<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrants [X]
Filed by a Party other than the Registrants [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
TRAVELERS GROUP INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: See
column entitled "Citicorp Security" below.
(2) Aggregate number of securities to which transaction applies: See column
entitled "Number of shares of the Citicorp Security to be received by
Travelers" for the aggregate number of each class/series of Citicorp
Securities to which the transaction applies.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: The filing fee of $14,180,927.47
was calculated pursuant to Rule 0-11(a)(4) and (c) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), by multiplying
1/50th of 1% by an amount equal to the sum of the amounts in the column
entitled "Aggregate Value of each class/series of Citicorp Securities
to be received by Travelers" (i.e., $70,904,637,331.79).
(4) Proposed maximum aggregate value of transaction: $70,904,637,331.79.
(5) Total fee paid: $14,180,927.47.
<TABLE>
<CAPTION>
PRICE PER SHARE NUMBER OF SHARES OF AGGREGATE VALUE OF EACH
OF CITICORP THE CITICORP SECURITY CLASS/SERIES OF CITICORP
SECURITY ON TO BE RECEIVED SECURITIES TO BE
CITICORP SECURITY APRIL 29, 1998 BY TRAVELERS RECEIVED BY TRAVELERS
- - ----------------- ------------------ --------------------- -------------------------
<S> <C> <C> <C>
Common Stock......................... $148.3125(1) 469,456,197.0000 $69,626,222,217.56
Graduated Rate Cumulative Preferred
Stock, Series 8A................... $ 100.00(2) 625,000.0000 $ 62,500,000.00
Graduated Rate Cumulative Preferred
Stock, Series 8B................... $ 100.00(2) 610,500.0000 $ 61,050,000.00
7.50% Noncumulative Preferred Stock,
Series 17.......................... $ 251.875(1) 1,395,436.3916 $ 351,475,541.12
Adjustable Rate Cumulative Preferred
Stock, Series 18................... $ 249.375(1) 699,999.7152 $ 174,562,428.99
Adjustable Rate Cumulative Preferred
Stock, Series 19................... $ 250.625(1) 358,289.8583 $ 89,796,395.73
8.30% Noncumulative Preferred Stock,
Series 20.......................... $ 265.00(1) 499,919.7417 $ 132,478,731.55
8.50% Noncumulative Preferred Stock,
Series 21.......................... $ 268.125(1) 599,999.7968 $ 160,874,945.51
7.75% Cumulative Preferred Stock,
Series 22.......................... $265.9375(1) 453,799.8217 $ 120,677,071.33
Fixed/Adjustable Rate Cumulative
Preferred Stock, Series 23......... $ 500.00(2) 250,000.0000 $ 125,000,000.00
------------------
Total.............................................................................. $70,904,637,331.79
</TABLE>
(1) The "Price per share of Citicorp Security on April 29, 1998" was calculated
pursuant to Rule 0-11(a)(4) and (c) of the Exchange Act by taking the
average of the high and low sale prices of a share of the Citicorp Security
on April 29, 1998.
(2) The "Price per share of Citicorp Security on April 29, 1998" was calculated
pursuant to Rule 0-11(a)(4) and (c) of the Exchange Act by using the book
value of a share of the Citicorp Security as of April 29, 1998.
<PAGE> 2
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
As filed with the Commission on June 16, 1998.
<PAGE> 3
[Travelers Group Logo] [CITICORP LOGO]
Dear Fellow Stockholders: June 16, 1998
The Boards of Directors of Travelers Group Inc. and Citicorp have
unanimously approved a "merger of equals" designed to create one of the world's
premier financial services companies. The combination of our preeminent brands
and the highly complementary strategic fit of our businesses will create a
company uniquely qualified to capitalize on new opportunities around the world.
The combined company will be named Citigroup Inc. and will have 100 million
account relationships and operations in 100 countries.
In the merger, Citicorp stockholders will receive 2.5 shares of Citigroup
common stock for each share of Citicorp common stock they own. Each outstanding
share of Citicorp preferred stock will be converted into one share of a
corresponding series of preferred stock of Citigroup. Travelers stockholders
will continue to hold their existing shares of common and preferred stock, which
will automatically become shares of Citigroup common and preferred stock after
the merger. Following the merger, former Citicorp stockholders and Travelers
stockholders will each hold approximately 50% of Citigroup's outstanding common
stock.
The Boards of Directors of Citicorp and Travelers have determined that the
merger is in the best interests of their stockholders, and each board
unanimously recommends voting FOR approval of the merger agreement.
The merger cannot be completed unless the stockholders of both companies
approve the merger agreement. We have each scheduled special meetings for our
stockholders to vote on the merger agreement. YOUR VOTE IS VERY IMPORTANT.
You are cordially invited to attend. Whether or not you plan to attend your
company's special meeting, it is important that your shares be voted. Please
take the time to vote by completing and mailing the enclosed proxy card to us.
Alternatively, you may vote your shares by telephone. If you sign, date and mail
your proxy card or use telephonic voting without indicating how you want to
vote, your proxy will be counted as a vote in favor of the merger agreement. If
your shares are held in "street name," you must instruct your broker in order to
vote. If you fail to vote or to instruct your broker to vote your shares, the
effect will be the same as a vote against the merger agreement.
The date, times and places of the special meetings are as follows:
<TABLE>
<S> <C>
For Travelers stockholders: For Citicorp stockholders:
Wednesday, July 22, 1998, 10:00 a.m. Wednesday, July 22, 1998, 3:00 p.m.
Citicorp Citicorp
399 Park Avenue 399 Park Avenue
New York, New York 10043 New York, New York 10043
</TABLE>
This Joint Proxy Statement/Prospectus provides you with detailed
information about the proposed merger. We encourage you to read this document
carefully. In addition, you may obtain information about our companies from
documents that we have filed with the Securities and Exchange Commission.
<TABLE>
<S> <C>
/s/ Sanford I. Weill /s/ John S. Reed
Sanford I. Weill John S. Reed
Chairman of the Board and Chairman
Chief Executive Officer Citicorp
Travelers Group Inc.
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THE MERGER DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OR THE CITIGROUP COMMON AND PREFERRED STOCK TO BE ISSUED IN
THE MERGER, NOR HAVE THEY DETERMINED IF THIS JOINT PROXY STATEMENT/PROSPECTUS IS
ACCURATE OR ADEQUATE. FURTHERMORE, THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT DETERMINED THE FAIRNESS OR MERITS OF THE MERGER. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Joint Proxy Statement/Prospectus is dated June 16, 1998, and is first being
mailed to stockholders on or about June 18, 1998.
<PAGE> 4
[Travelers Group Logo]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
The Special Meeting of Stockholders of Travelers Group Inc. (the "Company")
will be held at Citicorp, 399 Park Avenue (53rd Street and Park Avenue), New
York, New York 10043, on Wednesday, July 22, 1998 at 10:00 a.m. local time, to
consider and vote upon the following proposals:
1. To approve the Agreement and Plan of Merger, dated as of April 5, 1998
by and between the Company and Citicorp (the "Merger Agreement") and the
transactions contemplated thereby, including the issuance of the
Company's common stock (the "Merger Share Issuance") pursuant to the
merger (the "Merger") of Citicorp with and into a subsidiary of the
Company in accordance with the terms of the Merger Agreement and the
change of the Company's name to "Citigroup Inc." following the Merger
(the "Name Change");
2. To amend the Restated Certificate of Incorporation of the Company to
increase to 6 billion the number of shares of the Company's common stock
authorized for issuance (the "Increase in Authorized Common Stock");
and to transact such other business as may properly come before the Special
Meeting.
The Board of Directors has set the close of business (5:00 p.m., New York
City time) on June 5, 1998 as the record date for determining stockholders
entitled to notice of and to vote at the Special Meeting. A list of stockholders
entitled to vote at the Special Meeting will be maintained at the Company's
headquarters, 388 Greenwich Street, New York, New York 10013 prior to the
Special Meeting, and will also be available for inspection at the meeting
itself.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER, THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER
SHARE ISSUANCE AND THE NAME CHANGE, AND THE INCREASE IN AUTHORIZED COMMON STOCK
ARE IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, HAS UNANIMOUSLY
APPROVED THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER SHARE ISSUANCE AND THE NAME CHANGE, AND THE
INCREASE IN AUTHORIZED COMMON STOCK, AND UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE TO ADOPT THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER SHARE ISSUANCE AND THE NAME CHANGE,
AND THE INCREASE IN AUTHORIZED COMMON STOCK AT THE SPECIAL MEETING.
All stockholders are cordially invited to attend the Special Meeting.
By Order of the Board of Directors,
/s/ Charles O. Prince
Charles O. Prince, III
Secretary
June 16, 1998
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE SIGNED, DATED AND PROMPTLY
RETURNED IN THE ENCLOSED ENVELOPE OR THAT YOU REGISTER YOUR VOTE BY TELEPHONE BY
FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD, SO THAT YOUR SHARES WILL BE
REPRESENTED WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
YOU SHOULD NOT SEND STOCK CERTIFICATES WITH YOUR PROXY CARD.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY............................... 1
Comparative Market Price and Dividend
Information......................... 8
Selected Financial Data............... 10
Comparative Unaudited Per Share
Data................................ 10
Condensed Consolidated Financial Data
of Travelers Group Inc. and
Subsidiaries -- Historical.......... 11
Condensed Consolidated Financial Data
of Citicorp and
Subsidiaries -- Historical.......... 12
Selected Unaudited Pro Forma Combined
Financial Data of Travelers Group
Inc. and Citicorp................... 13
RISK FACTORS.......................... 14
Citigroup's Compliance with
Applicable Law................... 14
No Fairness Opinions from
Independent Financial Advisors... 14
Fixed Merger Consideration Despite
Potential Change in Relative
Stock Prices..................... 14
Management of Citigroup following
the Merger....................... 15
Uncertainties in Integrating
Business Operations and Realizing
Enhanced Earnings................ 15
THE MERGER............................ 16
General............................. 16
Background of the Merger............ 17
Rationale for the Merger;
Recommendation of Each Company's
Board of Directors............... 19
Form of the Merger.................. 21
Merger Consideration................ 21
Conversion of Shares; Procedures for
Exchange of Certificates;
Fractional Shares................ 22
Effective Time...................... 23
Effect on Awards Outstanding Under
Citicorp Stock Plans............. 23
Stock Exchange Listings............. 23
Federal Income Tax Consequences of
the Merger....................... 23
Accounting Treatment................ 25
Regulatory and Third-Party
Approvals........................ 25
Appraisal Rights.................... 29
Interests of Certain Persons in the
Merger........................... 30
Litigation.......................... 31
Existing Business Relationships
between Citicorp and Travelers... 32
Delisting and Deregistration of
Citicorp Common Stock............ 32
Restrictions on Resales by
Affiliates....................... 32
Cautionary Statement Concerning
Forward-Looking Statements....... 33
THE PROPOSED INCREASE IN AUTHORIZED
SHARES OF TRAVELERS COMMON STOCK.... 34
THE STOCKHOLDERS' MEETINGS............ 35
Purpose, Time and Place............. 35
Record Date; Voting Power........... 35
Votes Required...................... 36
Share Ownership of Management and
Certain Stockholders............. 37
Voting of Proxies................... 37
Revocability of Proxies............. 37
Solicitation of Proxies............. 38
REGULATION OF CITIGROUP UNDER BANKING
LAWS................................ 39
Holding Company Regulation.......... 39
Capital Adequacy.................... 41
Prompt Corrective Action............ 42
Enforcement Powers of the Federal
Banking Agencies................. 43
Control Acquisitions................ 43
Future Legislation.................. 43
THE MERGER AGREEMENT.................. 44
General............................. 44
Closing; Effective Time............. 44
Citigroup Certificate of
Incorporation.................... 44
Citigroup By-Laws................... 44
Board and Officers of Citigroup..... 44
Reservation of Right to Revise
Transaction...................... 45
Consideration to be Received in the
Merger........................... 45
Exchange of Certificates; Fractional
Shares........................... 45
Representations and Warranties...... 46
Certain Covenants................... 46
Coordination of Dividends........... 47
No Solicitation..................... 47
Citicorp Stock-Based Awards......... 48
Employee Benefit Plans.............. 49
Indemnification, Exculpation and
Insurance........................ 49
Conditions to the Consummation of
the Merger....................... 50
Termination......................... 51
Expenses............................ 52
Amendment; Extension and Waiver..... 52
</TABLE>
i
<PAGE> 6
<TABLE>
<S> <C>
DESCRIPTION OF CITIGROUP CAPITAL STOCK
FOLLOWING THE MERGER................ 53
Citigroup Common Stock.............. 53
Citigroup Preferred Stock........... 53
Outstanding Series of Travelers
Preferred Stock.................. 55
New Citigroup Preferred Stock....... 58
Citigroup Series O Preferred
Stock............................ 60
Citigroup Series P Preferred
Stock............................ 61
Citigroup Series Q Preferred
Stock............................ 61
Citigroup Series R Preferred
Stock............................ 61
Citigroup Series S Preferred
Stock............................ 62
Citigroup Series T Preferred
Stock............................ 62
Citigroup Series U Preferred
Stock............................ 62
Citigroup Series V Preferred
Stock............................ 63
Citigroup Series W Preferred
Stock............................ 63
Stock Exchange Matters.............. 64
COMPARISON OF RIGHTS OF STOCKHOLDERS
OF TRAVELERS AND CITICORP........... 64
Authorized Capital.................. 64
Board of Directors.................. 65
Committees of the Board of
Directors........................ 65
Newly Created Directorships and
Vacancies........................ 66
Removal of Directors................ 66
Officers............................ 66
Special Meetings of Stockholders.... 66
Quorum at Stockholder Meetings...... 67
Stockholder Action by Written
Consent.......................... 67
Advance Notice of
Stockholder-Proposed Business at
Annual Meetings.................. 67
Amendment of Governing Documents.... 67
Fair Price Provisions............... 68
NEW CITIGROUP DEPOSITARY SHARES....... 69
General............................. 69
Dividends and Other Distributions... 69
Withdrawal of Stock................. 70
Redemption of Depositary Shares..... 70
Voting the Citigroup Deposited
Preferred Stock.................. 70
Amendment and Termination of the
Deposit Agreement................ 70
Charges of Depositary............... 71
Resignation and Removal of
Depositary....................... 71
Miscellaneous....................... 71
EXPERTS............................... 71
LEGAL MATTERS......................... 72
SUBMISSION OF FUTURE STOCKHOLDER
PROPOSALS........................... 72
WHERE YOU CAN FIND MORE INFORMATION... 73
TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS....... 75
ANNEX A -- AGREEMENT AND PLAN OF
MERGER..................... A-1
ANNEX B -- PROPOSED AMENDMENT TO
ARTICLE FIRST AND ARTICLE
FOURTH OF THE RESTATED
CERTIFICATE OF
INCORPORATION OF TRAVELERS
GROUP INC.................. B-1
ANNEX C -- SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW.... C-1
</TABLE>
ii
<PAGE> 7
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. FOR A MORE COMPLETE
UNDERSTANDING OF THE MERGER AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL
TERMS OF THE MERGER, YOU SHOULD READ THIS ENTIRE DOCUMENT CAREFULLY, AS WELL AS
THE ADDITIONAL DOCUMENTS WE REFER YOU TO. SEE "WHERE YOU CAN FIND MORE
INFORMATION" (PAGES 73 THROUGH 74).
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: Our companies are proposing to merge because
we believe the combination will provide significant benefits to our
stockholders, customers and employees. We believe the merger will enable us
to take advantage of the complementary strategic fit of our respective
businesses, combining Travelers' investment banking, asset management,
consumer finance and property-casualty and life insurance businesses with
Citicorp's global consumer finance and worldwide corporate banking businesses
to create a global leader in financial services with growth opportunities not
available to either company on its own. The combined company will serve
customers in 100 countries. To review the background and reasons for the
merger in greater detail, see pages 17 through 21.
Q: WHAT IS "CITIGROUP INC."?
A: Citigroup Inc. is the name that Travelers and
Citicorp have agreed to use for the combined company after the merger.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Citicorp common stockholders will receive
2.5 shares of common stock of Citigroup in exchange for each share of
Citicorp common stock they hold. Citicorp preferred stockholders will receive
one share of a corresponding series of preferred stock of Citigroup in
exchange for each share of Citicorp preferred stock they hold. Your Citicorp
preferred stock currently traded as depositary shares will be exchanged for
Citigroup preferred stock traded as depositary shares, and your existing
depositary receipts for Citicorp preferred stock will automatically represent
the new Citigroup preferred stock.
Each share of Travelers common stock will automatically represent one share
of Citigroup common stock and each share of Travelers preferred stock will
automatically represent one share of an identical series of Citigroup
preferred stock.
After the merger, Citicorp's former common stockholders and Travelers' former
common stockholders will each own approximately half the common stock of the
combined company, Citigroup.
We will not issue fractional shares. Instead, Citicorp common stockholders
will receive cash for any fractional share of Citigroup common stock owed to
them. The amount of cash will be based on the closing price of Citigroup
common stock on the date of the merger.
For example:
- If you currently own 100 shares of Citicorp common stock, then after the
merger you will receive 250 shares of Citigroup common stock.
- If you currently own 1 share of Citicorp common stock, then after the
merger you will receive 2 shares of Citigroup common stock and a check for
the market value of the half share.
- If you currently own 100 shares of Travelers common stock, then after the
merger those shares will represent 100 shares of Citigroup common stock.
Q: WHAT RISKS SHOULD I CONSIDER?
A: You should review "RISK FACTORS" on
pages 14 through 15.
You should also review the countervailing factors considered by each
company's Board of Directors. See "THE MERGER -- Rationale for the Merger;
Recommendation of Each Company's Board of Directors."
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger during
the third quarter of 1998.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: We expect that the exchange of shares by
Citicorp stockholders will be tax-free to Citicorp
1
<PAGE> 8
stockholders for federal income tax purposes. However, Citicorp stockholders
will have to pay taxes on cash received for fractional shares. We expect that
the merger will be tax-free to Travelers stockholders for federal income tax
purposes. To review the tax consequences to stockholders in greater detail,
see pages 23 through 25.
THE TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND ON YOUR OWN SITUATION. YOU
SHOULD CONSULT YOUR TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX
CONSEQUENCES OF THE MERGER TO YOU.
Q: WHAT WILL CITIGROUP'S DIVIDEND POLICY BE?
A: Following the merger, Citigroup's Board of Directors will use its
discretion to decide whether to declare dividends and the amount of any
dividends. In making its decision, the Board will consider various factors,
including the earnings and financial condition of Citigroup and its
subsidiaries.
Q: WHY IS CITICORP MERGING INTO A SUBSIDIARY OF TRAVELERS?
A: The merger was structured so that in applying to become a bank holding
company under the Bank Holding Company Act, Travelers (and therefore
Citigroup) could continue to be able to underwrite insurance for at least
two years. Citicorp is being merged into a subsidiary of Travelers
primarily to simplify certain aspects of the regulatory process relating to
the merger and because of certain funding advantages that result from this
structure.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: Citicorp stockholders: You are being asked to approve the merger agreement
which provides that Citicorp will merge into a wholly owned subsidiary of
Travelers.
CITICORP'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS VOTING FOR THE ADOPTION OF THE MERGER AGREEMENT.
Travelers stockholders: You are being asked to approve the merger agreement
and the transactions contemplated thereby, including the issuance of
Travelers common stock pursuant to the merger of Citicorp into a subsidiary
of Travelers in accordance with the terms of the merger agreement and the
change of Travelers' name to "Citigroup Inc." following the merger. You are
also being asked to approve an increase in the company's authorized common
stock to 6 billion shares.
TRAVELERS' BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED EACH OF THESE
PROPOSALS AND RECOMMENDS VOTING FOR EACH PROPOSAL.
Q: WHY IS THE TRAVELERS BOARD OF DIRECTORS ASKING TRAVELERS' STOCKHOLDERS TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF TRAVELERS COMMON STOCK?
A: The Travelers Board believes it would be desirable to increase the number
of shares of authorized Travelers common stock to make available additional
shares for possible stock splits, acquisitions, financings, employee
benefit plan issuances and for other corporate purposes that may arise.
The Travelers Board believes that stock splits enhance the liquidity and
marketability of the common stock by increasing the number of shares
outstanding and lowering the price per share.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign and mail it
in the enclosed return envelope as soon as possible, so that your shares
will be represented at your stockholders' meeting. If you prefer, you may
vote by telephone (the toll-free number is listed on the proxy card).
If you sign and send in your proxy and do not indicate how you want to vote,
your proxy will be counted as a vote in favor of all the proposals. If you do
not vote or you abstain, it will have the effect of a vote against the
proposals.
The Citicorp special meeting and the Travelers special meeting will take
place on Wednesday, July 22, 1998, at 3:00 p.m. and 10:00 a.m., respectively.
You may attend your stockholders' meeting and vote your shares in person,
rather than signing and mailing your proxy card. In addition, you may
withdraw your proxy up to and including the day of your stockholders' meeting
by following the directions on page 37 and either change your vote or attend
your stockholders' meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your Citicorp or Travelers shares only if you provide
instructions on how to vote; except that brokers who hold shares of
Travelers' stock as nominees will have discre-
2
<PAGE> 9
tionary authority to vote such shares for the increase in authorized common
stock to 6 billion shares. Other than as described above, without
instructions, your shares will not be voted. Shares that are not voted will
be counted as votes against the proposals.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. If you are a Citicorp common stockholder, after the merger is completed
we will send you written instructions for exchanging your Citicorp common
stock certificates for Citigroup common stock certificates. If you are a
Travelers stockholder, you should retain your stock certificates as the
merger and the company's name change will not require surrender of
Travelers stock certificates at any time. Holders of most series of
Citicorp preferred stock will also not be required to exchange their
current certificates. See pages 22 through 23 for further details.
If you would like additional copies of this Joint Proxy Statement/Prospectus,
or if you have questions about the merger, you should contact:
Georgeson & Company Inc.
Wall Street Plaza
New York, New York 10005
Phone Number: (800) 223-2064
Morrow & Company, Inc.
909 Third Avenue
20th Floor
New York, New York 10022
Phone Number: (800) 566-9061
3
<PAGE> 10
THE COMPANIES
CITICORP
399 Park Avenue
New York, NY 10043
(212) 559-1000
Citicorp is a global financial services organization that, through
Citibank, N.A. and other subsidiaries, serves more consumer and corporate
customers around the world than any other bank. Its worldwide consumer business
provides 70 million bankcard accounts and operates more than 1,000 Citibank
branches in more than 40 countries. Through its international network of
offices, Citibank also serves the funding and transaction service needs of
global corporations, governments and other institutions, as well as those of
local growth companies in emerging markets.
TRAVELERS GROUP INC.
388 Greenwich Street
New York, NY 10013
(212) 816-8000
Travelers engages in investment and asset management services, consumer
finance, and life and property-casualty insurance services. Travelers provides
investment banking, asset management, retail brokerage and other financial
services through its Salomon Smith Barney subsidiaries. Through Commercial
Credit Company, Travelers offers consumer loans, credit-related insurance and
credit card services. Individual life insurance, annuities and pension programs
are offered primarily through the Travelers Insurance, Travelers Life and
Annuity and Primerica Life Insurance companies. Travelers Property Casualty
Corp., an 83% owned subsidiary, provides a wide range of commercial and personal
property and casualty insurance products and services to businesses, government
units, associations and individuals.
THE STOCKHOLDERS' MEETINGS (PAGE 35)
The Travelers Special Meeting will be held at 399 Park Avenue, New York,
New York, at 10:00 a.m. on Wednesday, July 22, 1998. At the special meeting,
Travelers stockholders will be asked to approve the merger agreement and the
transactions contemplated thereby, including the issuance of Travelers common
stock pursuant to the merger of Citicorp with a subsidiary of Travelers in
accordance with the terms of the merger agreement and the change of Travelers'
name to "Citigroup Inc." following the merger. Travelers stockholders will also
be asked to approve an increase in the company's authorized common stock to 6
billion shares.
The Citicorp Special Meeting will be held at 399 Park Avenue, New York, New
York, at 3:00 p.m. on Wednesday, July 22, 1998. At the special meeting, Citicorp
stockholders will be asked to approve the merger agreement.
RECORD DATE; VOTING POWER (PAGE 35)
You are entitled to vote at your stockholders' meeting if you owned shares
as of the close of business (5:00 p.m., New York City time) on June 5, 1998, the
Record Date.
On the Record Date, there were 1,149,185,942 shares of Travelers common
stock, 280,000 shares of Travelers Series I preferred stock, 400,000 shares of
Travelers Series J preferred stock and 500,000 shares of Travelers Series K
preferred stock entitled to vote at the Travelers Special Meeting. Travelers
stockholders will be entitled to one vote at the special meeting for each share
of Travelers common stock, 44.60526 votes for each share of Travelers Series I
preferred stock and three votes for each share of Travelers Series J preferred
stock and Travelers Series K preferred stock held of record on the Record Date
for each of the proposals described above.
On the Record Date, there were 451,635,725 shares of Citicorp common stock
entitled to vote at the special meeting. Citicorp stockholders will be entitled
to one vote at the special meeting for each share of Citicorp common stock held
of record on the Record Date for the adoption of the merger agreement. Shares of
Citicorp preferred stock will not be entitled to vote.
VOTES REQUIRED (PAGE 36)
Approval by Travelers stockholders of the proposal to approve the merger
agreement and the transactions contemplated thereby, including the issuance of
Travelers common stock pursuant to the merger of Citicorp with a subsidiary of
Travelers in accordance with the terms of the merger agreement and the change of
Travelers' name to "Citigroup Inc." following the merger, and the proposal to
increase to 6 billion the authorized shares of common stock will each require
the approval of more than 50% of the aggregate voting power of Travelers
4
<PAGE> 11
common stock, Travelers Series I preferred stock, Travelers Series J preferred
stock and Travelers Series K preferred stock outstanding on the Record Date.
Approval by Citicorp stockholders of the merger agreement will require the
approval of more than 50% of the shares of Citicorp common stock outstanding on
the Record Date.
ACCOUNTING TREATMENT (PAGE 25)
We expect the merger will be accounted for as a pooling of interests, which
means that we will treat our companies as if they had always been combined for
accounting and financial reporting purposes.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS (PAGE 37)
On the Record Date, directors and executive officers of Travelers and
Citicorp and their affiliates may be deemed to be the beneficial owners of
30,681,723 shares of Travelers common stock, or approximately 2.6% of the voting
power of the Travelers voting stock outstanding on the Record Date, and no
shares of Travelers preferred stock entitled to vote at the Special Meeting.
On the Record Date, directors and executive officers of Citicorp and
Travelers and their affiliates may be deemed to be the beneficial owners of
4,781,381 shares of Citicorp common stock or approximately 1.1% of the shares of
Citicorp common stock outstanding on the Record Date.
The directors and executive officers of Citicorp and Travelers have
indicated that they intend to vote the Citicorp common stock owned by them FOR
the proposal to approve the merger agreement. The directors and executive
officers of Travelers and Citicorp have indicated that they intend to vote the
Travelers stock owned by them FOR the proposal to approve the merger agreement
and the transactions contemplated thereby, including the issuance of Travelers
common stock pursuant to the merger and the change of Travelers' name to
"Citigroup Inc." following the merger, and FOR the proposal to increase the
number of authorized shares of Travelers common stock to 6 billion shares.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 30)
A number of directors and executive officers of Travelers and Citicorp have
interests in the merger as employees and/or directors that are different from,
or in addition to, yours as a stockholder. If we complete the merger, certain
directors and members of the existing senior management of each of Travelers and
Citicorp will be designated as members of the initial Board of Directors and
senior management of Citigroup. In addition, if the merger is completed, options
to purchase Citicorp common stock held by Citicorp's directors and officers will
be automatically converted into options to acquire shares of Citigroup common
stock adjusted to account for the exchange ratio of common shares in the merger.
Also, certain indemnification arrangements and directors' and officers'
liability insurance for existing directors and officers of Citicorp will be
continued by Citigroup. The Board of Directors of Citicorp and Travelers
recognized these interests and determined that they did not affect the benefits
of the merger to the Citicorp stockholders and the Travelers stockholders,
respectively. Please refer to pages 30 through 31 for more information
concerning these interests.
DIRECTORS AND EXECUTIVE OFFICERS OF CITIGROUP
FOLLOWING THE MERGER (PAGE 31)
Following the merger, the Board of Directors of Citigroup will initially
consist of 24 members, including Mr. Weill and Mr. Reed. Of the remaining 22
directors, half will be selected by Travelers from the non-employee directors
currently on the Travelers Board and the other half will be the non-employee
directors currently serving on the Citicorp Board. Mr. Reed and Mr. Weill will
each serve as Chairman and Co-Chief Executive Officer of Citigroup. The other
executive officers of Citigroup will be designated by the Board of Directors of
Citigroup following the merger.
LISTING OF CITIGROUP STOCK (PAGE 23)
Applications for listing the Citigroup common stock to be issued in
connection with the merger have been made with the New York Stock Exchange
(NYSE) and the Pacific Exchange. Application for listing the depositary shares
representing Citigroup preferred stock to be issued in the merger in exchange
for Citicorp's Series 17, 18, 19, 20, 21 and 22 preferred stock has also been
made with the
5
<PAGE> 12
NYSE. Following the merger, Travelers and Citicorp stockholders will be able to
trade shares of Citigroup common stock on the NYSE and the Pacific Exchange.
Citicorp stockholders, however, will no longer be able to trade Citicorp stock
on any exchange because Citicorp stock will no longer be listed on any exchange.
The trading symbol for the Citigroup common stock will be "CCI."
REGULATORY APPROVALS (PAGE 25)
We are each required to make filings with or to obtain approvals from
certain domestic and international regulatory authorities in connection with the
merger. These consents and approvals include the approval of the Federal Reserve
Board under the Bank Holding Company Act, as well as certain other federal
banking agencies, state banking agencies, state insurance regulatory authorities
and other domestic and foreign authorities.
An application and notice was filed with the Federal Reserve Board on May
1, 1998. All other necessary applications and notices have been filed or are in
the process of being filed.
We cannot predict whether we will obtain all required regulatory approvals
before we complete the merger, or whether any approvals will include conditions
that would be detrimental to Citigroup.
CANCELLATION OF THE MERGER (PAGE 50)
We can jointly agree to call off the merger at any time before completing
the merger. Either of us can call off the merger if:
- - - we do not complete the merger by December 31, 1998, except that either of us
may extend this deadline up to 90 days if the merger is delayed because we
have not received certain regulatory approvals;
- - - the stockholders of Travelers or Citicorp do not approve the merger agreement;
- - - the other party breaches or materially fails to comply with any of the
representations or warranties it made or obligations it has under the merger
agreement if these result in a material adverse change incapable of being
cured by such party;
- - - legal restraints or prohibitions will prevent the consummation of the merger,
limit the conduct of a material portion of the business of Travelers or
Citicorp or compel either company to dispose of a material portion of its
business (except as may be required under the Bank Holding Company Act), or
are reasonably likely to have a material adverse effect on Travelers or
Citicorp;
- - - the conditions of any Bank Holding Company Act approval are not satisfactory
to Travelers or Citicorp;
- - - there is a material adverse change since April 5, 1998 with respect to either
company;
- - - our counsel do not deliver opinions in respect of certain federal income tax
consequences of the merger; or
- - - the Board of Directors of either company determines, after consultation with
outside counsel, that it must enter into an agreement with a third party that
has made a proposal to acquire a majority of that company's voting power or a
substantial portion of its assets on terms that are more favorable to that
company's stockholders than the merger.
APPRAISAL RIGHTS (PAGE 29)
Both of our companies are organized under Delaware law. Under Delaware law,
Travelers and Citicorp stockholders, other than the holders of Citicorp Series
8A, Series 8B and Series 23 preferred stock, have no right to an appraisal of
the value of their shares in connection with the merger.
See pages 29 through 30 for a description of certain appraisal rights.
FORWARD-LOOKING STATEMENTS MAY PROVE
INACCURATE (PAGE 33)
We have each made forward-looking statements in this document (and in
documents that are incorporated by reference) that are subject to risks and
uncertainties. Forward-looking statements include the information concerning
possible or assumed future results of operations of Travelers, Citicorp or
Citigroup. Also, when we use words such as "believes," "expects," "anticipates"
or similar expressions, we are making forward-looking statements. Stockholders
should note that many factors, some of which are discussed elsewhere in this
document and in the documents which we incorporate by reference, could affect
the future financial results of Citigroup, Travelers and Citicorp and could
cause those results to differ materially from those expressed in our
forward-looking state-
6
<PAGE> 13
ments contained or incorporated by reference in this document. These factors
include the following:
- - - operating, legal and regulatory risks;
- - - economic, political and competitive forces affecting our commercial banking,
credit card, foreign exchange, insurance, investment banking, asset
management, broker-dealer and financial services businesses; and
- - - the risk that our analyses of these risks and forces could be incorrect and/or
that the strategies developed to address them could be unsuccessful.
7
<PAGE> 14
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
COMPARATIVE MARKET PRICE DATA
The following table presents trading information for Travelers and Citicorp
common stock on the NYSE on April 3, 1998 and June 15, 1998. April 3, 1998 was
the last full trading day prior to our announcement of the signing of the merger
agreement. June 15, 1998 was the last practicable trading day for which
information was available prior to the date of this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
TRAVELERS
TRAVELERS CITICORP COMMON STOCK
COMMON STOCK COMMON STOCK PRICE X 2.50
(DOLLARS PER SHARE) (DOLLARS PER SHARE) (DOLLARS PER SHARE)
------------------- ------------------- --------------------
HIGH LOW CLOSE HIGH LOW CLOSE HIGH LOW CLOSE
--------- ------- ----- -------- -------- ----- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
April 3, 1998... 62 3/16 61 1/4 61 11/16 144 1/2 142 3/16 142 7/8 155 15/32 153 1/8 154 7/32
June 15, 1998... 61 3/8 59 13/16 59 7/8 149 1/8 144 1/2 144 1/2 153 7/16 149 17/32 149 11/16
</TABLE>
On the Record Date, there were approximately 47,360 holders of record of
Citicorp common stock, 55,508 holders of record of Travelers common stock, 9
holders of record of Travelers Series I preferred stock, 418 holders of record
of depositary shares representing Travelers Series J preferred stock and 332
holders of record of depositary shares representing Travelers Series K preferred
stock.
HISTORICAL MARKET PRICES AND DIVIDENDS
The principal trading market for Travelers and Citicorp common stock is the
NYSE. Travelers common stock is also listed on the Pacific Exchange, and
Citicorp common stock is also listed on the Chicago, Pacific, London, Amsterdam,
Tokyo, Swiss, Toronto, Dusseldorf and Frankfurt stock exchanges. The following
tables set forth, for the periods indicated, the high and low closing price per
share on the NYSE, based on published financial sources, and dividends declared
on Travelers and Citicorp common stock.
<TABLE>
<CAPTION>
TRAVELERS
COMMON STOCK
(DOLLARS PER SHARE)
--------------------
CALENDAR PERIOD HIGH LOW DIVIDEND
--------------- -------- -------- --------
<S> <C> <C> <C>
Fiscal 1996 (ended December 31, 1996)
First Quarter............................................. 23 1/2 19 .075
Second Quarter............................................ 22 7/8 18 13/16 .075
Third Quarter............................................. 24 15/16 19 3/8 .075
Fourth Quarter............................................ 31 11/16 24 9/16 .075
Fiscal 1997 (ended December 31, 1997)
First Quarter............................................. 38 15/16 29 3/16 .10
Second Quarter............................................ 44 1/16 30 13/16 .10
Third Quarter............................................. 49 1/16 42 .10
Fourth Quarter............................................ 57 3/8 43 1/8 .10
Fiscal 1998 (ending December 31, 1998)
First Quarter............................................. 63 3/8 45 1/8 .125
Second Quarter (through June 15, 1998).................... 73 59 5/8 .125
</TABLE>
The share prices above have been adjusted for various Travelers stock
splits.
8
<PAGE> 15
<TABLE>
<CAPTION>
CITICORP
COMMON STOCK
(DOLLARS PER SHARE)
--------------------
CALENDAR PERIOD HIGH LOW DIVIDEND
--------------- ------ ------ --------
<S> <C> <C> <C>
Fiscal 1996 (ended December 31, 1996)
First Quarter............................................. 81 62 1/2 .45
Second Quarter............................................ 86 5/8 75 3/8 .45
Third Quarter............................................. 90 5/8 76 1/4 .45
Fourth Quarter............................................ 109 1/4 91 3/8 .45
Fiscal 1997 (ended December 31, 1997)
First Quarter............................................. 126 3/8 100 1/4 .525
Second Quarter............................................ 124 1/4 102 1/2 .525
Third Quarter............................................. 139 11/16 123 5/16 .525
Fourth Quarter............................................ 144 3/16 116 .525
Fiscal 1998 (ending December 31, 1998)
First Quarter............................................. 145 5/8 113 1/8 .575
Second Quarter (through June 15, 1998).................... 180 1/2 142 1/2 .575
</TABLE>
Post-Merger Dividend Policy. Following the merger, the declaration of
dividends will be at the discretion of the Citigroup Board and will be
determined after consideration of various factors, including (without
limitation) the earnings and financial condition of Citigroup and its
subsidiaries.
9
<PAGE> 16
SELECTED FINANCIAL DATA
The following tables show financial results actually achieved by each of
Citicorp and Travelers (the "historical" figures) and also show results as if
the companies had been combined for the periods shown (the "pro forma combined"
figures). Pro forma combined figures are simply arithmetical combinations of
Citicorp's and Travelers' separate historical results; you should not assume
that Citicorp and Travelers would have achieved the combined pro forma results
if they had actually been combined during the periods shown.
Citicorp's and Travelers' annual historical figures are derived from
financial statements audited by KPMG Peat Marwick LLP, independent auditors of
both companies. Historical earnings per share data reflect the adoption in 1997
of SFAS No. 128, "Earnings per Share." Prior periods have been restated. Figures
for the three months ended March 31, 1998 and 1997 are unaudited, but Travelers
and Citicorp each believes that its own three-month figures reflect all normal
recurring adjustments necessary for a fair presentation of the financial
position and results of operations for those periods. You should not assume that
the first quarter 1998 results are indicative of results for any future period.
COMPARATIVE UNAUDITED PER SHARE DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE THREE
MONTHS ENDED AS OF OR FOR THE YEAR ENDED
MARCH 31, DECEMBER 31,
----------------------- ------------------------------
1998 1997 1997 1996 1995
--------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
CITICORP COMMON STOCK:
Income from continuing operations(1)
Basic earnings per share
Historical................................... $ 2.28 $ 2.07 $ 7.53 $ 7.73 $ 7.60
Pro Forma Equivalent(2)...................... $ 2.33 $ 1.93 $ 7.13 $ 7.43 $ 6.00
Diluted earnings per share
Historical................................... $ 2.23 $ 2.01 $ 7.33 $ 7.43 $ 6.50
Pro Forma Equivalent(2)...................... $ 2.25 $ 1.85 $ 6.85 $ 7.10 $ 5.45
Cash dividends per common share
Historical................................... $ 0.575 $0.525 $ 2.10 $ 1.80 $ 1.20
Pro Forma Equivalent(2)...................... $0.3125 $0.250 $ 1.00 $ 0.75 $ 0.67
Book value per share at period end
Historical................................... $ 44.01 $41.08 $42.50 $40.25 $38.64
Pro Forma Equivalent(2)...................... $ 43.88 $42.48
TRAVELERS COMMON STOCK:
Income from continuing operations(3)
Basic earnings per share(4)
Historical................................... $ 0.95 $ 0.71 $ 2.69 $ 2.84 $ 1.81
Pro Forma Combined........................... $ 0.93 $ 0.77 $ 2.85 $ 2.97 $ 2.40
Diluted earnings per share(4)
Historical................................... $ 0.91 $ 0.67 $ 2.54 $ 2.71 $ 1.74
Pro Forma Combined........................... $ 0.90 $ 0.74 $ 2.74 $ 2.84 $ 2.18
Cash dividends per common share
Historical(4)................................ $ 0.125 $0.100 $0.400 $0.300 $0.267
Pro Forma Combined(5)........................ $ 0.125 $0.100 $0.400 $0.300 $0.267
Book value per share at period end
Historical(4)................................ $ 17.50 $14.59 $16.98 $14.74 $13.06
Pro Forma Combined........................... $ 17.55 $16.99
</TABLE>
- - ---------------
(1) The year ended December 31, 1997 includes restructuring charges of $889
million ($556 million after-tax).
(2) Amounts are calculated by multiplying the Travelers pro forma combined per
share amounts by the exchange ratio for common shares in the merger.
(3) The year ended December 31, 1997 includes restructuring charges of $838
million ($496 million after-tax).
(4) Historical amounts for Travelers have been adjusted to reflect various
Travelers stock splits.
(5) Amounts represent Travelers' historical dividends per common share.
10
<PAGE> 17
CONDENSED CONSOLIDATED FINANCIAL DATA
OF TRAVELERS GROUP INC. AND SUBSIDIARIES -- HISTORICAL
(In millions of dollars except per share amounts)
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED
MARCH 31, (UNAUDITED) AS OF OR FOR THE YEAR ENDED DECEMBER 31,(1)
--------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenues...................... $ 10,368 $ 8,700 $ 37,609 $ 32,414 $ 27,287 $ 22,719 $ 16,964
-------- -------- -------- -------- -------- -------- --------
Total Revenues, net of Interest
Expense........................... $ 7,191 $ 6,322 $ 26,166 $ 23,487 $ 17,909 $ 15,093 $ 10,259
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations(1)..................... $ 1,093 $ 815 $ 3,104 $ 3,282 $ 2,141 $ 747 $ 1,843
Discontinued operations............. (334) 150 180 (28)
Cumulative effect of accounting
change(2)......................... (72)
-------- -------- -------- -------- -------- -------- --------
Net income.......................... $ 1,093 $ 815 $ 3,104 $ 2,948 $ 2,291 $ 927 $ 1,743
-------- -------- -------- -------- -------- -------- --------
Per common share data(3):
Basic earnings per share
Income from continuing
operations.................... $ 0.95 $ 0.71 $ 2.69 $ 2.84 $ 1.81 $ 0.53 $ 2.02
Net income...................... $ 0.95 $ 0.71 $ 2.69 $ 2.53 $ 1.94 $ 0.69 $ 1.91
Diluted earnings per share
Income from continuing
operations.................... $ 0.91 $ 0.67 $ 2.54 $ 2.71 $ 1.74 $ 0.53 $ 1.92
Net income...................... $ 0.91 $ 0.67 $ 2.54 $ 2.42 $ 1.86 $ 0.68 $ 1.81
Cash dividends per common share... $ 0.125 $ 0.100 $ 0.400 $ 0.300 $ 0.267 $ 0.192 $ 0.163
Total Assets........................ $408,475 $367,993 $386,555 $345,948 $302,344 $287,093 $286,125
Long-term debt:
Parent company.................... $ 2,227 $ 1,699 $ 1,695 $ 1,903 $ 2,042 $ 1,377 $ 1,504
Consolidated...................... $ 29,288 $ 25,391 $ 28,352 $ 24,696 $ 22,235 $ 22,277 $ 18,683
Redeemable preferred securities:
Parent company obligated.......... $ 1,480 $ 1,420 $ 1,280 $ 1,420 $ 560 $ 700 $ 700
Consolidated...................... $ 3,125 $ 2,665 $ 2,525 $ 2,665 $ 560 $ 700 $ 700
Total stockholders' equity.......... $ 21,613 $ 17,852 $ 20,893 $ 17,942 $ 15,853 $ 12,432 $ 13,872
Ratio of earnings to fixed charges
and preferred stock dividends..... 1.53x 1.52x 1.41x 1.51x 1.32x 1.10x 1.39x
</TABLE>
- - ---------------
(1) On November 28, 1997, Travelers completed a merger of a wholly owned
subsidiary with and into Salomon Inc (renamed Salomon Smith Barney Holdings
Inc.) in a transaction accounted for as a pooling of interests and,
accordingly, current and prior year information has been restated. As a
result of the merger, Salomon Smith Barney recorded an after-tax
restructuring charge of $496 million, primarily for severance and costs
related to excess or unused office space, facilities and other assets, which
is included in Income from continuing operations and Net income. The results
of Aetna's property and casualty businesses are included only from the date
of acquisition, April 2, 1996. Results of operations prior to 1994 exclude
the amounts of The Travelers Corporation (old Travelers), except that
results for 1993 include Travelers' equity in earnings relating to the 27%
interest purchased in December 1992. Results of operations include the
Shearson businesses from July 31, 1993, the date of acquisition.
(2) Cumulative effect of accounting change in 1993 represents a change in
accounting for postretirement benefits other than pensions and a change in
accounting for postemployment benefits.
(3) All amounts have been adjusted to reflect various Travelers stock splits.
11
<PAGE> 18
CONDENSED CONSOLIDATED FINANCIAL DATA
OF CITICORP AND SUBSIDIARIES -- HISTORICAL
(In millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED
MARCH 31, (UNAUDITED) AS OF OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Interest Revenue................... $ 2,839 $ 2,804 $ 11,402 $ 10,940 $ 9,951 $ 8,911 $ 7,690
Fees, Commissions, and Other Revenue... 2,766 2,392 10,214 9,256 8,727 7,837 8,385
-------- -------- -------- -------- -------- -------- --------
Total Revenue, Net of Interest
Expense.............................. 5,605 5,196 21,616 20,196 18,678 16,748 16,075
Provision for Credit Losses............ 507 423 1,907 1,926 1,991 1,881 2,600
Operating Expense(1)................... 3,394 3,169 13,987 12,197 11,102 10,256 10,615
-------- -------- -------- -------- -------- -------- --------
Income Before Taxes and Cumulative
Effects of Accounting Changes........ $ 1,704 $ 1,604 $ 5,722 $ 6,073 $ 5,585 $ 4,611 $ 2,860
Income Taxes........................... 639 609 2,131 2,285 2,121 1,189 941
-------- -------- -------- -------- -------- -------- --------
Income Before Cumulative Effects of
Accounting Changes................... 1,065 995 3,591 3,788 3,464 3,422 1,919
Cumulative Effects of Accounting
Changes(2)........................... (56) 300
-------- -------- -------- -------- -------- -------- --------
Net Income(1).......................... $ 1,065 $ 995 $ 3,591 $ 3,788 $ 3,464 $ 3,366 $ 2,219
Net Income Per Share
Basic
Before Accounting Changes.............. $ 2.28 $ 2.07 $ 7.53 $ 7.73 $ 7.60 $ 7.84 $ 4.26
After Accounting Changes(2)............ 2.28 2.07 7.53 7.73 7.60 7.69 5.05
Diluted
Before Accounting Changes.............. $ 2.23 $ 2.01 $ 7.33 $ 7.43 $ 6.50 $ 6.40 $ 3.54
After Accounting Changes(2)............ 2.23 2.01 7.33 7.43 6.50 6.29 4.13
Dividends Declared Per Common
Share(3)............................. 0.575 0.525 2.10 1.80 1.20 0.45 --
Total Loans, Net of Unearned Income and
Allowance for Credit Losses.......... $182,772 $166,705 $178,197 $169,109 $160,274 $147,265 $134,588
Total Assets........................... 330,414 290,354 310,897 281,018 256,853 250,489 216,574
Total Deposits......................... 214,719 188,848 199,121 184,955 167,131 155,726 145,089
Long-Term Debt(4)...................... 20,159 18,824 19,785 18,850 18,488 17,894 18,160
Common Stockholders' Equity............ 19,871 18,877 19,293 18,644 16,510 13,582 10,066
Total Stockholders' Equity............. 21,471 20,780 21,196 20,722 19,581 17,769 13,953
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends............ 1.47x 1.49x 1.41x 1.45x 1.37x 1.26x 1.14x
Return on Average Common Stockholders'
Equity............................... 21.74% 20.76% 18.11% 20.35% 20.80% 25.81% 21.06%
Common Stockholders' Equity to
Assets............................... 6.01% 6.50% 6.21% 6.63% 6.43% 5.42% 4.65%
Total Stockholders' Equity to Assets... 6.50% 7.16% 6.82% 7.37% 7.62% 7.09% 6.44%
</TABLE>
- - ---------------
(1) Includes restructuring charges of $889 million ($556 million after-tax) in
the year ended December 31, 1997 and $425 million ($254 million after-tax)
in the year ended December 31, 1993.
(2) Refers to the adoption in 1994 of Statement of Financial Accounting
Standards ("SFAS") No. 112, "Employers Accounting for Postemployment
Benefits," and in 1993 of SFAS No. 109, "Accounting for Income Taxes."
(3) Citicorp resumed paying dividends on its common stock on April 18, 1994,
after having suspended the dividend on October 15, 1991.
(4) Includes $750 million on March 31, 1998, December 31, 1997 and March 31,
1997 and $300 million on December 31, 1996 of guaranteed preferred
beneficial interests in Citicorp subordinated debt issued by wholly-owned
trusts.
12
<PAGE> 19
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
OF TRAVELERS GROUP INC. AND CITICORP
(In millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED AS OF OR FOR THE YEAR ENDED
MARCH 31, DECEMBER 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Revenue, Net of Interest Expense...... $ 12,796 $ 11,518 $ 47,782 $ 43,683 $ 36,587
Total Operating Expense(1)(2)............... $ 9,332 $ 8,567 $ 37,048 $ 33,047 $ 27,662
Income from Continuing Operations(2)........ $ 2,158 $ 1,810 $ 6,695 $ 7,070 $ 5,605
Net Income Per Share
Income from Continuing Operations:
Basic....................................... $ 0.93 $ 0.77 $ 2.85 $ 2.97 $ 2.40
Diluted..................................... $ 0.90 $ 0.74 $ 2.74 $ 2.84 $ 2.18
Dividends Declared Per Common Share(3)...... $ 0.125 $ 0.100 $ 0.400 $ 0.300 $ 0.267
Total Assets................................ $738,889 $658,347 $697,452 $626,966 $559,197
Total Deposits.............................. $214,719 $188,848 $199,121 $184,955 $167,131
Long-Term Debt.............................. $ 48,697 $ 43,465 $ 47,387 $ 43,246 $ 40,723
Redeemable Preferred Stock.................. $ 280 $ 420 $ 280 $ 420 $ 560
Redeemable Preferred Securities of
Subsidiary Trusts......................... $ 3,595 $ 2,995 $ 2,995 $ 2,545 $ --
Common Stockholders' Equity................. $ 40,034 $ 35,604 $ 38,736 $ 35,461 $ 31,251
Total Stockholders' Equity.................. $ 43,084 $ 38,632 $ 42,089 $ 38,664 $ 35,434
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends................. 1.50x 1.50x 1.41x 1.48x 1.35x
Return on Average Common Stockholders'
Equity.................................... 21.75% 19.85% 17.35% 20.28% 18.16%
Common Stockholders' Equity to Assets....... 5.42% 5.41% 5.55% 5.66% 5.59%
Total Stockholders' Equity to Assets........ 5.83% 5.87% 6.03% 6.17% 6.34%
</TABLE>
- - ---------------
(1) Includes provisions for credit losses.
(2) The year ended December 31, 1997 includes restructuring charges of $1,727
million ($1,052 million after-tax).
(3) Amounts represent Travelers' historical dividends per common share.
13
<PAGE> 20
RISK FACTORS
In addition to the other information included in this Joint Proxy
Statement/Prospectus (including the matters addressed in "THE
MERGER -- Cautionary Statement Concerning Forward-Looking Statements" on page
33), the matters described below should be considered carefully by stockholders
of Citicorp and Travelers in determining whether to approve the merger agreement
and the transactions contemplated thereby.
CITIGROUP'S COMPLIANCE WITH APPLICABLE LAW
As a result of the merger, Citigroup will become a bank holding company
subject to regulation under the Bank Holding Company Act of 1956, as amended
(the "BHC Act"), and the requirements of the Glass-Steagall Act, among other
laws. See "REGULATION OF CITIGROUP UNDER BANKING LAWS." In general, the
activities of bank holding companies are limited to banking, managing or
controlling banks and other activities that the Federal Reserve Board determines
to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto. Section 4 of the BHC Act provides that, with certain
exceptions, providing insurance as principal, agent or broker is not closely
related to banking or managing or controlling banks. Under the BHC Act in its
current form, after two years from the date as of which it becomes a bank
holding company, Citigroup will be required to conform any activities that are
not considered to be closely related to banking under the BHC Act. This two-year
period may be extended by the Federal Reserve Board for three additional
one-year periods, upon finding that such an extension would not be detrimental
to the public interest. Therefore, while the merger is permitted under current
law, if the BHC Act is not amended before the end of this period (including any
extensions), Citigroup may, among other things, be required to divest itself of
certain insurance underwriting businesses or cease being a bank holding company
subject to the BHC Act. The feasibility of ceasing to be a bank holding company
would depend on the law at the time, but might include transferring the domestic
banking business of Citigroup to federal or state savings associations or other
appropriate entities that are not regarded as "banks" under the BHC Act and
Citigroup's foreign banking business to Edge Act Corporations, foreign banks or
other appropriate entities. In connection with such transfers, Citigroup's
foreign banking business might become subject to additional or different
regulations and the mix of assets held by Citigroup may be affected as a result
of asset constraints under current law and regulations relating to federal and
state savings associations. There can be no assurance that Citigroup's
divestiture of certain insurance underwriting businesses or its ceasing to be a
bank holding company would not result in significant costs or other
disadvantages to Citigroup.
Various legislation, including proposals to overhaul the bank regulatory
system and expand the powers of bank holding companies, is from time to time
introduced in Congress. One such proposal, H.R. 10, passed the House of
Representatives on May 14, 1998. That bill would amend the BHC Act to make
insurance underwriting a permissible business for a bank holding company.
Consequently, if enacted in its present form, Citigroup would not be under any
obligation to conform its business to the current limitations of the BHC Act.
However, there is no assurance that such legislation as currently drafted, or
any other legislation, will ultimately be enacted and, if enacted, of the
ultimate effect that any such potential legislation or implementing regulations
would have upon the financial condition or results of operations of Citigroup or
its subsidiaries.
NO FAIRNESS OPINIONS FROM INDEPENDENT FINANCIAL ADVISORS
Neither Travelers nor Citicorp engaged an independent financial advisor to
formally evaluate the financial fairness of the exchange ratio. As a result,
stockholders of each company will vote on the merger based upon the
recommendations of their respective directors without an opinion from an
independent financial advisor that the merger is fair to stockholders from a
financial point of view. See "THE MERGER -- Rationale for the Merger;
Recommendation of Each Company's Board of Directors."
FIXED MERGER CONSIDERATION DESPITE POTENTIAL CHANGE IN RELATIVE STOCK PRICES
Upon completion of the merger, each share of Citicorp common stock will be
converted into the right to receive 2.5 shares of Citigroup common stock. This
exchange ratio will not be adjusted in the event of any increase or decrease in
the price of either Citicorp or Travelers common stock. The prices of Citicorp
and
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<PAGE> 21
Travelers common stock when the merger takes place may vary from their prices at
the date of this Joint Proxy Statement/Prospectus and at the date of the special
meetings of the stockholders of Citicorp and Travelers. For example, during the
twelve month period ending on June 15, 1998 (the most recent practicable date
prior to the printing of this Joint Proxy Statement/Prospectus), the closing
price of Citicorp common stock varied from a low of $112.75 to a high of $180.50
and ended that period at $144.50, and the closing price of Travelers common
stock varied from a low of $38.50 to a high of $73.00 and ended that period at
$59.875 (see "Comparative Market Price and Dividend Information" on page 8 for
further information). Such variations may be the result of changes in the
business, operations or prospects of Citicorp, Travelers or the combined
company, market assessments of the likelihood that the merger will be
consummated and the timing thereof, regulatory considerations, general market
and economic conditions and other factors. At the time of their special
meetings, the holders of Citicorp and Travelers common stock will not know the
exact value of the Citigroup common stock that they will receive when the merger
is completed.
Holders of common stock of Citicorp and Travelers are urged to obtain
current market quotations for Citicorp and Travelers common stock.
MANAGEMENT OF CITIGROUP FOLLOWING THE MERGER
Following the consummation of the merger, Sanford I. Weill and John S. Reed
will each serve as Chairman and Co-Chief Executive Officer of Citigroup. Each of
the Travelers and Citicorp Board of Directors considered this management
structure in their discussions regarding the merger. Messrs. Reed and Weill have
indicated their intention to engage in open communications with each other and
with other members of senior management of Citigroup. There can be no assurance,
however, that such communications will be optimal or will result in reconciling
differing views, if any, held by the Co-Chief Executive Officers. See "THE
MERGER -- Rationale for the Merger; Recommendation of Each Company's Board of
Directors."
UNCERTAINTIES IN INTEGRATING BUSINESS OPERATIONS AND REALIZING ENHANCED EARNINGS
The merger involves the integration of two companies that conduct
substantially different business activities, that have different corporate
cultures and that have previously operated independently. No assurance can be
given that Travelers and Citicorp will be able to integrate their operations
without encountering difficulties including, without limitation, the loss of key
employees and customers, the disruption of their respective ongoing businesses
or possible inconsistencies in standards, controls, procedures and policies.
Additionally, in determining that the merger is in the best interests of
Travelers and Citicorp, as the case may be, each of the Travelers and the
Citicorp Board of Directors considered that enhanced earnings may result from
the consummation of the merger, including from cross-marketing opportunities.
However, there can be no assurance that any enhanced earnings will result from
the merger.
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<PAGE> 22
THE MERGER
UPON CONSUMMATION OF THE MERGER OF CITICORP INTO A WHOLLY OWNED SUBSIDIARY
OF TRAVELERS, TRAVELERS WILL BE RENAMED CITIGROUP INC. CONSEQUENTLY, WE HAVE
USED THE TERM "CITIGROUP" IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO REFER TO
TRAVELERS FOLLOWING THE MERGER. THE DISCUSSION IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OF THE MERGER AND THE PRINCIPAL TERMS OF THE MERGER
AGREEMENT IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE
MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AS ANNEX A AND IS INCORPORATED HEREIN BY REFERENCE.
GENERAL
Travelers Group Inc. ("Travelers") and Citicorp ("Citicorp") are furnishing
this Joint Proxy Statement/Prospectus to holders of shares of (i) common stock,
par value $.01 per share, of Travelers ("Travelers Common Stock"), (ii) common
stock, par value $1.00 per share, of Citicorp ("Citicorp Common Stock"), (iii)
Series I Convertible Preferred Stock, par value $1.00 per share, of Travelers
(the "Travelers Series I Preferred Stock"), (iv) 8.08% Cumulative Preferred
Stock, Series J, par value $1.00 per share, of Travelers (the "Travelers Series
J Preferred Stock") and (v) 8.40% Cumulative Preferred Stock, Series K, par
value $1.00 per share, of Travelers (the "Travelers Series K Preferred Stock"
and, together with the Travelers Series I Preferred Stock and the Travelers
Series J Preferred Stock, the "Travelers Voting Preferred Stock"), in connection
with the solicitation of proxies by the respective Boards of Directors of
Travelers (the "Travelers Board") and Citicorp (the "Citicorp Board") for use at
their special meetings of stockholders to be held on July 22, 1998 and at any
adjournments or postponements thereof. This Joint Proxy Statement/ Prospectus is
also being furnished to holders of Graduated Rate Cumulative Preferred Stock,
Series 8A, without par value, of Citicorp (the "Citicorp Series 8A Preferred
Stock"), Graduated Rate Cumulative Preferred Stock, Series 8B, without par
value, of Citicorp (the "Citicorp Series 8B Preferred Stock"), and
Fixed/Adjustable Rate Cumulative Preferred Stock, Series 23, without par value,
of Citicorp (the "Citicorp Series 23 Preferred Stock") in connection with each
such holder's appraisal rights under Section 262 of the Delaware General
Corporation Law ("DGCL") and to holders of all series of Citicorp preferred
stock for informational purposes.
At their special meeting, the holders of Travelers Common Stock and
Travelers Voting Preferred Stock (collectively, "Travelers Voting Stock") will
be asked to vote upon a proposal to approve and adopt (i) the Agreement and Plan
of Merger, dated as of April 5, 1998, by and between Travelers and Citicorp (the
"Merger Agreement") and the transactions contemplated thereby, including the
issuance (the "Merger Share Issuance") of common stock, par value $.01 per
share, of Citigroup ("Citigroup Common Stock") pursuant to the merger (the
"Merger") of Citicorp with and into a subsidiary of Travelers, with the
subsidiary of Travelers (the "Merger Sub") surviving the Merger, in accordance
with the terms of the Merger Agreement and the change of Travelers' name to
"Citigroup Inc." following the Merger (the "Name Change") and (ii) an amendment
to the Restated Certificate of Incorporation of Travelers (the "Travelers
Certificate") to increase to 6 billion the shares of Travelers Common Stock
authorized for issuance. At their special meeting, the stockholders of Citicorp
will be asked to vote upon a proposal to approve and adopt the Merger Agreement
and the transactions contemplated thereby (including, without limitation, the
Merger).
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Travelers, which is a part of the Registration Statement on Form S-4 (the
"Registration Statement") filed by Travelers with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), in order to register the shares of Citigroup common stock,
shares of preferred stock and the depositary shares to be issued to Citicorp
stockholders in the Merger.
In the Merger, other than shares held in Travelers' or Citicorp's treasury,
(i) each share of Citicorp Common Stock issued and outstanding immediately prior
to the effective time of the Merger (the "Effective Time"), will be converted,
without any action on the part of the holder thereof, into the right to receive
2.5 shares (the "Exchange Ratio") of Citigroup Common Stock, with cash being
paid in lieu of fractional shares of Citigroup Common Stock, and (ii) each
issued and outstanding share of Citicorp preferred stock, without par value
("Citicorp Preferred Stock"), of the series identified in the left-hand column
below will be
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<PAGE> 23
converted, without any action of the holder thereof, into the right to receive
one share of Citigroup preferred stock, par value $1.00 per share, of the
corresponding series identified in the right-hand column below (those series
identified below, collectively, "New Citigroup Preferred Stock").
<TABLE>
<CAPTION>
SERIES OF CITIGROUP
SERIES OF CITICORP PREFERRED STOCK
PREFERRED STOCK ISSUED IN EXCHANGE
------------------ -------------------
<S> <C>
Graduated Rate Cumulative Preferred Stock, Graduated Rate Cumulative Preferred Stock,
Series 8A Series W
Graduated Rate Cumulative Preferred Stock, Graduated Rate Cumulative Preferred Stock,
Series 8B Series O
7.50% Noncumulative Preferred Stock, Series 7.50% Noncumulative Preferred Stock, Series
17 P
Adjustable Rate Cumulative Preferred Stock, Adjustable Rate Cumulative Preferred Stock,
Series 18 Series Q
Adjustable Rate Cumulative Preferred Stock, Adjustable Rate Cumulative Preferred Stock,
Series 19 Series R
8.30% Noncumulative Preferred Stock, Series 8.30% Noncumulative Preferred Stock, Series
20 S
8 1/2% Noncumulative Preferred Stock, Series 8 1/2% Noncumulative Preferred Stock, Series
21 T
7 3/4% Cumulative Preferred Stock, Series 22 7 3/4% Cumulative Preferred Stock, Series U
Fixed/Adjustable Rate Cumulative Preferred Fixed/Adjustable Rate Cumulative Preferred
Stock, Series 23 Stock, Series V
</TABLE>
The terms, designations, preferences, limitations, privileges and rights
(other than par value) of the respective series of New Citigroup Preferred Stock
will be identical to those of the corresponding series of Citicorp Preferred
Stock. Each share of the corresponding series of New Citigroup Preferred Stock,
other than the Citigroup Series O Preferred Stock and the Citigroup Series W
Preferred Stock, will be represented by depositary shares ("New Citigroup
Depositary Shares"), each representing a one-tenth interest in a share of the
corresponding series of New Citigroup Preferred Stock.
BACKGROUND OF THE MERGER
Sanford I. Weill, Chairman and Chief Executive Officer of Travelers, and
John S. Reed, Chairman (and the chief executive officer) of Citicorp, have known
each other personally and professionally for more than thirty years. In late
February of 1998, Mr. Weill raised with Mr. Reed the possibility of a business
combination between Travelers and Citicorp. During the discussion, Messrs. Reed
and Weill considered the complementary strengths of the businesses of the two
companies and developing trends in the financial services industry. Messrs. Reed
and Weill agreed to meet again and continue their discussions. In the ten days
following the meeting, Paul J. Collins, Vice Chairman of Citicorp, continued
discussions with various representatives of Travelers. Senior executives of the
two companies and their legal counsel held several meetings between March 5 and
March 21, 1998.
Commencing the week of March 23, 1998, representatives of Travelers and
Citicorp discussed and provided each other with information relating to certain
business, financial, legal, tax and accounting matters regarding Travelers and
Citicorp. Various executive officers of Travelers, including the chief financial
officer, chief accounting officer and general counsel, as well as certain other
financial, accounting, tax and legal personnel of Travelers, met with certain
members of Citicorp's executive management, including the chief financial
officer and general counsel of Citicorp, and reviewed and discussed such
information. In addition, outside legal and accounting advisors of Travelers and
Citicorp began reviewing and analyzing such information.
On March 18, 1998, Mr. Reed began informal discussions relating to the
proposed Merger with members of the Citicorp Board. By March 24, he had advised
all of the directors of the status of the discussions with Travelers.
At a regular meeting of the Travelers Board on March 25, 1998, Travelers'
executive management discussed with the Travelers Board an overview of the
business of Citicorp and the strategic rationale for a
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<PAGE> 24
business combination as well as the nature of discussions between the two
companies to date. During the meeting, the Travelers Board considered the
benefits and risks of the proposed transaction for Travelers and its
stockholders. Following such discussions, the Travelers Board authorized
management to continue to pursue a business combination with Citicorp.
On March 26, 1998, representatives of Travelers and Citicorp met with
representatives of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and discussed regulatory issues relating to the
proposed transaction.
From March 27 through April 3, 1998, representatives of Travelers and
Citicorp, together with their advisors, discussed the terms of a draft Merger
Agreement and various other issues relating to the proposed Merger, including
the structure of the transaction, tax and accounting issues and required
regulatory approvals. The Exchange Ratio was negotiated directly by the
executive managements of Travelers and Citicorp on April 3 and April 4, 1998.
On April 2, 1998 at a special meeting of the Travelers Board, Travelers'
executive management and outside legal counsel updated the Travelers Board on
matters relating to the proposed Merger with Citicorp. Executive management of
Travelers first discussed the financial aspects of the proposed transaction, the
businesses of Citicorp, strategic implications that the proposed Merger would
have on each of the businesses of Travelers and its subsidiaries and certain
other matters. Outside counsel for Travelers then discussed the terms and
conditions of the draft Merger Agreement, the regulatory issues relating to the
proposed Merger, the status of the due diligence review of, and the negotiations
with, Citicorp, fiduciary duties of the Travelers Board in connection with the
proposed Merger and certain other legal matters. Travelers' executive management
also discussed the proposed management structure of the combined entity
following the Merger whereby the combined entity would be run by co-chief
executive officers. During the meeting, the Travelers Board considered the
benefits and risks of the proposed transaction for Travelers and its
stockholders. Following these discussions, the Travelers Board authorized
management to continue to pursue the proposed Merger.
At a special meeting of the Citicorp Board on April 3, 1998, Citicorp's
management discussed with the Citicorp Board an overview of the business of
Travelers and the strategic rationale for a business combination as well as the
nature of discussions between the two companies. Management of Citicorp
discussed the financial aspects of the proposed transaction, the strategic
implications that the proposed Merger would have on the principal businesses of
Citicorp and its subsidiaries and other aspects of the proposed Merger. Legal
counsel for Citicorp discussed the terms and conditions of the draft Merger
Agreement which was distributed to the Citicorp Board, the regulatory issues
relating to the proposed Merger, the status of the due diligence review of, and
the negotiations with, Travelers, fiduciary duties of the Citicorp Board in
connection with the proposed Merger and other legal matters. Citicorp's
management also discussed the proposal that the combined entity would be run by
co-chief executive officers. During the meeting, the Citicorp Board considered
the advantages and disadvantages of the proposed transaction for Citicorp and
its stockholders. Following extensive discussions, the Citicorp Board authorized
management to continue to pursue the proposed Merger.
On the evening of April 4, 1998 at a special meeting of the Travelers Board
held telephonically, Travelers' executive management updated the Travelers Board
on the proposed Exchange Ratio. Outside counsel for Travelers then reviewed the
terms and conditions of the Merger Agreement, the regulatory consents required
to consummate the proposed Merger, the fiduciary duties of the Travelers Board
in connection with the proposed Merger and certain other legal matters. After
extensive discussion, the Travelers Board unanimously determined that the Merger
is in the best interests of the stockholders of Travelers and approved the
Merger Agreement and the Merger and unanimously resolved to recommend that
stockholders of Travelers vote to adopt the Merger Agreement.
On the evening of April 4, 1998 at a special meeting of the Citicorp Board
held telephonically, Citicorp's management updated the Citicorp Board on the
proposed Exchange Ratio. Legal counsel for Citicorp then provided additional
analysis of the matters discussed at the April 3 meeting. After discussion, the
Citicorp Board unanimously determined (with one director absent) that the Merger
is in the best interests of the
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<PAGE> 25
stockholders of Citicorp and approved the Merger Agreement and the Merger and
unanimously resolved to recommend that stockholders of Citicorp vote to adopt
the Merger Agreement.
Following resolution of open items, the Merger Agreement was signed by both
Citicorp and Travelers on April 5, 1998, and the transaction was announced on
April 6, 1998 by a joint press release issued by Travelers and Citicorp prior to
the commencement of trading on the NYSE.
On June 8, 1998, in accordance with the provisions of the Merger Agreement,
Travelers and Citicorp agreed to change the form of the merger to be a merger of
Citicorp with and into a subsidiary of Travelers.
RATIONALE FOR THE MERGER; RECOMMENDATION OF EACH COMPANY'S BOARD OF DIRECTORS
Travelers and Citicorp believe that the merger of two of the world's
leading financial services companies will create significant value for their
respective stockholders. Travelers and Citicorp have a unique opportunity to
take advantage of the complementary strategic fit of their businesses, combining
Citicorp's and Travelers' products to create one of the largest, most
diversified financial services companies in the world, with growth opportunities
not available to either company on its own. Our complementary skills and
products are expected to allow Citigroup to provide a wider range of products
and services, in both developed and emerging markets, than any competitor.
Citigroup will have 100 million account relationships and operations in 100
countries, and it will rank at or near the top among all financial services
companies in assets, earnings and market value (calculated by combining the two
companies' data as of March 31, 1998).
The Merger will bring together two organizations with core commitments to
serving consumers, corporations, institutions and governments around the world
through sales and service channels in banking, insurance, consumer finance,
credit cards, investment banking, securities brokerage and asset management.
Citigroup's combination of lending, underwriting, corporate finance, advisory,
securitization and risk management capacities will offer greater convenience to
clients. The combined company, with Salomon Smith Barney's equity and fixed
income securities businesses and Citibank's derivatives and foreign exchange
businesses, will be preeminent in global trading. Likewise, Citigroup will be
among the world's leading asset management firms, well positioned to serve
established markets and to seek new business in such markets as the expected
privatization of pension and retirement fund management proceeds throughout the
world.
Citigroup will seek to grow by building on the combining companies'
strengths, such as Citicorp's unrivaled global presence, Travelers' wide array
of financial products and services and demonstrated cross-selling expertise and
our commitment to quality products offered under well known and respected brand
names. Each of Travelers and Citicorp believes that the combined company can
achieve enhanced earnings by (i) utilizing Citicorp's international distribution
system and customer base to cross-sell Travelers' products and services, (ii)
utilizing Travelers' existing sales force and customer base to cross-sell
Citicorp's products and services and (iii) increasing Citicorp's market
penetration with existing customers through Travelers' cross-selling expertise.
The increased wealth and sophistication of U.S. consumers and the emergence of a
sizable middle class in many international markets present opportunities for
Citigroup that neither Travelers nor Citicorp could meet alone.
Although Citigroup will seek to reduce expenses by combining overlapping
functions and facilities, each company's Board views potential revenue growth as
of far greater importance than expected cost savings in its determination to
recommend the Merger. Each company's Board recognizes the challenges inherent in
combining two such complex organizations; these were considered by each
company's Board and are discussed in more detail below.
Other positive factors considered by each company's Board include: (i) the
terms and conditions of the Merger Agreement, including an Exchange Ratio that
provides certainty about the number of shares of Citigroup Common Stock that
will be issued in the Merger; (ii) the expected treatment of the Merger as a
tax-free reorganization; and (iii) the expected treatment of the Merger as a
pooling of interests for financial reporting and accounting purposes.
In addition, in reaching its conclusions, each company's Board considered,
among other things, (i) information concerning the financial performance and
condition, business operations, earnings and
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<PAGE> 26
prospects of each of Travelers and Citicorp and the projected future financial
performance of that company as well as of Citigroup for the next two years and
(ii) the impact of the Merger on that company's customers. However, no formal
valuation analyses or independent valuations were presented to either Board.
Each company's Board also considered certain countervailing factors in its
deliberations concerning the Merger, including: (i) possible difficulties
integrating the two companies' managements and corporate cultures; (ii) the
feasibility of operating Citigroup with two chief executives; (iii) the
composition and functioning of Citigroup's Board of Directors; (iv) uncertainty
regarding stockholders', customers' and employees' perceptions of the Merger;
and (v) the fact that the Exchange Ratio will not be adjusted even if the two
companies' performance and financial condition diverge in the period prior to
the Merger. Each company's Board directed management to address the foregoing
concerns. In respect of the countervailing factor identified in clause (i)
above, the companies have established joint transition teams to foster mutual
cooperation and communication in order to achieve an orderly transition. In
respect of the countervailing factor identified in clause (ii) above, each
company's Board recognized that each co-chief executive officer has much to
contribute to the combined enterprise and that Messrs. Reed and Weill have been
friends for more than thirty years. In respect of the countervailing factor
identified in clause (iii) above, the companies have established a team of
outside directors from each company to review the corporate governance of
Citigroup generally as well as the functions of each Board's various committees
to recommend a plan for integrating the committees. In respect of the
countervailing factor identified in clause (iv) above, the companies have
implemented a joint communication strategy directed towards addressing the
concerns of the referenced constituencies. In respect of the countervailing
factor identified in clause (v) above, each company's Board recognized that the
Merger is expected to provide long-term strategic benefits that would
counterbalance any short-term divergence in financial performance of either
company.
Each company's Board also considered the financial and legal consequences
of Citigroup becoming a bank holding company subject to regulation under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"), and the
requirements of the Glass-Steagall Act and the fact that, following the
expiration of the applicable waiver period, Citigroup will have to conform any
activities that are not closely related to banking under the BHC Act unless
appropriate legislation is enacted. See "-- Regulatory and Third-Party
Approvals" and "REGULATION OF CITIGROUP UNDER BANKING LAWS." In the event that
such legislation has not been enacted, at the expiration of the waiver period,
Citigroup will evaluate its alternatives in order to comply with whatever laws
are then applicable. The Boards considered the impact on Citigroup of conforming
its activities under the BHC Act, including the possible divestiture of certain
insurance underwriting businesses or ceasing to be a bank holding company by
causing its commercial bank subsidiaries to convert into non-bank entities, such
as federal or state savings associations. At the present time, the Boards do not
believe that compliance with applicable law will have a material adverse effect
on Citigroup.
The Citicorp Board also considered certain additional countervailing
factors, including: (i) the potential of the Merger to distract from Citicorp's
efforts to establish a worldwide branded consumer offering; and (ii) the fact
that Travelers' business is largely U.S.-based and whether this might detract
from Citicorp's global orientation. Citicorp uses the "Citi" brand name in all
aspects of its business. The Citicorp Board considered whether management focus
on matters relating to the Merger would distract from development of the "Citi"
brand. In addition, the Citicorp Board noted that the breadth and depth of
Citicorp's presence in markets around the world distinguishes Citicorp from its
competition and considered whether management focus on the Merger would impact
Citicorp's global financial services brand.
The Travelers Board also considered certain additional countervailing
factors including: (i) the possible distraction of management from day-to-day
operations; and (ii) increased exposure to global economic changes, such as
recent events in Asia. In respect of the countervailing factor identified in
clause (i) above, the companies have established transition teams to help
minimize unnecessary management distractions and achieve an orderly transition
following the Merger. In respect of the countervailing factor identified in
clause (ii) above, Travelers' management considered that the increased exposure
was an unavoidable element of achieving the goal of becoming a global financial
services company but believes that the size and scope of Citigroup and its
varied businesses would mitigate the adverse effect to Citigroup of such
exposure.
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The Exchange Ratio was determined by negotiation between the companies to
reflect the "merger of equals" character of the transaction taking into
consideration the similar market capitalizations of the two companies
(approximately $65 and $70 billion for Citicorp and Travelers, respectively, as
of the date of the Merger Agreement) and to achieve approximately equal share
ownership in Citigroup by the stockholders of the two companies.
Travelers and Citicorp each considered obtaining a fairness opinion from an
independent financial advisor with respect to the Exchange Ratio but determined
not to do so. Under Delaware law, the board of directors of a company is not
required to obtain a fairness opinion or an outside valuation report prior to
approving a business combination as long as the directors have adequate
information upon which a proper exercise of business judgment can be made. In
light of the expertise of their respective managements in financial matters,
each company's Board determined not to request a fairness opinion from an
independent financial advisor. Furthermore, obtaining a fairness opinion from an
independent financial advisor would have involved disclosing proprietary
information to significant competitors of each company.
Each company's Board individually determined that the potential advantages
of the Merger far outweigh the disadvantages. Each company's Board also believes
that Citigroup, more fully than either company by itself, could be the kind of
financial services institution -- with global perspective and infrastructure,
extensive resources and a broad range of products designed to meet specific
demands -- best suited to meet the needs of customers around the world in the
twenty-first century. Based on consideration of these and other relevant
matters, each company's Board unanimously determined that the Merger, upon the
terms and conditions set forth in the Merger Agreement, is in the best interests
of its company and its company's stockholders.
The foregoing discussion of the factors considered by each company's Board
is not intended to be exhaustive, but is believed to include all material
factors considered by each company's Board. In reaching its decision to approve
the Merger, each company's Board did not quantify or assign any relative weights
to the factors considered, and individual directors may have given different
weights to different factors.
FORM OF THE MERGER
Subject to the terms and conditions of the Merger Agreement and in
accordance with the DGCL, at the Effective Time, Citicorp will be merged with
and into Merger Sub. Merger Sub will be the surviving corporation in the Merger,
and will continue its corporate existence under Delaware law. Travelers will
change its name to "Citigroup Inc." upon consummation of the Merger. The
Travelers Restated Certificate of Incorporation (the "Travelers Certificate"),
as in effect immediately prior to the Effective Time (and as amended pursuant to
the Merger Agreement as described herein and as supplemented by the certificates
of designation for the New Citigroup Preferred Stock which will become effective
at the Effective Time), will be the certificate of incorporation of Citigroup
(the "Citigroup Certificate"), and the by-laws of Travelers (the "Travelers
By-Laws"), as amended as described herein, will be the by-laws of Citigroup (the
"Citigroup By-Laws"). Pursuant to the Merger Agreement, Travelers and Citicorp
have agreed to change the method of effecting the Merger from a merger of
Citicorp with and into Travelers to a merger of Citicorp with and into a
subsidiary of Travelers.
MERGER CONSIDERATION
At the Effective Time, (i) each outstanding share of Citicorp Common Stock,
other than certain shares owned by Citicorp or Travelers, will be converted into
the right to receive 2.5 fully paid and nonassessable shares of Citigroup Common
Stock (except that cash will be paid in lieu of fractional shares as described
under "-- Conversion of Shares; Procedures for Exchange of Certificates;
Fractional Shares" below) and (ii) each outstanding share of Citicorp Preferred
Stock, other than certain shares owned by Citicorp or Travelers, will be
converted into the right to receive one fully paid and nonassessable share of
the corresponding newly established series of New Citigroup Preferred Stock. As
of the Effective Time, all such shares of Citicorp Common Stock and Citicorp
Preferred Stock, as the case may be, will no longer be outstanding and will
automatically be cancelled and will cease to exist and each holder of shares of
Citicorp Common Stock or Citicorp Preferred Stock, as the case may be, will
cease to have any rights in respect of those shares, except to receive the
consideration set forth in the immediately preceding sentence. See
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"-- Conversion of Shares; Procedures for Exchange of Certificates; Fractional
Shares." The Exchange Ratio was determined through arm's-length negotiations
between Citicorp and Travelers.
Any shares of Citicorp Common Stock and Citicorp Preferred Stock owned
immediately prior to the Effective Time by Citicorp or Travelers will be
canceled and retired and shall cease to exist, and no consideration will be
delivered in exchange for those shares; provided, however, that any shares of
Citicorp Common Stock and Citicorp Preferred Stock (i) held by Citicorp or
Travelers in connection with any market making or proprietary trading activity
or for the account of another person, (ii) as to which Citicorp or Travelers is
or may be required to act as a fiduciary or in a similar capacity or (iii) the
cancellation of which would violate any legal duties or obligations of Citicorp
or Travelers, will not be cancelled but, instead, will be treated as set forth
in the preceding paragraph.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The conversion of Citicorp Common Stock into the right to receive Citigroup
Common Stock and Citicorp Preferred Stock into the right to receive New
Citigroup Preferred Stock will occur automatically at the Effective Time. As
soon as practicable after the Effective Time, Citibank, N.A., in its capacity as
Exchange Agent (the "Exchange Agent"), will send a transmittal letter to each
former holder of Citicorp Common Stock, Citicorp Series 8A Preferred Stock or
Citicorp Series 8B Preferred Stock. The transmittal letter will contain
instructions with respect to obtaining shares of Citigroup Common Stock or New
Citigroup Preferred Stock, as the case may be, in exchange for shares of
Citicorp Common Stock, Citicorp Series 8A Preferred Stock and Citicorp Series 8B
Preferred Stock. CITICORP STOCKHOLDERS AND TRAVELERS STOCKHOLDERS SHOULD NOT
RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
After the Effective Time, each certificate that previously represented
shares of Citicorp Common Stock, Citicorp Series 8A Preferred Stock and Citicorp
Series 8B Preferred Stock will represent only the right to receive the Citigroup
Common Stock or New Citigroup Preferred Stock into which such shares were
converted in the Merger and the right to receive cash in lieu of fractional
shares of Citigroup Common Stock as described below. However, after the Merger,
depositary receipts formerly representing depositary shares of Citicorp Series
17 Preferred Stock, Citicorp Series 18 Preferred Stock, Citicorp Series 19
Preferred Stock, Citicorp Series 20 Preferred Stock, Citicorp Series 21
Preferred Stock, Citicorp Series 22 Preferred Stock and Citicorp Series 23
Preferred Stock (other than any depositary shares of Citicorp Series 23
Preferred Stock whose holders have properly perfected appraisal rights) will
automatically represent depositary shares of the corresponding series of New
Citigroup Preferred Stock and need not be exchanged.
Holders of certificates previously representing Citicorp Common Stock,
Citicorp Series 8A Preferred Stock and Citicorp Series 8B Preferred Stock will
not be paid dividends or distributions on the Citigroup Common Stock or the New
Citigroup Preferred Stock into which such shares have been converted with a
record date after the Effective Time, and will not be paid cash in lieu of
fractional shares of Citigroup Common Stock, until such certificates are
surrendered to the Exchange Agent for exchange. When such certificates are
surrendered, any unpaid dividends and any cash in lieu of fractional shares of
Citigroup Common Stock payable as described below will be paid without interest.
In the event of a transfer of ownership of Citicorp Common Stock, Citicorp
Series 8A Preferred Stock and Citicorp Series 8B Preferred Stock which is not
registered in the records of Citicorp's transfer agent, a certificate
representing the proper number of shares of Citigroup Common Stock or New
Citigroup Preferred Stock may be issued to a person other than the person in
whose name the certificate so surrendered is registered if such certificate is
properly endorsed or otherwise is in proper form for transfer and the person
requesting such issuance will pay any transfer or other taxes required by reason
of the issuance of shares of Citigroup Common Stock or New Citigroup Preferred
Stock to a person other than the registered holder of such certificate or
establish to the satisfaction of Citigroup that such tax has been paid or is not
applicable.
All shares of Citigroup Common Stock or New Citigroup Preferred Stock
issued upon conversion of shares of Citicorp Common Stock or Citicorp Preferred
Stock, as the case may be (including any cash paid in lieu of any fractional
shares of Citigroup Common Stock), will be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Citicorp Common Stock or
Citicorp Preferred Stock,
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subject, however, to Citigroup's obligation to pay any dividends or make any
other distributions with a record date prior to the Effective Time that may have
been declared by Citicorp on such shares of Citicorp Common Stock or Citicorp
Preferred Stock and which remain unpaid at the Effective Time.
No fractional shares of Citigroup Common Stock will be issued to any
Citicorp stockholder upon surrender of certificates previously representing
Citicorp Common Stock. For each fractional share that would otherwise be issued,
the Exchange Agent will remit to such stockholders an amount in cash equal to
the product obtained by multiplying the fractional share interest to which such
holder would otherwise be entitled by the closing price for a share of Citigroup
Common Stock on the NYSE Composite Transaction Tape on the date on which the
Merger is completed (the "Closing Date").
EFFECTIVE TIME
The Effective Time will be the time of the filing of the Certificate of
Merger with the Delaware Secretary of State or such later time as is agreed upon
by Citicorp and Travelers and specified in the Certificate of Merger. The filing
of the Certificate of Merger will occur as soon as practicable, but no later
than the second business day, after satisfaction or waiver of the conditions to
the consummation of the Merger set forth in the Merger Agreement unless another
date is agreed to in writing by Citicorp and Travelers, except that such filing
may be postponed by either party for up to 90 days after such satisfaction or
waiver of the conditions to the consummation of the Merger to the extent
necessary to obtain any material governmental, regulatory or other third-party
approvals, consents, orders or authorizations required in connection with or as
a result of the Merger.
EFFECT ON AWARDS OUTSTANDING UNDER CITICORP STOCK PLANS
At the Effective Time, each outstanding award or entitlement under
Citicorp's Savings Incentive Plan, 1997 Stock Purchase Plan Offering, 1997 Stock
Incentive Plan, 1988 Stock Incentive Plan, Executive Incentive Compensation
Plan, Directors' Deferred Compensation Plan and Deferred Compensation Plan
(collectively, the "Citicorp Stock Plans") will be adjusted as follows. Each
outstanding award or entitlement under any Citicorp Stock Plan will be converted
into the same instrument of Citigroup and will be assumed by Citigroup. Each
outstanding option or right to purchase shares of Citicorp Common Stock will be
assumed by Citigroup and will be converted into an option or right to purchase,
upon the same terms and conditions that were applicable to the option or right
immediately prior to the Effective Time, the number of shares of Citigroup
Common Stock equal to the number of shares of Citicorp Common Stock subject to
such option immediately prior to the Effective Time multiplied by the Exchange
Ratio, at a price per share equal to the exercise price for each such share of
Citicorp Common Stock subject to such option or right divided by the Exchange
Ratio. The option adjustments will be made in a manner that preserves the status
of "incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) and so as not to result in a
"disqualifying disposition" of the stock underlying the incentive stock options.
As of the Record Date, options to purchase approximately 37,000,000 shares of
Citicorp Common Stock were outstanding under the Citicorp Stock Plans.
STOCK EXCHANGE LISTINGS
Application for listing the Citigroup Common Stock issued pursuant to the
Merger and the depositary shares representing the New Citigroup Preferred Stock
issued pursuant to the Merger in exchange for Citicorp Preferred Stock has been
made with the NYSE. Application for listing shares of Citigroup Common Stock has
also been made with the Pacific Exchange. The trading symbol for the Citigroup
Common Stock will be "CCI." Following the Merger, Citicorp stockholders will no
longer be able to trade Citicorp stock on any exchange because Citicorp stock
will no longer be listed on any exchange.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion is a summary of the material U.S. federal income
tax consequences of the Merger to a stockholder of Citicorp (a "Holder") that
holds shares of Citicorp Common Stock or Citicorp Preferred Stock (collectively,
the "Citicorp Capital Stock") as a capital asset at the Effective Time. The
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discussion is based on laws, regulations, rulings and decisions in effect on the
date hereof, all of which are subject to change (possibly with retroactive
effect) and to differing interpretations. This discussion does not address all
aspects of federal taxation that may be relevant to particular Holders in light
of their personal circumstances or to Holders subject to special treatment under
the Code, including, without limitation, banks, tax-exempt organizations,
insurance companies, dealers in securities or foreign currency, Holders who
received their Citicorp Capital Stock through the exercise of employee stock
options or otherwise as compensation, Holders who are not U.S. persons (as
defined in Section 7701(a)(30) of the Code) and Holders who hold Citicorp
Capital Stock as part of a hedge, straddle or conversion transaction. In
addition, the discussion does not address any state, local or foreign tax
consequences of the Merger.
EACH HOLDER OF CITICORP CAPITAL STOCK IS URGED TO CONSULT ITS TAX ADVISOR
WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER.
Tax Opinions. In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
counsel to Travelers, and the opinion of Shearman & Sterling, counsel to
Citicorp (such opinions referred to collectively herein as the "Tax Opinions"),
subject to the assumptions, limitations, qualifications and other considerations
described below under "-- Certain Considerations with Respect to Opinions," the
Merger will constitute a "reorganization" for U.S. federal income tax purposes
within the meaning of Section 368(a) of the Code, and Travelers, Merger Sub and
Citicorp will each be a party to such "reorganization" within the meaning of
Section 368(b) of the Code.
Consummation of the Merger is conditioned upon counsel to both Travelers
and Citicorp delivering at the Effective Time tax opinions to the same effect
and subject to substantially the same assumptions, limitations, qualifications
and considerations as the Tax Opinions (collectively, the "Closing Tax
Opinions"). In the event that Travelers or Citicorp is unable to obtain the
Closing Tax Opinions, each of Travelers and Citicorp is permitted under the
Merger Agreement to waive the receipt of the Closing Tax Opinions as a condition
to such party's obligation to consummate the Merger. As of the date of this
Joint Proxy Statement/Prospectus, neither Travelers nor Citicorp intends to
waive the receipt of the Closing Tax Opinions as a condition to the consummation
of the Merger. In the event of such a failure to obtain the Closing Tax Opinions
and either Travelers' or Citicorp's determination to waive such condition to the
consummation of the Merger, Citicorp and Travelers will resolicit the vote of
their respective stockholders to approve the Merger Agreement.
Tax Consequences of the Merger. In accordance with the Tax Opinions
regarding the treatment of the Merger as a reorganization within the meaning of
Section 368(a) of the Code, subject to the assumptions, limitations,
qualifications and other considerations described below under "-- Certain
Considerations with Respect to Opinions," in the opinion of Skadden, Arps,
Slate, Meagher & Flom LLP and Shearman & Sterling (i) no gain or loss will be
recognized by Travelers, Merger Sub or Citicorp as a result of the Merger; (ii)
no gain or loss will be recognized by a Holder of Citicorp Capital Stock upon
the exchange of its shares solely for shares of Citigroup Common Stock or New
Citigroup Preferred Stock (collectively, the "Citigroup Capital Stock") pursuant
to the Merger, except with respect to cash, if any, received by a Holder of
Citicorp Common Stock in lieu of a fractional share of Citigroup Common Stock;
(iii) the aggregate tax basis of the shares of Citigroup Capital Stock received
solely in exchange for shares of Citicorp Capital Stock pursuant to the Merger
(including a fractional share of Citigroup Common Stock for which cash is
received) will be the same as the aggregate tax basis of the shares of Citicorp
Capital Stock surrendered in exchange therefor; (iv) the holding period for
shares of Citigroup Capital Stock received in exchange for shares of Citicorp
Capital Stock pursuant to the Merger (including a fractional share of Citigroup
Common Stock) will include the holding period of the shares of Citicorp Capital
Stock surrendered in exchange therefor; and (v) cash received by a Holder of
Citicorp Common Stock in lieu of a fractional share of Citigroup Common Stock
will be treated as received in exchange for such fractional share and capital
gain or loss will be recognized in an amount equal to the difference between the
amount of cash received and the portion of the tax basis of the share of
Citicorp Common Stock allocable to such fractional interest.
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Certain Considerations with Respect to Opinions. The Tax Opinions and the
foregoing summary of the U.S. federal income tax consequences of the Merger are
and will be subject to certain assumptions, limitations and qualifications and
based on current law and, among other things, certain representations of
Citicorp and Travelers, including representations made by the respective
managements of Citicorp and Travelers. Reference is made to the full text of the
Tax Opinions, which set forth the assumptions made and matters considered in
connection therewith, copies of which have been filed as exhibits to the
Registration Statement of which this Joint Proxy Statement/Prospectus forms a
part. Opinions of counsel are not binding on the Internal Revenue Service
("IRS") and do not preclude the IRS from adopting a contrary position. In
addition, if any of such representations or assumptions are inconsistent with
the actual facts, the U.S. federal income tax consequences of the Merger could
be adversely affected. In particular, the opinion regarding the tax-free nature
of the receipt of New Citigroup Preferred Stock in exchange for Citicorp
Preferred Stock is based on certain representations of the management of
Citicorp. If such representations are inconsistent with the actual facts,
Holders of one or more series of Citicorp Preferred Stock may recognize gain
(but not loss) on the exchange even though the Merger is tax-free to Travelers,
Merger Sub, Citicorp and the other Holders of Citicorp Capital Stock.
ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Accordingly, the book value of the
assets, liabilities and stockholders' equity of Citicorp will be combined with
the corresponding balance sheet categories of Travelers and carried forward to
the combined corporation, subject to any adjustments required to conform the
accounting policies and financial statement classifications of the two
companies. In future financial statements, the results of operations of the
combined corporation will include the results of both Travelers and Citicorp for
the entire fiscal year in which the Merger occurs and all prior fiscal periods
presented therein. Certain expenses incurred to effect the Merger must be
treated by the combined corporation as current charges against income rather
than adjustments to its balance sheet.
The unaudited pro forma financial information contained in this Joint Proxy
Statement/Prospectus has been prepared using the pooling of interests accounting
method to account for the Merger. See "SUMMARY," "SUMMARY -- Selected Unaudited
Pro Forma Combined Financial Data of Travelers Group Inc. and Citicorp" and
"TRAVELERS GROUP INC. AND CITICORP UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS."
REGULATORY AND THIRD-PARTY APPROVALS
Under the Merger Agreement, Travelers and Citicorp have agreed to use their
best efforts to obtain all necessary actions or nonactions, waivers, consents
and approvals from any governmental authority necessary, proper or advisable to
consummate and make effective the Merger (the "Requisite Regulatory Approvals").
The Requisite Regulatory Approvals include approvals of the Federal Reserve
Board under the BHC Act, certain other federal and state banking agencies, state
insurance regulatory authorities and other domestic and foreign regulatory
authorities, as described below. An application and notice was filed with the
Federal Reserve Board on May 1, 1998. All other applications and notices have
been filed, or are in the process of being filed.
Federal Reserve Board. The Merger is subject to approval by the Federal
Reserve Board under Sections 3 and 4 of the BHC Act. In reviewing the proposed
transaction under the applicable statutes, the Federal Reserve Board will
consider the financial and managerial resources and future prospects of the
existing and proposed organizations and the convenience and needs of the
communities to be served. In considering financial and managerial factors, the
Federal Reserve Board will evaluate, among other things, the adequacy of the
capital of the parties to the transaction. In addition, the Federal Reserve
Board will assess the degree to which Travelers and Citicorp are taking
appropriate steps to assure that electronic data processing systems and those of
their vendors are Year 2000 compliant and plans for ensuring Year 2000 readiness
of the resulting organization.
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The Federal Reserve Board is prohibited from approving any transaction if
it would result in a monopoly or would be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any part of the United States or if its effect in any section of the United
States would be substantially to lessen competition, or to tend to create a
monopoly, or result in a restraint of trade, unless the Federal Reserve Board
finds that the anti-competitive effects of the transaction are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In addition,
under the Community Reinvestment Act of 1977, as amended (the "CRA"), the
Federal Reserve Board must take into account the record of performance of each
of the depository institution subsidiaries of Travelers and Citicorp in meeting
the credit needs of the entire community of that institution, including low and
moderate income neighborhoods.
Federal Reserve Board regulations require publication of notice of, and the
opportunity for public comment on, the application submitted for approval of the
Merger and authorize the Federal Reserve Board to hold a public hearing in
connection therewith if the Federal Reserve Board determines that such a hearing
would be appropriate. Any such hearing or comments provided by third parties
could prolong the period during which the application is subject to review by
the Federal Reserve Board. A public hearing has been scheduled by the Federal
Reserve Board for June 25, 1998.
The Federal Reserve Board will furnish notice and a copy of the application
for approval of the Merger to the Office of the Comptroller of the Currency (the
"OCC"), the Federal Deposit Insurance Corporation (the "FDIC"), the Office of
Thrift Supervision (the "OTS") and appropriate state regulatory authorities.
These agencies have 30 days to submit their views and recommendations to the
Federal Reserve Board.
The Federal Reserve Board's regulations require that the responsible
Reserve Bank accept or return an application within seven business days of
receipt and that the Federal Reserve Board act on the application within 60
calendar days of acceptance unless the Federal Reserve Board notifies the
applicant that the period has been extended. There can be no assurances that the
Federal Reserve Board will not extend such period.
Assuming Federal Reserve Board approval, the Merger may not be consummated
until 30 days after such approval, during which time the Department of Justice
may challenge the Merger on antitrust grounds and seek the divestiture of
certain assets and operations, except that, with the approval of the Federal
Reserve Board and the Department of Justice, the waiting period may be reduced
to no less than 15 days. The commencement of an antitrust action by the
Department of Justice would stay the effectiveness of Federal Reserve Board
approval of the Merger unless a court specifically orders otherwise.
As a result of the Merger, Citigroup will become a bank holding company
subject to regulation under the BHC Act and the requirements of the
Glass-Steagall Act, among other laws. See "REGULATION OF CITIGROUP UNDER BANKING
LAWS." In general, the activities of bank holding companies are limited to
banking, managing or controlling banks and other activities that the Federal
Reserve Board determines to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Section 4 of the BHC Act
provides that, with certain exceptions, providing insurance as principal, agent
or broker is not closely related to banking or managing or controlling banks.
Under the BHC Act in its current form, after two years from the date as of which
it becomes a bank holding company, Citigroup will be required to conform any
activities that are not considered to be closely related to banking under the
BHC Act. This two-year period may be extended by the Federal Reserve Board for
three additional one-year periods, upon finding that such an extension would not
be detrimental to the public interest. In conforming its activities to the BHC
Act, Citigroup may, among other things, move certain insurance agency and
brokerage activities into banks or subsidiaries of banks. The Merger was
structured so that in applying to become a bank holding company, Travelers (and
therefore Citigroup) could continue to be able to underwrite insurance under the
BHC Act for at least two years. Citicorp is being merged into a subsidiary of
Travelers primarily to simplify certain aspects of the regulatory process
relating to the Merger and because of certain funding advantages that result
from this structure.
Section 20 of the Glass-Steagall Act prohibits a member bank of the Federal
Reserve System, such as Citicorp's subsidiary, Citibank, N.A., from being
affiliated with a company that is principally engaged in underwriting and
dealing in securities. The Federal Reserve Board has determined by regulation
that
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underwriting and dealing in certain "eligible" securities is an activity closely
related to banking and is therefore permissible for bank holding companies and
their subsidiaries. The Federal Reserve Board has also determined that a
securities firm that does not generate more than 25% of its gross revenue from
underwriting and dealing in certain "ineligible" securities is not deemed for
purposes of the Glass-Steagall Act to be "principally engaged" in securities
underwriting and dealing. Based on preliminary calculations, Travelers and
Citicorp believe that the ineligible revenues of their combined securities
businesses will be below this threshold. For the eight quarters ended December
31, 1997, on a pro forma combined basis, ineligible revenues amounted to
approximately 15% of gross revenue.
Travelers and Citicorp each provides discretionary and non-discretionary
asset management and consulting services to a wide array of U.S. and non-U.S.
publicly offered investment funds (the "Public Funds"), private investment funds
(the "Private Funds") and institutional and individual investors through a
number of wholly-owned subsidiaries, some of which are registered as investment
advisers in the relevant jurisdictions. As of March 31, 1998, Travelers and its
subsidiaries held $165 billion in assets under management: $107.6 billion in
Public Funds and $57.4 billion in Private Funds and institutional and individual
accounts. As of March 31, 1998, Citicorp and its subsidiaries held $117 billion
in assets under management: $32 billion in Public Funds and $85 billion in
Private Funds and institutional and individual accounts.
Neither Travelers nor Citicorp expects that the Merger will materially
affect the operations of any of the Public Funds or the ability of the combined
company to continue providing services to the Public Funds and that new advisory
agreements or client consents to the Merger will not be required under
applicable law in most countries, including the U.S. It is also anticipated that
subsidiaries of Travelers and Citicorp providing investment advice to the
Private Funds will be able to continue such activities provided that they comply
with the regulatory framework imposed by federal banking laws.
In this connection, the Federal Reserve Board has not authorized bank
holding companies to be affiliated with companies that organize, sponsor,
control or distribute U.S. funds that issue securities frequently (i.e.,
open-end mutual funds). Citicorp is currently subject to this restriction.
Travelers is not presently subject to this restriction and, as a result of
becoming so subject, the open-end U.S. Public Funds for which a Travelers
subsidiary acts as distributor will be required to engage an independent party
to provide certain distribution services. However, Travelers believes that such
requirement will have minimal impact on Citigroup's revenues. In addition, there
will be limits on the extent to which directors, officers or employees of
Citigroup or its subsidiaries may serve as directors, officers or employees of
any of the U.S. Public Funds.
Following completion of the Merger, Citigroup will review whether it would
be in the best interests of shareholders of any of the Public Funds to
consolidate certain of those entities or change any of the administrative
service providers. Any such consolidations or changes would require approval by
the directors and/or shareholders of such Public Funds.
State Banking Department Approvals. In addition to the federal banking
agencies, the Merger will be subject to application or notice to state banking
authorities in New York, Delaware and Utah.
Under New York banking law, the New York Banking Department is required to
take into consideration the safety and soundness of the resulting institution as
a bank holding company and the impact on public confidence, public interests and
the convenience and needs thereof, and interests of depositors, creditors and
stockholders. Further, the New York Banking Department must consider whether the
Merger may result in such a lessening of competition as to be injurious to the
interests of the public or tend toward monopoly.
Under Utah banking law, the Utah Department of Financial Institutions is
required to take into consideration the safety and soundness of the resulting
institution and any adverse impact on competition or public confidence in
determining whether to approve the application. The Utah Department of Financial
Institutions must also evaluate other aspects of the Merger so as to protect the
public interest and interests of depositors, creditors and stockholders.
Further, the Utah Department of Financial Institutions must consider whether the
applicant has demonstrated sound management practices and financial strength as
well as the public interest, the credit needs of the communities served, and the
views of relevant federal regulators evaluating the Merger.
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Under Delaware banking law, the Delaware State Bank Commissioner is
required to take into consideration a variety of issues, including the effects
on competition in the market, convenience and needs of banking customers, and
financial and management resources of the resulting company, in determining
whether to object to the Merger or allow the usual 60-day notice period to
expire without adverse action.
Insurance Regulatory Approvals. The Merger also requires filings with, and
approvals of, the state insurance regulatory authorities (the "Insurance
Commissions") under the respective insurance codes (the "Insurance Codes") of
Arizona, New Jersey, New York and Delaware, which are the United States
jurisdictions in which the insurance companies owned or otherwise controlled by
Citicorp are domiciled. The Insurance Codes each contain generally similar
provisions (subject to certain variations) applicable to the acquisition of
control of a domestic insurer, including a rebuttable presumption of control
that arises from the ownership of 10% or more of the voting securities of a
domestic insurer or any person that controls a domestic insurer.
Generally, a person seeking to acquire voting securities, such as the
common stock, in an amount that would result in such person controlling,
directly or indirectly, a domestic insurer must, together with any person
ultimately controlling such person, file an Application for Approval of
Acquisition of Control of or Merger with a Domestic Insurer or comparable
application (each a "Form A") with the relevant Insurance Commission and send a
copy of such Form A to the domestic insurer. Travelers has made Form A filings
with the Insurance Commissions of the domiciliary states of Citicorp's insurer
subsidiaries.
In certain jurisdictions, the Form A filings trigger public hearing
requirements and/or statutory periods within which decisions must be rendered
approving or disapproving the acquisition of control. In other states, public
hearings are discretionary and/or there are no periods within which such
decisions must be rendered. The periods within which hearings must be commenced
or decisions rendered may not begin until the relevant Insurance Commission has
deemed the Form A filing complete, and the Insurance Commission has discretion
to request that Travelers furnish additional information before it deems the
Form A filing complete. A public hearing on Travelers' Form A filing with the
Delaware Insurance Department was held on June 4, 1998. In addition, public
hearings have been scheduled for June 18 and June 19, 1998 by the New Jersey and
Missouri Insurance Departments, respectively, on Travelers' Form A filings in
those states. A decision on whether a public hearing will be held by the Arizona
Insurance Department has not been reached. The Insurance Codes generally require
the relevant Insurance Commission to approve the application for the acquisition
of control unless the Insurance Commission determines (in certain states, after
a public hearing) that such application should be disapproved on one or more
prescribed regulatory grounds. The Insurance Codes contain provisions providing
generally for judicial review of an Insurance Commission order.
As Citicorp is merging into a newly-formed wholly owned subsidiary of
Travelers, there will be no change of control of Travelers' insurance company
subsidiaries. Because no change in control of such insurance company
subsidiaries will occur, no Form A filings should be required to be filed with
the Insurance Commissions of the U.S. domiciliary states of Travelers' insurance
company subsidiaries, although to avoid potential delay in the consummation of
the Merger and without waiver of the right to contest the necessity for the
filing, Travelers has, under protest, filed a Form A with the Insurance
Commissioner of Missouri. Some other states with jurisdiction over Travelers'
insurance company subsidiaries have indicated that they may require some form of
informational filings relating to the Merger. In addition, in certain foreign
jurisdictions in which Travelers' insurance company subsidiaries conduct
business, Travelers may need to file pre-merger notifications.
Other Regulatory Approvals. As a result of the Merger, among other things,
Travelers or Citicorp will be required, pursuant to applicable antitrust and
other laws and regulations, either to notify or obtain the consent of certain
regulatory authorities and organizations to which subsidiaries of either or both
companies may be subject, including overseas authorities. Also, consents or
approvals are required from various self-regulatory organizations of which
subsidiaries of either or both companies are members, including the The New York
Stock Exchange, Inc., the Commodities Futures Trading Commission and the
National Futures Association.
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If the approval of the Merger by any of the aforementioned authorities is
subject to compliance with certain conditions, there can be no assurance that
the parties or their subsidiaries will be able to comply with such conditions or
that compliance or non-compliance will not have adverse consequences for the
combined company after consummation of the Merger. The parties believe that the
proposed Merger is compatible with such regulatory requirements. Nevertheless,
there can be no assurance that a challenge to the proposed transaction on the
grounds that the proposed Merger is not compatible with the competition or other
laws or regulations of a certain jurisdiction will not be made or, if a
challenge is made, what the result will be.
While Travelers and Citicorp believe that they will receive the Requisite
Regulatory Approvals for the Merger, there can be no assurance regarding the
timing of such approvals or the ability of the companies to obtain such
approvals on satisfactory terms or the absence of litigation challenging such
approvals or otherwise. There can likewise be no assurance that the Department
of Justice, any state attorney general or other domestic or foreign regulatory
authority will not attempt to challenge the Merger on antitrust grounds or for
other reasons, or, if such a challenge is made, as to the result thereof. It is
a condition to the parties' respective obligations to consummate the Merger that
they file the requisite application and notices under the BHC Act and that the
requisite approvals in respect thereof are obtained. In addition, the Merger is
conditioned upon the receipt of all other consents, approvals and actions of
governmental authorities and the filing of all other notices with such
authorities, which would reasonably be expected to have a material adverse
effect on Citigroup and its prospective subsidiaries, if they were not received
or filed. See "THE MERGER AGREEMENT -- Conditions to the Consummation of the
Merger."
Third-Party Approvals. Each of Travelers and Citicorp is a party to a
number of credit facilities, indentures and other similar agreements.
Consummation of the Merger may require the consent of, or waiver from, the other
parties to certain of such agreements. Pursuant to the Merger Agreement,
Travelers and Citicorp have agreed to use their best efforts to obtain all
consents, approvals and waivers from third parties necessary in connection with
the consummation of the Merger, although the consummation of the Merger is not
conditioned upon obtaining any such third-party consent, approval or waiver.
Travelers and Citicorp do not believe that the failure to obtain such consents,
approvals or waivers would have a material adverse effect on Citigroup.
APPRAISAL RIGHTS
Under the DGCL, holders of capital stock of Travelers or Citicorp
(including the holders of depositary shares), except for holders of record
(each, an "Appraisal Holder") of shares of Citicorp Series 8A Preferred Stock,
Citicorp Series 8B Preferred Stock or Citicorp Series 23 Preferred Stock (any
such shares, "Appraisal Shares"), are not entitled to dissenters' appraisal
rights which would give them the right to obtain the payment of cash in exchange
for their securities or related depositary shares as a result of the Merger
because the shares such holders currently own are listed on a national
securities exchange and the consideration such holders will own after the Merger
will be shares of Citigroup and cash in lieu of fractional shares.
The Appraisal Holders, or any one of them, upon compliance with the
applicable statutory procedures summarized herein, may be entitled to appraisal
rights under Section 262 of the DGCL ("Section 262"). This Joint Proxy
Statement/Prospectus constitutes notice to the Appraisal Holders of the possible
availability of appraisal rights under Section 262, and the applicable statutory
provisions of the DGCL are attached to this Joint Proxy Statement/Prospectus as
Annex C. This summary does not intend to be complete and is qualified in its
entirety by reference to Annex C. Under the DGCL, an Appraisal Holder wishing to
exercise any available appraisal rights must be the record holder of Appraisal
Shares on the date the written demand for appraisal is made and must continue to
hold such shares through the Effective Time.
If the Appraisal Holders were to assert their appraisal rights with respect
to their Appraisal Shares, then within 120 days after the consummation of the
Merger, Citigroup or an Appraisal Holder would be entitled to file a petition in
the Delaware Chancery Court demanding a determination of the fair value of the
shares as to which a timely demand for appraisal had been made. Citigroup is
under no obligation to, and there is no present intention that Citigroup will,
file a petition with respect to the appraisal of the fair value of any Appraisal
Shares. Accordingly, it would be the obligation of the Appraisal Holders, or any
one of them, to
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initiate all necessary action to perfect any appraisal rights within the time
prescribed in Section 262. Appraisal Holders who elect to exercise appraisal
rights should mail or deliver their written demands to: Charles E. Long, Vice
Chairman and Secretary, Citicorp, 399 Park Avenue, New York, New York 10043.
Appraisal Holders who desire to exercise their appraisal rights must
deliver a written demand for appraisal to Citicorp to the address set forth in
the immediately preceding paragraph, before the taking of the vote on the
approval and adoption of the Merger Agreement at the Special Meeting of the
stockholders of Citicorp.
A demand for appraisal must be executed by or for the Appraisal Holder of
record, fully and correctly, as such stockholder's name appears on the stock
certificates. If Appraisal Shares are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, such demand must be executed by or
for the fiduciary. If Appraisal Shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, such demand must be executed
by or for all joint owners. A record owner, such as a broker, who holds
Appraisal Shares as a nominee for others, may exercise appraisal rights with
respect to such Appraisal Shares held for all or less than all beneficial owners
of such Appraisal Shares as to which the holder is the record owner. In such
case, the written demand must set forth the number of Appraisal Shares covered
by such demand.
The written demand for appraisal should specify the Appraisal Holder's name
and mailing address, the number of Appraisal Shares covered by the demand, and
that the Appraisal Holder is thereby demanding appraisal of such shares.
If a petition for an appraisal were timely filed, after a hearing on such
petition, the Delaware Chancery Court would appraise the "fair value" of the
Appraisal Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
The fair value of the Appraisal Shares as determined under Section 262 could be
more than, the same as, or less than the value of the consideration such
Appraisal Holders would receive pursuant to the Merger Agreement if they did not
seek appraisal of the Appraisal Shares. The Delaware Supreme Court has stated
that "proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in the appraisal proceedings. The Delaware Chancery Court would
determine the amount of interest, if any, to be paid upon the amounts to be
received in respect of the Appraisal Shares. The costs of the action may be
determined by the Delaware Chancery Court and charged to the parties as the
Delaware Chancery Court deems equitable.
Any Appraisal Holders who seek appraisal would not, after the consummation
of the Merger, be entitled to vote the Appraisal Shares for any purpose or be
entitled to the payment of dividends or other distributions on the Appraisal
Shares (except dividends or other distributions payable as of a record date
prior to the consummation of the Merger).
If the Appraisal Holders who seek appraisal properly demanded appraisal of
their Appraisal Shares but failed to perfect, or effectively withdrew or lost,
their right to appraisal, as provided in the DGCL, the Appraisal Shares would be
converted into the right to receive the consideration receivable with respect to
such Appraisal Shares in accordance with the Merger Agreement. A stockholder
will fail to perfect, or effectively lose or withdraw, his or her right to
appraisal if, among other things, no petition for appraisal is filed within 120
days after the Effective Time, or if the stockholder withdraws his or her demand
for appraisal. Any withdrawal attempted more than 60 days after the Effective
Time would require the written approval of Citigroup. Moreover, no appraisal
proceeding pending in the Delaware Court of Chancery will be dismissed without
the approval of the Court, and any such approval would be conditioned upon such
terms as the Court deems just.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the respective recommendations of the Travelers Board and
the Citicorp Board with respect to the Merger, stockholders of Citicorp and
Travelers should be aware that, as described below, certain
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members of Travelers' and Citicorp's managements and Boards of Directors may
have interests in the Merger that are different from, or in addition to, the
interests of stockholders of Citicorp and Travelers, and that may create
potential conflicts of interest. Four executive officers of Travelers, or one of
its subsidiaries, are members of the 19-person Travelers Board that approved the
Merger. Four executive officers of Citicorp are members of the 15-person
Citicorp Board that approved the Merger.
Except as described below, such persons have, to the knowledge of Travelers
and Citicorp, no material interest in the Merger other than those of
stockholders of Citicorp and Travelers generally.
Directors and Executive Officers of Citigroup Following the Merger. Upon
completion of the Merger, the Board of Directors of Citigroup will consist of 24
members, half of whom will be selected by Travelers and the other half will be
selected by Citicorp. Subject to the approval of the Board of Directors of
Citigroup, Mr. Reed and Mr. Weill will each serve as Chairman and Co-Chief
Executive Officer of Citigroup. The rest of the directors will not be employees
of either Citicorp or Travelers or their subsidiaries. The other executive
officers of Citigroup will be designated by the Board of Directors of Citigroup
following the Merger.
Equity-Based Awards. In accordance with the terms of the various
equity-based incentive award plans maintained by Citicorp and the terms of the
Merger Agreement, all awards of stock options, restricted stock and other common
equity-based awards outstanding at the Effective Time under any such Citicorp
plan will be converted into similar awards with respect to Citigroup Common
Stock, adjusted to reflect the Exchange Ratio of 2.5. The vesting of any such
equity-based awards will not be accelerated as a result of the Merger. Following
the Merger, upon any termination of employment as a result of the Merger, any
vested stock option originally granted under a Citicorp plan will remain
exercisable for at least six months (for any five-year option) and one year (for
any ten-year option), except that the performance vesting options granted in
January 1998 will remain exercisable until January 2003.
Indemnification and Insurance. Pursuant to the Merger Agreement, Citigroup
will indemnify and hold harmless from liability for acts or omissions occurring
at or prior to the Effective Time those classes of persons currently entitled to
indemnification from Citicorp and its subsidiaries as provided in their
respective certificates of incorporation and by-laws and will assume existing
indemnification agreements of Citicorp following the Merger, and directors and
officers of Citicorp who become directors and officers of the combined company
following the Merger will be entitled to the same indemnification under the
Citigroup Certificate and the Citigroup By-laws. The Merger Agreement also
provides that for six years after the Effective Time, Citigroup will maintain
liability insurance covering acts or omissions occurring prior to the Effective
Time with respect to those persons who were covered by Citicorp's directors' and
officers' liability insurance policy on terms with respect to such coverage and
amounts no less favorable than those in effect on the date of the Merger
Agreement. Citigroup, however, will not be required to pay more than 200% of the
amount paid by Citicorp in 1997 to maintain such insurance. In connection with
its obligation as described in the foregoing sentence, Citigroup is permitted
under the Merger Agreement to substitute policies of Citigroup or its
subsidiaries containing terms with respect to coverage and amount no less
favorable to the directors and officers in question.
LITIGATION
On April 6, 1998, a holder of Travelers Common Stock filed a purported
class action suit in the Court of Chancery of the State of Delaware against
Travelers and the Travelers Board. The complaint alleges that if the Merger were
completed Travelers' stockholders would receive inadequate consideration for
their Travelers shares and the Travelers Board would breach its fiduciary duties
to Travelers' stockholders.
The complaint alleges that because the Travelers Board controls the
business of Travelers there exists an imbalance of knowledge and economic power
between the Travelers Board and the members of the class. The complaint demands,
among other things, judgment enjoining preliminarily and permanently the
directors of Travelers to fulfill their fiduciary duties to protect the
Travelers stockholders, and not to take any action in furtherance of the Merger
without adequate protection for the Travelers stockholders and compensation for
the class of stockholders.
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On April 8, 1998, a second purported class action was filed in the Delaware
Court of Chancery. The allegations were virtually identical to the above
complaint.
As of June 15, 1998, neither complaint had been served. Travelers believes
that these claims are without merit and intends to vigorously defend itself.
EXISTING BUSINESS RELATIONSHIPS BETWEEN CITICORP AND TRAVELERS
Travelers and Citicorp are party to various credit facilities, indentures,
trusts and other agreements entered into in the ordinary course of their
businesses pursuant to which affiliates of Citicorp act as trustee or agent or
in a similar capacity or as a lender or in a similar financing capacity. In
addition, Travelers, Smith Barney Inc., a wholly owned subsidiary of Travelers,
and several other affiliates of Travelers (collectively, the "Lessees"), lease
two office buildings, located in New York City at 388 and 390 Greenwich Street,
from the 1993 Smith Barney Office Building Trust (the "Trust"). Citibank, N.A.,
a wholly owned subsidiary of Citicorp, owns approximately 13 percent of the
Trust and acts as agent on the financing of the two buildings. The lease covers
approximately 2,300,000 square feet and runs through March 27, 2003. The Lessees
have an option to purchase these two buildings from the Trust. Affiliates of
each company perform services for affiliates of the other company in the
ordinary course of business. Although Travelers and Citicorp intend to replace
Citicorp and its affiliates as participants under certain of such arrangements
related to Travelers and its affiliates prior to the consummation of the Merger,
such action is not a condition to the consummation of the Merger.
DELISTING AND DEREGISTRATION OF CITICORP COMMON STOCK
If the Merger is consummated, the shares of Citicorp Common Stock and
Citicorp Preferred Stock will be delisted from all stock exchanges on which they
were formerly listed, and will be deregistered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Consequently, Citicorp stockholders
will no longer be able to trade Citicorp Common Stock or Citicorp Preferred
Stock on any exchange.
RESTRICTIONS ON RESALES BY AFFILIATES
Affiliates of Citicorp. The shares of Citigroup stock to be issued to
Citicorp stockholders in the Merger have been registered under the Securities
Act. These shares may be traded freely and without restriction by those
stockholders not deemed to be "affiliates" of Citicorp as that term is defined
under the Securities Act. An affiliate of a corporation, as defined by the rules
promulgated under the Securities Act, is a person who directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, that corporation. Any subsequent transfer by an affiliate
of Citicorp must be one permitted by the resale provisions of Rule 145
promulgated under the Securities Act (or Rule 144 promulgated under the
Securities Act, in the case of such persons who become affiliates of Citigroup)
or as otherwise permitted under the Securities Act. These restrictions are
expected to apply to the executive officers who are also directors of Citicorp
(as well as to certain other related individuals or entities).
Affiliates of Travelers. During the Pooling Restricted Period (as defined
below), shares of Travelers Common Stock which have been registered under the
Securities Act may be traded freely and without restriction by those
stockholders not deemed to be "affiliates" of Travelers as that term is defined
under the Securities Act. Any subsequent transfer by an affiliate of Travelers
during the Pooling Restricted Period must be one permitted by the resale
provisions of Rule 145 promulgated under the Securities Act (or Rule 144
promulgated under the Securities Act, in the case of such persons who are
affiliates of Travelers) or as otherwise permitted under the Securities Act.
These restrictions are expected to apply to the directors and certain executive
officers of Travelers (as well as to certain other related individuals or
entities).
Affiliates of Either Company. SEC guidelines regarding qualifying for the
pooling of interests method of accounting also limit sales of shares of the
acquiring company and acquired company by affiliates of either company in a
business combination such as the Merger. These guidelines indicate that the
pooling of interests method of accounting will generally not be challenged on
the basis of sales by such affiliates if these persons do not dispose of any of
the shares of the corporation they own or any shares of the corporation they
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receive in connection with a merger during the period beginning 30 days prior to
the merger and ending when financial results covering at least 30 days of
post-merger operations of the combined entity have been published (the "Pooling
Restricted Period").
Citicorp has agreed to deliver to Travelers not less than 30 days prior to
the consummation of the Merger for each of its affiliates, an agreement that
such person will not dispose of (i) any Travelers Common Stock in violation of
the Securities Act or (ii) any Citigroup Common Stock or Citicorp Common Stock
during the Pooling Restricted Period.
Travelers has agreed to deliver to Citicorp not less than 30 days prior to
the consummation of the Merger for each of its affiliates, an agreement that
such person will not dispose of any Citigroup Common Stock or Travelers Common
Stock during the Pooling Restricted Period.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Travelers and Citicorp have each made forward-looking statements in this
document (and in certain documents that are incorporated by reference in this
Joint Proxy Statement/Prospectus) that are subject to risks and uncertainties.
These statements are based on the beliefs and assumptions of the respective
company's management, and on information currently available to such management.
Forward-looking statements include the information concerning possible or
assumed future results of operations of Travelers, Citicorp and Citigroup set
forth under "SUMMARY," "THE MERGER -- Background of the Merger," "-- Rationale
for the Merger; Recommendation of Each Company's Board of Directors" and
"TRAVELERS GROUP INC. AND CITICORP UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS," and statements preceded by, followed by or that include
the words "believes," "expects," "anticipates," "intends," "plans," "estimates"
or similar expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder values
of the combined company following the Merger may differ materially from those
expressed in these forward-looking statements. Many of the factors that will
determine these results and values are beyond Travelers' and Citicorp's ability
to control or predict. Stockholders are cautioned not to put undue reliance on
any forward-looking statements. In addition, Travelers and Citicorp do not have
any intention or obligation to update forward-looking statements after they
distribute this Joint Proxy Statement/Prospectus, even if new information,
future events or other circumstances have made them incorrect or misleading. For
those statements, Travelers and Citicorp claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995.
Stockholders of Travelers and Citicorp should understand that the following
important factors, in addition to those discussed elsewhere in the documents
which are incorporated by reference into this Joint Proxy Statement/Prospectus,
could affect the future results of the combined company following the Merger,
and could cause results to differ materially from those expressed in such
forward-looking statements: (i) compliance with the regulatory requirements of
the BHC Act and the Glass-Steagall Act following the Merger (see "-- Regulatory
and Third-Party Approvals" and "REGULATION OF CITIGROUP UNDER BANKING LAWS");
(ii) the effect of economic conditions and interest rates on a national,
regional or international basis; (iii) the ability of Travelers and Citicorp to
successfully integrate their operations, the compatibility of the operating
systems of the combining companies, the degree to which existing administrative
and back-office functions and costs of Travelers and Citicorp are complementary
or redundant and the timing of implementation of changes in operations to effect
cost savings; (iv) competitive pressures in the commercial banking, insurance,
investment banking, asset management, broker-dealer and financial services
industries; (v) the financial resources of, and products available to,
competitors; (vi) changes in laws and regulations, including changes in
accounting standards; (vii) changes in the securities and foreign exchange
markets; (viii) the timing of the implementation of changes in operations to
achieve enhanced earnings or effect cost savings; and (ix) opportunities that
may be presented to and pursued by the combined company following the Merger.
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THE PROPOSED INCREASE IN AUTHORIZED SHARES OF TRAVELERS COMMON STOCK
Paragraph A of Article Fourth of Travelers Certificate as currently in
effect authorizes the issuance of up to an aggregate of 3 billion shares of
Travelers Common Stock. As of the Record Date (as defined below), 1,202,491,679
shares of Travelers Common Stock were issued and outstanding including
51,341,864 shares that were issued but held by subsidiaries of Travelers.
Approximately 225 million shares of Travelers Common Stock have been reserved
for issuance pursuant to various compensation and benefit plans of Travelers and
of Travelers subsidiaries, and 17,688,886 shares were reserved for issuance upon
conversion of outstanding convertible securities. There were, therefore, as of
the Record Date, approximately 1.555 billion shares of authorized Travelers
Common Stock available for future issuances. If the Merger proposals are
approved by the stockholders of each of Travelers and Citicorp, approximately
1.3 billion shares will be issued or reserved for issuance in connection with
the Merger and there will be approximately 255 million shares of authorized
common stock available for future issuances. The Travelers Board believes it
would be desirable to increase the number of shares of authorized Travelers
Common Stock in order to make available additional shares for possible stock
splits, acquisitions, financings, employee benefit plan issuances and for such
other corporate purposes as may arise. The Travelers Board believes that stock
splits enhance the liquidity and marketability of the Travelers Common Stock by
increasing the number of shares outstanding and lowering the price per share.
The Travelers Board has approved stock splits on five prior occasions: 3-for-2
in February 1993, 4-for-3 in August 1993, 3-for-2 in May 1996, 4-for-3 in
November 1996 and 3-for-2 in November 1997, which splits, when taken together,
are equivalent to a 6-for-1 split.
Other than in connection with the Merger, Travelers has no specific plans
currently calling for issuance of any of the additional shares of Travelers
Common Stock and is subject to certain restrictions on its ability to issue
additional shares of Travelers Common Stock. The rules of the NYSE currently
require stockholder approval of issuances of common stock under certain
circumstances including those in which the number of shares to be issued is
equal to or exceeds 20% of the voting power outstanding. The Travelers Group
1996 Stock Incentive Plan provides that Travelers will not grant any additional
options unless the number of outstanding and unexercised options under all plans
of Travelers is less than 10% of the Travelers Common Stock issued and
outstanding. In other instances, the issuance of additional shares of authorized
Travelers Common Stock would be within the discretion of the Travelers Board
without the requirement of further action by its stockholders. All newly
authorized shares would have the same rights as the presently authorized shares,
including the right to cast one vote per share and to participate in dividends
when and to the extent declared and paid. Under the Travelers Certificate,
stockholders of Travelers do not have preemptive rights.
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THE STOCKHOLDERS' MEETINGS
PURPOSE, TIME AND PLACE
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
Citicorp and Travelers in connection with the solicitation of proxies by the
Citicorp Board and Travelers Board from holders of Citicorp Common Stock and
Travelers Voting Stock for use at special meetings to be held on July 22, 1998,
at, in the case of Citicorp, 399 Park Avenue, New York, New York at 3:00 p.m.,
local time and at any adjournments or postponements thereof (the "Citicorp
Special Meeting"), and, in the case of Travelers, 399 Park Avenue, New York, New
York, at 10:00 a.m., local time, and at any adjournments or postponements
thereof (the "Travelers Special Meeting" and, together with the Citicorp Special
Meeting, the "Special Meetings"). At the Citicorp Special Meeting, holders of
Citicorp Common Stock will be asked to consider and vote upon a proposal to
approve and adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger, and such other matters as may properly come
before the Citicorp Special Meeting. At the Travelers Special Meeting, holders
of Travelers Voting Stock will be asked to consider and vote upon a proposal to
approve the Merger Agreement and the transactions contemplated thereby,
including the Merger Share Issuance and the Name Change, and a proposal to amend
the Travelers Certificate to increase to 6 billion the number of shares of
Travelers Common Stock authorized for issuance (the "Increase in Authorized
Travelers Common Stock") and such other matters as may properly come before the
Travelers Special Meeting.
RECORD DATE; VOTING POWER
Travelers. The Travelers Board has fixed the close of business (5:00 p.m.,
New York City time) on June 5, 1998 (the "Record Date") as the record date for
determining the holders of Travelers Voting Stock entitled to notice of, and to
vote at, the Travelers Special Meeting. Only holders of record of Travelers
Voting Stock at the close of business on the Record Date will be entitled to
notice of, and to vote at, the Travelers Special Meeting.
Shares of Travelers Series J Preferred Stock and Travelers Series K
Preferred Stock are held in the form of depositary shares, each representing an
interest in one-twentieth of one share of Travelers Series J Preferred Stock or
Travelers Series K Preferred Stock, as the case may be (collectively, the
"Travelers Depositary Shares"). First Chicago Trust Company of New York, as
depositary (the "Depositary") of the Travelers Series J Preferred Stock and the
Travelers Series K Preferred Stock, will be the sole holder of record of such
stock on the Travelers Record Date. Under the deposit agreements (the "Deposit
Agreements"), dated as of February 23, 1993 and February 13, 1996, respectively,
among Travelers (as successor to Salomon Inc), the Depositary and the holders of
depositary receipts, the Depositary is required to mail to the record holders of
the Travelers Depositary Shares as of the Record Date a notice containing (i)
such information as is contained in this Joint Proxy Statement/Prospectus and
(ii) a statement that the holders of the Travelers Depositary Shares may
instruct the Depositary as to the exercise of the voting rights pertaining to
the amount of Travelers Series J Preferred Stock or Travelers Series K Preferred
Stock underlying their respective Travelers Depositary Shares (including an
express indication that instructions may be given to the Depositary to give a
discretionary proxy to a person designated by Travelers) and a brief statement
as to the manner in which such instructions may be given. Upon the written
request of the holders of the Travelers Depositary Shares on the Record Date,
the Depositary shall endeavor insofar as practicable to vote or cause to be
voted, in accordance with the instructions set forth in such requests, the
maximum number of whole shares of Travelers Series J Preferred Stock or
Travelers Series K Preferred Stock, as the case may be, underlying the Travelers
Depositary Shares as to which any particular voting instructions are received.
In the absence of specific instructions from a holder of such Travelers
Depositary Shares, the Depositary will abstain from voting to the extent of the
stock underlying such holder's Travelers Depositary Shares (but, at the
Depositary's discretion, not from appearing at the Travelers Special Meeting
with respect to such preferred stock unless directed to the contrary by the
holders of all of the Travelers Depositary Shares representing such preferred
stock).
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At the close of business on the Record Date, (i) 1,149,185,942 shares of
Travelers Common Stock were issued and outstanding and entitled to vote at the
Travelers Special Meeting; (ii) 280,000 shares of Travelers Series I Preferred
Stock were issued and outstanding; (iii) 400,000 shares of Travelers Series J
Preferred Stock were issued and outstanding, all of which were held of record by
the Depositary and which were beneficially owned by holders of record of
8,000,000 depositary shares; and (iv) 500,000 shares of Travelers Series K
Preferred Stock were issued and outstanding, all of which were held by the
Depositary and which were beneficially owned by holders of record of 10,000,000
depositary shares. Holders of record of Travelers Common Stock are entitled to
one vote per share on any matter which may properly come before the Travelers
Special Meeting. The holders of record of the Travelers Series I Preferred Stock
are entitled to 44.60526 votes per share when voting together as a single class
with Travelers Common Stock and the other series of Travelers Voting Preferred
Stock. The holders of record of Travelers Series J Preferred Stock and the
Travelers Series K Preferred Stock are each entitled to three votes per share
when voting together as a single class with the Travelers Common Stock and the
Travelers Series I Preferred Stock. Votes may be cast at the Travelers Special
Meeting in person or by proxy. See "-- Voting of Proxies."
The presence at the Travelers Special Meeting, either in person or by proxy
of the holders of a majority of the voting power represented by the Travelers
Voting Stock is necessary to constitute a quorum in order to transact business
at the Travelers Special Meeting. In the event that a quorum is not present at
the Travelers Special Meeting, such meeting will be adjourned or postponed in
order to solicit additional proxies.
Citicorp. The Citicorp Board has fixed the close of business (5:00 p.m.,
New York City time) on June 5, 1998 as the record date for determining the
holders of Citicorp Common Stock entitled to notice of, and to vote at, the
Citicorp Special Meeting. Only holders of record of Citicorp Common Stock at the
close of business on the Record Date will be entitled to notice of, and to vote
at, the Citicorp Special Meeting.
At the close of business on the Record Date, 451,635,725 shares of Citicorp
Common Stock were issued and outstanding and entitled to vote at the Citicorp
Special Meeting. Holders of record of Citicorp Common Stock are entitled to one
vote per share on any matter which may properly come before the Citicorp Special
Meeting. Votes may be cast at the Citicorp Special Meeting in person or by
proxy. See "-- Voting of Proxies."
The presence at the Citicorp Special Meeting, either in person or by proxy
of the holders of a majority of the outstanding Citicorp Common Stock entitled
to vote, is necessary to constitute a quorum of the Citicorp Common Stock, in
order to transact business at the Citicorp Special Meeting. However, in the
event that a quorum is not present at the Citicorp Special Meeting, it is
expected that such meeting will be adjourned or postponed in order to solicit
additional proxies.
VOTES REQUIRED
Travelers. Approval of the proposal to adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger Share Issuance and the
Name Change, and the proposal to approve and adopt the Increase in Authorized
Travelers Common Stock will require the affirmative vote of more than 50% of the
voting power of the Travelers Voting Stock outstanding on the Record Date. Under
applicable Delaware law, in determining whether the proposal to approve and
adopt Merger Agreement and the transactions contemplated thereby, including the
Merger Share Issuance and the Name Change, and the proposal to approve and adopt
the Increase in Authorized Travelers Common Stock have received the requisite
number of affirmative votes, abstentions will be counted and have the same
effect as a vote against the proposals. Brokers who hold shares of Travelers'
stock as nominees, in the absence of instructions from the beneficial owners
thereof, will have discretionary authority to vote such shares for the approval
of the Increase in Authorized Travelers Common Stock, but not for the approval
of the Merger Agreement and the transactions contemplated thereby. Any shares
which are not voted because the nominee-broker lacks discretionary authority
will be counted and have the same effect as a vote against the proposals.
Citicorp. Approval of the proposal to adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger, will require the
affirmative vote of more than 50% of the shares of Citicorp Common Stock
outstanding on the Record Date. Under applicable Delaware law, in determining
whether
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the proposal to approve and adopt the Merger Agreement has received the
requisite number of affirmative votes, abstentions will be counted and have the
same effect as a vote against the proposal. Brokers who hold shares of Citicorp
Common Stock as nominees will not have discretionary authority to vote such
shares in the absence of instructions from the beneficial owners thereof. Any
shares which are not voted because the nominee-broker lacks such discretionary
authority will be counted and have the same effect as a vote against the
proposal.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS
Travelers. As of the close of business on the Record Date, Travelers' and
Citicorp's directors and executive officers and their affiliates may be deemed
to be the beneficial owners of 30,681,723 outstanding shares of Travelers Common
Stock (collectively representing approximately 2.6% of the voting power of the
Travelers Voting Stock) and no shares of Travelers Voting Preferred Stock. Such
executive officers and directors of Travelers and Citicorp have indicated that
they will vote for approval of the Merger Agreement and the transactions
contemplated thereby, including the Merger Share Issuance and the Name Change,
and the Increase in Authorized Travelers Common Stock.
Citicorp. As of the close of business on the Record Date, Citicorp's and
Travelers' directors and executive officers and their affiliates may be deemed
to be the beneficial owners of 4,781,381 outstanding shares of Citicorp Common
Stock (collectively representing approximately 1.1% of the voting power of the
Citicorp Common Stock). Such executive officers and directors of Citicorp and
Travelers have indicated that they will vote for approval of the Merger
Agreement.
VOTING OF PROXIES
Shares represented by properly executed proxies (whether through the return
of the enclosed proxy card or by telephone) received in time for a Special
Meeting will be voted at such Special Meeting in the manner specified by such
proxies. Citicorp stockholders should be aware that, if your proxy is properly
executed but does not contain voting instructions, or if you use telephonic
voting without indicating how you want to vote, your proxy will be voted FOR
approval of the Merger Agreement. Travelers stockholders should be aware that,
if your proxy is properly executed but does not contain voting instructions, or
if you use telephonic voting without indicating how you want to vote, your proxy
will be voted FOR approval of the Merger Agreement and the transactions
contemplated thereby, including the Merger Share Issuance and the Name Change,
and FOR approval of the Increase in Authorized Travelers Common Stock. It is not
expected that any matter other than as described herein will be brought before
the Special Meetings. If other matters are properly presented before the Special
Meetings, the persons named in such proxy will have authority to vote in
accordance with their judgment on any other such matter, including without
limitation, any proposal to adjourn or postpone the meeting or otherwise
concerning the conduct of the meeting; provided, that a proxy that has been
designated to vote against the approval of the Merger Agreement will not be
voted, either directly or through a separate proposal, to adjourn the meeting to
solicit additional votes.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed Citicorp or Travelers proxy card or a
vote by telephone, does not preclude a stockholder from voting in person. A
stockholder of Travelers may revoke a proxy at any time prior to its exercise by
(i) delivering, prior to the Travelers Special Meeting, to Charles O. Prince,
III, Secretary, Travelers Group Inc., 388 Greenwich Street, New York, New York
10013, a written notice of revocation bearing a later date or time than the
proxy; (ii) delivering to the Secretary of Travelers a duly executed proxy
bearing a later date or time than the revoked proxy; or (iii) attending the
Travelers Special Meeting and voting in person. A stockholder of Citicorp may
revoke a proxy at any time prior to its exercise by (i) delivering, prior to the
Citicorp Special Meeting, to Charles E. Long, Vice Chairman and Secretary,
Citicorp, 399 Park Avenue, New York, New York 10043, a written notice of
revocation bearing a later date or time than the proxy; (ii) delivering to the
Secretary of Citicorp a duly executed proxy bearing a later date or time than
the revoked proxy; or (iii) attending the Citicorp Special Meeting and voting in
person. Attendance at the relevant Special Meeting will not by itself constitute
revocation of a proxy. Neither Citicorp
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nor Travelers expects to adjourn the relevant Special Meeting for a period of
time long enough to require the setting of a new Record Date for such meeting.
If an adjournment occurs, it will have no effect on the ability of either
Citicorp's or Travelers' stockholders of record as of the Record Date to
exercise their voting rights or to revoke any previously delivered proxies.
SOLICITATION OF PROXIES
Each of Citicorp and Travelers will bear the cost of solicitation of
proxies from its own stockholders, except that Travelers and Citicorp intend to
share equally the cost associated with this Joint Proxy Statement/Prospectus,
including related filing fees. In addition to solicitation by mail, the
directors, officers and employees of each of Citicorp and Travelers and their
respective subsidiaries may solicit proxies from stockholders of such company by
telephone, telegram or in person. Arrangements will also be made with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of stock held of record by such
persons, and Citicorp and Travelers will reimburse such company's custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses in
connection therewith.
In addition, Citicorp and Travelers have retained Georgeson & Company Inc.
and Morrow & Company, Inc. to assist them in the solicitation of proxies from
stockholders in connection with the Special Meetings. Each of Georgeson &
Company Inc. and Morrow & Company, Inc. will receive a fee which Citicorp and
Travelers expect will not exceed $20,000 as compensation for its services and
reimbursement of its out-of-pocket expenses. Citicorp and Travelers has agreed
to indemnify each of Georgeson & Company Inc. and Morrow & Company, Inc. against
certain liabilities arising out of or in connection with its engagement.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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REGULATION OF CITIGROUP UNDER BANKING LAWS
As a result of the Merger, Citigroup will be a bank holding company subject
to supervision and regulation by the Federal Reserve Board under the BHC Act. As
a bank holding company, Citigroup's activities and those of its banking and
nonbanking subsidiaries are limited to the business of banking and activities
closely related to banking as more fully described below, and Citigroup may not
directly or indirectly acquire the ownership or control of more than five
percent of any class of voting shares or substantially all of the assets of any
company, including a bank, without the prior specific or general approval of the
Federal Reserve Board.
The subsidiary depository institutions of Citicorp (the "banking
subsidiaries"), including its principal bank subsidiary, Citibank, N.A., are
subject to supervision and examination by their respective federal and state
banking authorities. The nationally chartered affiliate banks, including
Citibank, N.A., are supervised and examined by the OCC; federal savings
association subsidiaries are regulated by the OTS; and state-chartered
depository institutions are supervised by the banking departments within their
respective states, as well as the FDIC. The FDIC also has back-up enforcement
authority with respect to each of the banking subsidiaries, the deposits of
which are insured by the FDIC, up to applicable limits. Citicorp's banking
subsidiaries are also subject to requirements and restrictions under federal,
state and foreign law, including requirements to maintain reserves against
deposits, restrictions on the types and amounts of loans that may be made and
the interest that may be charged thereon, and limitations on the types of
investments that may be made and the types of services that may be offered.
Various consumer laws and regulations also affect the operations of Citicorp's
banking subsidiaries.
HOLDING COMPANY REGULATION
Activities Restrictions. The activities of U.S. bank holding companies are
generally limited to the business of banking, managing or controlling banks and
other activities that the Federal Reserve Board determines to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto. Section 4 of the BHC Act provides that, with certain exceptions, it is
not closely related to banking or managing or controlling banks for a bank
holding company or any subsidiary (other than a bank or the subsidiary of a
bank) to provide insurance as principal, agent or broker. Under the BHC Act in
its current form, after two years from the date as of which it becomes a bank
holding company, Citigroup will be required to conform any activities that are
not considered to be closely related to banking under the BHC Act. This two-year
period may be extended by the Federal Reserve Board for three additional
one-year periods, upon finding that such an extension would not be detrimental
to the public interest. In conforming its activities to the BHC Act, Citigroup
may, among other things, move certain insurance agency and brokerage activities
into subsidiaries of banks. Section 20 of the Glass-Steagall Act prohibits a
member bank of the Federal Reserve System, such as Citibank, N.A., from being
affiliated with a company that is principally engaged in underwriting and
dealing in securities. The Federal Reserve Board has determined by regulation
that underwriting and dealing in certain "eligible" securities is an activity
closely related to banking and is therefore permissible for bank holding
companies and their subsidiaries. The Federal Reserve Board has also determined
that a securities firm that does not generate more than 25% of its gross revenue
from underwriting and dealing in certain "ineligible" securities is not deemed
for purposes of the Glass-Steagall Act to be "principally engaged" in securities
underwriting and dealing. Based on preliminary calculations, Citicorp and
Travelers believe that the ineligible revenues of the combined securities
businesses will be below this threshold. Travelers is considering other
modifications to its securities business with respect to the distribution of
open-end U.S. Public Funds in order to conform these activities to the
requirements of the Federal Reserve Board. Citigroup may consider other
consolidations or changes to its securities business following the Merger. See
"THE MERGER -- Regulatory and Third-Party Approvals."
Subject to prior specific or general Federal Reserve Board consent, a bank
holding company may generally acquire less than 20 percent of the voting
securities of a company that does not do business in the United States, and 20
percent or more of the voting securities of any such company if the Federal
Reserve Board finds by regulation or order that its activities are usual in
connection with banking or finance outside the United States. In general, bank
holding companies may engage in a broader set of activities outside of the
United States. Outside the United States, for example, bank holding company
subsidiaries may sponsor, distribute, and advise open-end mutual funds. Bank
holding companies may also underwrite and deal in debt,
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and to a limited extent, equity securities, subject to local country laws. In
addition, a bank holding company and its bank subsidiaries may, subject to
certain requirements for prior Federal Reserve Board consent or notice, acquire
banks and establish branches subject to local country laws and to United States
laws prohibiting companies from doing business in certain countries.
Certain Transactions with Affiliates. There are various legal restrictions
on the extent to which a bank holding company and certain of its nonbank
subsidiaries can borrow or otherwise obtain credit from banking subsidiaries or
engage in certain other transactions with or involving those banking
subsidiaries. In general, these restrictions require that any such transactions
must be on terms that would ordinarily be offered to unaffiliated entities and
secured by designated amounts of specified collateral. Transactions between a
banking subsidiary and the holding company or any nonbank subsidiary are limited
to 10 percent of the banking subsidiary's capital stock and surplus, and as to
the holding company and all such nonbank subsidiaries in the aggregate, to 20
percent of the bank's capital stock and surplus.
Regulatory Restrictions on Dividends. It is the policy of the Federal
Reserve Board that bank holding companies should pay cash dividends on common
stock only out of income available over the past year and only if prospective
earnings retention is consistent with the organization's expected future needs
and financial condition. The policy provides that bank holding companies should
not maintain a level of cash dividends that undermines the bank holding
company's ability to serve as a source of strength to its banking subsidiaries.
Various federal and state statutory provisions limit the amount of
dividends that subsidiary banks and savings associations can pay to their
holding companies without regulatory approval. In the case of national bank
subsidiaries regulated by the OCC, two different calculations are performed to
measure the amount of dividends that may be paid: a recent earnings test and a
cumulative net undivided profits test. Under the recent earnings test, a
dividend may not be paid if the total of all dividends declared by the bank in
any calendar year is in excess of the current year's net profits combined with
the retained net undivided profits of the two preceding years unless the bank
obtains the approval of the appropriate regulatory agency. Under the cumulative
net undivided profits test, a dividend may not be paid in excess of a bank's
cumulative net undivided profits after deducting bad debts in excess of the
reserve for loan losses. Citicorp's state bank subsidiaries are also subject to
limitations under state law regarding the amount of earnings that may be paid
out as dividends. The OTS also limits the amount of earnings of thrift
subsidiaries that may be paid out as dividends.
In addition to these explicit limitations, the federal regulatory agencies
are authorized to prohibit a banking subsidiary or bank holding company from
engaging in an unsafe or unsound banking practice. Depending upon the
circumstances, the agencies could take the position that paying a dividend would
constitute an unsafe or unsound banking practice.
Because Citigroup will be a legal entity separate and distinct from its
subsidiaries, its right to participate in the distribution of assets of any
subsidiary upon the subsidiary's liquidation or reorganization will be subject
to the prior claims of the subsidiary's creditors. In the event of a liquidation
or other resolution of an insured depository institution, the claims of
depositors and other general or subordinated creditors are entitled to a
priority of payment over the claims of holders of any obligation of the
institution to its shareholders, including any depository institution holding
company (such as Citigroup) or any shareholder or creditor thereof.
Cross-Guarantee and Holding Company Liability. A depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC in connection with (i) the default of a
commonly controlled FDIC-insured depository institution or (ii) any assistance
provided by the FDIC to a commonly controlled depository institution in danger
of default. Each of Citicorp's banking subsidiaries and Travelers' federal
savings bank subsidiary will be a commonly controlled depository institution of
Citigroup for this purpose. Cross-guarantee liability may result in the ultimate
failure or insolvency of other insured depository institutions in a holding
company structure. Any obligation or liability owed by a banking subsidiary to
its parent company or any of the banking subsidiary's other affiliates is
subordinate to the banking subsidiary's cross-guarantee liability.
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Under Federal Reserve Board policy, a bank holding company is expected to
act as a source of financial strength to each of its banking subsidiaries and
commit resources to their support. Such support may be required at times when,
absent this Federal Reserve Board policy, a holding company may not be inclined
to provide it. As discussed below under "-- Prompt Corrective Action," a bank
holding company in certain circumstances could be required to guarantee the
capital plan of an undercapitalized banking subsidiary.
In the event of a bank holding company's bankruptcy under Chapter 11 of the
U.S. Bankruptcy Code, the trustee will be deemed to have assumed and is required
to cure immediately any deficit under any commitment by the debtor holding
company to any of the federal banking agencies to maintain the capital of an
insured depository institution, and any claim for breach of such obligation will
generally have priority over most other unsecured claims.
CAPITAL ADEQUACY
The Federal Reserve Board has issued standards for measuring capital
adequacy for bank holding companies. These standards are designed to provide
risk-responsive capital guidelines and to incorporate a consistent framework for
use by financial institutions operating in major international financial
markets. The federal banking regulators have issued standards for banks and
savings associations that are similar to, but not identical with, the standards
for bank holding companies.
In general, the risk-related standards require banks and bank holding
companies to maintain capital based on "risk adjusted" assets so that categories
of assets with potentially higher credit risk will require more capital backing
than categories with lower credit risk. In addition, banks and bank holding
companies are required to maintain capital to support off-balance sheet
activities such as loan commitments.
The standards classify total capital for this risk-based measure into two
tiers referred to as Tier 1 and Tier 2. Tier 1 capital consists of common
shareholders' equity, certain non-cumulative and cumulative perpetual preferred
stock, and minority interests in equity accounts of consolidated subsidiaries,
less certain adjustments; Tier 2 capital consists of the allowance for loan and
lease losses (within certain limits), perpetual preferred stock not included in
Tier 1, hybrid capital instruments, term subordinated debt, and
intermediate-term preferred stock, less certain adjustments. Bank holding
companies are required to meet a minimum ratio of 8% of qualifying total capital
to risk-adjusted assets, and a minimum ratio of 4% of qualifying Tier 1 capital
to risk-adjusted assets. Capital that qualifies as Tier 2 capital is limited in
amount to 100% of Tier 1 capital in testing compliance with the total risk-based
capital minimum standards.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier 1 capital to adjusted average total assets of 3% for bank
holding companies that meet certain specified criteria, including those having
the highest regulatory rating. Other bank holding companies generally are
required to maintain a leverage ratio of at least 3% plus 100 to 200 basis
points. The guidelines also provide that bank holding companies experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the Federal Reserve
Board has indicated that it may consider other indicia of capital strength in
evaluating proposals for expansion or new activities.
The Federal Reserve Board's standards provide that concentration of credit
risk and certain risks arising from nontraditional activities, as well as an
institution's ability to manage these risks, are important factors to be taken
into account by regulatory agencies in assessing an organization's overall
capital adequacy. The risk-based capital standards also provide for the
consideration of interest rate risk in the agencies' determination of a bank
holding company's capital adequacy. The standards require bank holding companies
to effectively measure and monitor their interest rate risk and to maintain
capital adequate for that risk.
In addition to the risk-based capital requirements, bank holding companies
and their subsidiary banks with substantial trading activity are required to
hold capital based on their market risk exposure. Under the rules, a bank
holding company with total trading assets and liabilities of at least $1
billion, or the total trading assets and liabilities of which equals ten percent
or more of its total assets, must measure and hold capital for
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exposure to general market risk arising from fluctuations in interest rates,
equity prices, foreign exchange rates and commodity prices and exposure to
specific risk associated with debt and equity positions in the trading
portfolio. An institution that is subject to the market-risk rule must measure
its general market risk using its internal risk measurement model to calculate a
value-at-risk ("VAR") based capital charge.
The federal bank regulatory agencies have issued various proposals to amend
the risk-based capital standards for banks, savings associations and bank
holding companies. One proposal would revise the treatment given to (i)
AAA-rated asset-backed securities to reduce the amount of capital required and
(ii) certain direct credit substitutes provided by banking organizations to
require that capital be maintained against the value of the assets enhanced or
the loans protected.
As discussed below under "-- Enforcement Powers of the Federal Banking
Agencies," failure to meet the minimum regulatory capital requirements could
subject a bank holding company or its banking subsidiaries to a variety of
enforcement remedies available to federal regulatory authorities, including, in
the most severe cases, the termination of deposit insurance by the FDIC and
placing the banking subsidiary into conservatorship or receivership.
As of March 31, 1998, Citicorp's regulatory capital exceeded the minimum
requirements under the Federal Reserve Board's regulations. Citicorp's total
risk-based and Tier 1 risk-based capital ratios were 12.13% and 8.26%,
respectively, and its leverage ratio was 6.83%. As of March 31, 1998, all of
Citicorp's subsidiary depository institutions exceeded the minimum regulatory
capital requirements of their respective regulators. As of March 31, 1998,
Travelers' subsidiary depository institutions exceeded the minimum regulatory
capital requirements of their respective regulators. Travelers and Citicorp
estimate that on a pro forma basis as of March 31, 1998, the regulatory capital
ratios of Citigroup would have exceeded the regulatory requirements of the
Federal Reserve Board applicable to bank holding companies. See "TRAVELERS GROUP
INC. AND CITICORP UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
PROMPT CORRECTIVE ACTION
Under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), the federal banking agencies must take prompt supervisory and
regulatory actions against undercapitalized depository institutions. Depository
institutions are assigned one of five capital categories: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized," and subjected to differential regulation
corresponding to the capital category within which the institution falls. Under
certain circumstances, a well capitalized, adequately capitalized or
undercapitalized institution may be treated as if the institution were in the
next lower capital category. A depository institution is generally prohibited
from making capital distributions (including paying dividends) or paying
management fees to a holding company if the institution would thereafter be
undercapitalized. Adequately capitalized institutions cannot accept, renew or
roll over brokered deposits except with a waiver from the FDIC, and are subject
to restrictions on the interest rates that can be paid on such deposits.
Undercapitalized institutions may not accept, renew, or roll over brokered
deposits.
The banking regulatory agencies are permitted or, in certain cases,
required to take certain actions with respect to institutions falling within one
of the three undercapitalized categories. Depending on the level of an
institution's capital, the agency's corrective powers include, among other
things: prohibiting the payment of principal and interest on subordinated debt;
prohibiting the holding company from making distributions without prior
regulatory approval; placing limits on asset growth and restrictions on
activities; placing additional restrictions on transactions with affiliates;
restricting the interest rate the institution may pay on deposits; prohibiting
the institution from accepting deposits from correspondent banks; and in the
most severe cases, appointing a conservator or receiver for the institution. A
banking institution that is undercapitalized is required to submit a capital
restoration plan, and such a plan will not be accepted unless, among other
things, the banking institution's holding company guarantees the plan up to a
certain specified amount. Any such guarantee from a depository institution's
holding company is entitled to a priority of payment in bankruptcy. As of March
31, 1998, all of Citicorp's subsidiary depository institutions were "well
capitalized" under the
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federal bank regulatory agencies' definition. As of March 31, 1998, all of
Travelers' depository institution subsidiaries were "well capitalized." See
"-- Capital Adequacy."
ENFORCEMENT POWERS OF THE FEDERAL BANKING AGENCIES
The Federal Reserve Board and the other federal banking agencies have broad
enforcement powers, including the power to terminate deposit insurance, impose
substantial fines and other civil and criminal penalties and appoint a
conservator or receiver. Failure to comply with applicable laws, regulations and
supervisory agreements could subject Citigroup or its banking subsidiaries, as
well as officers, directors and other institution-affiliated parties of these
organizations, to administrative sanctions and potentially substantial civil
money penalties. In addition to the grounds discussed under "-- Prompt
Corrective Action," above, the appropriate federal banking agency may appoint
the FDIC as conservator or receiver for a banking subsidiary (or the FDIC may
appoint itself, under certain circumstances) if any one or more of a number of
circumstances exist, including, without limitation, the fact that the banking
subsidiary is undercapitalized and has no reasonable prospect of becoming
adequately capitalized; fails to become adequately capitalized when required to
do so; fails to submit a timely and acceptable capital restoration plan; or
materially fails to implement an accepted capital restoration plan.
CONTROL ACQUISITIONS
The Change in Bank Control Act (the "CBCA") prohibits a person or group of
persons from acquiring "control" of a bank holding company unless the Federal
Reserve Board has been notified and has not objected to the transaction. Under a
rebuttable presumption established by the Federal Reserve Board, the acquisition
of 10% or more of a class of voting stock of a bank holding company with a class
of securities registered under Section 12 of the Exchange Act would, under the
circumstances set forth in the presumption, constitute acquisition of control of
the bank holding company.
In addition, any company is required to obtain the approval of the Federal
Reserve Board under the BHC Act before acquiring 25% (5% in the case of an
acquiror that is a bank holding company) or more of the outstanding shares of
any class of voting securities of a bank holding company, or otherwise obtaining
control or a "controlling influence" over the bank holding company.
FUTURE LEGISLATION
Various legislation, including proposals to overhaul the bank regulatory
system and expand the powers of bank holding companies, is from time to time
introduced in Congress. Such legislation may change banking statutes and the
operating environment of Citigroup and its banking subsidiaries in substantial
and unpredictable ways. Travelers and Citicorp cannot determine whether such
potential legislation will ultimately be enacted, and if enacted, the ultimate
effect that any such potential legislation or implementing regulations would
have upon the financial condition or results of operations of Citigroup or its
subsidiaries.
One such proposal, H.R. 10, passed the House of Representatives on May 14,
1998. That bill would amend the BHC Act to make insurance underwriting a
permissible business for a bank holding company. Consequently, if enacted in its
present form, Citigroup would not be under any obligation to conform its
business to the current limitations of the BHC Act. However, there is no
assurance that such legislation as currently drafted, or any other legislation,
will be acted upon by the Senate, or, if passed by the Senate, will be signed
into law by the President.
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THE MERGER AGREEMENT
GENERAL
The Travelers Board and the Citicorp Board have each unanimously approved
and adopted the Merger Agreement. The Merger Agreement contemplates the merger
of Citicorp with and into Merger Sub, with Merger Sub continuing as the
surviving corporation. This section of the Joint Proxy Statement/Prospectus
describes material provisions of the Merger Agreement. The description of the
Merger Agreement contained in this Joint Proxy Statement/Prospectus does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached as Annex A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. Capitalized terms
in this Section have the meanings assigned to them in the Merger Agreement or,
if not so assigned in the Merger Agreement, the meanings assigned to them in
this Joint Proxy Statement/Prospectus. All stockholders of Travelers and
Citicorp are urged to read the Merger Agreement carefully and in its entirety.
CLOSING; EFFECTIVE TIME
The closing of the Merger (the "Closing") will take place at 10:00 a.m. on
the Closing Date, which will be no later than the second business day after
satisfaction or waiver of the conditions set forth in the Merger Agreement,
unless another time or date is agreed to by Travelers and Citicorp. Either party
has the right upon notice to the other party to delay the Closing by up to 90
days following the date on which the Closing would have occurred to the extent
necessary to obtain any material governmental, regulatory or other third party
approvals, consents, orders or authorizations required in connection with or as
a result of the Merger (including the Federal Reserve Board and applicable state
insurance authorities). The Closing will be held at a location in the City of
New York agreed upon by Travelers and Citicorp.
Subject to the provisions of the Merger Agreement, as soon as practicable
on or after the Closing Date, Travelers and Citicorp will file a Certificate of
Merger or other appropriate documents with the Secretary of State of Delaware in
accordance with the relevant provisions of the DGCL. The Merger will become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of Delaware, or at such subsequent date or time as Travelers
and Citicorp specify in the Certificate of Merger.
CITIGROUP CERTIFICATE OF INCORPORATION
Pursuant to the Merger Agreement, the Travelers Certificate will be amended
to change Travelers' name to Citigroup Inc. and such amended Restated
Certificate of Incorporation of Travelers will be the Certificate of
Incorporation of Citigroup until changed or amended as provided therein or by
applicable law.
CITIGROUP BY-LAWS
Pursuant to the Merger Agreement, the Travelers By-Laws will be amended to
reflect any changes necessary to reflect the agreements reached by Travelers and
Citicorp in respect of corporate governance of Citigroup (as described under
"-- Board and Officers of Citigroup" below), and such amended By-Laws of
Travelers will become the By-Laws of Citigroup until changed or amended as
provided therein or by applicable law.
BOARD AND OFFICERS OF CITIGROUP
The Chairman and Chief Executive Officer of Travelers and the Chairman (and
the chief executive officer) of Citicorp will each serve as Chairman and
Co-Chief Executive Officer of Citigroup. The other executive officers of
Citigroup will be appointed by the Board of Directors of Citigroup in accordance
with the Citigroup By-Laws. The initial Board of Directors of Citigroup will
have an equal number of directors designated by each of Travelers and Citicorp,
with the total number of directors equal to twenty-four (all of whom, other than
the Chairmen, will be outside directors).
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RESERVATION OF RIGHT TO REVISE TRANSACTION
Travelers and Citicorp may agree to change the method of effecting the
business combination between Travelers and Citicorp, including to provide for a
different form of merger. No such change, however, may (i) alter or change the
amount or kind of consideration to be received by holders of Citicorp Common
Stock or Citicorp Preferred Stock, (ii) adversely affect the proposed accounting
treatment for the Merger or the tax treatment to Travelers, Citicorp or their
respective stockholders as a result of receiving the Merger Consideration or
(iii) materially delay receipt of any approval of the Merger.
CONSIDERATION TO BE RECEIVED IN THE MERGER
Conversion of Citicorp Common Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any stockholder of either
Citicorp or Travelers, each issued and outstanding share of Citicorp Common
Stock (other than shares to be cancelled as described below) will be converted
into the right to receive 2.5 validly issued, fully paid and nonassessable
shares of Citigroup Common Stock.
Conversion of Citicorp Preferred Stock. At the Effective Time, each share
of Citicorp Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled as described below) will be
converted into the right to receive one validly issued, fully paid and
nonassessable share of a corresponding series of New Citigroup Preferred Stock.
The terms of each series of New Citigroup Preferred Stock issued in exchange for
a Series of Citicorp Preferred Stock will be substantially identical to the
terms of that series of Citicorp Preferred Stock and will be on parity with each
other and each other series of Citigroup Preferred Stock then outstanding with
respect to payment of dividends (except as otherwise provided with respect to
cumulation of dividends) and the distribution of assets upon liquidation,
dissolution or winding up.
Each share of Citicorp Common Stock and Citicorp Preferred Stock owned by
Travelers or held by Citicorp as treasury stock will be automatically cancelled
and retired at the Effective Time and will cease to exist, and no securities of
Travelers or other consideration will be delivered in exchange for those shares.
As of the Effective Time, all shares of Citicorp Common Stock and Citicorp
Preferred Stock will no longer be outstanding, will automatically be cancelled
and retired and will cease to exist. Each holder of shares of Citicorp Common
Stock and Citicorp Preferred Stock will cease to have any rights with respect to
those shares, except the right to receive the Merger Consideration in accordance
with the terms of the Merger Agreement.
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
At or prior to the Effective Time, Travelers will deposit, or cause to be
deposited, with Citibank, N.A. as exchange agent for the Merger (the "Exchange
Agent"), for the benefit of the holders of certificates of Citicorp Common Stock
and Citicorp Preferred Stock, certificates representing the shares of Citigroup
Common Stock and New Citigroup Preferred Stock (and cash in lieu of fractional
shares of Citigroup Common Stock, if applicable) to be issued in the Merger.
As soon as is practicable after the Effective Time, the Exchange Agent will
mail a form of transmittal letter to the holders of shares of Citicorp Common
Stock and Citicorp Series 8A Preferred Stock and Citicorp Series 8B Preferred
Stock. The form of transmittal letter will contain instructions on how to
surrender certificates in exchange for shares of Citigroup Common Stock (and
cash in lieu of fractional shares of Citigroup Common Stock, if applicable) and
Citigroup Series W and Series O Preferred Stock.
The Depositary is the only holder of record of shares of Citicorp Series 17
Preferred Stock, Citicorp Series 18 Preferred Stock, Citicorp Series 19
Preferred Stock, Citicorp Series 20 Preferred Stock, Citicorp Series 21
Preferred Stock, Citicorp Series 22 Preferred Stock and Citicorp Series 23
Preferred Stock, each of which is represented by the Citicorp depositary shares
(the "Citicorp Depositary Shares"). The Depositary will receive certificates
representing the New Citigroup Preferred Stock in exchange for certificates
representing the corresponding series of Citicorp Preferred Stock in connection
with the Merger. Following the Merger, the depositary receipts formerly
evidencing Citicorp Depositary Shares (other than any depositary shares of
Citicorp Series 23 Preferred Stock whose holders have properly perfected
appraisal rights) will automatically evidence depositary shares of the
corresponding series of New Citigroup Preferred
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Stock. Consequently, holders of depositary receipts evidencing Citicorp
Depositary Shares need not exchange those receipts after the Merger.
CITICORP STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY
CARD AND SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT EXCEPT WITH A TRANSMITTAL
FORM, WHICH WILL BE PROVIDED TO HOLDERS FOLLOWING THE EFFECTIVE TIME.
No dividends or other distributions declared with respect to Citigroup
Common Stock and Citigroup Series O or Series W Preferred Stock with a record
date after the Effective Time will be paid to the holder of any certificate
representing shares of Citicorp Common Stock or Citicorp Series 8A Preferred
Stock or Citicorp Series 8B Preferred Stock until such certificate has been
surrendered for exchange. Holders of certificates representing shares of
Citicorp Common Stock and Citicorp Series 8A Preferred Stock or Citicorp Series
8B Preferred Stock will be paid the amount of dividends or other distributions
with a record date after the Effective Time after surrender of such certificates
without any interest thereon.
No certificates or scrip representing fractional shares of Citigroup Common
Stock will be issued upon the surrender for exchange of stock certificates and
such fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Citigroup. In lieu of issuing fractional shares,
Citigroup will pay each former holder of Citicorp Common Stock an amount in cash
equal to the product obtained by multiplying (A) the fractional share interest
to which such former holder (after taking into account all shares of Citicorp
Common Stock held of record at the Effective Time by such holder) would
otherwise be entitled by (B) the closing price for a share of Travelers Common
Stock as reported on the NYSE Composite Transaction Tape (as reported in The
Wall Street Journal or, if not reported therein, any other authoritative source)
on the Closing Date. As soon as practicable after the determination of the
amount of cash to be paid to the holders of certificates formerly representing
Citicorp Common Stock with respect to any fractional share interests, the
Exchange Agent will make available such amounts to such holders.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain customary mutual representations and
warranties by each of Travelers and Citicorp relating to, among other things,
(i) corporate organization, structure and power; (ii) subsidiaries; (iii)
capitalization; (iv) authorization, execution, delivery, performance and
enforceability of, required consents, approvals, orders and authorizations of
governmental authorities relating to, and noncontravention of certain agreements
as a result of, the Merger Agreement; (v) documents filed by each of Travelers
and Citicorp with the SEC and other regulatory entities, the accuracy of
information contained therein and the absence of undisclosed liabilities of each
of Travelers and Citicorp; (vi) the accuracy of information supplied by each of
Travelers and Citicorp in connection with this Joint Proxy Statement/Prospectus
and the Registration Statement; (vii) absence of material changes or events with
respect to each of Travelers and Citicorp since December 31, 1997; (viii)
compliance with applicable laws and litigation; (ix) absence of changes in
benefit plans; (x) matters relating to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"); (xi) tax matters; (xii) required stockholder
votes in connection with the Merger Agreement; (xiii) satisfaction of certain
state takeover statutes; (xiv) treatment of the Merger as a "pooling of
interests" for accounting purposes; (xv) engagement of and payment of fees to
brokers, investment bankers, finders and financial advisors in connection with
the Merger Agreement; (xvi) ownership by Travelers of Citicorp Common Stock and
Citicorp Preferred Stock and ownership by Citicorp of Travelers Common Stock and
Travelers Preferred Stock; (xvii) intellectual property matters including
efforts to resolve any "Year 2000" computer problems; and (xviii) certain
material contracts and noncompetition agreements.
CERTAIN COVENANTS
Conduct of Business. Pursuant to the Merger Agreement, Travelers and
Citicorp have each agreed that, except as otherwise expressly contemplated by
the Merger Agreement or as consented to by the other party (such consent not to
be unreasonably withheld or delayed), during the period from the date of the
Merger Agreement to the Effective Time, each party will, and will cause its
subsidiaries to, carry on their respective
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businesses in the ordinary course consistent with past practice and in
compliance in all material respects with all applicable laws and regulations
and, to the extent consistent therewith, to use all reasonable efforts to
preserve intact their current business organizations (other than internal
organizational realignments), use all reasonable efforts to keep available the
services of their current officers and other key employees and preserve their
relationships with those persons having business dealings with them to the end
that their goodwill and ongoing businesses will be unimpaired at the Effective
Time.
The Merger Agreement provides that Citicorp and its subsidiaries and
Travelers and its subsidiaries, respectively, will not take any action outside
of the parameters specified in the Merger Agreement, such as, among other things
and with certain exceptions, amending its organizational documents; issuing,
selling or encumbering any shares of capital stock or options to acquire any
shares of such capital stock; selling, leasing or encumbering property or assets
(except in the ordinary course of business consistent with past practice);
declaring or paying dividends or recapitalizing or redeeming its capital stock;
making certain acquisitions; or taking any action that would cause the
representations and warranties regarding absence of certain changes or events in
the Merger Agreement to no longer be true and correct.
Pooling. Citicorp and Travelers have each agreed that between the date of
the Merger Agreement and the Effective Time they will use their best efforts to
cause the Merger to be accounted for as a pooling of interests and will not
knowingly take any action that would cause such accounting treatment not to be
obtained.
Affiliate Agreements. Each of Citicorp and Travelers has agreed to provide
to the other party not less than 45 days prior to the Effective Time a list of
names and addresses of each person who, in the reasonable judgment of Citicorp
or Travelers, as the case may be, is an affiliate within the meaning of Rule 145
under the Securities Act or otherwise applicable SEC accounting releases with
respect to pooling of interests accounting treatment (each such person, a
"Pooling Affiliate") and to deliver not less than 30 days prior to the Effective
Time an affiliate letter in the forms attached as exhibits to the Merger
Agreement, executed by each Pooling Affiliate identified in the respective list.
COORDINATION OF DIVIDENDS
Subject to certain accounting requirements relating to pooling of interests
accounting treatment for the Merger, each of Travelers and Citicorp will
coordinate with the other regarding the declaration and payment of dividends in
respect of the Travelers Common Stock and the Citicorp Common Stock and the
record dates and payment dates relating thereto, it being the intention of
Travelers and Citicorp that any holder of Travelers Common Stock or Citicorp
Common Stock will not receive two dividends, or fail to receive one dividend,
for any single calendar quarter with respect to its shares of Travelers Common
Stock and/or shares of Citicorp Common Stock, including shares of Citigroup
Common Stock that a holder receives in exchange for shares of Citicorp Common
Stock pursuant to the Merger.
NO SOLICITATION
The Merger Agreement provides that Citicorp and Travelers will not, nor
will they permit any of their respective subsidiaries to, nor will they
authorize or permit any of their officers, directors or employees or any
investment banker, financial adviser, attorney, accountant or other
representative retained by them or any of their subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate, or encourage
(including by way of furnishing information), or take any other action designed
to facilitate, any inquiries or the making of any Takeover Proposal (as defined
below) or (ii) participate in any discussions or negotiations regarding any
Takeover Proposal; provided, however, that if either the Citicorp Board or the
Travelers Board, as the case may be, determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to act
in a manner consistent with its fiduciary duties to its stockholders under
applicable law, Citicorp or Travelers, as the case may be, in response to a
Superior Proposal (as defined below), and subject to providing written notice of
its decision to take such action to the other party and compliance with its
obligation under the Merger Agreement to advise the other party of any request
for information or of any Takeover Proposal, may (a) furnish information with
respect to it and its subsidiaries to any person making a Superior Proposal
pursuant to a customary confidentiality agreement (as determined by it, based on
the advice of its outside counsel) and (b) participate in discussions or
negotiations regarding such Superior Proposal. A "Takeover
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Proposal" means any inquiry, proposal or offer from any person relating to any
(1) direct or indirect acquisition or purchase of a business that constitutes
15% or more of the net revenues, net income or the assets of Citicorp or
Travelers, as the case may be, and its subsidiaries, taken as a whole, (2)
direct or indirect acquisition or purchase of 15% or more of any class of equity
securities of Citicorp or Travelers, as the case may be, and its subsidiaries,
(3) tender offer or exchange offer that if consummated would result in any
person beneficially owning 15% or more of any class of any equity securities of
Citicorp or Travelers, as the case may be, or any of their respective
subsidiaries whose business constitutes 15% or more of the net revenues, net
income or assets of Citicorp or Travelers, as the case may be, and its
subsidiaries taken as a whole or (4) merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Citicorp or Travelers, as the case may be, or any of their respective
subsidiaries whose business constitutes 15% or more of the net revenues, net
income or assets of Travelers or Citicorp, as the case may be, and its
subsidiaries, taken as a whole.
Except as expressly permitted by the Merger Agreement, neither the Citicorp
Board nor the Travelers Board, nor any committee thereof, will (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to the
other party, the approval or recommendation by such Board or such committee of
the Merger or the Merger Agreement, (ii) approve or recommend or propose
publicly to approve or recommend any Takeover Proposal or (iii) cause either
Citicorp or Travelers to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Takeover Proposal (an "Acquisition Agreement"). Notwithstanding the foregoing,
such Board, to the extent that it determines in good faith, after consultation
with outside counsel, that in light of a Superior Proposal it is necessary to do
so in order to act in a manner consistent with its fiduciary duties to its
respective stockholders under applicable law, may terminate the Merger
Agreement, solely in order to enter into an Acquisition Agreement with respect
to any Superior Proposal, but only at a time that is after the fifth business
day following the other party's receipt of written notice advising it that such
Board is prepared to accept a Superior Proposal and only if, during such
five-day period, Citicorp or Travelers, as the case may be, has negotiated in
good faith with the other party to change the terms of the Merger Agreement to
enable the parties to proceed with the Merger. If the party that receives notice
does not agree to change the terms of the Merger Agreement, the other party may
solicit other proposals, including by conducting an auction. A "Superior
Proposal" means any proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction, for consideration consisting of cash and/or securities,
more than 50% of the combined voting power of the shares of either Citicorp
Common Stock or Travelers Common Stock, as the case may be, or all or
substantially all the assets of Citicorp or Travelers and otherwise on terms
which either the Citicorp Board or the Travelers Board, as the case may be,
determines in its good faith judgment to be more favorable to such company's
stockholders than the Merger and for which financing, to the extent required, is
then committed or which, in the good faith judgment of the such Board, is
reasonably capable of being obtained by such third party. Travelers and Citicorp
have agreed to immediately advise the other of any request for information or
any Takeover Proposal and to keep the other informed of the status of any such
request or Takeover Proposal.
CITICORP STOCK-BASED AWARDS
Simultaneously with the Merger, (i) each outstanding employee stock option
or other right to purchase or receive Citicorp Common Stock under employee
incentive or benefit plans, programs or arrangements and non-employee director
plans currently maintained by Citicorp ("Citicorp Stock Plans") will be
converted into an option to purchase the number of shares of Citigroup Common
Stock equal to the Exchange Ratio multiplied by the number of shares of Citicorp
Common Stock which could have been obtained prior to the Effective Time upon the
exercise of each such option (rounded to the nearest whole number of shares of
Citigroup Common Stock), at an exercise price per share equal to the exercise
price for each such share of Citicorp Common Stock subject to such Citicorp
option divided by the Exchange Ratio (rounded down to the nearest whole cent),
and (ii) Citigroup will assume the obligations of Citicorp under the Citicorp
Stock Plans. The other terms of each such option, and the plans under which they
were issued, will continue to apply in accordance with their terms. See "THE
MERGER -- Interests of Certain Persons in the Merger."
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Simultaneously with the Merger, (i) each outstanding award (including
restricted stock, deferred stock, phantom stock, stock equivalents and stock
units) (each, a "Citicorp Award") under any Citicorp Stock Plan will be
converted into the same instrument of Citigroup, in each case with such
adjustments (and no other adjustments) to the terms of such Citicorp Awards as
are necessary to preserve the value inherent in such Citicorp Awards with no
detrimental effects on the holders thereof; and (ii) Citigroup will assume the
obligations of Citicorp under the Citicorp Awards. The other terms of each
Citicorp Award, and the plans or agreements under which they were issued, will
continue to apply in accordance with their terms.
Citicorp and Travelers have agreed that each of their respective employee
incentive or benefit plans, programs and arrangements and non-employee director
plans will be amended, to the extent necessary, to reflect the transactions
contemplated by the Merger Agreement, including, but not limited to, the
conversion of shares of Citicorp Common Stock held or to be awarded or paid
pursuant to such benefit plans, programs or arrangements into shares of
Citigroup Common Stock on a basis consistent with the transactions contemplated
by the Merger Agreement. Furthermore, Citicorp and Travelers have agreed to
submit the amendments to such plans, programs and arrangements to their
respective stockholders, if such submission is determined to be necessary by
either company's legal counsel after consultation with one another; provided,
however, that such stockholder approval is not a condition to consummation of
the Merger.
Citigroup will (i) reserve for issuance the number of shares of Citigroup
Common Stock that will become subject to the benefit plans, programs and
arrangements referred to in the preceding three paragraphs and (ii) issue or
cause to be issued the appropriate number of shares of Citigroup Common Stock
pursuant to such plans, programs and arrangements, upon the exercise or
maturation of rights existing thereunder at the Effective Time or thereafter
granted or awarded.
EMPLOYEE BENEFIT PLANS
From and after the Effective Time, the employee benefit plans of Travelers
and Citicorp in effect as of the Effective Time will, subject to applicable law,
subject to the terms of the Merger Agreement and subject to the terms of such
plans, remain in effect with respect to the employees of Travelers and Citicorp
(or their respective subsidiaries), as the case may be, until such time as
Citigroup adopts new employee benefit plans and arrangements with respect to
employees of Citigroup and its subsidiaries. From and after the Effective Time,
Citigroup will, and will cause its subsidiaries to, honor in accordance with
their terms all employee benefit plans of Travelers and Citicorp, respectively,
and all other contracts, arrangements and commitments which apply to current or
former employees or directors of Travelers, Citicorp or their respective
subsidiaries.
Employees of Travelers, Citicorp and their respective subsidiaries will
receive credit for purposes of eligibility to participate, vesting, benefit
accrual and eligibility to receive benefits under any employee benefit plan,
program or arrangement established or maintained by Citigroup or any of its
subsidiaries and made available to such employees for service accrued or deemed
accrued prior to the Effective Time with Travelers, Citicorp or any of their
respective subsidiaries, as the case may be; provided, however, that such
crediting of service will not operate to duplicate any benefit or the funding of
any such benefit.
INDEMNIFICATION, EXCULPATION AND INSURANCE
Travelers has agreed to indemnify and hold harmless from liabilities for
acts or omissions occurring at or prior to the Effective Time those classes of
persons currently entitled to indemnification from Citicorp and its subsidiaries
as provided in their respective certificates of incorporation or by-laws (or
comparable organizational documents) and to assume as of the Effective Time any
indemnification agreements of Citicorp in effect as of the date of the Merger
Agreement. In addition, from and after the Effective Time, directors and
officers of Citicorp who become directors or officers of Citigroup will be
entitled to indemnification under Citigroup's Restated Certificate of
Incorporation and By-laws, as the same may be amended from time to time in
accordance with their terms and applicable law, and to all other indemnity
rights and protections as are afforded to other directors and officers of
Travelers.
In the event that Citigroup or any of its successors or assigns (i)
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or
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(ii) except for any disposition of assets by Citigroup required by applicable
law in connection with the Merger, transfers or conveys all or substantially all
of its properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of Citigroup assume
the obligations described under this section "-- Indemnification, Exculpation
and Insurance."
For six years after the Effective Time, Citigroup will maintain in effect
Citicorp's current directors' and officers' liability insurance covering acts or
omissions occurring prior to the Effective Time with respect to those persons
who are currently covered by Citicorp's directors' and officers' liability
insurance policy on terms with respect to such coverage and amount no less
favorable than those of such policy in effect on the date of the Merger
Agreement; provided that Citigroup may substitute policies of Citigroup or its
subsidiaries containing terms with respect to coverage and amount no less
favorable to such directors or officers; provided, further, that in no event
will Citigroup be required to pay aggregate premiums for the insurance described
in this paragraph in excess of 200% of the aggregate premiums paid by Citicorp
in 1997.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Travelers' and Citicorp's obligation to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of various conditions,
which include, in addition to the other customary closing conditions, the
following:
(i) the Citicorp stockholders having approved the Merger and the
Travelers stockholders having approved the Merger Share Issuance and the
Name Change;
(ii) other than the filing with the Secretary of State of Delaware of
the Certificate of Merger and other than the filing of application and
notice under the BHC Act and the receipt of approvals in respect thereof
(which shall have been obtained in form and substance reasonably
satisfactory to each of Citicorp and Travelers), all consents, approvals
and actions of, filings with and notices to any federal, state, local or
foreign government, any court, administrative, regulatory or other
governmental agency, commission or authority or any non-governmental
self-regulatory agency, commission or authority or arbitral tribunal (each,
a "Governmental Entity") required of Citicorp, Travelers or any of their
subsidiaries to consummate the Merger and the other transactions
contemplated by the Merger Agreement, the failure of which to be obtained
or taken is reasonably expected to have a material adverse effect on
Citigroup and its prospective subsidiaries, taken as a whole, having been
obtained in a form satisfactory to each of Travelers and Citicorp;
(iii) no judgment, order, decree, statute, law, ordinance, rule or
regulation enacted, entered, promulgated, enforced or issued by any court
or other Governmental Entity of competent jurisdiction or other legal
restraint or prohibition (collectively, "Restraints") being in effect (a)
preventing the consummation of the Merger, (b) except as may be required
under the BHC Act, prohibiting or limiting the ownership or operation by
Citicorp or Travelers and their respective subsidiaries of any material
portion of the business of Citicorp or Travelers and their respective
subsidiaries taken as a whole, or compelling Citicorp or Travelers and
their respective subsidiaries to dispose of any material portion of the
business of Citicorp or Travelers and their respective subsidiaries, taken
as a whole, as a result of the Merger or (c) which otherwise is reasonably
likely to have a material adverse effect on Citicorp or Travelers, as
applicable; provided, however, that each of the parties shall have used its
best efforts to prevent the entry of any such Restraints and to appeal as
promptly as possible any such Restraints that may be entered;
(iv) the Registration Statement having become effective under the
Securities Act and not being the subject of any stop order or proceedings
seeking a stop order; and
(v) the shares of Travelers' securities to be listed on the NYSE and
which are issuable to Citicorp stockholders in the Merger having been
approved for listing on the NYSE, subject to official notice of issuance.
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In addition, the obligation of each of Travelers and Citicorp to effect the
Merger is subject to the satisfaction or waiver of the following additional
conditions:
(i) the representations and warranties of the other party to the Merger
Agreement set forth in the Merger Agreement being true and correct as of
the date of the Merger Agreement and as of the Closing Date as though made
on and as of the Closing Date (except to the extent expressly made as of an
earlier date, in which case as of such date), except where the failure of
such representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "material adverse
effect," as such terms are defined below),would not have, individually or
in the aggregate, a material adverse effect on such other party;
(ii) the other party to the Merger Agreement having performed in all
respects all material obligations required to be performed by it under the
Merger Agreement on or prior to the Closing Date;
(iii) Travelers and Citicorp having received from their legal counsel,
Skadden, Arps, Slate, Meagher & Flom LLP and Shearman & Sterling,
respectively, on the Closing Date, opinions dated as of such date to the
effect that the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code and that Travelers and Citicorp will
each be a party to such reorganization within the meaning of Section 368(b)
of the Code (see "THE MERGER -- Federal Income Tax Consequences of the
Merger"); and
(iv) at any time after the date of the Merger Agreement no material
adverse change having occurred relating to the other party.
Subject to certain limited exceptions specified in the Merger Agreement,
"material adverse change" and "material adverse effect" mean, when used in
connection with Travelers or Citicorp, any change, effect, event, occurrence or
state of facts that is, or would reasonably be expected to be, materially
adverse to the business, financial condition or results of operations of such
entity and its subsidiaries taken as a whole, and the terms "material" and
"materially" have correlative meanings.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after the adoption thereof by Citicorp stockholders or
Travelers stockholders:
(a) by mutual written consent of Travelers and Citicorp;
(b) by either Travelers or Citicorp:
(i) if the Merger has not been completed by the later of December 31,
1998 or such date as the Closing may have been extended by either party
upon such party's exercise of its right to extend the Closing up to 90
days if certain regulatory approvals necessary for the Merger have not
otherwise been received; provided, however, that the right to terminate
the Merger Agreement will not be available to any party whose failure to
perform any of its obligations under the Merger Agreement results in the
failure of the Merger to be completed by such time;
(ii) if the approval of Citicorp stockholders has not been obtained
at a Citicorp stockholders meeting;
(iii) if the approval of Travelers stockholders has not been obtained
at a Travelers stockholders meeting; or
(iv) if any Restraint that has any of the effects set forth in clause
(iii) of "-- Conditions to the Consummation of the Merger" above shall
be in effect and shall have become final and nonappealable; provided,
that the party seeking to terminate the Merger Agreement shall have used
best efforts to prevent and remove such Restraint;
(c) by Travelers, if Citicorp breaches or fails to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in the Merger Agreement, which
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breach or failure to perform (A) would give rise to a material adverse
change relating to Citicorp and (B) is incapable of being cured by
Citicorp;
(d) by Travelers, if the Board of Directors of Travelers has exercised
its rights to enter into an agreement relating to a Superior Proposal as
set forth in the first paragraph under "-- No Solicitation" above; provided
that, Travelers must have first complied with all of the requirements set
forth above in all of the paragraphs under "-- No Solicitation" above;
(e) by Citicorp, if Travelers has breached or failed to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in the Merger Agreement, which breach or failure to
perform (A) would give rise to a material adverse change relating to
Travelers and (B) is incapable of being cured by Travelers; or
(f) by Citicorp, if the Board of Directors of Citicorp exercised its
rights to enter into an agreement relating to a Superior Proposal as set
forth in the first paragraph under "-- No Solicitation" above; provided
that, Citicorp must have first complied with all of the requirements set
forth above in all of the paragraphs under "-- No Solicitation" above.
In the event of termination of the Merger Agreement by either Citicorp or
Travelers, the Merger Agreement will become void and have no effect, without any
liability or obligation on the part of Travelers or Citicorp, other than (a) in
connection with any brokerage or advisory fees of any kind incurred by either
Citicorp or Travelers, (b) the obligation of Citicorp and Travelers to keep all
nonpublic information connected with the Merger confidential, (c) the agreement
between Citicorp and Travelers to each pay their own fees and pay one-half of
the costs of the Registration Statement relating to this Joint Proxy
Statement/Prospectus and (d) the effects of termination as described in this
paragraph, which provisions survive such termination; provided, however, that
nothing in the Merger Agreement will relieve Travelers or Citicorp from any
liability for any willful and material breach by such party of any of its
representations, warranties, covenants or agreements set forth in the Merger
Agreement.
EXPENSES
Whether or not the Merger is completed, all fees and expenses incurred in
connection with the Merger, the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such fees or expenses,
except that Citicorp and Travelers will each pay one-half of the costs of
printing and filing the Registration Statement relating to this Joint Proxy
Statement/Prospectus.
AMENDMENT; EXTENSION AND WAIVER
The Merger Agreement may be amended by Travelers and Citicorp at any time
before or after the approval of the Merger Agreement by the Citicorp
stockholders and/or the Travelers stockholders; provided that, after any such
approval, Travelers and Citicorp may not make any amendment that by law requires
further approval by either Citicorp stockholders or Travelers stockholders
without the further approval of such stockholders. The Merger Agreement may not
be amended except by an instrument in writing signed on behalf of both Travelers
and Citicorp.
At any time prior to the Effective Time, Travelers or Citicorp may (i)
extend the time for the performance of any of the obligations or other acts of
the other party, (ii) waive any inaccuracies in the representations and
warranties of the other party contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement or (iii) subject to the
proviso of the first sentence of the immediately preceding paragraph, waive
compliance by the other party of the agreements or conditions contained in the
Merger Agreement. Any agreement on the part of Travelers or Citicorp to any such
extension or waiver will be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of Travelers or Citicorp to assert
any of its rights under the Merger Agreement or otherwise will not constitute a
waiver of such rights.
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DESCRIPTION OF CITIGROUP CAPITAL STOCK FOLLOWING THE MERGER
Upon consummation of the Merger, Travelers will be renamed Citigroup Inc.,
the Travelers Certificate will become the Citigroup Certificate and Citigroup
will issue shares of common stock and preferred stock to holders of Citicorp
Common Stock and Citicorp Preferred Stock. The shares of Travelers Common Stock
and Travelers Preferred Stock outstanding prior to the Merger will automatically
become shares of Citigroup and are referred to in this section as Citigroup
Common Stock and Citigroup Preferred Stock, respectively.
CITIGROUP COMMON STOCK
The Travelers Certificate currently authorizes the issuance of 3 billion
shares of Travelers Common Stock. Upon the receipt of the requisite Travelers
stockholder approval in respect of the Increase in Authorized Travelers Common
Stock, the Travelers Certificate will authorize the issuance of 6 billion shares
of Travelers Common Stock. On the Record Date, there were 1,202,491,679 shares
of Travelers Common Stock issued and outstanding.
Citigroup is expected to issue approximately 1.13 billion shares of
Citigroup Common Stock to holders of Citicorp Common Stock in the Merger. Based
upon such number and the number of shares of Travelers Common Stock outstanding
on the Record Date, there would be approximately 2.33 billion shares of
Citigroup Common Stock outstanding immediately following consummation of the
Merger.
Holders of shares of Citigroup Common Stock will be entitled to one vote
per share for the election of directors and for all other matters to be voted on
generally by the stockholders. Subject to the rights of holders of shares of
Citigroup Preferred Stock, holders of shares of Citigroup Common Stock have
equal rights to participate in dividends when declared and, in the event of
liquidation, in the net assets of Citigroup available for distribution to
stockholders. Citigroup may not declare any dividends on the Citigroup Common
Stock unless full preferential amounts to which holders of Citigroup Preferred
Stock are entitled have been paid or declared and set apart for payment upon all
outstanding shares of Citigroup Preferred Stock.
The shares of Citigroup Common Stock, when issued to holders of outstanding
shares of Citicorp Common Stock in connection with the Merger, will be duly
authorized, validly issued, fully paid and non-assessable. The holders of shares
of Citigroup Common Stock will have no preemptive rights or preferential rights
of subscription for any shares of Citigroup Common Stock or other securities of
Citigroup.
Citibank, N.A. will be the transfer agent and registrar for the Citigroup
Common Stock.
CITIGROUP PREFERRED STOCK
Under the Citigroup Certificate, the Board of Directors of Citigroup (the
"Citigroup Board") will be authorized to issue 30,000,000 shares of Citigroup
preferred stock ("Citigroup Preferred Stock") in one or more series, and to
establish from time to time the number of shares to be included in each such
series and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof,
as will be stated and expressed in the resolution or resolutions providing for
the issue thereof adopted by the Citigroup Board (except to the extent stated
and expressed in the Citigroup Certificate). The Travelers Board has adopted
resolutions creating and designating each series of New Citigroup Preferred
Stock and such resolutions will be filed in a Certificate of Designation as an
amendment to the Travelers Certificate, which will become the Citigroup
Certificate following the Merger.
The rights of holders of the Citigroup Preferred Stock will be subject to,
and may be adversely affected by, the rights of holders of any shares of
Citigroup Preferred Stock that may be issued in the future. The Citigroup Board
may cause shares of Citigroup Preferred Stock to be issued for any corporate
purpose. Shares of Citigroup Preferred Stock issued after the Effective Time may
have the effect, under certain circumstances, alone or in combination with
certain other provisions of the Citigroup Certificate described below, of
rendering more difficult or discouraging an acquisition of Citigroup deemed
undesirable by the Citigroup Board.
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Under existing interpretations of the Federal Reserve Board and the Office
of Thrift Supervision, if the holders of the Citigroup Preferred Stock become
entitled to vote for the election of directors because dividends on the
Citigroup Preferred Stock are in arrears as described below, Citigroup Preferred
Stock may then be deemed a "class of voting securities" and a holder of 25% or
more of the Citigroup Preferred Stock (or a holder of 5% or more of the
Citigroup Preferred Stock that otherwise exercises a "controlling influence"
over Citigroup) may then be subject to regulation as a "bank holding company" in
accordance with the BHC Act, and a holder of 25% or more of the Citigroup
Preferred Stock (or a holder of 10% or more of the Citigroup Preferred Stock
that otherwise possesses certain "control factors" with respect to Citigroup)
may then be subject to regulation as a "savings and loan holding company" in
accordance with the Home Owner's Loan Act of 1933, as amended. In addition, at
such time, (i) any bank holding company or foreign bank with a U.S. presence
generally would be required to obtain the approval of the Federal Reserve Board
under the BHC Act to acquire or retain 5% or more of the Citigroup Preferred
Stock; (ii) any person other than a bank holding company may be required to
obtain the approval of the Federal Reserve Board and the OTS under the CBCA to
acquire or retain 10% or more of the Citigroup Preferred Stock; and (iii) any
savings and loan holding company generally could not retain in excess of 5% of
the Citigroup Preferred Stock. Before exercising its option to redeem any shares
of Citigroup Preferred Stock, Citigroup will obtain the approval of the Federal
Reserve Board to the extent then required by applicable law.
No full dividends will be declared or paid or set apart for payment on the
preferred stock of any series ranking, as to dividends, on a parity with or
junior to any other series of Citigroup Preferred Stock for any period unless
full dividends have been or are contemporaneously declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on such
series of Citigroup Preferred Stock for (i) all dividend periods terminating on
or prior to the date of payment of such full cumulative dividends (in the case
of a series of cumulative preferred stock) or (ii) the immediately preceding
dividend period (in the case of a series of noncumulative preferred stock).
When dividends are not paid in full upon any series of Citigroup Preferred
Stock and any other preferred stock ranking on a parity as to dividends with
such series of Citigroup Preferred Stock, all dividends declared upon shares of
such series of Citigroup Preferred Stock and any other preferred stock ranking
on a parity as to dividends will be declared pro rata so that the amount of
dividends declared per share on such series of Citigroup Preferred Stock and
such other preferred stock will in all cases bear to each other the same ratio
that accrued dividends per share (which, in the case of noncumulative preferred
stock, will not include any cumulation in respect of unpaid dividends for prior
dividend periods) on the shares of such series of Citigroup Preferred Stock and
such other preferred stock bear to each other. Except as provided in the
preceding sentence, unless full dividends on all outstanding shares of any such
series of Citigroup Preferred Stock have been declared and paid or set apart for
payment for all past dividend periods, in the case of a series of cumulative
preferred stock, or for the immediately preceding dividend period, in the case
of a series of noncumulative preferred stock, no dividends (other than dividends
or distributions paid in shares of, or options, warrants or rights to subscribe
for or purchase shares of, the Citigroup Common Stock or another stock of
Citigroup ranking junior to the Citigroup Preferred Stock as to dividends and
upon liquidation) will be declared or paid or set aside for payment or other
distribution declared or made upon the Citigroup Common Stock or upon any other
stock of Citigroup ranking junior to or on parity with the Citigroup Preferred
Stock as to dividends or upon liquidation, nor will any Citigroup Common Stock
nor any other stock of Citigroup ranking junior to or on parity with such
Citigroup Preferred Stock as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any shares of any
such stock) by Citigroup (except by conversion into or exchange for stock of
Citigroup ranking junior to the Citigroup Preferred Stock as to dividends and
upon liquidation).
All shares of Citigroup Preferred Stock (including the New Citigroup
Preferred Stock) will rank on a parity on liquidation and as to dividends
(except as otherwise provided with respect to cumulation of dividends) with each
other series. No shares of Citigroup Preferred Stock will have any preemptive or
subscription rights.
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OUTSTANDING SERIES OF TRAVELERS PREFERRED STOCK
Each outstanding series of preferred stock of Travelers at the Effective
Time will remain outstanding as a series of Citigroup Preferred Stock, with
identical terms and designation. As of the Record Date, Travelers had
outstanding 1,600,000 shares (evidenced by 8,000,000 depositary shares, each of
which represents a one-fifth interest in a share of such stock) of its 6.365%
Cumulative Preferred Stock, Series F ("Citigroup Series F Preferred Stock"),
800,000 shares (evidenced by 4,000,000 depositary shares, each of which
represents a one-fifth interest in a share of such stock) of its 6.213%
Cumulative Preferred Stock, Series G ("Citigroup Series G Preferred Stock"),
800,000 shares (evidenced by 4,000,000 depositary shares, each of which
represents a one-fifth interest in a share of such stock) of its 6.231%
Cumulative Preferred Stock, Series H ("Citigroup Series H Preferred Stock"),
280,000 shares of its Series I Preferred Stock ("Citigroup Series I Preferred
Stock"), 400,000 shares (evidenced by 8,000,000 depositary shares, each of which
represents a one-twentieth interest in a share of such stock) of its Series J
Preferred Stock ("Citigroup Series J Preferred Stock"), 500,000 shares
(evidenced by 10,000,000 depositary shares, each of which represents a
one-twentieth interest in a share of such stock) of its Series K Preferred Stock
("Citigroup Series K Preferred Stock"), 800,000 shares (evidenced by 4,000,000
depositary shares, each of which represents a one-fifth interest in a share of
such stock) of its Series M Preferred Stock ("Citigroup Series M Preferred
Stock") and 2,262 shares of its Cumulative Adjustable Rate Preferred Stock,
Series Y ("Citigroup Series Y Preferred Stock"), all of which shares are fully
paid and nonassessable.
Citigroup Series F Preferred Stock. The Citigroup Series F Preferred Stock
is redeemable, in whole or in part, at Citigroup's option at any time on or
after June 16, 2007 at a redemption price equal to $250 per share, plus accrued
and unpaid dividends. The Citigroup Series F Preferred Stock provides for
cumulative quarterly dividends at the rate of 6.365% per year, calculated as a
percentage of the $250 per share liquidation value. The holders of the Citigroup
Series F Preferred Stock do not have voting rights except (i) as provided by
law, (ii) under certain circumstances if six quarterly dividends are in arrears
and (iii) that a two-thirds vote of all shares of Citigroup Preferred Stock then
outstanding voting as a class is required for Citigroup to (x) create any class
of stock having a preference as to dividends or distributions of assets over the
Citigroup Series F Preferred Stock or (y) alter or change the provisions of the
Citigroup Certificate so as to adversely affect the powers, preferences or
rights of the holders of Citigroup Series F Preferred Stock. Depositary shares,
each representing one-fifth of a share of Citigroup Series F Preferred Stock,
are traded on the NYSE.
Citigroup Series G Preferred Stock. The Citigroup Series G Preferred Stock
is redeemable, in whole or in part, at Citigroup's option at any time on or
after July 11, 2007 at a redemption price equal to $250 per share, plus accrued
and unpaid dividends. The Citigroup Series G Preferred Stock provides for
cumulative quarterly dividends at the rate of 6.213% per year, calculated as a
percentage of the $250 per share liquidation value. The holders of the Citigroup
Series G Preferred Stock do not have voting rights except (i) as provided by
law, (ii) under certain circumstances if six quarterly dividends are in arrears
and (iii) that a two-thirds vote of all shares of Citigroup Preferred Stock then
outstanding voting as a class is required for Citigroup to (x) create any class
of stock having a preference as to dividends or distributions of assets over the
Citigroup Series G Preferred Stock or (y) alter or change the provisions of the
Citigroup Certificate so as to adversely affect the powers, preferences or
rights of the holders of Citigroup Series G Preferred Stock. Depositary shares,
each representing one-fifth of a share of Citigroup Series G Preferred Stock,
are traded on the NYSE.
Citigroup Series H Preferred Stock. The Citigroup Series H Preferred Stock
is redeemable, in whole or in part, at Citigroup's option at any time on or
after September 8, 2007 at a redemption price equal to $250 per share, plus
accrued and unpaid dividends. The Citigroup Series H Preferred Stock provides
for cumulative quarterly dividends at the rate of 6.231% per year, calculated as
a percentage of the $250 per share liquidation value. The holders of the
Citigroup Series H Preferred Stock do not have voting rights except (i) as
provided by law, (ii) under certain circumstances if six quarterly dividends are
in arrears and (iii) that a two-thirds vote of all shares of Citigroup Preferred
Stock then outstanding voting as a class is required for Citigroup to (x) create
any class of stock having a preference as to dividends or distributions of
assets over the Citigroup Series H Preferred Stock or (y) alter or change the
provisions of the Citigroup Certificate so as to adversely affect the powers,
preferences or rights of the holders of Citigroup Series H Preferred Stock.
Depositary shares, each representing one-fifth of a share of Citigroup Series H
Preferred Stock, are traded on the NYSE.
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Citigroup Series I Preferred Stock. 140,000 shares of the Citigroup Series
I Preferred Stock will be redeemed on each October 31, commencing October 31,
1998 (so long as any shares of the Citigroup Series I Preferred Stock remain
outstanding), by a cash payment of $1,000 per share plus an amount per share
equal to all accrued and unpaid dividends, whether declared or undeclared, to
the date of redemption. Any shares of Citigroup Series I Preferred Stock
purchased, redeemed or otherwise acquired by Citigroup and not previously
credited against its mandatory redemption obligation may be applied, on a pro
rata basis, to mandatory redemption payments to be made. The Citigroup Series I
Preferred Stock provides for quarterly dividends in the amount of $22.50 per
share. On and after the redemption date, dividends will cease to accrue,
provided that the redemption price has been duly paid or provided for.
In addition to any voting rights provided in the Citigroup Certificate and
any voting rights provided by law, the holders of shares of Citigroup Series I
Preferred Stock are entitled to 44.60526 votes per share when voting as a class
with the Citigroup Common Stock, subject to anti-dilution adjustment. The shares
of Citigroup Series I Preferred Stock are entitled to vote together as a class
with the shares of Citigroup Common Stock (and any other shares of capital stock
of Citigroup at the time entitled to vote together as a class) on all matters
submitted to a vote of stockholders of Citigroup. Holders of Citigroup Series I
Preferred Stock have additional voting rights under certain circumstances if six
quarterly dividends are in arrears. In addition, holders of Citigroup Series I
Preferred Stock together with all other series of Citigroup Preferred Stock,
voting as one class, must give their approval by a two-thirds vote of shares of
Citigroup Preferred Stock then outstanding in the event that Citigroup (i)
authorizes shares of any class or series of stock having a preference or
priority as to dividends or liquidation ("Senior Stock") over the Citigroup
Preferred Stock, (ii) reclassifies any shares of Citigroup stock into shares of
Senior Stock, (iii) authorizes any security exchangeable for, convertible into,
or evidencing the right to purchase any shares of Senior Stock, (iv) amends,
alters or repeals the Citigroup Certificate to alter or change the preferences,
rights or powers of Citigroup Preferred Stock so as to affect the Citigroup
Preferred Stock adversely, or (v) effects the voluntary liquidation, dissolution
or winding up of Citigroup, or the sale, lease, exchange of all or substantially
all of the assets, property or business of Citigroup, or merges or consolidates
Citigroup with or into another corporation (except a wholly owned subsidiary of
Citigroup), provided that no separate vote of holders of Citigroup Preferred
Stock as a class will be required in the case of a merger or consolidation or a
sale, exchange or conveyance of all or substantially all of the assets, property
or business of Citigroup (any such transaction, a "transaction") if (A) the
resulting, surviving or acquiring corporation will have after such transaction
no stock either authorized or outstanding (except such stock of Citigroup as may
have been authorized immediately preceding such transaction, or such stock of
the resulting, surviving or acquiring corporation issued in exchange therefor)
ranking prior to, or on parity with, the Citigroup Preferred Stock or the stock
of the resulting, surviving or acquiring corporation and (B) if each holder of
shares of Citigroup Preferred Stock immediately preceding such transaction will
receive in exchange therefor the same number of shares of stock, with
substantially the same preferences, rights and powers, of the resulting,
surviving or acquiring corporation (the events described in clauses (i) through
(v) being referred to herein as the "Citigroup Preferred Stock Voting Events").
Finally, without obtaining the approval of a majority of the outstanding shares
of Citigroup Preferred Stock voting together separately as one class, Citigroup
may not amend the Citigroup Certificate to increase the authorized amount of
Citigroup Preferred Stock or to authorize any other stock ranking on a parity
with the Citigroup Preferred Stock either as to payment of dividends or upon
liquidation.
Each share of Citigroup Series I Preferred Stock is convertible (at the
option of the holder thereof) into 44.60526 shares of Citigroup Common Stock,
subject to anti-dilution adjustment.
Citigroup Series J Preferred Stock. Citigroup, at its option, may redeem
shares of Citigroup Series J Preferred Stock, as a whole or in part, at any time
or from time to time, at a price of $500 per share, plus an amount per share
equal to all accumulated but unpaid dividends thereon, whether or not declared,
to the date fixed for redemption. The Citigroup Series J Preferred Stock
provides for cumulative quarterly dividends in the amount of $10.10 per share.
Depositary shares, each representing one-twentieth of a share of Citigroup
Series J Preferred Stock, are traded on the NYSE.
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Holders of shares of Citigroup Series J Preferred Stock are entitled to
vote together as a class with the shares of Citigroup Common Stock (and any
other shares of capital stock of Citigroup at the time entitled to vote together
as a class) on all matters submitted to a vote of stockholders of Citigroup,
provided that, when voting with Citigroup Common Stock, each share of Citigroup
Series J Preferred Stock is entitled to three votes. Holders of Citigroup Series
J Preferred Stock have additional voting rights under certain circumstances if
six quarterly dividends are in arrears. In addition, holders of Citigroup Series
J Preferred Stock together with all other series of Citigroup Preferred Stock,
voting as one class, must give their approval by a two-thirds vote of the then
outstanding shares of Citigroup Preferred Stock upon the occurrence of a
Citigroup Preferred Stock Voting Event. Finally, without obtaining the approval
of a majority of the outstanding shares of Citigroup Preferred Stock voting
together separately as one class, Citigroup may not amend the Citigroup
Certificate so as to increase the authorized amount of Citigroup Preferred Stock
or so as to authorize any other class of stock ranking on a parity with the
Citigroup Preferred Stock either as to payment of dividends or upon liquidation.
Citigroup Series K Preferred Stock. The Citigroup Series K Preferred Stock
is redeemable, in whole or in part, at Citigroup's option at any time on or
after March 31, 2001, at a redemption price equal to $500 per share, plus
accrued and unpaid dividends. The Citigroup Series K Preferred Stock provides
for cumulative quarterly dividends in the amount of $10.50 per share. Depositary
shares, each representing one-twentieth of a share of Citigroup Series K
Preferred Stock, are traded on the NYSE.
Holders of shares of Citigroup Series K Preferred Stock are entitled to
vote together as a class with the shares of Citigroup Common Stock (and any
other shares of capital stock of Citigroup at the time entitled to vote together
as a class) on all matters submitted to a vote of stockholders of Citigroup,
provided that, when voting with Citigroup Common Stock, each share of Citigroup
Series K Preferred Stock is entitled to three votes. Holders of Citigroup Series
K Preferred Stock have voting rights under certain circumstances if six
quarterly dividends are in arrears. In addition, holders of Citigroup Series K
Preferred Stock together with all other series of Citigroup Preferred Stock,
voting as one class, must give their approval by a two-thirds vote of the then
outstanding shares of Citigroup Preferred Stock upon the occurrence of a
Citigroup Preferred Stock Voting Event. Finally, without obtaining the approval
of a majority of the outstanding shares of Citigroup Preferred Stock voting
together separately as one class, Citigroup may not amend the Citigroup
Certificate so as to increase the authorized amount of Citigroup Preferred Stock
or so as to authorize any other class of stock ranking on a parity with the
Citigroup Preferred Stock either as to payment of dividends or upon liquidation.
Citigroup Series M Preferred Stock. The Citigroup Series M Preferred Stock
is redeemable, in whole or in part, at Citigroup's option at any time on or
after October 8, 2007, at a redemption price equal to $250 per share, plus an
amount per share equal to all accrued and unpaid dividends thereon, whether or
not declared, to the date fixed for redemption. The Citigroup Series M Preferred
Stock provides for cumulative quarterly dividends at the rate of 5.864% per
year, calculated as a percentage of the $250 per share liquidation value. The
holders of the Citigroup Series M Preferred Stock do not have voting rights
except (i) as required by law, (ii) under certain circumstances if six quarterly
dividends are in arrears and (iii) that a two-thirds vote of all shares of
Citigroup Preferred Stock then outstanding voting as a class is required for
Citigroup to (x) create any class of stock having a preference as to dividends
or distributions of assets over the Citigroup Series M Preferred Stock or (y)
alter or change the provisions of the Citigroup Certificate so as to adversely
affect the powers, preferences or rights of the holders of Citigroup Series M
Preferred Stock. Depositary shares, each representing one-fifth of a share of
Citigroup Series M Preferred Stock, are traded on the NYSE.
Citigroup Series Y Preferred Stock. The Citigroup Series Y Preferred Stock
is owned by subsidiaries of Citigroup, is redeemable without premium at
Citigroup's option on any dividend payment date at a redemption price of
$100,000 per share, plus accrued and unpaid dividends thereon to the date fixed
for redemption, and is subject to repurchase at the holder's request on
specified dates at its liquidation value of $100,000 per share, plus accrued and
unpaid dividends, if not redeemed on or prior to March 31, 1999. The holders of
the Citigroup Series Y Preferred Stock are entitled to a cumulative quarterly
dividend at an annual rate equal to the greater of (i) the Short Term Rate (as
defined below) and (ii) 4.85%. The "Short Term Rate" generally will be equal to
either 85% or 78% of the Money Market Yield (as defined in the
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Citigroup Certificate) of the 90-day rate for commercial paper multiplied by the
stock's $100,000 per share liquidation value. The holders of the Citigroup
Series Y Preferred Stock do not have voting rights except (i) as required by
law, (ii) under certain circumstances if six quarterly dividends are in arrears
and (iii) that a two-thirds vote of all shares of Citigroup Preferred Stock then
outstanding voting as a class is required for Citigroup to (x) create any class
of stock having a preference as to dividends or distributions of assets over the
Citigroup Series Y Preferred Stock or (y) alter or change the provisions of the
Citigroup Certificate so as to adversely affect the powers, preferences or
rights of the holders of Citigroup Series Y Preferred Stock.
NEW CITIGROUP PREFERRED STOCK
Pursuant to the terms of the Merger Agreement, each share of the Citicorp
Preferred Stock will be converted into the right to receive one share of New
Citigroup Preferred Stock. The terms, designations, preferences, limitations,
privileges and rights (other than par value) of the respective series of the New
Citigroup Preferred Stock will be identical to those of the corresponding series
of Citicorp Preferred Stock. Unless otherwise indicated below, the following
description applies to each series of the New Citigroup Preferred Stock. This
description does not purport to be complete and is qualified by reference to the
certificates of designations applicable thereto, copies of which have been filed
as exhibits to the Registration Statement. See "WHERE YOU CAN FIND MORE
INFORMATION."
Rank. Each series of New Citigroup Preferred Stock will rank on a parity
with each other series of Citigroup Preferred Stock outstanding as of the
Effective Time, and prior to the Citigroup Common Stock, as to payment of
dividends and liquidation.
Dividends and Distributions. The holders of shares of New Citigroup
Preferred Stock will be entitled to receive certain cash dividends as set forth
below, when and as declared by the Citigroup Board out of net profits or net
assets of Citigroup legally available for the payment of dividends, in each
case, in equal quarterly payments (rounded to the nearest cent) on February 15,
May 15, August 15 and November 15 in each year, except where such dates are
specifically different as set forth below (each a "Dividend Payment Date"),
commencing on the first Dividend Payment Date following the last dividend
payment date for the corresponding series of Citicorp Preferred Stock for which
the record date occurred prior to the Effective Time. Dividends payable on the
first Dividend Payment Date following the Effective Time will be in respect of
the quarterly dividend period commencing on and including the last dividend
payment date with respect to the Citicorp Preferred Stock for which the record
date occurred prior to the Effective Time. Dividends will be payable to the
holders of record on such record dates, not more than 30 nor less than 15 days
preceding the dividend payment dates, as may be determined by the Citigroup
Board or a duly authorized committee thereof.
Dividends on the New Citigroup Preferred Stock may be cumulative
("Cumulative Preferred Stock") or noncumulative ("Noncumulative Preferred
Stock") as provided below. Dividends on Cumulative Preferred Stock will be
cumulative from the Effective Time and will be payable quarterly in arrears on
the dates specified above. If Citigroup fails to declare or pay a dividend on
any series of Noncumulative Preferred Stock for any dividend period, Citigroup
will have no obligation to pay a dividend for such period, whether or not
dividends on such series of Noncumulative Preferred Stock are declared for any
future dividend period.
Subject to the terms described above, the amount of dividends payable for
any period shorter or longer than a full quarterly dividend period will be
determined on the basis of twelve 30-day months and a 360-day year. Accrued but
unpaid dividends will not bear interest. Dividends paid on the shares of New
Citigroup Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable will be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
Liquidation Preference. Upon any liquidation, dissolution or winding up of
Citigroup, whether voluntary or involuntary, the holders of the New Citigroup
Preferred Stock will have preference and priority over the Citigroup Common
Stock, or any other class of stock of Citigroup ranking, on liquidation,
dissolution or winding up, junior to the New Citigroup Preferred Stock, for
payments out of or distribution of the assets of Citigroup or proceeds thereof,
whether from capital or surplus, of the liquidation preference per share set
forth below, and after such payment the holders of New Citigroup Preferred Stock
will not be entitled to any
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further payments. If, upon such liquidation, dissolution or winding up of
Citigroup, the assets of Citigroup or proceeds thereof, distributable among the
holders of the shares of New Citigroup Preferred Stock, should be insufficient
to make the full liquidation payment in the amount per share set forth below,
and liquidating payments on any other preferred stock ranking, as to
liquidation, dissolution or winding up, on a parity with the New Citigroup
Preferred Stock, then such assets or proceeds thereof will be distributed among
the holders of the New Citigroup Preferred Stock and any such other preferred
stock ratably in accordance with the respective amounts which would be payable
on such shares of New Citigroup Preferred Stock and any such other preferred
stock if all amounts payable thereon were paid in full.
For purpose of liquidation preference, a consolidation or merger of
Citigroup with one or more corporations will not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, of Citigroup.
Redemption. Citigroup may, at its option, redeem any series of New
Citigroup Preferred Stock in whole or part, out of legally available funds, at
the redemption prices and on the dates set forth below for the related series.
If less than all outstanding shares of a series of New Citigroup Preferred
Stock are to be redeemed, shares to be redeemed shall be selected by Citigroup
from outstanding shares of New Citigroup Preferred Stock, by lot or pro rata as
determined by the Citigroup Board, or by any other method determined by the
Citigroup Board. From and after the redemption date (unless default will be made
by Citigroup in providing money for the payment of the redemption price),
dividends will cease to accrue on the shares of New Citigroup Preferred Stock
called for redemption, such shares will no longer be deemed to be outstanding
and all rights of the holders thereof (except the right to receive the
redemption price to the date fixed for redemption) will cease.
In addition, Citigroup, at its option, may redeem all, but not less than
all, of the outstanding shares of any series of the New Citigroup Preferred
Stock, out of legally available funds, if the holders of such shares would be
entitled to vote upon or consent to a merger or consolidation of Citigroup under
the circumstances described below and all of the following conditions have been
satisfied: (i) Citigroup will have requested the vote or consent of the holders
of such shares to the consummation of such merger or consolidation, stating in
such request that failing the requisite favorable vote or consent Citigroup will
have the option to redeem such shares; (ii) Citigroup will have not received the
favorable vote or consent requisite to the consummation of the transaction
within 60 days after making such written request; and (iii) such transaction
will be consummated on the date fixed for such redemption, which date will be no
more than one year after such request is made. Any such redemption will be on
notice at a redemption price per share of the New Citigroup Preferred Stock set
forth above, plus accrued and unpaid dividends thereon (but in the case of
Noncumulative Preferred Stock without cumulation of unpaid dividends for prior
dividend periods) to the date fixed for redemption.
Voting Rights. Holders of the New Citigroup Preferred Stock will have no
voting rights except as set forth below or as otherwise from time to time
required by law.
Whenever dividends on the New Citigroup Preferred Stock will be in arrears
for such number of dividend periods, whether or not consecutive, which will in
the aggregate contain not less than 540 days, the holders of outstanding shares
of the New Citigroup Preferred Stock (voting separately as a class with holders
of shares of any one or more other series of preferred stock ranking on a parity
with the New Citigroup Preferred Stock either as to dividends or the
distribution of assets upon liquidation, dissolution or winding up and upon
which like voting rights have been conferred and are exercisable) will be
entitled to elect two directors of Citigroup at its next annual meeting of
stockholders and at each subsequent annual meeting of stockholders on the terms
set forth below. Such voting rights will continue, in the case of any series of
Cumulative Preferred Stock, until all past dividends accumulated on shares of
Cumulative Preferred Stock will have been paid in full and, in the case of any
series of Noncumulative Preferred Stock, until all dividends on shares of
Noncumulative Preferred Stock will have been paid in full for at least one year.
Upon payment in full of such dividends such voting rights will terminate except
as expressly provided by law, subject to re-vesting in the event of each and
every subsequent default in the payment of dividends as aforesaid. Holders of
all series of preferred stock
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which are granted such voting rights (which rank on a parity with the New
Citigroup Preferred Stock either as to dividends or the distribution of assets
upon liquidation, dissolution or winding up) will vote as a class, and each
holder of shares of the New Citigroup Preferred Stock will have one vote for
each share of stock held and each other series will have such number of votes,
if any, for each share of stock held as may be granted to them. In the event the
holders of shares of the New Citigroup Preferred Stock are entitled to vote as
described in this paragraph, the maximum authorized number of members of
Citigroup Board will automatically be increased by two directors, and the
holders of the New Citigroup Preferred Stock will have the exclusive right, as
outlined above, to elect two directors at subsequent annual meetings of
stockholders.
Upon termination of the right of the holders of the New Citigroup Preferred
Stock to vote for directors as discussed in the prior paragraph, the term of
office of all directors then in office elected by such holders will terminate
immediately. Whenever the term of office of the directors elected by such
holders ends and the related special voting rights expire, the number of
directors will automatically be decreased to such number as may be provided for
in the Citigroup By-Laws.
So long as any shares of New Citigroup Preferred Stock remain outstanding,
Citigroup will not, without the affirmative vote or consent of the holders of at
least two-thirds of the shares of such series outstanding at the time (voting as
a class with all other series of preferred stock ranking on a parity with such
series either as to dividends or the distribution of assets upon liquidation,
dissolution or winding up and upon which like voting rights have been conferred
and are then exercisable), given in person or by proxy, either in writing or at
a meeting, (i) authorize, create or issue, or increase the authorized or issued
amount of any class or series of stock ranking prior to such series with respect
to payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up or (ii) amend, alter or repeal, whether by merger,
consolidation or otherwise, the provisions of the Citigroup Certificate or of
the resolutions contained in the Certificate of Designations designating such
New Citigroup Preferred Stock so as to materially and adversely affect any
right, preference, privilege or voting power of such series or the holders
thereof; provided, however, that any increase in the amount of the authorized
preferred stock or the creation and issuance of other series of preferred stock,
or any increase in the amount of authorized shares of New Citigroup Preferred
Stock, in each case ranking on a parity with or junior to the New Citigroup
Preferred Stock with respect to the payment of dividends and the distribution of
assets upon liquidation, dissolution or winding up will not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers. The foregoing voting provisions will not apply if all outstanding shares
of the affected series of New Citigroup Preferred Stock have been redeemed or
sufficient funds have been deposited in trust to effect such a redemption which
is scheduled to be consummated within three months after the time that such
rights would otherwise be exercisable.
Conversion Rights. None of the series of New Citigroup Preferred Stock is
convertible into shares of any other class or series of the capital stock of
Citigroup.
CITIGROUP SERIES O PREFERRED STOCK
Dividends. The shares of Citigroup Series O Preferred Stock will be
entitled to a cumulative dividend at a variable rate. For all quarterly dividend
periods ending on or prior to August 15, 1999, the annual dividend rate is the
Five-Year Treasury Rate (as defined in the Series O Preferred Stock Certificate
of Designation) plus 1.50%. After August 15, 1999 and on or prior to August 15,
2004, the annual dividend rate will be the Five-Year Treasury Rate plus 2.25%.
After August 15, 2004, the above rates may not be less than 7.00% nor greater
than 14.00% per year, and after August 15, 2004, the rates may not be less than
8.00% nor greater than 16.00% per year. The amount of dividends payable for each
full dividend period for the Citigroup Series O Preferred Stock is computed by
dividing the applicable dividend rate by four and applying the dividend rate to
the amount of $100.00 per share. The dividend rate will be increased in the
event of specified changes in the Internal Revenue Code that would decrease the
dividends received deduction applicable to corporate stockholders (a "Change in
Tax Law").
Liquidation Preference. In the event of a liquidation, dissolution or
winding up of Citigroup, the holder of shares of the Citigroup Series O
Preferred Stock will be entitled to receive $100 per share plus accrued and
unpaid dividends (whether or not earned or declared) and such holder shall not
be entitled to any further payment.
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Redemption. On August 15, 1999 and any time after August 15, 2004,
Citigroup, at its option, may redeem shares of Citigroup Series O Preferred
Stock in whole or in part at a price of $100 per share together with accrued and
unpaid dividends. The Citigroup Series O Preferred Stock may also be redeemed as
provided above and in certain other circumstances following a Change in Tax Law,
in each case at $100 per share together with accrued and unpaid dividends.
CITIGROUP SERIES P PREFERRED STOCK
Dividends. The shares of Citigroup Series P Preferred Stock will be
entitled to a noncumulative dividend in the amount of 7.50% per year. The amount
of dividends payable for each full dividend period will be computed by dividing
the dividend rate of 7.50% per year by four and applying the resulting rate of
1.875% to the amount of $250 per share.
Liquidation Preference. In the event of a liquidation, dissolution or
winding up of Citigroup, the holder of shares of the Citigroup Series P
Preferred Stock will be entitled to receive $250 per share plus accrued and
unpaid dividends (whether or not declared) from the immediately preceding
dividend payment date (but without any cumulation for unpaid dividends for prior
dividend periods) and such holder will not be entitled to any further payment.
Redemption. Except as provided above, the Citigroup Series P Preferred
Stock may not be redeemed prior to September 1, 1998. At any time or from time
to time on and after September 1, 1998, Citigroup, at its option, may redeem
shares of the Citigroup Series P Preferred Stock in whole or in part at a
redemption price of $250 per share, plus accrued and unpaid dividends (whether
or not declared) from the immediately preceding dividend payment date (but
without any cumulation for unpaid dividends for prior dividend periods).
CITIGROUP SERIES Q PREFERRED STOCK
Dividends. The shares of Citigroup Series Q Preferred Stock will be
entitled to a cumulative dividend at a variable rate. For each dividend period
the dividend rate will be equal to 84% of the Effective Rate (as defined below),
but not less than 4.50% per year or more than 10.50% per year. The "Effective
Rate" for any dividend period will be equal to the highest of the Treasury Bill
Rate, the Ten-Year Constant Maturity Rate and the Thirty-Year Constant Maturity
Rate (each as defined in the Citigroup Series Q Preferred Stock Certificate of
Designation) for such period. The amount of dividends payable for each full
dividend period for the Citigroup Series Q Preferred Stock will be computed by
dividing the dividend rate per year by four and applying the resulting rate to
the amount of $250 per share. Dividend periods will commence on February 28, May
31, August 31 and November 30 of each year.
Liquidation Preference. In the event of a liquidation, dissolution or
winding up of Citigroup, the holder of shares of Citigroup Series Q Preferred
Stock will be entitled to receive $250 per share plus accrued and unpaid
dividends (whether or not declared) and such holder will not be entitled to any
further payment.
Redemption. Except as provided above, the Citigroup Series Q Preferred
Stock may not be redeemed prior to May 31, 1999. At any time or from time to
time on and after May 31, 1999, Citigroup, at its option, may redeem shares of
the Citigroup Series Q Preferred Stock, in whole or in part, at a redemption
price of $250 per share together with accrued and unpaid dividends (whether or
not declared) to the date fixed for redemption.
CITIGROUP SERIES R PREFERRED STOCK
Dividends. The shares of Citigroup Series R Preferred Stock will be
entitled to a cumulative dividend at a variable rate. The dividend rate for the
Citigroup Series R Preferred Stock will be calculated in the same manner as the
dividend rate is calculated for the Citigroup Series R Preferred Stock described
above. Dividend periods will commence on February 28, May 31, August 31 and
November 30 of each year.
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Liquidation Preference. In the event of any liquidation, dissolution or
winding up of Citigroup, the holder of shares of Citigroup Series R Preferred
Stock will be entitled to receive $250 per share plus accrued and unpaid
dividends (whether or not declared) and such holder will not be entitled to any
further payment.
Redemption. Except as provided above, the Citigroup Series R Preferred
Stock may not be redeemed prior to August 31, 1999. At any time or from time to
time on and after August 31, 1999, Citigroup, at its option, may redeem shares
of the Citigroup Series R Preferred Stock, in whole or in part, at a redemption
price of $250 per share plus accrued and unpaid dividends (whether or not
declared) to the date fixed for redemption.
CITIGROUP SERIES S PREFERRED STOCK
Dividends. The shares of Citigroup Series S Preferred Stock will be
entitled to a noncumulative dividend in the amount of 8.30% per year. The amount
of dividends payable for each full dividend period for the Citigroup Series S
Preferred Stock will be computed by dividing the dividend rate of 8.30% per year
by four and applying the resulting rate of 2.075% to the amount of $250 per
share.
Liquidation Preference. In the event of a liquidation, dissolution or
winding up of Citigroup, the holder of shares of the Citigroup Series S
Preferred Stock will be entitled to receive $250 per share plus accrued and
unpaid dividends (whether or not declared) from the immediately preceding
dividend payment date (but without any cumulation for unpaid dividends for prior
dividend periods) and such holder will not be entitled to any further payment.
Redemption. Except as provided above, the Citigroup Series S Preferred
Stock may not be redeemed prior to November 15, 1999. At any time or from time
to time on and after November 15, 1999, Citigroup, at its option, may redeem
shares of the Citigroup Series S Preferred Stock in whole or in part at a
redemption price of $250 per share plus accrued and unpaid dividends (whether or
not declared) from the immediately preceding dividend payment date (but without
any cumulation for unpaid dividends for prior dividend periods).
CITIGROUP SERIES T PREFERRED STOCK
Dividends. The shares of Citigroup Series T Preferred Stock will be
entitled to a noncumulative dividend at a rate of 8.50% per year. The amount of
dividends payable for each full dividend period for the Citigroup Series T
Preferred Stock will be computed by dividing the dividend rate of 8.50% per year
by four and applying the resulting rate of 2.125% to the amount of $250 per
share.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of Citigroup, the holder of the shares of Citigroup Series T
Preferred Stock will be entitled to receive $250 per share plus accrued and
unpaid dividends (whether or not declared) from the immediately preceding
dividend payment date (but without any cumulation for unpaid dividends for prior
dividend periods) and such holder will not be entitled to any further payment.
Redemption. Except as provided above, the Citigroup Series T Preferred
Stock may not be redeemed prior to February 15, 2000. At any time or from time
to time on and after February 15, 2000, Citigroup, at its option, may redeem
shares of the Citigroup Series T Preferred Stock, in whole or in part, at a
redemption price of $250 per share, plus accrued and unpaid dividends (whether
or not declared) from the immediately preceding dividend payment date (but
without any cumulation for unpaid dividends for prior dividend periods).
CITIGROUP SERIES U PREFERRED STOCK
Dividends. The shares of Citigroup Series U Preferred Stock will be
entitled to a cumulative dividend at a rate of 7.75% per year. The amount of
dividends payable for each full dividend period for the Citigroup Series U
Preferred Stock will be computed by dividing the dividend rate of 7.75% per year
by four and applying the resulting rate of 1.9375% to the amount of $250 per
share.
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Liquidation Preference. In the event of any liquidation, dissolution or
winding up of Citigroup, the holder of shares of the Citigroup Series U
Preferred Stock will be entitled to receive $250 per share plus accrued and
unpaid dividends (whether or not declared) and such holder will not be entitled
to any further payment.
Redemption. Except as provided above, the Citigroup Series U Preferred
Stock may not be redeemed prior to May 15, 2000. At any time or from time to
time on and after May 15, 2000, Citigroup, at its option, may redeem shares of
the Citigroup Series U Preferred Stock, in whole or in part, at a redemption
price of $250 per share plus accrued and unpaid dividends (whether or not
declared) to the date fixed for redemption.
CITIGROUP SERIES V PREFERRED STOCK
Dividends. The shares of Citigroup Series V Preferred Stock will be
entitled to a cumulative dividend at a rate that changes over time. For each
dividend period up to but not including February 15, 2006, the dividend rate
will be 5.86% per year. The amount of dividends payable for each full Dividend
Period for Citigroup Series V Preferred Stock will be computed by dividing the
dividend rate of 5.86% per year by four and applying the resulting rate of
1.465% to the amount of $500 per share. For each dividend period beginning on or
after February 15, 2006, the dividend rate on the shares of Citigroup Series V
Preferred Stock will be equal to 0.50% plus the Effective Rate (as defined above
under "Citigroup Series Q Preferred Stock"), but not less than 6.00% or more
than 12.00%. The dividend rate will be increased in the event of a Change in Tax
Law.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of Citigroup, the holder of Citigroup Series V Preferred Stock will
be entitled to receive $500 per share plus accrued and unpaid dividends thereon
(whether or not declared) and such holder will not be entitled to any further
payment.
Redemption. Except as provided above or in this paragraph, the Citigroup
Series V Preferred Stock may not be redeemed prior to February 15, 2006. At any
time or from time to time on and after February 15, 2006, Citigroup, at its
option, may redeem shares of the Citigroup Series V Preferred Stock, in whole or
in part, at a redemption price of $500 per share plus all accrued and unpaid
dividends (whether or not declared) to the date fixed for redemption. Prior to
February 15, 2006, in the event of a Change in Tax Law, Citigroup at its option
may redeem all, but not less than all, of the Citigroup Series V Preferred Stock
at a price declining over time from $525 per share to $500 per share.
CITIGROUP SERIES W PREFERRED STOCK
Dividends. The shares of Citigroup Series W Preferred Stock will be
entitled to a cumulative dividend at a variable rate. For all quarterly dividend
periods ending on or prior to August 15, 1998, the annual dividend rate is the
Three-Year Treasury Rate (as defined in the Series W Preferred Stock Certificate
of Designation) plus 1.75%. After August 15, 1998 and on or prior to August 15,
2001, the annual dividend rate will be the Three-Year Treasury Rate plus 2.25%.
After August 15, 2001 and on or prior to August 15, 2004, the annual dividend
rate will be the Three-Year Treasury Rate plus 2.75%. After August 15, 2004, the
annual dividend rate will be the Three-Year Treasury Rate plus 3.00%; provided
that prior to August 15, 2004, the above rates may not be less than 7.00% nor
greater than 14.00% per year, and after August 15, 2004, the rates may not be
less than 8.00% nor greater than 16.00% per year. The amount of dividends
payable for each full dividend period for the Citigroup Series W Preferred Stock
is computed by dividing the applicable dividend rate by four and applying the
dividend rate to the amount of $100.00 per share. The dividend rate will be
increased in the event of a Change in Tax Law.
Liquidation Preference. In the event of a liquidation, dissolution or
winding up of Citigroup, the holder of shares of the Citigroup Series W
Preferred Stock will be entitled to receive $100 per share plus accrued and
unpaid dividends (whether or not earned or declared) and such holder will not be
entitled to any further payment.
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Redemption. On August 15, 1998, August 15, 2001 and any time after August
15, 2004, Citigroup, at its option, may redeem shares of Citigroup Series W
Preferred Stock in whole or in part at a price of $100 per share together with
accrued and unpaid dividends. If the Merger is consummated on or prior to August
15, 1998, it is expected that the Citigroup Series W Preferred Stock will be
redeemed on August 15, 1998. The Citigroup Series W Preferred Stock will also be
redeemable as provided above and in certain other circumstances following a
Change in Tax Law, in each case at $100 per share together with accrued and
unpaid dividends.
STOCK EXCHANGE MATTERS
It is a condition to the consummation of the Merger that the shares of
Citigroup Common Stock that will be issued (i) in connection with the Merger and
(ii) upon exercise of certain former Citicorp employee stock options which shall
be converted into options to purchase Citigroup Common Stock, be authorized for
listing on the NYSE, subject to official notice of issuance. In addition, it is
also a condition to the consummation of the Merger that the New Citigroup
Depositary Shares to be issued in the Merger will be listed on the NYSE, subject
to official notice of issuance, provided that the corresponding series of
Citicorp Depositary Shares are listed on the NYSE as of the date hereof.
Application has been made to list the Citigroup Common Stock and New Citigroup
Preferred Stock and the related Citigroup Depositary Shares to be issued in the
Merger or upon exercise of stock options as described above on the NYSE, subject
to official notice of issuance, except that the Citigroup Series O, Series V and
Series W Preferred Stock will not be listed on the NYSE. If the Merger is
consummated, Citicorp Common Stock and Citicorp Depositary Shares which are
currently listed on any exchange will cease to be listed. The Citicorp Common
Stock is also currently listed on the Chicago, Pacific, London, Amsterdam,
Tokyo, Swiss, Toronto, Dusseldorf and Frankfurt Stock Exchanges. Following the
Merger, however, the Citigroup Common Stock will not be listed on any of those
exchanges (other than the Pacific).
COMPARISON OF RIGHTS OF STOCKHOLDERS OF TRAVELERS AND CITICORP
The rights of Citicorp stockholders are currently governed by the DGCL and
the Restated Certificate of Incorporation and the By-Laws of Citicorp (the
"Citicorp Certificate" and the "Citicorp By-Laws," respectively). The rights of
Travelers stockholders are currently governed by the DGCL, the Travelers
Certificate and the Travelers By-Laws. In accordance with the Merger Agreement,
at the Effective Time, (i) each issued and outstanding share of Citicorp Common
Stock will be converted into the right to receive 2.5 shares of Citigroup Common
Stock and (ii) each issued and outstanding share of Citicorp Preferred Stock
will be converted into the right to receive one share of a corresponding series
of New Citigroup Preferred Stock. Accordingly, upon consummation of the Merger,
the rights of Travelers stockholders and Citicorp stockholders who become
stockholders of Citigroup in the Merger will be governed by the DGCL and the
Citigroup Certificate and the Citigroup By-Laws (which will be the Travelers
Certificate and the Travelers By-Laws, respectively, amended as described herein
or as necessary to reflect the recommendations of the team of outside directors
referred to in "THE MERGER -- Rationale for the Merger; Recommendation of Each
Company's Board of Directors" and the transactions contemplated in the Merger
Agreement). The following are summaries of the material differences between the
current rights of Citicorp stockholders and the rights of Travelers
stockholders.
The following discussions are not intended to be complete and are qualified
by reference to the Citicorp Certificate, the Citicorp By-Laws, the Travelers
Certificate and the Travelers By-Laws. Copies of these documents are
incorporated by reference herein and will be sent to stockholders of Travelers
and Citicorp upon request. See "WHERE YOU CAN FIND MORE INFORMATION."
AUTHORIZED CAPITAL
Citicorp. The authorized capital stock of Citicorp consists of 800,000,000
shares of Citicorp Common Stock, of which there were 451,524,629 shares
outstanding as of March 31, 1998, 20,000,000 shares of Citicorp Class B Common
Stock, par value $1.00 per share, of which there were no shares issued or
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outstanding as of March 31, 1998 and 50,000,000 shares of Citicorp Preferred
Stock, the issued and outstanding shares of which as of March 31, 1998 consist
of 625,000 shares of Citicorp Series 8A Preferred Stock, 625,000 shares of
Citicorp Series 8B Preferred Stock, 1,300,000 shares of Citicorp Series 16
Preferred Stock (all of which were redeemed on June 1, 1998), 1,400,000 shares
of Citicorp Series 17 Preferred Stock, 700,000 shares of Citicorp Series 18
Preferred Stock, 400,000 shares of Citicorp Series 19 Preferred Stock, 500,000
shares of Citicorp Series 20 Preferred Stock, 600,000 shares of Citicorp Series
21 Preferred Stock, 500,000 shares of Citicorp Series 22 Preferred Stock, and
250,000 shares of Citicorp Series 23 Preferred Stock. All shares of the Citicorp
Preferred Stock, other than the Citicorp Series 8A Preferred Stock and the
Citicorp Series 8B Preferred Stock, are beneficially held through depositary
shares, each of which represents one-tenth of one share of the underlying
Citicorp Preferred Stock.
Travelers. The authorized capital stock of Travelers consists of
3,000,000,000 shares of Travelers Common Stock, of which there were
1,150,046,708 shares outstanding as of April 30, 1998, and 30,000,000 shares of
Travelers Preferred Stock, the issued and outstanding shares of which as of
March 31, 1998 consist of: 1,600,000 shares of 6.365% Cumulative Preferred
Stock, Series F; 800,000 shares of 6.213% Cumulative Preferred Stock, Series G;
800,000 shares of 6.231% Cumulative Preferred Stock, Series H; 280,000 shares of
Series I Preferred Stock; 400,000 shares of Series J Preferred Stock; 500,000
shares of Series K Preferred Stock; 800,000 shares of 5.864% Cumulative
Preferred Stock, Series M; and 2,262 shares of Cumulative Adjustable Rate
Preferred Stock, Series Y.
BOARD OF DIRECTORS
Citicorp. Pursuant to the Citicorp By-Laws, the number of directors of
Citicorp is to be fixed from time to time by resolution adopted by the Citicorp
Board or by the Citicorp stockholders. The current number of Citicorp directors
is 15. The Citicorp Board is not divided into classes, and the Citicorp
directors are elected for one-year terms by an affirmative plurality of the
number of votes cast at the annual stockholders meeting by the holders of shares
entitled to vote in the election. A quorum at any meeting of the Citicorp Board
consists of a majority of the total number of directors, and a majority of the
directors present at any meeting at which a quorum is present is required to
approve Citicorp Board action.
Travelers. Pursuant to the Travelers Certificate and the Travelers
By-Laws, the number of Travelers directors is determined from time to time by
the affirmative vote of a majority of the entire Travelers Board. Currently,
there are 19 Travelers directors. The Travelers By-Laws provide that the
election and term of the Travelers directors is determined pursuant to the
Travelers Certificate. The Travelers Board is not divided into classes, and
Travelers directors are elected for one-year terms by the stockholders at
Travelers' annual meeting. The Travelers Certificate and the Travelers By-Laws
are silent as to the requisite vote of stockholders to elect directors. Under
the DGCL, directors are elected by a plurality of the votes present in person or
represented by proxy at a meeting of stockholders by the holders of shares
entitled to vote in the election. A quorum at any meeting of the Travelers Board
consists of one-third of the total number of Travelers directors, except when
the Travelers Board consists of one director, then one director constitutes a
quorum for the transaction of business. A majority of the directors present at
any meeting at which a quorum is present is required to approve an action of the
Travelers Board.
COMMITTEES OF THE BOARD OF DIRECTORS
Citicorp. The Citicorp By-Laws provide for an Executive Committee composed
of the Chairman, who must be an ex-officio member, and not less than three
additional directors who are appointed by the Citicorp Board, who may not be
officers or employees of Citicorp or any of its subsidiaries. The Citicorp Board
may from time to time appoint other committees with powers and duties determined
by the Citicorp Board. The Citicorp Board currently has an Executive Committee,
an Audit Committee, a Committee on Directors, a Committee on Subsidiaries and
Capital, a Personnel Committee, a Public Issues Committee and a Stock Committee.
Travelers. Pursuant to the Travelers By-Laws, the Travelers Board may
designate one or more standing committees, including an Executive Committee
which must consist of not fewer than two nor more than ten
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Travelers directors. The Travelers Board currently has an Executive Committee,
an Audit Committee, a Nominations, Compensation and Corporate Governance
Committee, an Ethics and Public Affairs Committee and a Finance Committee. It is
expected that the identity and/or composition of these committees may be changed
at or following the Effective Time.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Citicorp. Neither the Citicorp Certificate nor the Citicorp By-Laws
provide for the filling of board seats when they are newly created or vacated.
Under the DGCL, unless otherwise provided in the certificate of incorporation or
bylaws, (1) vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director and (2) whenever the holders of any class or classes of
stock or series thereof are entitled to elect one or more directors by the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
Travelers. Pursuant to the Travelers Certificate, newly created
directorships resulting from an increase in the number of Travelers directors
may be filled by a majority of the Travelers directors then in office, provided
that a quorum is present. Any other vacancy occurring on the Travelers Board may
be filled by a majority of the directors then in office, even if less than a
quorum, or by a sole remaining director.
REMOVAL OF DIRECTORS
Neither the Citicorp Certificate, the Citicorp By-Laws, the Travelers
Certificate nor the Travelers By-Laws includes a provision setting forth the
procedure for the removal of directors. Under the DGCL, any director or the
entire board of directors of a corporation may be removed, with or without
cause, by the holders of a majority of shares then entitled to vote at an
election of directors.
OFFICERS
Citicorp. Pursuant to the Citicorp By-Laws, the Citicorp Board appoints a
Chairman, who is Citicorp's chief executive officer. The Citicorp Board may also
appoint a President, one or more Vice Chairmen, Corporate Executive Vice
Presidents, and Executive Vice Presidents/Senior Corporate Officers, a Chairman
Credit Policy Committee, and one or more Senior Vice Presidents and Vice
Presidents, shall appoint a Secretary and a Chief Auditor, and may appoint other
officers. The Citicorp Certificate and the Citicorp By-Laws are silent as to the
removal of officers. Under the DGCL, officers may be removed at any time by
resolution of the Citicorp Board.
Travelers. Pursuant to the Travelers By-Laws, Travelers' officers consist
of a Chairman of the Board, a President, one or more Vice Presidents, a
Controller, a Secretary and a Treasurer, and other officers and assistant
officers as may be elected or appointed by the Travelers Board or by the
Travelers Executive Committee. The Travelers Certificate and the Travelers
By-Laws are silent as to the removal of officers. Under the DGCL, officers may
be removed at any time by resolution of the Travelers Board. Prior to the
Effective Time, the Travelers By-Laws will be amended to provide for two
Chairmen, who will be Co-Chief Executive Officers.
SPECIAL MEETINGS OF STOCKHOLDERS
Citicorp. Pursuant to the Citicorp By-Laws, a special meeting of
Citicorp's stockholders may be called at any time by the Citicorp Board or by
the Secretary at the written request of stockholders owning at least one-third
of the outstanding shares of Citicorp Common Stock.
Travelers. Pursuant to the Travelers By-Laws, a special meeting of
Travelers' stockholders may be called by the Chairman of the Board. A special
meeting must be called at the request, in writing, of a majority of the
Travelers Board or of the Travelers Executive Committee, or by the vote of the
Travelers Board or of
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the Travelers Executive Committee. A special meeting may also be called by any
Travelers stockholder in the event the entire Board of Directors becomes vacant.
QUORUM AT STOCKHOLDER MEETINGS
Pursuant to the Citicorp By-Laws and the Travelers By-Laws, the holders of
a majority of the shares of stock of the respective corporation entitled to vote
constitutes a quorum at all stockholder meetings. In the absence of a quorum,
the holders of a majority of the shares of stock present in person or by proxy
and entitled to vote may adjourn any meeting until a quorum attends.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Citicorp. The Citicorp Certificate provides that, whenever the vote of
stockholders at a meeting thereof is required or permitted to be taken for or in
connection with any corporate action by any provision of the DGCL, the meeting
and vote of stockholders may be dispensed with if such action is taken with the
written consent of the holders of not less than a majority of all the stock
entitled to be voted upon such action if a meeting were held, provided that (i)
the written consent of holders of not less than the minimum percentage of stock
required by the DGCL for such action is obtained and (ii) prompt notice is given
to all stockholders of the taking of corporate action without a meeting and by
less than unanimous written consent.
Travelers. The Travelers Certificate is silent with respect to the written
consent of stockholders in lieu of a meeting. Under the DGCL, unless otherwise
provided in the certificate of incorporation, any action which may be taken at
any annual or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if written consents are signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS AT ANNUAL MEETINGS
Neither the Travelers Certificate, the Travelers By-Laws, the Citicorp
Certificate nor the Citicorp By-Laws include a provision which requires that
advance notice be given to Travelers or Citicorp of stockholder-proposed
business to be conducted at annual meetings. The DGCL also does not explicitly
require that stockholder-proposed business be the subject of an advance notice
to stockholders.
AMENDMENT OF GOVERNING DOCUMENTS
Citicorp. Citicorp may amend, alter, change or repeal any provision of the
Citicorp Certificate as permitted by the DGCL. Under the DGCL, an amendment to a
corporation's certificate of incorporation requires the recommendation of a
corporation's board of directors, the approval of a majority of all shares
entitled to vote thereon, voting together as a single class, and the approval of
a majority of the outstanding stock of each class entitled to vote separately
thereon unless a higher vote is required in the corporation's certificate of
incorporation. The only provision of the Citicorp Certificate requiring such a
higher vote is the provision requiring two-thirds of each series of Citicorp
Preferred Stock, voting separately as a class with all other Citicorp Preferred
Stock on par with it, to approve amendments that would materially and adversely
affect such series' rights, preferences or voting power. The Citicorp By-Laws
provide that they may be amended or repealed, and new Citicorp By-Laws may be
adopted, by the Citicorp Board at any regular or special meeting. The DGCL
provides that the stockholders also have the power to amend or repeal the
Citicorp By-Laws and adopt new by-laws.
Travelers. Pursuant to the Travelers Certificate, Travelers reserves the
right to amend or repeal any provision of the Travelers Certificate as permitted
under the DGCL, except as noted below. Under the DGCL and the Travelers
Certificate, an amendment to a corporation's certificate of incorporation
requires the recommendation of a corporation's board of directors, the approval
of a majority of all shares entitled to vote thereon, voting together as a
single class, and the approval of a majority of the outstanding stock of each
class entitled to vote thereon unless a higher vote is required in the
corporation's certificate of incorporation (which is required by the Travelers
Certificate with respect to amending the provisions pertaining to the rights of
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<PAGE> 74
certain Travelers Preferred Stock (two-thirds affirmative vote), certain
business combinations (two-thirds affirmative vote of all voting stock, voting
together as a single class) and amendment of the Travelers By-Laws (two-thirds
affirmative vote, with three-quarters affirmative vote required to amend the
Travelers Certificate to change the voting requirement contained therein in
respect of the Travelers By-Laws)). Pursuant to the Travelers Certificate, the
Travelers Board has the power to make, alter, amend and repeal the Travelers By-
Laws by an affirmative vote of at least two-thirds of the entire Travelers
Board. Pursuant to the Travelers By-Laws, the Travelers directors may exercise
such power of amendment at any meeting; any alteration, however, can be repealed
by the Travelers Board or by the stockholders at any meeting duly called. Under
the DGCL, the stockholders also have the power to amend or repeal the Travelers
By-Laws or to adopt new by-laws.
FAIR PRICE PROVISIONS
Citicorp. The Citicorp Certificate does not include any provision
governing the approval requirements of business combinations. Under the DGCL, an
agreement of merger, or the sale, lease or exchange of all or substantially all
of a corporation's assets, must be approved by the corporation's board of
directors and adopted by the holders of a majority of the outstanding shares of
stock entitled to vote thereon and the approval of a majority of the outstanding
shares of each class entitled to vote separately thereon.
Travelers. In addition to the approval requirements of business
combinations under the DGCL, the Travelers Certificate includes what generally
is referred to as a "fair price provision."
In general, this provision of the Travelers Certificate provides that a
Business Combination (which is defined to include mergers, consolidations,
certain recapitalizations and the sale, lease, exchange or transfer of all or
substantially all of the assets of Travelers, with, to or for the benefit of an
Interested Stockholder (as defined therein)) requires approval by the
affirmative vote of at least two-thirds of the votes entitled to be cast by the
holders of all then outstanding shares of voting capital stock of Travelers,
excluding shares held by the Interested Stockholder and certain related parties,
unless the Business Combination is approved by a majority of the Continuing
Directors (as defined therein) or unless certain minimum price criteria and
procedural requirements which are intended to assure an adequate and fair price
under the circumstances are satisfied. In general, an "Interested Stockholder,"
for purposes of this provision, includes any person who is, or has announced or
publicly disclosed a plan or intention to become, the beneficial owner of 25% or
more of the voting capital stock of Travelers. A "Continuing Director" is any
member of the Travelers Board who is not affiliated with an Interested
Stockholder and who either was a director of Travelers prior to the time any
Interested Stockholder became an Interested Stockholder or whose nomination for
election or election to the Travelers Board was recommended or approved by a
majority of the Continuing Directors then in office.
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NEW CITIGROUP DEPOSITARY SHARES
GENERAL
At the Effective Time, Citigroup will assume the obligations of Citicorp
under the deposit agreements in respect of each series of Citicorp Preferred
Stock that will be exchanged for New Citigroup Preferred Stock in the Merger
(collectively, the "Deposit Agreements") and will instruct Citibank, N.A. (the
"Depositary") to treat the shares of Citigroup Series P Preferred Stock,
Citigroup Series Q Preferred Stock, Citigroup Series R Preferred Stock,
Citigroup Series S Preferred Stock, Citigroup Series T Preferred Stock,
Citigroup Series U Preferred Stock and Citigroup Series V Preferred Stock
(collectively, "Citigroup Deposited Preferred Stock") as new deposited
securities under the applicable Deposit Agreement. In accordance with the terms
of the relevant Deposit Agreement, the existing depositary receipts ("New
Citigroup Depositary Receipts") formerly evidencing Citicorp Depositary Shares
(other than any shares of Citicorp Series 23 Preferred Stock whose holders have
properly perfected appraisal rights) will automatically evidence the New
Citigroup Depositary Shares issued in exchange for the corresponding series of
Citicorp Depositary Shares.
The following is a summary of material provisions of the Deposit
Agreements. This description does not purport to be complete and is qualified by
reference to the Deposit Agreements, the forms of which have been filed as
exhibits to the Registration Statement. See "WHERE YOU CAN FIND MORE
INFORMATION." The terms of each of the Deposit Agreements is substantially
similar, except that each of the Deposit Agreements will govern matters relating
solely to the respective series of New Citigroup Preferred Stock, the New
Citigroup Depositary Shares and the New Citigroup Depositary Receipts issued
thereunder.
Each New Citigroup Depositary Share will represent a one-tenth interest in
the corresponding share of New Citigroup Preferred Stock. Application has been
made to list the New Citigroup Depositary Shares (other than the depositary
shares representing Citigroup Series V Preferred Stock) on the NYSE. The New
Citigroup Depositary Shares will be freely transferable under the Securities
Act.
Subject to the terms of the Deposit Agreements, each owner of a New
Citigroup Depositary Share will be entitled through the Depositary, in
proportion to the one-tenth interest in a share of the applicable New Citigroup
Preferred Stock underlying such New Citigroup Depositary Share, to all rights
and preferences of a share of such New Citigroup Preferred Stock (including
dividend, voting, redemption and liquidation rights). Because each share of
Deposited Citigroup Preferred Stock entitles the holder thereof to one vote on
matters on which such Citigroup Preferred Stock is entitled to vote, each New
Citigroup Depositary Share will, in effect, entitle the holder thereof to
one-tenth of a vote thereon.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Citigroup Deposited Preferred Stock to
the record holders of the New Citigroup Depositary Shares representing such
Citigroup Deposited Preferred Stock in proportion to the numbers of such New
Citigroup Depositary Shares owned by such holders on the relevant record date.
The Depositary will distribute only such amount, however, as can be distributed
without attributing to any holder of the New Citigroup Depositary Shares a
fraction of one cent, and any balance not so distributable will be held by the
Depositary (without liability for interest thereon) and will be added to and
treated as part of the next sum received by the Depositary for distribution to
record holders of New Citigroup Depositary Shares then outstanding.
In the event of a distribution other than in cash in respect of Citigroup
Deposited Preferred Stock, the Depositary will distribute the property received
by it to the record holders of the New Citigroup Depositary Shares entitled
thereto, unless the Depositary determines that it is not feasible to make such
distribution, in which case the Depositary may, with the approval of Citigroup,
adopt such method as it deems equitable and practicable to effect such
distribution, including the sale of such property and distribution of the net
proceeds from such sale to such holders.
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The Deposit Agreements also contain provisions relating to the manner in
which any subscription or similar rights offered by Citigroup to holders of the
Citigroup Deposited Preferred Stock will be made available to holders of the New
Citigroup Depositary Shares.
WITHDRAWAL OF STOCK
Upon surrender of New Citigroup Depositary Receipts at the principal office
of the Depositary (unless the related New Citigroup Depositary Shares have
previously been called for redemption) and subject to the terms of the related
Deposit Agreement, the holder of the New Citigroup Depositary Shares evidenced
thereby is entitled to delivery of the number of whole shares of New Citigroup
Preferred Stock and any money or other property represented by such New
Citigroup Depositary Shares. Partial shares of New Citigroup Preferred Stock
will not be issued. If the New Citigroup Depositary Receipts delivered by the
holder evidence a number of New Citigroup Depositary Shares in excess of the
number of New Citigroup Depositary Shares representing the number of whole
shares of New Citigroup Preferred Stock to be withdrawn, the Depositary will
deliver to such holder at the same time a New Citigroup Depositary Receipt
evidencing such excess number of New Citigroup Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
If the Citigroup Deposited Preferred Stock is subject to redemption in
whole or in part, the related New Citigroup Depositary Shares will be redeemed
from the proceeds received by the Depositary as a result of any such redemption
of such series of Citigroup Deposited Preferred Stock held by the Depositary.
The redemption price per New Citigroup Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
the underlying Citigroup Deposited Preferred Stock. Whenever Citigroup redeems
shares of a series of Citigroup Deposited Preferred Stock, the Depositary will
redeem as of the same redemption date the number of the New Citigroup Depositary
Shares representing the shares of the New Citigroup Preferred Stock so redeemed.
If less than all of the New Citigroup Depositary Shares are to be redeemed, the
New Citigroup Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Depositary.
VOTING THE CITIGROUP DEPOSITED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Citigroup
Deposited Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of the
Citigroup New Depositary Shares relating to such Citigroup Deposited Preferred
Shares. Each recordholder of the New Citigroup Depositary Shares on the record
date will be entitled to instruct the Depositary as to the exercise of the
voting rights pertaining to the number of shares of Citigroup Deposited
Preferred Stock represented by such recordholder's New Citigroup Depositary
Shares. The Depositary will endeavor, insofar as practicable, to vote the number
of shares of the Citigroup Deposited Preferred Stock represented by such New
Citigroup Depositary Shares in accordance with any such instructions, and
Citigroup will agree to take all action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of the Citigroup Deposited Preferred Stock to the
extent that it does not receive specific instructions from the holders of New
Citigroup Depositary Shares representing such Citigroup Deposited Preferred
Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of the New Citigroup Depositary Receipt evidencing any New
Citigroup Depositary Shares and any provision of a Deposit Agreement may at any
time and from time to time be amended by agreement between Citigroup and the
Depositary. However, any amendment which materially and adversely alters the
rights of the existing holders of the New Citigroup Depositary Shares will not
be effective unless such amendment has been approved by the holders of at least
a majority (or, in the case of amendments relating to or affecting rights to
receive dividends or distributions or voting or redemption rights, two-thirds)
of the New Citigroup Depositary Shares then outstanding under such Deposit
Agreement. A Deposit Agreement may be terminated by Citigroup or the Depositary
only if (i) all the outstanding New Citigroup Depositary Shares
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relating thereto have been redeemed, (ii) there has been a final distribution in
respect of the Citigroup Deposited Preferred Stock of the relevant series in
connection with any liquidation, dissolution or winding up of Citigroup and such
distribution has been distributed to the holders of the related New Citigroup
Depositary Shares or (iii) the holders of New Citigroup Depositary Shares
representing not less than two-thirds of the Depositary Shares outstanding have
consented to the termination.
CHARGES OF DEPOSITARY
Citigroup will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. Citigroup will
pay the charges of any Depositary in connection with the initial deposit of the
Citigroup Deposited Preferred Stock and the initial issuance of the relevant New
Citigroup Depositary Shares and any redemption of such New Citigroup Preferred
Stock. Holders of the New Citigroup Depositary Shares will pay certain other
taxes and certain governmental and other charges as are provided in the relevant
Deposit Agreement to be for their accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to Citigroup notice of
its election to do so and Citigroup may at any time remove the Depositary. Any
such resignation or removal will take effect upon the appointment of a successor
Depositary.
MISCELLANEOUS
The Depositary will forward to the holders of the New Citigroup Depositary
Shares all reports and communications from Citigroup which are delivered to such
Depositary and which Citigroup is required to furnish to the holders of the
Citigroup Deposited Preferred Stock.
Neither any Depositary nor Citigroup will be liable if it is prevented or
delayed by law of any circumstances beyond its control in performing its
obligations under a Deposit Agreement to holders of the New Citigroup Depositary
Shares other than for its negligence or willful misconduct. The obligations of
Citigroup and any Depositary under a Deposit Agreement will be limited to
performance in good faith of their duties thereunder and they will not be
obligated to prosecute or defend any legal proceeding in respect of any New
Citigroup Depositary Shares or Citigroup Deposited Preferred Stock unless
satisfactory indemnity is furnished. Citigroup and any Depositary may rely upon
written advice of counsel or accountants, upon information provided by persons
presenting the New Citigroup Preferred Stock for deposit, upon holders of the
New Citigroup Depositary Shares or other persons believed to be competent to
give such information and upon documents believed to be genuine and to have been
signed or presented by the proper party or parties.
EXPERTS
The consolidated financial statements and schedules of Travelers as of
December 31, 1997 and 1996, and for each of the years in the three-year period
ended December 31, 1997, incorporated or included in Travelers' Annual Report on
Form 10-K for the year ended December 31, 1997, and incorporated by reference
herein, have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as set forth in their reports thereon (also incorporated by
reference herein), which reports state that KPMG Peat Marwick LLP did not audit
the consolidated financial statements of Salomon Inc and its subsidiaries,
appearing in Salomon Inc's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "Salomon Financials"), as of December 31, 1996 and for
each of the two years in the period ended December 31, 1996 and that their
opinion with respect to any amounts derived from the Salomon Financials is based
on the report of Arthur Andersen LLP. The consolidated financial statements of
Travelers referred to above are incorporated by reference herein in reliance
upon such reports given upon the authority of said firms as experts in
accounting and auditing.
The consolidated financial statements and schedules of Citicorp and its
subsidiaries as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, and the related
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consolidated balance sheets of Citibank, N.A. and subsidiaries as of December
31, 1997 and 1996, included in the 1997 Citicorp Annual Report and Form 10-K,
have been incorporated by reference herein, in reliance upon the reports (also
incorporated by reference herein) of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Citigroup Common
Stock and the New Citigroup Preferred Stock (represented, in some cases, by the
New Citigroup Depositary Shares) to be issued pursuant to the Merger and the
federal income tax consequences of the Merger will be passed upon for Travelers
by Skadden, Arps, Slate, Meagher & Flom LLP, Travelers' outside legal counsel.
Kenneth J. Bialkin, a partner of Skadden, Arps, Slate, Meagher & Flom LLP, is a
director of Travelers and he and other attorneys in such firm beneficially own
an aggregate of less than 1% of the outstanding Travelers Common Stock. Certain
legal matters with respect to the federal income tax consequences of the Merger
will be passed upon for Citicorp by Shearman & Sterling, Citicorp's outside
legal counsel.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 Annual Meeting
of Stockholders of Citigroup must be received by the Secretary of Citigroup not
later than December 22, 1998 for inclusion in the proxy materials for such
meeting.
Due to the contemplated consummation of the Merger, Citicorp does not
currently expect to hold a 1999 Annual Meeting of Stockholders because Citicorp
will be a wholly owned subsidiary of Citigroup following the Merger. In the
event that the Merger is not consummated and such a meeting is held, to be
eligible for inclusion in Citicorp's proxy statement and form of proxy relating
to that meeting, proposals of stockholders intended to be presented at such
meeting must be received by Citicorp either (i) within a reasonable time after
Citicorp announces publicly the date of the meeting and before Citicorp mails
its proxy statement to stockholders in connection with such meeting, or (ii) no
later than November 10, 1998, if Citicorp shall have announced publicly its
intention not to consummate the Merger prior to such date.
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WHERE YOU CAN FIND MORE INFORMATION
Travelers and Citicorp file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that the companies file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Travelers and Citicorp public filings are also available
to the public from commercial document retrieval services and at the Internet
World Wide Web site maintained by the SEC at "http:// www.sec.gov." Reports,
proxy statements and other information concerning Travelers and Citicorp also
may be inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
Travelers has filed the Registration Statement to register with the SEC the
shares of Citigroup Common Stock, New Citigroup Preferred Stock and New
Citigroup Depositary Shares to be issued to Citicorp stockholders in the Merger.
This Joint Proxy Statement/Prospectus is a part of the Registration Statement
and constitutes a prospectus of Travelers, a proxy statement of Travelers for
the Travelers Special Meeting and a proxy statement of Citicorp for the Citicorp
Special Meeting.
As allowed by SEC rules, this Joint Proxy Statement/Prospectus does not
contain all the information that stockholders can find in the Registration
Statement or the exhibits to the Registration Statement.
The SEC allows Travelers and Citicorp to "incorporate by reference"
information into this Joint Proxy Statement/Prospectus, which means that the
companies can disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this Joint Proxy Statement/Prospectus, except
for any information superseded by information contained directly in the Joint
Proxy Statement/Prospectus. This Joint Proxy Statement/ Prospectus incorporates
by reference the documents set forth below that Travelers and Citicorp have
previously filed with the SEC. These documents contain important information
about the companies and their financial condition.
<TABLE>
<S> <C>
TRAVELERS SEC FILINGS (FILE NO. 1-9924) PERIOD
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Report on Form 10-Q Three months ended March 31, 1998
Current Reports on Form 8-K Dated January 8, 1998, January 28, 1998,
February 17, 1998, April 6, 1998, April 8,
1998, April 20, 1998 and June 1, 1998
Registration Statement on Form 8-B Dated May 10, 1988, setting forth a
description of the Travelers Common Stock
(including any amendments or reports filed
for the purpose of updating such description)
CITICORP SEC FILINGS (FILE NO. 1-5738) PERIOD
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Report on Form 10-Q Three months ended March 31, 1998
Current Reports on Form 8-K Dated January 20, 1998, April 5, 1998, April
8, 1998 and April 21, 1998
</TABLE>
Travelers and Citicorp incorporate by reference additional documents that
either company may file with the SEC between the date of this Joint Proxy
Statement/Prospectus and the date of the Special Meetings. These include
periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, as well as proxy statements.
Travelers has supplied all information contained or incorporated by
reference in this Joint Proxy Statement/ Prospectus relating to Travelers, and
Citicorp has supplied all such information relating to Citicorp.
If you are a stockholder of Travelers or Citicorp, Travelers or Citicorp,
as the case may be, may have sent you some of the documents incorporated by
reference, but you can obtain any of them through Travelers or Citicorp, as the
case may be, or the SEC or the SEC's Internet World Wide Web site described
above.
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Documents incorporated by reference are available from the companies without
charge, excluding all exhibits unless specifically incorporated by reference as
an exhibit to this Joint Proxy Statement/Prospectus. Stockholders of Travelers
or Citicorp may obtain documents incorporated by reference in this Joint Proxy
Statement/Prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:
TRAVELERS GROUP INC.
388 Greenwich Street
New York, New York 10013
Attention: Charles O. Prince, III -- Secretary
CITICORP
Corporate Affairs Distribution
850 Third Avenue, 13th Floor
New York, New York 10043
Attention: Jeffrey Barnard
If you would like to request documents from either company, please do so by
July 10, 1998 to receive them before the Travelers Special Meeting and/or
Citicorp Special Meeting. If you request any incorporated documents from us we
will mail them to you by first-class mail, or other equally prompt means, within
one business day of our receipt of your request.
You should rely only on the information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus to vote your shares at the
Travelers Special Meeting and/or Citicorp Special Meeting. Travelers and
Citicorp have not authorized anyone to provide you with information that is
different from what is contained in this Joint Proxy Statement/Prospectus. This
Joint Proxy Statement/Prospectus is dated June 16, 1998. You should not assume
that the information contained in the Joint Proxy Statement/Prospectus is
accurate as of any date other than that date, and neither the mailing of this
Joint Proxy Statement/Prospectus to stockholders nor the issuance of Citigroup's
securities in the Merger shall create any implication to the contrary.
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TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined statement of financial
position combines the historical consolidated statement of financial position of
Travelers and the historical consolidated statement of financial position of
Citicorp giving effect to the Merger as if it had been consummated on March 31,
1998. The following unaudited pro forma condensed combined statements of income
combine the historical statements of income of Travelers and Citicorp giving
effect to the Merger as if it had occurred on January 1, 1995. This information
should be read in conjunction with the accompanying notes hereto, the separate
historical financial statements of Travelers as of March 31, 1998 and for the
three months ended March 31, 1998 and 1997, and for each of the three years
ended December 31, 1997 which are contained in Travelers' Quarterly Report on
Form 10-Q for the three month period ended March 31, 1998 and its Annual Report
on Form 10-K for the fiscal year ended December 31, 1997, respectively, and the
separate historical financial statements of Citicorp as of March 31, 1998 and
for the three months ended March 31, 1998 and 1997, and for each of the three
years ended December 31, 1997, which are contained in Citicorp's Quarterly
Report on Form 10-Q for the three month period ended March 31, 1998 and its
Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
respectively.
The pro forma data is not necessarily indicative of the results of
operations that would have occurred had the Merger been consummated on the date
indicated or of future operations of the combined company.
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TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
AS OF MARCH 31, 1998
(in millions)
<TABLE>
<CAPTION>
TRAVELERS CITICORP PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........................ $ 3,943 $ 21,877 $ -- $ 25,820
Investments...................................... 64,156 35,922 100,078
Federal funds sold and securities borrowed or
purchased under agreements to resell........... 115,936 21,858 137,794
Brokerage receivables............................ 41,303 41,303
Trading account assets........................... 124,567 39,740 164,307
Consumer loans................................... 11,475 105,945 117,420
Commercial loans................................. -- 82,655 82,655
Allowance for credit losses...................... (331) (5,828) (6,159)
-------- -------- -------- --------
Loans, net..................................... 11,144 182,772 -- 193,916
Reinsurance recoverables......................... 9,622 9,622
Separate and variable accounts................... 12,943 12,943
Other assets..................................... 24,861 28,245 53,106
-------- -------- -------- --------
Total assets.............................. $408,475 $330,414 $ -- $738,889
======== ======== ======== ========
LIABILITIES
Deposits......................................... $ -- $214,719 $ -- $214,719
Investment banking and brokerage borrowings...... 18,195 18,195
Short-term borrowings............................ 3,804 10,351 14,155
Long-term debt................................... 29,288 19,409 48,697
Federal funds purchased and securities loaned or
sold under agreements to repurchase............ 118,312 11,106 129,418
Brokerage payables............................... 56,624 56,624
Trading account liabilities...................... 65,177 31,291 96,468
Insurance policy and claims reserves............. 43,766 43,766
Contractholder funds and separate and variable
accounts....................................... 28,120 28,120
Other liabilities................................ 20,451 21,317 41,768
-------- -------- -------- --------
Total liabilities......................... 383,737 308,193 -- 691,930
-------- -------- -------- --------
Redeemable preferred stock -- Series I........... 280 280
Trust preferred securities -- parent obligated... 1,200 750 (750) 1,200
Trust preferred securities -- subsidiary
obligated...................................... 1,645 750 2,395
STOCKHOLDERS' EQUITY
Preferred stock.................................. 1,450 1,600 3,050
Common stock..................................... 12 506 (495) 23
Additional paid-in capital....................... 5,872 6,493 (4,234) 8,131
Retained earnings................................ 16,369 17,564 33,933
Treasury stock, at cost.......................... (2,630) (4,729) 4,729 (2,630)
Accumulated other changes in equity from nonowner
sources........................................ 1,115 37 1,152
Unearned compensation............................ (575) (575)
-------- -------- -------- --------
Total stockholders' equity................ 21,613 21,471 -- 43,084
-------- -------- -------- --------
Total liabilities and stockholders'
equity............................... $408,475 $330,414 $ -- $738,889
======== ======== ======== ========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
76
<PAGE> 83
TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(in millions, except per share amounts)
<TABLE>
<CAPTION>
TRAVELERS CITICORP PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
REVENUES:
Loan interest, including fees............................... $ 407 $4,843 $ 5,250
Other interest and dividends................................ 4,421 1,460 5,881
Insurance premiums.......................................... 2,340 2,340
Commissions and fees........................................ 1,434 1,441 2,875
Principal transactions...................................... 780 585 1,365
Asset management and administration fees.................... 498 498
Realized gains from sales of investments.................... 144 241 385
Other income................................................ 344 499 843
-------- ------ --------
Total revenues.............................................. 10,368 9,069 19,437
Interest expense............................................ 3,177 3,464 6,641
-------- ------ --------
Total revenues, net of interest expense.............. 7,191 5,605 12,796
-------- ------ --------
OPERATING EXPENSES:
Policyholder benefits and claims............................ 1,994 1,994
Non-insurance compensation and benefits..................... 1,782 1,714 3,496
Insurance underwriting, acquisition and operating........... 812 812
Provision for credit losses................................. 87 507 594
Other operating............................................. 756 1,680 2,436
-------- ------ --------
Total operating expenses............................. 5,431 3,901 9,332
-------- ------ --------
Income before income taxes and minority interest............ 1,760 1,704 3,464
Provision for income taxes.................................. 609 639 1,248
Minority interest, net of income taxes...................... 58 58
-------- ------ --------
NET INCOME.................................................. $ 1,093 $1,065 $ 2,158
======== ====== ========
BASIC EARNINGS PER SHARE:
Net income.................................................. $ 0.95 $ 2.28 $ 0.93
======== ====== ========
Weighted average common shares outstanding.................. 1,116.2 452.1 2,246.5
======== ====== ========
DILUTED EARNINGS PER SHARE:
Net income.................................................. $ 0.91 $ 2.23 $ 0.90
======== ====== ========
Adjusted weighted average common shares outstanding......... 1,173.1 463.2 2,331.1
======== ====== ========
SUPPLEMENTAL INFORMATION:
Net interest revenue........................................ $ 1,651 $2,839 $ 4,490
Net interest revenue after provision for credit losses...... $ 1,564 $2,332 $ 3,896
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
77
<PAGE> 84
TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(in millions, except per share amounts)
<TABLE>
<CAPTION>
TRAVELERS CITICORP PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
REVENUES:
Loan interest, including fees............................... $ 306 $4,554 $ 4,860
Other interest and dividends................................ 3,498 1,303 4,801
Insurance premiums.......................................... 2,224 2,224
Commissions and fees........................................ 1,206 1,352 2,558
Principal transactions...................................... 762 495 1,257
Asset management and administration fees.................... 389 389
Realized gains from sales of investments.................... 17 108 125
Other income................................................ 298 437 735
-------- ------ --------
Total revenues.............................................. 8,700 8,249 16,949
Interest expense............................................ 2,378 3,053 5,431
-------- ------ --------
Total revenues, net of interest expense.............. 6,322 5,196 11,518
-------- ------ --------
OPERATING EXPENSES:
Policyholder benefits and claims............................ 1,905 1,905
Non-insurance compensation and benefits..................... 1,548 1,665 3,213
Insurance underwriting, acquisition and operating........... 805 805
Provision for credit losses................................. 72 423 495
Other operating............................................. 645 1,504 2,149
-------- ------ --------
Total operating expenses............................. 4,975 3,592 8,567
-------- ------ --------
Income before income taxes and minority interest............ 1,347 1,604 2,951
Provision for income taxes.................................. 483 609 1,092
Minority interest, net of income taxes...................... 49 49
-------- ------ --------
NET INCOME.................................................. $ 815 $ 995 $ 1,810
======== ====== ========
BASIC EARNINGS PER SHARE:
Net income.................................................. $ 0.71 $ 2.07 $ 0.77
======== ====== ========
Weighted average common shares outstanding.................. 1,103.9 461.4 2,257.4
======== ====== ========
DILUTED EARNINGS PER SHARE:
Net income.................................................. $ 0.67 $ 2.01 $ 0.74
======== ====== ========
Adjusted weighted average common shares outstanding......... 1,182.0 475.7 2,371.3
======== ====== ========
SUPPLEMENTAL INFORMATION:
Net interest revenue........................................ $ 1,426 $2,804 $ 4,230
Net interest revenue after provision for credit losses...... $ 1,354 $2,381 $ 3,735
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
78
<PAGE> 85
TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(in millions, except per share amounts)
<TABLE>
<CAPTION>
TRAVELERS CITICORP PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
REVENUES:
Loan interest, including fees............................... $ 1,404 $18,967 $ 20,371
Other interest and dividends................................ 16,214 5,516 21,730
Insurance premiums.......................................... 8,995 8,995
Commissions and fees........................................ 5,119 5,817 10,936
Principal transactions...................................... 2,504 1,727 4,231
Asset management and administration fees.................... 1,715 1,715
Realized gains from sales of investments.................... 406 668 1,074
Other income................................................ 1,252 2,002 3,254
-------- ------- --------
Total revenues.............................................. 37,609 34,697 72,306
Interest expense............................................ 11,443 13,081 24,524
-------- ------- --------
Total revenues, net of interest expense.............. 26,166 21,616 47,782
-------- ------- --------
OPERATING EXPENSES:
Policyholder benefits and claims............................ 7,714 7,714
Non-insurance compensation and benefits..................... 6,345 6,617 12,962
Insurance underwriting, acquisition and operating........... 3,236 3,236
Provision for credit losses................................. 277 1,907 2,184
Restructuring charge........................................ 838 889 1,727
Other operating............................................. 2,744 6,481 9,225
-------- ------- --------
Total operating expenses............................. 21,154 15,894 37,048
-------- ------- --------
Income before income taxes and minority interest............ 5,012 5,722 10,734
Provision for income taxes.................................. 1,696 2,131 3,827
Minority interest, net of income taxes...................... 212 212
-------- ------- --------
NET INCOME.................................................. $ 3,104 $ 3,591 $ 6,695
======== ======= ========
BASIC EARNINGS PER SHARE:
Net income.................................................. $ 2.69 $ 7.53 $ 2.85
======== ======= ========
Weighted average common shares outstanding.................. 1,102.6 458.1 2,247.9
======== ======= ========
DILUTED EARNINGS PER SHARE:
Net income.................................................. $ 2.54 $ 7.33 $ 2.74
======== ======= ========
Adjusted weighted average common shares outstanding......... 1,179.9 471.1 2,357.7
======== ======= ========
SUPPLEMENTAL INFORMATION:
Net interest revenue........................................ $ 6,175 $11,402 $ 17,577
Net interest revenue after provision for credit losses...... $ 5,898 $ 9,495 $ 15,393
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
79
<PAGE> 86
TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(in millions, except per share amounts)
<TABLE>
<CAPTION>
TRAVELERS CITICORP PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
REVENUES:
Loan interest, including fees............................... $ 1,163 $18,509 $ 19,672
Other interest and dividends................................ 13,286 4,840 18,126
Insurance premiums.......................................... 7,633 7,633
Commissions and fees........................................ 4,637 5,469 10,106
Principal transactions...................................... 3,027 1,501 4,528
Asset management and administration fees.................... 1,390 1,390
Realized gains from sales of investments.................... 55 210 265
Other income................................................ 1,223 2,076 3,299
-------- ------- --------
Total revenues.............................................. 32,414 32,605 65,019
Interest expense............................................ 8,927 12,409 21,336
-------- ------- --------
Total revenues, net of interest expense.............. 23,487 20,196 43,683
-------- ------- --------
OPERATING EXPENSES:
Policyholder benefits and claims............................ 7,366 7,366
Non-insurance compensation and benefits..................... 5,804 6,244 12,048
Insurance underwriting, acquisition and operating........... 3,013 3,013
Provision for credit losses................................. 260 1,926 2,186
Other operating............................................. 2,481 5,953 8,434
-------- ------- --------
Total operating expenses............................. 18,924 14,123 33,047
-------- ------- --------
Gain on sale of subsidiaries and affiliates................. 445 445
-------- ------- --------
Income before income taxes and minority interest............ 5,008 6,073 11,081
Provision for income taxes.................................. 1,679 2,285 3,964
Minority interest, net of income taxes...................... 47 47
-------- ------- --------
Income from continuing operations........................... $ 3,282 $ 3,788 $ 7,070
======== ======= ========
BASIC EARNINGS PER SHARE:
Income from continuing operations........................... $ 2.84 $ 7.73 $ 2.97
======== ======= ========
Weighted average common shares outstanding.................. 1,097.6 469.6 2,271.6
======== ======= ========
DILUTED EARNINGS PER SHARE:
Income from continuing operations........................... $ 2.71 $ 7.43 $ 2.84
======== ======= ========
Adjusted weighted average common shares outstanding......... 1,170.6 489.3 2,393.9
======== ======= ========
SUPPLEMENTAL INFORMATION:
Net interest revenue........................................ $ 5,522 $10,940 $ 16,462
Net interest revenue after provision for credit losses...... $ 5,262 $ 9,014 $ 14,276
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
80
<PAGE> 87
TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(in millions, except per share amounts)
<TABLE>
<CAPTION>
TRAVELERS CITICORP PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
REVENUES:
Loan interest, including fees............................... $ 1,119 $17,808 $ 18,927
Other interest and dividends................................ 13,045 5,155 18,200
Insurance premiums.......................................... 4,977 4,977
Commissions and fees........................................ 3,713 5,165 8,878
Principal transactions...................................... 2,140 1,612 3,752
Asset management and administration fees.................... 1,087 1,087
Realized gains from sales of investments.................... 152 132 284
Other income................................................ 1,054 1,818 2,872
-------- ------- --------
Total revenues.............................................. 27,287 31,690 58,977
Interest expense............................................ 9,378 13,012 22,390
-------- ------- --------
Total revenues, net of interest expense.............. 17,909 18,678 36,587
-------- ------- --------
OPERATING EXPENSES:
Policyholder benefits and claims............................ 5,017 5,017
Non-insurance compensation and benefits..................... 5,149 5,726 10,875
Insurance underwriting, acquisition and operating........... 1,912 1,912
Provision for credit losses................................. 171 1,991 2,162
Other operating............................................. 2,320 5,376 7,696
-------- ------- --------
Total operating expenses............................. 14,569 13,093 27,662
-------- ------- --------
Loss on sale of subsidiaries and affiliates................. (20) (20)
-------- ------- --------
Income before income taxes.................................. 3,320 5,585 8,905
Provision for income taxes.................................. 1,179 2,121 3,300
-------- ------- --------
Income from continuing operations........................... $ 2,141 $ 3,464 $ 5,605
======== ======= ========
BASIC EARNINGS PER SHARE:
Income from continuing operations........................... $ 1.81 $ 7.60 $ 2.40
======== ======= ========
Weighted average common shares outstanding.................. 1,099.4 411.5 2,128.2
======== ======= ========
DILUTED EARNINGS PER SHARE:
Income from continuing operations........................... $ 1.74 $ 6.50 $ 2.18
======== ======= ========
Adjusted weighted average common shares outstanding......... 1,184.4 510.2 2,459.9
======== ======= ========
SUPPLEMENTAL INFORMATION:
Net interest revenue........................................ $ 4,786 $ 9,951 $ 14,737
Net interest revenue after provision for credit losses...... $ 4,615 $ 7,960 $ 12,575
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
81
<PAGE> 88
TRAVELERS GROUP INC. AND CITICORP
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
1. DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION
The Merger Agreement provides that each share of Citicorp Common Stock will
be exchanged for 2.5 shares of Citigroup Common Stock. The Merger, which is
expected to be completed in the third quarter of 1998, is expected to be
accounted for under the "pooling of interests" method and, accordingly,
Travelers' historical consolidated financial statements presented in future
reports will be restated to include the accounts and results of Citicorp. The
Merger and/or related transactions are subject to customary closing conditions,
including regulatory and Travelers and Citicorp stockholder approval.
2. ACCOUNTING POLICIES AND FINANCIAL STATEMENT CLASSIFICATIONS
Travelers and Citicorp are in the process of reviewing their accounting
policies and financial statement classifications and, as a result of this
review, it may be necessary to restate either Travelers' or Citicorp's financial
statements to conform to those accounting policies and classifications that are
determined to be most appropriate.
3. INTERCOMPANY TRANSACTIONS
Transactions between Travelers and Citicorp are not material in relation to
the pro forma combined financial statements and therefore intercompany balances
have not been eliminated from the pro forma combined accounts.
4. PRO FORMA ADJUSTMENTS
The pro forma adjustments to common stock, additional paid-in capital and
treasury stock reflect the retirement of shares of Citicorp Common Stock held in
treasury and the issuance at March 31, 1998 of 1,128.8 million shares of
Citigroup Common Stock to effect the Merger, calculated by multiplying the
number of shares of Citicorp Common Stock outstanding at March 31, 1998 (451.5
million shares) by the Exchange Ratio (2.5). The number of shares to be issued
at consummation of the Merger will be based on the actual number of shares of
Citicorp Common Stock outstanding at that time. Additionally, the pro forma
adjustments transfer Citicorp's trust preferred securities to subsidiary
obligated to reflect the merger of Citicorp into a newly formed, wholly owned
subsidiary of Travelers.
5. PRO FORMA CAPITAL RATIOS
The pro forma combined risk-based capital and leverage ratios at March 31,
1998 are estimated to be:
<TABLE>
<S> <C>
Tier 1 Capital Ratio.................................. 8.5%
Total Capital Ratio................................... 11.1%
Leverage Ratio........................................ 5.7%
</TABLE>
6. PRO FORMA EARNINGS PER SHARE
The pro forma combined basic and diluted earnings per share for the
respective periods presented is based on the combined weighted average number of
common shares and adjusted weighted average shares of Travelers and Citicorp.
The number of weighted average common shares and adjusted weighted average
shares of Citicorp is based on an Exchange Ratio of 2.5 shares of Citigroup
Common Stock for each issued
82
<PAGE> 89
TRAVELERS GROUP INC. AND CITICORP
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
and outstanding share of Citicorp. The pro forma combined basic and diluted
earnings per share have been calculated as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
Income from continuing operations.............. $ 2,158 $ 1,810 $ 6,695 $ 7,070 $ 5,605
Preferred dividends............................ (63) (74) (279) (319) (491)
-------- -------- -------- -------- --------
Income from continuing operations available to
common stockholders for basic EPS............ 2,095 1,736 6,416 6,751 5,114
Effect of dilutive securities.................. 6 10 36 56 259
-------- -------- -------- -------- --------
Income from continuing operations available to
common stockholders for diluted EPS.......... $ 2,101 $ 1,746 $ 6,452 $ 6,807 $ 5,373
======== ======== ======== ======== ========
Weighted average common shares outstanding
applicable to basic EPS...................... 2,246.5 2,257.4 2,247.9 2,271.6 2,128.2
Effect of dilutive securities:
Convertible securities....................... 13.2 26.7 25.2 44.9 264.0
Employee stock plans......................... 65.3 80.2 77.6 72.4 66.1
Warrants..................................... 6.1 7.0 7.0 5.0 1.6
-------- -------- -------- -------- --------
Adjusted weighted average common shares
outstanding applicable to diluted EPS........ 2,331.1 2,371.3 2,357.7 2,393.9 2,459.9
======== ======== ======== ======== ========
Basic earnings per share:
Continuing operations........................ $ 0.93 $ 0.77 $ 2.85 $ 2.97 $ 2.40
======== ======== ======== ======== ========
Diluted earnings per share:
Continuing operations........................ $ 0.90 $ 0.74 $ 2.74 $ 2.84 $ 2.18
======== ======== ======== ======== ========
</TABLE>
7. RESTRUCTURING CHARGES AND FUTURE COST SAVINGS
The pro forma financial statements do not reflect any restructuring costs
related to the Merger. Management has not yet determined the amount of such
costs; however, a restructuring charge may be recorded after the consummation of
the Merger. Management does not anticipate that any such charge will be material
to the financial position of the combined company.
The pro forma financial statements do not reflect any future cost savings
that may result from the reduction of overhead expenses, changes in corporate
infrastructure and the elimination of redundant expenses. Although management
expects that cost savings will result from the Merger, there can be no assurance
that cost savings will be achieved.
The statements contained in note 7 above may be deemed to be
forward-looking statements within the meaning of Section 27A of the Securities
Act. Forward-looking statements are typically identified by the words "believe,"
"expect," "anticipate," "intend," "estimate" and similar expressions. These
forward-looking statements are based largely on management's expectations and
are subject to a number of uncertainties. Actual results could differ materially
from these forward-looking statements. Neither Travelers nor Citicorp undertakes
any obligation to update publicly or revise any forward-looking statements.
83
<PAGE> 90
ANNEX A
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
TRAVELERS GROUP INC.
AND
CITICORP
DATED AS OF APRIL 5, 1998
================================================================================
<PAGE> 91
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
THE MERGER.................................................. A-1
SECTION 1.01 The Merger.................................................. A-1
SECTION 1.02 Closing..................................................... A-2
SECTION 1.03 Effective Time.............................................. A-2
SECTION 1.04 Effects of the Merger....................................... A-2
SECTION 1.05 Certificate of Incorporation and By-laws.................... A-2
SECTION 1.06 Boards, Committees and Officers............................. A-2
SECTION 1.07 Reservation of Right to Revise Transaction.................. A-2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES.................................... A-2
SECTION 2.01 Effect on Capital Stock..................................... A-2
SECTION 2.02 Exchange of Certificates.................................... A-3
SECTION 2.03 Certain Adjustments......................................... A-6
ARTICLE III
REPRESENTATIONS AND WARRANTIES.............................. A-6
SECTION 3.01 Representations and Warranties of Citicorp.................. A-6
SECTION 3.02 Representations and Warranties of Travelers................. A-15
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS................... A-24
SECTION 4.01 Conduct of Business......................................... A-24
SECTION 4.02 No Solicitation by Citicorp................................. A-27
SECTION 4.03 No Solicitation by Travelers................................ A-28
ARTICLE V
ADDITIONAL AGREEMENTS....................................... A-30
SECTION 5.01 Preparation of the Form S-4 and the Joint Proxy Statement;
Stockholders Meetings....................................... A-30
SECTION 5.02 Letters of Citicorp's Accountants........................... A-31
SECTION 5.03 Letters of Travelers' Accountants........................... A-31
SECTION 5.04 Access to Information; Confidentiality...................... A-31
SECTION 5.05 Best Efforts, Cooperation................................... A-31
SECTION 5.06 Stock Options and Restricted Stock.......................... A-33
SECTION 5.07 Indemnification, Exculpation and Insurance.................. A-34
SECTION 5.08 Fees and Expenses........................................... A-34
SECTION 5.09 Public Announcements........................................ A-34
SECTION 5.10 Affiliates.................................................. A-35
SECTION 5.11 NYSE and PSE Listing........................................ A-35
SECTION 5.12 Stockholder Litigation...................................... A-35
SECTION 5.13 Tax Treatment............................................... A-35
SECTION 5.14 Pooling of Interests........................................ A-35
</TABLE>
A-i
<PAGE> 92
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 5.15 Travelers Preferred Stock................................... A-35
SECTION 5.16 Standstill Agreements; Confidentiality Agreements........... A-36
SECTION 5.17 Compliance with 1940 Act Section 15......................... A-36
SECTION 5.18 Consent Procedure........................................... A-36
SECTION 5.19 Employee Benefit Plans...................................... A-36
ARTICLE VI
CONDITIONS PRECEDENT........................................ A-37
SECTION 6.01 Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-37
SECTION 6.02 Conditions to Obligations of Travelers...................... A-38
SECTION 6.03 Conditions to Obligations of Citicorp....................... A-38
SECTION 6.04 Frustration of Closing Conditions........................... A-38
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER........................... A-39
SECTION 7.01 Termination................................................. A-39
SECTION 7.02 Effect of Termination....................................... A-39
SECTION 7.03 Amendment................................................... A-39
SECTION 7.04 Extension; Waiver........................................... A-40
SECTION 7.05 Procedure for Termination, Amendment, Extension or Waiver... A-40
ARTICLE VIII
GENERAL PROVISIONS.......................................... A-40
SECTION 8.01 Nonsurvival of Representations and Warranties............... A-40
SECTION 8.02 Notices..................................................... A-40
SECTION 8.03 Definitions................................................. A-41
SECTION 8.04 Interpretation.............................................. A-41
SECTION 8.05 Counterparts................................................ A-42
SECTION 8.06 Entire Agreement; No Third-Party Beneficiaries.............. A-42
SECTION 8.07 Governing Law............................................... A-42
SECTION 8.08 Assignment.................................................. A-42
SECTION 8.09 Consent to Jurisdiction..................................... A-42
SECTION 8.10 Headings.................................................... A-42
SECTION 8.11 Severability................................................ A-42
</TABLE>
A-ii
<PAGE> 93
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this Agreement), dated as of April 5, 1998,
by and between TRAVELERS GROUP INC., a Delaware corporation ("Travelers"), and
CITICORP, a Delaware corporation ("Citicorp").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Travelers and Citicorp have
approved the merger of Citicorp with and into Travelers (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement, whereby (a)
each issued and outstanding share of common stock, par value $1.00 per share, of
Citicorp ("Citicorp Common Stock"), other than shares owned by Travelers or
Citicorp, will be converted into the right to receive the Merger Consideration
(as defined in Section 2.01(b)) and (b) each issued and outstanding share of
Citicorp Preferred Stock (as defined in Section 3.01(c)), other than shares
owned by Travelers or Citicorp, will be converted into the right to receive one
share of the corresponding series of preferred stock, with a par value of $1.00
per share, of Travelers pursuant to Article II (collectively, "Travelers
Preferred Stock");
WHEREAS, the respective Boards of Directors of Travelers and Citicorp have
each determined that the Merger and the other transactions contemplated hereby
are consistent with, and in furtherance of, their respective business strategies
and goals;
WHEREAS, Travelers and Citicorp desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Citicorp shall be merged with and into Travelers at the
Effective Time (as defined in Section 1.03). Following the Effective Time,
Travelers shall be the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of Citicorp in
accordance with the DGCL.
SECTION 1.02 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VI, unless another time or date
is agreed to by the parties hereto; provided, however, that each of Travelers
and Citicorp by notice to the other party shall have the right to delay the
Closing by up to 90 days following the date on which the Closing would otherwise
have occurred hereunder to the extent necessary in order to obtain any material
governmental, regulatory or other third-party approvals, consents, orders or
authorizations required in connection with or as a result of the transactions
contemplated hereby (including the Board of Governors of the Federal Reserve
System and applicable state insurance authorities) that have not yet then been
obtained in connection with the Closing. The Closing will be held at the offices
of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New
York 10022 or at such other location in the City of New York as the parties
hereto shall agree to in writing.
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SECTION 1.03 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with the Secretary of State of the State of Delaware, or at such
subsequent date or time as Travelers and Citicorp shall agree and specify in the
Certificate of Merger (the time the Merger becomes effective being hereinafter
referred to as the "Effective Time").
SECTION 1.04 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.05 Certificate of Incorporation and By-laws. The Restated
Certificate of Incorporation and By-laws of Travelers shall be the certificate
of incorporation and by-laws, respectively, of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law, except
that as of the Effective Time (i) the By-laws shall be amended as necessary to
reflect the provisions of Section 1.06 and (ii) the Restated Certificate of
Incorporation shall be amended to change the name of the Surviving Corporation
to a name agreed to in writing by Travelers and Citicorp.
SECTION 1.06 Boards, Committees and Officers. The Chairman and Chief
Executive Officer of Travelers and the Chairman of Citicorp shall serve as the
Co-Chairmen and Co-Chief Executive Officers of the Surviving Corporation. Prior
to the Effective Time, Travelers and Citicorp shall mutually determine the other
individuals who will serve as officers of the Surviving Corporation. Such
officers shall be appointed by the Board of Directors of the Surviving
Corporation in accordance with its by-laws. The initial Board of Directors and
committees of the Board of Directors of the Surviving Corporation shall be
constituted of an equal number of directors designated by each of Travelers and
Citicorp, with the total number of directors comprising the initial Board of
Directors of the Surviving Corporation to equal twenty-four (all of whom, other
than the Co-Chairmen, shall be outside directors).
SECTION 1.07 Reservation of Right to Revise Transaction. If each of
Travelers and Citicorp agree in writing, they may change the method of effecting
the business combination between Travelers and Citicorp, and each party shall
cooperate in such efforts, including to provide for a different form of merger;
provided, however, that no such change shall (i) alter or change the amount or
kind of consideration to be received by holders of Citicorp Common Stock or
Citicorp Preferred Stock, (ii) adversely affect the proposed accounting
treatment for the Merger or the tax treatment to Travelers, Citicorp or their
respective stockholders as a result of receiving the Merger Consideration, or
(iii) materially delay receipt of any approval referred to in this Agreement or
the consummation of the transactions contemplated hereby.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.01 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Citicorp Common Stock, Citicorp Preferred Stock, Travelers Common Stock or
Travelers Preferred Stock:
(a) Cancellation of Treasury Stock and Travelers-Owned Stock. Each
share of Citicorp Common Stock and Citicorp Preferred Stock that is owned
by Citicorp or Travelers shall automatically be cancelled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor; provided, however, that any shares of Citicorp Common Stock and
Citicorp Preferred Stock (i) held by Citicorp or Travelers in connection
with any market making or proprietary trading activity or for the account
of another person, (ii) as to which Citicorp or Travelers is or may be
required to act as a fiduciary or in a similar capacity or (iii) the
cancellation of which would violate any legal duties or obligations of
Citicorp or Travelers, in each case shall not be cancelled but, instead,
shall be treated as set
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forth in Section 2.01(b) (in the case of Citicorp Common Stock) or 2.01(c)
(in the case of Citicorp Preferred Stock).
(b) Conversion of Citicorp Common Stock. Subject to Section 2.02(e),
each issued and outstanding share of Citicorp Common Stock (other than
shares to be cancelled in accordance with Section 2.01(a)) shall be
converted into the right to receive 2.50 (the "Exchange Ratio") fully paid
and nonassessable shares of common stock, par value $.01 per share (the
"Travelers Common Stock"), of Travelers (the "Merger Consideration"). As of
the Effective Time, all such shares of Citicorp Common Stock shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any
such shares of Citicorp Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration and
any cash in lieu of fractional shares of Travelers Common Stock to be
issued or paid in consideration therefor upon surrender of such certificate
in accordance with Section 2.02, without interest.
(c) Conversion of Citicorp Preferred Stock. Each issued and
outstanding share of Citicorp Preferred Stock (other than shares to be
cancelled in accordance with Section 2.01(a)) shall be converted into the
right to receive one fully paid and nonassessable share of the
corresponding series of Travelers Preferred Stock, which Travelers
Preferred Stock (i) shall have terms that are substantially identical to
the Citicorp Preferred Stock (provided that, as a result of the Merger, the
issuer thereof shall be Travelers rather than Citicorp), (ii) shall all be
on a parity with each other and each series of Travelers Preferred Stock
then outstanding with respect to payment of dividends and the distribution
of assets upon liquidation, dissolution or winding up and (iii) shall be
issued pursuant to action taken by the Board of Directors of Travelers. As
of the Effective Time, all such shares of Citicorp Preferred Stock shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any
such shares of Citicorp Preferred Stock shall cease to have any rights with
respect thereto, except the right to receive one share of the corresponding
series of Travelers Preferred Stock to be issued in consideration therefor
upon surrender of such certificate in accordance with Section 2.02, without
interest.
SECTION 2.02 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Travelers shall enter
into an agreement with Citicorp as exchange agent for the Merger (Citicorp
solely in such capacity as exchange agent, the "Exchange Agent"), which
shall provide that Travelers shall deposit with the Exchange Agent as of
the Effective Time, for the benefit of the holders of shares of Citicorp
Common Stock and Citicorp Preferred Stock, for exchange in accordance with
this Article II, through the Exchange Agent, certificates representing the
shares of Travelers Common Stock and Travelers Preferred Stock (such shares
of Travelers Common Stock and Travelers Preferred Stock, together with any
dividends or distributions with respect thereto with a record date after
the Effective Time, any Excess Shares (as defined in Section 2.02(e)) and
any cash (including cash proceeds from the sale of the Excess Shares)
payable in lieu of any fractional shares of Travelers Common Stock being
hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.01 in exchange for outstanding shares of Citicorp Common Stock
and Citicorp Preferred Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Citicorp Common Stock or Citicorp
Preferred Stock (the "Certificates") whose shares were converted into the
right to receive the Merger Consideration or shares of Travelers Preferred
Stock, as applicable, pursuant to Section 2.01, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Travelers and Citicorp may reasonably specify) and (ii)
instructions for use in surrendering the Certificates in exchange for the
Merger Consideration or shares of Travelers Preferred Stock, as applicable.
Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required
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by the Exchange Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of
whole shares of Travelers Common Stock or Travelers Preferred Stock which
such holder has the right to receive pursuant to the provisions of this
Article II, certain dividends or other distributions in accordance with
Section 2.02(c) and cash in lieu of any fractional share of Travelers
Common Stock in accordance with Section 2.02(e), and the Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Citicorp Common Stock or Citicorp Preferred Stock which is not
registered in the transfer records of Citicorp, a certificate representing
the proper number of shares of Travelers Common Stock or Travelers
Preferred Stock may be issued to a person other than the person in whose
name the Certificate so surrendered is registered if such Certificate is
properly endorsed or otherwise in proper form for transfer and the person
requesting such issuance pays any transfer or other taxes required by
reason of the issuance of shares of Travelers Common Stock or Travelers
Preferred Stock to a person other than the registered holder of such
Certificate or establishes to the satisfaction of Travelers that such tax
has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.02, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender
the Merger Consideration or shares of Travelers Preferred Stock, as
applicable, which the holder thereof has the right to receive in respect of
such Certificate pursuant to the provisions of this Article II, certain
dividends or other distributions in accordance with Section 2.02(c) and
cash in lieu of any fractional share of Travelers Common Stock in
accordance with Section 2.02(e). No interest shall be paid or will accrue
on any cash payable to holders of Certificates pursuant to the provisions
of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Travelers Common Stock or Travelers
Preferred Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares
of Travelers Common Stock or Travelers Preferred Stock represented thereby,
and, in the case of Certificates representing Citicorp Common Stock, no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.02(e), and all such dividends, other distributions
and cash in lieu of fractional shares of Travelers Common Stock shall be
paid by Travelers to the Exchange Agent and shall be included in the
Exchange Fund, in each case until the surrender of such Certificate in
accordance with this Article II. Subject to the effect of applicable
escheat or similar laws, following surrender of any such Certificate there
shall be paid to the holder of the certificate representing whole shares of
Travelers Common Stock or Travelers Preferred Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective
Time theretofore paid with respect to such whole shares of Travelers Common
Stock or Travelers Preferred Stock, and, in the case of Certificates
representing Citicorp Common Stock, the amount of any cash payable in lieu
of a fractional share of Travelers Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment
date subsequent to such surrender payable with respect to such whole shares
of Travelers Common Stock or Travelers Preferred Stock.
(d) No Further Ownership Rights in Citicorp Common Stock or Citicorp
Preferred Stock. All shares of Travelers Common Stock or Travelers
Preferred Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid
pursuant to this Article II) shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to the shares of Citicorp
Common Stock or Citicorp Preferred Stock, as applicable, theretofore
represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by Citicorp on such shares of Citicorp Common Stock
or Citicorp Preferred Stock which remain unpaid at the Effective Time, and
there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Citicorp Common Stock
or Citicorp Preferred Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Exchange Agent for any reason, they shall
be cancelled and exchanged as provided in this Article II, except as
otherwise provided by law.
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(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of
Travelers Common Stock shall be issued upon the surrender for exchange
of Certificates, no dividend or distribution of Travelers shall relate
to such fractional share interests and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a
stockholder of Travelers.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (A) the number of whole
shares of Travelers Common Stock delivered to the Exchange Agent by
Travelers pursuant to Section 2.02(a) over (B) the aggregate number of
whole shares of Travelers Common Stock to be distributed to former
holders of Citicorp Common Stock pursuant to Section 2.02(b) (such
excess being herein called the "Excess Shares"). Following the Effective
Time, the Exchange Agent shall, on behalf of former holders of
Certificates representing Citicorp Common Stock, sell the Excess Shares
at then-prevailing prices on The New York Stock Exchange, Inc. (the
"NYSE"), all in the manner provided in Section 2.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. The Exchange
Agent shall use reasonable efforts to complete the sale of the Excess
Shares as promptly following the Effective Time as, in the Exchange
Agent's sole judgment, is practicable consistent with obtaining the best
execution of such sales in light of prevailing market conditions. Until
the net proceeds of such sale or sales have been distributed to the
holders of Certificates formerly representing Citicorp Common Stock, the
Exchange Agent shall hold such proceeds in trust for such holders (the
"Common Shares Trust"). The Surviving Corporation shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent incurred
in connection with such sale of the Excess Shares. The Exchange Agent
shall determine the portion of the Common Shares Trust to which each
former holder of Citicorp Common Stock is entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the
Common Shares Trust by a fraction, the numerator of which is the amount
of the fractional share interest to which such former holder of Citicorp
Common Stock is entitled (after taking into account all shares of
Citicorp Common Stock held at the Effective Time by such holder) and the
denominator of which is the aggregate amount of fractional share
interests to which all former holders of Citicorp Common Stock are
entitled.
(iv) Notwithstanding the provisions of Section 2.02(e)(ii) and
(iii), the Surviving Corporation may elect at its option, exercised
prior to the Effective Time, in lieu of the issuance and sale of Excess
Shares and the making of the payments hereinabove contemplated, to pay
each former holder of Citicorp Common Stock an amount in cash equal to
the product obtained by multiplying (A) the fractional share interest to
which such former holder (after taking into account all shares of
Citicorp Common Stock held at the Effective Time by such holder) would
otherwise be entitled by (B) the closing price for a share of Travelers
Common Stock as reported on the NYSE Composite Transaction Tape (as
reported in The Wall Street Journal, or, if not reported thereby, any
other authoritative source) on the Closing Date, and, in such case, all
references herein to the cash proceeds of the sale of the Excess Shares
and similar references shall be deemed to mean and refer to the payments
calculated as set forth in this Section 2.02(e)(iv).
(v) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Certificates formerly
representing Citicorp Common Stock with respect to any fractional share
interests, the Exchange Agent shall make available such amounts to such
holders of Certificates formerly representing Citicorp Common Stock
subject to and in accordance with the terms of Section 2.02(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to Travelers, upon
demand, and any holders of the Certificates who have not theretofore
complied with this Article II shall thereafter look only to Travelers for
payment of their claim for Merger Consideration or
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shares of Travelers Preferred Stock, any dividends or distributions with
respect to Travelers Common Stock or Travelers Preferred Stock, as
applicable, and any cash in lieu of fractional shares of Travelers Common
Stock.
(g) No Liability. None of Travelers, Citicorp or the Exchange Agent
shall be liable to any person in respect of any shares of Travelers Common
Stock or Travelers Preferred Stock, any dividends or distributions with
respect thereto, any cash in lieu of fractional shares of Travelers Common
Stock or any cash from the Exchange Fund, in each case, delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificate shall not have been surrendered prior to
two years after the Effective Time (or immediately prior to such earlier
date on which any Merger Consideration or shares of Travelers Preferred
Stock, any dividends or distributions payable to the holder of such
Certificate or any cash payable to the holder of such Certificate formerly
representing Citicorp Common Stock pursuant to this Article II, would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.01(d)), any such Merger Consideration or shares of
Travelers Preferred Stock, dividends or distributions in respect of such
Certificate or such cash shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Travelers, on a daily
basis. Any interest and other income resulting from such investments shall
be paid to Travelers.
(i) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond
in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to
such Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration or shares of
Travelers Preferred Stock and, if applicable, any unpaid dividends and
distributions on shares of Travelers Common Stock or Travelers Preferred
Stock deliverable in respect thereof and any cash in lieu of fractional
shares, in each case, due to such person pursuant to this Agreement.
SECTION 2.03 Certain Adjustments. If after the date hereof and on or
prior to the Effective Time the outstanding shares of Travelers Common Stock or
Citicorp Common Stock shall be changed into a different number of shares by
reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities shall
be declared thereon with a record date within such period, or any similar event
shall occur (any such action, an "Adjustment Event"), the Exchange Ratio shall
be adjusted accordingly to provide to the holders of Citicorp Common Stock the
same economic effect and percentage ownership of Travelers Common Stock as
contemplated by this Agreement prior to such reclassification, recapitalization,
split-up, combination, exchange or dividend or similar event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of Citicorp. Except as
disclosed in the Citicorp Filed SEC Documents (as defined in Section 3.01(g)) or
as set forth on the Disclosure Schedule delivered by Citicorp to Travelers prior
to the execution of this Agreement (the "Citicorp Disclosure Schedule") and
making reference to the particular subsection of this Agreement to which
exception is being taken, Citicorp represents and warrants to Travelers as
follows:
(a) Organization, Standing and Corporate Power. Each of Citicorp and
its subsidiaries (as defined in Section 8.03) is a corporation or other
legal entity duly organized, validly existing and in good standing (with
respect to jurisdictions which recognize such concept) under the laws of
the jurisdiction in which it is organized and has the requisite corporate
or other power, as the case may be, and authority to carry on its business
as now being conducted, except, as to subsidiaries, for those jurisdictions
where the
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failure to be so organized, existing or in good standing individually or in
the aggregate would not have a material adverse effect (as defined in
Section 8.03) on Citicorp. Each of Citicorp and its subsidiaries is duly
qualified or licensed to do business and is in good standing (with respect
to jurisdictions which recognize such concept) in each jurisdiction in
which the nature of its business or the ownership, leasing or operation of
its properties makes such qualification or licensing necessary, except for
those jurisdictions where the failure to be so qualified or licensed or to
be in good standing individually or in the aggregate would not have a
material adverse effect on Citicorp. Citicorp is duly registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). Citicorp has made available to Travelers prior to the execution
of this Agreement complete and correct copies of its certificate of
incorporation and by-laws, each as amended to date.
(b) Subsidiaries. Section 3.01(b) of the Citicorp Disclosure Schedule
includes all the subsidiaries of Citicorp which as of the date of this
Agreement are Significant Subsidiaries (as defined in Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission (the "SEC")). All
the outstanding shares of capital stock of, or other equity interests in,
each Significant Subsidiary (i) have been validly issued and are fully paid
and nonassessable, (ii) are owned directly or indirectly by Citicorp, free
and clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") and
(iii) are free of any other restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests), except in the case of clauses (ii) and (iii) for any
Liens or restrictions that would not have a material adverse effect on
Citicorp.
(c) Capital Structure. The authorized capital stock of Citicorp
consists of (i) 800,000,000 shares of Citicorp Common Stock, (ii)
20,000,000 shares of Class B Common Stock, par value $1.00 per share, of
Citicorp ("Citicorp Class B Common Stock") and (iii) 20,000,000 shares of
preferred stock, without par value, of Citicorp ("Citicorp Authorized
Preferred Stock"), of which 4,000,000 shares have been designated as Second
Series Preferred Stock, 1,500,000 shares have been designated as Third
Series Preferred Stock, 1,000,000 shares have been designated as Fourth
Series Preferred Stock, 400,000 shares have been designated as Seventh
Series Preferred Stock, 625,000 shares have been designated as Series 8A
Preferred Stock, 625,000 shares have been designated as Series 8B Preferred
Stock, 5,000,000 shares have been designated as Series 9 Preferred Stock,
5,900 shares have been designated as Series 12 Preferred Stock, 6,600
shares have been designated as Series 13 Preferred Stock, 800,000 shares
have been designated as Series 14 Preferred Stock, 7,200,000 shares have
been designated as Series 15 Preferred Stock, 1,300,000 shares have been
designated as Series 16 Preferred Stock, 1,400,000 shares have been
designated as Series 17 Preferred Stock, 700,000 shares have been
designated as Series 18 Preferred Stock, 400,000 shares have been
designated as Series 19 Preferred Stock, 500,000 shares have been
designated as Series 20 Preferred Stock, 600,000 shares have been
designated as Series 21 Preferred Stock, 500,000 shares have been
designated as Series 22 Preferred Stock, and 250,000 shares have been
designated as Series 23 Preferred Stock (in each case, as defined in
Section 3.01(c) of the Citicorp Disclosure Schedule). "Citicorp Preferred
Stock" means Citicorp Authorized Preferred Stock that is issued and
outstanding from time to time. At the close of business on March 31, 1998:
(i) 506,298,235 shares of Citicorp Common Stock were issued and
outstanding; (ii) 54,773,606 shares of Citicorp Common Stock were held by
Citicorp in its treasury (such shares, "Citicorp Treasury Stock"); (iii) no
shares of Citicorp Class B Common Stock were issued or outstanding; (iv)
6,900,000 shares of Citicorp Preferred Stock were issued and outstanding as
follows: (1) 625,000 shares of Series 8A Preferred Stock were issued and
outstanding, (2) 625,000 shares of Series 8B Preferred Stock were issued
and outstanding, (3) 1,300,000 shares of Series 16 Preferred Stock were
issued and outstanding, (4) 1,400,000 shares of Series 17 Preferred Stock
were issued and outstanding, (5) 700,000 shares of Series 18 Preferred
Stock were issued and outstanding, (6) 400,000 shares of Series 19
Preferred Stock were issued and outstanding, (7) 500,000 shares of Series
20 Preferred Stock were issued and outstanding, (8) 600,000 shares of
Series 21 Preferred Stock were issued and outstanding, (9) 500,000 shares
of Series 22 Preferred Stock were issued and outstanding, (10) 250,000
shares of Series 23 Preferred Stock were issued and outstanding and (11)
163,945 Book Value Shares as described in Section 3.01(c) of the Citicorp
Disclosure Schedule were issued and outstanding; (v) no shares of
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Citicorp Preferred Stock were held by Citicorp in its treasury, other than
shares held for purposes of market making, proprietary trading or otherwise
on behalf of customers; and (vi) 80,038,906 shares of Citicorp Common Stock
were reserved for issuance pursuant to the Savings Incentive Plan of
Citicorp, the 1997 Stock Purchase Plan of Citicorp, the 1997 Stock
Incentive Plan of Citicorp, the 1988 Stock Incentive Plan of Citicorp and
the Dividend Reinvestment and Common Stock Purchase Plan of Citicorp
(collectively, the "Citicorp Stock Plans"), of which 28,449,057 shares were
subject to outstanding employee stock options to purchase Citicorp Common
Stock granted under the Citicorp Stock Plans at December 31, 1997. Citicorp
covenants to provide in writing to Travelers no later than April 7, 1998
the number of shares of Citicorp Common Stock which at the close of
business on March 31, 1998 were subject to outstanding employee stock
options or other rights to purchase or receive Citicorp Common Stock
granted under the Citicorp Stock Plans (collectively, "Citicorp Employee
Stock Options"). All of the series of Citicorp Preferred Stock currently
outstanding rank on a parity with each other with respect to payment of
dividends and distribution of assets upon liquidation, dissolution or
winding up. None of the series of Citicorp Preferred Stock currently
outstanding has any voting rights, except for rights to elect directors in
the event of a default in the payment of dividends and except for the
rights set forth on Section 3.01(c) of the Citicorp Disclosure Schedule.
All outstanding shares of capital stock of Citicorp are, and all shares
which may be issued will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. Except
as set forth in this Section 3.01(c), except for changes since March 31,
1998 resulting from the issuance of shares of Citicorp Common Stock
pursuant to the Citicorp Employee Stock Options and other rights referred
to above in this Section 3.01(c) and except as permitted by Section
4.01(a)(ii), (x) there are not issued, reserved for issuance or outstanding
(A) any shares of capital stock or other voting securities of Citicorp, (B)
any securities of Citicorp convertible into or exchangeable or exercisable
for shares of capital stock or voting securities of Citicorp and (C) any
warrants, calls, options or other rights to acquire from Citicorp or any
Citicorp subsidiary, and no obligation of Citicorp or any Citicorp
subsidiary to issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock or voting
securities of Citicorp and (y) other than agreements entered into with
respect to the Citicorp Stock Plans in effect as of the close of business
on March 31, 1998, there are no outstanding obligations of Citicorp or any
Citicorp subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities. Neither Citicorp nor any Citicorp subsidiary
is a party to any voting agreement with respect to the voting of any such
securities. There are no outstanding (A) securities of Citicorp or any
Citicorp subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities or ownership interests
in any Citicorp subsidiary, (B) warrants, calls, options or other rights to
acquire from Citicorp or any Citicorp subsidiary, and no obligation of
Citicorp or any Citicorp subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible
into or exchangeable or exercisable for any capital stock, voting
securities or ownership interests in, any Citicorp subsidiary or (C)
obligations of Citicorp or any Citicorp subsidiary to repurchase, redeem or
otherwise acquire any such outstanding securities of Citicorp subsidiaries
or to issue, deliver or sell, or cause to be issued, delivered or sold, any
such securities. Other than the Citicorp subsidiaries, Citicorp does not
directly or indirectly beneficially own any securities or other beneficial
ownership interests in any other entity other than (i) in the ordinary
course of trading, underwriting, asset management, merchant banking,
securitization, insurance portfolios or market making activities of
Citicorp or the Citicorp subsidiaries or the Citicorp Funds or ownership of
the Citicorp Funds or (ii) as are not material to Citicorp and its
subsidiaries, taken as a whole. "Citicorp Fund" means (i) any investment
account advised or managed by Citicorp on behalf of third parties and (ii)
any partnership, limited liability company, or other similar investment
vehicle or entity engaged in the business of making investments of which
Citicorp or a Citicorp subsidiary acts as the general partner, managing
member, manager, advisor or the equivalent or as the general partner of
another Citicorp Fund.
(d) Authority; Noncontravention. Citicorp has all requisite corporate
power and authority to enter into this Agreement and, subject to the
Citicorp Stockholder Approval (as defined in Section 3.01(l)), to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Citicorp and the consummation by Citicorp
of the transactions contemplated hereby have
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been duly authorized by all necessary corporate action on the part of
Citicorp, subject, in the case of the Merger, to the Citicorp Stockholder
Approval. This Agreement has been duly executed and delivered by Citicorp
and, assuming the due authorization, execution and delivery by Travelers,
constitutes a legal, valid and binding obligation of Citicorp, enforceable
against Citicorp in accordance with its terms. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of Citicorp or any of its
subsidiaries under, (i) the certificate of incorporation or by-laws of
Citicorp or the comparable organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to Citicorp or any
of its subsidiaries or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Citicorp or any of its subsidiaries or
their respective properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not (x) have a material
adverse effect on Citicorp or (y) reasonably be expected to materially
impair or delay the ability of Citicorp to perform its obligations under
this Agreement. No consent, approval, order or authorization of, action by
or in respect of, or registration, declaration or filing with, any federal,
state, local or foreign government, any court, administrative, regulatory
or other governmental agency, commission or authority or any
non-governmental U.S. or foreign self-regulatory agency, commission or
authority or any arbitral tribunal (each, a "Governmental Entity") is
required by Citicorp or any of its subsidiaries in connection with the
execution and delivery of this Agreement by Citicorp or the consummation by
Citicorp of the transactions contemplated hereby, except for: (1) the
filing with the SEC of (A) a proxy statement relating to the Citicorp
Stockholders Meeting (as defined in Section 5.01(b)) (such proxy statement,
together with the proxy statement relating to the Travelers Stockholders
Meeting (as defined in Section 5.01(c)), in each case as amended or
supplemented from time to time, the "Joint Proxy Statement"), and (B) such
reports under Section 13(a), 13(d), 15(d) or 16(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required
in connection with this Agreement and the transactions contemplated hereby;
(2) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware and appropriate documents with the relevant
authorities of other states in which Citicorp is qualified to do business
and such filings with Governmental Entities to satisfy the applicable
requirements of state securities or "blue sky" laws; (3) the consents,
approvals and notices required under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the Investment Advisors Act of 1940, as
amended (the "Advisors Act"); (4) filings in respect of, and approvals and
authorizations of, any Governmental Entity having jurisdiction over the
securities, commodities, banking, insurance or other financial services
businesses; and (5) such consents, approvals, orders or authorizations the
failure of which to be made or obtained individually or in the aggregate
would not (x) have a material adverse effect on Citicorp or (y) reasonably
be expected to materially impair or delay the ability of Citicorp to
perform its obligations under this Agreement.
(e) Reports; Undisclosed Liabilities.
(i) Citicorp has filed all required reports, schedules, forms,
statements and other documents (including exhibits and all other
information incorporated therein) with the SEC since January 1, 1995
(the "Citicorp SEC Documents"). As of their respective dates, the
Citicorp SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such
Citicorp SEC Documents, and none of the Citicorp SEC Documents when
filed contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except to the
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extent that information contained in any Citicorp SEC Document has been
revised or superseded by a later filed Citicorp SEC Document, none of
the Citicorp SEC Documents contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Citicorp included in the Citicorp SEC Documents comply as
to form, as of their respective dates of filing with the SEC, in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of
Citicorp and its consolidated subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments). Except (A) as reflected in
such financial statements or in the notes thereto or (B) for liabilities
incurred in connection with this Agreement or the transactions
contemplated hereby, neither Citicorp nor any of its subsidiaries has
any liabilities or obligations of any nature which, individually or in
the aggregate, would have a material adverse effect on Citicorp.
(ii) Except as would not have a material adverse effect on
Citicorp, Citicorp and each of its subsidiaries have timely filed all
reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to
file since January 1, 1995 with (1) the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), (2) the Federal
Deposit Insurance Corporation, (3) the Office of the Comptroller of the
Currency, (4) any state banking or insurance commission or any other
state regulatory authority, (5) the Office of Thrift Supervision and (6)
any other self-regulatory organization (clauses (1) through (6),
collectively, the "Citicorp Regulatory Agencies"), and have paid all
fees and assessments due and payable in connection therewith. Except for
normal examinations conducted by a Citicorp Regulatory Agency in the
regular course of the business of Citicorp and its subsidiaries, no
Citicorp Regulatory Agency has initiated any proceeding or, to the
knowledge of Citicorp, investigation into the business or operations of
Citicorp or any of its subsidiaries since January 1, 1995. Except as
would not have a material adverse effect on Citicorp, there is no
unresolved violation, criticism, or exception by any Citicorp Regulatory
Agency with respect to any report or statement relating to any
examinations of Citicorp or any of its subsidiaries.
(iii) Except in each case as would not have a material adverse
effect on Citicorp, the annual statements of each subsidiary of Citicorp
that is an insurer for the years ended December 31, 1996 and 1997 as
filed with the respective Departments of Insurance of each such
subsidiary's domiciliary states have been prepared in accordance with
the accounting practices prescribed or permitted by each such Department
of Insurance (the "Citicorp State Statutory Accounting Principles"), and
such accounting practices have been applied on a basis consistent with
the Citicorp State Statutory Accounting Principles applicable to each
such annual statement throughout the periods involved, except as set
forth in the notes, exhibits or schedules thereto, and such annual
statements present fairly in all material respects the financial
position and results of operations of each such subsidiary as of the
dates and for the periods covered thereby in accordance with the
Citicorp State Statutory Accounting Principles applicable to each such
annual statement.
(f) Information Supplied. None of the information supplied or to be
supplied by Citicorp specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with
the SEC by Travelers in connection with the issuance of Travelers Common
Stock and Travelers Preferred Stock in the Merger (the "Form S-4") will, at
the time the Form S-4 becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading or (ii) the Joint Proxy Statement will, at the date it is
first mailed to Citicorp's stockholders or at the time of the Citicorp
Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any
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material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. The Joint Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder, except that no representation or warranty
is made by Citicorp with respect to statements made or incorporated by
reference therein based on information supplied by Travelers specifically
for inclusion or incorporation by reference in the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since December 31, 1997, Citicorp and its subsidiaries have
conducted their business only in the ordinary course or as disclosed in any
Citicorp Filed SEC Document, and there has not been (1) any material
adverse change in Citicorp, (2) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property)
with respect to any of Citicorp's capital stock, other than regular
quarterly cash dividends on the Citicorp Common Stock and dividends payable
on Citicorp Preferred Stock in accordance with their terms as of the date
of this Agreement (or as of their date of issue if subsequent to the date
of this Agreement), (3) any split, combination or reclassification of any
of Citicorp's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in
substitution for shares of Citicorp's capital stock, except for issuances
of Citicorp Common Stock upon the exercise of Citicorp Employee Stock
Options awarded prior to the date hereof in accordance with their present
terms or issued pursuant to Section 4.01(a) or in accordance with the terms
of the Citicorp Stock Plans, (4) (A) any granting by Citicorp or any of its
subsidiaries to any current or former director, executive officer or other
key employee of Citicorp or its subsidiaries of any increase in
compensation, bonus or other benefits, except for normal increases in the
ordinary course of business or as was required under any employment
agreements in effect as of the date of the most recent audited financial
statements included in the Citicorp SEC Documents filed and publicly
available prior to the date of this Agreement (as amended to the date of
this Agreement, the "Citicorp Filed SEC Documents"), (B) any granting by
Citicorp or any of its subsidiaries to any such current or former director,
executive officer or key employee of any increase in severance or
termination pay, except in the ordinary course of business, or (C) any
entry by Citicorp or any of its subsidiaries into, or any amendment of, any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director,
executive officer or key employee, other than in the ordinary course of
business, (5) except insofar as may have been disclosed in the Citicorp
Filed SEC Documents or required by a change in generally accepted
accounting principles, any change in accounting methods, principles or
practices by Citicorp materially affecting its assets, liabilities or
business or (6) except insofar as may have been disclosed in the Citicorp
Filed SEC Documents, any tax election that individually or in the aggregate
would reasonably be expected to have a material adverse effect on Citicorp
or any of its tax attributes or any settlement or compromise of any
material income tax liability.
(h) Compliance with Applicable Laws; Litigation.
(i) Citicorp, its subsidiaries and employees hold all permits,
licenses, variances, exemptions, orders, registrations and approvals of
all Governmental Entities which are required for the operation of the
businesses of Citicorp and its subsidiaries (collectively, the "Citicorp
Permits"), except where the failure to have any such Citicorp Permits
individually or in the aggregate would not have a material adverse
effect on Citicorp. Citicorp and its subsidiaries are in compliance with
the terms of the Citicorp Permits and all applicable statutes, laws,
ordinances, rules and regulations, except where the failure so to comply
individually or in the aggregate would not have a material adverse
effect on Citicorp. As of the date of this Agreement, except as
disclosed in the Citicorp Filed SEC Documents, no action, demand,
requirement or investigation by any Governmental Entity and no suit,
action or proceeding by any person, in each case with respect to
Citicorp or any of its subsidiaries or any of their respective
properties is pending or, to the knowledge (as defined in Section 8.03)
of Citicorp, threatened, other than, in each case, those the outcome of
which individually or in the aggregate would not (i) reasonably be
expected to have a material adverse
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effect on Citicorp or (ii) reasonably be expected to materially impair
or delay the ability of Citicorp to perform its obligations under this
Agreement.
(ii) Except as would not have a material adverse effect on
Citicorp, neither Citicorp nor any of its subsidiaries is subject to any
outstanding order, injunction or decree or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is
a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any
supervisory letter from or has adopted any resolutions at the request of
any Governmental Entity that restricts in any material respect the
conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its management or its business (each, a
"Regulatory Agreement"), nor has Citicorp or any of its subsidiaries or
affiliates (as defined in Section 8.03) been advised since January 1,
1995 by any Governmental Entity that it is considering issuing or
requesting any such Regulatory Agreement that would have a material
adverse effect on Citicorp. After the date of this Agreement, no matters
referred to in this Section 3.01(h)(ii) shall have arisen.
(i) Absence of Changes in Benefit Plans. Since December 31, 1997,
there has not been any adoption or amendment in any material respect by
Citicorp or any of its subsidiaries of any collective bargaining agreement
or any material bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding
providing benefits to any current or former employee, officer or director
of Citicorp or any of its wholly owned subsidiaries (collectively, the
"Citicorp Benefit Plans"), or any material change in any actuarial or other
assumption used to calculate funding obligations with respect to any
Citicorp pension plans, or any change in the manner in which contributions
to any Citicorp pension plans are made or the basis on which such
contributions are determined.
(j) ERISA Compliance.
(i) Except as set forth on Section 3.1(j)(i) of the Citicorp
Disclosure Schedule, with respect to the Citicorp Benefit Plans, no
event has occurred and, to the knowledge of Citicorp, there exists no
condition or set of circumstances, in connection with which Citicorp or
any of its subsidiaries could be subject to any liability that
individually or in the aggregate would have a material adverse effect on
Citicorp under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Code or any other applicable law.
(ii) Each Citicorp Benefit Plan has been administered in accordance
with its terms, except for any failures so to administer any Citicorp
Benefit Plan that individually or in the aggregate would not reasonably
be expected to have a material adverse effect on Citicorp. Citicorp, its
subsidiaries and all the Citicorp Benefit Plans are in compliance with
the applicable provisions of ERISA, the Code and all other applicable
laws and the terms of all applicable collective bargaining agreements,
except for any failures to be in such compliance that individually or in
the aggregate would not reasonably be expected to have a material
adverse effect on Citicorp. Each Citicorp Benefit Plan that is intended
to be qualified under Section 401(a) or 401(k) of the Code has received
a favorable determination letter from the IRS that it is so qualified
and each trust established in connection with any Citicorp Benefit Plan
that is intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the IRS that
such trust is so exempt. To the knowledge of Citicorp, no fact or event
has occurred since that date of any determination letter from the IRS
which is reasonably likely to affect adversely the qualified status of
any such Citicorp Benefit Plan or the exempt status of any such trust,
except for any occurrence that individually or in the aggregate would
not reasonably be expected to have a material adverse effect on
Citicorp.
(iii) Except as any of the following either individually or in the
aggregate would not reasonably be expected to have a material adverse
effect on Citicorp, (x) neither Citicorp nor any trade or business,
whether or not incorporated (an "ERISA Affiliate"), which together with
Citicorp would be deemed to be a "single employer" within the meaning of
Section 4001(b) of ERISA, has
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incurred any liability under Title IV of ERISA and no condition exists
that presents a risk to Citicorp or any ERISA Affiliate of Citicorp of
incurring any such liability (other than liability for benefits or
premiums to the Pension Benefit Guaranty Corporation arising in the
ordinary course, (y) no Citicorp Benefit Plan has incurred an
"accumulated funding deficiency" (within the meaning of Section 302 of
ERISA or Section 412 of the Code) whether or not waived and (z) to the
knowledge of Citicorp, there are not any facts or circumstances that
would materially change the funded status of any Citicorp Benefit Plan
that is a "defined benefit" plan (as defined in Section 3(35) of ERISA)
since the date of the most recent actuarial report for such plan. No
Citicorp Benefit Plan is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
(iv) Neither Citicorp nor any of its subsidiaries is a party to any
collective bargaining or other labor union contract applicable to
persons employed by Citicorp or any of its subsidiaries and no
collective bargaining agreement is being negotiated by Citicorp or any
of its subsidiaries, in each case that is material to Citicorp and its
subsidiaries taken as a whole. As of the date of this Agreement, there
is no labor dispute, strike or work stoppage against Citicorp or any of
its subsidiaries pending or, to the knowledge of Citicorp, threatened
which may interfere with the respective business activities of Citicorp
or any of its subsidiaries, except where such dispute, strike or work
stoppage individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Citicorp. As of the date
of this Agreement, to the knowledge of Citicorp, none of Citicorp, any
of its subsidiaries or any of their respective representatives or
employees has committed any unfair labor practice in connection with the
operation of the respective businesses of Citicorp or any of its
subsidiaries, and there is no charge or complaint against Citicorp or
any of its subsidiaries by the National Labor Relations Board or any
comparable governmental agency pending or threatened in writing, except
for any occurrence that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on Citicorp.
(v) No Citicorp Benefit Plan provides medical benefits (whether or
not insured) with respect to current or former employees after
retirement or other termination of service the cost of which is material
to Citicorp and its subsidiaries taken as a whole.
(vi) No amounts payable under the Citicorp Benefit Plans solely as
a result of the consummation of the transactions contemplated by this
Agreement will fail to be deductible for federal income tax purposes by
virtue of section 280G of the Code. Except as disclosed in Section
3.01(j)(vi) of the Citicorp Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not, either alone or in
combination with another event, (A) entitle any current or former
employee, officer or director of Citicorp or any ERISA Affiliate of
Citicorp to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement, (B) accelerate
the time of payment or vesting, or increase the amount of compensation
due any such employee, officer or director or (C) constitute a "change
of control" under any Citicorp Benefit Plan, and Citicorp and its board
of directors have taken all required actions to effect the foregoing.
(k) Taxes.
(i) Each of Citicorp and its subsidiaries has filed all material
tax returns and reports required to be filed by it and all such returns
and reports are complete and correct in all material respects, or
requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, except to the extent that such
failures to file, to be complete or correct or to have extensions
granted that remain in effect individually or in the aggregate would not
have a material adverse effect on Citicorp. Citicorp and each of its
subsidiaries has paid (or Citicorp has paid on its behalf) all taxes (as
defined below) shown as due on such returns, and the most recent
financial statements contained in the Citicorp Filed SEC Documents
reflect an adequate reserve for all taxes payable by Citicorp and its
subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
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(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Citicorp or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that individually or in
the aggregate would not have a material adverse effect on Citicorp.
(iii) Neither Citicorp nor any of its subsidiaries has taken any
action or knows of any fact, agreement, plan or other circumstance that
is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(iv) As used in this Agreement, "taxes" shall include all (x)
federal, state, local or foreign income, property, sales, excise, use,
occupation, service, transfer, payroll, franchise, withholding and other
taxes or similar governmental charges, fees, levies or other assessments
including any interest, penalties or additions with respect thereto, (y)
liability for the payment of any amounts of the type described in clause
(x) as a result of being a member of an affiliated, consolidated,
combined or unitary group, and (z) liability for the payment of any
amounts as a result of being party to any tax sharing agreement or as a
result of any express or implied obligation to indemnify any other
person with respect to the payment of any amounts of the type described
in clause (x) or (y).
(l) Voting Requirements. The affirmative vote of the holders of a
majority of the outstanding shares of Citicorp Common Stock at the Citicorp
Stockholders Meeting to adopt this Agreement (the "Citicorp Stockholder
Approval") is the only vote of the holders of any class or series of
Citicorp's capital stock necessary to approve and adopt this Agreement and
the transactions contemplated hereby. The Board of Directors of Citicorp
has duly and validly approved and taken all corporate action required to be
taken by the Citicorp Board of Directors for the consummation of the
transactions contemplated by this Agreement.
(m) State Takeover Statutes. The Board of Directors of Citicorp has
approved this Agreement and the consummation of the Merger and the other
transactions contemplated hereby and, assuming the accuracy of Travelers'
representation and warranty contained in Section 3.02(p), such approval
constitutes approval of the Merger and the other transactions contemplated
by this Agreement by the Board of Directors of Citicorp under the
provisions of Section 203 of the DGCL such that Section 203 of the DGCL
does not apply to the Merger or the other transactions contemplated by this
Agreement. To the knowledge of Citicorp, no other state takeover statute is
applicable to the Merger or the other transactions contemplated by this
Agreement.
(n) Accounting Matters. Citicorp has disclosed to its independent
public accountants all actions taken by it or its subsidiaries that would
impact the accounting of the business combination to be effected by the
Merger as a pooling of interests. As of the date hereof, Citicorp, based on
advice from its independent public accountants, believes that the Merger
will qualify for "pooling of interests" accounting.
(o) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Citicorp.
(p) Ownership of Travelers Capital Stock. Except as set forth in
Section 3.01(p) of the Citicorp Disclosure Schedule, except for shares
owned by Citicorp Benefit Plans or shares held or managed for the account
of another person or as to which Citicorp is required to act as a fiduciary
or in a similar capacity, as of the date hereof, neither Citicorp nor, to
its knowledge without independent investigation, any of its affiliates, (i)
beneficially owns (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing
of, in each case, shares of capital stock of Travelers.
(q) Intellectual Property.
(i) Citicorp and its subsidiaries own or have a valid license to
use all trademarks, service marks and trade names (including any
registrations or applications for registration of any of the foregoing)
(collectively, the "Citicorp Intellectual Property") necessary to carry
on its business substantially as
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currently conducted except for such Citicorp Intellectual Property the
failure of which to own or validly license individually or in the
aggregate would not reasonably be expected to have a material adverse
effect on Citicorp. Neither Citicorp nor any such subsidiary has
received any notice of infringement of or conflict with, and, to
Citicorp's knowledge, there are no infringements of or conflicts with,
the rights of others with respect to the use of any Citicorp
Intellectual Property that individually or in the aggregate, in either
such case, would reasonably be expected to have a material adverse
effect on Citicorp.
(ii) The consummation of the Merger and the other transactions
contemplated by this Agreement will not result in the loss by Citicorp
of any rights to use computer and telecommunication software including
source and object code and documentation and any other media (including,
without limitation, manuals, journals and reference books) necessary to
carry on its business substantially as currently conducted and the loss
of which would have a material adverse effect on Citicorp.
(iii) The computer software operated by Citicorp which is material
to the conduct of its business is capable of providing or is being
adapted to provide uninterrupted millennium functionality to record,
store, process and present calendar dates falling on or after January 1,
2000 in substantially the same manner and with the same functionality as
such software records, stores, processes and presents such calendar
dates falling on or before December 31, 1999, except as would not have a
material adverse effect on Citicorp. The costs of the adaptations
referred to in this clause (iii) will not have a material adverse effect
on Citicorp.
(r) Certain Contracts. Except as set forth in the Citicorp Filed SEC
Documents or as permitted pursuant to Section 4.01(a), neither Citicorp nor
any of its subsidiaries is a party to or bound by (i) any agreement
relating to the incurring of indebtedness (including sale and leaseback and
capitalized lease transactions and other similar financing transactions)
providing for payment or repayment in excess of $1 billion, other than such
agreements relating to indebtedness incurred in the ordinary course of
business of Citicorp's subsidiaries to finance their securities and
commodity portfolio positions and consumer finance business, (ii) any
"material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) or (iii) any non-competition agreement or any
other agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, all or any
substantial portion of the business of Citicorp and its subsidiaries, taken
as a whole, is or would be conducted.
SECTION 3.02 Representations and Warranties of Travelers. Except as
disclosed in the Travelers Filed SEC Documents (as defined in Section 3.02(g))
or as set forth on the Disclosure Schedule delivered by Travelers to Citicorp
prior to the execution of this Agreement (the "Travelers Disclosure Schedule")
and making reference to the particular subsection of this Agreement to which
exception is being taken, Travelers represents and warrants to Citicorp as
follows:
(a) Organization, Standing and Corporate Power. Each of Travelers and
its subsidiaries is a corporation or other legal entity duly organized,
validly existing and in good standing (with respect to jurisdictions which
recognize such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may
be, and authority to carry on its business as now being conducted, except,
as to subsidiaries, for those jurisdictions where the failure to be so
organized, existing or in good standing individually or in the aggregate
would not have a material adverse effect on Travelers. Each of Travelers
and its subsidiaries is duly qualified or licensed to do business and is in
good standing (with respect to jurisdictions which recognize such concept)
in each jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be
so qualified or licensed or to be in good standing individually or in the
aggregate would not have a material adverse effect on Travelers. Travelers
has made available to Citicorp prior to the execution of this Agreement
complete and correct copies of its certificate of incorporation and
by-laws, each as amended to date.
(b) Subsidiaries. Exhibit 21 to Travelers' Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 includes all the subsidiaries
of Travelers which as of the date of this Agreement are
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Significant Subsidiaries. All the outstanding shares of capital stock of,
or other equity interests in, each Significant Subsidiary (i) have been
validly issued and are fully paid and nonassessable, (ii) are owned
directly or indirectly by Travelers, free and clear of all Liens and (iii)
are free of any other restriction (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests), except in the case of clauses (ii) and (iii) for any Liens or
restrictions that would not have a material adverse effect on Travelers.
(c) Capital Structure. The authorized capital stock of Travelers
consists of shares of Travelers Common Stock (1,500,000,000 shares of which
are authorized as of the date hereof and an additional 1,500,000,000 shares
are proposed to be authorized by Travelers stockholders at the 1998 Annual
Meeting of Travelers stockholders) and 30,000,000 shares of preferred
stock, par value $1.00 per share, of Travelers ("Travelers Authorized
Preferred Stock"), of which 1,200,000 shares have been designated as Series
A Preferred Stock, 2,500,000 shares have been designated as Series B
Preferred Stock, 8,000,000 shares have been designated as Series C
Preferred Stock, 7,500,000 shares have been designated as Series D
Preferred Stock, 4,444 shares have been designated as Series Z Preferred
Stock, 1,600,000 shares have been designated as Series F Preferred Stock,
800,000 shares have been designated as Series G Preferred Stock, 800,000
shares have been designated as Series H Preferred Stock, 280,000 shares
have been designated as Series I Preferred Stock, 400,000 shares have been
designated as Series J Preferred Stock, 500,000 shares have been designated
as Series K Preferred Stock, 690,000 shares have been designated as Series
L Preferred Stock, 800,000 shares have been designated as Series M
Preferred Stock and 5,000 shares have been designated as Series Y Preferred
Stock (in each case, as defined in Section 3.01(c) of the Travelers
Disclosure Schedule). "Travelers Preferred Stock" means Travelers
Authorized Preferred Stock that is issued and outstanding from time to
time. At the close of business on March 31, 1998: (i) 1,151,944,402 shares
of Travelers Common Stock were issued and outstanding; (ii) 104,069,490
shares of Travelers Common Stock in the aggregate were held by Travelers
and its subsidiaries in their treasuries; (iii) 5,182,262 shares of
Travelers Preferred Stock were issued and outstanding as follows: (1)
1,600,000 shares of Series F Preferred Stock were issued and outstanding
(evidenced by 10,000,000 depositary shares, each of which represents a
one-fifth interest in a share of Series F Preferred Stock), (2) 800,000
shares of Series G Preferred Stock were issued and outstanding (evidenced
by 4,000,000 depositary shares, each of which represents a one-fifth
interest in a share of Series G Preferred Stock), (3) 800,000 shares of
Series H Preferred Stock were issued and outstanding (evidenced by
4,000,000 depositary shares, each of which represents a one-fifth interest
in a share of Series H Preferred Stock), (4) 280,000 shares of Series I
Preferred Stock were issued and outstanding, (5) 400,000 shares of Series J
Preferred Stock were issued and outstanding (evidenced by 8,000,000
depositary shares, each of which represents a one-twentieth interest in a
share of Series J Preferred Stock), (6) 500,000 shares of Series K
Preferred Stock were issued and outstanding (evidenced by 10,000,000
depositary shares, each of which represents a one-twentieth interest in a
share of Series K Preferred Stock), (7) 800,000 shares of Series M
Preferred Stock were issued and outstanding (evidenced by 4,000,000
depositary shares, each of which represents a one-fifth interest in a share
of Series M Preferred Stock) and (8) 2,262 shares of Series Y Preferred
Stock were issued and outstanding; (iv) 690,000 shares of Series L
Preferred Stock are reserved for issuance upon exercise of purchase
contracts comprising a part of the 9 1/2% Trust Preferred Stock (TruPs)
Units of SI Financing Trust I; (v) no shares of Travelers Preferred Stock
were held by Travelers in its treasury, other than shares held for purposes
of market making, proprietary trading or otherwise on behalf of customers;
(vi) 12,489,472 shares of Travelers Common Stock were reserved for issuance
upon conversion of the Series I Preferred Stock; (vii) 668,567 shares of
Travelers Common Stock were reserved for issuance upon conversion of
certain Amended and Restated Restricted Convertible Subordinated Notes (the
"Convertible Notes"); (viii) 7,993,463 shares of Travelers Common Stock
were reserved for issuance pursuant to outstanding warrants to purchase
shares of Travelers Common Stock (collectively with the Convertible Notes
and the Series I Preferred Stock, the "Travelers Convertible Securities");
and (ix) shares of Travelers Common Stock reserved for issuance pursuant to
the plans set forth in Section 3.02(c)(ix) of the Travelers Disclosure
Schedule (collectively, the "Travelers Stock Plans"), of which 62,254,352
shares are subject to outstanding employee stock options or other rights to
purchase or receive Travelers Common Stock
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granted under the Travelers Stock Plans (collectively, "Travelers Employee
Stock Options"). All of the series of Travelers Preferred Stock currently
outstanding rank on a parity with each other with respect to payment of
dividends and distribution of assets upon liquidation, dissolution or
winding up. None of the series of Travelers Preferred Stock currently
outstanding has any (i) right to vote as a separate class with respect to
the Merger or the authorization of additional shares of Travelers Common
Stock or (ii) any other voting rights, except in the case of this clause
(ii) for rights (x) to elect directors in the event of a default in the
payment of dividends and (y) as set forth in Section 3.02(c) of the
Travelers Disclosure Schedule. All outstanding shares of capital stock of
Travelers are, and all shares which may be issued will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth in this Section 3.02(c),
except for changes since March 31, 1998 resulting from the issuance of
shares of Travelers Common Stock pursuant to the Travelers Employee Stock
Options, the Travelers Convertible Securities or other rights referred to
above in this Section 3.02(c), and except as permitted by Section
4.01(b)(ii), (x) there are not issued, reserved for issuance or outstanding
(A) any shares of capital stock or other voting securities of Travelers,
(B) any securities of Travelers convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of Travelers
and (C) any warrants, calls, options or other rights to acquire from
Travelers or any Travelers subsidiary, and no obligation of Travelers or
any Travelers subsidiary to issue, any capital stock, voting securities or
securities convertible into or exchangeable or exercisable for capital
stock or voting securities of Travelers and (y) other than agreements
entered into with respect to the Travelers Stock Plans in respect of reload
options in effect as of the close of business on March 31, 1998, there are
no outstanding obligations of Travelers or any Travelers subsidiary to
repurchase, redeem or otherwise acquire any such securities or to issue,
deliver or sell, or cause to be issued, delivered or sold, any such
securities. Neither Travelers nor any Travelers subsidiary is a party to
any voting agreement with respect to the voting of any such securities.
Except with respect to Travelers Property Casualty Corp., there are no
outstanding (A) securities of Travelers or any Travelers subsidiary
convertible into or exchangeable or exercisable for shares of capital stock
or other voting securities or ownership interests in any Travelers
subsidiary, (B) warrants, calls, options or other rights to acquire from
Travelers or any Travelers subsidiary, and no obligation of Travelers or
any Travelers subsidiary to issue, any capital stock, voting securities or
other ownership interests in, or any securities convertible into or
exchangeable or exercisable for any capital stock, voting securities or
ownership interests in, any Travelers subsidiary or (C) obligations of
Travelers or any Travelers subsidiary to repurchase, redeem or otherwise
acquire any such outstanding securities of Travelers subsidiaries or to
issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities. Other than the Travelers subsidiaries, Travelers does not
directly or indirectly beneficially own any securities or other beneficial
ownership interests in any other entity other than (i) in the ordinary
course of trading, underwriting, asset management, merchant banking,
securitization, insurance portfolios or market making activities of
Travelers or the Travelers subsidiaries or the Travelers Funds or ownership
of the Travelers Funds or (ii) as are not material to Travelers and its
subsidiaries, taken as a whole. "Travelers Fund" means (i) any investment
account advised or managed by Travelers on behalf of third parties and (ii)
any partnership, limited liability company, or other similar investment
vehicle or entity engaged in the business of making investments of which
Travelers or a Travelers subsidiary acts as the general partner, managing
member, manager, advisor or the equivalent or the general partner of
another Travelers Fund.
(d) Authority; Noncontravention. Travelers has all requisite
corporate power and authority to enter into this Agreement and, subject to
the Travelers Stockholder Approval (as defined in Section 3.02(l)), to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Travelers and the consummation by
Travelers of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Travelers, subject, in the
case of the Merger and the issuance of Travelers Common Stock and Travelers
Preferred Stock in connection with the Merger, to the Travelers Stockholder
Approval. This Agreement has been duly executed and delivered by Travelers
and, assuming the due authorization, execution and delivery by Citicorp,
constitutes a legal, valid and binding obligation of Travelers, enforceable
against Travelers in accordance with its terms. The execution and delivery
of this Agreement does not, and the consummation
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of the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of a benefit under, or result in the creation of
any Lien upon any of the properties or assets of Travelers or any of its
subsidiaries under, (i) the certificate of incorporation or by-laws of
Travelers or the comparable organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to Travelers or any
of its subsidiaries or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Travelers or any of its subsidiaries or
their respective properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not (x) have a material
adverse effect on Travelers or (y) reasonably be expected to materially
impair or delay the ability of Travelers to perform its obligations under
this Agreement. No consent, approval, order or authorization of, action by,
or in respect of, or registration, declaration or filing with, any
Governmental Entity is required by Travelers or any of its subsidiaries in
connection with the execution and delivery of this Agreement by Travelers
or the consummation by Travelers of the transactions contemplated hereby,
except for: (1) the filing with the SEC of (A) the Joint Proxy Statement
relating to the Travelers Stockholders Meeting, (B) the Form S-4 and (C)
such reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act
as may be required in connection with this Agreement and the transactions
contemplated hereby; (2) the filing of the Certificate of Merger and the
Certificates of Designations with respect to the Travelers Preferred Stock
(the "Certificates of Designations") with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities
of other states in which Travelers is qualified to do business and such
filings with Governmental Entities to satisfy the applicable requirements
of state securities or "blue sky" laws; (3) such filings with and approvals
of the NYSE to permit the shares of Travelers Common Stock that are to be
issued in the Merger and under the Citicorp Stock Plans and to permit the
shares of Travelers Preferred Stock that are to be issued in the Merger in
exchange for like securities representing Citicorp Preferred Stock that are
listed on the NYSE or the Pacific Stock Exchange (the "PSE") (collectively,
the "Travelers Listed Securities"), in each case to continue to be listed
on the NYSE or the PSE following the Merger, as the case may be; (4) the
consents, approvals and notices required under the 1940 Act and the
Advisors Act; (5) the filing of applications and notices, as applicable,
with the Federal Reserve Board under the BHC Act, and the receipt of
approvals of such applications and notices; (6) the filing of appropriate
documents with, and approvals of, the respective Commissioners of Insurance
or similar regulatory authorities of Arizona, New York, New Jersey and
Delaware; (7) filings in respect of, and approvals and authorizations of,
any other Governmental Entity having jurisdiction over the securities,
commodities, banking, insurance or other financial services businesses; and
(8) such consents, approvals, orders or authorizations the failure of which
to be made or obtained individually or in the aggregate would not (x) have
a material adverse effect on Travelers or (y) reasonably be expected to
materially impair or delay the ability of Travelers to perform its
obligations under this Agreement.
(e) Reports; Undisclosed Liabilities.
(i) Travelers has filed all required reports, schedules, forms,
statements and other documents (including exhibits and all other
information incorporated therein) with the SEC since January 1, 1995
(the "Travelers SEC Documents"). As of their respective dates, the
Travelers SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Travelers SEC Documents, and none of the Travelers
SEC Documents when filed contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the
extent that information contained in any Travelers SEC Document has been
revised or superseded by a later filed Travelers SEC Document, none of
the Travelers SEC Documents contains any untrue statement of a material
fact or omits to
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state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
Travelers included in the Travelers SEC Documents comply as to form, as
of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position of Travelers and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal recurring
year-end audit adjustments). Except (A) as reflected in such financial
statements or in the notes thereto or (B) for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby,
neither Travelers nor any of its subsidiaries has any liabilities or
obligations of any nature which, individually or in the aggregate, would
have a material adverse effect on Travelers.
(ii) Except as would not have a material adverse effect on
Travelers, Travelers and each of its subsidiaries have timely filed all
reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to
file since January 1, 1995 with (1) any state insurance commission or
any other state regulatory authority and (2) any other self-regulatory
organization (clauses (1) and (2), collectively, the "Travelers
Regulatory Agencies"), and have paid all fees and assessments due and
payable in connection therewith. Except for normal examinations
conducted by a Travelers Regulatory Agency in the regular course of the
business of Travelers and its subsidiaries, no Travelers Regulatory
Agency has initiated any proceeding or, to the knowledge of Travelers,
investigation into the business or operations of Travelers or any of its
subsidiaries since January 1, 1995. Except as would not have a material
adverse effect on Travelers, there is no unresolved violation,
criticism, or exception by any Travelers Regulatory Agency with respect
to any report or statement relating to any examinations of Travelers or
any of its subsidiaries.
(iii) Except in each case as would not have a material adverse
effect on Travelers, the annual statements of each subsidiary of
Travelers that is an insurer for the years ended December 31, 1996 and
1997 as filed with the respective Departments of Insurance of each such
subsidiary's domiciliary states have been prepared in accordance with
the accounting practices prescribed or permitted by each such Department
of Insurance (the "Travelers State Statutory Accounting Principles"),
and such accounting practices have been applied on a basis consistent
with the Travelers State Statutory Accounting Principles applicable to
each such annual statement throughout the periods involved, except as
set forth in the notes, exhibits or schedules thereto, and such annual
statements present fairly in all material respects the financial
position and results of operations of such subsidiary as of the dates
and for the periods covered thereby in accordance with the Travelers
State Statutory Accounting Principles applicable to each such annual
statement.
(f) Information Supplied. None of the information supplied or to be
supplied by Travelers specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
the Joint Proxy Statement will, at the date it is first mailed to
Travelers' stockholders or at the time of the Travelers Stockholders
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The Form S-4 and the Joint Proxy Statement will
comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act, respectively, and the rules and
regulations thereunder, except that no representation or warranty is made
by Travelers with respect to statements made or incorporated by reference
therein based on information supplied by Citicorp specifically for
inclusion or incorporation by reference in the Form S-4 or the Joint Proxy
Statement.
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(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since December 31, 1997, Travelers and its subsidiaries have
conducted their business only in the ordinary course or as disclosed in any
Travelers Filed SEC Document, and there has not been (1) any material
adverse change in Travelers, (2) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property)
with respect to any of Travelers' capital stock, other than regular
quarterly cash dividends on the Travelers Common Stock and dividends
payable on Travelers Preferred Stock in accordance with their terms as of
the date of this Agreement (or as of their date of issue if subsequent to
the date of this Agreement), (3) any split, combination or reclassification
of any of Travelers' capital stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of or in
substitution for shares of Travelers' capital stock, except for issuances
of Travelers Common Stock upon the exercise of Travelers Employee Stock
Options awarded prior to the date hereof in accordance with their present
terms or issued pursuant to Section 4.01(b), except upon conversion of the
Travelers Convertible Securities and except in accordance with the terms of
the Travelers Stock Plans, (4) (A) any granting by Travelers or any of its
subsidiaries to any current or former director, executive officer or other
key employee of Travelers or its subsidiaries of any increase in
compensation, bonus or other benefits, except for normal increases in the
ordinary course of business or as was required under any employment
agreements in effect as of the date of the most recent audited financial
statements included in the Travelers SEC Documents filed and publicly
available prior to the date of this Agreement (as amended to the date of
this Agreement, the "Travelers Filed SEC Documents"), (B) any granting by
Travelers or any of its subsidiaries to any such current or former
director, executive officer or key employee of any increase in severance or
termination pay, except in the ordinary course of business or pursuant to
the Travelers Stock Plans, or (C) any entry by Travelers or any of its
subsidiaries into, or any amendment of, any employment, deferred
compensation, consulting, severance, termination or indemnification
agreement with any such current or former director, executive officer or
key employee, other than in the ordinary course of business, (5) except
insofar as may have been disclosed in the Travelers Filed SEC Documents or
required by a change in generally accepted accounting principles, any
change in accounting methods, principles or practices by Travelers
materially affecting its assets, liabilities or business or (6) except
insofar as may have been disclosed in the Travelers Filed SEC Documents,
any tax election that individually or in the aggregate would reasonably be
expected to have a material adverse effect on Travelers or any of its tax
attributes or any settlement or compromise of any material income tax
liability.
(h) Compliance with Applicable Laws; Litigation.
(i) Travelers, its subsidiaries and employees hold all permits,
licenses, variances, exemptions, orders, registrations and approvals of
all Governmental Entities which are required for the operation of the
businesses of Travelers and its subsidiaries (collectively, the
"Travelers Permits") except where the failure to have any such Travelers
Permits individually or in the aggregate would not have a material
adverse effect on Travelers. Travelers and its subsidiaries are in
compliance with the terms of the Travelers Permits and all applicable
statutes, laws, ordinances, rules and regulations, except where the
failure so to comply individually or in the aggregate would not have a
material adverse effect on Travelers. As of the date of this Agreement,
except as disclosed in the Travelers Filed SEC Documents, no action,
demand, requirement or investigation by any Governmental Entity and no
suit, action or proceeding by any person, in each case with respect to
Travelers or any of its subsidiaries or any of their respective
properties is pending or, to the knowledge of Travelers, threatened,
other than, in each case, those the outcome of which individually or in
the aggregate would not (i) reasonably be expected to have a material
adverse effect on Travelers or (ii) reasonably be expected to materially
impair or delay the ability of Travelers to perform its obligations
under this Agreement.
(ii) Except as would not have a material adverse effect on
Travelers, neither Travelers nor any of its subsidiaries is subject to
any Regulatory Agreement, nor has Travelers or any of its subsidiaries
or affiliates been advised since January 1, 1995 by any Governmental
Entity that it is considering
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issuing or requesting any such Regulatory Agreement that would have a
material adverse effect on Travelers. After the date of this Agreement,
no matters referred to in this Section 3.02(h)(ii) shall have arisen.
(i) Absence of Changes in Benefit Plans. Since December 31, 1997,
there has not been any adoption or amendment in any material respect by
Travelers or any of its subsidiaries of any collective bargaining agreement
or any material bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding
providing benefits to any current or former employee, officer or director
of Travelers or any of its wholly owned subsidiaries (collectively, the
"Travelers Benefit Plans"), or any material change in any actuarial or
other assumption used to calculate funding obligations with respect to any
Travelers pension plans, or any change in the manner in which contributions
to any Travelers pension plans are made or the basis on which such
contributions are determined.
(j) ERISA Compliance.
(i) With respect to the Travelers Benefit Plans, no event has
occurred and, to the knowledge of Travelers, there exists no condition
or set of circumstances, in connection with which Travelers or any of
its subsidiaries could be subject to any liability that individually or
in the aggregate would have a material adverse effect on Travelers under
ERISA, the Code or any other applicable law.
(ii) Each Travelers Benefit Plan has been administered in
accordance with its terms, except for any failures so to administer any
Travelers Benefit Plan that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on Travelers.
Travelers, its subsidiaries and all the Travelers Benefit Plans are in
compliance with the applicable provisions of ERISA, the Code and all
other applicable laws and the terms of all applicable collective
bargaining agreements, except for any failures to be in such compliance
that individually or in the aggregate would not reasonably be expected
to have a material adverse effect on Travelers. Each Travelers Benefit
Plan that is intended to be qualified under Section 401(a) or 401(k) of
the Code has received a favorable determination letter from the IRS that
it is so qualified and each trust established in connection with any
Travelers Benefit Plan that is intended to be exempt from federal income
taxation under Section 501(a) of the Code has received a determination
letter from the IRS that such trust is so exempt. To the knowledge of
Travelers, no fact or event has occurred since that date of any
determination letter from the IRS which is reasonably likely to affect
adversely the qualified status of any such Travelers Benefit Plan or the
exempt status of any such trust, except for any occurrence that
individually or in the aggregate would not reasonably be expected to
have a material adverse effect on Travelers.
(iii) Except as any of the following either individually or in the
aggregate would not reasonably be expected to have a material adverse
effect on Travelers, (x) neither Travelers nor any ERISA Affiliate of
Travelers has incurred any liability under Title IV of ERISA and no
condition exists that presents a risk to Travelers or any ERISA
Affiliate of Travelers of incurring any such liability (other than
liability for benefits or premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course), (y) no Travelers Benefit
Plan has incurred an "accumulated funding deficiency" (within the
meaning of Section 302 of ERISA or Section 412 of the Code) whether or
not waived and (z) to the knowledge of Travelers, there are not any
facts or circumstances that would materially change the funded status of
any Travelers Benefit Plan that is a "defined benefit" plan (as defined
in Section 3(35) of ERISA) since the date of the most recent actuarial
report for such plan. No Travelers Benefit Plan is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA.
(iv) Neither Travelers nor any of its subsidiaries is a party to
any collective bargaining or other labor union contract applicable to
persons employed by Travelers or any of its subsidiaries and no
collective bargaining agreement is being negotiated by Travelers or any
of its subsidiaries, in each case that is material to Travelers and its
subsidiaries taken as a whole. As of the date of this Agreement, there
is no labor dispute, strike or work stoppage against Travelers or any of
its
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subsidiaries pending or, to the knowledge of Travelers, threatened which
may interfere with the respective business activities of Travelers or
any of its subsidiaries, except where such dispute, strike or work
stoppage individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Travelers. As of the date
of this Agreement, to the knowledge of Travelers, none of Travelers, any
of its subsidiaries or any of their respective representatives or
employees has committed any unfair labor practice in connection with the
operation of the respective businesses of Travelers or any of its
subsidiaries, and there is no charge or complaint against Travelers or
any of its subsidiaries by the National Labor Relations Board or any
comparable governmental agency pending or threatened in writing, except
for any occurrence that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on Travelers.
(v) No Travelers Benefit Plan provides medical benefits (whether or
not insured) with respect to current or former employees after
retirement or other termination of service the cost of which is material
to Travelers and its subsidiaries taken as a whole.
(vi) No amounts payable under the Travelers Benefit Plans solely as
a result of the consummation of the transactions contemplated by this
Agreement will fail to be deductible for federal income tax purposes by
virtue of section 280G of the Code. The consummation of the transactions
contemplated by this Agreement will not, either alone or in combination
with another event, (A) entitle any current or former employee, officer
or director of Travelers or any ERISA Affiliate of Travelers to
severance pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, (B) accelerate the time of payment
or vesting, or increase the amount of compensation due any such
employee, officer or director or (C) constitute a "change of control"
under any Travelers Benefit Plan, and Travelers and its board of
directors have taken all required actions to effect the foregoing.
(k) Taxes.
(i) Each of Travelers and its subsidiaries has filed all material
tax returns and reports required to be filed by it and all such returns
and reports are complete and correct in all material respects, or
requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, except to the extent that such
failures to file, to be complete or correct or to have extensions
granted that remain in effect individually or in the aggregate would not
have a material adverse effect on Travelers. Travelers and each of its
subsidiaries has paid (or Travelers has paid on its behalf) all taxes
shown as due on such returns, and the most recent financial statements
contained in the Travelers Filed SEC Documents reflect an adequate
reserve for all taxes payable by Travelers and its subsidiaries for all
taxable periods and portions thereof accrued through the date of such
financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Travelers or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that individually or in
the aggregate would not have a material adverse effect on Travelers.
(iii) Neither Travelers nor any of its subsidiaries has taken any
action or knows of any fact, agreement, plan or other circumstance that
is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(l) Voting Requirements. The affirmative vote at the Travelers
Stockholders Meeting (the "Travelers Stockholder Approval") of the holders
of a majority of the voting power of all outstanding shares of Travelers
Common Stock, Series I Preferred Stock, Series J Preferred Stock and Series
K Preferred Stock, voting as a single class, is the only vote of the
holders of any class or series of Travelers' capital stock necessary to
approve and adopt this Agreement and the transactions contemplated hereby.
The Board of Directors of Travelers has duly and validly approved and taken
all corporate action required to be taken by the Travelers Board of
Directors for the consummation of the transactions contemplated by this
Agreement.
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(m) State Takeover Statutes; Certificate of Incorporation. The Board
of Directors of Travelers (including a majority of the continuing directors
thereof (as defined in Article Eighth of Travelers' Restated Certificate of
Incorporation)) has approved the terms of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby
and, assuming the accuracy of Citicorp's representation and warranty
contained in Section 3.01(p), such approval constitutes approval of the
Merger and the other transactions contemplated by this Agreement by the
Travelers Board of Directors under the provisions of Article Eighth of
Travelers' Restated Certificate of Incorporation and Section 203 of the
DGCL and represents all the actions necessary to ensure that the
supermajority voting requirement of Article Eighth of Travelers' Restated
Certificate of Incorporation and Section 203 of the DGCL do not apply to
Citicorp in connection with the Merger and the other transactions
contemplated by this Agreement. To the knowledge of Travelers, no other
state takeover statute is applicable to the Merger or the other
transactions contemplated by this Agreement.
(n) Accounting Matters. Travelers has disclosed to its independent
public accountants all actions taken by it or its subsidiaries that would
impact the accounting of the business combination to be effected by the
Merger as a pooling of interests. As of the date hereof, Travelers, based
on advice from its independent public accountants, believes that the Merger
will qualify for "pooling of interests" accounting.
(o) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of
Travelers.
(p) Ownership of Citicorp Capital Stock. Except for shares owned by
Travelers Benefit Plans or shares held or managed for the account of
another person or as to which Travelers is required to act as a fiduciary
or in a similar capacity, as of the date hereof, neither Travelers nor, to
its knowledge without independent investigation, any of its affiliates, (i)
beneficially owns (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing
of, in each case, shares of capital stock of Citicorp.
(q) Intellectual Property.
(i) Travelers and its subsidiaries own or have a valid license to
use all trademarks, service marks and trade names (including any
registrations or applications for registration of any of the foregoing)
(collectively, the "Travelers Intellectual Property") necessary to carry
on its business substantially as currently conducted, except for such
Travelers Intellectual Property the failure of which to own or validly
license individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Travelers. Neither
Travelers nor any such subsidiary has received any notice of
infringement of or conflict with, and, to Travelers' knowledge, there
are no infringements of or conflicts with, the rights of others with
respect to the use of any Travelers Intellectual Property that
individually or in the aggregate, in either such case, would reasonably
be expected to have a material adverse effect on Travelers.
(ii) The consummation of the Merger and the other transactions
contemplated by this Agreement will not result in the loss by Travelers
of any rights to use computer and telecommunication software including
source and object code and documentation and any other media (including,
without limitation, manuals, journals and reference books) necessary to
carry on its business substantially as currently conducted and the loss
of which would have a material adverse effect on Travelers.
(iii) The computer software operated by Travelers which is material
to the conduct of its business is capable of providing or is being
adapted to provide uninterrupted millennium functionality to record,
store, process and present calendar dates falling on or after January 1,
2000 in substantially the same manner and with the same functionality as
such software records, stores, processes and presents such calendar
dates falling on or before December 31, 1999, except as would
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not have a material adverse effect on Travelers. The costs of the
adaptations referred to in this clause (iii) will not have a material
adverse effect on Travelers.
(r) Certain Contracts. Except as set forth in the Travelers Filed SEC
Documents or as permitted pursuant to Section 4.01(b), neither Travelers
nor any of its subsidiaries is a party to or bound by (i) any agreement
relating to the incurring of indebtedness (including sale and leaseback and
capitalized lease transactions and other similar financing transactions)
providing for payment or repayment in excess of $1 billion, other than such
agreements relating to indebtedness incurred in the ordinary course of
business of Travelers' subsidiaries to finance their securities and
commodity portfolio positions and consumer finance business, (ii) any
"material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) or (iii) any non-competition agreement or any
other agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, all or any
substantial portion of the business of Travelers and its subsidiaries,
taken as a whole, is or would be conducted.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01 Conduct of Business.
(a) Conduct of Business by Citicorp. Except as set forth in Section
4.01(a) of the Citicorp Disclosure Schedule, except as otherwise expressly
contemplated by this Agreement or except as consented to by Travelers, such
consent not to be unreasonably withheld or delayed, during the period from
the date of this Agreement to the Effective Time, Citicorp shall, and shall
cause its subsidiaries to, carry on their respective businesses in the
ordinary course consistent with past practice and in compliance in all
material respects with all applicable laws and regulations and, to the
extent consistent therewith, use all reasonable efforts to preserve intact
their current business organizations (other than internal organizational
realignments), use all reasonable efforts to keep available the services of
their current officers and other key employees and preserve their
relationships with those persons having business dealings with them to the
end that their goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing (but
subject to the above exceptions), during the period from the date of this
Agreement to the Effective Time, Citicorp shall not, and shall not permit
any of its subsidiaries to:
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned subsidiary of
Citicorp to its parent, or by a subsidiary that is partially owned by
Citicorp or any of its subsidiaries, provided that Citicorp or any such
subsidiary receives or is to receive its proportionate share thereof,
and other than the regular quarterly cash dividends with respect to the
Citicorp Common Stock and dividends payable on Citicorp Preferred Stock
in accordance with their terms as of the date of this Agreement (or as
of their date of issue if subsequent to the date of this Agreement), (x)
declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, except for issuances of
Citicorp Common Stock upon the exercise of Citicorp Employee Stock
Options under the Citicorp Stock Plans or in connection with other
awards under the Citicorp Stock Plans outstanding as of the date hereof
in accordance with their present terms or issued pursuant to Section
4.01(a)(ii) or (z) except pursuant to agreements entered into with
respect to the Citicorp Stock Plans in effect as of the close of
business on March 31, 1998, purchase, redeem or otherwise acquire any
shares of capital stock of Citicorp or any of its subsidiaries or any
other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or subject
to any Lien any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options
to acquire, any such shares, voting securities or convertible securities
(other than (x) the
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issuance of Citicorp Common Stock upon the exercise of Citicorp Employee
Stock Options or in connection with other awards under the Citicorp
Stock Plans (I) outstanding as of the date hereof in accordance with
their present terms or granted after the date hereof in the ordinary
course of business consistent with past practice or (II) after
consulting with Travelers, otherwise granted after the date hereof (so
long as such additional amount of Citicorp Common Stock subject to
Citicorp Employee Stock Options and/or other awards under the Citicorp
Stock Plans granted under this clause (II) do not exceed 2,000,000
shares of Citicorp Common Stock in the aggregate), (y) in connection
with the issuance of nonvoting Citicorp Preferred Stock in the ordinary
course of business consistent with past practice or (z) the sale of
Citicorp Treasury Stock as contemplated by Section 5.14);
(iii) amend its certificate of incorporation, by-laws or other
comparable organizational documents, other than in connection with the
issuance of nonvoting Citicorp Preferred Stock in the ordinary course of
business consistent with past practice;
(iv) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any person, except for such acquisitions made in
the ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets
(including securitizations), other than in the ordinary course of
business consistent with past practice;
(vi) take any action that would cause the representations and
warranties set forth in Section 3.01(g) (with each reference therein to
"ordinary course of business" being deemed for purposes of this Section
4.01(a)(vi) to be immediately followed by "consistent with past
practice") to no longer be true and correct; or
(vii) authorize, or commit or agree to take, any of the foregoing
actions;
provided that the limitations set forth in this Section 4.01(a) (other than
clause (iii)) shall not apply to: (x) any transaction between Citicorp and
any wholly owned subsidiary or between any wholly owned subsidiaries of
Citicorp; or (y) The Student Loan Corporation or any of its subsidiaries to
the extent inconsistent with the fiduciary duties of its Board of
Directors, provided that Citicorp will not take any action as a stockholder
of The Student Loan Corporation that would reasonably be expected to
materially impair or delay the transactions provided for in this Agreement.
(b) Conduct of Business by Travelers. Except as set forth in Section
4.01(b) of the Travelers Disclosure Schedule, except as otherwise expressly
contemplated by this Agreement or except as consented to by Citicorp, such
consent not to be unreasonably withheld or delayed, during the period from
the date of this Agreement to the Effective Time, Travelers shall, and
shall cause its subsidiaries to, carry on their respective businesses in
the ordinary course consistent with past practice and in compliance in all
material respects with all applicable laws and regulations and, to the
extent consistent therewith, use all reasonable efforts to preserve intact
their current business organizations (other than internal organizational
realignments), use all reasonable efforts to keep available the services of
their current officers and other key employees and preserve their
relationships with those persons having business dealings with them to the
end that their goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing (but
subject to the above exceptions), during the period from the date of this
Agreement to the Effective Time, Travelers shall not, and shall not permit
any of its subsidiaries to:
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned subsidiary of
Travelers to its parent, or by a subsidiary that is partially owned by
Travelers or any of its subsidiaries, provided that Travelers or any
such subsidiary receives or is to receive its proportionate share
thereof, and other than the regular quarterly cash dividends with
respect to the Travelers Common Stock (which, subject to Section 5.14,
may be increased) and dividends payable on the Travelers Preferred Stock
in accordance with their terms as of the date of
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this Agreement (or as of their date of issue if subsequent to the date
of this Agreement), (x) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock,
(y) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, except for issuances
of Travelers Common Stock upon conversion of Travelers Convertible
Securities and except upon the exercise of Travelers Employee Stock
Options under the Travelers Stock Plans or in connection with other
awards under the Travelers Stock Plans outstanding as of the date hereof
in accordance with their present terms or issued pursuant to Section
4.01(b)(ii) or (z) except pursuant to agreements entered into with
respect to the Travelers Stock Plans in effect as of the close of
business on March 31, 1998, purchase, redeem or otherwise acquire any
shares of capital stock of Travelers or any of its subsidiaries or any
other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or subject
to any Lien any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options
to acquire, any such shares, voting securities or convertible securities
(other than (x) the issuance of Travelers Common Stock or options to
purchase shares of Travelers Common Stock upon the exercise of Travelers
Employee Stock Options or in connection with other awards under the
Travelers Stock Plans (I) outstanding as of the date hereof in
accordance with their present terms or granted after the date hereof in
the ordinary course of business consistent with past practice or (II)
after consulting with Citicorp, otherwise granted after the date hereof
(so long as such additional amount of Travelers Common Stock subject to
Travelers Employee Stock Options and/or other awards under the Travelers
Stock Plans granted under this clause (II) do not exceed 2,000,000
shares of Travelers Common Stock in the aggregate), (y) upon conversion
of Travelers Convertible Securities or (z) in connection with the
issuance of nonvoting Travelers Preferred Stock in the ordinary course
of business consistent with past practice);
(iii) except as contemplated by this Agreement or the Proxy
Statement for Travelers' 1998 Annual Meeting of Shareholders, amend its
certificate of incorporation, by-laws or other comparable organizational
documents, other than in connection with the issuance of nonvoting
Travelers Preferred Stock in the ordinary course of business consistent
with past practice;
(iv) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any person, except for such acquisitions made in
the ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets
(including securitizations), other than in the ordinary course of
business consistent with past practice;
(vi) take any action that would cause the representations and
warranties set forth in Section 3.02(g) (with each reference therein to
"ordinary course of business" being deemed for purposes of this Section
4.01(b)(vi) to be immediately followed by "consistent with past
practice") to no longer be true and correct; or
(vii) authorize, or commit or agree to take, any of the foregoing
actions;
provided that the limitations set forth in this Section 4.01(b) (other than
clause (iii)) shall not apply to: (x) any transaction between Travelers and
any wholly owned subsidiary or between any wholly owned subsidiaries of
Travelers; or (y) Travelers Property Casualty Corp. or any of its
subsidiaries to the extent inconsistent with the fiduciary duties of its
Board of Directors, provided that Travelers will not take any action as a
stockholder of Travelers Property Casualty Corp. that would reasonably be
expected to materially impair or delay the transactions provided for in
this Agreement.
(c) Coordination of Dividends. Subject to Section 5.14, each of
Travelers and Citicorp shall coordinate with the other regarding the
declaration and payment of dividends in respect of the Travelers Common
Stock and the Citicorp Common Stock and the record dates and payment dates
relating
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thereto, it being the intention of Travelers and Citicorp that any holder
of Citicorp Common Stock or Travelers Common Stock shall not receive two
dividends, or fail to receive one dividend, for any single calendar quarter
with respect to its shares of Citicorp Common Stock and/or shares of
Travelers Common Stock, including shares of Travelers Common Stock that a
holder receives in exchange for shares of Citicorp Common Stock pursuant to
the Merger.
(d) Other Actions. Except as required by law, Citicorp and Travelers
shall not, and shall not permit any of their respective subsidiaries to,
voluntarily take any action that would reasonably be expected to result in
any of the conditions to the Merger set forth in Article VI not being
satisfied.
(e) Advice of Changes. Citicorp and Travelers shall promptly advise
the other party orally and in writing to the extent it has knowledge of any
change or event having, or which, insofar as can reasonably be foreseen,
would reasonably be expected to have a material adverse effect on such
party or on the truth of their respective representations and warranties or
the ability of the conditions set forth in Article VI to be satisfied;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or
remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement.
SECTION 4.02 No Solicitation by Citicorp.
(a) Citicorp shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any of its directors, officers or
employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to,
directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Citicorp Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any Citicorp
Takeover Proposal; provided, however, that if, at any time, the Board of
Directors of Citicorp determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to Citicorp's stockholders under applicable law, Citicorp
may, in response to a Citicorp Superior Proposal (as defined in Section
4.02(b)) and subject to providing prior written notice of its decision to
take such action to Travelers (the "Citicorp Notice") and compliance with
Section 4.02(c), following delivery of the Citicorp Notice (x) furnish
information with respect to Citicorp and its subsidiaries to any person
making a Citicorp Superior Proposal pursuant to a customary confidentiality
agreement (as determined by Citicorp after consultation with its outside
counsel) and (y) participate in discussions or negotiations regarding such
Citicorp Superior Proposal. For purposes of this Agreement, "Citicorp
Takeover Proposal" means any inquiry, proposal or offer from any person
relating to any (w) direct or indirect acquisition or purchase of a
business that constitutes 15% or more of the net revenues, net income or
the assets of Citicorp and its subsidiaries, taken as a whole, (x) direct
or indirect acquisition or purchase of 15% or more of any class of equity
securities of Citicorp or any of its subsidiaries whose business
constitutes 15% or more of the net revenues, net income or assets of
Citicorp and its subsidiaries, taken as a whole, (y) tender offer or
exchange offer that if consummated would result in any person beneficially
owning 15% or more of any class of equity securities of Citicorp or any of
its subsidiaries whose business constitutes 15% or more of the net
revenues, net income or assets of Citicorp and its subsidiaries, taken as a
whole, or (z) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Citicorp or any of its subsidiaries whose business constitutes 15% or more
of the net revenues, net income or assets of Citicorp and its subsidiaries,
taken as a whole, other than the transactions contemplated by this
Agreement.
(b) Except as expressly permitted by this Section 4.02, neither the
Board of Directors of Citicorp nor any committee thereof shall (i) withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse
to Travelers, the approval or recommendation by such Board of Directors or
such committee of the Merger or this Agreement, (ii) approve or recommend,
or propose publicly to approve or recommend, any Citicorp Takeover Proposal
or (iii) cause Citicorp to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, a
"Citicorp Acquisition Agreement") related to any Citicorp Takeover
Proposal. Notwithstanding the foregoing, in the event that
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the Board of Directors of Citicorp determines in good faith, after
consultation with outside counsel, that in light of a Citicorp Superior
Proposal it is necessary to do so in order to act in a manner consistent
with its fiduciary duties to Citicorp's stockholders under applicable law,
the Board of Directors of Citicorp may (subject to this and the following
sentences) terminate this Agreement solely in order to concurrently enter
into a Citicorp Acquisition Agreement with respect to any Citicorp Superior
Proposal, but only after the fifth business day following Travelers'
receipt of written notice advising Travelers that the Board of Directors of
Citicorp is prepared to accept a Citicorp Superior Proposal and only if,
during such five-day period, Citicorp and its advisors shall have
negotiated in good faith with Travelers to make such adjustments in the
terms and conditions of this Agreement as would enable Travelers to proceed
with the transactions contemplated herein on such adjusted terms; it being
understood and agreed that should Travelers not seek to proceed with the
transactions contemplated herein on such adjusted terms, Citicorp may
solicit additional Citicorp Takeover Proposals, including by conducting an
auction. For purposes of this Agreement, a "Citicorp Superior Proposal"
means any proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash
and/or securities, more than 50% of the combined voting power of the shares
of Citicorp Common Stock then outstanding or all or substantially all the
assets of Citicorp and otherwise on terms which the Board of Directors of
Citicorp determines in its good faith judgment to be more favorable to
Citicorp's stockholders than the Merger and for which financing, to the
extent required, is then committed or which, in the good faith judgment of
the Board of Directors of Citicorp, is reasonably capable of being obtained
by such third party.
(c) In addition to the obligations of Citicorp set forth in paragraphs
(a) and (b) of this Section 4.02, Citicorp shall immediately advise
Travelers orally and in writing of any request for information or of any
Citicorp Takeover Proposal. Citicorp will keep Travelers reasonably
informed of the status of any such request or Citicorp Takeover Proposal.
(d) Nothing contained in this Section 4.02 shall prohibit Citicorp
from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to Citicorp's stockholders if, in the good faith judgment of the
Board of Directors of Citicorp, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law; provided, however, that, except in connection with a
Citicorp Superior Proposal, neither Citicorp nor its Board of Directors nor
any committee thereof shall withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to this Agreement or the
Merger or approve or recommend, or propose publicly to approve or
recommend, a Citicorp Takeover Proposal.
SECTION 4.03 No Solicitation by Travelers.
(a) Travelers shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any of its directors, officers or
employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to,
directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Travelers Takeover Proposal (as defined below) or
(ii) participate in any discussions or negotiations regarding any Travelers
Takeover Proposal; provided, however, that if, at any time, the Board of
Directors of Travelers determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to Travelers' stockholders under applicable law, Travelers
may, in response to a Travelers Superior Proposal (as defined in Section
4.03(b)) and subject to providing prior written notice of its decision to
take such action to Citicorp (the "Travelers Notice") and compliance with
Section 4.03(c), following delivery of the Travelers Notice (x) furnish
information with respect to Travelers and its subsidiaries to any person
making a Travelers Superior Proposal pursuant to a customary
confidentiality agreement (as determined by Travelers after consultation
with its outside counsel) and (y) participate in discussions or
negotiations regarding such Travelers Superior Proposal. For purposes of
this Agreement, "Travelers Takeover Proposal" means any inquiry, proposal
or offer from any person relating to any (w) direct or indirect acquisition
or purchase of a business that constitutes 15% or more of
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the net revenues, net income or the assets of Travelers and its
subsidiaries, taken as a whole, (x) direct or indirect acquisition or
purchase of 15% or more of any class of equity securities of Travelers or
any of its subsidiaries whose business constitutes 15% or more of the net
revenues, net income or assets of Travelers and its subsidiaries, taken as
a whole, (y) tender offer or exchange offer that if consummated would
result in any person beneficially owning 15% or more of any class of equity
securities of Travelers or any of its subsidiaries whose business
constitutes 15% or more of the net revenues, net income or assets of
Travelers and its subsidiaries, taken as a whole, or (z) merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Travelers or any of its
subsidiaries whose business constitutes 15% or more of the net revenues,
net income or assets of Travelers and its subsidiaries, taken as a whole,
other than the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 4.03, neither the
Board of Directors of Travelers nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Citicorp, the approval or recommendation by such Board of
Directors or such committee of the Merger, this Agreement or the issuance
of Travelers Common Stock and Travelers Preferred Stock in connection with
the Merger, (ii) approve or recommend, or propose publicly to approve or
recommend, any Travelers Takeover Proposal or (iii) cause Travelers to
enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "Travelers Acquisition
Agreement") related to any Travelers Takeover Proposal. Notwithstanding the
foregoing, in the event that the Board of Directors of Travelers determines
in good faith, after consultation with outside counsel, that in light of a
Travelers Superior Proposal it is necessary to do so in order to act in a
manner consistent with its fiduciary duties to Travelers' stockholders
under applicable law, the Board of Directors of Travelers may (subject to
this and the following sentences) terminate this Agreement solely in order
to concurrently enter into a Travelers Acquisition Agreement with respect
to any Travelers Superior Proposal, but only after the fifth business day
following Citicorp's receipt of written notice advising Citicorp that the
Board of Directors of Travelers is prepared to accept a Travelers Superior
Proposal and only if, during such five-day period, Travelers and its
advisors shall have negotiated in good faith with Citicorp to make such
adjustments in the terms and conditions of this Agreement as would enable
Citicorp to proceed with the transactions contemplated herein on such
adjusted terms; it being understood and agreed that should Citicorp not
seek to proceed with the transactions contemplated herein on such adjusted
terms, Travelers may solicit additional Travelers Takeover Proposals,
including by conducting an auction. For purposes of this Agreement, a
"Travelers Superior Proposal" means any proposal made by a third party to
acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Travelers Common Stock then
outstanding or all or substantially all the assets of Travelers and
otherwise on terms which the Board of Directors of Travelers determines in
its good faith judgment to be more favorable to Travelers' stockholders
than the Merger and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the Board of Directors of
Travelers, is reasonably capable of being obtained by such third party.
(c) In addition to the obligations of Travelers set forth in
paragraphs (a) and (b) of this Section 4.03, Travelers shall immediately
advise Citicorp orally and in writing of any request for information or of
any Travelers Takeover Proposal. Travelers will keep Citicorp reasonably
informed of the status and of any such request or Travelers Takeover
Proposal.
(d) Nothing contained in this Section 4.03 shall prohibit Travelers
from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to Travelers' stockholders if, in the good faith judgment of the
Board of Directors of Travelers, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law; provided, however, that, except in connection with a
Travelers Superior Proposal, neither Travelers nor its Board of Directors
nor any committee thereof shall withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to this Agreement, the
Merger, the issuance of Travelers Common Stock and Travelers Preferred
Stock in connection with the
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Merger, or approve or recommend, or propose publicly to approve or
recommend, a Travelers Takeover Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Preparation of the Form S-4 and the Joint Proxy Statement;
Stockholders Meetings.
(a) As soon as practicable following the date of this Agreement,
Citicorp and Travelers shall prepare and file with the SEC the Joint Proxy
Statement and Travelers shall prepare and file with the SEC the Form S-4,
in which the Joint Proxy Statement will be included as a prospectus. Each
of Citicorp and Travelers shall use best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable
after such filing. Citicorp will use all best efforts to cause the Joint
Proxy Statement to be mailed to Citicorp's stockholders, and Travelers will
use all best efforts to cause the Joint Proxy Statement to be mailed to
Travelers' stockholders, in each case as promptly as practicable after the
Form S-4 is declared effective under the Securities Act. Travelers shall
also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a general
consent to service of process) required to be taken under any applicable
state securities laws in connection with the issuance of Travelers Common
Stock and Travelers Preferred Stock in the Merger and Citicorp shall
furnish all information concerning Citicorp and the holders of Citicorp
Common Stock and Citicorp Preferred Stock as may be reasonably requested in
connection with any such action. No filing of, or amendment or supplement
to, the Form S-4 will be made by Travelers or to the Joint Proxy Statement
will be made by Travelers or Citicorp without providing the other party the
opportunity to review and comment thereon. Travelers will advise Citicorp,
promptly after it receives notice thereof, of the time when the Form S-4
has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the
Travelers Common Stock issuable in connection with the Merger for offering
or sale in any jurisdiction, or any request by the SEC for amendment of the
Joint Proxy Statement or the Form S-4 or comments thereon and responses
thereto or requests by the SEC for additional information. If at any time
prior to the Effective Time any information relating to Citicorp or
Travelers, or any of their respective affiliates, officers or directors,
should be discovered by Citicorp or Travelers which should be set forth in
an amendment or supplement to any of the Form S-4 or the Joint Proxy
Statement, so that any of such documents would not include any misstatement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall
promptly notify the other party hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC
and, to the extent required by law, disseminated to the stockholders of
Citicorp and Travelers.
(b) Citicorp shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Citicorp Stockholders Meeting") for the purpose of
obtaining the Citicorp Stockholder Approval and shall, through its Board of
Directors, recommend to its stockholders the approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby.
Without limiting the generality of the foregoing, Citicorp agrees that its
obligations pursuant to the first sentence of this Section 5.01(b) shall
not be affected by the commencement, public proposal, public disclosure or
communication to Citicorp of any Citicorp Takeover Proposal.
(c) Travelers shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Travelers Stockholders Meeting") for the purpose of
obtaining the Travelers Stockholder Approval and, if necessary, increasing
the number of shares of authorized Travelers Common Stock and shall,
through its Board of Directors, recommend to its stockholders the approval
and adoption of this Agreement, the Merger and the other transactions
contemplated hereby. Without limiting the generality of the foregoing,
Travelers agrees that its obligations pursuant to the first sentence of
this Section 5.01(c) shall not be affected by the
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commencement, public proposal, public disclosure or communication to
Travelers of any Travelers Takeover Proposal.
(d) Travelers and Citicorp will use best efforts to hold the Citicorp
Stockholders Meeting and the Travelers Stockholders Meeting on the same
date and as soon as practicable after the date hereof.
SECTION 5.02 Letters of Citicorp's Accountants.
(a) Citicorp shall use best efforts to cause to be delivered to
Travelers two letters from Citicorp's independent accountants, one dated a
date within two business days before the date on which the Form S-4 shall
become effective and one dated a date within two business days before the
Closing Date, each addressed to Travelers, in form and substance reasonably
satisfactory to Travelers and customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
(b) Citicorp shall use best efforts to cause to be delivered to
Travelers and Travelers' independent accountants two letters from
Citicorp's independent accountants addressed to Travelers and Citicorp, one
dated as of the date the Form S-4 is effective and one dated as of the
Closing Date, in each case stating that accounting for the Merger as a
pooling of interests under Opinion 16 of the Accounting Principles Board
and applicable SEC rules and regulations is appropriate if the Merger is
closed and consummated in accordance with this Agreement.
SECTION 5.03 Letters of Travelers' Accountants.
(a) Travelers shall use best efforts to cause to be delivered to
Citicorp two letters from Travelers' independent accountants, one dated a
date within two business days before the date on which the Form S-4 shall
become effective and one dated a date within two business days before the
Closing Date, each addressed to Citicorp, in form and substance reasonably
satisfactory to Citicorp and customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
(b) Travelers shall use best efforts to cause to be delivered to
Citicorp and Citicorp's independent accountants two letters from Travelers'
independent accountants addressed to Citicorp and Travelers, one dated as
of the date the Form S-4 is effective and one dated as of the Closing Date,
stating that the accounting for the Merger as a pooling of interests under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations is appropriate if the Merger is closed and consummated in
accordance with this Agreement.
SECTION 5.04 Access to Information; Confidentiality. To the extent
permitted by applicable law and subject to the Agreement dated March 30, 1998,
between Travelers and Citicorp (the "Confidentiality Agreement"), each of
Citicorp and Travelers shall, and shall cause each of its respective
subsidiaries to, afford to the other party and to the officers, employees,
accountants, counsel, financial advisors and other representatives of such other
party, reasonable access during normal business hours during the period prior to
the Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, each of Citicorp and
Travelers shall, and shall cause each of its respective subsidiaries to, furnish
promptly to the other party (a) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (b) all other information
concerning its business, properties and personnel as such other party may
reasonably request. No review pursuant to this Section 5.04 shall have an effect
for the purpose of determining the accuracy of any representation or warranty
given by either party hereto to the other party hereto. Each of Citicorp and
Travelers will hold, and will cause its respective officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreement.
SECTION 5.05 Best Efforts; Cooperation.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to
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assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (i) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and
filings and the taking of all steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated
or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and
to fully carry out the purposes of, this Agreement. Nothing set forth in
this Section 5.05(a) will limit or affect actions permitted to be taken
pursuant to Sections 4.02 and 4.03.
(b) In connection with and without limiting the foregoing, Citicorp
and Travelers shall (i) take all action necessary to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable
to the Merger, this Agreement or any of the other transactions contemplated
hereby and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to the Merger, this Agreement or any of the
other transactions contemplated hereby, take all action necessary to ensure
that the Merger and the other transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or
regulation on the Merger and the other transactions contemplated by this
Agreement.
(c) Each of Travelers and Citicorp shall cooperate with each other in
obtaining opinions of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
Travelers, and Shearman & Sterling, counsel to Citicorp, dated as of the
Closing Date, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. In
connection therewith, each of Travelers and Citicorp shall deliver to
Shearman & Sterling and Skadden, Arps, Slate, Meagher & Flom LLP customary
representation letters in form and substance reasonably satisfactory to
such counsel and Citicorp shall obtain any representation letters from
appropriate stockholders and shall deliver any such letters obtained to
Shearman & Sterling and Skadden, Arps, Slate, Meagher & Flom LLP (the
representation letters referred to in this sentence are collectively
referred to as the "Tax Certificates").
(d) Travelers shall use its best efforts to assist Citicorp and
certain of its subsidiaries that are subject to reporting obligations under
the BHC Act in the preparation and filing, on the earliest practicable date
after the date of this Agreement, of a Current Report on Form 8-K for
Citicorp containing the information required by Item 512(a)(1)(ii) of
Regulation S-K of the SEC, including the historical financial statements of
Travelers required by Rule 3-05 of Regulation S-X of the SEC and the pro
forma financial information with respect to the business combination
contemplated by this Agreement required by Article 11 of Regulation S-X of
the SEC and applicable reports to other Governmental Entities.
(e) Citicorp shall use its best efforts to assist Travelers and
certain of its subsidiaries that are subject to the reporting requirements
of the Exchange Act (the "Reporting Subs") in the preparation and filing,
on the earliest practicable date after the date of this Agreement, of
Current Reports on Form 8-K for each of Travelers and the Reporting Subs
containing the information required by Item 512(a)(1)(ii) of Regulation S-K
of the SEC, including the historical financial statements of Citicorp
required by Rule 3-05 of Regulation S-X of the SEC and the pro forma
financial information with respect to the business combination contemplated
by this Agreement required by Article 11 of Regulation S-X of the SEC, and
Citicorp shall take all other action necessary to allow Travelers and the
Reporting Subs to issue and sell securities on a continuous or delayed
basis in one or more public offerings registered under the Securities Act.
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(f) Each of Travelers and Citicorp shall consult and cooperate with
the other with respect to significant developments in its business and
shall give reasonable consideration to the other's views with respect
thereto.
SECTION 5.06 Stock Options and Restricted Stock.
(a) As of the Effective Time, (i) each outstanding Citicorp Employee
Stock Option shall be converted into an option (an "Adjusted Option") to
purchase the number of shares of Travelers Common Stock equal to the number
of shares of Citicorp Common Stock subject to such Citicorp Employee Stock
Option immediately prior to the Effective Time multiplied by the Exchange
Ratio (rounded to the nearest whole number of shares of Travelers Common
Stock), at an exercise price per share equal to the exercise price for each
such share of Citicorp Common Stock subject to such option divided by the
Exchange Ratio (rounded down to the nearest whole cent), and all references
in each such option to Citicorp shall be deemed to refer to Travelers,
where appropriate; provided, however, that the adjustments provided in this
clause (i) with respect to any options which are "incentive stock options"
(as defined in Section 422 of the Code) or which are described in Section
423 of the Code, shall be affected in a manner consistent with the
requirements of Section 424(a) of the Code, and (ii) Travelers shall assume
the obligations of Citicorp under the Citicorp Stock Plans. The other terms
of each Adjusted Option, and the plans or agreements under which they were
issued, shall continue to apply in accordance with their terms. The date of
grant of each Adjusted Option shall be the date on which the corresponding
Citicorp Employee Stock Option was granted.
(b) As of the Effective Time, (i) each outstanding award (including
restricted stock, deferred stock, phantom stock, stock equivalents and
stock units) (each a "Citicorp Award") under any Citicorp Stock Plan shall
be converted into the same instrument of Travelers, in each case with such
adjustments (and no other adjustments) to the terms of such Citicorp Awards
as are necessary to preserve the value inherent in such Citicorp Awards
with no detrimental effects on the holder thereof and (ii) Travelers shall
assume the obligations of Citicorp under the Citicorp Awards. The other
terms of each Citicorp Award, and the plans or agreements under which they
were issued, shall continue to apply in accordance with their terms.
(c) Citicorp and Travelers agree that each of the Citicorp Stock Plans
and Travelers Stock Plans shall be amended, to the extent necessary, to
reflect the transactions contemplated by this Agreement, including, but not
limited to the conversion of shares of Citicorp Common Stock held or to be
awarded or paid pursuant to such benefit plans, programs or arrangements
into shares of Travelers Common Stock on a basis consistent with the
transactions contemplated by this Agreement. Citicorp and Travelers agree
to submit the amendments to the Travelers Stock Plans or the Citicorp Stock
Plans to their respective stockholders, if such submission is determined to
be necessary by counsel to Citicorp or Travelers after consultation with
one another; provided, however, that such approval shall not be a condition
to the consummation of the Merger.
(d) Travelers shall (i) reserve for issuance the number of shares of
Travelers Common Stock that will become subject to the benefit plans,
programs and arrangements referred to in this Section 5.06 and (ii) issue
or cause to be issued the appropriate number of shares of Travelers Common
Stock pursuant to applicable plans, programs and arrangements, upon the
exercise or maturation of rights existing thereunder on the Effective Time
or thereafter granted or awarded. No later than the Effective Time,
Travelers shall prepare and file with the SEC a registration statement on
Form S-8 (or other appropriate form) registering a number of shares of
Travelers Common Stock necessary to fulfill Travelers' obligations under
this Section 5.06. Such registration statement shall be kept effective (and
the current status of the prospectus required thereby shall be maintained)
for at least as long as Adjusted Options or Citicorp Awards remain
outstanding.
(e) As soon as practicable after the Effective Time, Travelers shall
deliver to the holders of Citicorp Employee Stock Options and Citicorp
Awards appropriate notices setting forth such holders' rights pursuant to
the respective Citicorp Stock Plans and the agreements evidencing the
grants of such Citicorp Employee Stock Options and Citicorp Awards and that
such Citicorp Employee Stock Options and
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Citicorp Awards and the related agreements shall be assumed by Travelers
and shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section after giving effect to the
Merger).
(f) Citicorp will exchange each outstanding Book Value Share prior to
the Effective Time for such number of Citicorp Common Shares having a fair
market value as of the date of exchange equal to the book value of such
Book Value Share.
SECTION 5.07 Indemnification, Exculpation and Insurance.
(a) Travelers agrees to indemnify and hold harmless from liabilities
for acts or omissions occurring at or prior to the Effective Time those
classes of persons currently entitled to indemnification from Citicorp and
its subsidiaries as provided in their respective certificates of
incorporation or by-laws (or comparable organizational documents) and to
assume as the Surviving Corporation in the Merger, without further action,
as of the Effective Time any indemnification agreements of Citicorp in
effect as of the date hereof. In addition, from and after the Effective
Time, directors and officers of Citicorp who become directors or officers
of Travelers will be entitled to indemnification under Travelers' Restated
Certificate of Incorporation and By-laws, as the same may be amended from
time to time in accordance with their terms and applicable law, and to all
other indemnity rights and protections as are afforded to other directors
and officers of Travelers.
(b) In the event that Travelers or any of its successors or assigns
(i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or
merger or (ii) except for any disposition of assets by the Surviving
Corporation required by applicable law in connection with the Merger,
transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision will be made
so that the successors and assigns of Travelers assume the obligations set
forth in this Section 5.07.
(c) For six years after the Effective Time, Travelers shall maintain
in effect Citicorp's current directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time with
respect to those persons who are currently covered by Citicorp's directors'
and officers' liability insurance policy on terms with respect to such
coverage and amount no less favorable than those of such policy in effect
on the date hereof; provided that Travelers may substitute therefor
policies of Travelers or its subsidiaries containing terms with respect to
coverage and amount no less favorable to such directors or officers;
provided, further, that in no event shall Travelers be required to pay
aggregate premiums for insurance under this Section 5.07(c) in excess of
200% of the aggregate premiums paid by Citicorp in 1997 for such purpose.
(d) The provisions of this Section 5.07 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not
in substitution for, any other rights to indemnification or contribution
that any such person may have by contract or otherwise.
SECTION 5.08 Fees and Expenses. Except as provided in this Section 5.08,
all fees and expenses incurred in connection with the Merger, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated, except that each of
Travelers and Citicorp shall bear and pay one-half of the costs and expenses
incurred in connection with the filing, printing and mailing of the Form S-4 and
the Joint Proxy Statement (including SEC filing fees).
SECTION 5.09 Public Announcements. Travelers and Citicorp will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as either party may
determine is required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange. The
parties agree that the
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initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form heretofore agreed to by the parties.
SECTION 5.10 Affiliates.
(a) Not less than 45 days prior to the Effective Time, Citicorp shall
deliver to Travelers a list of names and addresses of each person who, in
Citicorp's reasonable judgment, is an affiliate within the meaning of Rule
145 of the rules and regulations promulgated under the Securities Act or
otherwise applicable SEC accounting releases with respect to pooling of
interests accounting treatment (each such person, a "Pooling Affiliate") of
Citicorp. Citicorp shall provide Travelers such information and documents
as Travelers shall reasonably request for purposes of reviewing such list.
Citicorp shall deliver or cause to be delivered to Travelers, not later
than 30 days prior to the Effective Time, an affiliate letter in the form
attached hereto as Exhibit 5.10(a), executed by each of the Pooling
Affiliates of Citicorp identified in the foregoing list. Travelers shall be
entitled to place legends as specified in such affiliate letters on the
certificates evidencing any of the Travelers Common Stock to be received by
the Pooling Affiliates of Citicorp pursuant to the terms of this Agreement,
and to issue appropriate stop transfer instructions to the transfer agent
for the Travelers Common Stock, consistent with the terms of such letters.
(b) Not less than 45 days prior to the Effective Time, Travelers shall
deliver to Citicorp a list of names and addresses of each person who, in
Travelers' reasonable judgment is a Pooling Affiliate of Travelers.
Travelers shall provide Citicorp such information and documents as Citicorp
shall reasonably request for purposes of reviewing such list. Travelers
shall deliver or cause to be delivered to Citicorp, not later than 30 days
prior to the Effective Time, an affiliate letter in the form attached
hereto as Exhibit 5.10(b), executed by each Pooling Affiliate of Travelers
identified in the foregoing list.
SECTION 5.11 NYSE and PSE Listing. Travelers shall use its best efforts
to cause the Travelers Listed Securities to be approved for listing on the NYSE
and Pacific Exchange, subject to official notice of issuance, as promptly as
practicable after the date hereof, and in any event prior to the Closing Date.
SECTION 5.12 Stockholder Litigation. Each of Citicorp and Travelers shall
give the other the reasonable opportunity to participate in the defense of any
stockholder litigation against Citicorp or Travelers, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
SECTION 5.13 Tax Treatment. Each of Travelers and Citicorp shall use best
efforts to cause the Merger to qualify as a reorganization under the provisions
of Section 368(a) of the Code and to obtain the opinions of counsel referred to
in Sections 6.02(c) and 6.03(c), including, without limitation, forebearing from
taking any action that would cause the Merger not to qualify as a reorganization
under the provisions of Section 368(a) of the Code.
SECTION 5.14 Pooling of Interests. Each of Citicorp and Travelers shall
use their respective best efforts to cause the transactions contemplated by this
Agreement, including the Merger, to be accounted for as a pooling of interests
under Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, and such accounting treatment to be accepted by each of Citicorp's
and Travelers' independent certified public accountants, respectively, and to be
accepted by the SEC, and each of Citicorp and Travelers agrees that it will not
knowingly take any action that would cause such accounting treatment not to be
obtained.
SECTION 5.15 Travelers Preferred Stock. Prior to the Effective Time, the
Board of Directors of Travelers shall take all necessary action to establish the
terms of the Travelers Preferred Stock as contemplated by this Agreement and
file the Certificates of Designations with the Secretary of State of the State
of Delaware, all in accordance with the applicable provisions of the DGCL. The
Certificates of Designations shall in all respects be substantially identical to
the existing certificates of designations for the Citicorp Preferred Stock,
except that the issuer thereof shall be Travelers instead of Citicorp and that
the Certificates of Designations shall state that Travelers' obligations to pay
dividends thereunder, if any, shall commence on the first dividend payment date
that occurs following the Effective Time.
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SECTION 5.16 Standstill Agreements; Confidentiality Agreements. During
the period from the date of this Agreement through the Effective Time, neither
Citicorp nor Travelers shall terminate, amend, modify or waive any provision of
any confidentiality or standstill agreement to which it or any of its respective
subsidiaries is a party (other than the Confidentiality Agreement pursuant to
its terms or by written agreement of the parties thereto). During such period,
Citicorp or Travelers, as the case may be, shall enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreement, including
by obtaining injunctions to prevent any breaches of such agreements and to
enforce specifically the terms and provisions thereof in any court of the United
States of America or of any state having jurisdiction.
SECTION 5.17 Compliance with 1940 Act Section 15.
(a) Citicorp and Travelers acknowledge that each of Citicorp and
Travelers has entered into this Agreement in reliance upon the benefits and
protections provided by Section 15(f) of the 1940 Act. Each of Citicorp and
Travelers shall not take, and each of them shall cause its affiliates not
to take, any action not contemplated by this Agreement that would have the
effect, directly or indirectly, of causing the requirements of any of the
provisions of Section 15(f) of the 1940 Act not to be met in respect of
this Agreement and the transactions contemplated hereby, and each of them
shall not fail to take, and each of them shall cause its affiliates not to
fail to take, and after the Closing Date shall not cause the Surviving
Corporation to fail to take, any action if the failure to take such action
would have the effect, directly or indirectly, of causing the requirements
of any of the provisions of Section 15(f) of the 1940 Act not to be met in
respect of this Agreement and the transactions contemplated hereby. In that
regard, each of Citicorp and Travelers shall conduct its business and
shall, subject to applicable fiduciary duties, use its reasonable best
efforts to cause each of its affiliates to conduct its business so as to
assure that, insofar as within the control of Citicorp and Travelers or
their respective affiliates:
(i) for a period of three years after the Closing Date, at least
75% of the members of the Board of Directors or trustees of each fund
that is registered under the 1940 Act, and that continues after the
Closing Date its existing or a replacement investment advisory contract
with the Surviving Corporation or any affiliate of the Surviving
Corporation, are not (A) "interested persons" of the investment manager
of such Fund after the Closing Date or (B) "interested persons" of the
present investment manager of such fund; and
(ii) for a period of two years after the Closing Date, there shall
not be imposed on any of the funds or sub-advisory funds that is
registered under the 1940 Act an "unfair burden" as a result of the
transactions contemplated by this Agreement, or any terms, conditions or
understandings applicable thereto.
(b) The terms and quotations in this Section 5.17 shall have the
meanings set forth in Section 15(f) or Section 2(a)(19) of the 1940 Act.
SECTION 5.18 Consent Procedure. In connection with obtaining consents
from investment advisory clients, if such consents are determined to be
necessary, each of Citicorp and Travelers shall (i) keep the other party
informed of the status of obtaining consents, (ii) facilitate the other party's
communication with clients regarding such consents, (iii) provide to the other
party draft proxy statements and (iv) to the extent applicable, deliver to the
other party prior to the Closing copies of all executed client consents and make
available for inspection the originals of such consents prior to the Closing.
SECTION 5.19 Employee Benefit Plans.
(a) From and after the Effective Time, the Citicorp Benefit Plans and
Travelers Benefit Plans in effect as of the Effective Time shall, subject
to applicable law, the terms of this Agreement and the terms of such plans,
remain in effect with respect to the employees of Citicorp or Travelers (or
their respective subsidiaries), as the case may be, until such time as the
Surviving Corporation shall adopt new employee benefit plans and
arrangements with respect to employees of the Surviving Corporation and its
subsidiaries. From and after the Effective Time, the Surviving Corporation
shall, and shall cause its subsidiaries to, honor in accordance with their
terms all Citicorp Benefit Plans and Travelers Benefit Plans, respectively,
as amended as permitted hereunder, and all other contracts, arrangements
and
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commitments which apply to current or former employees or directors of
Citicorp, Travelers or their respective subsidiaries.
(b) Employees of Citicorp, Travelers and their respective subsidiaries
shall receive credit for purposes of eligibility to participate, vesting,
benefit accrual and eligibility to receive benefits under any employee
benefit plan, program or arrangement established or maintained by the
Surviving Corporation or any of its subsidiaries and made available to such
employees for service accrued or deemed accrued prior to the Effective Time
with Citicorp, Travelers or any of their respective subsidiaries, as the
case may be; provided, however, that such crediting of service shall not
operate to duplicate any benefit or the funding of any such benefit.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. Each of the Citicorp Stockholder Approval
and the Travelers Stockholder Approval shall have been obtained.
(b) Governmental and Regulatory Approvals. Other than the filing
provided for under Section 1.03 and other than the filing of applications
and notices under the BHC Act and the receipt of approvals in respect
thereof which shall have been obtained in form and substance reasonably
satisfactory to each of Travelers and Citicorp, all consents, approvals and
actions of, filings with and notices to any Governmental Entity required of
Citicorp, Travelers or any of their subsidiaries to consummate the Merger
and the other transactions contemplated hereby, the failure of which to be
obtained or taken is reasonably expected to have a material adverse effect
on the Surviving Corporation and its prospective subsidiaries, taken as a
whole, shall have been obtained in form and substance reasonably
satisfactory to each of Travelers and Citicorp.
(c) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect (i) preventing the consummation of the
Merger, (ii) except as may be required under the BHC Act, prohibiting or
limiting the ownership or operation by Citicorp or Travelers and their
respective subsidiaries of any material portion of the business or assets
of Citicorp or Travelers and their respective subsidiaries taken as a
whole, or compelling Citicorp or Travelers and their respective
subsidiaries to dispose of or hold separate any material portion of the
business or assets of Citicorp or Travelers and their respective
subsidiaries, taken as a whole, as a result of the Merger or any of the
other transactions contemplated by this Agreement or (iii) which otherwise
is reasonably likely to have a material adverse effect on Citicorp or
Travelers, as applicable; provided, however, that each of the parties shall
have used its best efforts to prevent the entry of any such Restraints and
to appeal as promptly as possible any such Restraints that may be entered.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(e) NYSE Listing. The shares of Travelers Listed Securities issuable
to Citicorp's stockholders as contemplated by this Agreement shall have
been approved for listing on the NYSE, subject to official notice of
issuance.
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SECTION 6.02 Conditions to Obligations of Travelers. The obligation of
Travelers to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Citicorp set forth herein shall be true and correct both when
made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case
as of such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or "material adverse effect" set forth
therein) would not have, individually or in the aggregate, a material
adverse effect on Citicorp.
(b) Performance of Obligations of Citicorp. Citicorp shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) Tax Opinion. Travelers shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to Travelers, an opinion dated as of the
Closing Date, to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and
Travelers and Citicorp will each be a party to such reorganization within
the meaning of Section 368(b) of the Code. In rendering such opinion,
counsel for Travelers may require delivery of, and rely upon, the Tax
Certificates.
(d) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any material adverse change
relating to Citicorp.
SECTION 6.03 Conditions to Obligations of Citicorp. The obligation of
Citicorp to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Travelers set forth herein shall be true and correct both
when made and at and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in which
case as of such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or "material adverse effect" set forth
therein) would not have, individually or in the aggregate, a material
adverse effect on Travelers.
(b) Performance of Obligations of Travelers. Travelers shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) Tax Opinion. Citicorp shall have received from Shearman &
Sterling, counsel to Citicorp, an opinion dated as of the Closing Date, to
the effect that the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and Travelers and Citicorp will each
be a party to such reorganization within the meaning of Section 368(b) of
the Code. In rendering such opinion, counsel for Citicorp may require
delivery of, and rely upon, the Tax Certificates.
(d) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any material adverse change
relating to Travelers.
SECTION 6.04 Frustration of Closing Conditions. Neither Travelers nor
Citicorp may rely on the failure of any condition set forth in Section 6.01,
6.02 or 6.03, as the case may be, to be satisfied if such failure was caused by
such party's failure to use best efforts to consummate the Merger and the other
transactions contemplated by this Agreement, as required by and subject to
Section 5.05.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Citicorp Stockholder
Approval or the Travelers Stockholder Approval:
(a) by mutual written consent of Travelers and Citicorp;
(b) by either Travelers or Citicorp:
(i) if the Merger shall not have been consummated by the later of
December 31, 1998 or such date as the Closing may have been extended by
either party pursuant to the proviso to Section 1.02; provided, however,
that the right to terminate this Agreement pursuant to this Section
7.01(b)(i) shall not be available to any party whose failure to perform
any of its obligations under this Agreement results in the failure of
the Merger to be consummated by such time;
(ii) if the Citicorp Stockholder Approval shall not have been
obtained at a Citicorp Stockholders Meeting duly convened therefor or at
any adjournment or postponement thereof;
(iii) if the Travelers Stockholder Approval shall not have been
obtained at a Travelers Stockholders Meeting duly convened therefor or
at any adjournment or postponement thereof; or
(iv) if any Restraint having any of the effects set forth in
Section 6.01(c) shall be in effect and shall have become final and
nonappealable; provided, that the party seeking to terminate this
Agreement pursuant to this Section 7.01(b)(iv) shall have used best
efforts to prevent the entry of and to remove such Restraint;
(c) by Travelers, if Citicorp shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants
or other agreements contained in this Agreement, which breach or failure to
perform (A) would give rise to a material adverse change relating to
Citicorp and (B) is incapable of being cured by Citicorp;
(d) by Travelers if the Board of Directors of Travelers shall have
exercised its rights set forth in Section 4.03(b); provided that, in order
for the termination of this Agreement pursuant to this paragraph (d) to be
deemed effective, Travelers shall have complied with all provisions
contained in Section 4.03, including the notice provisions therein;
(e) by Citicorp, if Travelers shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants
or other agreements contained in this Agreement, which breach or failure to
perform (A) would give rise to a material adverse change relating to
Travelers and (B) is incapable of being cured by Travelers; or
(f) by Citicorp if the Board of Directors of Citicorp shall have
exercised its rights set forth in Section 4.02(b); provided that, in order
for the termination of this Agreement pursuant to this paragraph (f) to be
deemed effective, Citicorp shall have complied with all provisions of
Section 4.02, including the notice provisions therein.
SECTION 7.02 Effect of Termination. In the event of termination of this
Agreement by either Citicorp or Travelers as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Travelers or Citicorp, other than the provisions of
Section 3.01(o), Section 3.02(o), the last sentence of Section 5.04, Section
5.08, this Section 7.02 and Article VIII, which provisions survive such
termination, provided, however, that nothing herein shall relieve any party from
any liability for any willful and material breach by such party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.03 Amendment. This Agreement may be amended by the parties at
any time before or after the Citicorp Stockholder Approval or the Travelers
Stockholder Approval; provided, however, that after any such approval, there
shall not be made any amendment that by law requires further approval by the
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stockholders of Citicorp or Travelers without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 7.04 Extension; Waiver. At any time prior to the Effective Time,
a party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.03, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 7.05 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01 shall, in order to be
effective, require, in the case of Travelers or Citicorp, action by its Board of
Directors or, with respect to any amendment to this Agreement, the duly
authorized committee of its Board of Directors to the extent permitted by law.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 8.02 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Travelers, to:
Travelers Group Inc.
388 Greenwich Street
New York, New York 10013
Telecopy No.: (212) 816-8996
Attention: Charles O. Prince, III
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopy No.: (212) 735-2000
Attention: Kenneth J. Bialkin
(b) if to Citicorp, to
Citicorp
153 East 53rd Street
New York, New York 10022
Telecopy No.: (212) 559-0415
Attention: John J. Roche
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with copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy No.: (212) 848-7179
Attention: David W. Heleniak
SECTION 8.03 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person, where "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise; provided, however, that (x) any investment account advised or
managed by such person or one of its subsidiaries or affiliates on behalf
of third parties, or (y) any partnership, limited liability company, or
other similar investment vehicle or entity engaged in the business of
making investments of which such person acts as the general partner,
managing member, manager, investment advisor, principal underwriter or the
equivalent shall not be deemed an affiliate of such person;
(b) "material adverse change" or "material adverse effect" means, when
used in connection with Citicorp or Travelers, any change, effect, event,
occurrence or state of facts that is, or would reasonably be expected to
be, materially adverse to the business, financial condition or results of
operations of such party and its subsidiaries taken as a whole other than
any change, effect, event or occurrence relating to (i) the economy or
securities markets of the United States or any other region in general,
(ii) this Agreement or the transactions contemplated hereby or the
announcement thereof, (iii) the failure to obtain applicable regulatory or
other third party consents that are required under this Agreement or (iv)
the financial services industry in general, and not specifically relating
to Citicorp or Travelers or their respective subsidiaries, and the terms
"material" and "materially" have correlative meanings;
(c) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(d) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board
of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person; provided that "subsidiary" shall not
include (x) with respect to Citicorp, any Citicorp Fund or any person in
which a Citicorp Fund holds an ownership interest, (y) with respect to
Travelers, any Travelers Fund or any person in which a Travelers Fund holds
an ownership interest; and (z) any entity in which a "subsidiary" that is a
Small Business Investment Company formed pursuant to the Small Business
Investment Act has an equity interest.
(e) "knowledge" of any person which is not an individual means the
knowledge of such person's executive officers.
SECTION 8.04 Interpretation. When a reference is made in this Agreement
to an Article, Section or Exhibit, such reference shall be to an Article or
Section of, or an Exhibit to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
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defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
SECTION 8.05 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.06 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein), and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Article II, Section 5.06 and Section 5.07, are not intended to
confer upon any person other than the parties any rights or remedies.
SECTION 8.07 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF
LAWS THEREOF.
SECTION 8.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.09 Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of Delaware or a Delaware state court.
SECTION 8.10 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.11 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
TRAVELERS GROUP INC.
By: /s/ SANFORD I. WEILL
------------------------------------
Name: Sanford I. Weill
Title: Chairman of the Board and
Chief Executive Officer
CITICORP
By: /s/ JOHN S. REED
------------------------------------
Name: John S. Reed
Title: Chairman
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ANNEX B
PROPOSED AMENDMENT TO ARTICLE FIRST AND ARTICLE FOURTH
OF THE RESTATED CERTIFICATE OF INCORPORATION
OF TRAVELERS GROUP INC.
------------------------
Article FIRST of the Restated Certificate of Incorporation is hereby
amended to read in its entirety as set forth below:
FIRST: The name of the Corporation is: Citigroup Inc.
------------------------
The first sentence of paragraph A, Article FOURTH, is hereby amended to
read in its entirety as follows:
The total number of shares of Common Stock which the Corporation shall
have the authority to issue is Six Billion (6,000,000,000) shares of Common
Stock having a par value of one cent ($.01) per share.
------------------------
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ANNEX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SECTION 262 -- APPRAISAL RIGHTS. (a) Any stockholder of a corporation of
this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to sec.228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's shares
of stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of a
nonstock corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date or the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
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(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or execution of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
C-3
<PAGE> 140
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
C-4
<PAGE> 141
TRAVELERS GROUP INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF TRAVELERS GROUP INC. FOR THE SPECIAL MEETING, JULY 22, 1998
The undersigned hereby constitutes and appoints Sanford I. Weill, James
Dimon and Charles O. Prince, III, and each of them his or her true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Special Meeting of Stockholders of Travelers Group Inc.
("Travelers") to be held at 399 Park Avenue, New York, New York 10043 on
Wednesday, July 22, 1998 at 10:00 a.m. local time, and at any and all
adjournments or postponements thereof, on all matters properly coming before
said Special Meeting, including but not limited to the matters set forth on the
reverse side.
If shares of Travelers Common Stock are issued or held for the account of
the undersigned under employee plans and voting rights attach to such shares
(any such plans, a "Voting Plan"), then the undersigned hereby directs the
respective fiduciary of each applicable Voting Plan to vote all shares of
Travelers Common Stock in the undersigned's name and/or account under such
Voting Plan in accordance with the instructions given herein, at the Special
Meeting and at any and all adjournments or postponements thereof, on all matters
properly coming before the Special Meeting, including but not limited to the
matters set forth on the reverse side.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. YOUR PROXY CANNOT BE
VOTED UNLESS YOU SIGN, DATE AND RETURN THIS CARD OR FOLLOW THE INSTRUCTIONS FOR
TELEPHONIC VOTING SET FORTH ON THE REVERSE SIDE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE
PROPOSALS AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES (OR, IN THE CASE OF
A VOTING PLAN, WILL BE VOTED IN THE DISCRETION OF THE VOTING PLAN TRUSTEE OR
ADMINISTRATOR) UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL
MEETING.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
TRAVELERS GROUP INC.
P.O. BOX 11486
NEW YORK, NY 10203-0486
FOLD AND DETACH HERE
<PAGE> 142
Please mark your votes
as in this example
X
<TABLE>
<S> <C> <C> <C> <C> <C>
1. Proposal to adopt the Agreement and Plan of For Against Abstain THE BOARD OF DIRECTORS
Merger, dated as of April 5, 1998, between [ ] [ ] [ ] RECOMMENDS A VOTE
Travelers and Citicorp, and the transactions FOR APPROVAL OF
contemplated thereby (including, without THE STATED PROPOSALS
limitation, the issuance of Travelers common
stock pursuant to the merger of Citicorp with and
into a subsidiary of Travelers, with the
subsidiary of Travelers surviving the merger, in
accordance with the terms of the Agreement and
Plan of Merger and the change of Travelers' name
to "Citigroup Inc." following the merger).
2. Proposal to amend the Restated Certificate of For Against Abstain THE UNDERSIGNED HEREBY ACKNOWLEDGES
Incorporation of Travelers to increase to 6 [ ] [ ] [ ] RECEIPT OF THE NOTICE OF SPECIAL
billion the shares of common stock authorized for MEETING AND THE JOINT PROXY
issuance. STATEMENT/PROSPECTUS RELATING TO THE
SPECIAL MEETING.
Date ----------------------------------
---------------------------------------
Signature
---------------------------------------
Signature if held jointly
Note: Please sign this proxy exactly
as name appears herein. If shares are
held by joint tenants, both should
sign. Attorneys-in-fact, executors,
administrators, trustees, guardians,
corporation officers or others signing
in a representative capacity should
indicate the capacity in which they are
signing.
The undersigned hereby revokes all
proxies heretofore given by the
undersigned to vote at said Special
Meeting and any and all adjournments or
postponements thereof. IF NO BOXES ARE
MARKED, THIS PROXY WILL BE VOTED IN THE
MANNER DESCRIBED ON THE REVERSE SIDE.
PLEASE SIGN, DATE, AND MAIL THIS PROXY
PROMPTLY IN THE RETURN ENVELOPE whether
or not you expect to attend the Special
Meeting. You may nevertheless vote in
person if you do attend.
</TABLE>
SFOLD AND DETACH HERES
<PAGE> 143
VOTE BY TELEPHONE
QUICK****EASY****IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
YOU WILL BE ASKED TO ENTER THE NUMBER LOCATED IN THE BOX MARKED "CONTROL
NUMBER." YOU WILL THEN HEAR THESE INSTRUCTIONS:
<TABLE>
<S> <C>
- - -------------------------------------------------------------------------
OPTION #1: To vote as the Board of Directors recommends on ALL
proposals: Press 1
- - -------------------------------------------------------------------------
OPTION #2: If you choose to vote on each proposal separately, press 0.
You will hear these instructions:
- - -------------------------------------------------------------------------
</TABLE>
Proposal 1: To vote FOR, press 1; AGAINST, PRESS 9; ABSTAIN, press 0
Proposal 2: To vote FOR, press 1; AGAINST, PRESS 9; ABSTAIN, press 0
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1 - THANK YOU FOR VOTING
IF YOU VOTE BY
TELEPHONE
DO NOT MAIL BACK
YOUR PROXY
<TABLE>
<S> <C>
CALL**TOLL-FREE**ON A TOUCH-TONE TELEPHONE
1-888-776-5662 - ANYTIME
THERE IS NO CHARGE TO YOU FOR THIS CALL. CONTROL NUMBER
</TABLE>
FOLD AND DETACH HERE
