
The Indenture provides that the Company, at the Company's option: (a) will
be discharged from any and all obligations in respect of the Subordinated Debt
Securities of a series (except for certain obligations to register the transfer
or exchange of Subordinated Debt Securities, replace stolen, lost or mutilated
Subordinated Debt Securities, maintain paying agencies and hold moneys for
payment in trust) or (b) need not comply with certain restrictive covenants of
the Indenture (including those described under "Certain Covenants of the
Company"), in each case if the Company deposits, in trust with the Debt Trustee
or the Defeasance Agent, money or U.S. Government Obligations which through the
payment of interest thereon and principal thereof in accordance with their terms
will provide money, in an amount sufficient to pay all the principal (including
any mandatory sinking fund payments) of, and interest and premium, if any, on,
the Subordinated Debt Securities of such series on the dates such payments are
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due in accordance with the terms of such Subordinated Debt Securities, and if
certain other conditions are met. To exercise any such option, the Company is
required to deliver to the Debt Trustee and the Defeasance Agent, if any, an
opinion of counsel to the effect that (i) the deposit and related defeasance
would not cause the holders of the Subordinated Debt Securities of such series
to recognize income, gain or loss for U.S. federal income tax purposes and, in
the case of a Discharge pursuant to clause (a), such opinion shall be
accompanied by a private letter ruling to the effect received by Citicorp from
the United States Internal Revenue Service or a revenue ruling pertaining to a
comparable form of transaction to the effect published by the United States
Internal Revenue Service, and (ii) if listed on any national securities
exchange, such Subordinated Debt Securities would not be delisted from such
exchange as a result of the exercise of such option.
GOVERNING LAW
The Indenture and the Subordinated Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York.
THE DEBT TRUSTEE
The Company or its affiliates maintain certain accounts and other banking
relationships with the Debt Trustee and its affiliates.
DESCRIPTION OF THE CAPITAL SECURITIES
Each Trust may issue, from time to time, only one series of Capital
Securities having terms described in the Prospectus Supplement relating thereto.
The Declaration of each Trust authorizes the Regular Trustees of such Trust to
issue on behalf of such Trust one series of Capital Securities. The Declaration
will be qualified as an indenture under the Trust Indenture Act. The Capital
Securities will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferred or other special rights or
such restrictions as shall be set forth in the Declaration or made part of the
Declaration by the Trust Indenture Act and which will substantially mirror the
terms of the Subordinated Debt Securities held by the Trust and described in the
Prospectus Supplement relating thereto. Reference is made to the Prospectus
Supplement relating to the Capital Securities of the Trust for specific terms,
including (i) the distinctive designation of such Capital Securities; (ii) the
number of Capital Securities issued by such Trust; (iii) the annual distribution
rate (or method of determining such rate) for Capital Securities issued by such
Trust and the date or dates upon which such distributions shall be payable; (iv)
whether distributions on Capital Securities issued by such Trust shall be
cumulative, and, in the case of Capital Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Capital Securities issued by such Trust shall
be cumulative; (v) the amount or amounts which shall be paid out of the assets
of such Trust to the holders of Capital Securities of such Trust upon voluntary
or involuntary dissolution, winding-up or termination of such Trust; (vi) the
obligation, if any, of such Trust to purchase or redeem Capital Securities
issued by such Trust and the price or prices at which, the period or periods
within which, and the terms and conditions upon which, Capital Securities issued
by such Trust shall be purchased or redeemed, in whole or in part, pursuant to
such obligation; (vii) the voting rights, if any, of Capital Securities issued
by such Trust in addition to those required by law, including the number of
votes per Capital Security and any requirement for the approval by the holders
of Capital Securities, or of Capital Securities issued by one or more Trusts, or
of both, as a condition to specified action or amendments to the Declaration of
such Trust; (viii) the terms and conditions, if any, upon which the Subordinated
Debt Securities may be distributed to holders of Capital Securities; (ix) if
applicable, any securities exchange upon which the Capital Securities shall be
listed; and (x) any other relevant rights, preferences, privileges, limitations
or restrictions of Capital Securities issued by such Trust not inconsistent with
the Declaration of such Trust or with applicable law. Pursuant to the Indenture,
for as long as Subordinated Debt Securities are held by a Trust, any amendment
to the Indenture that would require the consent of a majority of the holders of
Subordinated Debt Securities or all such holders will require the consent of a
majority in liquidation amount of the Trust Securities of such Trust or all
holders of such Trust Securities, respectively. Unless otherwise specified in
the applicable Prospectus Supplement, a redemption of Subordinated Debt
Securities will result in a redemption of a corresponding amount of Trust
Securities. Citicorp's obligations under the Capital Securities Guarantees,
taken together with its obligations under the Subordinated Debt Securities, the
Indenture and the Declarations, will provide a full and unconditional guarantee
on a subordinated basis by Citicorp of payments due on the Capital Securities.
Certain United States federal income tax considerations applicable to any
offering of Capital Securities will be described in the Prospectus Supplement
relating thereto.
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In connection with the issuance of Capital Securities, each Trust will
issue one series of Common Securities. The Declaration of each Trust authorizes
the Regular Trustees of such trust to issue on behalf of such Trust one series
of Common Securities having such terms including distributions, redemption,
voting, liquidation rights or such restrictions as shall be set forth therein.
Except for voting rights, the terms of the Common Securities issued by a Trust
will be substantially identical to the terms of the Capital Securities issued by
such trust and the Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Capital Securities except that, upon an event of
default under the Declaration, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Capital Securities. Except in certain limited circumstances, the Common
Securities will also carry the right to vote to appoint, remove or replace any
of the Trustees of a Trust. All of the Common Securities of each Trust will be
directly or indirectly owned by the Company.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If an Event of Default under the Declaration of a Trust occurs and is
continuing, then the holders of Capital Securities of such Trust would rely on
the enforcement by the Institutional Trustee of its rights as a holder of the
applicable series of Subordinated Debt Securities against the Company. In
addition, the holders of a majority in liquidation amount of the Capital
Securities of such Trust will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Institutional
Trustee or to direct the exercise of any trust or power conferred upon the
Institutional Trustee under the applicable Declaration, including the right to
direct the Institutional Trustee to exercise the remedies available to it as a
holder of the Subordinated Debt Securities. If the Institutional Trustee fails
to enforce its rights under the applicable series of Subordinated Debt
Securities, a holder of Capital Securities of such Trust may institute a legal
proceeding directly against the Company to enforce the Institutional Trustee's
rights under the applicable series of Subordinated Debt Securities without first
instituting any legal proceeding against the Institutional Trustee or any other
person or entity. Notwithstanding the foregoing, if an Event of Default under
the applicable Declaration has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
applicable series of Subordinated Debt Securities on the date such interest or
principal is otherwise payable (or in the case of redemption, on the redemption
date), then a holder of Capital Securities of such Trust may directly institute
a proceeding for enforcement of payment to such holder of the principal of or
interest on the applicable series of Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Capital
Securities of such holder (a "Direct Action") on or after the respective due
date specified in the applicable series of Subordinated Debt Securities. In
connection with such Direct Action, the Company will be subrogated to the rights
of such holder of Capital Securities under the applicable Declaration to the
extent of any payment made by the Company to such holder of Capital Securities
in such Direct Action.
DESCRIPTION OF THE CAPITAL SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Capital
Securities Guarantees which will be executed and delivered by Citicorp for the
benefit of the holders from time to time of Capital Securities. Each Capital
Securities Guarantee will be qualified as an indenture under the Trust Indenture
Act. Wilmington Trust Company will act as indenture trustee under each Capital
Securities Guarantee for purposes of the Trust Indenture Act (the "Capital
Guarantee Trustee"). The terms of each Capital Securities Guarantee will be
those set forth in such Capital Securities Guarantee and those made part of such
Capital Securities Guarantee by the Trust Indenture Act. This summary of the
material terms of the Capital Securities Guarantees does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the form of Capital Securities Guarantee, which
is filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, and the Trust Indenture Act. Each Capital Securities Guarantee
will be held by the Capital Guarantee Trustee for the benefit of the holders of
the Capital Securities of the applicable Trust.
GENERAL
Pursuant to each Capital Securities Guarantee, the Company will irrevocably
agree, to the extent set forth therein, to pay in full, to the holders of the
Capital Securities issued by a Trust, the Guarantee Payments (as defined herein)
(except to the extent paid by such Trust), as and when due, regardless of any
defense, right of set-off or counterclaim which such Trust may have or assert.
The following payments with respect to Capital Securities issued by a Trust to
the extent not paid by such Trust (the "Guarantee Payments"), will be subject to
the Capital
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Securities Guarantee thereon (without duplication): (i) any accrued and unpaid
distributions which are required to be paid on such Capital Securities, to the
extent such Trust shall have funds available therefor; (ii) the redemption
price, including all accrued and unpaid distributions to the date of payment
(the "Redemption Price"), to the extent such Trust has funds available therefor
with respect to any Capital Securities called for redemption by such Trust and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
such Trust (other than in connection with the distribution of Subordinated Debt
Securities to the holders of Capital Securities or the redemption of all of the
Capital Securities), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid distributions on such Capital Securities to the date
of payment, to the extent such Trust has funds available therefor and (b) the
amount of assets of such Trust remaining available for distribution to holders
of such Capital Securities in liquidation of such Trust. The redemption price
and liquidation amount will be fixed at the time the Capital Securities are
issued. The Company's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Company to the holders of Capital
Securities or by causing the applicable Trust to pay such amounts to such
holders.
Each Capital Securities Guarantee will not apply to any payment of
distributions except to the extent such Trust shall have funds available
therefor. If the Company does not make interest payments on the Subordinated
Debt Securities purchased by a Trust, such Trust will not pay distributions on
the Capital Securities issued by such Trust and will not have funds available
therefor. See "Description of the Subordinated Debt Securities -- Certain
Covenants of the Company." The Capital Securities Guarantees, when taken
together with the Company's obligations under the Subordinated Debt Securities,
the Indenture and the Declarations, including its obligations in the Indenture
to pay costs, expenses, debts and liabilities of such Trust (other than with
respect to the Trust Securities), will provide a full and unconditional
guarantee on a subordinated basis by the Company of payments due on the Capital
Securities.
The Company has also agreed separately to irrevocably guarantee the
obligations of the Trusts with respect to the Common Securities (the "Common
Securities Guarantees") to the same extent as the Capital Securities Guarantees,
except that upon an Event of Default under the Indenture, holders of Capital
Securities shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Capital Securities Guarantee, the Company will covenant that, so
long as any Capital Securities issued by the applicable Trust remain
outstanding, if there shall have occurred any event that would constitute an
event of default under such Capital Securities Guarantee or the Declaration of
such Trust, then (a) the Company shall not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase, acquire for value or
make a liquidation payment with respect to, any of its capital stock (other than
(i) purchases or acquisitions of shares of Citicorp Common Stock in connection
with the satisfaction by Citicorp of its obligations under any employee benefit
plans or any other contractual obligation of Citicorp (other than a contractual
obligation ranking pari passu with or junior in right of payment to the
Subordinated Debt Securities issued to the related Trust) entered into prior to
issuance of the Subordinated Debt Securities, (ii) as a result of a
reclassification of Citicorp capital stock or the exchange or conversion of one
class or series of Citicorp capital stock for another class or series of
Citicorp capital stock or (iii) the purchase of fractional interests in shares
of Citicorp capital stock pursuant to the conversion or exchange provisions of
such Citicorp capital stock or the security being converted or exchanged) and
(b) the Company shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the Company
which rank pari passu with or junior in right of payment to such Subordinated
Debt Securities.
MODIFICATION OF THE CAPITAL SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Capital Securities (in which case no vote will be required), each
Capital Securities Guarantee may be amended only with the prior approval of the
holders of not less than a majority in liquidation amount of the outstanding
Capital Securities issued by the applicable Trust. The manner of obtaining any
such approval of holders of such Capital Securities will be as set forth in an
accompanying Prospectus Supplement. All guarantees and agreements contained in a
Capital Securities Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Capital Securities of the applicable Trust then outstanding.
TERMINATION
Each Capital Securities Guarantee will terminate as to the Capital
Securities issued by the applicable Trust (a) upon full payment of the
Redemption Price of all Capital Securities of such Trust, (b) upon distribution
of the
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Subordinated Debt Securities held by such Trust to the holders of the Capital
Securities of such Trust or (c) upon full payment of the amounts payable in
accordance with the Declaration of such Trust upon liquidation of such Trust.
Each Capital Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Capital Securities
issued by the applicable Trust must restore payment of any sums paid under such
Capital Securities or such Capital Securities Guarantee.
EVENTS OF DEFAULT
An event of default under a Capital Securities Guarantee will occur upon
the failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Capital Securities
relating to such Capital Securities Guarantee have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Capital Guarantee Trustee in respect of the Capital Securities Guarantee or to
direct the exercise of any trust or power conferred upon the Capital Guarantee
Trustee under such Capital Securities Guarantee. If the Capital Guarantee
Trustee fails to enforce such Capital Securities Guarantee, any holder of
Capital Securities relating to such Capital Securities Guarantee may institute a
legal proceeding directly against the Company to enforce the Capital Guarantee
Trustee's rights under such Capital Securities Guarantee, without first
instituting a legal proceeding against the relevant Trust, the Capital Guarantee
Trustee or any other person or entity. Notwithstanding the foregoing, if the
Company has failed to make a guarantee payment, a holder of Capital Securities
may directly institute a proceeding against the Company for enforcement of the
Capital Securities Guarantee for such payment. The Company waives any right or
remedy to require that any action be brought first against such Trust or any
other person or entity before proceeding directly against the Company.
STATUS OF THE CAPITAL SECURITIES GUARANTEES
The Capital Securities Guarantees will constitute unsecured obligations of
the Company and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Company, (ii) pari passu with the most senior preferred
or preference stock now or hereafter issued by the Company and with any
guarantee now or hereafter entered into by Citicorp in respect of any preferred
or preference stock of any affiliate of the Company, and (iii) senior to the
Company's common stock. The terms of the Capital Securities provide that each
holder of Capital Securities issued by the applicable Trust by acceptance
thereof agrees to the subordination provisions and other terms of the Capital
Securities Guarantee relating thereto.
The Capital Securities Guarantees will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
Capital Securities Guarantee without instituting a legal proceeding against any
other person or entity).
INFORMATION CONCERNING THE CAPITAL GUARANTEE TRUSTEE
The Capital Guarantee Trustee, prior to the occurrence of a default with
respect to a Capital Securities Guarantee, undertakes to perform only such
duties as are specifically set forth in such Capital Securities Guarantee and,
after default, shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to such
provisions, the Capital Guarantee Trustee is under no obligation to exercise any
of the powers vested in it by a Capital Securities Guarantee at the request of
any holder of Capital Securities, unless offered reasonable indemnity against
the costs, expenses and liabilities which might be incurred thereby.
The Company or its affiliates maintain certain accounts and other banking
relationships with the Capital Guarantee Trustee and its affiliates.
GOVERNING LAW
The Capital Securities Guarantees will be governed by and construed in
accordance with the laws of the State of New York.
EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBT SECURITIES AND THE CAPITAL SECURITIES GUARANTEE
As set forth in the Declaration, the sole purpose of each of the Trusts is
to issue the Trust Securities evidencing undivided beneficial interests in the
assets of each of the Trusts, and to invest the proceeds from such issuance and
sale in the Subordinated Debt Securities.
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As long as payments of interest and other payments are made when due on the
Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the following
factors: (i) the aggregate principal amount of Subordinated Debt Securities will
be equal to the sum of the aggregate stated liquidation amount of the Trust
Securities; (ii) the interest rate and the interest and other payment dates on
the Subordinated Debt Securities will match the distribution rate and
distribution and other payment dates for the Capital Securities; (iii) Citicorp
shall pay all, and the applicable Trust shall not be obligated to pay, directly
or indirectly, all costs, expenses, debts, and obligations of the applicable
Trust (other than with respect to the Trust Securities); and (iv) the
Declaration further provides that the Citicorp Trustees shall not, and shall not
cause or permit the applicable Trust to, among other things, engage in any
activity that is not consistent with the purposes of the applicable Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Capital Securities (to the extent funds therefor are
available) are guaranteed by Citicorp as and to the extent set forth under
"Description of the Capital Securities Guarantees." If Citicorp does not make
interest payments on the Subordinated Debt Securities purchased by the
applicable Trust, it is expected that the applicable Trust will not have
sufficient funds to pay distributions on the Capital Securities. The Capital
Securities Guarantee does not apply to any payment of distributions unless and
until the applicable Trust has sufficient funds for the payment of such
distributions. The Capital Securities Guarantee covers the payment of
distributions and other payments on the Capital Securities only if and to the
extent that Citicorp has made a payment of interest or principal on the
Subordinated Debt Securities held by the applicable Trust as its sole asset. The
Capital Securities Guarantees, when taken together with Citicorp's obligations
under the Subordinated Debt Securities and the Indenture and its obligations
under the Declarations, including its obligations in the Indenture to pay costs,
expenses, debts and liabilities of the applicable Trust (other than with respect
to the Trust Securities), provide a full and unconditional guarantee on a
subordinated basis by Citicorp of amounts payable on the Capital Securities.
Notwithstanding the foregoing, if Citicorp fails to make interest or other
payments on the Subordinated Debt Securities when due (taking account of any
Extension Period described in any Prospectus Supplement), or if any other Event
of Default occurs under the Indenture, the Declaration provides a mechanism
whereby the holders of the Capital Securities, using the procedures described in
"Description of the Capital Securities -- Book-Entry Only Issuance -- The
Depository Trust Company" and "-- Voting Rights" in any accompanying Prospectus
Supplement, may direct the Institutional Trustee to enforce its rights under the
Subordinated Debt Securities. If the Institutional Trustee fails to enforce its
rights under the Subordinated Debt Securities, a holder of Capital Securities
may institute a legal proceeding against Citicorp to enforce the Institutional
Trustee's rights under the Subordinated Debt Securities without first
instituting any legal proceeding against the Institutional Trustee or any other
person or entity. Notwithstanding the foregoing, if an event of default under
the Declaration (a "Declaration Event of Default") has occurred and is
continuing and such event is attributable to the failure of Citicorp to pay
interest or principal on the Subordinated Debt Securities on the date such
interest or principal is otherwise payable (or in the case of redemption on the
redemption date), then a holder of Capital Securities may institute a Direct
Action for payment on or after the respective due date specified in the
Subordinated Debt Securities. In connection with such Direct Action, Citicorp
will be subrogated to the rights of such holder of Capital Securities under the
Declaration to the extent of any payment made by Citicorp to such holder of
Capital Securities in such Direct Action. Citicorp, under the Capital Securities
Guarantee, acknowledges that the Guarantee Trustee shall enforce the Capital
Securities Guarantee on behalf of the holders of the Capital Securities. If
Citicorp fails to make payments under the Capital Securities Guarantee, the
Capital Securities Guarantee provides a mechanism whereby the holders of the
Capital Securities may direct the Guarantee Trustee to enforce its rights
thereunder. Any holder of Capital Securities may institute a legal proceeding
directly against Citicorp to enforce the Guarantee Trustee's rights under the
Capital Securities Guarantee without first instituting a legal proceeding
against the applicable Trust, the Guarantee Trustee, or any other person or
entity.
PLAN OF DISTRIBUTION
Citicorp may sell the Subordinated Debt Securities and any Trust may sell
Capital Securities in any of, or any combination of, the following ways: (i)
directly to purchasers, (ii) through agents and (iii) through underwriters or
dealers. Such underwriters, dealers or agents may be affiliates of Citicorp, and
offers or sales of such securities may include secondary market transactions by
affiliates of Citicorp.
Offers to purchase Offered Securities may be solicited directly by Citicorp
and/or any Trust, as the case may be, or by agents designated by Citicorp and/or
any Trust, as the case may be, from time to time. Any such agent, who may
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be deemed to be an underwriter as that term is defined in the Securities Act,
involved in the offer or sale of the Offered Securities in respect of which this
Prospectus is delivered will be named, and any commissions payable by Citicorp
to such agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agency will be acting on a best
efforts basis for the period of its appointment (ordinarily five business days
or less). Agents, dealers and underwriters may be customers of, engage in
transactions with, or perform services for the Company in the ordinary course of
business.
If an underwriter or underwriters are utilized in the sale, Citicorp will
execute an underwriting agreement with such underwriters at or prior to the time
of sale to them and the names of the underwriters and the terms of the
transaction will be set forth in the Prospectus Supplement, which will be used
by the underwriters to make releases of the Offered Securities in respect of
which this Prospectus is delivered to the public.
If a dealer is utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, Citicorp and/or any Trust, as the case may
be, will sell such Offered Securities to the dealer, as principal. The dealer
may then resell such Offered Securities to the public at varying prices to be
determined by such dealer at the time of resale. The name of the dealer and the
terms of the transaction will be set forth in the Prospectus Supplement.
Agents, underwriters, and dealers may be entitled under the relevant
agreements to indemnification by Citicorp and/or any Trust, as the case may be,
against certain liabilities, including liabilities under the Securities Act.
This Prospectus and related Prospectus Supplement may be used by affiliates
of Citicorp in connection with offers and sales related to secondary market
transactions. Such affiliates may act as principal or agent in such
transactions. Such sales may be made at prices related to prevailing market
prices at the time of sale.
The participation of an affiliate of Citicorp in the offer and sale of the
Offered Securities will comply with the requirements of Rule 2720 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (the "NASD")
regarding underwriting securities of the affiliate. No NASD member participating
in offers and sales will execute a transaction in the Securities in a
discretionary account without the prior written specific approval of the
member's customer.
Underwriters, agents or their controlling persons may engage in
transactions with and perform services for Citicorp in the ordinary course of
business.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Capital
Securities will be passed upon on behalf of the Trusts by Morris, Nichols, Arsht
& Tunnell, special Delaware counsel to the Trusts. The validity of the
Subordinated Debt Securities and the Capital Securities Guarantee and certain
matters relating thereto will be passed upon for Citicorp by Stephen E. Dietz,
an Associate General Counsel of Citibank, N.A. Mr. Dietz owns or has the right
to acquire a number of shares of Common Stock of Citicorp equal to less than
0.01% of the outstanding Common Stock of Citicorp.
EXPERTS
The consolidated financial statements and schedules of Citicorp and its
subsidiaries as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, and the related consolidated balance
sheets of Citibank, N.A. and subsidiaries as of December 31, 1997 and 1996,
included in the 1997 Citicorp Annual Report and Form 10-K, have been
incorporated by reference herein, in reliance upon the reports (also
incorporated by reference herein) of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements and schedules of Travelers Group Inc.
as of December 31, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997, incorporated or included in Traveler's Annual
Report on Form 10-K for the year ended December 31, 1997, and incorporated by
reference herein, have been audited by KPMG Peat Marwick LLP, independent
certified public accountants, as set forth in their reports thereon (also
incorporated by reference herein), which reports state that KPMG Peat Marwick
LLP did not audit the consolidated financial statements of Salomon Inc and its
subsidiaries, appearing in Salomon Inc's Annual Report on Form 10-K for the year
ended December 31, 1996 (the "Salomon Financials"), as of December 31, 1996 and
for each of the two years in the period ended December 31, 1996 and that their
opinion with respect to any amounts derived from the Salomon Financials is based
on the report of Arthur Anderson LLP. The consolidated financial statements of
Travelers referred to above are incorporated by reference herein in reliance
upon such reports given upon the authority of said firms as experts in
accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN
CONNECTION WITH THE OFFER CONTAINED BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CITICORP, CITICORP CAPITAL III
OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF CITICORP OR CITICORP CAPITAL III SINCE THE DATE
HEREOF.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Summary ................................................................ S-4
Citicorp Summary Financial Data ........................................ S-8
Capitalization of Citicorp ............................................. S-9
Special Considerations ................................................. S-10
Use of Proceeds ........................................................ S-12
Accounting Treatment ................................................... S-13
The Trust .............................................................. S-13
Description of the Capital Securities .................................. S-14
Description of the Guarantee ........................................... S-23
Description of the Subordinated Debt Securities ........................ S-23
United States Federal Income Taxation .................................. S-28
ERISA Considerations ................................................... S-31
Underwriting ........................................................... S-31
Validity of Securities ................................................. S-33
PROSPECTUS
Available Information .................................................. 2
Incorporation of Certain Documents by Reference ........................ 2
Citicorp ............................................................... 3
Citicorp Ratios of Income to Fixed Charges ............................. 4
Use of Proceeds ........................................................ 4
The Trusts ............................................................. 4
Description of the Subordinated Debt Securities ........................ 5
Description of the Capital Securities .................................. 9
Description of the Capital Securities Guarantees ....................... 10
Effect of Obligations Under the Subordinated Debt Securities
and the Capital Securities Guarantee ................................. 12
Plan of Distribution ................................................... 13
Validity of Securities ................................................. 14
Experts ................................................................ 14
================================================================================
================================================================================
9,000,000 SECURITIES
CITICORP CAPITAL III
7.10% TRUST PREFERRED SECURITIES (TRUPS (R))
(LIQUIDATION AMOUNT $25 PER
CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY
[CITICORP LOGO (R)]
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PROSPECTUS SUPPLEMENT
JUNE 19, 1998
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SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
================================================================================
