<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-42575
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 30, 1997)
20,000,000 Securities
CITIGROUP CAPITAL V
7% Trust Preferred Securities (TRUPS-Registered Trademark-)
$25 liquidation amount
guaranteed to the extent set forth herein by
Citigroup Inc.
[LOGO]
---------
A brief description of the 7% Trust Preferred Securities
(TRUPS-Registered Trademark-) can be found under "Summary Information-- Q&A" in
this Prospectus Supplement.
The 7% Trust Preferred Securities (TRUPS-Registered Trademark-) have been
approved for listing on the New York Stock Exchange subject to official notice
of issuance. Trading of the 7% Trust Preferred Securities
(TRUPS-Registered Trademark-) is expected to begin within 30 days after they are
first issued.
WE URGE YOU TO CAREFULLY READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE
S-6, WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH THESE 7% TRUST PREFERRED
SECURITIES (TRUPS-REGISTERED TRADEMARK-), ALONG WITH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS, BEFORE YOU MAKE YOUR INVESTMENT DECISION.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus Supplement or the Prospectus to which it relates is truthful or
complete. 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>
PER TRUST PREFERRED
SECURITY TOTAL
------------------------- ----------------
<S> <C> <C>
Public offering price......................................................... $25.00 $500,000,000
Underwriting commissions to be paid by Citigroup Inc.......................... (1) (1)
Proceeds to Citigroup Capital V............................................... $25.00 $500,000,000
</TABLE>
- --------------
(1) Underwriting commissions of $0.7875 per Trust Preferred Security (or
$15,750,000 for all 7% Trust Preferred Securities
(TRUPS-Registered Trademark-)) will be paid by Citigroup Inc.; except that
for sales of 10,000 or more 7% Trust Preferred Securities
(TRUPS-Registered Trademark-) to a single purchaser, the commissions will be
$0.50 per Trust Preferred Security.
We expect that the 7% Trust Preferred Securities
(TRUPS-Registered Trademark-) will be ready for delivery in book-entry form only
through The Depository Trust Company on or about November 19, 1998.
"TRUPS" is a registered service mark of Salomon Smith Barney Inc.
--------------
Salomon Smith Barney
A.G. Edwards & Sons, Inc.
Merrill Lynch & Co.
Morgan Stanley Dean Witter
PaineWebber Incorporated
Prudential Securities Incorporated
November 13, 1998
<PAGE>
YOU SHOULD ONLY RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. WE HAVE NOT, AND THE
UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT
INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION,
YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE UNDERWRITERS ARE NOT, MAKING AN
OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AS WELL AS INFORMATION WE PREVIOUSLY
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND INCORPORATED BY REFERENCE,
IS ACCURATE AS OF THE DATE ON THE FRONT COVER OF THIS PROSPECTUS SUPPLEMENT
ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY
HAVE CHANGED SINCE THAT DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Summary Information--Q&A............................................................................................... S-3
Risk Factors........................................................................................................... S-6
The Company............................................................................................................ S-9
Use of Proceeds........................................................................................................ S-9
Ratio of Income to Combined Fixed Charges and Preferred Stock Dividends................................................ S-9
Accounting Treatment................................................................................................... S-9
Capitalization......................................................................................................... S-10
Description of the Preferred Securities................................................................................ S-11
Description of the Junior Subordinated Debt Securities................................................................. S-21
Description of Guarantee............................................................................................... S-26
Effect of Obligations Under the Junior Subordinated Debt Securities and the Guarantee.................................. S-28
United States Federal Income Taxation.................................................................................. S-29
ERISA Considerations................................................................................................... S-32
Underwriting........................................................................................................... S-33
Legal Matters.......................................................................................................... S-34
PROSPECTUS
Available Information.................................................................................................. 3
Incorporation of Certain Documents by Reference........................................................................ 4
Recent Developments.................................................................................................... 5
The Company............................................................................................................ 5
TRV Trusts............................................................................................................. 5
Use of Proceeds........................................................................................................ 6
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.............................................. 6
Description of Junior Subordinated Debt Securities..................................................................... 7
Description of Preferred Securities.................................................................................... 12
Description of Guarantees.............................................................................................. 14
Description of Capital Stock........................................................................................... 16
Description of Preferred Stock Offered Hereby.......................................................................... 20
Description of Depositary Shares....................................................................................... 22
Plan of Distribution................................................................................................... 24
Legal Matters.......................................................................................................... 25
Experts................................................................................................................ 26
</TABLE>
S-2
<PAGE>
SUMMARY INFORMATION--Q&A
The following information supplements, and should be read together with, the
information contained in other parts of this Prospectus Supplement and in the
accompanying Prospectus. This summary highlights selected information from this
Prospectus Supplement and the accompanying Prospectus to help you understand the
7% Trust Preferred Securities (TRUPS-Registered Trademark-) (the "Preferred
Securities"). You should carefully read this Prospectus Supplement and the
accompanying Prospectus to understand fully the terms of the Preferred
Securities as well as the tax and other considerations that are important to you
in making a decision about whether to invest in the Preferred Securities. You
should pay special attention to the "Risk Factors" section beginning on page S-6
of this Prospectus Supplement to determine whether an investment in the
Preferred Securities is appropriate for you.
WHAT ARE THE PREFERRED SECURITIES?
Each Preferred Security represents an undivided beneficial interest in the
assets of Citigroup Capital V (formerly Travelers Capital V) ("Citigroup
Capital"). Each Preferred Security will entitle the holder to receive quarterly
cash distributions as described in this Prospectus Supplement. Citigroup Capital
is offering 20,000,000 Preferred Securities at a price of $25 for each Preferred
Security.
WHO IS CITIGROUP CAPITAL?
Citigroup Capital is a Delaware business trust. Its principal place of
business is c/o Citigroup Inc., 153 East 53rd Street, New York, NY 10043, and
its telephone number is (212) 559-1000.
Citigroup Capital will sell its Preferred Securities to the public and its
common securities (the "Common Securities") to Citigroup Inc. (formerly
Travelers Group Inc.) ("Citigroup" or the "Company"). Citigroup Capital will use
the proceeds from these sales to buy a series of 7% junior subordinated
deferrable interest debentures due November 15, 2028 (the "Junior Subordinated
Debt Securities") from Citigroup with the same financial terms as the Preferred
Securities. Citigroup will guarantee payments made on the Preferred Securities.
There are four trustees of Citigroup Capital (the "Citigroup Capital
Trustees"). Two of the trustees are employees or officers of Citigroup (the
"Regular Trustees"). The Chase Manhattan Bank will act as the Institutional
Trustee (as defined in the accompanying Prospectus under the heading "TRV
Trusts") of Citigroup Capital and as Guarantee Trustee (as defined in the
accompanying Prospectus under the heading "Description of Guarantees"). Chase
Manhattan Bank Delaware will act as the Delaware Trustee (as defined in the
accompanying Prospectus under the heading "TRV Trusts") of Citigroup Capital.
WHO IS CITIGROUP INC.?
Citigroup's businesses provide a broad range of financial services to
consumer and corporate customers around the world. Among these businesses are
Citibank, Commercial Credit, Primerica Financial Services, Salomon Smith Barney,
SSBC Asset Management, Travelers Life & Annuity and Travelers Property Casualty.
On October 8, 1998, the Company changed its name from Travelers Group Inc.
to Citigroup Inc. in connection with the merger of Citicorp into a newly formed,
wholly owned subsidiary of the Company. The mailing address of Citigroup's
principal executive office is 153 East 53rd Street, New York, NY 10043, and its
telephone number is (212) 559-1000.
WHEN WILL YOU RECEIVE QUARTERLY DISTRIBUTIONS?
If you purchase the Preferred Securities, you are entitled to receive
cumulative cash distributions at an annual rate of 7% of the liquidation amount
of $25 per Preferred Security. Distributions will accumulate from the date
Citigroup Capital issues the Preferred Securities and will be paid quarterly in
arrears on January 15, April 15, July 15 and October 15 of each year, beginning
January 15, 1999.
WHEN CAN PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
So long as no event of default under the Junior Subordinated Debt Securities
has occurred and is continuing, Citigroup can, on one or more occasions, defer
interest payments on the Junior Subordinated Debt Securities for up
S-3
<PAGE>
to 20 consecutive quarterly periods. A deferral of interest payments cannot
extend, however, beyond the maturity date of the Junior Subordinated Debt
Securities (which is November 15, 2028).
If Citigroup defers interest payments on the Junior Subordinated Debt
Securities, Citigroup Capital will also defer distributions on the Preferred
Securities. During this deferral period, distributions will continue to accrue
on the Preferred Securities at an annual rate of 7% of the liquidation amount of
$25 per Preferred Security. Also, the deferred distributions will themselves
accrue interest at an annual rate of 7% (to the extent permitted by law). Once
Citigroup makes all interest payments on the Junior Subordinated Debt
Securities, with accrued interest, it can again postpone interest payments on
the Junior Subordinated Debt Securities if no event of default under the Junior
Subordinated Debt Securities has occurred and is continuing.
During any period in which Citigroup defers interest payments on the Junior
Subordinated Debt Securities, Citigroup will not be permitted to (with limited
exceptions):
- pay a dividend or make any distributions on its capital stock or redeem,
purchase, acquire or make a liquidation payment on any of its capital
stock, or make any guarantee payments with respect to the foregoing; or
- make an interest, principal or premium payment on, or repurchase or
redeem, any of its debt securities that rank equal with or junior to the
Junior Subordinated Debt Securities.
If Citigroup defers payments of interest on the Junior Subordinated Debt
Securities, the Preferred Securities will be treated as being issued with
original issue discount for United States federal income tax purposes. This
means you will be required to recognize interest income with respect to
distributions and include such amounts in your gross income for United States
federal income tax purposes even though you will not have received any cash
distributions relating to such interest income. See "United States Federal
Income Taxation--Interest Income and Original Issue Discount."
WHEN CAN CITIGROUP CAPITAL REDEEM THE PREFERRED SECURITIES?
Citigroup Capital must redeem all of the outstanding Preferred Securities
and Common Securities (together, the "Trust Securities") when the Junior
Subordinated Debt Securities are paid at maturity on November 15, 2028. In
addition, if Citigroup redeems any Junior Subordinated Debt Securities before
their maturity, Citigroup Capital will use the cash it receives from the
redemption to redeem, on a pro rata basis, Preferred Securities and Common
Securities having a combined liquidation amount equal to the principal amount of
the Junior Subordinated Debt Securities redeemed.
Citigroup can redeem some or all of the Junior Subordinated Debt Securities
before their maturity at 100% of their principal amount on one or more occasions
any time on or after November 15, 2003. Citigroup also has the option to redeem,
in whole or in part, the Junior Subordinated Debt Securities at any time if
certain changes in tax, investment company or bank regulatory law occur and
certain other conditions are satisfied, as more fully described under
"Description of the Preferred Securities--Special Event Redemption." In any
case, Citigroup will pay accrued interest to the date of redemption. Prior to
any such redemption, Citigroup will obtain any required regulatory approvals.
WHAT IS CITIGROUP'S GUARANTEE OF THE PREFERRED SECURITIES?
Citigroup will guarantee the Preferred Securities based on:
- its obligations to make payments on the Junior Subordinated Debt
Securities;
- its obligations under the Preferred Securities Guarantee (the
"Guarantee"); and
- its obligations under the Amended and Restated Declaration of Trust of
Citigroup Capital (the "Declaration"), which sets forth the terms of the
Trust.
Citigroup has irrevocably guaranteed that if a payment on the Junior
Subordinated Debt Securities is made to Citigroup Capital but, for any reason,
Citigroup Capital does not make the corresponding distribution or redemption
payment to the holders of the Preferred Securities, then Citigroup will make the
payments directly to the holders of the Preferred Securities. To avoid a double
payment to a holder of the Preferred Securities, if Citigroup makes a
S-4
<PAGE>
payment under the Guarantee, the holder's right to receive the corresponding
payment from Citigroup Capital will automatically be surrendered to Citigroup.
Citigroup's obligations under the Guarantee are:
- subordinate and junior in right of payment to its other liabilities;
- equal in rank to its most senior current or future preferred stock and to
any current or future guarantee of preferred or preference stock of any of
its subsidiaries; and
- senior to its common stock.
WHEN COULD THE JUNIOR SUBORDINATED DEBT SECURITIES BE DISTRIBUTED TO YOU?
Citigroup has the right to dissolve Citigroup Capital at any time. Prior to
any such dissolution, Citigroup will obtain any required regulatory approvals.
If Citigroup terminates Citigroup Capital, Citigroup Capital will redeem the
Preferred Securities by distributing the Junior Subordinated Debt Securities to
holders of the Preferred Securities and the Common Securities on a pro rata
basis. If the Junior Subordinated Debt Securities are distributed, Citigroup
will use it best efforts to list the Junior Subordinated Debt Securities on the
New York Stock Exchange ("NYSE") (or any other exchange on which the Preferred
Securities are then listed) in place of the Preferred Securities.
WILL THE PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE?
The Preferred Securities have been approved for listing on the NYSE subject
to official notice of issuance. Trading of the Preferred Securities is expected
to begin within 30 days after they are first issued.
WILL HOLDERS OF THE PREFERRED SECURITIES HAVE ANY VOTING RIGHTS?
Generally, the holders of the Preferred Securities will not have any voting
rights. See "Description of the Preferred Securities--Voting Rights."
IN WHAT FORM WILL THE PREFERRED SECURITIES BE ISSUED?
The Preferred Securities will be represented by one or more global
securities that will be deposited with and registered in the name of The
Depository Trust Company ("DTC") or its nominee. This means that you will not
receive a certificate for your Preferred Securities and that your broker will
maintain your position in the Preferred Securities. Citigroup Capital expects
that the Preferred Securities will be ready for delivery through DTC on or about
November 19, 1998.
S-5
<PAGE>
RISK FACTORS
Your investment in the Preferred Securities will involve certain risks. You
should carefully consider the following discussion of risks, and the other
information in this Prospectus Supplement and the accompanying Prospectus,
before deciding whether an investment in the Preferred Securities is suitable
for you.
CITIGROUP'S OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBT
SECURITIES ARE SUBORDINATED.
Citigroup's obligations under the Junior Subordinated Debt Securities will
rank junior in priority of payment to all of Citigroup's senior indebtedness.
This means that Citigroup cannot make any payments on the Junior Subordinated
Debt Securities if it defaults on a payment of senior indebtedness and does not
cure such default within the applicable grace period or if the senior
indebtedness becomes immediately due because of a default and has not yet been
paid in full. In addition, Citigroup's obligations under the Junior Subordinated
Debt Securities will be effectively subordinated to all existing and future
liabilities of Citigroup's subsidiaries.
Citigroup's obligations under the Guarantee will rank in priority of payment
as follows:
- subordinate and junior in right of payment to its other liabilities;
- equal in rank to its most senior current or future preferred stock and to
any current or future guarantee of preferred or preference stock of any of
its subsidiaries; and
- senior to its common stock.
This means that Citigroup cannot make any payments on the Guarantee if it
defaults on a payment on any of its other liabilities. In addition, in the event
of the bankruptcy, liquidation or dissolution of Citigroup, its assets would be
available to pay obligations under the Guarantee only after Citigroup made all
payments on its other liabilities.
Neither the Preferred Securities, the Junior Subordinated Debt Securities
nor the Guarantee limit the ability of Citigroup and its subsidiaries to incur
additional indebtedness, including indebtedness that ranks senior in priority of
payment to the Junior Subordinated Debt Securities and the Guarantee. See
"Description of Guarantee--Status of the Guarantee" and "Description of the
Junior Subordinated Debt Securities--Subordination."
THE GUARANTEE ONLY COVERS PAYMENTS IF CITIGROUP CAPITAL HAS CASH AVAILABLE.
The ability of Citigroup Capital to pay scheduled distributions on the
Preferred Securities, the redemption price of the Preferred Securities and the
liquidation amount of each Preferred Security is solely dependent upon Citigroup
making the related payments on the Junior Subordinated Debt Securities when due.
If Citigroup defaults on its obligations to pay principal or interest on the
Junior Subordinated Debt Securities, Citigroup Capital will not have sufficient
funds to pay distributions, the redemption price or the liquidation amount of
each Preferred Security. In those circumstances, you will not be able to rely
upon the Guarantee for payment of these amounts.
Instead, you:
- may directly sue Citigroup or seek other remedies to collect your pro rata
share of payments owed; or
- may rely on the Institutional Trustee to enforce Citigroup Capital's
rights under the Junior Subordinated Debt Securities.
DEFERRAL OF DISTRIBUTIONS WOULD HAVE TAX CONSEQUENCES FOR YOU AND MAY AFFECT THE
TRADING PRICE OF THE PREFERRED SECURITIES.
So long as no event of default under the Junior Subordinated Debt Securities
has occurred and is continuing, Citigroup can, on one or more occasions, defer
interest payments on the Junior Subordinated Debt Securities for up to 20
consecutive quarterly periods. If Citigroup defers interest payments on the
Junior Subordinated Debt Securities, Citigroup Capital will defer distributions
on the Preferred Securities during any deferral period. However, distributions
would still accumulate and such deferred distributions would themselves accrue
interest at the annual rate of 7% per annum (to the extent permitted by law).
S-6
<PAGE>
If Citigroup defers payments of interest on the Junior Subordinated Debt
Securities, you will be required to recognize interest income for United States
federal income tax purposes (based on your pro rata share of the interest on the
Junior Subordinated Debt Securities held by Citigroup Capital) before you
receive any cash relating to such interest. In addition, you will not receive
such cash if you sold the Preferred Securities before the end of any deferral
period or before the record date relating to distributions which are paid.
Citigroup has no current intention of deferring interest payments on the
Junior Subordinated Debt Securities and believes that such deferral is a remote
possibility. However, if Citigroup exercises its right in the future, the
Preferred Securities may trade at a price that does not fully reflect the value
of accrued but unpaid interest on the Junior Subordinated Debt Securities. If
you sell the Preferred Securities during an interest deferral period, you may
not receive the same return on investment as someone else who continues to hold
the Preferred Securities. In addition, the existence of Citigroup's right to
defer payments of interest on the Junior Subordinated Debt Securities may mean
that the market price for the Preferred Securities (which represent an undivided
beneficial interest in the Junior Subordinated Debt Securities) may be more
volatile than other securities that do not have these rights.
See "United States Federal Income Taxation" for more information regarding
the tax consequences of purchasing, holding and selling the Preferred
Securities.
PREFERRED SECURITIES MAY BE REDEEMED AT ANY TIME IF CERTAIN CHANGES IN TAX,
INVESTMENT COMPANY OR BANK REGULATORY LAW OCCUR.
If certain changes in tax, investment company or bank regulatory law occur
and are continuing, and certain other conditions are satisfied, Citigroup has
the right to redeem, in whole or in part, the Junior Subordinated Debt
Securities. Any such redemption will cause a mandatory redemption of Preferred
Securities and Common Securities having an aggregate liquidation amount equal to
the aggregate principal amount of Junior Subordinated Debt Securities to be
redeemed within 90 days of the event at a redemption price equal to $25 per
security plus any accrued and unpaid distributions. Prior to any such
redemption, Citigroup will obtain any required regulatory approvals. See
"Description of the Preferred Securities--Distribution of the Junior
Subordinated Debt Securities" and "--Special Event Redemption."
PREFERRED SECURITIES MAY BE REDEEMED AT THE OPTION OF THE COMPANY.
At the option of the Company, the Junior Subordinated Debt Securities may be
redeemed, in whole, at any time, or in part, from time to time, on or after
November 15, 2003 at a redemption price equal to the principal amount to be
redeemed plus any accrued and unpaid interest to the redemption date. Prior to
any such redemption, Citigroup will obtain any required regulatory approvals.
See "Description of the Junior Subordinated Debt Securities--Optional
Redemption." You should assume that the Company will exercise its redemption
option if the Company is able to refinance at a lower interest rate or it is
otherwise in the interest of the Company to redeem the Junior Subordinated Debt
Securities. If the Junior Subordinated Debt Securities are redeemed, the Trust
must redeem the Preferred Securities and the Common Securities having an
aggregate liquidation amount equal to the aggregate principal amount of Junior
Subordinated Debt Securities to be redeemed. See "Description of the Preferred
Securities-- Mandatory Redemption of Trust Securities."
PENDING TAX LITIGATION MAY RESULT IN A CHANGE IN TAX LAW THAT WILL PERMIT THE
COMPANY TO REDEEM THE JUNIOR SUBORDINATED DEBT SECURITIES.
It has been reported that the Internal Revenue Service ("IRS") recently
challenged another company's deduction for interest paid on a debt instrument
similar in some respects to the Junior Subordinated Debt Securities. Based on
available information, the Company and Citigroup Capital do not believe that
this challenge will affect the Company's ability to deduct interest payments on
the Junior Subordinated Debt Securities. However, you should be aware that
further developments favoring the IRS's challenge, or other unrelated
developments, could cause a Tax Event (as described in "Description of the
Preferred Securities--Special Event Redemption"). Laws and regulations have also
been proposed in the past which, if adopted retroactively, could also cause a
Tax Event.
S-7
<PAGE>
THERE CAN BE NO ASSURANCE AS TO THE MARKET PRICES FOR THE PREFERRED SECURITIES
OR THE JUNIOR SUBORDINATED DEBT SECURITIES.
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed in
exchange for Preferred Securities upon a termination of Citigroup Capital.
Accordingly, the Preferred Securities that an investor may purchase, whether
pursuant to the offer made by this Prospectus Supplement or in the secondary
market, or the Junior Subordinated Debt Securities that a holder of Preferred
Securities may receive upon a termination of Citigroup Capital, may trade at a
discount to the price that the investor paid to purchase the Preferred
Securities offered by this Prospectus Supplement. As a result of Citigroup's
right to defer interest payments on the Junior Subordinated Debt Securities, the
market price of the Preferred Securities (which represent undivided beneficial
ownership interests in Citigroup Capital, the assets of which consist solely of
the Junior Subordinated Debt Securities) may be more volatile than the market
prices of other securities that are not subject to such optional deferrals.
CITIGROUP MAY TERMINATE CITIGROUP CAPITAL AT ANY TIME.
Subject to obtaining any required regulatory approval, Citigroup has the
right to terminate Citigroup Capital at any time. If Citigroup decides to
exercise its right to terminate Citigroup Capital, Citigroup Capital will redeem
the Preferred Securities and Common Securities by distributing the Junior
Subordinated Debt Securities to holders of the Preferred Securities and Common
Securities on a pro rata basis.
Under current United States federal income tax law, a distribution of Junior
Subordinated Debt Securities to you on the dissolution of Citigroup Capital
should not be a taxable event to you. However, if Citigroup Capital is
characterized for United States federal income tax purposes as an association
taxable as a corporation at the time it is dissolved or if there is a change in
law, the distribution of Junior Subordinated Debt Securities to you may be a
taxable event to you.
Citigroup has no current intention of causing the termination of Citigroup
Capital and the distribution of the Junior Subordinated Debt Securities.
Citigroup anticipates that it would consider exercising this right in the event
that expenses associated with maintaining Citigroup Capital were substantially
greater than currently expected, such as if certain changes in tax law,
investment company law or banking regulatory law occurred. Citigroup cannot
predict the other circumstances under which this right would be exercised.
Although Citigroup will use its best efforts to list the Junior Subordinated
Debt Securities on the NYSE (or any other exchange on which the Preferred
Securities are then listed) if they are distributed, we cannot assure you that
the Junior Subordinated Debt Securities will be approved for listing or that a
trading market will exist for those securities.
YOU HAVE LIMITED VOTING RIGHTS.
You will have limited voting rights. In particular, subject to certain
exceptions, only Citigroup can elect or remove any of Citigroup Capital
Trustees. See "Description of the Preferred Securities--Voting Rights."
S-8
<PAGE>
THE COMPANY
Citigroup's businesses provide a broad range of financial services to
consumer and corporate customers around the world. Among these businesses are
Citibank, Commercial Credit, Primerica Financial Services, Salomon Smith Barney,
SSBC Asset Management, Travelers Life & Annuity and Travelers Property Casualty.
On October 8, 1998, the Company changed its name from Travelers Group Inc.
to Citigroup Inc. in connection with the merger of Citicorp into a newly formed,
wholly owned subsidiary of the Company.
The Company is a holding company, and services its obligations primarily
with dividends and advances that it receives from subsidiaries. The
subsidiaries' dividend paying abilities are limited by certain covenant
restrictions in credit agreements and/or by regulatory requirements, including
those imposed by federal bank regulatory authorities, the insurance departments
of a number of states, and various capital requirements imposed by securities
regulators. The Company is also subject to certain capital requirements as a
bank holding company. Each of the Company's major operating subsidiaries
finances its operations on a stand-alone basis consistent with its
capitalization and ratings.
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, the Company may be required to commit resources to
its subsidiary banks in certain circumstances.
The principal office of the Company is located at 153 East 53rd Street, New
York, NY 10043, and its telephone number is (212) 559-1000.
USE OF PROCEEDS
All of the net proceeds from the sale of the Preferred Securities offered
hereby will be invested by Citigroup Capital in Junior Subordinated Debt
Securities of the Company. The Company will use the proceeds from the sale of
the Junior Subordinated Debt Securities to Citigroup Capital for general
corporate purposes, which may include capital contributions to subsidiaries of
the Company, the redemption of shares of preferred stock of the Company, and/or
the reduction or refinancing of borrowings of the Company or its subsidiaries.
See "Capitalization."
RATIO OF INCOME TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the supplemental consolidated ratio of income
to combined fixed charges and preferred stock dividends of the Company at
September 30, 1998 and for each of the five most recent fiscal years, after
giving retroactive effect to the merger with Citicorp on October 8, 1998 in a
transaction accounted for as a pooling of interests.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
NINE MONTHS ENDED ------------------------------------------
SEPTEMBER 30, 1998 1997 1996 1995 1994
--------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ratio of income to combined fixed charges and preferred stock
dividends (excluding interest on deposits)................. 1.62 1.66 1.80 1.56 1.34
<CAPTION>
YEAR ENDED DECEMBER 31,
NINE MONTHS ENDED ------------------------------------------
SEPTEMBER 30, 1998 1997 1996 1995 1994
--------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ratio of income to combined fixed charges and preferred stock
dividends (including interest on deposits)................. 1.37 1.41 1.48 1.35 1.21
<CAPTION>
1993
---------
<S> <C>
Ratio of income to combined fixed charges and preferred stock
dividends (excluding interest on deposits)................. 1.37
1993
---------
<S> <C>
Ratio of income to combined fixed charges and preferred stock
dividends (including interest on deposits)................. 1.22
</TABLE>
ACCOUNTING TREATMENT
The financial statements of Citigroup Capital will be reflected in the
Company's consolidated financial statements with the Preferred Securities
reflected in "Company or subsidiary obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely junior subordinated debt
securities of--Company."
S-9
<PAGE>
CAPITALIZATION
The following table sets forth the supplemental consolidated capitalization
of the Company at September 30, 1998, after giving retroactive effect to the
merger with Citicorp on October 8, 1998 in a transaction accounted for as a
pooling of interests, and as adjusted to give effect to (i) the issuance and
sale of additional long-term debt of the Company and certain of its subsidiaries
after September 30, 1998 through the date hereof, (ii) the conversion, on
October 14, 1998, of $140 million face amount of the Series I Cumulative
Convertible Preferred Stock of the Company into shares of common stock of the
Company and (iii) the issuance of the Preferred Securities.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
------------------------
OUTSTANDING AS ADJUSTED
----------- -----------
<S> <C> <C>
(DOLLARS IN MILLIONS)
Debt:
Investment banking and brokerage borrowings.................................................... $ 16,128 $ 15,826
Short-term borrowings.......................................................................... 19,492 18,010
Long-term debt................................................................................. 49,419 50,971
----------- -----------
Total debt................................................................................. 85,039 84,807
----------- -----------
Redeemable Preferred Stock--Series I............................................................... 280 140
----------- -----------
Company or subsidiary obligated mandatorily redeemable preferred securities of subsidiary trusts
holding solely junior subordinated debt securities of--
Company........................................................................................ 1,200 1,700
Subsidiaries................................................................................... 2,620 2,620
Stockholders' equity:
Preferred stock at aggregate liquidation value................................................. 2,313 2,313
Common stock and additional paid-in capital (net of treasury stock)............................ 5,031 5,171
Retained earnings.............................................................................. 35,746 35,746
Accumulated other changes in equity from nonowner sources...................................... 593 593
Unearned compensation.......................................................................... (593) (593)
----------- -----------
Total stockholders' equity................................................................. 43,090 43,230
----------- -----------
Total capitalization........................................................................... $ 132,229 $ 132,497
----------- -----------
----------- -----------
</TABLE>
S-10
<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Institutional Trustee, The Chase Manhattan Bank, will act as
indenture trustee under the Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Preferred Securities
will include those stated in the Declaration and those made part of the
Declaration by the Trust Indenture Act. This description supplements and, to the
extent inconsistent therewith, replaces the description of the general terms and
provisions of the Preferred Securities set forth in the accompanying Prospectus
under the caption "Description of Preferred Securities." The following summary
of the material terms and provisions of the Preferred Securities does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Declaration (a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus Supplement is a part), the Trust
Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of
Citigroup Capital the Trust Securities, which represent undivided beneficial
interests in the assets of Citigroup Capital. All of the Common Securities will
be owned, directly or indirectly, by the Company. The Common Securities rank
PARI PASSU, and payments will be made thereon on a PRO RATA basis, with the
Preferred 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 Preferred Securities. The Declaration does not permit the
issuance by Citigroup Capital of any securities other than the Trust Securities
or the incurrence of any indebtedness by Citigroup Capital. Pursuant to the
Declaration, the Institutional Trustee will hold title to the Junior
Subordinated Debt Securities purchased by Citigroup Capital for the benefit of
the holders of the Trust Securities. The payment of distributions out of money
held by Citigroup Capital, and payments upon redemption of the Preferred
Securities or liquidation of Citigroup Capital out of money held by Citigroup
Capital, are guaranteed by the Company to the extent described under
"Description of Guarantee." The Guarantee will be held by The Chase Manhattan
Bank, the Guarantee Trustee, for the benefit of the holders of the Preferred
Securities. The Guarantee does not cover payment of distributions when Citigroup
Capital does not have sufficient available funds to pay such distributions. In
such event, the remedy of a holder of Preferred Securities is to (i) vote to
direct the Institutional Trustee to enforce the Institutional Trustee's rights
under the Junior Subordinated Debt Securities or (ii) if the failure of
Citigroup Capital to pay distributions is attributable to the failure of the
Company to pay interest or principal on the Junior Subordinated Debt Securities,
institute a proceeding directly against the Company for enforcement of payment
to such holder of the principal or interest on the Junior Subordinated Debt
Securities having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Junior Subordinated Debt Securities. See "--Voting Rights."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 7% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears beyond the first date such distributions are payable
(or would be payable, if not for any Extension Period or default by the Company
on the Junior Subordinated Debt Securities) will bear interest thereon at the
rate per annum of 7% thereof 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 Preferred Securities will be cumulative, will accrue
from and including November 19, 1998, and will be payable quarterly in arrears
on January 15, April 15, July 15 and October 15 of each year, commencing January
15, 1999. When, as and if available for payment, distributions will be made by
the Institutional Trustee, except as otherwise described below.
The distribution rate and the distribution payment dates and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Junior Subordinated Debt
Securities.
The Company has the right under the Indenture to defer payments of interest
on the Junior Subordinated Debt Securities by extending the interest payment
period from time to time on the Junior Subordinated Debt Securities for
S-11
<PAGE>
an Extension Period not exceeding 20 consecutive quarterly interest periods
during which no interest shall be due and payable, PROVIDED, that no Extension
Period may extend beyond the maturity of the Junior Subordinated Debt
Securities. As a consequence of the Company's extension of the interest payment
period, quarterly distributions on the Preferred Securities would be deferred
(though such distributions would continue to accrue with interest thereon
compounded quarterly, since interest would continue to accrue on the Junior
Subordinated Debt Securities) during any such extended interest payment period.
In the event that the Company exercises its right to extend the interest payment
period, then (a) the Company 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 or make any
guarantee payment with respect thereto (other than (i) repurchases, redemptions
or other acquisitions of shares of capital stock of the Company in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of employees, officers, directors or consultants, (ii) as a
result of an exchange or conversion of any class or series of the Company's
capital stock for any other class or series of the Company's capital stock, or
(iii) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged), and (b) the Company 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 the Company which rank PARI
PASSU with or junior to the Junior Subordinated Debt Securities. The foregoing,
however, will not apply to any stock dividends paid by the Company where the
dividend stock is the same stock as that on which the dividend is being paid.
Prior to the termination of any Extension Period, the Company 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; PROVIDED FURTHER, that no Extension Period may
extend beyond the maturity of the Junior Subordinated Debt Securities. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may commence a new Extension Period, subject to the above requirements.
Consequently, there could be up to 60 Extension Periods of varying lengths
throughout the term of the Junior Subordinated Debt Securities. See "Description
of the Junior Subordinated Debt Securities--Interest" and "--Option to Extend
Interest Payment Period." The Regular Trustees shall give the holders of the
Preferred Securities notice of any Extension Period upon their receipt of notice
thereof from the Company. See "Description of the Junior Subordinated Debt
Securities--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 Preferred Securities as they appear on the books and
records of Citigroup Capital on the record date next following the termination
of such deferral period.
Distributions on the Preferred Securities will be made on the dates payable
to the extent that Citigroup Capital has funds available for the payment of such
distributions in the Property Account. Citigroup Capital's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from the Company on the Junior Subordinated Debt Securities.
See "Description of the Junior Subordinated Debt Securities." The payment of
distributions out of monies held by Citigroup Capital is guaranteed by the
Company to the extent set forth under "Description of Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of Citigroup Capital at the
close of business on the relevant record dates, which, as long as the Preferred
Securities remain in book-entry only form, will be one Business Day prior to the
relevant payment dates. Such distributions will be paid through the
Institutional Trustee who will hold amounts received in respect of the Junior
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 Preferred Securities do not continue to remain in
book-entry only form, the relevant record dates shall conform to the rules of
any securities exchange on which the Preferred Securities are listed and, if
none, the Regular Trustees shall have the right to select relevant record dates,
which shall be more than 14 days but less than 60 days prior to the relevant
payment dates. In the event that any date on which distributions are to be made
on the Preferred 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), except that, if such Business Day is in the next succeeding
calendar year, 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 record date.
A "Business Day" shall mean any day other than Saturday, Sunday or any other day
on which banking institutions in New York City (in the State of New York) are
permitted or required by any applicable law to close.
S-12
<PAGE>
MANDATORY REDEMPTION OF TRUST SECURITIES
The Preferred Securities have no stated maturity date but will be redeemed
upon the maturity of the Junior Subordinated Debt Securities or to the extent
the Junior Subordinated Debt Securities are redeemed. The Junior Subordinated
Debt Securities will mature on November 15, 2028, and may be redeemed, in whole
or in part, at any time on or after November 15, 2003, or at any time, in whole
or in part, in certain circumstances upon the occurrence of a Tax Event, an
Investment Company Event or a Regulatory Capital Event (as described under
"Special Event Redemption" below). See "Description of the Junior Subordinated
Debt Securities--Optional Redemption." Upon the maturity of the Junior
Subordinated Debt Securities, the proceeds of the repayment thereof shall
simultaneously be applied to redeem all outstanding Trust Securities at the
Redemption Price. Upon the redemption of the Junior Subordinated Debt
Securities, whether in whole or in part (either at the option of the Company or
pursuant to a Tax Event, an Investment Company Event or a Regulatory Capital
Event), the proceeds from such redemption shall simultaneously be applied to
redeem Trust Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Junior Subordinated Debt Securities so
redeemed at the Redemption Price; PROVIDED, that holders of Trust Securities
shall be given not less than 30 nor more than 60 days' notice of such
redemption. In the event that fewer than all of the outstanding Preferred
Securities are to be redeemed, the Preferred Securities will be redeemed PRO
RATA as described under "--Book-Entry Only Issuance--The Depository Trust
Company" below.
SPECIAL EVENT REDEMPTION
"Tax Event" means that the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that, as a result of (a) any
amendment to, 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 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 the date of this Prospectus Supplement), in
either case after the date of this Prospectus Supplement, there is more than an
insubstantial risk that (i) Citigroup Capital would be subject to United States
federal income tax with respect to income accrued or received on the Junior
Subordinated Debt Securities, (ii) interest payable to Citigroup Capital on the
Junior Subordinated Debt Securities would not be deductible, in whole or in
part, by the Company for United States federal income tax purposes or (iii)
Citigroup Capital would be subject to more than a DE MINIMIS amount of other
taxes, duties or other governmental charges.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel experienced
in practicing under the 1940 Act (as defined herein) to the effect that, as a
result of the occurrence of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that Citigroup Capital is or will be
considered an "investment company" which is required to be registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
1940 Act Law becomes effective on or after the date of this Prospectus
Supplement.
"Regulatory Capital Event" means a determination by Citigroup, based on an
opinion of counsel experienced in such matters (who may be an employee of
Citigroup or any of its affiliates), that, as a result of (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 Preferred Securities will no longer constitute Tier
I Capital of Citigroup or any bank holding company of which Citigroup 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 Citigroup's primary federal banking regulator.
Subject to obtaining any required regulatory approval, if a Tax Event, an
Investment Company Event or a Regulatory Capital Event (each, a "Special Event")
shall occur and be continuing, the Company shall have the right, upon not less
than 30 nor more than 60 days' notice, to redeem the Junior Subordinated Debt
Securities, in whole or in part, for cash within 90 days following the
occurrence of such Special Event, and, following such redemption, Trust
Securities with an aggregate liquidation amount equal to the aggregate principal
amount of the Junior Subordinated Debt Securities so redeemed shall be redeemed
by Citigroup Capital at the Redemption Price on a PRO RATA basis;
S-13
<PAGE>
PROVIDED, HOWEVER, that if at the time there is available to the Company or
Citigroup Capital the opportunity to eliminate, within such 90-day period, the
Special Event by taking some ministerial action, such as filing a form or making
an election or pursuing some other similar reasonable measure that will have no
adverse effect on Citigroup Capital, the Company or the holders of the Trust
Securities, then the Company or Citigroup Capital will pursue such measure in
lieu of redemption.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Citigroup will have the right at any time to dissolve Citigroup Capital and,
after satisfaction of the liabilities of creditors of Citigroup Capital as
provided by applicable law, to cause Junior Subordinated Debt Securities to be
distributed to the holders of the Preferred Securities in an aggregate stated
principal amount equal to the aggregate stated liquidation amount of the
Preferred Securities then outstanding. Prior to any such dissolution, Citigroup
will obtain any required regulatory approvals.
If the Junior Subordinated Debt Securities are distributed to the holders of
the Preferred Securities, the Company will use its best efforts to cause the
Junior Subordinated Debt Securities to be listed on the NYSE or on such other
exchange as the Preferred Securities are then listed.
After the date for any distribution of Junior Subordinated Debt Securities
upon dissolution of Citigroup Capital, (i) the Preferred Securities will no
longer be deemed to be outstanding, (ii) the securities depositary or its
nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debt Securities to be delivered upon such distribution, and (iii)
any certificates representing Preferred Securities not held by the Depositary or
its nominee will be deemed to represent Junior 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 with
accrued and unpaid interest equal to accrued and unpaid distributions on, such
Preferred Securities until such certificates are presented to the Company or its
agent for transfer or reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed in
exchange for the Preferred Securities if a dissolution and liquidation of
Citigroup Capital were to occur. Accordingly, the Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Junior Subordinated Debt Securities that an investor
may receive if a dissolution and liquidation of Citigroup Capital were to occur,
may trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Citigroup Capital may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If Citigroup Capital gives a notice of redemption in respect of the
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York City time, on the redemption date, and if the Company has paid to the
Institutional Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Junior Subordinated Debt Securities, the
Institutional Trustee will irrevocably deposit with the Depositary (as defined
in the accompanying Prospectus) 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 Preferred
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 Preferred
Securities so called for redemption will cease, except the right of the holders
of such Preferred Securities to receive the Redemption Price but without
interest on such Redemption Price. In the event that any date fixed for
redemption of Preferred 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 Preferred Securities is
improperly withheld or refused and not paid either by Citigroup Capital, or by
the Company pursuant to the Guarantee, distributions on such Preferred
Securities will continue to accrue at the then applicable rate from the original
redemption date to the date of payment, in which case
S-14
<PAGE>
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 Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed in accordance with the
Depositary's standard procedures. See "--Book-Entry Only Issuance--The
Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries,
including, without limitation, Salomon Smith Barney Inc., may at any time, and
from time to time, purchase outstanding Preferred 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 Citigroup Capital (each a "Liquidation"), the
holders of the Preferred Securities will be entitled to receive out of the
assets of Citigroup Capital, after satisfaction of liabilities to creditors,
distributions in an amount equal to the aggregate of the stated liquidation
amount of $25 per Preferred Security plus accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation, Junior 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 with
accrued and unpaid interest equal to accrued and unpaid distributions on, the
Preferred Securities outstanding at such time have been distributed on a PRO
RATA basis to the holders of such Preferred Securities. See "--Distribution of
the Junior Subordinated Debt Securities."
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because Citigroup Capital has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by Citigroup Capital on the Preferred Securities shall be paid on a PRO RATA
basis. The holders of the Common Securities will be entitled to receive
distributions upon any such Liquidation PRO RATA with the holders of the
Preferred Securities, except that if a Declaration Event of Default has occurred
and is continuing the Preferred Securities shall have a preference over the
Common Securities with regard to such distributions.
Pursuant to the Declaration, Citigroup Capital shall terminate (i) on
November 19, 2053, the expiration of the term of the Trust, (ii) upon the
bankruptcy of the Company or the holder of the Common Securities, (iii) upon the
filing of a certificate of dissolution or its equivalent with respect to the
holder of the Common Securities or the Company, the filing of a certificate of
cancellation with respect to Citigroup Capital, or the revocation of the charter
of the holder of the Common Securities or the Company and the expiration of 90
days after the date of revocation without a reinstatement thereof, (iv) upon the
distribution of Junior Subordinated Debt Securities to holders of Preferred
Securities upon exercise of the Company's right to dissolve Citigroup Capital at
any time and distribute Junior Subordinated Debt Securities to holders of
Preferred Securities, (v) upon the entry of a decree of a judicial dissolution
of the holder of the Common Securities, the Company or Citigroup Capital, or
(vi) upon the redemption of all the Trust Securities.
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 Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Preferred 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 Preferred Securities and only the holders
of the Preferred Securities will have the right to direct the Institutional
Trustee with respect to certain matters under the Declaration, and therefore the
Indenture. In the event that any Declaration Event of Default with respect to
the Preferred Securities is waived by the holders of the Preferred Securities as
provided in the Declaration, the holders of Common Securities pursuant to the
Declaration have agreed that such waiver also constitutes a waiver of such
Declaration Event of Default with respect to the Common Securities for all
purposes under the Declaration without any further act, vote or consent of the
holders of Common Securities. See "--Voting Rights."
S-15
<PAGE>
If the Institutional Trustee fails to enforce its rights under the Junior
Subordinated Debt Securities, any holder of Preferred Securities may directly
institute a legal proceeding against the Company to enforce the Institutional
Trustee's rights under the Junior Subordinated Debt Securities without first
instituting any legal proceeding against the Institutional Trustee or any other
person or entity. If a Declaration Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest or principal on the Junior 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 Preferred Securities may also directly
institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Junior Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due date specified in the
Junior Subordinated Debt Securities without first (i) directing the
Institutional Trustee to enforce the terms of the Junior Subordinated Debt
Securities or (ii) instituting a legal proceeding against the Company to enforce
the Institutional Trustee's rights under the Junior Subordinated Debt
Securities. In connection with such Direct Action, the Company will be
subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by the Company to such holder of
Preferred Securities in such Direct Action. Consequently, the Company will be
entitled to payment of amounts that a holder of Preferred Securities receives in
respect of an unpaid distribution that resulted in the bringing of a Direct
Action to the extent that such holder receives or has already received full
payment with respect to such unpaid distribution from Citigroup Capital. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debt Securities.
Upon the occurrence of an Indenture Event of Default, the Institutional
Trustee as the sole holder of the Junior Subordinated Debt Securities will have
the right under the Indenture to declare the principal of and interest on the
Junior Subordinated Debt Securities to be immediately due and payable. The
Company and Citigroup Capital are each required to file annually with the
Institutional Trustee an officers' certificate as to its compliance with all
conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described in this Prospectus Supplement and in the accompanying
Prospectus under "Description of Guarantees--Modification of Guarantees;
Assignment," and except as provided under the Trust Act, the Trust Indenture Act
and as otherwise required by law and the Declaration, the holders of the
Preferred 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
Preferred 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 Junior Subordinated Debt Securities, to (i) direct the
time, method and place of conducting any proceeding for any remedy available to
the Indenture Trustee, or exercising any trust or power conferred on the
Indenture Trustee with respect to the Junior Subordinated Debt Securities, (ii)
waive any past Indenture Event of Default that is waivable under Section 5.13 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Junior Subordinated Debt Securities shall be due and
payable, or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior 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 Junior Subordinated Debt Securities (a "Super Majority") affected
thereby, only the holders of at least such Super Majority in aggregate
liquidation amount of the Preferred Securities may direct the Institutional
Trustee to give such consent or take such action. If the Institutional Trustee
fails to enforce its rights under the Junior Subordinated Debt Securities, any
record holder of Preferred Securities may directly institute a legal proceeding
against the Company to enforce the Institutional Trustee's rights under the
Junior Subordinated Debt Securities without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity. The
Institutional Trustee shall notify all holders of the Preferred Securities of
any notice of default received from the Indenture Trustee with respect to the
Junior 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 available to the Institutional Trustee, the Institutional Trustee, as
holder of the Junior Subordinated Debentures, shall not take any of the actions
described in clauses (i), (ii), (iii) or
S-16
<PAGE>
(iv) above unless the Institutional Trustee has obtained an opinion of a
nationally recognized independent tax counsel experienced in such matters to the
effect that, as a result of such action, Citigroup Capital 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
Junior 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 written 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 where any amendment,
modification or termination 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 aggregate liquidation
amount of the Trust Securities which the relevant Super Majority represents of
the aggregate principal amount of the Junior Subordinated Debt Securities
outstanding. The Institutional Trustee shall be under no obligation to 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 a
nationally recognized independent tax counsel experienced in such matters to the
effect that for United States federal income tax purposes Citigroup Capital will
not be classified as other than a grantor trust.
A waiver of an Indenture Event of Default by the Institutional Trustee at
the direction of the holders of the Preferred Securities will constitute a
waiver of the corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred 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 Preferred 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 Preferred 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 Preferred Securities will be required for Citigroup Capital to
redeem and cancel Preferred Securities or distribute Junior Subordinated Debt
Securities in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Book-Entry Only Issuance--The
Depository Trust Company."
Except in certain circumstances, holders of the Preferred Securities will
have no rights to appoint or remove the Citigroup Trustees, who may be
appointed, removed or replaced solely by the Company 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 and the
Delaware Trustee), 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 Citigroup Capital other than
pursuant to the terms of the Declaration, then the holders of the Trust
Securities voting together as a single 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 holders 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
Preferred Securities or the Common Securities, then only holders of the affected
class will be entitled to vote on such amendment or proposal and such amendment
or
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proposal shall not be effective except with the approval of holders of a
majority in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause Citigroup
Capital to be classified for United States federal income tax purposes as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Institutional Trustee or (iii) cause Citigroup Capital to be deemed an
"investment company" which is required to be registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
Citigroup Capital 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. Citigroup Capital may, with the consent of the Regular Trustees
and without the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; PROVIDED, that (i) such successor entity either (x)
expressly assumes all of the obligations of Citigroup Capital under the Trust
Securities or (y) substitutes for the Preferred 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 Trust
Securities rank with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Company expressly acknowledges a trustee of
such successor entity possessing the same powers and duties as the Institutional
Trustee, in its capacity as the holder of the Junior Subordinated Debt
Securities, (iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Preferred Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the Preferred
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 Citigroup Capital, (vii) prior to such
merger, consolidation, amalgamation or replacement, Citigroup Capital has
received an opinion of a nationally recognized independent counsel to Citigroup
Capital experienced in such matters 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), and (B) following such
merger, consolidation, amalgamation or replacement, neither Citigroup Capital
nor such successor entity will be required to register as an "investment
company" under the 1940 Act; and (viii) the Company guarantees the obligations
of such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, Citigroup Capital
shall not, except with the consent of holders of 100% 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 in the opinion of a nationally
recognized independent tax counsel experienced in such matters, such
consolidation, amalgamation, merger or replacement would cause Citigroup Capital
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 for
the Preferred Securities. The Preferred 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 Preferred Securities certificates,
representing the total aggregate number of Preferred Securities, will be issued
and will be deposited with DTC.
The laws of some jurisdictions 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 the global Preferred Securities
as represented by a global certificate.
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
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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. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. (the "NASD").
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 Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct 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 Preferred Securities.
Transfers of ownership interests in the Preferred 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 Preferred Securities, except in the event that
use of the book-entry system for the Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Preferred Securities in accordance
with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to Citigroup Capital as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co. consenting
or voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy). The Company and Citigroup Capital believe that the
arrangements among DTC, Direct and Indirect Participants, and Beneficial Owners
will enable the Beneficial Owners to exercise rights equivalent in substance to
the rights that can be directly exercised by a holder of a beneficial interest
in Citigroup Capital.
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their 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 to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in "street name," and such
payments will be the responsibility of such Participant and not of DTC,
Citigroup Capital or the Company, subject to any statutory or regulatory
requirements to the contrary that may be in effect from time to time. Payment of
distributions to DTC is the responsibility of Citigroup Capital, disbursement of
such payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
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Except as provided herein, a Beneficial Owner in a global Preferred Security
certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
Citigroup Capital. Under such circumstances, in the event that a successor
securities depositary is not obtained, Preferred Securities certificates are
required to be printed and delivered. Additionally, the Regular Trustees (with
the consent of the Company) may decide to discontinue use of the system of
book-entry transfers through DTC (or any successor depositary) with respect to
the Preferred Securities. In that event, certificates for the Preferred
Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and Citigroup Capital believe to
be reliable, but neither the Company nor Citigroup Capital takes responsibility
for the accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after such a 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 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 Preferred Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. Notwithstanding the foregoing, the holders of
Preferred 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 following a Declaration Event of Default.
PAYING AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the following provisions will apply:
The Institutional Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of Citigroup Capital, but upon payment (with the giving
of such indemnity as Citigroup Capital or the Company may require) in respect of
any tax or other government charges that may be imposed in relation to it.
Citigroup Capital will not be required to register or cause to be registered
the transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate Citigroup
Capital in such a way so that Citigroup Capital will not be required to register
as an "investment company" under the 1940 Act or be characterized as other than
a grantor trust for United States federal income tax purposes. The Company is
authorized and directed to conduct its affairs so that the Junior Subordinated
Debt Securities will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Company and the Regular
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust of Citigroup Capital or the certificate of
incorporation of the Company, that each of the Company 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 Preferred Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Junior
Subordinated Debt Securities in which Citigroup Capital will invest the proceeds
from the issuance and sale of the Trust Securities. This description supplements
and, to the extent inconsistent therewith, replaces the description of the
general terms and provisions of the Junior Subordinated Debt Securities set
forth in the accompanying Prospectus under the caption "Description of Junior
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 of the Junior Subordinated Debt Securities in the accompanying
Prospectus; the Indenture, dated as of October 7, 1996 (the "Indenture"),
between the Company and The Chase Manhattan Bank, as Trustee (the "Indenture
Trustee"), the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and the accompanying Prospectus
form a part; and the Trust Indenture Act. Certain capitalized terms used herein
are defined in the Indenture.
Under certain circumstances involving the dissolution of Citigroup Capital,
subject to obtaining any required regulatory approval, Junior Subordinated Debt
Securities will be distributed to the holders of the Trust Securities in
liquidation of Citigroup Capital. See "Description of the Preferred
Securities--Special Event Redemption or Distribution."
If the Junior Subordinated Debt Securities are distributed to the holders of
the Preferred Securities, the Company will use its best efforts to have the
Junior Subordinated Debt Securities listed on the New York Stock Exchange or on
such other national securities exchange or similar organization on which the
Preferred Securities are then listed or quoted.
GENERAL
The Junior Subordinated Debt Securities will be issued as unsecured debt
under the Indenture. The Junior Subordinated Debt Securities will be limited in
aggregate principal amount to approximately $515,463,925, such amount being the
sum of the aggregate stated liquidation amount of the Preferred Securities and
the capital contributed by the Company to Citigroup Capital in exchange for the
Common Securities (the "Citigroup Payment").
The Junior Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Junior 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 November 15, 2028.
If Junior Subordinated Debt Securities are distributed to holders of
Preferred Securities in liquidation of such holders' interests in Citigroup
Capital, such Junior Subordinated Debt Securities will initially be issued in
the form of one or more Global Securities (as defined under "Book-Entry and
Settlement" below). As described herein, under certain limited circumstances,
Junior 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 Junior Subordinated Debt Securities are issued in certificated form,
such Junior 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 Junior Subordinated Debt Securities issued as a
Global Security will be made to DTC, to a successor depositary or, in the event
that no depositary is used, to a Paying Agent for the Junior Subordinated Debt
Securities. In the event Junior Subordinated Debt Securities are issued in
certificated form, principal and interest will be payable, the transfer of the
Junior Subordinated Debt Securities will be registrable and Junior Subordinated
Debt Securities will be exchangeable for Junior Subordinated Debt Securities of
other denominations of a like aggregate principal amount at the corporate trust
office of the Indenture Trustee in New York, New York; PROVIDED, that payment of
interest may be made at the option of the Company by check mailed to the address
of the persons entitled thereto.
The Company does not intend to issue and sell the Junior Subordinated Debt
Securities to any purchasers other than Citigroup Capital.
There are no covenants or provisions in the Indenture that would afford the
holders of the Junior Subordinated Debt Securities protection in the event of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect such holders.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debt Securities are
subordinated and junior in right of payment to all Senior Indebtedness of the
Company. No payment of principal (including redemption payments),
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premium, if any, or interest on the Junior Subordinated Debt Securities may be
made if (i) any Senior Indebtedness of the Company has not been paid when due
and any applicable grace period with respect to such default has ended and such
default has not been cured or waived or ceased to exist, or (ii) the maturity of
any Senior Indebtedness of the Company has been accelerated because of a
default. Upon any distribution of assets of the Company 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 the Company must be paid in full before the holders of Junior
Subordinated Debt Securities are entitled to receive or retain any payment. Upon
satisfaction of all claims related to all Senior Indebtedness of the Company
then outstanding, the rights of the holders of the Junior Subordinated Debt
Securities will be subrogated to the rights of the holders of Senior
Indebtedness of the Company to receive payments or distributions applicable to
Senior Indebtedness until all amounts owing on the Junior Subordinated Debt
Securities are paid in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities, notes,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
conditional sale or title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations,
contingent or otherwise, of such obligor in respect of any letters of credit,
banker's acceptance, security purchase facilities or similar credit
transactions, (v) all obligations in respect of interest rate swap, cap or other
agreements, interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other similar agreements, (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise and (vii) all obligations of the type referred
to in clauses (i) through (vi) above of other persons secured by any lien on any
property or asset of such obligor (whether or not such obligation is assumed by
such obligor), except for (1) any such indebtedness that is by its terms
subordinated to or PARI PASSU with the Junior Subordinated Debt Securities and
(2) any indebtedness between or among such obligor or its affiliates, including
all other debt securities and guarantees in respect of those debt securities,
issued to (a) any other Citigroup Trust or a trustee of such trust and (b) any
other trust, or a trustee of such trust, partnership or other entity affiliated
with the Company that is a financing vehicle of the Company (a "financing
entity") in connection with the issuance by such financing entity of preferred
securities or other securities that rank PARI PASSU with, or junior to, the
Preferred Securities. 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 the Company.
OPTIONAL REDEMPTION
Subject to obtaining any required regulatory approval, the Company shall
have the right to redeem the Junior Subordinated Debt Securities, in whole or in
part, from time to time, on or after November 15, 2003, or at any time in
certain circumstances upon the occurrence of a Tax Event, an Investment Company
Event or a Regulatory Capital Event, as described under "Description of the
Preferred Securities--Special Event Redemption," upon not less than 30 nor more
than 60 days' notice, at a redemption price equal to 100% of the principal
amount to be redeemed plus any accrued and unpaid interest, including Additional
Interest (as defined herein), if any, to the redemption date. If a partial
redemption of the Preferred Securities resulting from a partial redemption of
the Junior Subordinated Debt Securities would result in the delisting of the
Preferred Securities, the Company may only redeem the Junior Subordinated Debt
Securities in whole.
INTEREST
Each Junior Subordinated Debt Security shall bear interest at the rate of 7%
per annum, from and including the original date of issuance, payable quarterly
in arrears on January 15, April 15, July 15 and October 15 of each year (each an
"Interest Payment Date"), commencing January 15, 1999 to the person in whose
name such Junior Subordinated Debt Security is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event the Junior Subordinated Debt Securities
shall not continue to remain in book-entry only form, the Company shall have the
right to select record dates, which shall be more than 14 days but less than 60
days prior to the Interest Payment Date.
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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 Junior
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
The Company shall have the right at any time, and from time to time, during
the term of the Junior Subordinated Debt Securities, to defer payments of
interest by extending the interest payment period for a period not exceeding 20
consecutive quarters, PROVIDED, that no Extension Period may extend beyond the
maturity of the Junior Subordinated Debt Securities, at the end of which
Extension Period, the Company shall pay all interest then accrued and unpaid
(including any Additional Interest) together with interest thereon compounded
quarterly at the rate specified for the Junior Subordinated Debt Securities to
the extent permitted by applicable law ("Compound Interest"); PROVIDED FURTHER,
that during any such Extension Period, (a) the Company 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
or make any guarantee payment with respect thereto (other than (i) repurchases,
redemptions or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers, directors or
consultants, (ii) as a result of an exchange or conversion of any class or
series of the Company's capital stock for any other class or series of the
Company's capital stock, or (iii) the purchase of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged), and (b) the
Company 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 the
Company which rank PARI PASSU with or junior to the Junior Subordinated Debt
Securities. The foregoing, however, will not apply to any stock dividends paid
by the Company where the dividend stock is the same stock as that on which the
dividend is being paid. Prior to the termination of any Extension Period, the
Company may further defer payments of interest by extending such Extension
Period; PROVIDED, HOWEVER, that such Extension Period, including all such
previous and further extensions, may not exceed 20 consecutive quarterly
interest periods (including the quarterly interest period in which notice of
such Extension Period (as described below) is given); PROVIDED FURTHER, that no
Extension Period may extend beyond the maturity of the Junior Subordinated Debt
Securities. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may commence a new Extension Period, subject to
the terms set forth in this section. No interest during an Extension Period,
except at the end thereof, shall be due and payable. The Company has no present
intention of exercising its right to defer payments of interest by extending the
interest payment period on the Junior Subordinated Debt Securities. If the
Institutional Trustee shall be the sole holder of the Junior Subordinated Debt
Securities, the Company 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 Preferred Securities would
be payable, if not for such Extension Period, or (ii) the date the Regular
Trustees are required to give notice to the New York Stock Exchange (or other
applicable self-regulatory organization) or to holders of the Preferred
Securities of the record date or the date such distribution would be payable, if
not for such Extension Period, but in any event one Business Day prior to such
record date. The Regular Trustees shall give notice of the Company's selection
of such Extension Period to the holders of the Preferred Securities. If the
Institutional Trustee shall not be the sole holder of the Junior Subordinated
Debt Securities, the Company shall give the holders of the Junior Subordinated
Debt Securities notice of its selection of such Extension Period ten Business
Days prior to the earlier of (i) the next succeeding Interest Payment Date or
(ii) the date upon which the Company is required to give notice to the New York
Stock Exchange (or other applicable self-regulatory organization) or to holders
of the Junior Subordinated Debt Securities of the record or payment date of such
related interest payment.
ADDITIONAL INTEREST
If at any time Citigroup Capital 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, the Company will pay as additional interest ("Additional Interest")
on the Junior Subordinated Debt Securities such additional amounts as shall be
required so that the net amounts received and retained by Citigroup
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Capital after paying any such taxes, duties, assessments or other governmental
charges will be not less than the amounts Citigroup Capital would have received
had no such taxes, duties, assessments or other governmental charges been
imposed.
INDENTURE EVENTS OF DEFAULT
The following are Events of Default with respect to the Junior Subordinated
Debt Securities: (a) default in the payment of the principal of (or premium, if
any, on) any Junior Subordinated Debt Security at its maturity; (b) default for
30 days in the payment of any installment of interest on any Junior Subordinated
Debt Security; (c) default for 90 days after written notice in the performance
of any other covenant in respect of the Junior Subordinated Debt Securities; and
(d) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of the Company. The Indenture
Trustee may withhold notice to the holders of the Junior Subordinated Debt
Securities of any default with respect thereto (except in the payment of
principal, premium or interest) if it considers such withholding to be in the
interests of such holders.
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Junior Subordinated Debt Securities,
will have the right to declare the principal of and the interest on the Junior
Subordinated Debt Securities (including any Compound Interest and Additional
Interest, if any) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Junior Subordinated Debt Securities. See "Description of Junior
Subordinated Debt Securities--Events of Default" in the accompanying Prospectus
for a description of the Indenture Events of Default. An Indenture Event of
Default also constitutes a Declaration Event of Default. The holders of
Preferred Securities in certain circumstances have the right to direct the
Institutional Trustee to exercise its rights as the holder of the Junior
Subordinated Debt Securities. See "Description of the Preferred
Securities--Declaration Events of Default" and "--Voting Rights."
Notwithstanding the foregoing, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Junior Subordinated Debt Securities
on the date such interest or principal is otherwise payable, the Company
acknowledges that, in such event, a holder of Preferred Securities may institute
a Direct Action for payment on or after the respective due date specified in the
Junior Subordinated Debt Securities. The Company may not amend the Indenture to
remove the foregoing right to bring a Direct Action without the prior written
consent of all of the holders of Preferred Securities of Citigroup Capital.
Notwithstanding any payment made to such holder of Preferred Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of or interest on the Junior Subordinated Debt Securities
held by Citigroup Capital or the Institutional Trustee of Citigroup Capital, and
the Company shall be subrogated to the rights of the holder of such Preferred
Securities with respect to payments on the Preferred Securities to the extent of
any payments made by the Company to such holder in any Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debt Securities.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of Citigroup
Capital as a result of the occurrence of a Special Event, the Junior
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, Junior
Subordinated Debt Securities represented by a Global Security will not be
exchangeable for, and will not otherwise be issuable as, Junior 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.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
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 Junior Subordinated Debt
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.
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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 Junior Subordinated Debt Securities are distributed to holders of
Preferred Securities in liquidation of such holders' interests in Citigroup
Capital, DTC will act as securities depositary for the Junior Subordinated Debt
Securities. For a description of DTC and the specific terms of the depositary
arrangements, see "Description of the Preferred 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 Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. The
Company 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 the Company, Citigroup Capital, the Indenture Trustee, any paying
agent and any other agent of the Company or the Indenture 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 Junior 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 Junior Subordinated Debt
Securities registered in the names of persons other than the depositary or its
nominee only if (i) the depositary notifies the Company 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) the Company, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Indenture Event of Default with respect to
such Junior Subordinated Debt Securities. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for Junior
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.
CERTAIN COVENANTS
For so long as the Trust Securities remain outstanding, the Company will
covenant (i) to directly or indirectly maintain 100% ownership of the Common
Securities of the 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 not voluntarily dissolve, wind-up or terminate the
Trust, except in connection with a distribution of Junior Subordinated Debt
Securities as described under "Distribution of the Junior Subordinated Debt
Securities" and in connection with certain mergers, consolidations or
amalgamations permitted by the Declaration, (iii) to timely perform its duties
as Sponsor of the Trust and (iv) to use its reasonable efforts to cause the
Trust (a) to remain a statutory business trust, except in connection with the
distribution of Junior Subordinated Debt Securities to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration of the Trust, and (b) to otherwise continue
to be classified as a grantor trust for United States federal income tax
purposes.
MISCELLANEOUS
The Indenture provides that the Company will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Junior Subordinated
Debt Securities, (ii) the organization, maintenance and dissolution of Citigroup
Capital, (iii) the retention of the Citigroup Trustees and (iv) the enforcement
by the Institutional Trustee of the rights of the holders of the Preferred
Securities.
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DESCRIPTION OF GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by the Company for the benefit of the holders of
Preferred Securities. The Guarantee will be qualified as an indenture under the
Trust Indenture Act. The Chase Manhattan Bank will act as indenture trustee
under the Guarantee (the "Guarantee Trustee"). The terms of the Guarantee will
be those set forth in the Guarantee and those made part of the Guarantee by the
Trust Indenture Act. This description supplements and, to the extent
inconsistent therewith, replaces the description of the general terms and
provisions of the Guarantee set forth in the accompanying Prospectus under the
caption "Description of Guarantees." The summary 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 Guarantee, which is filed as an exhibit to
the Registration Statement of which this Prospectus Supplement forms a part, and
the Trust Indenture Act. The Guarantee will be held by the Guarantee Trustee for
the benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company will
irrevocably and unconditionally agree to pay in full to the holders of the
Preferred Securities (except to the extent paid by Citigroup Capital), as and
when due, regardless of any defense, right of set-off or counterclaim which
Citigroup Capital may have or assert, the following payments (the "Guarantee
Payments"), without duplication: (i) any accrued and unpaid distributions that
are required to be paid on the Preferred Securities, to the extent Citigroup
Capital has funds available therefor, and (ii) the redemption price of $25 per
Preferred Security, plus all accrued and unpaid distributions (the "Redemption
Price"), to the extent Citigroup Capital has funds available therefor, with
respect to any Preferred Securities called for redemption by Citigroup Capital,
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of Citigroup Capital (other than in connection with the distribution of Junior
Subordinated Debt Securities to the holders of Preferred Securities or the
redemption of all of the Preferred Securities) the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Preferred Securities to the date of payment or (b) the amount of assets of
Citigroup Capital remaining for distribution to holders of the Preferred
Securities in liquidation of Citigroup Capital. 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 Preferred Securities or by causing Citigroup
Capital to pay such amounts to such holders.
The Guarantee will be a guarantee on a subordinated basis with respect to
the Preferred Securities from the time of issuance of the Preferred Securities
but will not apply to any payment of distributions or Redemption Price, or to
payments upon the dissolution, winding-up or termination of Citigroup Capital,
except to the extent Citigroup Capital shall have funds available therefor. If
the Company does not make interest payments on the Junior Subordinated Debt
Securities, Citigroup Capital will not pay distributions on the Preferred
Securities and will not have funds available therefor. See "Description of
Junior Subordinated Debt Securities." The Guarantee, when taken together with
the Company's obligations under the Junior Subordinated Debt Securities, the
Indenture and the Declaration, including its obligations to pay costs, expenses,
debts and liabilities of Citigroup Capital (other than with respect to Trust
Securities), will provide a full and unconditional guarantee on a subordinated
basis by the Company of payments due on the Preferred Securities.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company will covenant that, so long as any Preferred
Securities remain outstanding, if there shall have occurred any event that would
constitute an Event of Default under such Guarantee or the Declaration, then (a)
the Company 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 or make any guarantee payment with respect
thereto (other than (i) repurchases, redemptions or other acquisitions of shares
of capital stock of the Company in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of employees,
officers, directors or consultants, (ii) as a result of an exchange or
conversion of any class or series of the Company's capital stock for any other
class or series of the Company's capital stock, or (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged) and (b) the Company 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 the Company which rank PARI PASSU with or
junior to the Junior Subordinated Debt Securities. The
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Guarantee, however, will except from the foregoing any stock dividends paid by
the Company where the dividend stock is the same stock as that on which the
dividend is being paid.
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
Guarantee may be amended only with the prior approval of the holders of not less
than a majority in aggregate liquidation amount of the outstanding Preferred
Securities. All guarantees and agreements contained in the Guarantee shall bind
the successors, assignees, receivers, trustees and representatives of the
Company and shall inure to the benefit of the holders of the Preferred
Securities then outstanding.
EVENTS OF DEFAULT
An Event of Default under the 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 aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce
the Guarantee Trustee's rights under the Guarantee, any holder of related
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against Citigroup Capital, the Guarantee
Trustee or any other person or entity. A holder of Preferred Securities may also
directly institute a legal proceeding against the Company to enforce such
holder's right to receive payment under the Guarantee without first (i)
directing the Guarantee Trustee to enforce the terms of the Guarantee or (ii)
instituting a legal proceeding against Citigroup Capital or any other person or
entity.
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Guarantee and as to any default in such performance.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, undertakes to perform only such duties as are specifically set
forth in the Guarantee and, after default with respect to the Guarantee, 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 provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to the Preferred Securities upon full
payment of the Redemption Price of all Preferred Securities, upon distribution
of the Junior Subordinated Debt Securities to the holders of the Preferred
Securities or upon full payment of the amounts payable in accordance with the
Declaration upon liquidation of Citigroup Capital. The Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
holder of Preferred Securities must restore payment of any sums paid under the
Preferred Securities or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation 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 the Company in respect of any preferred or
preference stock of any subsidiary of the Company and (iii) senior to the
Company's common stock. The terms of the Preferred Securities provide that each
holder of Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee.
The Guarantee 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 Guarantee without instituting a
legal proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
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EFFECT OF OBLIGATIONS UNDER THE
JUNIOR SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of Citigroup Capital is to
issue the Trust Securities evidencing undivided beneficial interests in the
assets of Citigroup Capital, and to invest the proceeds from such issuance and
sale in the Junior Subordinated Debt Securities.
As long as payments of interest and other payments are made when due on the
Junior 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 Junior 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 Junior Subordinated Debt Securities will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) pursuant to the Indenture, the Company shall pay, and
Citigroup Capital shall not be obligated to pay, directly or indirectly, all
costs, expenses, debt and obligations of Citigroup Capital other than with
respect to the Trust Securities; and (iv) the Declaration further provides that
the Citigroup Trustees shall not cause or permit Citigroup Capital to, among
other things, engage in any activity that is not consistent with the purposes of
Citigroup Capital.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of Guarantees" in the accompanying Prospectus. If the Company does
not make interest payments on the Junior Subordinated Debt Securities purchased
by Citigroup Capital, it is expected that Citigroup Capital will not have
sufficient funds to pay distributions on the Preferred Securities. The Guarantee
is a guarantee on a subordinated basis with respect to the Preferred Securities
from the time of its issuance but does not apply to any payment of distributions
unless and until Citigroup Capital has sufficient funds for the payment of such
distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal or other payments on the Junior Subordinated
Debt Securities held by Citigroup Capital as its sole asset. The Guarantee, when
taken together with the Company's obligations under the Junior Subordinated Debt
Securities and the Indenture and its obligations under the Declaration,
including its obligations to pay costs, expenses, debts and liabilities of
Citigroup Capital (other than with respect to the Trust Securities), will
provide a full and unconditional guarantee of distributions, redemption payments
and liquidation payments on the Preferred Securities.
If the Company fails to make interest or other payments on the Junior
Subordinated Debt Securities when due (taking account of any Extension Period),
the Declaration provides a mechanism whereby the holders of the Preferred
Securities, using the procedures described in "Description of the Preferred
Securities--Book Entry Only Issuance-- The Depository Trust Company" and
"--Voting Rights," may direct the Institutional Trustee to enforce its rights
under the Junior Subordinated Debt Securities. If the Institutional Trustee
fails to enforce its rights under the Junior Subordinated Debt Securities, any
holder of Preferred Securities may directly institute a legal proceeding against
the Company to enforce the Institutional Trustee's rights under the Junior
Subordinated Debt Securities without first instituting any legal proceeding
against the Institutional Trustee or any other person or entity. If a
Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Junior 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 Preferred Securities may also institute a Direct Action for payment on
or after the respective due date specified in the Junior Subordinated Debt
Securities without first (i) directing the Institutional Trustee to enforce the
terms of the Junior Subordinated Debt Securities or (ii) instituting a legal
proceeding against the Company to enforce the Institutional Trustee's rights
under the Junior Subordinated Debt Securities. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action.
Consequently, the Company will be entitled to payment of amounts that a holder
of Preferred Securities receives in respect of an unpaid distribution that
resulted in the bringing of a Direct Action to the extent that such holder
receives or has already received full payment with respect to such unpaid
distribution from Citigroup Capital. The Company, under the Guarantee,
acknowledges that the Guarantee Trustee shall enforce the Guarantee on behalf of
the holders of the Preferred Securities. If the Company fails to make payments
under the Guarantee, the Guarantee provides a mechanism whereby the holders of
the Preferred Securities may direct the Guarantee Trustee to enforce its rights
thereunder. If the Guarantee Trustee fails to enforce the
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Guarantee, any holder of Preferred Securities may directly institute a legal
proceeding against the Company to enforce the Guarantee Trustee's rights under
the Guarantee without first instituting a legal proceeding against Citigroup
Capital, the Guarantee Trustee, or any other person or entity. A holder of
Preferred Securities may also directly institute a legal proceeding against the
Company to enforce such holder's right to receive payment under the Guarantee
without first (i) directing the Guarantee Trustee to enforce the terms of the
Guarantee or (ii) instituting a legal proceeding against Citigroup Capital or
any other person or entity.
The Company and Citigroup Capital believe that the above mechanisms and
obligations, taken together, are equivalent to a full and unconditional
guarantee by the Company of payments due on the Preferred Securities. See
"Description of Guarantee--General."
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of the material United States federal income tax
consequences of the purchase, ownership and disposition of Preferred Securities.
Unless otherwise stated, this summary deals only with Preferred Securities held
as capital assets by holders who purchase the Preferred Securities upon original
issuance. It does not deal with special classes of holders such as banks,
thrifts, real estate investment trusts, regulated investment companies, common
trust funds, insurance companies, dealers in securities or currencies,
tax-exempt investors, persons that have a functional currency other than the
United States Dollar or persons that will hold the Preferred Securities as a
position in a "straddle," as part of a "synthetic security" or "hedge," as part
of a "conversion transaction" or other integrated investment, or as other than a
capital asset. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the Preferred Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder and administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change, possibly
with retroactive effect.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
In connection with the issuance of the Junior Subordinated Debt Securities,
Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden, Arps"), tax counsel to the
Company and Citigroup Capital, will render its opinion generally to the effect
that, under then current law and assuming full compliance with the terms of the
Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Junior Subordinated Debt Securities
held by Citigroup Capital will be classified for United States federal income
tax purposes as indebtedness of the Company.
CLASSIFICATION OF CITIGROUP CAPITAL
In connection with the issuance of the Preferred Securities, Skadden, Arps
will render its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, Citigroup Capital 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 Preferred Securities generally will be considered the
owner of an undivided interest in the Junior Subordinated Debt Securities, and
each holder will be required to include in its gross income interest (or
original issue discount ("OID")) with respect to its allocable share of those
Junior Subordinated Debt Securities.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under Treasury regulations applicable to debt instruments issued on or after
August 13, 1996 (the "Regulations"), a "remote" contingency that stated interest
will not be timely paid will be ignored in determining whether a debt instrument
is issued with OID. The Company believes that the likelihood of its exercising
its option to defer payments is remote within the meaning of the Regulations.
Based on the foregoing, the Company believes that, although the matter is not
free from doubt, the Junior Subordinated Debt Securities will not be considered
to be issued with OID at the time of their original issuance and, accordingly,
that a holder of the Preferred Securities should include in gross income such
holder's allocable share of interest on the Junior Subordinated Debt Securities
in accordance with such holder's method of tax accounting.
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Under the Regulations, if the option to defer any payment of interest was
determined not to be "remote" or if the Company exercised such option, the
Junior Subordinated Debt Securities would be treated as issued with OID at the
time of issuance or at the time of such exercise, as the case may be, and all
stated interest on the Junior Subordinated Debt Securities would thereafter be
treated as OID as long as the Junior Subordinated Debt Securities remained
outstanding. In such event, all of a holder's taxable interest income with
respect to the Junior Subordinated Debt Securities would constitute OID that
would have to be included in income on an economic accrual basis before the
receipt of the cash attributable to the interest, regardless of such holder's
method of tax accounting, and actual distributions of stated interest would not
be reported as taxable income. Consequently, a holder of Preferred Securities
would be required to include in gross income OID even though the Company would
not make any actual cash payments during an Extension Period.
No rulings or other interpretations have been issued by the Internal Revenue
Service (the "IRS") which have
addressed the meaning of the term "remote" as used in the Regulations, and it is
possible that the IRS could take a position contrary to the interpretation
herein.
Because income on the Preferred Securities will constitute interest or OID,
corporate holders of Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Preferred Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF
CITIGROUP CAPITAL
Under certain circumstances, as described under "Description of the
Preferred Securities--Special Event Redemption or Distribution," Junior
Subordinated Debt Securities may be distributed to holders in exchange for the
Preferred Securities upon the liquidation of Citigroup Capital. 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 Junior Subordinated Debt Securities equal to such
holder's aggregate tax basis in its Preferred Securities. A holder's holding
period in the Junior Subordinated Debt Securities received in liquidation of
Citigroup Capital would include the period during which the Preferred Securities
were held by such holder.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Junior Subordinated Debt Securities may be redeemed
by the Company for cash and the proceeds of such redemption distributed by
Citigroup Capital to holders in redemption of their Preferred Securities. Under
current law, such a redemption would, for United States federal income tax
purposes, constitute a taxable disposition of the redeemed Preferred Securities,
and a holder could recognize gain or loss as if it sold such redeemed Preferred
Securities for cash. See "United States Federal Income Taxation--Sales of
Preferred Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will be considered to have disposed
of all or part of its PRO RATA share of the Junior Subordinated Debt Securities
and will recognize gain or loss equal to the difference between its adjusted tax
basis in the Preferred Securities and the amount realized on the sale of such
Preferred Securities. Assuming that the Company does not exercise its option to
defer payment of interest on the Junior Subordinated Debt Securities and that
the Junior Subordinated Debt Securities are not deemed to be issued with OID, a
holder's adjusted tax basis in the Preferred Securities generally will be its
initial purchase price. If the Junior Subordinated Debt Securities are deemed to
be issued with OID, a holder's tax basis in the Preferred Securities generally
will be its initial purchase price, increased by OID previously includible in
such holder's gross income to the date of disposition and decreased by
distributions or other payments received on the Preferred Securities since and
including the date that the Junior Subordinated Debt Securities were deemed to
be issued with OID. Such gain or loss generally will be a capital gain or loss
(except to the extent of any accrued interest with respect to such holder's PRO
RATA share of the Junior Subordinated Debt Securities required to be included in
income) and generally will be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
Should the Company exercise its option to defer any payment of interest on
the Junior Subordinated Debt Securities, the Preferred Securities may trade at a
price that does not accurately reflect the value of accrued but unpaid interest
with respect to the underlying Junior Subordinated Debt Securities. In the event
of such a deferral, a holder who disposes of its Preferred Securities between
record dates for payments of distributions thereon will be required to include
in income as ordinary income accrued but unpaid interest on the Junior
Subordinated Debt Securities to the date of disposition and to add such amount
to its adjusted tax basis in its PRO RATA share of the
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underlying Junior Subordinated Debt Securities deemed disposed of. To the extent
the selling price is less than the holder's adjusted tax basis, 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
For purposes of this discussion, a "United States Alien Holder" is any
person other than (i) a citizen or a resident of the United States; (ii) a
corporation, partnership, or other entity created or organized in or under the
laws of the United States or any political subdivision thereof; (iii) an estate
the income of which is subject to United States federal income tax regardless of
its source; or (iv) a trust if (A) a U.S. court is able to exercise primary
supervision over the trust's administration and (B) one or more United States
persons have the authority to control all of the trust's substantial decisions.
The term "United States" means the United States of America (including the
States and the District of Columbia).
Under present United States federal income tax law: (i) payments by
Citigroup Capital or any of its paying agents to any holder of a Preferred
Security who or which is a United States Alien Holder will not be subject to
United States federal withholding tax; PROVIDED, that, (a) the beneficial owner
of the Preferred Security does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the Company entitled
to vote, (b) the beneficial owner of the Preferred Security is not a controlled
foreign corporation that is related to the Company through stock ownership, and
(c) either (A) the beneficial owner of the Preferred Security certifies to
Citigroup Capital or its agent, under penalties of perjury, that it is not a
United States holder and provides its name and address or (B) 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 Preferred Security in such capacity, certifies to
Citigroup Capital or its agent, under penalties of perjury, that such statement
has been received from the beneficial owner by it or by a Financial Institution
holding such security for the beneficial owner and furnishes Citigroup Capital
or its agent with a copy thereof; and (ii) a United States Alien Holder of a
Preferred Security will not be subject to United States federal withholding tax
on any gain realized upon the sale or other disposition of a Preferred Security.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Preferred Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Preferred Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States federal income tax, provided the
required information is provided to the IRS on a timely basis.
The United States Treasury Department recently issued final regulations
governing information reporting and the certification procedures regarding
withholding and backup withholding on certain amounts paid to United States
Alien Holders after December 31, 1999. The new Treasury regulations would alter
the procedures for claiming the benefits of an income tax treaty and may change
the certification procedures relating to the receipt by intermediaries of
payments on behalf of a beneficial owner of a Junior Subordinated Debt Security.
Holders of Preferred Securities should consult their tax advisors concerning the
effect, if any, of such new Treasury regulations on an investment in the
Preferred Securities.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
S-31
<PAGE>
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (an "ERISA Plan") should consider the fiduciary standards of ERISA in
the context of the ERISA Plan's particular circumstances before authorizing an
investment in the Preferred Securities of the Trust. Among other factors, the
fiduciary should consider whether such an investment is in accordance with the
documents governing the ERISA Plan and whether the investment is appropriate for
the ERISA Plan in view of its overall investment policy and diversification of
its portfolio.
Certain provisions of ERISA and the Code prohibit ERISA Plans, as well as
individual retirement accounts and Keogh plans subject to section 4975 of the
Code (collectively, "Plans"), from engaging in certain transactions involving
"plan assets" with parties that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the Plan. The U.S.
Department of Labor has issued a final regulation (the "Regulation") with regard
to whether the underlying assets of an entity in which employee benefit plans
acquire equity interests are deemed to be plan assets.
Under such Regulation, for purposes of ERISA and section 4975 of the Code,
the assets of the Trust would be deemed to be "plan assets" of a Plan whose
assets were used to purchase Preferred Securities of the Trust if the Preferred
Securities of the Trust were considered to be equity interests in the Trust and
no exception to plan asset status were applicable under the Regulation.
If the assets of the Trust were deemed to be plan assets of Plans that are
holders of the Preferred Securities of the Trust, a Plan's investment in the
Preferred Securities of the Trust might be deemed to constitute a delegation
under ERISA of the duty to manage plan assets by a fiduciary investing in
Preferred Securities of the Trust. Also, the Company might be considered a
"party in interest" or "disqualified person" with respect to Plans whose assets
were used to purchase Preferred Securities of the Trust. If this were the case,
an investment in Preferred Securities of the Trust by a Plan might constitute,
or in the course of the operation of the Trust give rise to, a prohibited
transaction under ERISA or the Code. In particular, it is likely that under such
circumstances a prohibited extension of credit to the Company would be
considered to occur under ERISA and the Code.
In addition, the Company might be considered a "party in interest" or
"disqualified person" with respect to certain Plans for reasons unrelated to the
operation of the Trust, E.G., because of the provision of services by the
Company or an affiliate to the Plan. A purchase of Preferred Securities of the
Trust by any such Plan would be likely to result in a prohibited extension of
credit to the Company, without regard to whether the assets of the Trust
constituted plan assets.
Because of the possibility that a prohibited extension of credit could occur
as a result of the purchase or holding of the Preferred Securities of the Trust
by a Plan, the Preferred Securities of the Trust may be not purchased or held by
any Plan or any person investing "plan assets" of any Plan, unless such
purchaser or holder is eligible for the exemptive relief available under
Prohibited Transaction Class Exemption ("PTCE") 96-23 (for certain transactions
determined by in-house asset managers), PTCE 95-60 (for certain transactions
involving insurance company general accounts), PTCE 91-38 (for certain
transaction involving bank collective investment funds), PTCE 90-1 (for certain
transactions involving insurance company separate accounts), or PTCE 84-14 (for
certain transactions determined by independent qualified asset managers). Any
purchaser of the Preferred Securities of the Trust or any interest therein will
be deemed to have represented to the Trust that either (a) it is not a Plan and
is not purchasing such securities (or interest therein) on behalf of or with
"plan assets" of any Plan or (b) its purchase and holding of the Preferred
Securities of the Trust (or interest therein) is eligible for the exemptive
relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that any person considering
the purchase of Preferred Securities of the Trust with Plan assets consult with
its counsel regarding the consequences under ERISA and the Code of the
acquisition and ownership of Preferred Securities of the Trust and the
availability of exemptive relief under the class exemptions listed above. In
JOHN HANCOCK MUTUAL LIFE INSURANCE CO. V. HARRIS TRUST AND SAVINGS BANK, 114
S.Ct. 517 (1993), the Supreme Court ruled that assets held in an insurance
company's general account may be deemed to be "plan assets" for ERISA purposes
under certain circumstances. The issues raised in HARRIS TRUST have also been
the subject of legislative action, and have been addressed in proposed
regulations issued by the U.S. Department of Labor in December 1997.
S-32
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated November 13, 1998 (the "Underwriting Agreement"), each Underwriter named
below (the "Underwriters") has severally agreed to purchase from Citigroup
Capital, and Citigroup Capital has agreed to sell to such Underwriter, the
number of Preferred Securities set forth opposite the name of such Underwriter
below.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SECURITIES
----------------------- ------------------
<S> <C>
Salomon Smith Barney Inc. ................ 2,825,000
A.G. Edwards & Sons, Inc. ................ 2,812,500
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................... 2,812,500
Morgan Stanley & Co. Incorporated......... 2,812,500
PaineWebber Incorporated.................. 2,812,500
Prudential Securities Incorporated........ 2,812,500
Bear, Stearns & Co. Inc................... 187,500
Goldman, Sachs & Co....................... 187,500
Lehman Brothers Inc....................... 187,500
ABN AMRO Incorporated..................... 118,750
BT Alex. Brown Incorporated............... 118,750
J.C. Bradford & Co........................ 118,750
CIBC Oppenheimer Corp..................... 118,750
Dain Rauscher Incorporated................ 118,750
Donaldson, Lufkin & Jenrette Securities
Corporation............................. 118,750
EVEREN Securities, Inc.................... 118,750
Fleet Securities, Inc..................... 118,750
McDonald & Company Securities, Inc........ 118,750
Piper Jaffray Inc......................... 118,750
Raymond James & Associates, Inc........... 118,750
Robert W. Baird & Co. Incorporated........ 118,750
The Robinson-Humphrey Company, LLC........ 118,750
SG Cowen Securities Corporation........... 118,750
Warburg Dillon Read LLC................... 118,750
Wheat First Securities, Inc............... 118,750
Advest, Inc............................... 25,000
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SECURITIES
----------------------- ------------------
<S> <C>
Craigie Incorporated...................... 25,000
Crowell, Weedon & Co...................... 25,000
Doley Securities, Inc..................... 25,000
Fahnestock & Co. Inc...................... 25,000
Fidelity Capital Markets,
A Division of National Financial
Services Corporation.................. 25,000
Fifth Third/The Ohio Company.............. 25,000
First Albany Corporation.................. 25,000
First of Michigan Corporation............. 25,000
Gibraltar Securities Co................... 25,000
Gruntal & Co., L.L.C...................... 25,000
J.J.B. Hilliard, W.L. Lyons, Inc.......... 25,000
Interstate/Johnson Lane Corporation....... 25,000
Janney Montgomery Scott Inc............... 25,000
Legg Mason Wood Walker, Incorporated...... 25,000
Mesirow Financial, Inc.................... 25,000
Morgan Keegan & Company, Inc.............. 25,000
Olde Discount Corporation................. 25,000
Roney Capital Markets..................... 25,000
Scott & Stringfellow, Inc................. 25,000
Stephens Inc.............................. 25,000
Stifel, Nicolaus & Company, 25,000
Incorporated............................
TD Securities (USA) Inc................... 25,000
Tucker Anthony Incorporated............... 25,000
Utendahl Capital Partners, L.P............ 25,000
Wedbush Morgan Securities................. 25,000
------------------
Total................................. 20,000,000
------------------
------------------
</TABLE>
The Underwriters are obligated to take and pay for the total number of
Preferred Securities offered hereby if any such Preferred Securities are
purchased. In the event of default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.
The Underwriting Agreement provides that Citigroup Capital and the Company
will indemnify the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, and to make certain
contributions in respect thereof.
Citigroup Capital and the Company have agreed, during the period beginning
on the date of the Underwriting Agreement and continuing to and including the
date that is 60 days after the closing date for the purchase of the Preferred
Securities, not to offer, sell, contract to sell or otherwise dispose of any
preferred securities, any preferred stock or any other securities (including any
backup undertakings of such preferred stock or other securities) of the Company
or of Citigroup Capital, in each case that are substantially similar to the
Preferred Securities, or any securities convertible into or exchangeable for the
Preferred Securities or such substantially similar securities of either
Citigroup Capital or the Company, except preferred securities offered pursuant
to the accompanying Prospectus, without the prior written consent of Salomon
Smith Barney Inc.
In view of the fact that the proceeds of the sale of the Preferred
Securities will ultimately be used to purchase the Junior Subordinated Debt
Securities of the Company, the Underwriting Agreement provides that the Company
will pay as compensation to the Underwriters $0.7875 per Preferred Security for
the accounts of the several Underwriters ($15,750,000 in the aggregate);
PROVIDED that such compensation will be $0.50 per Preferred Security for sales
of 10,000 or more Preferred Securities to a single purchaser. Therefore, to the
extent of such sales, the actual amount of Underwriters' Compensation will be
less than the aggregate amount specified in the preceding sentence.
The Underwriters propose to offer the Preferred Securities, in part,
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at a price that
represents a concession not in excess of $0.50, provided that such concession
for sales of 10,000 or more Preferred
S-33
<PAGE>
Securities to a single purchaser will not be in excess of $0.30 per Preferred
Security. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $0.35 per Preferred Security to certain brokers and dealers.
After the Preferred Securities are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
representatives of the Underwriters.
The Preferred Securities have been approved for listing on the NYSE subject
to official notice of issuance. Trading of the Preferred Securities on the NYSE
is expected to commence within a 30-day period after the initial delivery of the
Preferred Securities.
Salomon Smith Barney Inc. is an indirect wholly owned subsidiary of the
Company and an affiliate of Citigroup Capital. The offering of Preferred
Securities will comply with the requirements of Rule 2720 of the Conduct Rules
of the NASD regarding a NASD member firm's underwriting securities of an
affiliate. Certain of the Underwriters and their affiliates have in the past
provided, and may in the future provide, investment and/or commercial banking
services to the Company and its subsidiaries in the ordinary course of business.
The Underwriters may engage in over-allotment, stabilizing transactions and
covering transactions in accordance with Regulation M under the Securities
Exchange Act of 1934, as amended. Over-allotment involves sales in excess of the
offering size, which creates a short position for the Underwriters. Stabilizing
transactions involve bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Covering transactions
involve purchases of the Preferred Securities in the open market after the
distribution has been completed in order to cover short positions. Such
stabilizing transactions and covering transactions may cause the price of the
Preferred Securities to be higher than it would otherwise be in the absence of
such transactions.
Because Salomon Smith Barney Inc. is an affiliate of the Company and a
member of the NASD, the offering of Preferred Securities will be conducted
pursuant to the applicable sections of Rule 2810 of the Conduct Rules of the
NASD. The Underwriters may not confirm sales to any discretionary account
without the prior specific written approval of a customer.
This Prospectus Supplement together with an applicable Prospectus may also
be used by Salomon Smith Barney Inc. or an affiliate (the "Citigroup
Subsidiaries," and each, a "Citigroup Subsidiary") in connection with offers and
sales of the Preferred Securities (subject to obtaining any necessary approval
of the New York Stock Exchange for any such offers and sales) in market-making
transactions at negotiated prices related to prevailing market prices at the
time of sale. Any Citigroup Subsidiary may act as principal or agent in such
transactions. No Citigroup Subsidiary has any obligation to make a market in any
of the Preferred Securities and any Citigroup Subsidiary may discontinue any
market-making activities at any time without notice, at its sole discretion.
LEGAL MATTERS
The validity of the Preferred Securities, the Junior Subordinated Debt
Securities, the Guarantee and certain matters relating thereto and certain
United States federal income tax matters will be passed upon for the Company and
Citigroup Capital by Skadden, Arps, New York, New York. Certain legal matters
will be passed upon for the Underwriters by Dewey Ballantine LLP, New York, New
York. Kenneth J. Bialkin, a partner of Skadden, Arps, is a director of the
Company and he and other attorneys in such firm beneficially own an aggregate of
less than one percent of the common stock of the Company. Dewey Ballantine LLP
has from time to time acted as counsel for the Company and certain of its
subsidiaries and may do so in the future. A member of Dewey Ballantine LLP
participating in this matter is the beneficial owner of shares of the Company's
common stock.
S-34
<PAGE>
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20,000,000 Securities
Citigroup Capital V
7% Trust Preferred Securities (TRUPS-Registered Trademark-)
$25 liquidation amount
guaranteed to the extent set forth herein by
Citigroup Inc.
[LOGO]
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PROSPECTUS SUPPLEMENT
NOVEMBER 13, 1998
(INCLUDING PROSPECTUS
DATED DECEMBER 30, 1997)
---------
Salomon Smith Barney
A.G. Edwards & Sons, Inc.
Merrill Lynch & Co.
Morgan Stanley Dean Witter
PaineWebber Incorporated
Prudential Securities Incorporated
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