Summary of CITIGROUP INC - Yahoo! Finance

Other Events, Material Modification to Rights of Security Holders, Unregistered Sal

Item 3.03. Material Modification to Rights of Security Holders.

On June 9, 2009, the board of directors of Citigroup adopted a Tax Benefits Preservation Plan (the "Plan"). The purpose of the Plan is to protect Citigroup's ability to utilize certain tax assets, such as net operating loss carryforwards and tax credits (the "Tax Benefits"), to offset future income. Citigroup's use of the Tax Benefits in the future could be significantly limited if it experiences an "ownership change" for U.S. federal income tax purposes. In general, an "ownership change" will occur if there is a cumulative change in Citigroup's ownership by "5-percent shareholders" (as defined under U.S. income tax laws) that exceeds 50 percentage points over a rolling three-year period.

The Plan is designed to reduce the likelihood that Citigroup will experience an ownership change by (i) discouraging any person or group from becoming a "5-percent shareholder" and (ii) discouraging any existing "5-percent shareholder" from acquiring more than a specified number of additional shares of Citigroup stock. There is no guarantee, however, that the Plan will prevent Citigroup from experiencing an ownership change.

A corporation that experiences an ownership change will generally be subject to an annual limitation on certain of its pre-ownership change tax assets equal to the value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate (subject to certain adjustments), provided that the annual limitation would be increased each year to the extent that there is an unused limitation in a prior year. The limitation arising from an ownership change on Citigroup's ability to utilize the Tax Benefits depends on the value of Citigroup's stock at the time of the ownership change. If Citigroup's Tax Benefits are subject to limitation because it experiences an ownership change, depending on the value of Citigroup's stock at the time of the ownership change, Citigroup's tangible common equity might be reduced.

After giving careful consideration to this issue, in light of the previously announced exchange offers, Citigroup's board of directors has concluded that the Plan is in the best interests of Citigroup and its stockholders.

In connection with the adoption of the Plan, on June 9, 2009, Citigroup's board of directors declared a dividend of one preferred stock purchase right (a "Right") for each outstanding (i) share of Citigroup's common stock and (ii) one-millionth of a share of the Series M preferred stock (as described below, the "Interim Securities"). The dividend will be payable to holders of record of Citigroup's common stock and Interim Securities on June 22, 2009 (the "Record Date").

Each Right will initially represent the right to purchase, for $20.00 (the "Purchase Price"), one one-millionth of a share of Series R Cumulative Participating Preferred Stock, par value $1.00 per share (the "Series R Preferred Stock"). The terms and conditions of the Rights are set forth in the Plan.

The Rights will not be exercisable until the earlier of (i) the close of business on the 10th business day after the date (the "Stock Acquisition Date") of the announcement that a person has become an Acquiring Person (as defined below) and (ii) the close of business on the 10th business day (or such later day as may be designated by Citigroup's board of directors before any person has become an Acquiring Person (as defined below)) after the date of the commencement of a tender or exchange offer by any person which could, if consummated, result in such person

becoming an Acquiring Person (as defined below). The date that the Rights become exercisable is referred to as the "Distribution Date."

After any person has become an Acquiring Person (as defined below) (other than Rights treated as beneficially owned under certain U.S. tax rules by the Acquiring Person), each Right will generally entitle the holder to purchase for the Purchase Price a number of shares of Series R Preferred Stock having a market value of twice the Purchase Price.

An "Acquiring Person" means, in general, any person or group that has become a "5-percent shareholder" of Citigroup, other than (A) Citigroup or any subsidiary or employee benefit plan or compensation arrangement of Citigroup; (B) the United States government; (C) certain existing "5-percent shareholders" (including certain persons who are "5-percent shareholders" following the previously announced exchange offers with Citigroup) so long as each such shareholder does not acquire more than a specified number of additional shares of Citigroup's stock; (D) certain other "grandfathered persons" (as described in the Plan), so long as such "grandfathered persons" satisfy the applicable requirements in the Plan; (E) any person or group that Citigroup's board of directors determines, in its sole discretion, has inadvertently become a "5-percent shareholder" (or inadvertently failed to continue to qualify as a "grandfathered person"), so long as such person or group promptly divests sufficient shares so as to no longer own 5% of Citigroup's stock; (F) any person or group that has become a "5-percent shareholder" (or failed to qualify as a "grandfathered person") solely as a result of certain "in-kind distributions," so long as such person or group satisfies the applicable requirements set forth in the Plan; (G) any person or group that Citigroup's board of directors determines, in its sole discretion, has not jeopardized or endangered Citigroup's utilization of its Tax Benefits, so long as each such shareholder does not acquire any additional shares of Citigroup's stock and so long as our board of directors does not, in its sole discretion, make a contrary determination; and (H) any person that acquires at least a majority of Citigroup's common stock (and, for so long as the Interim Securities remain outstanding, at least a majority of the Interim Securities) in connection with an offer to acquire 100% of Citigroup's common stock then outstanding (and, for so long as the Interim Securities remain outstanding, 100% of the Interim Securities).

At any time after any person has become an Acquiring Person (but before any person becomes the beneficial owner of 50% or more of the outstanding shares of Citigroup's common stock), Citigroup's board of directors may generally exchange all or part of the Rights (other than Rights beneficially owned under certain U.S. tax rules by an Acquiring Person) for shares of Series R Preferred Stock at an exchange ratio of one one-millionth of a share of Series R Preferred Stock per Right.

The issuance of the Rights is not taxable to holders of Citigroup's common stock or Interim Securities for U.S. federal income tax purposes.

Upon conversion of the Interim Securities into common stock, any Rights . . .

Item 3.02. Unregistered Sales of Equity Securities.

On June 10, 2009, Citigroup announced that it had entered into definitive exchange agreements (the "Exchange Agreements") with each of the U.S. Treasury and the Federal Deposit Insurance Corporation (the "FDIC") in connection with the private exchange offers previously announced on February 27, 2009.

The following is a summary of the material terms of the Exchange Agreements:

General: Pursuant to the Exchange Agreement with the U.S. Treasury, the U.S. Treasury will exchange an amount of its preferred stock for newly issued warrants of Citigroup and Interim Securities to match on a "dollar-for-dollar" basis with the aggregate liquidation preference of the preferred stock exchanged by all of the private holders of its convertible preferred stock issued in January 2008 (the "Private Holders") (the "U.S. Treasury Private Transaction").

ˇ The Interim Securities will convert to Citigroup common stock at a conversion rate initially set at 1,000,000 shares of common stock for one share of Interim Security (equal to an initial conversion price of $3.25 per share), subject to shareholder authorization of the additional common stock needed for the transaction. The maximum number of shares of Interim Securities to be issued to the U.S. Treasury and the Private Holders is 11,540 shares. If shareholder authorization is not received within six months after the closing of the U.S. Treasury Private Transaction, the Interim Securities will pay a 9% dividend that will increase by 2 percentage points each quarter up to a maximum dividend of 19%.

ˇ The warrants entitle the U.S. Treasury to purchase shares of Citigroup common stock at $0.01 per share if the shareholder authorization is not received within six months after the closing of the U.S. Treasury Private Transaction. The maximum number of shares of common stock issuable to the U.S. Treasury and the Private Holders upon exercise of the warrants is 790,000,000 shares. The warrants will be cancelled if shareholder authorization is received.

ˇ The U.S. Treasury Private Transaction is exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended.

The U.S. Treasury has also agreed to exchange an additional amount of its preferred stock for Citigroup common stock to match, on a "dollar-for-dollar" basis, the aggregate liquidation amount of the preferred securities subject to the previously announced public exchange offers, up to an aggregate liquidation amount of $25 billion (including securities exchanged in the U.S. Treasury Private Transaction), at a conversion price of $3.25 per share (the "U.S. Treasury Public Transaction").

Additionally, the preferred stock held by the U.S. Treasury that is not exchanged in the U.S. Treasury Private Transaction or the U.S. Treasury Public Transaction, together with the preferred stock held by the FDIC, will be exchanged, contemporaneously with the closing of the U.S. Treasury Public Transaction, for trust preferred securities with a coupon of 8% maturing in 2039 and having other material terms substantially similar to Citigroup's outstanding TRUPSŽ (the "USG TRUPSŽ Transaction").

Conditions to Completion of the U.S. Treasury Private Transaction: The respective obligations of Citigroup and the U.S. Treasury to consummate the U.S. Treasury Private Transaction are subject to the satisfaction or waiver by Citigroup or the U.S. Treasury, as applicable, at or before the closing, of the following conditions:

ˇ absence of any law, rule, order, injunction or judgment prohibiting or preventing the completion of the U.S. Treasury Private Transaction;

ˇ receipt of all material approvals or authorizations of any governmental entities required for the consummation of the U.S. Treasury Private Transaction; and

ˇ the approval of the NYSE for Citigroup to issue the Interim Securities without shareholder approval being in full force and effect.

The obligation of the U.S. Treasury to consummate the U.S. Treasury Private Transaction is also subject to the fulfillment or waiver by the U.S. Treasury at or prior to the closing of, among others, the following conditions:

ˇ the accuracy of the representations and warranties made by Citigroup in the Exchange Agreement with the U.S. Treasury, subject to certain materiality exceptions;

ˇ Citigroup having performed in all material respects all the obligations required to be performed by it at or prior to closing; and

ˇ the consummation or concurrent consummation of the exchanges with the Private Holders, pursuant to which a minimum of $11.5 billion in aggregate liquidation preference of preferred stock is exchanged.

Conditions to Completion of the U.S. Treasury Public Transaction: The respective obligations of Citigroup and the U.S. Treasury to consummate the U.S. Treasury Public Transaction are subject to the satisfaction or waiver by Citigroup or the U.S. Treasury, as applicable, at or before the closing, of the following conditions:

ˇ absence of any law, rule, order, injunction or judgment prohibiting or preventing the completion of the U.S. Treasury Public Transaction;

ˇ receipt of all material approvals or authorizations of any governmental entities required for the consummation of the U.S. Treasury Public Transaction; and

ˇ the approval of the NYSE for Citigroup to issue the Interim Securities without shareholder approval being in full force and effect.

The obligation of the U.S. Treasury to consummate the U.S. Treasury Public Transaction is also subject to the fulfillment or waiver by the U.S. Treasury, at or prior to the closing of, among others, the following conditions:

ˇ the accuracy of the representations and warranties made by Citigroup in the Exchange Agreement with the U.S. Treasury, subject to certain materiality exceptions;

ˇ Citigroup having performed in all material respects all the obligations required to be performed by it at or prior to closing; and

ˇ the consummation of the U.S. Treasury Private Transaction and the previously announced public exchange offer.

Conditions to Completion of the USG TRUPSŽ Transaction: The respective obligations of Citigroup and the U.S. Treasury and the FDIC to consummate the USG TRUPSŽ Transaction are subject to the satisfaction or waiver by Citigroup or the U.S. Treasury or the FDIC, as applicable, at or before the closing, of the following conditions:

ˇ absence of any law, rule, order, injunction or judgment prohibiting or preventing the completion of the USG TRUPSŽ Transactions;

ˇ receipt of all material approvals or authorizations of any governmental entities required for the consummation of the USG TRUPSŽ Transaction; and

ˇ the approval of the NYSE for Citigroup to issue the Interim Securities without . . .