Each T-DECS is a unit comprised of a prepaid stock purchase contract and a subordinated amortizing note due December 15, 2012 issued by Citigroup, which has an initial principal amount of $20.284 per amortizing note and a scheduled final installment payment date of December 15, 2012.
On December 15, 2012, each purchase contract will automatically settle and Citigroup will deliver a number of shares of its common stock, based on the applicable market value, which is the average of the daily volume weighted average prices, or VWAPs (as defined herein), of the common stock on each of the 20 consecutive trading days ending on the third trading day immediately preceding December 15, 2012, as follows: if the applicable market value equals or exceeds $3.94, you will receive 25.3968 shares; if the applicable market value is greater than $3.15 but less than $3.94, you will receive a number of shares having a value, based on the applicable market value, equal to $100; and if the applicable market value is less than or equal to $3.15, you will receive 31.7460 shares.
At any time prior to December 15, 2012, you may settle your purchase contract and Citigroup will deliver 25.3968 shares of its common stock. In addition, if a fundamental change (as defined herein) occurs and you elect to settle your purchase contracts early in connection with such fundamental change, you will receive a number of shares of Citigroup common stock based on the fundamental change early settlement rate, as described herein. Citigroup may elect to settle all outstanding purchase contracts prior to the December 15, 2012 settlement date at the early mandatory settlement rate (as defined herein), upon a date fixed by Citigroup upon not less than 5 business days’ notice. The purchase contract holders will not receive any cash distributions.
The amortizing notes will pay you equal quarterly installments of $1.875 per amortizing note, which in the aggregate will be equivalent to a 7.50% cash payment per year with respect to each $100 stated amount of T-DECS. Citigroup will have the right to defer installment payments at any time and from time to time under the circumstances, and subject to the conditions, described herein, so long as such deferral period does not extend beyond December 15, 2015. The amortizing notes will be junior subordinated obligations of Citigroup, and will rank (i) junior both in liquidation and right of payment, to the extent set forth in the junior subordinated debt indenture, to all of Citigroup’s “Senior Indebtedness” (as defined under “Description of the Amortizing Notes — Subordinated Debt”) and (ii) equally with all of Citigroup’s unsecured and subordinated indebtedness, whether currently existing or hereinafter created, other than junior subordinated indebtedness that is designated as junior to the amortizing notes. If Citigroup elects to settle the purchase contracts early, you will have the right to require Citigroup to repurchase your amortizing notes, except in certain circumstances as described herein.
Each T-DECS may be separated into its constituent purchase contract and amortizing note after the initial issuance date of the T-DECS.
Citigroup will apply to list the T-DECS on the New York Stock Exchange under the symbol “CPRH,” and Citigroup expects trading on the New York Stock Exchange to begin within 30 days after the T-DECS are first issued. However, Citigroup will not initially apply to list the separate purchase contracts or the separate amortizing notes on any securities exchange or automated inter-dealer quotation system, but Citigroup may list such separate purchase contracts and separate amortizing notes in the future as described herein. Prior to this offering, there has been no public market for the T-DECS. Citigroup’s common stock is listed on The New York Stock Exchange under the symbol “C.” The last reported sale price of Citigroup’s common stock on The New York Stock Exchange on December 16, 2009 was $3.45 per share.
Concurrently with this offering, Citigroup is offering 5,396,825,397 shares of its common stock (or 6,206,349,207 shares if the underwriters in that offering exercise their over-allotment option in full). Neither offering is contingent upon the other.