<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 20, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CITIGROUP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6021 52-1568099
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
399 PARK AVENUE
NEW YORK, NEW YORK 10043
(212) 559-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CHARLES O. PRINCE, III, ESQ.
CHIEF ADMINISTRATIVE OFFICER, GENERAL COUNSEL AND CORPORATE SECRETARY
CITIGROUP INC.
399 PARK AVENUE
NEW YORK, NEW YORK 10043
(212) 559-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
CHESTER D. LONGENECKER, ESQ. KENNETH J. BIALKIN, ESQ. DAVID J. SORKIN, ESQ.
GENERAL COUNSEL AND SECRETARY ERIC J. FRIEDMAN, ESQ. ALAN D. SCHNITZER, ESQ.
ASSOCIATES FIRST CAPITAL CORPORATION SKADDEN, ARPS, SLATE, MEAGHER & FLOM SIMPSON THACHER & BARTLETT
250 EAST CARPENTER FREEWAY LLP 425 LEXINGTON AVENUE
IRVING, TEXAS 75062-2729 FOUR TIMES SQUARE NEW YORK, NEW YORK 10017
(972) 652-4000 NEW YORK, NEW YORK 10036 (212) 455-2000
(212) 735-3000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the merger referred to herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share.............................. 553,092,061 $51.5578 $28,516,217,015 $7,528,300
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The maximum number of shares of common stock of Citigroup Inc., a Delaware
corporation ("Citigroup"), issuable to stockholders of Associates First
Capital Corporation, a Delaware corporation ("Associates"), upon
consummation of the merger of Associates with and into Citigroup based on
the exchange ratio of one share of Associates class A common stock to be
exchanged for 0.7334 of a share of common stock of Citigroup.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(1) under the
Securities Act, based on the aggregate market value on September 18, 2000 of
the shares of Associates common stock expected be exchanged in connection
with the merger and computed by dividing (i) the product of (A) the average
of the high and low prices of Associates common stock as reported on the New
York Stock Exchange Composite Transaction Tape on September 18, 2000
($37.8125) and (B) 754,147,888, representing the maximum number of shares of
Associates common stock expected to be exchanged in connection with the
merger by (ii) 553,092,061, representing the maximum number of shares of
Citigroup common stock expected to be issued in connection with the merger.
(3) Calculated by multiplying the proposed maximum aggregate offering price for
all securities to be registered by .000264.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
[ASSOCIATES LOGO]
[ , 2000]
Dear fellow stockholders:
The board of directors of Associates First Capital Corporation has
unanimously agreed to merge Associates with Citigroup Inc. This transaction
presents us with a unique opportunity to enhance stockholder value by taking
advantage of a highly complementary strategic fit for Associates with a merger
partner that is one of the premier financial services companies in the world.
In the merger, Associates stockholders will receive 0.7334 of a share of
Citigroup common stock for each share of Associates class A common stock that
they own at the effective time of the merger. Citigroup common stock is listed
on the New York Stock Exchange and the Pacific Exchange, and its trading symbol
is "C." Following the merger, former Associates stockholders will hold
approximately 10% of Citigroup's outstanding common stock.
The merger cannot be completed unless the stockholders of Associates
holding a majority of the number of outstanding shares of Associates common
stock vote in favor of the proposed transaction. This proxy statement-prospectus
contains detailed information about the proposed merger, and we urge you to read
it carefully. In addition, you may obtain information about Associates and
Citigroup from documents that each has filed with the Securities and Exchange
Commission.
The board of directors of Associates has unanimously determined that the
merger is in the best interests of Associates and its stockholders, and the
board unanimously recommends voting FOR approval and adoption of the merger
agreement, the merger, and the other transactions contemplated by the merger
agreement. We have scheduled a special meeting for our stockholders to vote on
the merger agreement, the merger, and the transactions contemplated by the
merger agreement, and you are cordially invited to attend the meeting at
[ ] on [ ], 2000, at [10:00] a.m. local time.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card to us. Alternatively, you may vote your shares electronically through
the Internet, by facsimile or by telephone. If you sign, date and mail your
proxy card or use electronic 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 fail to instruct your broker to vote your shares,
the effect will be the same as a vote against the merger agreement, the merger
and the other transactions contemplated by the merger agreement.
Keith W. Hughes
Chairman and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED THE MERGER DESCRIBED IN THIS PROXY STATEMENT-PROSPECTUS,
NOR HAVE THEY DETERMINED IF THIS 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.
INVESTORS ARE URGED TO READ THE "RISK FACTORS" TO THE MERGER LISTED ON
PAGES 12 AND 13 OF THIS PROXY STATEMENT-PROSPECTUS.
This proxy statement-prospectus is dated [ ], 2000, and is first
being mailed to stockholders on or about [ ], 2000.
<PAGE> 3
[ASSOCIATES LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A special meeting of stockholders of Associates First Capital Corporation
will be held at [place] on [date], 2000, at [10:00 a.m.] local time, to consider
and vote upon the following proposals:
- To approve and adopt the Agreement and Plan of Merger, dated as of
September 5, 2000, by and between Associates and Citigroup Inc., the
merger of Associates with and into Citigroup in accordance with the terms
of the merger agreement and the transactions contemplated by the merger
agreement; and
- To transact such other business as may properly come before the special
meeting.
The Associates board of directors has set the close of business (5:00 p.m.,
New York City time) on [ ], 2000 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
Associates' headquarters, 250 East Carpenter Freeway, Irving, Texas, 75062,
prior to the special meeting, and will also be available for inspection at the
meeting itself.
THE ASSOCIATES BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE
MERGER AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT ARE IN THE BEST INTERESTS OF ASSOCIATES AND ITS STOCKHOLDERS,
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE MERGER AND THE OTHER
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT, THE MERGER AND
THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AT THE SPECIAL MEETING.
All stockholders are cordially invited to attend the special meeting.
By Order of the Board of Directors,
Chester D. Longenecker
Secretary
[ ], 2000
It is important that the enclosed proxy card be signed, dated and promptly
returned in the enclosed envelope or that you register your vote electronically
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.
Do not send your stock certificates with your proxy card.
<PAGE> 4
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement-prospectus incorporates important business and
financial information about Associates and Citigroup from other documents that
are not included in or delivered with this proxy statement-prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain those documents incorporated by reference in this proxy
statement-prospectus by accessing the Securities and Exchange Commission's
website maintained at "http://www.sec.gov" or by requesting copies in writing or
by telephone from the appropriate company at the following addresses:
<TABLE>
<S> <C>
ASSOCIATES FIRST CAPITAL CORPORATION CITIGROUP INC.
250 East Carpenter Freeway 153 East 53rd Street
Irving, Texas 75062-2729 New York, New York 10043
Attention: General Counsel Attention: Treasurer
</TABLE>
If you would like to request documents, please do so by [ ], 2000
in order to receive them before your special meeting.
See "Where You Can Find More Information" on pages 56 through 58.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
Market Price and Dividend Information....................... 6
Selected Financial Data..................................... 8
Condensed Consolidated Financial Data of Citigroup Inc. and
Subsidiaries -- Historical................................ 9
Condensed Consolidated Financial Data of Associates and
Subsidiaries -- Historical................................ 10
Selected Unaudited Pro Forma Combined Financial Data of
Citigroup and Associates.................................. 11
RISK FACTORS................................................ 12
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 14
THE MERGER.................................................. 16
General................................................... 16
Background of the Merger.................................. 16
Rationale for the Merger; Recommendation of Each Company's
Board of Directors..................................... 18
Opinion of Associates' Financial Advisor.................. 21
Stock Exchange Listings................................... 26
Federal Income Tax Consequences of the Merger............. 26
Accounting Treatment...................................... 27
Regulatory and Third-Party Approvals...................... 28
Appraisal Rights.......................................... 32
Interests of Certain Persons in the Merger................ 32
Existing Business Relationships between Citigroup and
Associates............................................. 33
Delisting and Deregistration of Associates Common Stock... 33
Restrictions on Resales by Affiliates..................... 33
THE STOCKHOLDERS MEETING.................................... 35
Purpose, Time and Place................................... 35
Record Date; Voting Power................................. 35
Votes Required............................................ 35
Share Ownership of Management and Certain Stockholders.... 35
Voting of Proxies......................................... 35
Electronic Voting......................................... 36
Revocability of Proxies................................... 36
Solicitation of Proxies................................... 36
THE MERGER AGREEMENT........................................ 38
General................................................... 38
Form of the Merger........................................ 38
Timing of Closing......................................... 38
Merger Consideration...................................... 38
Conversion of Shares; Procedures for Exchange of
Certificates; Fractional Shares........................ 39
Effect on Stock Based Awards.............................. 40
Board and Officers of Citigroup........................... 40
Representations and Warranties............................ 40
Certain Covenants......................................... 41
Coordination of Dividends................................. 42
No Solicitation........................................... 42
Indemnification and Insurance............................. 44
Conditions to the Consummation of the Merger.............. 44
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Termination of the Merger Agreement....................... 45
Termination Fees.......................................... 45
COMPARISON OF RIGHTS OF STOCKHOLDERS OF ASSOCIATES AND
CITIGROUP................................................. 47
Authorized Capital........................................ 47
Board of Directors........................................ 48
Committees of the Board of Directors...................... 48
Newly Created Directorships and Vacancies................. 49
Removal of Directors...................................... 49
Officers.................................................. 49
Special Meetings of Stockholders.......................... 50
Quorum at Stockholder Meetings............................ 50
Stockholder Action by Written Consent..................... 51
Advance Notice of Stockholder-Proposed Business at Annual
Meetings............................................... 51
Amendment of Governing Documents.......................... 51
Fair Price Provision...................................... 53
Stockholders Rights Plan.................................. 53
EXPERTS..................................................... 55
LEGAL MATTERS............................................... 55
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS.................. 56
WHERE YOU CAN FIND MORE INFORMATION......................... 56
ANNEX A..................................................... A-1
ANNEX B..................................................... B-1
INFORMATION NOT REQUIRED IN THE PROSPECTUS.................. II-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 to which we refer you. See "Where You Can Find More
Information" (pages 56 through 58).
Q: WHAT IS CITIGROUP INC.?
A: Citigroup is a diversified holding company whose businesses provide a broad
range of financial services to consumer and corporate customers in 103
countries and territories. Citigroup's activities are conducted through
Global Consumer, Global Corporate and Investment Bank, Global Investment
Management and Private Banking, and Investment Activities. On October 8,
1998, Citigroup changed its name from Travelers Group Inc. to Citigroup Inc.
in connection with the merger of Citicorp into a subsidiary of Citigroup.
Q: WHY SHOULD THE ASSOCIATES STOCKHOLDERS APPROVE THE MERGER WITH CITIGROUP?
A: We believe the merger will create value for Associates stockholders, both as
a result of the amount of common stock to be issued in exchange for
Associates common stock and the ability of the merged company to take
advantage of the complementary strategic fit of the consumer finance, credit
card and commercial finance businesses of Associates and Citigroup. The
merger will enhance Citigroup's consumer finance business in the U.S.,
strengthen its position in the U.S. credit card business and significantly
expand the combined company's business in commercial finance. The combined
company will serve customers in approximately [ ] countries. To review
the background and reasons for the merger in greater detail, see pages 16
through 18.
Q: WHAT DOES THE ASSOCIATES BOARD OF DIRECTORS RECOMMEND?
A: Associates' board of directors has unanimously approved the merger agreement
and recommends that Associates stockholders vote FOR the proposal to approve
and adopt the merger agreement, the merger and the other transactions
contemplated by the merger agreement.
Q: WHAT WILL ASSOCIATES STOCKHOLDERS RECEIVE IN THE MERGER?
A: Associates common stockholders will receive 0.7334 of a share of common stock
of Citigroup in exchange for each share of Associates common stock they hold
at the effective time of the merger. After the merger, Associates' former
common stockholders will own approximately 10% of the common stock of
Citigroup.
Citigroup will not issue fractional shares to Associates stockholders.
Instead, Associates common stockholders will receive cash for any fractional
share of Citigroup common stock owed to them.
For example:
- If you currently own 100 shares of Associates common stock, after the
merger you will receive 73 shares of Citigroup common stock, and a check
for the value of the 0.34 fractional share. The value of the fractional
share will be calculated as described in "The Merger
Agreement -- Conversion of Shares; Procedures for Exchange of Certificates;
Fractional Shares" on page 39.
Q: WHAT RISKS SHOULD I CONSIDER?
A: You should review "Risk Factors" on pages 12 through 13.
You should also review the adverse factors considered by the Associates'
board of directors. See "The Merger -- Rationale for the Merger;
Recommendation of Associates' Board of Directors -- Associates" on pages 18
through 19.
1
<PAGE> 8
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger by the end of 2000. However, delays in
obtaining regulatory approvals could delay completion of the merger.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: We expect that the exchange by Associates stockholders of Associates common
stock for Citigroup common stock will be tax-free for United States federal
income tax purposes, except with respect to any cash received instead of
fractional shares of Citigroup common stock. The closing of the merger is
conditioned upon the delivery at the closing of the merger by each of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Citigroup, and Simpson
Thacher & Bartlett, counsel to Associates, of its opinion that the merger
will constitute a "reorganization" for United States federal income tax
purposes. We describe the expected United States federal income tax
consequences of the merger in more detail on pages 26 and 27.
Q: HOW WILL THE MERGER BE TREATED FOR ACCOUNTING PURPOSES?
A: We expect the merger to qualify as a pooling of interests, which means that
for accounting and financial reporting purposes, Citigroup will treat
Citigroup and Associates as if they had always been combined.
Q: WHAT ARE ASSOCIATES STOCKHOLDERS BEING ASKED TO VOTE UPON?
A: You are being asked to approve and adopt the merger agreement, the merger and
the other transactions contemplated by the merger agreement.
Associates' board of directors has unanimously approved the merger agreement
pursuant to which Associates would merge with and into Citigroup and
recommends voting FOR the proposal to approve and adopt the merger agreement,
the merger and the other transactions contemplated by the merger agreement.
Q: WHEN AND WHERE IS THE ASSOCIATES STOCKHOLDER MEETING?
A: The special meeting of Associates stockholders to vote on the merger will be
at [place, location] on [day, date], 2000 at [time].
Q. WHO CAN VOTE ON THE MERGER?
A: Holders of Associates common stock at the close of business on [ ],
2000 can vote at the special meeting.
Q. WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
A: The merger must be approved by a majority of the number of outstanding shares
of Associates common stock.
Q: WHO ELSE MUST APPROVE THE MERGER?
A: In addition to the approval of the Associates stockholders, the merger
agreement requires that the parties obtain the consent or approval of certain
domestic and foreign antitrust, banking, consumer finance and insurance
regulators. See "The Merger -- Regulatory and Third Party Approvals" on pages
28 through 32. Citigroup is not required to obtain the approval of its
stockholders to complete the merger under Delaware law, under Citigroup's
restated certificate of incorporation or under the rules of the New York
Stock Exchange.
2
<PAGE> 9
Q: WHAT DO I NEED TO DO NOW?
A: 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. You may also cast your vote
electronically by the Internet, by facsimile or by telephone as set forth on
the enclosed proxy card.
If you sign and send in your proxy or use electronic voting and do not
indicate how you want to vote, your proxy will be counted as a vote in favor
of the proposals. If you do not vote or you abstain, it will have the effect
of a vote against the proposals.
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 shares only if you provide instructions on how to
vote. You should instruct your broker to vote your shares, following the
directions your broker provides. Shares that are not voted because you do not
instruct your broker effectively will be counted as votes against the merger.
Q: CAN I CHANGE MY VOTE AFTER I MAIL MY PROXY CARD OR GRANT A PROXY
ELECTRONICALLY?
A: Yes, you can change your vote at any time before your proxy is voted at the
special meeting. You can do this in three ways:
- You can send Associates a written statement that you would like to revoke
your proxy.
- You can send Associates a new proxy card or grant a new proxy
electronically.
- You can attend the stockholder meeting and vote in person. However, your
attendance alone will not revoke your proxy -- you must also vote in
person.
You should send your revocation or new proxy card to Associates' Secretary at
the address on the cover page. If you instructed a broker to vote your
shares, you must follow your broker's directions for changing those
instructions.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send you written instructions for
exchanging your Associates common stock certificates for Citigroup common
stock certificates.
Q: DO I HAVE DISSENTERS' OR APPRAISAL RIGHTS?
A: No, you will not have dissenters' or appraisal rights relating to the merger
under Delaware law.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement-prospectus or the enclosed proxy card, you should
contact:
Associates First Capital Corporation
250 East Carpenter Freeway
Irving, Texas 75062-2729
(972) 652-4000
Attention: General Counsel
or
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey, 07072-2586
(201) 896-5691
Attention: William P. Fiske
3
<PAGE> 10
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: You can find more information about Associates and Citigroup from various
sources described under "Where You Can Find More Information" on pages 56
through 58 of this proxy statement-prospectus.
Q: HOW IMPORTANT IS MY VOTE?
A: Since the merger agreement cannot be consummated without the affirmative vote
of the holders of a majority of Associates common stock, every stockholder
vote is important. An abstention or failure to vote will have the same effect
as a vote against the merger.
OTHER INFORMATION ABOUT THE MERGER
OPINION OF ASSOCIATES' FINANCIAL ADVISOR (PAGES 21 THROUGH 26)
In deciding to approve the merger agreement, the merger and the other
transactions contemplated by the merger agreement, the Associates board of
directors considered the opinion, dated September 5, 2000, of its financial
advisor, Goldman, Sachs & Co., as to the fairness from a financial point of view
to the holders of Associates common stock of the exchange ratio of 0.7334 of a
share of Citigroup common stock for each share of Associates common stock in the
merger. The written opinion of Goldman Sachs is attached as Annex B to this
proxy statement-prospectus. WE ENCOURAGE YOU TO READ THIS OPINION CAREFULLY AND
IN ITS ENTIRETY.
STOCK EXCHANGE LISTINGS (PAGE 26)
Citigroup [will apply] to list the Citigroup common stock to be issued in
connection with the merger with the New York Stock Exchange (NYSE) and the
Pacific Exchange.
THE MERGER
The merger agreement is attached as Annex A to this proxy
statement-prospectus. We encourage you to read the merger agreement. It is the
principal document governing the merger.
CONDITIONS TO THE CONSUMMATION OF THE MERGER (PAGES 44 AND 45)
The completion of the merger depends upon meeting a number of conditions,
including the following:
- approval and adoption of the merger agreement by Associates stockholders,
- receipt of all consents and approvals required to consummate the merger,
- absence of any legal prohibition to consummation of the merger,
- listing of shares of Citigroup common stock issuable to Associates
stockholders on the New York Stock Exchange and the Pacific Exchange, and
- receipt from Citigroup's accountants of a letter confirming that the
merger will qualify for "pooling of interests" accounting treatment and
from Associates' accountants a letter confirming its concurrence with the
conclusion of Associates' management that Associates meets the conditions
necessary for Associates to enter into a merger accounted for as a
"pooling of interests".
In addition, Citigroup's obligation to complete the merger is subject to,
among other things:
- the accuracy, as of closing, of the representations and warranties made
by Associates and the performance of obligations by Associates, to the
extent set forth in the merger agreement,
- the receipt of an opinion of counsel that the merger will constitute a
reorganization for United States federal income tax purposes, and
- no condition having been imposed by any governmental entity in connection
with any regulatory approval being obtained from them, which requires
Associates or its subsidiaries to be operated in a
4
<PAGE> 11
manner which is materially different from industry standards in effect on the
date of the merger agreement and which materially adversely affects the
business, financial condition, results of operations or prospects of Associates
and its subsidiaries taken as a whole, or their businesses, other than
their commercial financial businesses, taken as a whole.
In addition, Associates' obligation to complete the merger is subject to,
among other things:
- the accuracy, as of closing, of the representations and warranties made
by Citigroup and the performance of obligations by Citigroup, to the
extent set forth in the merger agreement, and
- the receipt of an opinion of counsel that the merger will constitute a
reorganization for United States federal income tax purposes.
TERMINATION OF THE MERGER AGREEMENT (PAGE 45)
The merger agreement may be terminated at any time prior to the completion
of the merger:
- by mutual written consent of Citigroup and Associates;
- by either Citigroup or Associates if:
- the merger is not approved by Associates' stockholders at the special
meeting;
- government or court action prevents the merger or would have a material
adverse effect on Associates or Citigroup; or
- the merger is not completed by April 1, 2001 (other than because of a
breach of the merger agreement caused by the terminating party). Either
party can extend this date up to May 1, 2001 if the merger has not been
completed because a regulatory approval has not been obtained but the
party expects the approval within the extended period;
- by Citigroup if Associates changes its recommendation as provided in the
merger agreement, or fails to convene a meeting of Associates
stockholders to vote on the merger;
- by Associates if its board of directors determines, consistent with its
fiduciary duties to Associates' stockholders, that Associates should
enter into an acquisition agreement providing for a transaction that the
Associates board deems superior to the merger.
TERMINATION FEES (PAGES 45 AND 46)
Associates must pay to Citigroup a termination fee of $400 million if any
of the following occurs:
- Citigroup terminates the merger agreement because Associates changes its
recommendation as provided in the merger agreement or fails to convene a
meeting of Associates stockholders to vote on the merger;
- another proposal to acquire Associates is made and either Associates or
Citigroup terminates the merger agreement because the merger was not
consummated by April 1, 2001 (as such date may be extended pursuant to
the merger agreement) or Associates stockholders did not approve the
merger at the special meeting and, within 18 months of the termination,
Associates enters into a definitive agreement to consummate a takeover
proposal for Associates;
- (a) another proposal to acquire Associates is made, (b) Associates
changes its recommendation as provided in the merger agreement and (c)
the merger agreement is terminated for any reason; or
- Associates terminates the merger agreement because its board of directors
determines, consistent with its fiduciary duties to Associates'
stockholders, that Associates should enter into an acquisition agreement
providing for a transaction that the Associates board deems superior to
the merger.
5
<PAGE> 12
THE COMPANIES
Citigroup Inc.
399 Park Avenue
New York, New York 10043
(212) 559-1000
Citigroup is a diversified holding company whose businesses provide a broad
range of financial services to consumer and corporate customers in 103 countries
and territories. Citigroup's activities are conducted through Global Consumer,
Global Corporate and Investment Bank, Global Investment Management and Private
Banking, and Investment Activities. On October 8, 1998, Citigroup changed its
name from Travelers Group Inc. to Citigroup Inc. in connection with the merger
of Citicorp into a subsidiary of Citigroup.
Associates First Capital Corporation
250 East Carpenter Freeway
Irving, Texas 75062-2729
(972) 652-4000
Associates is a leading, diversified consumer and commercial finance
organization which provides finance, leasing and related services to individual
consumers and businesses in the United States and internationally. Associates
Corporation of North America, a wholly-owned subsidiary, is the principal U.S.-
based operating subsidiary of Associates. Associates' consumer finance
operations consist of a variety of specialized consumer financing products and
services, including home equity lending, personal lending, retail sales finance
and credit cards. Associates' commercial finance operations primarily provide
retail financing, leasing and wholesale financing for heavy-duty and medium-duty
trucks and truck trailers, construction, material handling and other industrial
and communications equipment, manufactured housing, recreational vehicles and
auto fleet leasing and other commercial products and services. As part of its
consumer finance and commercial finance activities, Associates makes available
to its customers credit-related and other insurance products and also provides
property, casualty and other specialty insurance lines to non-finance customers
through a separate business.
MARKET PRICE AND DIVIDEND INFORMATION
MARKET PRICE DATA
The following table presents trading information for Citigroup and
Associates common stock on the NYSE on September 5, 2000 and [ ],
2000. September 5, 2000 was the last full trading day prior to our announcement
of the signing of the merger agreement. [ ], 2000 was the last
trading day for which information was available prior to the date of this proxy
statement-prospectus.
<TABLE>
<CAPTION>
CITIGROUP ASSOCIATES
COMMON STOCK COMMON STOCK
---------------------------- ----------------------------
HIGH LOW CLOSE HIGH LOW CLOSE
---- --- ----- ---- --- -----
(DOLLARS PER SHARE) (DOLLARS PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
September 5, 2000........ 58 3/4 57 5/16 57 9/16 28 1/16 27 11/16 28
[month] [ ], 2000.......
<CAPTION>
CITIGROUP
COMMON STOCK
PRICE X.7334
--------------------------------------
HIGH LOW CLOSE
-------- ------- -------
(DOLLARS PER SHARE)
<S> <C> <C> <C>
September 5, 2000........ 43.08725 42.0330 42.2163
[month] [ ], 2000.......
</TABLE>
On the Record Date, there were approximately [ ] holders of record of
Associates common stock.
6
<PAGE> 13
HISTORICAL MARKET PRICES AND DIVIDENDS
The principal trading market for Citigroup and Associates common stock is
the NYSE. Citigroup common stock is also listed on the Pacific Exchange. The
following tables set forth, for the periods indicated, the high and low sale
price per share on the NYSE, based on published financial sources, and dividends
declared on Citigroup and Associates common stock.
<TABLE>
<CAPTION>
CITIGROUP
COMMON STOCK
---------------------------------
CALENDAR PERIOD HIGH LOW DIVIDEND
--------------- ---- --- --------
(DOLLARS PER SHARE)
<S> <C> <C> <C>
Fiscal 1998 (ended December 31, 1998)
First Quarter............................................. 31 11/16 22 9/16 .0625
Second Quarter............................................ 36 3/4 29 9/16 .0625
Third Quarter............................................. 36 15/32 18 9/16 .0625
Fourth Quarter............................................ 26 5/8 14 1/4 .09
Fiscal 1999 (ended December 31, 1999)
First Quarter............................................. 33 7/32 24 1/2 .09
Second Quarter............................................ 38 13/16 30 3/32 .105
Third Quarter............................................. 38 13/64 30 57/64 .105
Fourth Quarter............................................ 43 11/16 31 35/64 .105
Fiscal 2000 (ending December 31, 2000)
First Quarter............................................. 46 25/32 35 11/32 .12
Second Quarter............................................ 50 23/32 42 .12
Third Quarter (through September [ ], 2000).............. .14
</TABLE>
The share prices and dividends above have been adjusted for the Citigroup
three-for-two stock split paid on May 28, 1999 and the four-for-three stock
split paid on August 25, 2000.
<TABLE>
<CAPTION>
ASSOCIATES
COMMON STOCK
---------------------------------
CALENDAR PERIOD HIGH LOW DIVIDEND
--------------- ---- --- --------
(DOLLARS PER SHARE)
<S> <C> <C> <C>
Fiscal 1998 (ended December 31, 1998)
First Quarter............................................. 41 5/16 32 7/8 .05
Second Quarter............................................ 42 3/4 35 11/16 .05
Third Quarter............................................. 43 3/8 28 3/32 .05
Fourth Quarter............................................ 43 11/16 22 21/32 .055
Fiscal 1999 (ended December 31, 1999)
First Quarter............................................. 47 1/2 36 7/16 .055
Second Quarter............................................ 49 38 1/2 .055
Third Quarter............................................. 43 7/8 33 11/16 .055
Fourth Quarter............................................ 39 13/16 26 3/16 .065
Fiscal 2000 (ending December 31, 2000)
First Quarter............................................. 27 11/16 15 3/4 .065
Second Quarter............................................ 29 11/16 19 13/16 .065
Third Quarter (through September [ ], 2000).............. .065
</TABLE>
The share prices and dividends above have been adjusted for the Associates
two-for-one stock split paid on December 23, 1998.
Post Merger Dividend Policy. Following the merger, the declaration of
dividends will be at the discretion of the Citigroup board of directors and will
be determined after consideration of various factors, including, without
limitation, the earnings and financial condition of Citigroup and its
subsidiaries.
7
<PAGE> 14
SELECTED FINANCIAL DATA
The following tables show financial results actually achieved by each of
Citigroup and Associates (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 (excluding per share amounts) are simply
arithmetical combinations of Citigroup's and Associates' separate historical
results. You should not assume that Citigroup and Associates would have achieved
the combined pro forma results if they had actually been combined during the
periods shown.
Citigroup's and Associates' annual historical figures are derived from
financial statements audited by KPMG LLP, independent auditors of Citigroup, and
Ernst & Young LLP, independent auditors of Associates, respectively. Figures for
the six months ended June 30, 2000 and 1999 are unaudited, but Associates and
Citigroup each believes that its own six-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 six-month 2000 results are indicative of results for any future period.
COMPARATIVE UNAUDITED PER SHARE DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX
MONTHS ENDED AS OF OR FOR THE YEAR ENDED
JUNE 30, DECEMBER 31,
----------------- ---------------------------
2000 1999 1999 1998 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CITIGROUP INC. COMMON STOCK:
Basic earnings per share from continuing
operations(1)
Historical....................................... $ 1.47 $ 1.09 $ 2.22 $ 1.25 $ 1.43
Pro Forma Combined............................... $ 1.46 $ 1.12 $ 2.28 $ 1.36 $ 1.49
Diluted earnings per share from continuing
operations(1)
Historical....................................... $ 1.43 $ 1.06 $ 2.15 $ 1.21 $ 1.37
Pro Forma Combined............................... $ 1.42 $ 1.08 $ 2.21 $ 1.33 $ 1.43
Cash dividends per common share
Historical(1).................................... $0.240 $0.195 $0.405 $0.278 $0.200
Pro Forma Combined(2)............................ $0.240 $0.195 $0.405 $0.278 $0.200
Book value per share at period end
Historical(1).................................... $11.08 $ 9.51 $10.46 $ 8.96 $ 8.44
Pro Forma Combined............................... $11.96 $11.30
ASSOCIATES FIRST CAPITAL CORPORATION COMMON STOCK:
Basic earnings per share
Historical(4).................................... $ 0.97 $ 0.95 $ 2.05 $ 1.76 $ 1.49
Pro Forma Equivalent(3).......................... $ 1.07 $ 0.82 $ 1.67 $ 1.00 $ 1.09
Diluted earnings per share
Historical(4).................................... $ 0.97 $ 0.95 $ 2.04 $ 1.75 $ 1.48
Pro Forma Equivalent(3).......................... $ 1.04 $ 0.79 $ 1.62 $ 0.98 $ 1.05
Cash dividends per common share
Historical(4).................................... $0.130 $0.110 $0.230 $0.205 $0.200
Pro Forma Equivalent(3).......................... $0.176 $0.143 $0.297 $0.204 $0.147
Book value per share at period end
Historical(4).................................... $14.13 $12.51 $13.46 $11.72 $ 9.05
Pro Forma Equivalent(3).......................... $ 8.77 $ 8.29
</TABLE>
---------------
(1) Historical amounts for Citigroup have been adjusted to reflect the
four-for-three split in Citigroup's common stock paid on August 25, 2000.
(2) Amounts represent Citigroup's historical dividends per common share.
(3) Amounts are calculated by multiplying the Citigroup pro forma combined per
share amounts by 0.7334, the exchange ratio for common shares in the merger.
(4) Historical amounts for Associates have been adjusted to reflect the
two-for-one split in Associates' common stock paid on December 23, 1998.
8
<PAGE> 15
CONDENSED CONSOLIDATED FINANCIAL DATA
OF CITIGROUP INC. AND SUBSIDIARIES -- HISTORICAL
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
MONTHS ENDED
JUNE 30, (UNAUDITED) AS OF OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
--------- --------- -------- -------- -------- -------- --------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenues............... $ 47,403 $ 40,957 $ 82,005 $ 76,431 $ 72,306 $ 65,101 $ 58,957
-------- -------- -------- -------- -------- -------- --------
Total Revenues, net of
Interest Expense........... $ 32,888 $ 28,450 $ 57,237 $ 48,936 $ 47,782 $ 43,765 $ 36,567
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations................. $ 6,595 $ 4,937 $ 9,994 $ 5,807 $ 6,705 $ 7,073 $ 5,610
Discontinued operations...... $ -- $ -- $ -- $ -- $ -- $ (334) $ 150
Cumulative effect of
accounting change.......... $ -- $ (127) $ (127) $ -- $ -- $ -- $ --
-------- -------- -------- -------- -------- -------- --------
Net income................... $ 6,595 $ 4,810 $ 9,867 $ 5,807 $ 6,705 $ 6,739 $ 5,760
======== ======== ======== ======== ======== ======== ========
Per common share data(1):
Basic earnings per share
Income from continuing
operations............... $ 1.47 $ 1.09 $ 2.22 $ 1.25 $ 1.43 $ 1.48 $ 1.20
Net income............... $ 1.47 $ 1.06 $ 2.19 $ 1.25 $ 1.43 $ 1.41 $ 1.24
Diluted earnings per share
Income from continuing
operations............... $ 1.43 $ 1.06 $ 2.15 $ 1.21 $ 1.37 $ 1.42 $ 1.09
Net income............... $ 1.43 $ 1.03 $ 2.12 $ 1.21 $ 1.37 $ 1.35 $ 1.12
Cash dividends per common
share.................... $ 0.240 $ 0.195 $ 0.405 $ 0.278 $ 0.200 $ 0.150 $ 0.134
Total assets(2).............. $791,333 $689,135 $715,690 $668,782 $697,384 $626,906 $559,146
Long-term debt:
Parent company............. $ 7,335 $ 3,843 $ 4,181 $ 2,422 $ 1,695 $ 1,903 $ 2,042
Consolidated............... $ 51,296 $ 49,030 $ 47,092 $ 48,671 $ 47,387 $ 43,246 $ 40,723
Redeemable preferred
securities:
Parent company obligated... $ 2,300 $ 2,440 $ 2,300 $ 1,840 $ 1,280 $ 1,420 $ 560
Consolidated............... $ 4,920 $ 5,060 $ 4,920 $ 4,460 $ 3,275 $ 2,965 $ 560
Total stockholders'
equity(2).................. $ 51,576 $ 44,923 $ 48,890 $ 42,791 $ 41,851 $ 38,416 $ 35,183
</TABLE>
---------------
(1) All share and per share data have been adjusted to reflect the
four-for-three split in Citigroup's common stock paid on August 25, 2000.
(2) Total assets and total stockholders' equity at December 31, 1998 and 1999
and at June 30, 1999 have been restated to reflect the March 2000 conversion
of a portion of the convertible debt of Nikko Securities Co. Ltd. into
common stock.
9
<PAGE> 16
CONDENSED CONSOLIDATED FINANCIAL DATA
OF ASSOCIATES AND SUBSIDIARIES -- HISTORICAL
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
MONTHS ENDED
JUNE 30,
(UNAUDITED) AS OF OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------
2000 1999 1999 1998 1997 1996 1995
--------- --------- ------- ------- ------- ------- -------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenues....................... $ 6,395 $ 5,934 $12,131 $ 9,377 $ 8,279 $ 7,098 $ 6,107
------- ------- ------- ------- ------- ------- -------
Total Revenues, net of Interest
Expense............................ $ 4,386 $ 4,009 $ 8,225 $ 6,180 $ 5,503 $ 4,642 $ 3,929
------- ------- ------- ------- ------- ------- -------
Income from continuing operations.... $ 709 $ 695 $ 1,490 $ 1,224 $ 1,032 $ 857 $ 723
Net income........................... $ 709 $ 695 $ 1,490 $ 1,224 $ 1,032 $ 857 $ 723
======= ======= ======= ======= ======= ======= =======
Per common share data:
Basic earnings per share
Income from continuing
operations.................... $ 0.97 $ 0.95 $ 2.05 $ 1.76 $ 1.49 $ 1.24 $ 1.04
Net income....................... $ 0.97 $ 0.95 $ 2.05 $ 1.76 $ 1.49 $ 1.24 $ 1.04
Diluted earnings per share
Income from continuing
operations.................... $ 0.97 $ 0.95 $ 2.04 $ 1.75 $ 1.48 $ 1.23 $ 1.04
Net income....................... $ 0.97 $ 0.95 $ 2.04 $ 1.75 $ 1.48 $ 1.23 $ 1.04
Cash dividends per common share.... $ 0.130 $ 0.110 $ 0.230 $ 0.205 $ 0.200 $ 0.100 n/a
Total assets......................... $87,701 $85,894 $82,957 $75,175 $57,233 $48,268 $41,304
Long-term debt:
Parent company..................... $ 1,181 $ 1,923 $ 1,387 $ 809 $ 424 $ 638 $ 836
Consolidated....................... $42,153 $43,161 $41,404 $37,597 $28,228 $24,030 $21,373
Total stockholders' equity........... $10,295 $ 9,110 $ 9,801 $ 8,527 $ 6,269 $ 5,438 $ 4,801
</TABLE>
10
<PAGE> 17
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
OF CITIGROUP AND ASSOCIATES
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED
JUNE 30, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------
2000 1999 1999 1998 1997
-------- -------- ----------- ----------- -----------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Total Revenues...................... $ 53,798 $ 46,891 $ 94,136 $ 85,808 $ 80,585
-------- -------- -------- -------- --------
Total Revenues, net of Interest
Expense........................... $ 37,274 $ 32,459 $ 65,462 $ 55,116 $ 53,285
-------- -------- -------- -------- --------
Income from continuing operations... $ 7,304 $ 5,632 $ 11,484 $ 7,031 $ 7,737
Cumulative effect of accounting
change............................ $ -- $ (127) $ (127) $ -- $ --
-------- -------- -------- -------- --------
Net income.......................... $ 7,304 $ 5,505 $ 11,357 $ 7,031 $ 7,737
======== ======== ======== ======== ========
Net Income Per Share
Income from continuing operations
Basic.......................... $ 1.46 $ 1.12 $ 2.28 $ 1.36 $ 1.49
Diluted........................ $ 1.42 $ 1.08 $ 2.21 $ 1.33 $ 1.43
Dividends Declared Per Common
Share(1).......................... $ 0.240 $ 0.195 $ 0.405 $ 0.278 $ 0.200
Total assets........................ $879,034 $775,029 $798,647 $743,957 $754,616
Total long term debt................ $ 93,449 $ 92,191 $ 88,496 $ 86,268 $ 75,615
Redeemable preferred securities:
Parent company obligated.......... $ 2,300 $ 2,440 $ 2,300 $ 1,840 $ 1,280
Consolidated...................... $ 4,920 $ 5,060 $ 4,920 $ 4,460 $ 3,275
Common Stockholders' Equity......... $ 60,096 $ 51,920 $ 56,765 $ 49,005 $ 44,767
Total stockholders' equity.......... $ 61,871 $ 54,033 $ 58,690 $ 51,318 $ 48,120
</TABLE>
---------------
(1) Amounts represent Citigroup's historical dividends per common share.
11
<PAGE> 18
RISK FACTORS
In addition to the other information included in this proxy
statement-prospectus (including the matters addressed "Special Note Regarding
Forward - Looking Statements" pages 14 and 15), you should carefully consider
the matters described below in determining whether to approve the merger
agreement, the merger and the other transactions contemplated by the merger
agreement.
BECAUSE THE MARKET PRICE OF CITIGROUP COMMON STOCK COULD DECLINE, YOU CANNOT BE
SURE OF THE MARKET VALUE OF THE CITIGROUP COMMON STOCK THAT YOU WILL RECEIVE IN
THE MERGER
Upon completion of the merger, each share of Associates common stock will
be converted into the right to receive 0.7334 of a share of Citigroup common
stock. This exchange ratio will not be adjusted in the event of any increase or
decrease in the price of either Associates or Citigroup common stock. The prices
of Associates and Citigroup common stock when the merger takes place may vary
from their prices at the date of this proxy statement-prospectus and at the date
of the special meeting of the stockholders of Associates. For example, during
the twelve month period ending on [ ], 2000 (the most recent
practicable date prior to the printing of this proxy statement-prospectus), the
closing price of Associates common stock varied from a low of $[ ] to a
high of $[ ] and ended that period at $[ ], and the closing price
of Citigroup common stock as adjusted for splits varied from a low of
$[ ] to a high of $[ ] and ended that period at $[ ].
Variations like these may occur as a result of changes in the business,
operations or prospects of Associates, Citigroup or the combined company, market
assessments of the likelihood that the merger will be consummated and the timing
of the merger's completion, regulatory considerations, general market and
economic conditions and other factors. At the time of the special meeting, you
will not know the exact value of the Citigroup common stock that you will
receive when the merger is completed.
We urge you to obtain current market quotations for Associates and
Citigroup common stock.
THE PRICE OF CITIGROUP COMMON STOCK MIGHT DECREASE AFTER THE MERGER
Following the merger, holders of Associates common stock will become
stockholders of Citigroup. Citigroup common stock could decline in value after
the merger. As discussed above, the market value of Citigroup common stock
fluctuates based upon general market and economic conditions, Citigroup's
business and prospects and other factors.
CITIGROUP MAY FAIL TO REALIZE THE BENEFITS OF THE MERGER
The value of Citigroup's common stock could be adversely affected to the
extent that Citigroup fails to realize the benefits of the merger. The merger
will involve the integration of the businesses of Associates and Citigroup, and
we cannot assure you that this will happen or that it will happen in a timely
manner. Associates and Citigroup have different corporate cultures and have
previously operated independently. It is possible that the integration process
could result in the loss of key employees, the disruption of each company's
ongoing businesses or inconsistencies in standards, controls, procedures and
policies. Additionally, in determining that the merger is in the best interests
of Associates, the Associates board of directors considered that enhanced
earnings may result from the consummation of the merger, including from cost
savings. However, we cannot assure you that any enhanced earnings will result
from the merger.
DIRECTORS AND OFFICERS OF ASSOCIATES HAVE POTENTIAL CONFLICTS OF INTEREST IN
PROMOTING THE MERGER
You should be aware that the directors and officers of Associates have
potential conflicts of interest in promoting the merger. For a discussion of
these interests, see "The Merger -- Interests of Certain Persons in the Merger"
on pages 32 and 33.
12
<PAGE> 19
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT ASSOCIATES' STOCK PRICE
AND FUTURE BUSINESS AND OPERATIONS
If the merger is not completed, Associates may be subject to the following
material risks:
- the price of Associates common stock may decline to the extent that the
current market price reflects a market assumption that the merger will be
completed,
- Associates may be required to pay Citigroup a termination fee of $400
million, and
- costs related to the merger, such as legal, accounting and financial
advisor fees, must be paid even if the merger is not completed.
If the merger agreement is terminated and Associates' board of directors
determines to seek another merger or business combination, there can be no
assurance that it will be able to find an equivalent strategic partner or a
partner willing to pay an equivalent or more attractive price than that which
would be paid in the merger. In addition, while the merger agreement is in
effect and subject to the limited exceptions described in this proxy
statement-prospectus, Associates is prohibited from directly or indirectly
soliciting or encouraging the initiation of any inquiries or proposals regarding
certain extraordinary transactions, such as a merger, sale of assets or similar
transactions with any party other than Citigroup.
THE OPINION OBTAINED BY ASSOCIATES FROM ITS FINANCIAL ADVISOR WILL NOT
REFLECT CHANGES IN CIRCUMSTANCES PRIOR TO THE MERGER
Associates does not intend to obtain an updated opinion from Goldman Sachs,
Associates' financial advisor. Changes in the operations and prospects of
Citigroup or Associates, general market and economic conditions and other
factors which are beyond the control of Citigroup, and on which the opinion of
Goldman Sachs is based, may alter the value of Citigroup or Associates or their
stock prices by the time the merger is completed. As a result of the foregoing,
Associates stockholders should be aware that the opinion of Goldman Sachs does
not address the fairness of the exchange ratio at the time the merger will be
completed or at any time other than September 5, 2000.
13
<PAGE> 20
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement-prospectus and the documents that are made part of
this proxy statement-prospectus by reference to other documents filed with the
Securities and Exchange Commission include various forward-looking statements
about Citigroup and Associates that are subject to risks and uncertainties.
Forward-looking statements include the information concerning future financial
performance, business strategy, projected plans and objectives of Citigroup and
Associates set forth under:
- "Summary", including questions and answers about the merger,
- "Selected Unaudited Pro Forma Combined Financial Data of Citigroup and
Associates",
- "Selected Financial Data -- Comparative Unaudited Per Share Data", and
- "The Merger".
Statements preceded by, followed by or that otherwise include the words
"believes", "expects", "anticipates", "intends", "estimates", "plans", "may
increase", "may fluctuate" and similar expressions or future or conditional
verbs such as "will," "should," "would," and "could" are generally
forward-looking in nature and not historical facts. You should understand that
the following important factors, in addition to those discussed elsewhere in the
documents which are incorporated by reference into this 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:
- the effect of economic conditions and interest rates on a national,
regional or international basis;
- the performance of Citigroup's businesses following the pending
acquisition of Associates;
- the timing of the implementation of changes in operations to achieve
enhanced earnings or effect cost savings;
- the ability of Citigroup and Associates to successfully integrate their
operations, the compatibility of the operating systems of the combining
companies, and the degree to which existing administrative and
back-office functions and costs of Citigroup and Associates are
complementary or redundant;
- the ability to satisfy all conditions precedent to Citigroup's
acquisition of Associates (including stockholder and various regulatory
approvals);
- competitive pressures in the consumer finance, commercial finance,
insurance, financial services, asset management, private banking,
corporate and investment banking and capital and emerging markets
industries;
- the financial resources of, and products available to, competitors;
- changes in laws and regulations, including changes in accounting
standards;
- changes in the securities and foreign exchange markets; and
- opportunities that may be presented to and pursued by the combined
company following the Merger.
These forward-looking statements involve risks and uncertainties in addition to
the risk factors described above under "Risk Factors".
Most of these factors are difficult to predict accurately and are generally
beyond the control of Citigroup and Associates.
14
<PAGE> 21
You should consider the areas of risk described above in connection with
any forward-looking statements that may be made by Citigroup or Associates or
anyone acting for either or both of them. Except for their ongoing obligations
to disclose material information under the federal securities laws, neither
Citigroup nor Associates undertakes any obligation to release publicly any
revisions to any forward-looking statements, to report events or circumstances
after the date of this proxy statement-prospectus or to report the occurrence of
unanticipated events. For any forward-looking statements contained in this proxy
statement-prospectus, Citigroup and Associates claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
15
<PAGE> 22
THE MERGER
THE DISCUSSION IN THIS 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 PROXY STATEMENT-PROSPECTUS AS ANNEX A AND IS INCORPORATED INTO THIS PROXY
STATEMENT-PROSPECTUS BY REFERENCE.
GENERAL
We are furnishing this proxy statement-prospectus to you in connection with
the solicitation of proxies by the Associates board of directors for use at our
special meeting of stockholders to be held on [date], 2000 and at any
adjournments or postponements of the special meeting.
At the special meeting, you will be asked to vote upon a proposal to
approve and adopt the Agreement and Plan of Merger, dated as of September 5,
2000, by and between Associates and Citigroup Inc., the merger and the other
transactions contemplated by the merger agreement.
In the merger, other than shares owned by Associates or Citigroup in a
capacity that does not involve market making or acting as a fiduciary, each
share of Associates common stock issued and outstanding immediately prior to the
closing of the merger, will be converted, without any action on the part of the
holder of that share, into the right to receive 0.7334 of a share (the "Exchange
Ratio") of Citigroup common stock, with cash being paid in lieu of fractional
shares of Citigroup common stock.
BACKGROUND OF THE MERGER
Members of Citigroup and Associates senior management, including Robert I.
Lipp, Member of the Office of the Chairman, Vice Chairman of Citigroup, and
Chairman and Chief Executive Officer of Citigroup's Global Consumer Business,
and Keith W. Hughes, Chairman and Chief Executive Officer of Associates, have
known each other professionally for more than ten years. In late 1999 and early
2000, senior management of both companies discussed strategic alternatives
affecting Citigroup and Associates. In March 2000, Associates informed Citigroup
that Associates was not interested in entering into discussions with Citigroup
regarding a business combination between the two companies, and there was no
discussion as to price or range of prices. There were no further discussions
prior to July 2000 regarding these matters between the companies.
In July 2000, Mr. Lipp called Roy A. Guthrie, Senior Executive Vice
President and Chief Financial Officer of Associates, to congratulate him on
Associates' earnings for its fiscal quarter ended June 30, 2000. During the
conversation, Mr. Lipp indicated that if Associates ever wanted to rethink
strategic alternatives, Citigroup would be interested in pursuing discussions
with Associates. Mr. Guthrie did not pursue the topic at that time.
On August 2, 2000, Mr. Hughes made a courtesy visit to Sanford I. Weill,
Chairman and Chief Executive Officer of Citigroup, in New York City. Messrs.
Weill and Hughes did not engage in any substantive discussions regarding a
possible business combination between Citigroup and Associates at that meeting.
On August 13, 2000, Mr. Weill met with senior management of Citigroup's Global
Consumer Business to discuss the possibility of approaching Associates regarding
a business combination between the two companies. On August 18, 2000, Mr. Weill
called Mr. Hughes to inquire as to whether he was willing to explore on a
preliminary basis a combination of the two companies. In light of the
substantial increase in the Associates common stock price, Mr. Hughes agreed to
meet with Mr. Weill to discuss the complementary strengths of the businesses of
the two companies. On August 22, 2000, Messrs. Weill and Hughes met and
discussed a general overview of a possible acquisition by Citigroup of
Associates, including preliminary discussions as to price. Messrs. Weill and
Hughes agreed to meet again and continue their discussions.
At a regularly scheduled meeting of the Associates board on August 29,
2000, Mr. Hughes discussed with the Associates board the nature of discussions
between the two companies to date. Also participating in the meeting were
representatives of Goldman, Sachs & Co., financial advisor to Associates, and
Simpson Thacher & Bartlett, legal counsel to Associates. Together with Goldman
Sachs, Associates' executive management discussed with the Associates board the
strategic and valuation aspects of a possible business combination. Legal
counsel discussed with the board the legal standards applicable to their
consideration of a business combination. During the meeting, the Associates
board considered the benefits and risks of a transaction for
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<PAGE> 23
Associates and its stockholders. Following such discussions, the Associates
board authorized management to continue discussing a possible business
combination with Citigroup.
In late August of 2000, Mr. Weill began informal discussions with a number
of members of the Citigroup board relating to a proposed business combination
between Citigroup and Associates.
On August 31, 2000, Citigroup and Associates entered into a confidentiality
agreement. Beginning August 31, senior management of Citigroup and Associates
provided each other with information and participated in meetings and
discussions relating to certain business, financial, legal, tax and accounting
matters regarding Citigroup and Associates as part of a reciprocal due diligence
review. In addition, legal, financial and accounting advisors of Citigroup and
Associates participated in the review, discussion and analysis of such
information.
From September 2 through September 5, 2000, representatives of Citigroup
and Associates, 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.
At a meeting on September 3, 2000, Messrs. Weill and Hughes discussed the
financial terms of the proposed merger that they would be willing to recommend
to their respective boards of directors, including the structure and amount of
the Exchange Ratio, and agreed to the amount of a breakup fee which would be
payable to Citigroup under certain circumstances, but other material terms of a
possible transaction remained unresolved.
At a meeting of the Associates board on September 4, 2000, Associates'
executive management updated the Associates board as to the status of
discussions between the two companies. Management of Associates and Goldman
Sachs discussed the strategic, financial and valuation aspects of the proposed
transaction, the status of the financial, accounting and business due diligence,
the implications of the proposed merger for the principal businesses of
Associates and other aspects of the proposed merger. Legal counsel for
Associates discussed the terms and conditions of the draft merger agreement, the
regulatory issues relating to the proposed merger, the status of the legal due
diligence review of, and the negotiations with, Citigroup and other legal
matters. During the meeting, the Associates board considered the benefits and
risks of the proposed transaction for Associates and its stockholders. Following
these discussions, the Associates board authorized management to continue to
pursue the proposed merger and agreed to meet again on September 5, 2000.
On September 5, 2000, at a meeting of the Citigroup board, Citigroup's
executive management and legal counsel reviewed with the Citigroup board the
proposed merger with Associates. Executive management of Citigroup discussed the
financial aspects of the proposed transaction, the businesses of Associates,
strategic implications that the proposed merger would have on each of the
businesses of Citigroup and its subsidiaries and other aspects of the proposed
merger. A representative of Salomon Smith Barney Inc., a Citigroup subsidiary,
discussed certain financial aspects of the proposed merger with the Citigroup
board. A representative of Skadden, Arps, Slate, Meagher & Flom LLP, outside
legal counsel for Citigroup, 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, Associates,
the fiduciary duties of the Citigroup board in connection with the proposed
merger and certain other legal matters. During the meeting, the Citigroup board
considered the benefits and risks of the proposed transaction for Citigroup and
its stockholders. After extensive discussion, the Citigroup board unanimously
determined that the merger is in the best interests of the stockholders of
Citigroup and approved the merger agreement, the merger and the other
transactions contemplated by the merger agreement.
On September 5, 2000, following the close of trading on the NYSE, at a
meeting of the Associates board, Associates' management updated the Associates
board on the proposed merger. Representatives of Goldman Sachs discussed certain
financial aspects of the proposed merger with the Associates board and rendered
an oral opinion, which was subsequently confirmed in writing, that, as of
September 5, 2000, the Exchange Ratio is fair from a financial point of view to
Associates' stockholders. Simpson Thacher & Bartlett, legal counsel for
Associates, discussed the fiduciary duties of the Associates Board in connection
with the proposed merger.
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<PAGE> 24
Legal counsel and management then provided an update of their due diligence
investigation and additional analysis of the matters discussed at the September
4 board meeting, including the terms and conditions of the draft merger
agreement. After extensive discussions, the Associates board unanimously
determined that the merger is in the best interests of the stockholders of
Associates and approved the merger agreement, the merger and the transactions
contemplated by the merger agreement and unanimously resolved to recommend that
stockholders of Associates vote to approve and adopt the merger, the merger
agreement and the transactions contemplated by the merger agreement.
Following additional negotiation, the merger agreement was signed by both
Associates and Citigroup late in the evening on September 5, 2000, and the
transaction was announced on September 6, 2000 by a joint press release issued
by Citigroup and Associates prior to the commencement of trading on the NYSE.
RATIONALE FOR THE MERGER; RECOMMENDATION OF ASSOCIATES' BOARD OF DIRECTORS
ASSOCIATES
On September 5, 2000, the Associates board determined by a unanimous vote
that the merger is advisable and in the best interests of Associates and
Associates' stockholders. The Associates board approved the merger agreement and
decided to recommend that Associates' stockholders approve and adopt the merger
agreement, the merger and the other transactions contemplated by the merger
agreement.
In connection with its approval of the merger, its determination that the
merger is advisable and in the best interest of Associates' stockholders and its
recommendation that stockholders approve and adopt the merger agreement, the
merger and the other transactions contemplated by the merger agreement, the
board of directors of Associates consulted with its legal advisors, including
its General Counsel and representatives of Simpson Thacher & Bartlett, outside
counsel on the transaction, regarding duties of the members of the board, as
well as with members of management and Goldman Sachs, its financial advisor. The
Associates board also considered the following material information and factors
in reaching its determination to approve the merger agreement and to recommend
that the stockholders approve and adopt the merger agreement, the merger and the
other transactions contemplated by the merger agreement:
- the exchange ratio and the fact that, based on the closing price of
Citigroup and Associates common stock on September 5, 2000, the
consideration to be received in the merger represents an approximately
54% premium over the closing price of the Associates common stock on the
NYSE on such date;
- presentations by senior members of Associates management regarding the
strategic advantages of combining with Citigroup, operational aspects of
the transaction and the results of management's operational and legal due
diligence review;
- historical information concerning Associates' business, financial
performance and condition, operations, management, competitive position
and stock performance;
- the current trends towards consolidation and globalization in the
financial services industry, which increase the competitive risks facing
Associates;
- the opportunities that the merger presents for cost savings and the
cross-selling of services by each of Associates and Citigroup to the
clients of the other;
- the opportunities and alternatives available to Associates if the merger
were not to be undertaken, including the possibilities of continuing to
operate Associates as an independent entity, a sale of Associates through
a merger or by other means, and, in respect of each alternative, the
timing and likelihood of actually accomplishing these alternatives, and
the conclusion that a combination with Citigroup is expected to yield
greater benefits and is more feasible than the alternatives;
- current financial market conditions and the historical market prices of
Associates' common stock;
- the financial analyses and presentations of Goldman Sachs and the opinion
delivered to the Associates Board by Goldman Sachs, that, as of September
5, 2000 based upon and subject to the considerations set forth in the
opinion, the Exchange Ratio is fair from a financial point of view to
Associates' stockholders;
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<PAGE> 25
- the terms and conditions of the merger agreement, including (1) the right
of Associates, under certain circumstances, to respond to an unsolicited
proposal with respect to an alternative business combination and (2) the
right of Associates to terminate the merger agreement and accept an
unsolicited alternative proposal, subject to compliance with the terms of
the merger agreement and the payment to Citigroup of a $400 million
termination fee;
- the likelihood that the merger would be consummated, given the
experience, reputation and financial resources of Citigroup;
- the expected treatment of the merger as a tax-free reorganization; and
- the expected treatment of the merger as a pooling of interests for
financial reporting and accounting purposes.
The Associates board also considered certain adverse factors in its
deliberations concerning the merger, including:
- the challenges of combining the businesses, assets and workforces of two
major companies and the risks of not achieving the expected operating
efficiencies or growth;
- uncertainty regarding employees' perceptions of the merger;
- 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;
- the risk of diverting management focus and resources from other strategic
opportunities and from operational matters while working to implement the
merger; and
- the risk that the merger will not be consummated.
The foregoing discussion of the factors considered by the Associates board
is not intended to be exhaustive, but is believed to include all material
factors considered by the Associates board. In reaching its decision to approve
the merger agreement, the merger and the other transactions contemplated by the
merger agreement, the Associates board did not quantify or assign any relative
weights to the factors considered, and individual directors may have given
different weights to different factors. The Associates board considered all
these factors as a whole, and overall considered them to be favorable to, and to
support, its determination.
CITIGROUP
On September 5, 2000, the Citigroup board determined by a unanimous vote
that the merger is advisable and in the best interests of Citigroup and
Citigroup's stockholders. The Citigroup board approved the merger agreement, the
merger and the other transactions contemplated by the merger agreement.
In connection with its approval of the merger, and its determination that
the merger is advisable and in the best interest of Citigroup's stockholders,
the board of directors of Citigroup consulted with its legal advisors, including
Citigroup's General Counsel and representatives of Skadden, Arps, Slate, Meagher
& Flom LLP, outside counsel on the transaction, regarding duties of the members
of the board, as well as with members of management. The Citigroup board also
considered the following material information and factors in reaching its
determination to approve the merger agreement, the merger and the other
transactions contemplated by the merger agreement:
- The Citigroup board believes that the merger will join two well-managed
companies with complementary operations and will significantly expand
Citigroup's global consumer finance business. The merger presents
Citigroup with a unique opportunity to enhance stockholder value by
taking advantage of a highly complementary strategic fit for Citigroup
with a partner that will strengthen even further Citigroup's leading
position in the global financial services industry.
- The merger will enhance Citigroup's consumer finance business in the
United States and provide Citigroup with a significant consumer finance
presence internationally.
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<PAGE> 26
- The merger provides Citigroup with a unique opportunity to broaden its
consumer finance business into the high growth global arena. Associates
would add 700,000 customers in six countries in Europe and 2.4 million
customers in eight other countries outside the United States. In
addition, through 1999, Associates' international finance segment has
experienced a 34% compound annual growth rate in receivables since 1991
(50% compound annual growth rate since 1995), and its pre-tax earnings
have grown at a compound annual growth rate of 39% since 1995.
- Associates provides Citigroup with an immediate entry into and a strong
market position in Japan's consumer finance sector. Associates has the
fifth largest consumer finance company in Japan with approximately $7.5
billion in receivables. In addition, it has the largest full-service
consumer finance branch network in Japan, foreign or domestic, with 677
branches.
- Associates also provides Citigroup with increased presence in Canada,
where Associates is the largest home equity lender and has the largest
consumer finance branch network, foreign or domestic. Associates has 326
Canadian branches with $4.1 billion in receivables.
- The merger creates a leading consumer finance company in the United
States. It will significantly expand Citigroup's consumer finance network
by adding approximately 750 domestic full service branches, bring total
domestic branches to approximately 2,000. In addition, Associates will
add 225 branches that exclusively provide home equity sales and 180
branches that provide auto financing. Associates is a leading provider of
home equity loan services in the U.S.
- The merger enhances Citigroup's position in the U.S. credit card
business, adding 20 million credit-and bank-card customers and
approximately $10.9 billion in credit card managed receivables (as of
December 1999). Associates has a leading position in the private label
oil credit card business, with approximately 10 million customers, and a
significant retail private label credit card business, with approximately
3.8 million customers. Associates also has marketing partnerships for
credit cards with several large banks. Moreover, the merger will produce
earnings enhancements through back office consolidation.
- The merger expands Citigroup's position in commercial finance. Associates
has a leading position in truck and trailer leasing as well as
construction equipment financing. In addition, it has one of the largest
transportation and equipment finance sales forces in the United States.
Associates' commercial finance business will be integrated with
Citigroup's Global Equipment Finance business.
- The merger is expected to be accretive to earnings by at least $0.10 per
share in 2001.
- The merger is expected to result in pre-tax cost savings of approximately
$600 million per year, with two-thirds of such amount expected to be
realized in the first year.
- The terms and conditions of the merger agreement, including the fact that
the Exchange Ratio provides certainty about the number of shares of
Citigroup common stock that will be issued in the merger, and the fact
that in the event of certain terminations of the merger agreement,
Associates must pay to Citigroup a $400 million termination fee.
- The expected treatment of the merger as a tax-free reorganization; and
- The expected treatment of the merger as a pooling of interests for
financial reporting and accounting purposes.
Citigroup's board also considered certain adverse factors in its
deliberations concerning the merger, including:
- 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;
- The possibility that the value of the consideration received by the
Associates' stockholders in the merger may increase prior to the closing
of the merger given the fact that the merger agreement
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<PAGE> 27
provides for a fixed exchange ratio for the number of shares of Citigroup
common stock that will be issued in the merger in exchange for each share
of Associates common stock by virtue of the possibility that the price
per share of Citigroup common stock may increase prior to the closing of
the merger;
- the recent enactment by the Japanese government of legislation which
reduces the maximum allowable rate for new unsecured loans and borrowings
from 40.0% to 29.2%;
- the challenges of combining the businesses, assets and workforces of two
major companies and the risks of not achieving the expected operating
efficiencies or growth;
- uncertainty regarding employees' perceptions of the merger; and
- the possible distraction of management from day-to-day operations while
working to implement the merger.
The foregoing discussion of the factors considered by the Citigroup board
is not intended to be exhaustive, but is believed to include all material
factors considered by the Citigroup board. In reaching its decision to approve
the merger agreement, the merger and the other transactions contemplated by the
merger agreement, the Citigroup board did not quantify or assign any relative
weights to the factors considered, and individual directors may have given
different weights to different factors. The Citigroup board considered all these
factors as a whole, and overall considered them to be favorable to, and to
support, its determination.
OPINION OF ASSOCIATES' FINANCIAL ADVISOR
Goldman Sachs has acted as financial advisor to Associates in connection
with the merger. On September 5, 2000, Goldman Sachs delivered its opinion,
subsequently confirmed in writing, to the board of directors that, based upon
and subject to the considerations set forth in the opinion, as of that date, the
Exchange Ratio is fair from a financial point of view to the stockholders of
Associates.
THE FULL TEXT OF THE GOLDMAN SACHS OPINION IS ATTACHED AS ANNEX B TO THIS
PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED INTO THIS PROXY
STATEMENT-PROSPECTUS BY REFERENCE. WE URGE YOU TO READ THE OPINION IN ITS
ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed:
- the merger agreement;
- annual reports to stockholders and annual reports on Form 10-K of
Associates and Citigroup for the five years ended December 31, 1999;
- certain interim reports to stockholders and quarterly reports on Form
10-Q of Associates and Citigroup;
- certain other communications from Associates and Citigroup to their
stockholders;
- certain internal financial analyses and forecasts for Associates prepared
by its management; and
- certain cost savings and operating synergies projected by the managements
of Associates and Citigroup to result from the transaction contemplated
by the merger agreement.
Goldman Sachs also held discussions with members of the senior management
of Associates and Citigroup regarding their assessment of the strategic
rationale for, and the potential benefits of, the merger and the past and
current business operations, financial condition and future prospects of their
respective companies. In addition, Goldman Sachs has reviewed the reported price
and trading activity for Associates' common stock and Citigroup's common stock,
compared certain financial and stock market information for Associates and
Citigroup with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the banking and finance industries specifically and in
other industries generally and performed such other studies and analyses as it
considered appropriate.
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<PAGE> 28
Goldman Sachs has relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and has assumed such accuracy and
completeness for purposes of rendering its opinion. Citigroup did not make
available to Goldman Sachs its projections of expected future performance.
Accordingly, Goldman Sachs' review with respect to such information was limited
to discussions with the management of Citigroup of the estimates of research
analysts. In addition, Goldman Sachs has not made an independent evaluation or
appraisal of the assets and liabilities of Associates or Citigroup or any of
their subsidiaries (including any derivative or off-balance-sheet assets or
liabilities or loss and loss adjustment expense reserves) and Goldman Sachs has
not been furnished with any such evaluation or appraisal. Goldman Sachs'
employees are not actuaries and Goldman Sachs' services did not include
actuarial determinations or evaluations by it or any attempt to evaluate
actuarial assumptions and, in that regard, Goldman Sachs has assumed the
adequacy of the loss and loss adjustment expense reserves of Citigroup. In
addition, Goldman Sachs' employees are not expert in the evaluation of loan
portfolios for purposes of assessing the adequacy of the allowances for losses
with respect thereto and have assumed, with Associates' consent, that such
allowances for Citigroup are in the aggregate adequate to cover all such losses.
Goldman Sachs was not requested to, and did not, solicit from third parties
indications of interest in acquiring all or part of Associates or in engaging in
a business combination or any other strategic transaction with Associates.
Goldman Sachs also assumed that:
- the transaction contemplated by the merger agreement will be accounted
for as a pooling-of-interests under generally accepted accounting
principles; and
- all material governmental, regulatory or other consents and approvals
necessary for the consummation of the transaction contemplated by the
merger agreement will be obtained without any adverse affect on
Associates or Citigroup or on the contemplated benefits of the
transaction contemplated by the merger agreement.
Goldman Sachs' advisory services and the opinion Goldman Sachs presented to the
board were provided for the information and assistance of the board of directors
of Associates in connection with its consideration of the transaction, as
contemplated by the merger agreement, and Goldman Sachs' opinion does not
constitute a recommendation as to how any stockholder of Associates should vote
with respect to the merger.
The following is a summary of the material financial analyses presented by
Goldman Sachs to the Associates board on September 5, 2000. SOME OF THE
SUMMARIES OF THE FINANCIAL ANALYSES INCLUDE INFORMATION PRESENTED IN TABULAR
FORMAT. THE TABLES MUST BE READ TOGETHER WITH THE TEXT ACCOMPANYING EACH
SUMMARY.
Selected Companies Analysis. Goldman Sachs reviewed market valuation
information for 12 publicly traded companies:
CONSUMER FINANCE AND CREDIT CARD COMPANIES
Household International, Inc.
MBNA Corporation
Providian Financial Corporation
Capital One Financial Corporation
OTHER FINANCIAL SERVICES COMPANIES
American International Group
Morgan Stanley Dean Witter & Co.
American Express Company
Wells Fargo & Company
Goldman Sachs Group
Charles Schwab Corporation
COMMERCIAL FINANCE COMPANIES
CIT Group, Inc.
Heller Financial, Inc.
The 12 comparison companies were chosen because they are publicly traded
companies with operations that, for purposes of analysis, may be considered
similar to Associates and/or Citigroup. Goldman Sachs calculated and compared
the price-to-earnings per share multiples of Associates, Citigroup and the
compari-
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<PAGE> 29
son companies for projected 2000 and 2001. These projections were based on the
latest median estimates provided by IBES International Inc., a data service that
monitors and publishes a compilation of earnings estimates produced by selected
research analysts on publicly-traded companies.
The following table lists the median price-to-earnings per share multiples
for the comparison companies, as compared to the price-to-earnings per share
multiples for Associates and Citigroup. Price-to-earnings per share multiples
are presented based on projected 2000 and 2001 earnings estimates:
<TABLE>
<CAPTION>
2000E 2001E
----- -----
<S> <C> <C>
Consumer Finance and Credit Card Companies.................. 22.6x 18.3x
Commercial Finance Companies................................ 8.2x 7.1x
Other Financial Services Companies.......................... 24.8x 22.5x
Citigroup................................................... 21.0x 19.4x
Associates.................................................. 11.8x 10.3x
</TABLE>
Historical Stock Trading Analysis. Goldman Sachs reviewed the historical
trading performance of Associates common stock, Citigroup common stock,
Household International common stock, a commercial finance composite index
comprised of certain publicly traded companies in the commercial finance
industry, a credit card composite index comprised of certain publicly traded
companies involved in credit card finance and servicing and the S&P 500 over
various periods. The commercial finance composite index included CIT Group and
Heller Financial. The credit card composite index included MBNA, Providian and
Capital One. These analyses indicated the following:
- since Associates' IPO on May 8, 1996, Citigroup outperformed Associates
and the S&P 500, while the S&P 500 outperformed Associates over the same
period;
- over a three-year history of weekly indexed prices, the credit card
composite index outperformed Citigroup, while Citigroup outperformed the
S&P 500, Associates, Household International and the commercial finance
composite index; and
- since March 15, 2000, a comparison of daily indexed prices reveals that
Associates outperformed Citigroup, while Citigroup outperformed the
credit card composite index, the commercial finance composite index,
Household International and the S&P 500.
Exchange Ratio History. Goldman Sachs calculated, on a daily basis, the
exchange ratio history of Associates common stock to Citigroup common stock for
the period September 1, 1997 to September 1, 2000. The following table presents
the results:
<TABLE>
<S> <C>
Three-Year Historical Average............................... 1.11x
Two-Year Historical Average................................. 1.01x
One-Year Historical Average................................. 0.64x
As of September 1, 2000..................................... 0.47x
</TABLE>
Goldman Sachs calculated Associates' Price/Earnings ratios for the
following year using IBES estimates and EPS growth rates from 1996 to 1999 as
well as on September 1, 2000. The results of this analysis are presented on the
following table:
<TABLE>
<CAPTION>
AVERAGE P/E EPS GROWTH(%)
----------- -------------
<S> <C> <C>
1996..................................................... 14.7x 18
1997..................................................... 18.0x 20
1998..................................................... 19.9x 18
1999..................................................... 17.7x 17
September 1, 2000........................................ 11.8x 13(a)
</TABLE>
---------------
(a) For the six months ended June 30, 2000/June 30, 1999 growth (excluding
charges relating to discontinuance of certain operations)
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<PAGE> 30
Present Value Analysis. Goldman Sachs performed a per share present value
analysis for Associates on a stand-alone basis using the projections supplied to
Goldman Sachs by the management of Associates. Goldman Sachs discounted the
future dividends per share as projected by management and the terminal value
based on management's future earnings estimates.
Goldman Sachs calculated the terminal values of Associates on a stand-alone
basis in the year 2004 based on a range of 7.0 x EPS to 21.0 x EPS. The
projected dividends and such terminal values were then discounted to present
value using discount rates ranging from 10.0% to 15.0%. The implied per share
values derived from this analysis ranged from $16.68 to $58.37, corresponding to
a 39.1% discount to a 113.2% premium over the Associates closing price of $27.38
as of September 1, 2000. The results of the discounted cash flow analysis on a
per-share basis are as follows:
<TABLE>
<CAPTION>
EPS TERMINAL VALUE
MULTIPLE 10.0% DISCOUNT RATE 12.5% DISCOUNT RATE 15.0% DISCOUNT RATE
------------------ ------------------- ------------------- -------------------
<S> <C> <C> <C>
7.0x $20.08 $18.28 $16.68
9.0x $25.55 $23.25 $21.21
11.0x $31.02 $28.23 $25.74
12.0x $33.75 $30.71 $28.01
13.0x $36.49 $33.20 $30.27
15.0x $41.96 $38.17 $34.80
18.0x $50.16 $45.63 $41.59
21.0x $58.37 $53.09 $48.38
</TABLE>
Selected Transactions. Goldman Sachs reviewed 16 acquisitions since June
1996 involving companies in the banking and/or finance industries. The companies
were grouped into three categories: bank and thrift, consumer finance and
commercial finance. Goldman Sachs' analyses of these selected transactions
included the following information:
- aggregate consideration;
- premium to market price one week prior to announcement of deal;
- aggregate consideration as a multiple of earnings in the last 12 months;
and
- aggregate consideration as a multiple of tangible book value.
Tangible book value refers to the book value less intangible assets.
The table below presents the median values for the groups of selected
transactions versus the terms of the merger of Associates and Citigroup
contemplated by the merger agreement:
<TABLE>
<CAPTION>
TOTAL CONSIDERATION AS
PREMIUM TO MARKET MULTIPLE OF LATEST TOTAL CONSIDERATION AS
1 WEEK PRIOR TO TWELVE MONTHS MULTIPLE OF TANGIBLE
ANNOUNCEMENT EARNINGS BOOK VALUE
----------------- ---------------------- ----------------------
<S> <C> <C> <C>
Bank and Thrift..................... 29% 24.6x 4.5x
Consumer Finance.................... 68% 24.5x 4.9x
Commercial Finance.................. 38% 14.2x 1.8x
Citigroup-Associates................ 57% 20.5x 6.8x
</TABLE>
Price Analysis. Goldman Sachs analyzed the price per share of Associates
implied by the exchange ratio contemplated in the merger agreement using various
Citigroup stock prices and information provided by the management of Associates
and from IBES. Goldman Sachs calculated the premium of the implied price per
share of common stock with respect to current and historical prices of
Associates' common stock and as a
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<PAGE> 31
multiple of projected earnings and historical book value and managed
receivables. The results using the recent Citigroup stock price on September 1,
2000 are presented in the following table:
<TABLE>
<S> <C>
Premium to Market Price at September 1, 2000................ 54.0%
Premium to 1-Year High Price................................ 8.5%
Discount to All-Time High Price............................. (13.7%)
Multiple of Last Twelve Months Reported EPS................. 20.5x
Multiple of Management Projected 2000 EPS................... 18.2x
Multiple of Management Projected 2001 EPS................... 15.8x
Multiple of Common Equity at June 30, 2000.................. 3.01x
Multiple of Tangible Common Equity at June 30, 2000......... 6.78x
Premium to Managed Receivables at June 30, 2000............. 31.2%
</TABLE>
Pro Forma Merger Analysis. Goldman Sachs analyzed the impact the merger
would have on Citigroup's projected 2001 EPS based on IBES estimates. Goldman
Sachs calculated the impact on Citigroup's EPS assuming the transaction would be
accounted for as a pooling of interests, using 2001 EPS estimates for Citigroup,
based on IBES and 2001 earnings estimates for Associates based on Associates'
management's estimates. The results using Citigroup's closing stock price on
September 1, 2000, and assuming pre-tax synergies of $500 million in one case
and $750 million in the other case, are presented in the following table:
<TABLE>
<CAPTION>
ACCRETION TO CITIGROUP
ASSUMING PRE-TAX SYNERGIES PROJECTED 2001 EPS
-------------------------- ----------------------
<S> <C>
$500 million.......................................... 4.0%
$750 million.......................................... 5.0%
</TABLE>
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Associates or Citigroup or the merger. The analyses were prepared solely for
purposes of Goldman Sachs' providing its opinion to the Associates board as to
the fairness from a financial point of view of the exchange ratio pursuant to
the merger agreement to the stockholders of Associates. The analyses do not
purport to be appraisals or necessarily reflect the prices at which the business
or securities actually may be sold. Analyses based upon forecasts of future
results, which are inherently subject to uncertainty, are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. As described above, Goldman Sachs'
opinion to the Associates board was one of many factors taken into consideration
by the Associates board in making its determination to approve the merger
agreement, the merger and the other transactions contemplated by the merger
agreement. The foregoing summary describes material financial analyses used by
Goldman Sachs in connection with providing its opinion to the Associates board
of directors on September 5, 2000, but does not purport to be a complete
description of the analysis performed by Goldman Sachs in connection with such
opinion and is qualified by reference to the written opinion of Goldman Sachs
set forth in Annex B.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Associates, having provided certain investment banking services to
Associates from time to time, including having acted as
- lead manager for the initial public offering of 59,950,000 shares of
Associates' common stock in May 1996,
- lead manager for a follow-on offering of 15,000,000 shares of common
stock in November 1998 and
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- the financial advisor to Associates in connection with, and having
participated in certain of the negotiations leading to the merger
agreement.
Goldman Sachs is also familiar with Citigroup and its affiliates having
acted as
- co-manager in various preferred stock and debt offerings of Citigroup and
its affiliates,
- co-financial advisor to Citicorp in its acquisition of AT&T Universal
Card Services in December 1997 and
- financial advisor to Citigroup in its acquisition of J.P. Morgan's Global
Trust business in June 1998.
Eric Dobkin, a former partner and managing director of Goldman Sachs and a
current Advisory Director and Chairman Emeritus of Equity Capital Markets of
Goldman Sachs, is a director of Associates. Goldman Sachs provides a full range
of financial advisory and securities services and, in the course of its normal
trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of Associates or Citigroup for its
own account and for the accounts of customers.
Pursuant to a letter agreement dated September 1, 2000, Associates engaged
Goldman Sachs to act as its financial advisor to render a fairness opinion to
the Associates board of directors in connection with the exchange ratio pursuant
to the merger agreement. Pursuant to that letter agreement, Associates paid
Goldman Sachs a fee equal to $5.0 million upon execution of the merger
agreement. Associates will also pay Goldman Sachs a fee based on the
consideration paid in the merger. Associates has agreed to reimburse Goldman
Sachs for its reasonable out-of-pocket expenses, including attorney's fees, and
to indemnify Goldman Sachs against certain liabilities, including certain
liabilities under the federal securities laws.
STOCK EXCHANGE LISTINGS
Citigroup will apply to list the Citigroup common stock issued pursuant to
the merger in exchange for Associates common stock with the NYSE and the Pacific
Exchange. The trading symbol for the Citigroup common stock is "C." Following
the merger, Associates stockholders will no longer be able to trade Associates
stock on any exchange because Associates stock will have ceased to exist and
therefore will no longer be listed on any exchange.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary discusses certain United States federal income tax
consequences of the merger to holders of Associates common stock. The discussion
is based on the Internal Revenue Code of 1986, as amended, Treasury regulations,
administrative rulings and judicial decisions currently in effect, all of which
are subject to change (possibly with retroactive effect) and to differing
interpretations. This discussion applies only to Associates stockholders that
hold their Associates common stock as a capital asset within the meaning of
section 1221 of the Internal Revenue Code. Further, this discussion does not
address all aspects of United States federal taxation that may be relevant to a
particular stockholder in light of its personal circumstances or to stockholders
subject to special treatment under the United States federal income tax laws,
including:
- banks or trusts,
- tax-exempt organizations,
- insurance companies,
- dealers in securities or foreign currency,
- investors in pass-through entities,
- foreign persons,
- stockholders who received their Associates common stock through the
exercise of employee stock options, through a tax-qualified retirement
plan or otherwise as compensation, and
- stockholders who hold Associates common stock as part of a hedge,
straddle or conversion transaction.
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In addition, the discussion does not address any state, local or foreign
tax consequences of the merger.
EACH HOLDER OF ASSOCIATES COMMON STOCK SHOULD CONSULT ITS TAX ADVISOR WITH
RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER.
The closing of the merger is conditioned upon the delivery by each of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Citigroup, and Simpson
Thacher & Bartlett, counsel to Associates, of its opinion to the effect that, on
the basis of the facts, assumptions, and representations set forth in such
opinion, the merger will constitute a "reorganization" for United States federal
income tax purposes within the meaning of Section 368(a) of the Internal Revenue
Code, and Citigroup and Associates will each be a party to such "reorganization"
within the meaning of Section 368(b) of the Internal Revenue Code. As a result
of the merger qualifying as a "reorganization":
- no gain or loss will be recognized by Citigroup or Associates as a result
of the merger;
- no gain or loss will be recognized by a holder of Associates common stock
on the exchange of that common stock for Citigroup common stock pursuant
to the merger, except with respect to cash, if any, received by a holder
of Associates common stock instead of a fractional share of Citigroup
common stock,
- the aggregate tax basis of the Citigroup common stock received in
exchange for Associates common stock pursuant to the merger (including a
fractional share of Citigroup common stock for which cash is received)
will equal the aggregate tax basis of the Associates common stock
surrendered in exchange therefor,
- the holding period for the Citigroup common stock received in exchange
for Associates common stock pursuant to the merger (including a
fractional share of Citigroup common stock) will include the holding
period of the Associates common stock surrendered in exchange therefor;
and
- cash received by a holder of Associates common stock instead of a
fractional share of Citigroup common stock will be treated as received in
exchange for such fractional share and such holder will recognize capital
gain or loss in an amount equal to the difference between the amount of
cash received and the portion of the tax basis of the Associates common
stock allocable to such fractional share.
Neither Associates nor Citigroup has requested a ruling from the Internal
Revenue Service with respect to the United States federal income tax
consequences of the merger and opinions of counsel are not binding on the
Internal Revenue Service or any court. In addition, if any of representations or
assumptions upon which such opinions are based are inconsistent with the actual
facts, the United States federal income tax consequences of the merger could be
adversely affected.
Reporting Requirements. A holder of Associates common stock receiving
Citigroup common stock as a result of the merger may be required to retain
records related to such holder's Associates common stock and file with its
federal income tax return a statement setting forth facts relating to the
merger.
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 Associates will be combined with
the corresponding balance sheet categories of Citigroup 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 Associates and Citigroup
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.
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The unaudited pro forma financial information contained in this proxy
statement-prospectus has been prepared using the pooling of interests accounting
method to account for the merger. See "Summary -- Selected Unaudited Pro Forma
Combined Financial Data of Citigroup and Associates" on page 11.
REGULATORY AND THIRD-PARTY APPROVALS
Under the merger agreement, Citigroup and Associates have agreed to use
their best efforts to obtain all necessary actions or nonactions, waivers,
consents and approvals from any governmental authority necessary to consummate
and make effective the merger. The required regulatory approvals include
approvals of various federal and state banking agencies, domestic consumer
finance agencies, state insurance regulatory authorities and other domestic and
foreign regulatory authorities, as described below. All other applications and
notices have been filed, or are in the process of being filed.
Federal Banking Approvals. Completion of the merger is subject, under the
Change in Bank Control Act (the "CBCA"), to notice to and non-disapproval of the
Office of the Comptroller of the Currency (the "OCC") with respect to Associates
National Bank (Delaware) and the Federal Deposit Insurance Corporation (the
"FDIC") with respect to both Hurley State Bank and Associates Capital Bank, Inc.
The merger cannot be completed unless the appropriate agency has received sixty
days prior written notice of each acquisition of control over those entities by
Citigroup and within that time period the agency has not issued a notice
disapproving the proposed acquisition or extending the time period within which
such a disapproval may be issued. There can be no assurances that the OCC or the
FDIC will not extend such time period. Either the OCC or the FDIC may disapprove
any of the acquisitions.
The OCC and the FDIC must also publish notice of the proposed acquisitions
of control and solicit public comment thereon, particularly from persons in the
geographic area where the bank proposed to be acquired is located, before final
consideration by the agency. Any public comment, or any public hearing on the
merger, could prolong the period during which the merger is subject to
regulatory review.
In reviewing the proposed transaction under the CBCA, the OCC and the FDIC
must assess the competence, experience, integrity, and financial ability of the
acquiror. In each case, the appropriate federal banking agency may disapprove
the proposed acquisition if the financial condition of the acquiror is such as
might jeopardize the financial stability of the bank or prejudice the interests
of the depositors of the bank, or if the competence, experience, or integrity of
the acquiror or of any of the proposed management personnel indicates that it
would not be in the interest of the depositors of the bank, or in the interest
of the public to permit the acquiror to control the bank.
The OCC or the FDIC may also disapprove any of the proposed acquisitions of
control if:
- the proposed acquisition of control 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
- the effect of the proposed acquisition of control in any section of the
country may be substantially to lessen competition or to tend to create a
monopoly or the proposed acquisition of control would in any other manner
be in restraint of trade, and the anti-competitive effects of the
proposed acquisition of control are not clearly outweighed in the public
interest by the probable effect of the transaction in meeting the
convenience and needs of the community to be served.
Completion of the merger is also subject to prior notice to the Federal
Reserve Board under the International Banking Act and regulations thereunder
with respect to two non-U.S. bank subsidiaries of Associates that are based in
Hong Kong and the United Kingdom, respectively. Such notice must generally be
given at least 45 days prior to an investment in such a non-U.S. bank, although
the Federal Reserve Board has the option either to act more quickly or to
require its specific consent for the investment, which could take longer.
State Banking Approvals. Completion of the merger will be subject to
application to the Director of the South Dakota Division of Banking and the
approval of the South Dakota State Banking Commission with
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respect to the change in control of Hurley State Bank. The South Dakota
Commission will act on the application within 180 days of filing (but usually
acts within 60 days or less). In acting on the application, the South Dakota
Commission may consider, among other things:
- the character, reputation, and financial standing of the acquiror and its
motives in seeking to acquire the bank;
- the character, financial responsibility, business experience and standing
in the community of the acquiror and the proposed directors of the bank;
and
- such other facts and circumstances bearing on the bank and its relation
to the community as may be relevant.
Completion of the merger will be subject to an application to and approval
of the Utah Commissioner of Financial Institutions with respect to the
acquisition of control of Associates Capital Bank, Inc. The Utah Commissioner
will act on the application within 60 days of acceptance of the application as
complete. The Utah Commissioner may approve the application subject to any terms
and conditions the Utah Commissioner considers necessary to protect the public
interest and carry out the purposes of the Utah Financial Institutions Code, and
may disapprove the application if:
- the acquisition would be detrimental to the applicant or the bank;
- the applicant, its executive officers, directors, or principal
stockholders have not established a record of sound performance,
efficient management, financial responsibility, and integrity so that it
would be against the interest of the depositors, other customers,
creditors, stockholders, or the public to authorize the acquisition;
- the applicant's financial condition might jeopardize the financial
stability of the applicant or the bank or prejudice the interests of
depositors or other customers of the applicant or the bank;
- completion of the acquisition will tend to substantially lessen
competition, unless this effect is clearly outweighed by the benefit of
meeting the convenience and needs of the relevant market area to be
served; or
- the applicant has not established a record of meeting the credit needs of
the communities that it or its subsidiary depository institutions serves.
Domestic Consumer Finance Approvals. Completion of the merger is also
subject to applications or notices with respect to one or more of Associates'
subsidiaries acting as a mortgage banker, sales finance company, licensed
lender, mortgage lender and broker, small lender, financial institution, or
other consumer finance company in Arizona, California, Florida, Hawaii,
Illinois, New Jersey, New York and Puerto Rico.
State Insurance Regulatory Approvals. The merger also requires filings
with, and approvals of, the state insurance regulatory authorities (the
"Insurance Commissioners") under the respective insurance codes (the "Insurance
Codes") of Arizona, California, Delaware, Indiana, Minnesota, Missouri, Nevada,
Tennessee, Texas and Wisconsin, which are the United States jurisdictions in
which the insurance companies owned or otherwise controlled by Associates are
domiciled or commercially 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
Associates 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 a Form A Statement Regarding the
Acquisition of Control of or merger with a Domestic Insurer or comparable
application with the relevant Insurance Commissioner. Citigroup made Form A
filings with the Insurance Commissioners of the domiciliary states of
Associates' insurer subsidiaries on September 15, 2000.
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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 Commissioner
has deemed the Form A filing complete, and the Insurance Commissioner has
discretion to request that Citigroup furnish additional information before
he/she deems the Form A filing complete. The Insurance Codes generally require
the relevant Insurance Commissioner to approve the application for the
acquisition of control unless the Insurance Commissioner 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
Commissioner's order.
In addition to those filings, Citigroup will file Pre-Acquisition
Notification Forms Regarding the Potential Competitive Impact of a Proposed
Merger or Acquisition by a Non-Domiciliary Insurer Doing Business in this State
or by a Domestic Insurer (Form E) or a comparable form in 17 states where
filings were required. These filings are generally reviewed within 30 days, or
in some states, 60 days, after filing with the Insurance Commissioners, who may
request additional information on the competitive impact of a proposed
acquisition. The 60-day time period will expire on or about November 15, 2000.
The approvals described in this paragraph are pending in 17 states as of the
date hereof.
International Bank and Insurance Regulatory Filings. Banking and insurance
regulatory applications, notifications, or other filings may be required in one
or more of: Bermuda, Canada, Channel Islands, Costa Rica, France, Hong Kong,
India, Ireland, Isle of Man, Japan, Mauritius, Mexico, Netherlands, Norway,
Philippines, Portugal, New Zealand, Spain, Sweden, Taiwan and the United
Kingdom.
U.S. Antitrust Filing. Under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the related rules and regulations,
the merger may not be consummated unless certain waiting period requirements
have expired or been terminated. On September 8, 2000, Citigroup and Associates
filed a Premerger Notification and Report Form pursuant to the HSR Act with the
United States Department of Justice and the Federal Trade Commission. Under the
HSR Act, the merger may not be consummated until 30 days (unless early
termination of this waiting period is granted) after the initial filing or, if
the Department of Justice or the Federal Trade Commission issues a Request for
Documents and Other Additional Information (a "second request"), 20 days after
Citigroup and Associates have substantially complied with such a second request
(unless this period is shortened pursuant to a grant of early termination). At
any time before or after the effective time of the merger, the Federal Trade
Commission, the Department of Justice or others could take action under
antitrust laws with respect to the merger, including seeking to enjoin the
consummation of the merger, to rescind the merger, or to require the divestiture
of certain assets of Citigroup or Associates. Citigroup and Associates believe
that the merger will not be challenged on antitrust grounds; however, there can
be no assurance that a challenge to the merger on antitrust grounds will not be
made or, if such a challenge is made, that it would not be successful.
EC Antitrust Approval. The EC Merger Regulation requires notification to
the European Commission of all concentrations between companies which are deemed
to have a "Community dimension" because they exceed certain global and European
revenue thresholds. A concentration of this type may not be consummated until
the European Commission, acting within fixed deadlines, approves it as being
"compatible with the common market." A concentration is compatible with the
common market if it does not create or strengthen a dominant position as a
result of which effective competition would be significantly impeded in the
European Economic Area or a substantial part thereof.
The European Commission has exclusive jurisdiction vis-a-vis national
competition authorities in the European Economics Area to review concentrations
with a Community dimension. The European Commission may, upon request, refer the
case to the national competition authority of a particular member state if the
concentration threatens to create or strengthen a dominant position in a
distinct market within the territory of the requesting member state.
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The notification involves the disclosure to the European Commission of
detailed information, especially regarding the structure of the relevant markets
and the parties' competitive positions. Upon receipt of a notification, the
European Commission conducts a preliminary review with a maximum duration of one
month from notification, which may be extended to six weeks in certain
circumstances. This preliminary review concludes with a decision either to
approve the notified concentration (with or without conditions) or to initiate
an in-depth investigation if the concentration raises serious doubts as to its
compatibility with the common market. An in-depth investigation has a maximum
duration of four months, and must end with a European Commission decision either
approving the concentration (with or without conditions) or prohibiting it. If
the European Commission raises substantive issues in connection with the
proposed concentration, the parties may negotiate with the European Commission
to find a solution, which may take the form of a remedial undertaking to modify
the concentration on conditions and within a time frame agreed with the European
Commission.
Citigroup and Associates and their affiliates each conduct substantial
operations within the European Economic Area and satisfy the applicable turnover
thresholds, with the result that the merger will amount to a concentration with
a Community dimension and, therefore, be subject to the requirements of
notification to, and approval by, the European Commission. Citigroup believes
that the concentration effected by the merger with Associates will be considered
to be compatible with the common market, and approved by the European Commission
during the preliminary review phase. However, it cannot be ruled out that the
European Commission might seek to require remedial undertakings as a condition
to its approval and/or to open a second phase investigation to examine serious
doubts as regards compatibility with the common market.
Canadian, Taiwanese and Mexican Antitrust Approvals Mandatory pre-closing
antitrust filings are required in Canada, Taiwan and Mexico. While the parties
believe that the merger will be approved without any conditions imposed by the
respective competition authorities, it cannot be excluded that measures will be
enforced as a condition for approval in these countries.
Other Foreign Antitrust Approvals Citigroup and Associates conduct
operations in a number of other jurisdictions where other antitrust filings or
approvals may be required or advisable in connection with the completion of the
merger. Citigroup and Associates are currently reviewing whether other filings
or approvals may be required or desirable in these other jurisdictions.
Other Regulatory Approvals. As a result of the merger, among other things,
Associates or Citigroup may be required pursuant to other laws and regulations,
either to notify or obtain the consent of regulatory authorities and
organizations to which subsidiaries of either or both companies may be subject,
including overseas authorities.
If the approval of the merger by any of the authorities mentioned above 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 Associates and Citigroup believe that they will receive the requisite
regulatory approvals for the merger, there can be no assurance regarding the
timing of the approvals or the ability of the companies to obtain the 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. The merger
is conditioned upon the receipt of all necessary 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 subsidiaries and prospective subsidiaries, taken as
a whole, if they were not received or filed. See "The Merger
Agreement -- Conditions to the Consummation of the Merger" on pages 44 and 45.
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Third-Party Approvals. Associates is a party to a number of guaranties,
operating agreements, purchase agreements and other 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, Associates and
Citigroup 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.
Associates and Citigroup do not believe that the failure to obtain such
consents, approvals or waivers would have a material adverse effect on
Citigroup.
APPRAISAL RIGHTS
Under Delaware law, holders of common stock of Associates are not entitled
to dissenters' appraisal rights which would give them the right to obtain the
payment of cash in exchange for their securities as a result of the merger
because the Associates common stock is listed on a national securities exchange
and the merger consideration consists solely of shares of Citigroup and cash in
lieu of fractional shares.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Associates board with respect to
the merger, you should be aware that, as described below, certain members of
Associates' management and board of directors may have interests in the merger
that are different from, or in addition to, the interests of stockholders of
Associates, and that may create potential conflicts of interest. Two executive
officers of Associates are members of the eight person Associates board of
directors that approved the merger agreement, the merger and the other
transactions contemplated by the merger agreement.
Except as described below, these persons have, to the knowledge of
Associates, no material interest in the merger other than those of stockholders
of Associates generally.
Directors and Officers Following the Merger. Keith W. Hughes, Chairman and
Chief Executive Officer of Associates will join the Citigroup board and
management committee and become a Citigroup Vice Chairman. Roy A. Guthrie,
Senior Vice President and Chief Financial Officer of Associates, will become an
executive officer of Citigroup, a member of Citigroup's management committee and
have responsibility for United States commercial finance and international
commercial and consumer finance activities.
Employment Agreements with Executives. Thirty-nine executive employees of
Associates, including Mr. Hughes and Mr. Guthrie, have employment agreements
that were entered into prior to the date of the merger agreement. Pursuant to
these employment agreements, the executives will be entitled to certain benefits
if they are terminated by Citigroup without cause or if they resign with good
reason within fifteen months after the filing of the Form 8-K filed by
Associates on September 6, 2000 in connection with the merger. The benefits
received for terminations of this type include a lump sum cash payment in an
amount equal to two times (three times in the case of Mr. Hughes) the sum of the
executive's base salary and an amount equal to the average bonuses received by
the executive for the previous three years, a prorated bonus payment for the
year of the termination and the continuation of health and other welfare
benefits for two years following the termination (except that Mr. Hughes will
receive such benefits for three years following the termination). In addition,
under the terms of the employment agreements, as of the filing of the September
6 Form 8-K, executives who participated in the Associates supplemental
retirement non-qualified plans and retiree medical nonqualified plans became
fully vested in such plans.
Equity-Based Awards. In accordance with the terms of the employment
agreements, all outstanding stock options, restricted stock and other
stock-based awards granted to the executives became fully vested and exercisable
as of the filing of the September 6 Form 8-K. Upon the filing of the September 6
Form 8-K, options with respect to 2,565,768 shares of Associates common stock
became fully vested and exercisable and 814,960 shares of restricted Associates
common stock became fully vested. Pursuant to the terms of the merger agreement,
upon completion of the merger, all outstanding stock options and restricted
stock will be converted into similar awards with respect to Citigroup common
stock, adjusted to reflect the Exchange Ratio of 0.7334.
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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 of the merger those current or former
directors and officers of Associates currently entitled to indemnification from
Associates and its subsidiaries as provided in the certificates of incorporation
and by-laws (or comparable organizational documents) of Associates and its
subsidiaries, and any indemnification agreements or arrangements of Associates
will survive the merger and will continue in full force and effect in accordance
with their terms. In addition, the merger agreement provides that directors and
officers of Associates who become directors and officers of Citigroup or its
affiliates following the merger will be entitled to the same indemnity rights
and protections as are afforded to other directors and officers of Citigroup.
The merger agreement also provides that for six years after the effective time
of the merger, Citigroup will maintain Associates' current liability insurance
covering acts or omissions occurring prior to the effective time of the merger
for those persons who were covered by Associates' directors' and officers'
liability insurance policy on terms and in 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 Associates in 2000 to
maintain such insurance.
EXISTING BUSINESS RELATIONSHIPS BETWEEN CITIGROUP AND ASSOCIATES
In 1998 and 1999, affiliates of Associates sold to affiliates of Citigroup
184 consumer finance lending branches throughout the United States and Canada
and related personal loan receivables for an aggregate consideration of
approximately $892 million. These transactions involved the sale of
approximately $739 million in net receivables.
Citigroup and its affiliates have in the past provided, and currently
provide, commercial and investment banking and brokerage services to Associates
and its affiliates in the ordinary course of their respective businesses. These
services include (i) the provision of, and arranging for, credit, (ii) other
capital raising and investment activities, and (iii) cash management and paying
agency services. In addition, affiliates of Citigroup and affiliates of
Associates are counterparties in connection with various derivative transactions
entered into in the ordinary course of business. Associates and its affiliates
paid Citigroup and its affiliates customary fees and expenses for these
services.
DELISTING AND DEREGISTRATION OF ASSOCIATES COMMON STOCK
If the merger is consummated, the shares of Associates common 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. Consequently,
following completion of the merger, Associates stockholders will no longer be
able to trade Associates common stock on any exchange.
RESTRICTIONS ON RESALES BY AFFILIATES
Affiliates of Associates. The shares of Citigroup common stock to be
issued to Associates 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 Associates 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 Associates 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 directors and certain executive officers of Associates
(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
receive in
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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").
Associates has agreed to deliver to Citigroup for each of its affiliates an
agreement that such person will not dispose of (i) any Citigroup common stock in
violation of the Securities Act or (ii) any Citigroup common stock or Associates
common stock during the Pooling Restricted Period.
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THE STOCKHOLDERS MEETING
PURPOSE, TIME AND PLACE
This proxy statement-prospectus is being furnished to you in connection
with the solicitation of proxies by the Associates board from holders of
Associates class A common stock, the only class of Associates capital stock
outstanding, for use at the special meeting to be held at [place] on [date,
2000], at [10:00 a.m.] local time and at any adjournments or postponements of
the special meeting. At the special meeting, holders of Associates common stock
will be asked to consider and vote upon a proposal to approve and adopt the
merger agreement, the merger, and the other transactions contemplated by the
merger agreement, and such other matters as may properly come before the special
meeting.
RECORD DATE; VOTING POWER
The Associates board has fixed the close of business ([5:00] p.m., [Eastern
Standard Time]) on [ , 2000] as the record date for determining the
holders of Associates common stock entitled to notice of, and to vote at, the
special meeting. Only holders of record of Associates common stock at the close
of business on the record date will be entitled to notice of, and to vote at,
the special meeting.
At the close of business on the record date, [ ] shares of
Associates common stock were issued and outstanding and entitled to vote at the
special meeting. Holders of record of Associates common stock are entitled to
one vote per share on any matter which may properly come before the special
meeting. Votes may be cast at the special meeting in person or by proxy.
The presence at the special meeting, either in person or by proxy of the
holders of a majority of the outstanding Associates common stock entitled to
vote, is necessary to constitute a quorum of the common stock, in order to
transact business at the special meeting. However, in the event that a quorum is
not present at the special meeting, it is expected that the meeting will be
adjourned or postponed in order to solicit additional proxies.
VOTES REQUIRED
Approval of the proposal to approve and adopt the merger agreement, the
merger and the other transactions contemplated by the merger agreement will
require the affirmative vote of a majority of the shares of Associates common
stock outstanding on the record date. Under applicable Delaware law, in
determining whether the proposal to approve and adopt the merger agreement, the
merger and the other transactions contemplated by 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 Associates common stock as nominees will not have discretionary authority to
vote such shares in the absence of instructions from the beneficial owners of
those shares. 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
As of the close of business on the record date, Associates' directors and
executive officers and their affiliates may be deemed to be the beneficial
owners of [ ] outstanding shares of Associates common stock
(collectively representing approximately [ ]% of the voting power of the
common stock). These executive officers and directors of Associates have
indicated that they will vote for approval and adoption of the merger agreement,
the merger and the transactions contemplated by the merger agreement.
VOTING OF PROXIES
Shares represented by properly executed proxies (whether through the return
of the enclosed proxy card or through electronic voting through the Internet, by
facsimile or by telephone) received in time for the special meeting will be
voted at the special meeting in the manner specified by such proxies. If your
proxy is
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properly executed but does not contain voting instructions, or if you use
electronic voting without indicating how you want to vote, your proxy will be
voted FOR approval of the merger agreement, the merger and the transactions
contemplated by the merger agreement. If other matters are properly presented
before the special meeting, 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. It is not expected that any matter other than as
described in this proxy statement-prospectus will be brought before the special
meeting.
ELECTRONIC VOTING
Because Delaware, the state in which Associates is incorporated, permits
electronic submission of proxies through the Internet, by facsimile or by
telephone, instead of submitting proxies by mail on the enclosed proxy card or
voting instructions, many stockholders will have the option to submit their
proxies or voting instructions electronically. Please note that there are
separate arrangements for using electronic voting depending on whether your
shares are registered in our stock records in your name or in the name of a
brokerage firm or bank. You should check your proxy card or voting instructions
forwarded by your broker, bank or other holder of record to see which options
are available.
The electronic procedures described below for submitting your proxy or
voting instructions are designed to authenticate stockholders' identities, to
allow stockholders to have their shares voted and to confirm that their
instructions have been properly recorded.
Associates holders of record may submit their proxies through [website
address], [fax number] or [telephone number].
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed proxy card or through electronic
voting through the Internet, by facsimile or by telephone does not preclude a
stockholder from voting in person. A stockholder may revoke a proxy at any time
prior to your proxy being voted at the special meeting by:
- delivering, prior to the special meeting, to Chester D. Longenecker,
Secretary, Associates First Capital Corporation, 250 East Carpenter
Freeway, Irving, Texas, 75062, a written notice of revocation bearing a
later date or time than the proxy;
- submitting another proxy electronically, or by mail that is later dated
and, if applicable, that is properly signed; or
- attending the special meeting and voting in person.
Attendance at the special meeting will not by itself constitute revocation
of a proxy. If an adjournment occurs, it will have no effect on the ability of
stockholders of record as of the record date to exercise their voting rights or
to revoke any previously delivered proxies. Associates does not expect to
adjourn the special meeting for a period of time long enough to require the
setting of a new record date for such meeting.
SOLICITATION OF PROXIES
Associates generally will bear the cost of solicitation of proxies. In
addition to solicitation by mail, the directors, officers and employees of
Associates and its subsidiaries may solicit proxies from stockholders 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 Associates will reimburse such company's custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
In addition, Associates has retained Corporate Investor Communications,
Inc. to assist Associates in the solicitation of proxies from stockholders in
connection with the special meeting. Corporate Investor
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Communications, Inc. will receive a fee which Associates expects will not exceed
$25,000 as compensation for its services and reimbursement of its out-of-pocket
expenses. Associates has agreed to indemnify Corporate Investor Communications,
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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THE MERGER AGREEMENT
GENERAL
The Citigroup board and the Associates board have each unanimously approved
and adopted the merger agreement, the merger and the other transactions
contemplated by the merger agreement. The merger agreement contemplates the
merger of Associates with and into Citigroup, with Citigroup continuing as the
surviving corporation. This section of the proxy statement-prospectus describes
material provisions of the merger agreement. This description 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 proxy
statement-prospectus and is incorporated in this proxy statement-prospectus by
reference. We urge you to read the merger agreement carefully and in its
entirety.
FORM OF THE MERGER
Under the terms of the merger agreement, Associates will be merged with and
into Citigroup. Citigroup will be the surviving corporation in the merger and
will continue its corporate existence under Delaware law. The Citigroup restated
certificate of incorporation, as in effect immediately prior to the effective
time of the merger, will be the certificate of incorporation of the surviving
corporation in the merger, and the by-laws of Citigroup will be the by-laws of
the surviving corporation. Citigroup and Associates may agree to change the
method of effecting the merger, including to provide for a different form of
merger. No such change, however, may:
- alter or change the amount or kind of consideration to be received by
holders of Associates common stock,
- adversely affect the proposed accounting treatment for the merger or the
tax treatment to Citigroup or holders of Associates common stock as a
result of receiving the merger consideration, or
- materially delay the consummation of the transactions contemplated
hereby.
TIMING OF CLOSING
The closing of the merger will take place no later than the second day
after satisfaction or waiver of the conditions set forth in Article VI of the
merger agreement, unless another time or date is agreed to by Citigroup and
Associates. A certificate of merger will be filed with the Secretary of State of
the State of Delaware as soon as practicable following the closing, at which
time the merger will be effective.
MERGER CONSIDERATION
At the effective time of the merger, each outstanding share of Associates
common stock, other than certain shares owned by Associates or Citigroup which
will be treated as described below, will be converted into the right to receive
0.7334 of a validly issued, fully paid and nonassessable share of Citigroup
common stock (except that cash will be paid in lieu of fractional shares as
described below). As of the effective time of the merger, all shares of
Associates common stock will no longer be outstanding and will automatically be
cancelled and will cease to exist and each holder of shares of Associates common
stock will cease to have any rights in respect of those shares, except to
receive the merger consideration as set forth in the immediately preceding
sentence.
Any shares of Associates common stock owned immediately prior to the
effective time of the merger by Associates or Citigroup will be cancelled and
retired and will cease to exist, and no consideration will be delivered in
exchange for those shares; provided, however, that any of the following shares
of Associates common stock will not be cancelled but, instead, will be treated
as set forth in the preceding paragraph:
- held by Associates or Citigroup in connection with any market-making or
proprietary trading activity or for the account of another person;
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- as to which Associates or Citigroup is or may be required to act as a
fiduciary or in a similar capacity; or
- the cancellation of which would violate any legal duties or obligations
of Associates or Citigroup.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The conversion of Associates common stock into the right to receive
Citigroup common stock will occur automatically at the effective time of the
merger. As soon as reasonably practicable after the effective time of the
merger, Citibank, N.A., in its capacity as exchange agent, will send a
transmittal letter to each person who held Associates common stock immediately
prior to the effective time. The transmittal letter will contain instructions
with respect to obtaining shares of Citigroup common stock in exchange for
shares of Associates common stock. Associates stockholders should NOT return
stock certificates with the enclosed proxy card.
After the effective time of the merger, each certificate that previously
represented shares of Associates common stock will represent only the right to
receive the Citigroup common stock into which such shares of Associates common
stock were converted in the merger and the right to receive cash in lieu of
fractional shares of Citigroup common stock and dividends on Citigroup common
stock with record dates after the effective time of the merger as described
below.
Holders of certificates previously representing Associates common stock
will not be paid dividends or distributions on the Citigroup common stock into
which such shares have been converted with a record date at or after the
effective time of the merger, 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 Associates common stock which is
not registered in the records of Associates' transfer agent, a certificate
representing the proper number of shares of Citigroup common stock will 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 agrees to
pay any transfer or other taxes required by reason of the issuance of shares of
Citigroup common stock to a person other than the registered holder of such
certificate or establishes to the satisfaction of Citigroup that such tax has
been paid or is not applicable.
All shares of Citigroup common stock issued upon conversion of shares of
Associates common stock (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 Associates common stock,
subject, however, to Citigroup's obligation to pay any dividends or make any
other distributions with a record date prior to the effective time of the merger
that may have been declared or made by Associates on such shares of Associates
common stock and which remain unpaid at the effective time of the merger.
No fractional shares of Citigroup common stock will be issued to any
Associates stockholder upon surrender of certificates previously representing
Associates common stock. As promptly as practicable after the completion of the
merger, the exchange agent will sell on the NYSE the excess of the number of
whole shares of Citigroup common stock delivered to the exchange agent by
Citigroup for exchange by Citigroup in connection with the merger over the
aggregate number of whole shares of Citigroup common stock to be distributed to
former Associates stockholders. The exchange agent will pay to each former
Associates stockholder a portion of the net sale proceeds based upon the ratio
of each stockholder's fractional share interest to the aggregate amount of
fractional share interests to which all former Associates stockholders are
entitled. Notwithstanding the foregoing, Citigroup may, in the alternative, at
its option, elect to pay to each former Associates stockholder an amount in cash
equal to the product of each stockholder's fractional share interest and the
closing price for a share of Citigroup common stock on the NYSE Composite
Transaction Tape as reported in The Wall Street Journal on the closing date of
the merger.
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EFFECT ON STOCK BASED AWARDS
At the effective time of the merger, each outstanding award or entitlement
under Associates' incentive compensation plan will be adjusted. Each outstanding
award or entitlement (other than outstanding options to purchase Associates
common stock) under the incentive compensation plan will be converted into the
same instrument of Citigroup and will be assumed by Citigroup, with such
adjustments as are necessary to preserve the value of such award or entitlement.
Each outstanding option or right to purchase shares of Associates 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 of the merger, the number of
shares of Citigroup common stock equal to the number of shares of Associates
common stock subject to such option immediately prior to the effective time of
the merger multiplied by 0.7334, at a price per share equal to the exercise
price for each such share of Associates common stock subject to such option or
right divided by 0.7334. 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) and so as not to result in a "disqualifying
disposition" of the stock underlying the incentive stock options.
BOARD AND OFFICERS OF CITIGROUP
The directors and officers of Citigroup will, from and after the effective
time of the merger, become the directors and officers, respectively, of the
surviving corporation in the merger until their successors are duly elected,
appointed or qualified or until their earlier death, resignation or removal in
accordance with the certificate of incorporation and the by-laws of the
surviving corporation in the merger.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains certain customary mutual representations and
warranties by each of Citigroup and/or Associates. Some of the most significant
of these include:
- organization, standing and corporate power;
- subsidiaries;
- capital structure;
- authority and noncontravention;
- documents filed by each of Citigroup and Associates with the SEC and
other regulatory entities, the accuracy of information contained therein,
as well as information to be supplied for inclusion in the proxy
statement-prospectus and the registration statement, and the absence of
undisclosed liabilities of each of Citigroup and Associates;
- absence of material changes or events with respect to each of Citigroup
and Associates since January 1, 2000;
- compliance with applicable laws and litigation;
- employee benefit and tax matters; and
- treatment of the merger as a "pooling of interests" for accounting
purposes.
In addition, Associates made additional representations to Citigroup. The
most significant of these additional representations include:
- that Associates received the opinion of Goldman Sachs stating that, as of
the date of the merger agreement, the exchange ratio is fair from a
financial point of view to the stockholders of Associates;
- insurance matters; and
- amendment of the Associates rights agreement to render it inapplicable to
the merger and action to prevent the merger from constituting a
distribution date under the Associates rights agreement.
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CERTAIN COVENANTS
Conduct of Business. Subject to certain exceptions, including the consent
of the other party, Citigroup and Associates have each agreed, prior to the
completion of the merger to do, or refrain from doing the following:
- Associates, Citigroup and each of their subsidiaries must conduct their
businesses in compliance with applicable laws, preserve intact their
current business organizations, keep available the services of their
current officers and other key employees and preserve their relationships
with those persons having business dealings with them;
- Associates, Citigroup and each of their subsidiaries may not declare or
pay dividends outside the parameters set forth in the merger agreement;
- Associates, Citigroup and each of their respective subsidiaries may not
split, combine or reclassify their capital stock,
- Associates, Citigroup and Associates' subsidiaries may not amend their
certificates of incorporation;
In addition, pending completion of the merger and subject to certain
exceptions, including the consent of Citigroup, Associates agreed, and agreed to
cause its subsidiaries to, carry on its businesses in the ordinary course
consistent with past practice and to refrain from taking certain other actions,
including the following:
- amending its by-laws;
- purchasing, redeeming or acquiring its capital stock;
- issuing or encumbering or subjecting to any lien any shares of its
capital stock;
- acquiring or agreeing to acquire certain businesses;
- selling, encumbering or subjecting to any lien any material properties or
assets other than in the ordinary course of business;
- incurring indebtedness, or making any loans, capital contributions to or
investments in any person other than its wholly-owned subsidiaries;
- materially changing its accounting methods or methods of reporting income
and deductions for federal income tax purposes;
- changing investment or risk management policies;
- materially changing actuarial, reserving, renewal or residual methods,
practices or policies, or investment or risk management policies of
Associates' insurance subsidiaries;
- creating, renewing, or amending any agreement or contract or other
binding obligation of Associates restricting Associates from conducting
business as it is presently being conducted or restricting Associates or
its subsidiaries from engaging in any type of activity or business;
- granting an increase in compensation or severance pay to, or enter into
or amend benefit agreements with, current or former directors, officers
or key employees of Associates or its subsidiaries;
- making material tax elections;
- agreeing to any material agreements or material modifications of any
existing agreements with any governmental entities; and
- satisfying any claims or obligations material to Associates or its
subsidiaries.
Pending completion of the merger, Citigroup agreed to refrain from
acquiring all or substantially all of the capital stock or assets of any other
business unless such acquisition would not be expected to materially delay or
impede the consummation of the merger.
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Pooling. Associates and Citigroup have agreed to use their best efforts to
cause 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 the SEC, and Associates and
Citigroup have agreed that, except as required by applicable law or regulation,
they will take no action that would cause such accounting treatment not to be
obtained.
Affiliate Agreements. Associates has agreed to deliver to Citigroup for
each of its affiliates an agreement that such person will not dispose of (i) any
Citigroup common stock in violation of the Securities Act or (ii) any Citigroup
common stock or Associates common stock during the period of time from the date
that is 30 days prior to the effective time of the merger until the date that
financial results covering at least 30 days of post-merger combined operations
of Citigroup and Associates having been publicly released.
COORDINATION OF DIVIDENDS
From September 5, 2000 to the closing of the merger, Citigroup and
Associates will coordinate with the other regarding the declaration and payment
of dividends in respect of the shares of Citigroup common stock and the shares
of Associates common stock and the record dates and payment dates relating
thereto, it being the intention of the parties that holders of shares of
Associates common stock will not receive two dividends, or fail to receive one
dividend, for any single calendar quarter with respect to their shares of
Associates common stock and the shares of Citigroup common stock any holder of
shares of Associates common stock receives in exchange for shares of Associates
common stock pursuant to the merger.
NO SOLICITATION
The merger agreement provides that Associates will not, nor will it permit
any of its subsidiaries to, nor will it authorize or permit any of its
subsidiaries' officers, directors or employees or its financial advisor or any
other representative retained by it or any of its subsidiaries to, directly or
indirectly through another person,
- 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 a Company
Takeover Proposal or
- participate in any discussions or negotiations regarding any Company
Takeover Proposal.
The merger agreement defines a "Company Takeover Proposal" as:
- any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 30% or
more of the net revenues, net income or assets of Associates and its
subsidiaries, taken as a whole, or 30% or more of any class of equity
securities of Associates,
- any tender offer or exchange offer that if consummated would result in
any person beneficially owning 30% or more of any class of any equity
securities of Associates, or
- any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Associates (or
any Associates subsidiary whose business constitutes 30% or more of the
net revenues, net income or assets of Associates and its subsidiaries,
taken as a whole), other than the transactions contemplated by the merger
agreement.
Notwithstanding the foregoing, Associates and its board of directors, in
response to any bona fide Company Takeover Proposal which was not solicited by
it and which did not otherwise result from a breach of a specified portion of
the "no solicitation" provision in the merger agreement, subject to providing
written notice to Citigroup, is permitted to effect a change in the Associates
board recommendation of the merger or furnish information with respect to
Associates and its subsidiaries to any person making a Company Takeover
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Proposal pursuant to a customary confidentiality agreement and participate in
discussions or negotiations regarding such Company Takeover Proposal, provided
that:
- the Associates stockholders meeting has not occurred,
- the board of directors of Associates determines in good faith, after
consultation with outside counsel, that it is necessary to take such
action in order to act in a manner consistent with its fiduciary duties
to Associates' stockholders under applicable law, and
- in the case of effecting a change in the Associates board recommendation
of the merger only, Associates' board of directors concludes in good
faith that such Company Takeover Proposal constitutes a Company Superior
Proposal, provided that at least three business days prior to making such
conclusion, Associates' board of directors provides Citigroup written
notice advising Citigroup that the Associates' board of directors is
prepared to conclude that such Company Takeover Proposal constitutes a
Superior Proposal and during such three business day period Associates
and its advisors will have negotiated in good faith with Citigroup to
make adjustments in the terms and conditions of the merger agreement such
that such Company Takeover Proposal would no longer constitute a Company
Superior Proposal, and
- in the case of furnishing information with respect to Associates to any
person making a Company Takeover Proposal only, the Associates' board of
directors concludes in good faith that such Company Takeover Proposal is
reasonably likely to result in a Company Superior Proposal.
The merger agreement provides that "Company 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 Associates' capital stock then
outstanding or all or substantially all of the assets of Associates and
- which is otherwise on terms which the board of directors of Associates
determines in its good faith judgment (after consultation with either
Goldman Sachs or another nationally recognized investment banking firm
and outside counsel), taking into account, among other things, all legal,
financial, regulatory and other aspects of the proposal and the person
making the proposal, that the proposal:
- if consummated would result in a transaction that is more favorable to
Associates' stockholders from a financial point of view than the merger,
and
- is reasonably capable of being completed, including to the extent
required, financing which is then committed or which, in the good faith
judgment of the board of directors of Associates, is reasonably capable
of being obtained by such third party.
The merger agreement requires Associates, its subsidiaries and their
representatives to cease immediately and cause to be terminated any existing
activities, discussions or negotiations with any parties with respect to any
Company Takeover Proposal.
Except as expressly permitted by the "no solicitation" provision in the
merger agreement, neither the board of directors of Associates nor any committee
of the Associates' board of directors will:
- withdraw, modify or qualify (or propose to do so), in a manner adverse to
Citigroup, the approval of the merger agreement, the merger or the other
transactions contemplated by the merger agreement or the Associates board
recommendation or take any action or make any statement in connection
with the Associates stockholders meeting inconsistent with such approval
or Associates board recommendation,
- approve or recommend, or propose publicly to approve or recommend, any
Company Takeover Proposal, or
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- cause Associates to enter into any acquisition agreement or other similar
agreement (a "Company Acquisition Agreement") related to any Company
Takeover Proposal.
Notwithstanding the foregoing, the board of directors of Associates, to the
extent that it determines in good faith, after consultation with outside
counsel, that in light of a Company Superior Proposal it is necessary to do so
in order to act in a manner consistent with its fiduciary duties to the
Associates' stockholders under applicable law, may terminate the merger
agreement solely in order to concurrently enter into a Company Acquisition
Agreement with respect to any Company Superior Proposal, but only after the
third business day following Citigroup's receipt of written notice advising
Citigroup that the board of directors of Associates is prepared to accept a
Company Superior Proposal, specifying the material terms and conditions of such
Company Superior Proposal and identifying the person making such Company
Superior Proposal.
In addition, Associates is required to immediately advise Citigroup of any
request for information or of any Company Takeover Proposal, the material terms
and conditions of such request or Company Takeover Proposal and the identity of
the person making such request or Company Takeover Proposal.
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 of the merger those current or former directors and officers of
Associates currently entitled to indemnification from Associates and its
subsidiaries as provided in the certificates of incorporation and by-laws (or
comparable organizational documents) of Associates and its subsidiaries, and any
indemnification agreements or arrangements of Associates will survive the merger
and will continue in full force and effect in accordance with their terms. In
addition, the merger agreement provides that directors and officers of
Associates who become directors and officers of Citigroup or its affiliates
following the merger will be entitled to the same indemnity rights and
protections as are afforded to other directors and officers of Citigroup. The
merger agreement also provides that for six years after the effective time of
the merger, Citigroup will maintain Associates' current liability insurance
covering acts or omissions occurring prior to the effective time of the merger
for those persons who were covered by Associates' directors' and officers'
liability insurance policy on terms and in 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 Associates in 2000 to
maintain such insurance.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The completion of the merger depends upon meeting a number of conditions,
including the following:
- approval and adoption of the merger agreement by Associates stockholders;
- expiration or termination of the waiting period applicable to the merger
under the HSR Act;
- receipt of all consents and approvals required to consummate the merger;
- absence of any legal prohibition on consummation of the merger;
- listing of shares of Citigroup common stock issuable to Associates
stockholders on the New York Stock Exchange and the Pacific Exchange;
- the Form S-4 having become effective under the Securities Act and no stop
order or proceedings seeking a stop order having been entered or pending
by the SEC; and
- receipt of a letter confirming that accounting for the merger as a
"pooling of interests" is appropriate accounting treatment from
Citigroup's accountants and receipt of a letter from Associates'
accountants confirming their concurrence with the conclusion of
Associates' management that Associates meets the conditions necessary for
Associates to enter into a merger accounted for as a "pooling of
interests".
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In addition, Citigroup's obligation to complete the merger is subject to,
among other things:
- the accuracy, as of closing, of the representations and warranties made
by Associates and performance of obligations by Associates, to the extent
set forth in the merger agreement;
- the receipt of an opinion of counsel that the merger will constitute a
reorganization for United States federal income tax purposes; and
- no condition having been imposed by any governmental entity in connection
with any regulatory approval being obtained from it in connection with
the merger which alone or together with other conditions of this type
requires Associates or its subsidiaries to be operated in a manner which
is materially different from industry standards in effect on the date of
the merger agreement and which materially adversely affects the business,
financial condition, results of operations or prospects of Associates and
its subsidiaries, taken as a whole, or their businesses other than their
commercial finance businesses, taken as a whole.
In addition, Associates' obligation to complete the merger is subject to,
among other things:
- the accuracy, as of closing, of the representations and warranties made
by Citigroup and performance of obligations by Citigroup, to the extent
set forth in the merger agreement; and
- the receipt of an opinion of counsel that the merger will constitute a
reorganization for United States federal income tax purposes.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to the completion
of the merger:
- by mutual written consent of Citigroup and Associates;
- by either Citigroup or Associates if:
- the merger is not approved by Associates' stockholders;
- government or court action prevents or would be reasonably likely to
have a material adverse effect on Associates or Citigroup; or
- the merger is not completed by April 1, 2001 (other than because of a
breach of the merger agreement caused by the terminating party). Either
party can extend this date up to May 1, 2001 if the merger has not been
completed because a regulatory approval has not been obtained but the
party reasonably believes the approval will be obtained within the
extended period;
- by Citigroup if Associates had failed to recommend the merger in this
proxy statement-prospectus or changes its recommendation as provided in
the merger agreement, or fails to call or convene the meeting of the
Associates stockholders;
- by Associates if its board of directors determines, consistent with its
fiduciary duties to Associates' stockholders, that Associates should
enter into a Company Acquisition Agreement that the Associates board
deems a Company Superior Proposal.
TERMINATION FEES
Associates must pay to Citigroup a termination fee of $400 million if any
of the following occurs:
- Citigroup terminates the merger agreement because Associates had failed
to recommend the merger to its stockholders in this proxy
statement-prospectus or changes its recommendation or fails to call or
convene a meeting of Associates stockholders to vote on the merger;
- a Company Takeover Proposal is disclosed to Associates or any of its
subsidiaries, Associates stockholders generally or to the public and
either Associates or Citigroup terminates the merger agreement because
the merger was not consummated by April 1, 2001 (as such date may be
extended
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pursuant to the merger agreement) or Associates stockholders do not
approve the merger at the special meeting and, within 18 months of the
termination, Associates enters into a Company Acquisition Agreement;
- a Company Takeover Proposal is disclosed to Associates or any of its
subsidiaries, Associates stockholders generally or to the public,
Associates changes its recommendation as provided in the merger agreement
and the merger agreement is terminated by Citigroup or Associates for any
reason provided in the merger agreement; or
- Associates terminates the merger agreement because its board of directors
determines, consistent with its fiduciary duties to Associates'
stockholders, that Associates should enter into a Company Acquisition
Agreement that the Associates board deems a Company Superior Proposal.
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COMPARISON OF RIGHTS OF STOCKHOLDERS OF ASSOCIATES AND CITIGROUP
Citigroup and Associates are both organized under the laws of the State of
Delaware. Any differences, therefore, in the rights of holders of Citigroup
common stock and Associates common stock arise primarily from differences in
their restated certificates of incorporation, by-laws and, in the case of
Associates, the existence of a rights agreement. Upon completion of the merger,
each issued and outstanding share of Associates common stock, together with the
attached right to purchase Associates series A junior participating preferred
stock issued pursuant to its rights agreement, will be converted into the right
to receive 0.7334 of a share of Citigroup common stock. Accordingly, upon
consummation of the merger, the rights of Associates stockholders who become
stockholders of Citigroup in the merger will be governed by Delaware law, the
Citigroup restated certificate of incorporation and the Citigroup by-laws. The
following is a summary of the material differences between the current rights of
Associates stockholders and the rights of Citigroup stockholders.
The following discussions are not intended to be complete and are qualified
by reference to the Associates restated certificate of incorporation, the
Associates by-laws, the Citigroup restated certificate of incorporation and the
Citigroup by-laws. In addition, the identification of some of the differences in
the rights of these stockholders as material is not intended to indicate that
other differences that are equally important do not exist. We urge you to read
carefully the relevant provisions of Delaware law, as well as the restated
certificates of incorporation and by-laws of Citigroup and Associates. Copies of
these documents are incorporated by reference into this document and will be
sent to you upon request. See "Where You Can Find More Information" on pages 56
through 58.
AUTHORIZED CAPITAL
Associates. The authorized capital stock of Associates consists of:
- 1,150,000,000 shares of Associates common stock, of which there were
728,916,299 shares outstanding as of August 31, 2000;
- 144,118,820 shares of Associates class B common stock, par value $0.01
per share, of which there were no shares issued or outstanding as of
August 31, 2000; and
- 50,000,000 shares of preferred stock, par value $0.01 per share, of which
734,500 shares have been designated as series A junior participating
preferred stock, none of which were issued or outstanding as of August
31, 2000.
Citigroup. The authorized capital stock of Citigroup consists of:
- 10,000,000,000 shares of Citigroup common stock, of which there were
4,557,983,532 shares outstanding as of August 7, 2000; and
- 30,000,000 shares of Citigroup preferred stock, the issued and
outstanding shares of which as of August 7, 2000 consisted 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;
- 500,000 shares of 8.40% cumulative preferred stock, series K;
- 800,000 shares of 5.864% cumulative preferred stock, series M;
- 700,000 shares of adjustable rate cumulative preferred stock, series Q;
- 400,000 shares of adjustable rate cumulative preferred stock, series R;
- 500,000 shares of 7 3/4% cumulative preferred stock, series U;
- 250,000 shares of fixed/adjustable rate cumulative preferred stock,
series V;
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- 2,262 shares of cumulative adjustable rate preferred stock, series Y;
and
- 987 shares of 5.321% cumulative preferred stock, series YY.
BOARD OF DIRECTORS
Associates. The board of directors of Associates has eight directors. The
Associates restated certificate of incorporation and by-laws provide that,
subject to any rights of holders of preferred stock to elect additional
directors, the Associates board of directors will consist of not more than
twelve nor less than three directors.
The Associates by-laws provide that the number of directors will be fixed
from time to time by the affirmative vote of a majority of the Associates board
of directors that Associates would have if there were no vacancies on the board.
The Associates board of directors is not divided into classes, and the
Associates restated certificate of incorporation and by-laws provide for
Associates directors to be elected for one-year terms by an affirmative
plurality of the 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 Associates board of directors consists of
one-third of the total number of Associates directors but in no event less than
three directors. A majority of the directors present at any meeting at which a
quorum is present is required to approve an action of the Associates board of
directors.
Citigroup. There are sixteen Citigroup directors and one honorary
director. The Citigroup restated certificate of incorporation and by-laws
provide that the Citigroup board of directors will consist of a number of
directors to be determined from time to time by the affirmative vote of a
majority of the entire Citigroup board.
The Citigroup by-laws provide that the election and term of the Citigroup
directors is determined pursuant to the restated certificate of incorporation.
The Citigroup board of directors is not divided into classes, and Citigroup
directors are elected for one-year terms by the stockholders at the annual
stockholders meeting.
The Citigroup restated certificate of incorporation and the Citigroup
by-laws are silent as to the requisite vote of stockholders to elect directors.
Under Delaware law, 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 Citigroup board of directors consists of a
majority of the total number of Citigroup directors, except when the Citigroup
board of directors 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
Citigroup board of directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Associates. The Associates by-laws permit the Associates board of
directors to designate one or more standing committees or special committees,
including:
- an audit committee;
- a compensation committee;
- a nominating committee, and
- other committees designated by the board,
each of which must consist or two or more members.
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The Associates board of directors currently has the following committees:
- an audit committee;
- a compensation committee;
- a nominating committee;
- a finance committee; and
- other committees designated by the board.
Citigroup. The Citigroup by-laws permit the Citigroup board of directors
to designate one or more standing committees, including an executive committee,
which must consist of the Chairmen of Citigroup and not fewer than three
Citigroup directors.
The Citigroup board of directors currently has the following committees:
- an executive committee;
- an audit committee;
- a public affairs committee;
- a personnel, compensation and directors committee; and
- a preferred stock committee.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Associates. The Associates restated certificate of incorporation and
by-laws provide that, subject to any rights of holders of preferred stock, and
unless the Associates board of directors determines otherwise, any vacancies in
the board of directors caused by newly created directorships resulting from an
increase in the number of directors, or otherwise, may be filled by the
affirmative vote of a majority of the remaining members of the board of
directors, even if less than a quorum, or by the sole remaining director.
Citigroup. The Citigroup restated certificate of incorporation provides
that newly created directorships resulting from an increase in the number of
Citigroup directors may be filled by a majority of the Citigroup directors then
in office, provided that a quorum is present. Any other vacancy occurring on the
Citigroup board of directors 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 Associates restated certificate of incorporation, the
Associates by-laws, the Citigroup restated certificate of incorporation nor the
Citigroup by-laws includes a provision setting forth the procedure for the
removal of directors.
Under Delaware law, 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
Associates. Pursuant to the Associates by-laws, Associates' officers
consist of a chairman of the board of directors, and may include one or more
vice chairmen of the board of directors, a president and a secretary, each of
whom is elected by the board of directors.
The chairman of the board of directors or the president may elect or
appoint:
- one or more senior executive vice presidents;
- one or more executive vice presidents;
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- one or more senior vice presidents;
- one or more vice presidents;
- a treasurer;
- a comptroller;
- a general counsel;
- one or more assistant comptrollers;
- one or more assistant general counsels;
- one or more assistant secretaries; and
- any other officers as the chairman of the board of directors or president
deem necessary,
for a term as may be prescribed by the board of directors.
The Associates by-laws provide that officers may be removed at any time by
the chairman of the board of directors. If, however, the officer is also a
director, he or she may be discharged at any time by the board of directors.
Citigroup. Pursuant to the Citigroup by-laws, Citigroup's officers consist
of one or more chairmen, and may include a president, one or more vice chairmen,
one or more vice presidents, a secretary, and other officers and assistant
officers as may be elected or appointed by or pursuant to the direction of the
Citigroup board.
The Citigroup restated certificate of incorporation and by-laws are silent
as to the procedures for removal of officers.
Under Delaware law, officers may be removed at any time by resolution of
the Citigroup board.
SPECIAL MEETINGS OF STOCKHOLDERS
Associates. The Associates by-laws provide that the chairman, a vice
chairman of the board of directors, the president or any officer at the request
in writing of a majority of the board of directors may call a special meeting of
Associates' stockholders. The Associates by-laws also provide that a special
meeting of stockholders cannot be called by stockholders.
Citigroup. The Citigroup by-laws provide that the chairman, may call a
special meeting of Citigroup's stockholders. The Citigroup by-laws also provide
that a special meeting must be called at the request, in writing, of a majority
of the Citigroup board of directors, or by the vote of the Citigroup board of
directors.
The Citigroup by-laws also provide that a special meeting may be called by
any Citigroup stockholder in the event the entire board of directors becomes
vacant.
QUORUM AT STOCKHOLDER MEETINGS
Associates. The Associates restated certificate of incorporation provides
that the presence in person or by proxy of the holders of shares entitled to
cast a majority of all the votes which could be cast at a meeting by the holders
of all of the outstanding shares of stock of Associates entitled to vote on
every matter that is to be voted on without regard to class constitutes a quorum
at any stockholder meeting.
The Associates by-laws provide that at any meeting of the stockholders in
which a quorum is not present, the person serving as chairman of the meeting or
the holders of shares entitled to cast a majority of all of the votes which
could be cast at any meeting by the holders of outstanding shares of stock of
Associates who are present in person or by proxy and who are entitled to vote on
every matter that is to be voted on without regard to class at any meeting may
adjourn the meeting from time to time.
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Citigroup. The Citigroup by-laws provide that the holders of a majority of
the shares of stock of Citigroup 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
Associates. The Associates restated certificate of incorporation provides
that any corporate action required to be taken at any annual or special meeting
of the stockholders, or any corporate action which may be taken at any annual or
special meeting of the stockholders, may be taken only at a duly called annual
meeting of stockholders and may not be taken by written consent of the
stockholders in lieu of a meeting.
Citigroup. The Citigroup restated certificate of incorporation is silent
on the matter of action by stockholders by written consent in lieu of a meeting.
Under Delaware law, 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 any action at a meeting at which all shares entitled to vote on the
action were present and voted.
ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS AT ANNUAL MEETINGS
Associates. The Associates by-laws provide for an advance notice procedure
for the nomination, other than by or at the direction of the board of directors,
of candidates for election as directors as well as for other
stockholder-proposed business to be considered at annual meetings of
stockholders.
In general, notice of intent to nominate a director or raise matters at
stockholder meetings:
- must be received in writing by the secretary of Associates not less than
60 nor more than 90 days prior to the anniversary of the previous year's
annual meeting of stockholders; and
- must contain information relating to the person being nominated or the
matters to be brought before the meeting and relating to the stockholder
submitting the proposal.
Citigroup. The Citigroup by-laws provide for an advance notice procedure
for the nomination of candidates as well as for other stockholder-proposed
business to be considered at stockholder meetings.
Generally, notice of intent to make a nomination or raise matters at an
annual stockholder meeting must be received in writing by the secretary of
Citigroup, not more than 120 days and not less than 90 days in advance of the
anniversary date of the immediately preceding annual meeting. Notice of intent
to make a nomination or raise matters at a special meeting of stockholders must
be received by the Secretary of the Company by the 15th day following the
earlier of the day that notice of the meeting is first mailed to stockholders or
the day that the date of the special meeting was publicly disclosed. The
stockholder notice must contain:
- information relating to the stockholder submitting the proposal,
- the matter to be brought before the meeting, and
- a representation that the stockholder will appear in person or by proxy
to address the nomination or other matter specified in the notice.
AMENDMENT OF GOVERNING DOCUMENTS
Associates. The Associates restated certificate of incorporation requires
the affirmative vote of 75% of the total voting power of all classes of
outstanding common stock, voting together as a single class, to amend,
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repeal or adopt any provision inconsistent with the provisions of Associates'
restated certificate of incorporation relating to:
- the board of directors, including the powers and authority expressly
conferred upon the board of directors, the number of directors, vacancies
and removal;
- the manner in which stockholder action may be effected; and
- special meetings of stockholders.
The Associates restated certificate of incorporation and by-laws also
provide that the by-laws may be altered, amended or repealed by the affirmative
vote of directors constituting not less than a majority of the entire board of
directors (if effected by action of the board of directors), or by the
affirmative vote of the holders of at least 75% of the total voting power of all
classes of outstanding capital stock (if effected by action of the
stockholders).
Citigroup. The Citigroup restated certificate of incorporation
specifically reserves Citigroup's right to amend or repeal any provision of the
Citigroup restated certificate of incorporation as permitted under Delaware law,
except as noted below.
Under Delaware law, 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 on the amendment,
unless a higher vote is required in the corporation's restated certificate of
incorporation.
The Citigroup restated certificate of incorporation requires a 75% vote to
amend the provisions relating to the rights of various series of Citigroup
preferred stock.
The Citigroup restated certificate of incorporation also provides that the
affirmative vote of holders of 66 2/3% percent of the votes entitled to be cast
by the holders of all the then outstanding shares of voting stock, voting
together as a single class, is required to amend, alter, change or repeal, or
adopt any provisions inconsistent with, the provisions of Citigroup's restated
certificate of incorporation relating to various business combinations.
The Citigroup restated certificate of incorporation also provides that the
Citigroup board of directors has the power to make, alter, amend and repeal the
Citigroup by-laws by an affirmative vote of at least 66 2/3% of the entire
Citigroup board of directors.
The Citigroup restated certificate of incorporation also provides that the
affirmative vote of 75% of the voting power of the shares entitled to vote at an
election of directors is required to amend, alter, change or repeal, or adopt
any provision as part of the Citigroup restated certificate of incorporation
inconsistent with the purpose and intent of, the provisions of Citigroup's
restated certificate of incorporation relating to:
- the board of directors , including the powers and authority expressly
conferred upon the board of directors;
- the priority of payment of dividends on preferred stock and common stock;
- voting power of holders of common stock;
- the priority of distributions upon liquidation, dissolution or winding up
of Citigroup;
- the issuance of any shares of common or preferred stock; and
- the 66 2/3% voting requirement to amend, alter, change or repeal the
Citigroup by-laws.
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Pursuant to the Citigroup by-laws, the Citigroup directors may exercise
their power of amendment at any meeting. Any alteration, however, can be
repealed by the Citigroup board of directors or by the stockholders at any
meeting duly called.
Under Delaware law, the stockholders also have the power to amend or repeal
the Citigroup by-laws or to adopt new by-laws.
FAIR PRICE PROVISION
ASSOCIATES. The Associates restated certificate of incorporation does not
include a "fair price" or similar provision governing the approval requirements
of business combinations.
Under Delaware law, 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.
CITIGROUP. In addition to the approval requirements of business
combinations under Delaware law, the Citigroup restated certificate of
incorporation includes what generally is referred to as a "fair price
provision."
In general, this provision of the Citigroup restated certificate of
incorporation provides that a business combination, which is defined to include
mergers, consolidations, various recapitalizations and the sale, lease, exchange
or transfer of all or substantially all of the assets of Citigroup or any major
subsidiary, with, to or for the benefit of an interested stockholder of
Citigroup, requires approval by the affirmative vote of at least 66 2/3% of the
votes entitled to be cast by the holders of all then outstanding shares of
voting capital stock of Citigroup, excluding shares held by the interested
stockholder and other related parties, unless:
- the business combination is approved by a majority of the continuing
directors; or
- 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 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 Citigroup.
In general, a continuing director is any member of the Citigroup board of
directors who is not affiliated with an interested stockholder and who either
was a director of Citigroup prior to the time any interested stockholder became
an interested stockholder or whose nomination for election or election to the
Citigroup board of directors was recommended or approved by a majority of the
continuing directors then in office.
STOCKHOLDERS RIGHTS PLAN
ASSOCIATES. In 1998, Associates adopted a stockholder rights plan pursuant
to a rights agreement with First Chicago Trust Company of New York, as rights
agent. A summary of the material provisions of the rights agreement is set forth
below. The summary does not include a complete description of all of the terms
of the rights agreement. We urge you to read carefully the relevant provisions
of Associates' rights plan, a copy of which will be sent to you upon request.
See "Where You Can Find More Information" on pages 56 through 58.
Exercisability of Rights. Under the Associates rights agreement, one
right, referred to as an Associates right, attaches to each share of Associates
common stock and, when exercisable entitles the registered holder to purchase
from Associates one one-thousandth of a share of Associates series A junior
participating preferred stock at an initial purchase price of $200, subject to
customary antidilution adjustments.
The Associates rights will not become exercisable until the earlier of:
- ten days following a public announcement that a person or group of
affiliated or associated persons has become the beneficial owner of 15%
or more of the Associates common stock then outstanding; and
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- ten business days, or such later date as may be determined by the board
of directors of Associates, following the commencement of, or the
announcement of an intention to make, a tender offer or exchange offer
that would result in a person becoming the beneficial owner of 15% or
more of the Associates common stock then outstanding.
In connection with the merger, the Associates rights agreement was amended
to provide that the Associates rights will not become exercisable solely by
reason of the Citigroup merger agreement and the completion of the transactions
contemplated by that agreement.
"Flip In" Feature. In the event a person becomes the beneficial owner of
15% or more of the Associates common stock outstanding, each holder of an
Associates right, except for that person, will have the right to acquire, upon
exercise of the Associates right, instead of one one-thousandth of a share of
Associates series A junior participating preferred stock, shares of Associates
common stock having a value equal to twice the exercise price of the Associates
right. For example, if we assume that the initial purchase price of $200 is in
effect on the date that the flip-in feature of the Associates rights is
exercised, any holder of an Associates right, except for the person that has
become the beneficial owner of 15% or more of the Associates common stock
outstanding, may exercise his or her Associates right by paying to Associates
$200 in order to receive from Associates shares of Associates common stock
having a value equal to $400.
"Exchange" Feature. At any time after a person becomes a beneficial owner
of 15% or more, but less than 50%, of Associates common stock then outstanding,
the board of directors of Associates may, at its option, exchange all or some of
the Associates rights, except for those held by such person, for Associates
common stock at an exchange ratio of one share of Associates common stock, or
one one-thousandth of a share of Associates series A junior participating
preferred stock for each Associates right, subject to adjustment. Use of this
exchange feature means that eligible Associates rights holders would not have to
pay a purchase price before receiving shares of Associates common stock.
"Flip Over" Feature. In the event that, after a person acquires 15% or
more of the Associates common stock then outstanding:
- Associates merges into another entity;
- another entity merges into Associates; or
- Associates sells more than 50% of its assets or earning power,
then each holder of an Associates right, except for a person that is the
beneficial owner of 15% or more of the Associates common stock outstanding, will
have the right to receive, upon exercise of the Associates right, the number of
shares of the acquiring company's common stock having a value equal to two times
the exercise price of the Associates right.
Redemption of Rights. At any time prior to the earlier to occur of:
- any public announcement that a person has become the beneficial owner of
15% or more of the Associates common stock then outstanding; and
- April 13, 2008,
the board of directors of Associates may redeem all of the Associates rights at
a redemption price of $0.01 per right, subject to adjustment. The right to
exercise the Associates rights will terminate upon redemption, and at that time,
the holders of the Associates rights will have the right to receive only the
redemption price for each Associates right they hold.
Amendment of Rights. At any time before a person becomes the beneficial
owner of 15% or more of the Associates common stock then outstanding, the terms
of the existing Associates rights agreement may be amended by the board of
directors of Associates without the approval of the holders of the rights.
However, no amendment may be made that changes the redemption price of the
Associates rights.
Termination of Rights. If not previously exercised, the Associates rights
will expire on April 13, 2008, unless Associates earlier redeems or exchanges
the Associates rights or extends the expiration date.
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Anti-takeover Effects. The Associates rights have anti-takeover effects.
Once the Associates rights have become exercisable, in most cases the Associates
rights will cause substantial dilution to a person that attempts to acquire or
merge with Associates. Accordingly, the existence of the Associates rights may
deter potential acquirors from making a takeover proposal or tender offer. The
Associates rights should not interfere with any merger or other business
combination approved by the board of directors of Associates because Associates
may redeem the Associates rights and because the Associates board of directors
can amend the Associates rights agreement so that a transaction approved by the
Associates board of directors would not cause the Associates rights to become
exercisable.
Series A Junior Participating Preferred Stock. In connection with the
creation of the Associates rights, the board of directors of Associates
authorized the issuance of 734,500 shares of Associates preferred stock
designated as Associates series A junior participating preferred stock.
Associates designed the dividend, liquidation, voting and redemption
features of the Associates series A junior participating preferred stock so that
the value of one one-thousandth of a share of Associates series A junior
participating preferred stock approximates the value of one share of Associates
common stock. Shares of Associates series A junior participating preferred stock
may only be purchased after the Associates rights have become exercisable.
The rights of the Associates series A junior participating preferred stock
as to dividends, liquidation and voting, and in the event of mergers or
consolidations, are protected by customary antidilution provisions.
CITIGROUP. Citigroup does not have a stockholder rights plan.
EXPERTS
The consolidated financial statements of Citigroup as of December 31, 1999
and 1998, and for each of the years in the three-year period ended December 31,
1999, have been audited by KPMG LLP, independent certified public accountants,
as set forth in their report on the consolidated financial statements. The
consolidated financial statements are included in Citigroup's annual report on
Form 10-K, as amended, for the year ended December 31, 1999, and incorporated by
reference in this proxy statement-prospectus. The report of KPMG LLP also is
incorporated by reference in this proxy statement-prospectus. The report of KPMG
LLP covering the December 31, 1999 consolidated financial statements refers to
changes, in 1999, in Citigroup's methods of accounting for insurance-related
assessments, accounting for insurance and reinsurance contracts that do not
transfer insurance risk, and accounting for the costs of start-up activities.
The consolidated financial statements of Citigroup referred to above are
incorporated by reference herein in reliance upon such report and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Associates appearing in its Annual
Report on Form 10-K for the year ended December 31, 1999 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated by reference in this proxy
statement-prospectus. Such consolidated financial statements are incorporated by
reference in this proxy statement-prospectus in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Citigroup common
stock to be issued pursuant to the merger and the federal income tax
consequences of the merger will be passed upon for Citigroup by Skadden, Arps,
Slate, Meagher & Flom LLP, Citigroup's outside legal counsel. Kenneth J.
Bialkin, a partner of Skadden, Arps, Slate, Meagher & Flom LLP, is a director of
Citigroup and he and other attorneys at his firm beneficially own an aggregate
of less than 1% of the outstanding Citigroup common stock. Certain legal matters
with respect to the federal income tax consequences of the merger will be passed
upon for Associates by Simpson Thacher & Bartlett, Associates' outside legal
counsel.
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SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
Due to the contemplated consummation of the merger, Associates does not
currently expect to hold a 2001 annual meeting of stockholders because
Associates will have been merged into Citigroup in the merger. In the event that
the merger is not consummated and such a meeting is held, stockholders may
propose matters to be presented at the 2001 annual meeting of stockholders and
may also nominate persons to be directors. Any stockholder proposal intended for
inclusion in the proxy materials for the 2001 annual meeting of stockholders
must be received by Associates, addressed to the Secretary of Associates, P.O.
Box 660237, Dallas, Texas 75266-0237, no later than November 22, 2000.
In addition, the Associates by-laws provide for an advance notice procedure
for the nomination, other than by or at the direction of the board of directors,
of candidates for election as directors as well as for other
stockholder-proposed business to be considered at annual meetings of
stockholders.
In general, notice of intent to nominate a director or raise matters at
stockholder meetings:
- must be received in writing by the secretary of Associates not less than
60 nor more than 90 days prior to the anniversary of the previous year's
annual meeting of stockholders; and
- must contain information relating to the person being nominated or the
matters to be brought before the meeting and relating to the stockholder
submitting the proposal.
WHERE YOU CAN FIND MORE INFORMATION
Associates and Citigroup 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. Associates and Citigroup 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 Associates and
Citigroup also may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
Citigroup has filed a registration statement on Form S-4 to register with
the SEC the shares of Citigroup common stock to be issued to Associates
stockholders in the merger. This proxy statement-prospectus is a part of that
registration statement and constitutes a prospectus of Citigroup and a proxy
statement of Associates for the Associates special meeting.
As allowed by SEC rules, this 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 Associates and Citigroup to "incorporate by reference"
information into this 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 proxy statement-prospectus, except for any information
superseded by information contained directly in the proxy statement-prospectus.
This proxy statement-prospectus incorporates by reference the documents set
forth below that Associates and Citigroup have previously filed with the SEC.
These documents contain important information about the companies.
56
<PAGE> 63
<TABLE>
<CAPTION>
ASSOCIATES SEC FILINGS
(FILE NO. 2-44197) PERIOD
---------------------- ------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1999
Quarterly Reports on Form 10-Q Three months ended March 31, 2000
and June 30, 2000
Current Reports on Form 8-K Dated January 27, 2000, February 15,
2000, April 11, 2000, April 17,
2000, May 2, 2000, July 18, 2000 and
September 6, 2000
</TABLE>
<TABLE>
<CAPTION>
CITIGROUP SEC FILINGS
(FILE NO. 1-9924) PERIOD
--------------------- ------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1999
(as amended)
Quarterly Reports on Form 10-Q Three months ended March 31, 2000
and June 30, 2000
Current Reports on Form 8-K Dated January 18, 2000, February 16,
2000, February 28, 2000, April 17,
2000, June 19, 2000, July 11, 2000,
July 19, 2000, July 21, 2000 and
September 5, 2000
Registration Statement on Form 8-B May 10, 1998
</TABLE>
Associates and Citigroup incorporate by reference additional documents that
either company may file with the SEC between the date of this proxy
statement-prospectus and the date of the special meeting. 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.
Associates has supplied all information contained or incorporated by
reference in this proxy statement-prospectus relating to Associates, and
Citigroup has supplied all such information relating to Citigroup.
If you are a stockholder of Associates or Citigroup, Associates or
Citigroup, as the case may be, may have sent you some of the documents
incorporated by reference, but you can obtain any of them through Associates or
Citigroup, as the case may be, or the SEC or the SEC's Internet World Wide Web
site described above. Documents incorporated by reference are available from the
companies without charge, excluding all exhibits unless specifically
incorporated by reference as an exhibit to this proxy statement-prospectus.
Stockholders of Associates or Citigroup may obtain documents incorporated by
reference in this proxy statement-prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
ASSOCIATES FIRST CAPITAL CORPORATION
250 East Carpenter Freeway
Irving, Texas 75062-2729
Attention: General Counsel
CITIGROUP INC.
153 East 53rd Street
New York, New York 10043
Attention: Treasurer
If you would like to request documents from either company, please do so by
[ ], 2000 to receive them before the Associates Special Meeting. If you
request any incorporated documents from us we will mail them to you promptly by
first-class mail, or similar means.
You should rely only on the information contained or incorporated by
reference in this proxy statement-prospectus to vote your shares at the
Associates special meeting. Associates and Citigroup have not authorized
57
<PAGE> 64
anyone to provide you with information that is different from what is contained
in this proxy statement-prospectus. This proxy statement-prospectus is dated
[ ], 2000. You should not assume that the information contained in the
proxy statement-prospectus is accurate as of any date other than that date, and
neither the mailing of this proxy statement-prospectus to Associates'
stockholders nor the issuance of Citigroup's securities in the merger will
create any implication to the contrary.
58
<PAGE> 65
ANNEX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
CITIGROUP INC.
AND
ASSOCIATES FIRST CAPITAL CORPORATION
DATED AS OF SEPTEMBER 5, 2000
<PAGE> 66
TABLE OF CONTENTS
ARTICLE I
THE MERGER
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1.1 The Merger.................................... A-1
SECTION 1.2 Closing....................................... A-1
SECTION 1.3 Effective Time................................ A-1
SECTION 1.4 Effects of the Merger......................... A-2
SECTION 1.5 Certificate of Incorporation and By-laws of
the Surviving Corporation................................. A-2
SECTION 1.6 Directors and Officers........................ A-2
SECTION 1.7 Agreement to Cooperate to Revise
Transaction............................................... A-2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock....................... A-2
SECTION 2.2 Exchange of Certificates...................... A-3
SECTION 2.3 Certain Adjustments........................... A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the
Company................................................... A-6
SECTION 3.2 Representations and Warranties of Parent...... A-18
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business........................... A-24
SECTION 4.2 No Solicitation by the Company................ A-27
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4 and the Proxy
Statement; Stockholders Meeting........................... A-29
SECTION 5.2 Letters of the Company's Accountants.......... A-30
SECTION 5.3 Letters of Parent's Accountants............... A-30
SECTION 5.4 Access to Information; Confidentiality........ A-30
SECTION 5.5 Best Efforts.................................. A-30
SECTION 5.6 Employee Stock Options, Incentive and Benefit
Plans..................................................... A-31
SECTION 5.7 Indemnification, Exculpation and Insurance.... A-32
SECTION 5.8 Fees and Expenses............................. A-33
SECTION 5.9 Public Announcements.......................... A-34
SECTION 5.10 Affiliates.................................... A-34
SECTION 5.11 Stock Exchange Listing........................ A-34
SECTION 5.12 Stockholder Litigation........................ A-34
SECTION 5.13 Tax Treatment................................. A-34
</TABLE>
i
<PAGE> 67
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 5.14 Pooling of Interests.......................... A-34
SECTION 5.15 Standstill Agreements; Confidentiality
Agreements................................................ A-34
SECTION 5.16 Conveyance Taxes.............................. A-35
SECTION 5.17 Payment of Dividends.......................... A-35
SECTION 5.18 Section 16 Matters............................ A-35
SECTION 5.19 Employee Benefit Review....................... A-35
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to
Effect the Merger......................................... A-36
SECTION 6.2 Conditions to Obligations of Parent........... A-36
SECTION 6.3 Conditions to Obligations of the Company...... A-37
SECTION 6.4 Frustration of Closing Conditions............. A-37
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination................................... A-37
SECTION 7.2 Effect of Termination......................... A-38
SECTION 7.3 Amendment..................................... A-38
SECTION 7.4 Extension; Waiver............................. A-38
SECTION 7.5 Procedure for Termination..................... A-38
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and
Warranties................................................ A-39
SECTION 8.2 Notices....................................... A-39
SECTION 8.3 Definitions................................... A-39
SECTION 8.4 Interpretation................................ A-40
SECTION 8.5 Counterparts.................................. A-40
SECTION 8.6 Entire Agreement; No Third-Party
Beneficiaries............................................. A-40
SECTION 8.7 Governing Law................................. A-41
SECTION 8.8 Assignment.................................... A-41
SECTION 8.9 Consent to Jurisdiction....................... A-41
SECTION 8.10 Headings...................................... A-41
SECTION 8.11 Severability.................................. A-41
</TABLE>
ii
<PAGE> 68
AGREEMENT AND PLAN OF MERGER dated as of September 5, 2000, by and between
CITIGROUP INC., a Delaware corporation ("Parent"), and ASSOCIATES FIRST CAPITAL
CORPORATION, a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent and the Company have
each approved the merger of the Company with and into Parent (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement,
whereby each issued and outstanding share of Class A common stock, par value
$.01 per share, of the Company ("Company Common Stock"), other than shares owned
by the Company and Parent (with certain exceptions, as set forth in Section
2.1(a)), will be converted into the right to receive the Merger Consideration
(as defined in Section 2.1(b));
WHEREAS, the respective Boards of Directors of Parent and the Company 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 and are in the best interests of each corporation and their respective
stockholders;
WHEREAS, the parties 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 that this Agreement
be, and is hereby, adopted as a plan of reorganization for purposes of Section
368 of the Code; and
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction under United States
generally accepted accounting principles ("GAAP").
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 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law ("DGCL"), the Company shall be merged with and into Parent at the Effective
Time (as defined in Section 1.3). Following the Effective Time, Parent shall be
the surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of the Company in accordance with the
DGCL.
SECTION 1.2 Closing. Subject to the satisfaction or waiver of all the
conditions to closing contained in Article VI hereof, 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 day after
satisfaction or waiver of the conditions set forth in Article VI (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions), unless another time
or date is agreed to by the parties hereto. The Closing will be held at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New
York, New York 10036 or at such other location as is agreed to by the parties
hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable following the Closing, the parties shall cause the Merger
to be consummated by filing a certificate of merger (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 to effectuate
the Merger. 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 Parent and the Company shall agree and specify
in the Certificate of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
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<PAGE> 69
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the DGCL.
SECTION 1.5 Certificate of Incorporation and By-laws of the Surviving
Corporation. The Restated Certificate of Incorporation of Parent shall be the
certificate of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law. The by-laws of
Parent, as in effect immediately prior to the Effective Time, shall be the
by-laws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
SECTION 1.6 Directors and Officers. The directors and officers of Parent
shall, from and after the Effective Time, become the directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected, appointed or qualified or until their earlier death,
resignation or removal in accordance with the certificate of incorporation and
the by-laws of the Surviving Corporation.
SECTION 1.7 Agreement to Cooperate to Revise Transaction. Upon the
reasonable request of either party, each of Parent and the Company shall
cooperate in efforts to effect a change in the method of effecting the Merger
contemplated by this Agreement, 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 Company Common
Stock, (ii) adversely affect the proposed accounting treatment for the Merger or
the tax treatment to Parent or holders of Company Common Stock as a result of
receiving the Merger Consideration, or (iii) materially delay 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 2.1 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
Company Common Stock:
(a) Cancellation of Treasury Stock. Each share of Company Common
Stock that is owned directly by the Company or Parent 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 Company Common Stock (i) held by the Company or Parent in connection
with any market-making or proprietary trading activity or for the account
of another person, (ii) as to which the Company or Parent 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 the
Company or Parent, shall not be cancelled but, instead, shall be treated as
set forth in Section 2.1(b).
(b) Conversion of Company Common Stock. Subject to Section 2.2(e), at
the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, each issued and outstanding share of Company
Common Stock (other than shares to be cancelled in accordance with Section
2.1(a)), together with the rights attached thereto to purchase the
Company's Series A Junior Participating Preferred Stock issued pursuant to
the Rights Agreement between the Company and First Chicago Trust Company of
New York as Rights Agent, dated as of April 13, 1998 (the "Rights
Agreement"), shall be converted into the right to receive .7334 (the
"Exchange Ratio") of a validly issued, fully paid and nonassessable shares
of common stock, par value $.01 per share ("Parent Common Stock"), of
Parent. The consideration to be issued to holders of Company Common Stock
is referred to herein as the "Merger Consideration." As of the Effective
Time, all such shares of Company 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 Company 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 Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance
with Section 2.2(e) and any dividends or distributions to which such holder
is entitled pursuant to Section 2.2(c), in each case without interest.
A-2
<PAGE> 70
SECTION 2.2 Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time, Parent shall enter into an agreement with one of its bank or
trust company subsidiaries to act as exchange agent for the Merger (the
"Exchange Agent"), which shall provide that Parent shall deposit with the
Exchange Agent as of the Effective Time, for the benefit of the holders of
shares of Company Common Stock, for exchange in accordance with this Article II,
through the Exchange Agent, certificates representing the shares of Parent
Common Stock (such shares of Parent Common 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 2.2(e)) and any cash (including cash
proceeds from the sale of the Excess Shares) payable in lieu of any fractional
shares of Parent Common Stock being hereinafter referred to as the "Exchange
Fund") issuable pursuant to Section 2.1 in exchange for outstanding shares of
Company Common 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 Company Common Stock (the "Certificates")
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.1 and any cash in lieu of fractional shares of Parent
Common Stock to be issued or paid in consideration therefor upon surrender of
such certificate in accordance with Section 2.2(e) and any dividends or
distributions to which such holder is entitled pursuant to Section 2.2(c), (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 (or affidavits of loss in lieu of Certificates) to the Exchange
Agent and shall be in such form and have such other provisions as the Company
and Parent may reasonably specify) and (ii) instructions for use in surrendering
the Certificates in exchange for the Merger Consideration and any cash in lieu
of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 2.2(e) and any dividends or distributions to which such holder is
entitled pursuant to Section 2.2(c). Upon surrender of a Certificate (or
affidavits of loss in lieu of Certificates) for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required thereby, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Parent Common 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 2.2(c) and cash in
lieu of any fractional share of Parent Common Stock in accordance with Section
2.2(e), and the Certificate so surrendered shall forthwith be cancelled. In the
event of a surrender of a Certificate representing shares of Company Common
Stock which are not registered in the transfer records of the Company under the
name of the person surrendering such Certificate, a certificate representing the
proper number of shares of Parent Common Stock will be issued to a person other
than the person in whose name the Certificate so surrendered is registered if
such Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance of shares of Parent Common Stock to a
person other than the registered holder of such Certificate or establish to the
satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, 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 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 2.2(c) and cash in lieu of any fractional share of
Parent Common Stock in accordance with Section 2.2(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 Parent Common Stock with a record date at or
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock issuable hereunder
in respect thereof, and, no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(e), and all such dividends,
other distributions and cash in lieu of fractional shares of Parent Common Stock
shall be paid by Parent 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 Section 2.2(f). Subject to the
effect of applicable escheat or similar laws, following surrender of any such
Certificate there
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<PAGE> 71
shall be paid to the holder of the certificate representing whole shares of
Parent Common 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 at or after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock and the amount of any cash payable in lieu
of a fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 2.2(e) and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date at or after the Effective
Time and with a payment date subsequent to such surrender payable with respect
to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common 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 Company Common Stock
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 the Company on such shares of Company Common 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
Company Common 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.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution of Parent 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
Parent.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (A) the number of whole shares
of Parent Common Stock delivered to the Exchange Agent by Parent pursuant
to Section 2.2(a) over (B) the aggregate number of whole shares of Parent
Common Stock to be distributed to former holders of Company Common Stock
pursuant to Section 2.2(b) (such excess being herein called the "Excess
Shares"). Following the Effective Time, the Exchange Agent shall, on behalf
of the former stockholders of the Company, sell the Excess Shares at
then-prevailing prices on the New York Stock Exchange, Inc. ("NYSE"), all
in the manner provided in Section 2.2(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 reason able 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 Company Common Stock, the Exchange Agent shall hold
such proceeds in trust for such holders (the "Common Shares Trust"). 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 shall be paid by the
Surviving Corporation from the proceeds of such sales. The Exchange Agent
shall determine the portion of the Common Shares Trust to which each former
holder of Company 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 Company Common Stock is entitled
(after taking into account all shares of Company Common Stock held of
record 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 Company Common Stock are entitled.
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<PAGE> 72
(iv) Notwithstanding the provisions of Section 2.2(e)(ii) and (iii),
Parent 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 herein above contemplated, to pay each former holder of Company
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 Company Common Stock held of record at the
Effective Time by such holder) would otherwise be entitled by (B) the
closing price of the Parent Common Stock as reported on the NYSE Composite
Transaction Tape (as reported in The Wall Street Journal (National
Edition), or, if not reported therein, 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 2.2(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
Company Common Stock with respect to any fractional share interests, the
Exchange Agent shall make available such amounts to such holders of
Certificates formerly representing Company Common Stock subject to and in
accordance with the terms of Sections 2.2(b) and 2.2(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 the Surviving Corporation, upon demand,
and any holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to the Surviving Corporation for payment
of their claim for Merger Consideration, any dividends or distributions with
respect to Parent Common Stock and any cash in lieu of fractional shares of
Parent Common Stock.
(g) No Liability. None of the Company, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any shares of Parent
Common Stock, any dividends or distributions with respect thereto, any cash in
lieu of fractional shares of Parent 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 immediately prior to such date on which any Merger
Consideration, any dividends or distributions payable to the holder of such
Certificate or any cash payable to the holder of such Certificate pursuant to
this Article II would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.1(d)), any such Merger
Consideration, 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 Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(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 Parent, the
posting by such person of a bond in such reasonable amount as Parent 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 and, if applicable, any unpaid
dividends and distributions on shares of Parent Common Stock deliverable in
respect thereof and any cash in lieu of fractional shares of Parent Common
Stock, in each case due to such person pursuant to this Agreement.
SECTION 2.3 Certain Adjustments. If after the date hereof and on or prior
to the Effective Time the outstanding shares of Parent Common Stock or Company
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 Company Common Stock the same economic
effect
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<PAGE> 73
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 3.1 Representations and Warranties of the Company. Except (i) as
disclosed in the Company Filed SEC Documents (as defined in Section 3.1(g)),
(ii) with respect to matters to which Parent shall have given its consent
pursuant to Section 4.1(a), or (iii) as set forth on the Disclosure Schedule
delivered by the Company to Parent prior to the execution of this Agreement (the
"Company Disclosure Schedule") and making reference to the particular subsection
of this Agreement to which exception is being taken (regardless of whether such
subsection refers to the Company Disclosure Schedule), the Company represents
and warrants to Parent as follows (it being understood that any matter set forth
in the Company Disclosure Schedule with reference to a particular subsection of
this Agreement will be deemed to be set forth with reference to any other
subsection of this Agreement so long as the relevance of such matter to any such
other subsection is reasonably apparent):
(a) Organization, Standing and Corporate Power.
(i) Each of the Company and its significant subsidiaries (as
defined in Rule 1-02 of Regulation S-X, promulgated pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), by the
Securities and Exchange Commission (the "SEC")) ("significant
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 in good standing individually or in the aggregate would
not have a material adverse effect (as defined in Section 8.3) on the
Company. Each of the Company and its subsidiaries (as defined in Section
8.3) 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 the Company.
Section 3.1(a) of the Company Disclosure Schedule includes a complete
list of each of the subsidiaries through which the Company conducts (A)
its insurance operations (the "Company Insurance Subsidiaries"), and (B)
its finance activities (including commercial finance activities and
consumer finance activities, which consumer finance activities include
credit card operations, banking, home equity operations and consumer
financial services) (together the "Company Finance Subsidiaries").
(ii) The Company has delivered or provided to Parent prior to the
execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws, as amended to date.
(iii) In all material respects, the minute books of the Company
contain accurate records of all meetings and accurately reflect all
other actions taken by the stockholders, the Board of Directors and all
committees of the Board of Directors of the Company since January 1,
1998.
(b) Subsidiaries. (i) Section 3.1(b) of the Company Disclosure
Schedule includes all the subsidiaries of the Company which as of the date
of this Agreement are significant subsidiaries. All the outstanding shares
of capital stock of, or other equity interests in, each such significant
subsidiary (i) have been validly issued and are fully paid and
nonassessable; (ii) are owned directly or indirectly by the Company, 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
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ownership interests) that would prevent the operation by the Surviving
Corporation of such significant subsidiary's business as currently
conducted.
(c) Capital Structure. The authorized capital stock of the Company
consists of 1,150,000,000 shares of Company Common Stock, 144,118,820
shares of Class B Common Stock, $.01 par value ("Company Class B Common
Stock") and 50,000,000 shares of preferred stock, par value $.01 per share,
of the Company ("Company Authorized Preferred Stock"), of which 734,500
shares have been designated as Company Series A Junior Participating
Preferred Stock ("Company Preferred Stock"). At the close of business on
August 31, 2000: (i) 728,916,299 shares of Company Common Stock were issued
and outstanding; (ii) 1,042,648 shares of Company Common Stock were held by
the Company in its treasury (such shares, "Company Class A Common Treasury
Stock") and no shares of Company Common Stock were held by subsidiaries of
the Company; (iii) no shares of Company Class B Common Stock were issued
and outstanding; (iv) no shares of Company Class B Common Stock were held
by the Company in its treasury (such shares, "Company Class B Common
Treasury Stock") and no shares of Company Class B Common Stock were held by
subsidiaries of the Company; (v) no shares of Company Preferred Stock were
issued and outstanding and 734,500 shares of Company A Preferred Stock were
reserved for issuance pursuant to the Rights Agreement; (vi) no shares of
Company Preferred Stock were held by the Company in its treasury or were
held by any subsidiary of the Company; (vii) 100,000,000 shares of Company
Common Stock were reserved for issuance pursuant to the Company's Incentive
Compensation Plan (the "Company Stock Plan"), of which 25,231,589 shares
are subject to outstanding employee and non-employee director stock options
("Company Stock Options"), restricted Company Common Stock or other rights
to purchase or receive Company Common Stock granted under the Company Stock
Plan (collectively with Company Stock Options, "Company Awards"); and
(viii) other than as set forth above, no other shares of Company Authorized
Preferred Stock have been designated or issued. All outstanding shares of
capital stock of the Company are, and all shares thereof 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 3.1(c) and except for changes since August 31, 2000
resulting from the issuance of shares of Company Common Stock pursuant to
Company Awards and other rights referred to above in this Section 3.1(c),
(x) there are not issued, reserved for issuance or outstanding (A) any
shares of capital stock or voting securities or other ownership interests
of the Company, (B) any securities of the Company or any Company subsidiary
convertible into or exchangeable or exercisable for shares of capital stock
or voting securities or other ownership interests of the Company, or (C)
any warrants, calls, options or, except for commitments entered into in
connection with the $515,500,000 aggregate principal amount Redeemable
Hybrid Income Overnight Shares due October 16, 2002 ("RHINOs"), other
rights to acquire from the Company or any Company subsidiary, or any
obligation of the Company or any Company subsidiary to issue, any capital
stock, voting securities or other ownership interests in, or securities
convertible into or exchangeable or exercisable for, capital stock or
voting securities or other ownership interests of the Company, and (y)
there are no outstanding obligations of the Company or any Company
subsidiary to repurchase, redeem or otherwise acquire any such securities
or, except for commitments entered into in connection with the RHINOs, to
issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities. There are no outstanding (A) securities of the Company or any
Company subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or voting securities or other ownership interests
in any Company subsidiary, (B) warrants, calls, options or other rights to
acquire from the Company or any Company subsidiary, or any obligation of
the Company or any Company 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 other ownership interests in, any Company subsidiary or (C)
obligations of the Company or any Company subsidiary to repurchase, redeem
or otherwise acquire any such outstanding securities of Company
subsidiaries or to issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities. To the Company's knowledge, neither the
Company nor any Company subsidiary is a party to any agreement restricting
the transfer of, relating to the voting of, requiring registration of, or
granting any preemptive or, except as provided by the terms of
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Company Stock Options, antidilutive rights with respect to, any securities
of the type referred to in the two preceding sentences.
(d) Authority; Noncontravention. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject, in
the case of the Merger, to the Company Stockholder Approval (as defined in
Section 3.1(l)) to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on
the part of the Company, subject, in the case of the Merger, to the Company
Stockholder Approval. This Agreement has been duly executed and delivered
by the Company and, assuming the due authorization, execution and delivery
by Parent, constitutes the legal, valid and binding obligation of the
Company, enforce able against the Company in accordance with its terms. The
execution and delivery of this Agreement do 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 the Company or any of its
subsidiaries under, (i) the certificate of incorporation or by-laws of the
Company, (ii) the certificate of incorporation or by-laws or the comparable
organizational documents of any of its subsidiaries, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license or similar
authorization applicable to the Company or any of its subsidiaries or their
respective properties or assets or (iv) 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
the Company or any of its subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii), (iii) and (iv), any such
conflicts, violations, defaults, rights, losses or Liens that individually
or in the aggregate would not (x) have a material adverse effect on the
Company or (y) reasonably be expected to impair or delay the ability of the
Company to perform its obligations under this Agreement. To the knowledge
of the Company, 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 self-regulatory agency, commission or authority (a
"Governmental Entity") is required by or with respect to the Company or any
of its subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for (1) the filing of a
pre-merger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); (2) the filing with the SEC of (A) a proxy statement relating to the
Company Stockholders Meeting (as defined in Section 5.1(b)) (such proxy
statement, as amended or supplemented from time to time, the "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 by this Agreement; (3) the filing of the
Certificate of Merger with the Secretary of State of Delaware and such
filings with Governmental Entities to satisfy the applicable requirements
of the laws of states in which the Company and its subsidiaries are
qualified or licensed to do business or state securities or "blue sky"
laws; (4) such filings with and consents and approvals of the Commissioners
of Insurance or similar regulatory authorities having jurisdiction over the
insurance business; (5) filings in respect of, and approvals and
authorizations of, any Governmental Entity having jurisdiction over the
consumer lending, banking, insurance or other financial services
businesses; and (6) 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 the Company or (y)
reasonably be expected to materially impair or delay the ability of the
Company to perform its obligations under this Agreement.
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(e) Company Documents; Undisclosed Liabilities.
(i) Since January 1, 1997, the Company and its subsidiaries have
filed all required reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated
therein) with the SEC ("Company SEC Documents"). As of their respective
dates, the Company 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 Company SEC Documents, and no Company SEC Document
when filed (as amended and restated and as supplemented by subsequently
filed Company SEC Documents) 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. The
financial statements of the Company and its subsidiaries included in
Company SEC Documents complied 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 GAAP
(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 the Company
and its consolidated subsidiaries, or the appropriate subsidiary of the
Company and such subsidiary's consolidated subsidiaries, as the case may
be, 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 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 the Company
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 the Company. Section 3.1(e) of the Company Disclosure
Schedule identifies each subsidiary of the Company that is required to
file Company SEC Documents with the SEC.
(ii) The Company has made available to Parent true and complete
copies of the annual and quarterly statements of each of the Company
Insurance Subsidiaries as filed with the applicable insurance regulatory
authorities for the years ended December 31, 1999 and the quarterly
period ended March 31, 2000 (collectively, the "Company SAP
Statements"). Except as would not have a material adverse effect on the
Company, the Company SAP Statements were prepared in conformity with
statutory accounting practices prescribed or permitted by the applicable
insurance regulatory authorities consistently applied ("SAP") for the
periods covered thereby and (as may have been amended and restated or
supplemented by subsequently filed Company SAP statements) present
fairly the statutory financial position of such Company Insurance
Subsidiaries as at the respective dates thereof and the results of
operations of such subsidiaries for the respective periods then ended.
Except as would not have a material adverse effect on the Company, the
Company SAP Statements complied with all applicable Insurance Laws (as
defined in Section 3.1(h)) when filed, and, to the knowledge of the
Company, no deficiency has been asserted with respect to any Company SAP
Statements by the applicable insurance regulatory body or any other
governmental agency or body. The annual statutory balance sheets and
income statements included in the Company SAP Statements have been
audited, and the Company has made available to Parent true and complete
copies of all audit opinions related thereto. The Company has made
available to Parent true and complete copies of all examination reports
of insurance departments and any insurance regulatory agencies since
January 1, 1999 relating to the Company Insurance Subsidiaries.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with
the SEC by Parent in connection with the issuance of Parent Common 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
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necessary to make the statements therein not misleading or (ii) the Proxy
Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company 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 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 the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent specifically for inclusion
or incorporation by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby and except as permitted by Section 4.1(a), or as disclosed in any
Company SEC Document filed and publicly available prior to the date hereof
(as amended to the date hereof, "Company Filed SEC Documents") since
January 1, 2000, the Company and its subsidiaries have conducted their
business only in the ordinary course, and there has not been (i) any
material adverse change in the Company, including, but not limited to, any
material adverse change arising from or relating to fraudulent or
unauthorized activity, (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property)
with respect to any of the Company's capital stock, other than regular
quarterly cash dividends on the Company Common Stock and dividends payable
on the Company Preferred Stock in accordance with their terms, (iii) any
split, combination or reclassification of any of the Company'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 the
Company's capital stock, except for issuances of Company Common Stock upon
the exercise of Company Stock Options, in each case awarded prior to the
date hereof in accordance with their present terms, (iv) prior to the date
hereof (A) any granting by the Company or any of its subsidiaries to any
current or former director, executive officer or other key employee of the
Company or its subsidiaries of any increase in compensation, bonus or other
benefits, except for increases in the ordinary course of business, (B) any
granting by the Company 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, or (C) any entry by the Company 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, (v) except insofar as may have been disclosed in Company
Filed SEC Documents or required by a change in GAAP or SAP, any material
change in accounting methods (or underlying assumptions), principles or
practices by the Company affecting its assets, liabilities or business,
including without limitation, any reserving, renewal or residual method,
practice or policy, (vi) any tax election by the Company or its
subsidiaries or any settlement or compromise of any income tax liability by
the Company or its subsidiaries, except as would not be required to be
disclosed in the Company SEC Documents, (vii) any material change in
actuarial, pricing, or investment policies, (viii) any material insurance
transaction other than in the ordinary course of business consistent with
past practice or (ix) any agreement or commitment (contingent or otherwise)
to do any of the foregoing.
(h) Compliance with Applicable Laws; Litigation.
(i) The Company, 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 the Company and its subsidiaries (the "Company Permits"),
except where the failure to have any such Company Permits individually
or in the aggregate would not have a material adverse effect on the
Company. The Company and its subsidiaries are in compliance in all
respects with the terms of the Company 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 the Company. Except as disclosed in the
Company Filed SEC Documents, no action, demand, requirement or
investigation by any Govern mental Entity and no suit, action,
proceeding or arbitration by any person or Governmental Entity, in each
case with
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respect to the Company or any of its subsidiaries or any of their
respective properties is pending or, to the knowledge of the Company,
threatened, other than, in each case, those the outcome of which
individually or in the aggregate would not (i) have a material adverse
effect on the Company or (ii) reasonably be expected to impair the
ability of the Company to perform its obligations under this Agreement
or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
(ii) The business and operations of the Company Insurance
Subsidiaries have been conducted in compliance in all respects with all
applicable statutes, laws and regulations regulating the business of
insurance and all applicable orders and directives of insurance
regulatory authorities and market conduct recommendations resulting from
market conduct examinations of insurance regulatory authorities
(collectively, "Insurance Laws"), except where the failure so to comply
individually or in the aggregate would not have a material adverse
effect on the Company. Notwithstanding the generality of the foregoing,
except where the failure to do so would not, individually or in the
aggregate, have a material adverse effect on the Company, each Company
Insurance Subsidiary and, to the knowledge of the Company, its agents
have marketed, sold and issued insurance products in compliance, in all
respects, with Insurance Laws applicable to the business of such Company
Insurance Subsidiary and in the respective jurisdictions in which such
products have been sold, including, without limitation, in compliance
with (i) all applicable prohibitions against "redlining" or withdrawal
of business lines, (ii) all applicable requirements relating to the
disclosure of the nature of insurance products as policies of insurance
and (iii) all applicable requirements relating to insurance product
projections and illustrations. In addition, (i)'there is no pending or,
to the knowledge of the Company, threatened charge by any insurance
regulatory authority that any of the Company Insurance Subsidiaries has
violated, nor any pending or, to the knowledge of the Company,
threatened investigation by any insurance regulatory authority with
respect to possible violations of, any applicable Insurance Laws where
such violations would, individually or in the aggregate, have a material
adverse effect on the Company; and (ii) the Company Insurance
Subsidiaries have filed and will file all notices and reports required
to be filed with any insurance regulatory authority, except for such
notices and reports as to which the failure to file would have a
material adverse effect on the Company.
(iii) Except as otherwise applicable to similarly situated
companies generally, neither the Company 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, except as would not have a material adverse effect on the Company,
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 respect the conduct of its
business or, except as would not have a material adverse effect on the
Company, that in any manner relates to its capital adequacy, its
policies, its management or its business (each, a "Company Regulatory
Agreement"), nor has the Company or any of its subsidiaries or
affiliates (as defined in Section 8.3) (A) been advised since January 1,
2000 by any Governmental Entity that it is considering issuing or
requesting any such Company Regulatory Agreement or (B) have knowledge
of any pending or threatened regulatory investigation.
(iv) Each of the Company's insured depository institution
subsidiaries is "well-capitalized" (as that term is defined at 12 C.F.R.
225.2(r)(2)(i)) and "well managed" (as that term is defined at 12 C.F.R.
225.81(c)), and each institution's examination rating under the
Community Reinvestment Act of 1977 is satisfactory or outstanding.
(v) The business and operations of the Company and the Company
Finance Subsidiaries have been conducted in compliance in all material
respects with all applicable statutes and regulations regulating the
business of consumer lending, including state usury laws, the Truth in
Lending Act, the Real Estate Settlement Procedures Act, the Consumer
Credit Protection Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Homeowners Ownership and Equity Protection Act, the
Fair Debt Collections Act and other federal, state, local and foreign
laws regulating lending
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("Finance Laws"), and have complied in all material respects with all
applicable collection practices in seeking payment under any loan or
credit extension of such subsidiaries. In addition, there is no pending
or, to the knowledge of the Company, threatened charge by any
Governmental Entity that any of the Company Finance Subsidiaries has
violated, nor any pending or, to the knowledge of the Company,
threatened investigation by any Governmental Entity with respect to
possible violations of, any applicable Finance Laws where such
violations would, individually or in the aggregate, have a material
adverse effect on the Company.
(vi) Except for filings with the SEC, which are the subject of
Section 3.1(e)(i) and filings relating to insurance matters, which are
the subject of Section 3.1(e)(ii), the Company and each of its
subsidiaries have timely filed all regulatory reports, schedules, forms,
registrations and other documents, together with any amendments required
to be made with respect thereto, that they were required to file since
January 1, 2000 with (A) any Governmental Entity, and have timely paid
all taxes, fees and assessments due and payable in connection therewith,
except where the failure to make such payments and filings individually
or in the aggregate would not have a material adverse effect on the
Company. There is no material unresolved violation or exception by any
of such Governmental Entities with respect to any report or statement
relating to any examinations of the Company or any of its subsidiaries.
(i) Absence of Changes in Benefit Plans. Section 3.1(i) of the
Company Disclosure Schedule contains a true and complete list of (i) all
severance and employment agreements of the Company with directors or
executive officers or key employees, other than severance and employment
agreements the remaining cash obligations under which do not exceed $2
million in the aggregate, (ii) all severance programs, policies and
practices of each of the Company and each of its subsidiaries, and (iii)
all plans, agreements or arrangements of the Company and each of its
subsidiaries relating to its current or former employees, officers or
directors which contain change in control provisions (all such agreements,
programs, policies, practices, plans and arrangements being hereinafter
referred to as "Company Benefit Arrangements"). For purposes of this
Agreement, "Company Benefit Plan" shall mean each collective bargaining
agreement, employment agreement, consulting agreement, severance 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 the Company or any of its wholly owned subsidiaries, including but not
limited to any Company Benefit Arrangements. Since January 1, 2000, there
has not been any material change in any actuarial or other assumptions used
to calculate funding obligations with respect to any Company pension plans
or post-retirement benefit plans, or any change in the manner in which
contributions to any Company pension plans or post-retirement benefit plans
are made or in the basis on which such contributions are determined which,
individually or in the aggregate, would result in a material increase of
the Company's or its subsidiaries' liabilities thereunder.
(j) ERISA Compliance.
(i) With respect to Company Benefit Plans, no event has occurred
and there exists no condition or set of circumstances, in connection
with which the Company or any of its subsidiaries could be subject to
any liability that individually or in the aggregate would have a
material adverse effect on the Company under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Code or any other
applicable law.
(ii) Except as any of the following either individually or in the
aggregate would not have a material adverse effect on the Company, (x)
neither the Company nor any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with the Company
would be deemed to be a "single employer" within the meaning of Section
4001(b) of ERISA, has incurred any unsatisfied liability under Title IV
of ERISA and no condition exists that could reasonably be expected to
present a risk to the Company or any ERISA Affiliate of the Company of
incurring any such liability (other than liability for premiums to the
Pension Benefit Guaranty Corporation arising
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in the ordinary course), and (y) no Company 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.
(iii) Section 3.1(j)(iii) of the Company Disclosure Schedule
contains a true and complete list of each Company Benefit Plan that is
subject to Title IV of ERISA and indicates each such plan that is a
"multiemployer plan" within the meaning of Section 3 (37) of ERISA.
(iv) Subject to Section 5.19, each Company Benefit Plan which is a
welfare benefit plan as defined in Section 3(1) of ERISA (including any
such plan covering former employees of the Company or any subsidiary of
the Company) may be amended or terminated by the Surviving Corporation
on or at any time after the Closing Date.
(v) As of the date of this Agreement, neither the Company nor any
of its subsidiaries is a party to, or obligated under, any collective
bargaining or other labor union contract or arrangement applicable to
persons employed by the Company or any of its subsidiaries and no
collective bargaining agreement or other labor union contract or
arrangement is being negotiated by the Company or any of its
subsidiaries. As of the date of this Agreement, there is no labor
dispute, strike or work stoppage against the Company or any of its
subsidiaries pending or, to the knowledge of the Company, threatened
which may interfere with the respective business activities of the
Company or any of its subsidiaries, except where such dispute, strike or
work stoppage individually or in the aggregate would not have a material
adverse effect on the Company. As of the date of this Agreement, to the
knowledge of the Company, none of the Company, any of its subsidiaries
or any of their respective representatives or employees has committed
any unfair labor practice or other labor law violation in connection
with the operation of the respective businesses of the Company or any of
its subsidiaries, and there is no charge or complaint against the
Company or any of its subsidiaries before the National Labor Relations
Board or any comparable Governmental Entity pending or threatened in
writing, except for any occurrence that individually or in the aggregate
would not have a material adverse effect on the Company.
(vi) The Company has delivered to Parent (A) a list showing (1) the
number of shares of restricted common stock outstanding under the
Incentive Compensation Plan (the "ICP") the vesting of which is
accelerated by, and (2) the number of shares subject to, and the
exercise price of, each Company Stock Option the exercisability of which
is accelerated as a result of, the entering into of this Agreement, the
consummation of the transactions contemplated by this Agreement or any
filing by the Company with the SEC in respect thereof, and (B) a good
faith estimate of the amounts that may become payable under the Long
Term Performance Plan (the "LTPP"), the Shareholder Interest Bonus Plan
(the "SIB") and the employment agreements entered into by the Company
which are scheduled pursuant to Section 3.1(i)(i) of the Company
Disclosure Schedule (the "Employment Agreements") by virtue of entering
into of this Agreement, the consummation of the transactions
contemplated by this Agreement or any filing by the Company with the SEC
in respect thereof. Neither the entering into of this Agreement, the
consummation of the transactions contemplated by this Agreement or any
filing by the Company with the SEC in respect thereof will, either alone
or in combination with another event undertaken by the Company or any of
its subsidiaries prior to the date hereof, (A) entitle any current or
former employee or officer of the Company or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, (B) accelerate the time of
payment, vesting, or lapse of restrictions of or increase the amount of
compensation due, or result in a lapse of restrictions any such employee
or officer or (C) constitute a "change in control" under any Company
Benefit Plan except, in each case, pursuant to the LTPP, the SIB, the
Excess Benefit Plan, the Supplemental Retirement Income Plan, the
Supplemental Executive Welfare Plan and the Employment Agreements,
previously disclosed to Parent.
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(k) Taxes.
(i) Except as would not have a material adverse effect on the
Company, (A) each of the Company and its subsidiaries has filed all tax
returns and reports required to be filed by it and (B) all such tax
returns and reports are complete and correct in all respects, or
requests for extensions to file such returns or reports have been timely
filed, granted and have not expired. The Company and each of its
subsidiaries has paid (or the Company has paid on its behalf) all taxes
(as defined herein) due and payable, except as would not have a material
adverse effect on the Company, and the most recent financial statements
contained in Company Filed SEC Documents reflect an adequate reserve in
accordance with GAAP for all taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
(ii) No material deficiencies for any taxes have been proposed,
asserted or assessed against the Company or any of its subsidiaries that
are not adequately reserved for. The federal income tax returns of the
Company and each of its subsidiaries for tax years through 1986 have
closed by virtue of the applicable statute of limitations.
(iii) Neither the Company 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 and
other taxes or similar governmental charges, including any interest,
penalties or additions with respect thereto, (y) liability for the
payment of any amounts of the type described in (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 at the Company
Stockholders Meeting (the "Company Stockholder Approval") of a majority of
the number of outstanding shares of Company Common Stock to approve and
adopt this Agreement is the only vote of the holders of any class or series
of the Company's capital stock necessary to approve and adopt this
Agreement and the transactions contemplated hereby, including the Merger.
(m) State Takeover Statutes. To the knowledge of the Company, no
state takeover statute is applicable to the Merger or the other
transactions contemplated hereby.
(n) Accounting Matters. The Company 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, the Company, based
on advice from its independent public accountants, believes that the Merger
will qualify for "pooling of interests" accounting.
(o) Brokers. Except for Goldman, Sachs & Co., 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 the Company.
(p) Ownership of Parent Capital Stock. As of the date hereof, neither
the Company nor, to its knowledge without independent investigation, any of
its affiliates who are not directors or executive officers of the Company,
(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 Parent.
(q) Intellectual Property. Except as would not have a material
adverse effect on the Company, the Company and its subsidiaries own or have
a valid license to use all trade marks, service marks, trade names,
Internet domain names, copyrights, computer programs, software (whether in
source code or
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object code form and documentation related thereto), databases, inventions,
know-how and trade secrets (including any registrations or applications for
registration of any of the foregoing) (collectively, the "Company
Intellectual Property") necessary to carry on its business substantially as
currently conducted and except as would not have a material adverse effect
on the Company, the consummation of the Merger and the other transactions
contemplated hereby will not result in the loss or impairment of any such
rights. Neither the Company nor any such subsidiary has received any
written notice of infringement of or conflict with, and, to the Company's
knowledge, there are no infringements of or conflicts with, the rights of
others with respect to the use of any Company Intellectual Property that,
individually or in the aggregate, in either such case, would have a
material adverse effect on the Company. Except as would not have a material
adverse effect on the Company, the Company is not a party to or otherwise
bound by any settlement agreement, court or administrative judgment or
similar obligation that limits or restricts, or that upon the consummation
of the Merger would limit or restrict, the Company's ownership or rights to
use the Company Intellectual Property.
(r) Certain Contracts. Except as set forth in the Company Filed SEC
Documents or as permitted pursuant to Section 4.1(a), neither the Company
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 $250 million individually
or $1 billion in the aggregate, other than such agreements relating to
indebtedness incurred in the ordinary course of 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 the Company and its subsidiaries,
taken as a whole, is or would be conducted (the agreements, contracts and
obligations specified in clauses (ii) and (iii) above, collectively the
"Company Material Contracts").
(s) Environmental Liability. Except as set forth in the Company Filed
SEC Documents and except as would not have a material adverse effect on the
Company, there are no legal, administrative, arbitral or other proceedings,
claims, actions, causes of action, private environmental investigations or
rededication activities or governmental investigations of any nature
(collectively, "Environmental Claims") or any conditions or circumstances
that could form the basis of any Environmental Claim seeking to impose on
the Company or any of its subsidiaries, or that reasonably could be
expected to result in the imposition on the Company or any of its
subsidiaries of, any liability or obligation arising under applicable
common law standards relating to pollution or protection of the
environment, human health or safety, or under any local, state or federal
environmental statute, regulation, ordinance, decree, judgment or order
relating to pollution or protection of the environment, human health or
safety including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
(collectively, the "Environmental Laws"), pending or, to the knowledge of
the Company, threatened, against the Company or any of its subsidiaries as
a result of the transactions contemplated by this Agreement.
(t) Opinion of Financial Advisor. The Company has received the
opinion of Goldman, Sachs & Co., dated the date hereof, to the effect that,
as of such date, the Exchange Ratio is fair from a financial point of view
to the stockholders of the Company.
(u) Insurance Matters.
(i) To the extent required under Insurance Laws and except as would
not have a material adverse effect on the Company, all policies,
binders, slips, certificates, annuity contracts and participation
agreements and other agreements of insurance (including all
applications, supplements, endorsements, riders and ancillary agreements
in connection therewith), whether individual or group, that are issued
by the Company Insurance Subsidiaries (the "Company Insurance
Contracts") and any and all marketing materials, are on forms approved
by applicable insurance regulatory authorities or which have been filed
and not objected to by such authorities within the period provided for
objection, and such forms comply in all respects with the Insurance Laws
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applicable thereto and, as to premium rates established by the Company
or any Company Insurance Subsidiary which are required to be filed with
or approved, the premiums charged conform thereto in all respects, and
such premiums comply in all material respects with the Insurance Laws
applicable thereto.
(ii) All reinsurance and coinsurance treaties or agreements,
including retrocessional agreements, to which any Company Insurance
Subsidiary is a party or under which any Company Insurance Subsidiary
has any existing rights, obligations or liabilities are in full force
and effect, except for such treaties or agreements the failure to be in
full force and effect of which would not, individually or in the
aggregate, have a material adverse effect on the Company. Neither any
Company Insurance Subsidiary, nor, to the knowledge of the Company, any
other party to a reinsurance or coinsurance treaty or agreement to which
any Company Insurance Subsidiary is a party, is in default in any
material respect as to any provision thereof, and no such agreement
contains any provision providing that the other party thereto may
terminate such agreement, or reduce any reinsurance or retrocessional
coverage of any Company Insurance Subsidiary thereunder, by reason of
the transactions contemplated by this Agreement. Neither the Company nor
any Company Insurance Subsidiary has received any notice to the effect
that any other party to any such reinsurance and coinsurance treaty or
agreement that is otherwise terminable prior to the expiration thereof,
will be terminated by such party as a result of the transactions
contemplated by this Agreement. Neither the Company nor any Company
Insurance Subsidiary has received any notice to the effect that the
financial condition of any other party to any such agreement is impaired
with the result that a default thereunder or other failure to comply
with the terms thereof may reasonably be anticipated, whether or not
such default or non-compliance may be cured by the operation of any
offset clause in such agreement. Each Company Insurer Subsidiary was
entitled to take credit in its most recent Company SAP Statement for
that portion of its ceded liabilities under each such reinsurance or
coinsurance treaty as to which credit was taken in such Company SAP
Statement. No insurer or reinsurer or group of affiliated insurers or
reinsurers accounted for the direction to the Company Insurance
Subsidiaries or the ceding by any Company Insurance Subsidiaries of
insurance or reinsurance business in an aggregate amount equal to two
percent or more of the consolidated gross premium income of the Company
Insurance Subsidiaries for the year ended December 31, 1999.
(iii) Prior to the date hereof, the Company has delivered or made
available to Parent a true and complete copy of any actuarial reports
prepared by actuaries, independent or otherwise, with respect to any
Company Insurance Subsidiary since December 31, 1997, and all
attachments, addenda, supplements and modifications thereto (the
"Company Actuarial Analyses"). The information and data furnished by the
Company or any Company Insurance Subsidiary to its independent actuaries
in connection with the preparation of the Company Actuarial Analyses
were complete and accurate in all material respects. Furthermore, to the
knowledge of the Company, each Company Actuarial Analysis was based upon
an accurate inventory of policies in force for the Company Insurance
Subsidiaries, as the case may be, at the relevant time of preparation,
was prepared using appropriate modeling procedures accurately applied
and in conformity with generally accepted actuarial standards
consistently applied, and the projections contained therein were
properly prepared in accordance with the assumptions stated therein.
(iv) Each material contract between a Company Insurance Subsidiary
and a producer of business therefor ("Producer Agreements") is valid,
binding and in full force and effect in accordance with its terms, and,
to the knowledge of the Company, none of the parties thereto is in
default with respect to any such Producer Agreement, other than for such
failures to be valid, binding and in full force and effect or such
defaults which would not, individually or in the aggregate, have a
material adverse effect on the Company. To the knowledge of the Company,
no party to any Producer Agreement has given notice to any Company
Insurance Subsidiary that it intends to terminate or cancel any Producer
Agreement as a result of the transactions contemplated by this
Agreement. Since January 1, 1998, to the knowledge of the Company, at
the time any Company
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Insurance Subsidiary paid commissions to any producer in connection with
the sale of insurance or annuity contracts, each such producer was duly
licensed if required under applicable Insurance Law in the particular
jurisdiction in which such producer sold such insurance or annuity
contracts for the Company Insurance Subsidiary, other than in immaterial
respects.
(v) Liabilities and Reserves.
(i) All reserves and other liabilities established or reflected on
the Company SAP Statements of each Company Insurance Subsidiary for
insurance policy benefits, losses, claims and similar purposes were, as
of the respective dates of such Company SAP Statements, were determined
in all material respects in accordance with generally accepted actuarial
standards and principles consistently applied, were fairly stated in all
material respects in accordance with SAP and are based on actuarial
assumptions that are in accordance with those called for by the
provisions of the related insurance, annuity, reinsurance, coinsurance
and other applicable agreements of the relevant Company Insurance
Subsidiary. The admitted assets and risk based capital of each Company
Insurance Subsidiary as determined under applicable Insurance Laws are
in an amount at least equal to the minimum amounts required by
applicable Insurance Laws.
(ii) Except for regular periodic assessments in the ordinary course
of business or assessments based on developments which are publicly
known within the insurance industry, to the knowledge of the Company, no
claim or assessment is pending or threatened against any Company
Insurance Subsidiary by any state insurance guaranty association in
connection with such association's fund relating to insolvent insurers
which if determined adversely, would, individually or in the aggregate,
have a material adverse effect on the Company.
(w) Ineligible Persons. To the knowledge of those individuals
identified on Schedule 3.1(d), without independent investigation, neither
the Company or any of its controlled affiliates, nor any "affiliated
person" (as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act")) of the Company or any of its controlled
affiliates, is ineligible pursuant to Section 9(a) or 9(b) of the
Investment Company Act to act as an investment advisor (or in any other
capacity contemplated by the Investment Company Act) to a registered
investment company. To the knowledge of those individuals identified on
Schedule 3.1(d), without independent investigation, neither the Company or
any of its controlled affiliates nor, to the knowledge of the Company, any
"person associated with an investment adviser" (as defined in the
Investment Advisers Act) of the Company or any of its controlled
affiliates, is ineligible pursuant to Section 203 of the Investment
Advisers Act to act as an investment advisor or as an associated person to
a registered investment adviser. To the knowledge of those individuals
identified on Schedule 3.1(d), without independent investigation, neither
the Company or any of its controlled affiliates, nor any "associated person
of a broker or dealer" (as defined in the Exchange Act) of the Company or
any of its controlled affiliates, is ineligible pursuant to Section 15(b)
of the Exchange Act to act as a broker-dealer or as an associated person to
a registered broker-dealer.
(x) Rights Agreement. As of the date of this Agreement, the Company
or the Board of Directors of the Company, as the case may be, has (i) taken
all necessary actions so that the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not
result in a "Distribution Date" (as defined in the Rights Agreement) and
(ii) amended the Rights Agreement to render it inapplicable to this
Agreement and the transactions contemplated hereby.
(y) Derivative Transactions.
(i) All Derivative Transactions (as defined below) entered into by
the Company or any of its subsidiaries were entered into in all material
respects in accordance with applicable rules, regulations and policies
of any regulatory authority, and in accordance with the investment,
securities, commodities, risk management and other policies, practices
and procedures employed by the Company and its subsidiaries, and were
entered into with counterparties believed at the time to be financially
responsible and able to understand (either alone or in consultation with
their advisers) and to bear the risks of such Derivative Transactions.
The Company and each of its subsidiaries have
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duly performed in all material respects all of their obligations under
the Derivative Transactions to the extent that such obligations to
perform have accrued, and, to the Company's knowledge, there are no
material breaches, violations or defaults or allegations or assertions
of such by any party thereunder.
(ii) For purposes of this Section 3.1(y), "Derivative Transactions"
means any swap transaction, option, warrant, forward purchase or sale
transaction, futures transaction, cap transaction, floor transaction or
collar transaction relating to one or more currencies, commodities,
bonds, equity securities, loans, interest rates, catastrophe events,
weather-related events, credit-related events or conditions or any
indexes, or any other similar transaction (including any option with
respect to any of these transactions) or combination of any of these
transactions, including collateralized mortgage obligations or other
similar instruments or any debt or equity instruments evidencing or
embedding any such types of transactions, and any related credit
support, collateral or other similar arrangements related to such
transactions.
SECTION 3.2 Representations and Warranties of Parent. Except (i) as
disclosed in the Parent Filed SEC Documents (as defined in Section 3.2(g)), (ii)
with respect to matters to which the Company shall have given its consent
pursuant to Section 4.1(b) or (iii) as set forth on the Disclosure Schedule
delivered by Parent to the Company prior to the execution of this Agreement (the
"Parent Disclosure Schedule") and making reference to the particular subsection
of this Agreement to which exception is being taken (regardless of whether such
subsection refers to the Parent Disclosure Schedule), Parent represents and
warrants to the Company as follows (it being understood that any matter set
forth in the Parent Disclosure Schedule with reference to a particular
subsection of this Agreement will be deemed to be set forth with reference to
any other subsection of this Agreement so long as the relevance of such matter
to any such other subsection is reasonably apparent):
(a) Organization, Standing and Corporate Power.
(i) Each of Parent and its significant 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 duly
organized, validly existing and in good standing, individually or in the
aggregate, would not have a material adverse effect on Parent. Each of
Parent 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 Parent.
(ii) Parent has delivered or provided to the Company prior to the
execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws, as amended to date.
(b) Subsidiaries. Exhibit 21 to Parent's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 includes all the significant
subsidiaries of Parent as of the date of this Agreement. All the
outstanding shares of capital stock of, or other equity interests in, each
such significant subsidiary (i) have been validly issued and are fully paid
and nonassessable; (ii) are owned directly or indirectly by Parent, 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) that would prevent the
operation by the Surviving Corporation of such significant subsidiary's
business as currently conducted.
(c) Capital Structure. The authorized capital stock of Parent
consists of 10,000,000,000 shares of Parent Common Stock and 30,000,000
shares of preferred stock, par value $1.00 per share, of Parent ("Parent
Authorized Preferred Stock"), of which 1,600,000 shares have been
designated as 6.365%
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Cumulative Preferred Stock, Series F ("Parent Series F Preferred Stock"),
800,000 shares have been designated as 6.213% Cumulative Preferred Stock,
Series G ("Parent Series G Preferred Stock"), 800,000 shares have been
designated as 6.231% Cumulative Preferred Stock, Series H ("Parent Series H
Preferred Stock"), 500,000 shares have been designated as 8.40% Cumulative
Preferred Stock, Series K ("Parent Series K Preferred Stock"), 690,000
shares have been designated as 9.50% Cumulative Preferred Stock, Series L
("Parent Series L Preferred Stock"), 800,000 shares have been designated as
5.864% Cumulative Preferred Stock, Series M ("Parent Series M Preferred
Stock"), 700,000 shares have been designated as Adjustable Rate Cumulative
Preferred Stock, Series Q ("Parent Series Q Preferred Stock"), 400,000
shares have been designated as Adjustable Rate Cumulative Preferred Stock,
Series R ("Parent Series R Preferred Stock"), 500,000 shares have been
designated as 7 3/4% Cumulative Preferred Stock, Series U ("Parent Series U
Preferred Stock"), 250,000 shares have been designated as Fixed/Adjustable
Rate Cumulative Preferred Stock, Series V ("Parent Series V Preferred
Stock"), 5,000 shares have been designated as Cumulative Adjustable Rate
Preferred Stock, Series Y ("Parent Series Y Preferred Stock") and 987
shares have been designated as 5.321% Cumulative Preferred Stock, Series YY
("Parent Series YY Preferred Stock"). At the close of business on August 7,
2000 and adjusted to give effect to the four-for-three Parent Common Stock
split paid on August 25, 2000: (i) 4,557,983,532 shares of Parent Common
Stock were issued and outstanding; (ii) 258,530,410 shares of Parent Common
Stock were held by Parent in its treasury (iii) 59,582,808 shares of Parent
Common Stock were held by subsidiaries of Parent; (iv) 1,600,000 shares of
Parent Series F Preferred Stock were issued and outstanding (evidenced by
8,000,000 depositary shares, each of which represents a 1/5 interest in a
share of Parent Series F Preferred Stock); (v) 800,000 shares of Parent
Series G Preferred Stock were issued and outstanding (evidenced by
4,000,000 depositary shares, each of which represents a 1/5 interest in a
share of Parent Series G Preferred Stock); (vi) 800,000 shares of Parent
Series H Preferred Stock were issued and outstanding (evidenced by
4,000,000 depositary shares, each of which represents a 1/5 interest in a
share of Parent Series H Preferred Stock); (vii) 500,000 shares of Parent
Series K Preferred Stock were issued and outstanding (evidenced by
10,000,000 depositary shares, each of which represents a 1/20 interest in a
share of Parent Series K Preferred Stock); (viii) no shares of Parent
Series L Preferred Stock were issued and outstanding; (ix) 800,000 shares
of Parent Series M Preferred Stock were issued and outstanding (evidenced
by 4,000,000 depositary shares, each of which represents a 1/5 interest in
a share of Parent Series M Preferred Stock); (x) 700,000 shares of Parent
Series Q Preferred Stock were issued and outstanding (evidenced by
7,000,000 depositary shares, each of which represents a 1/10 interest in a
share of Parent Series Q Preferred Stock); (xi) 400,000 shares of Parent
Series R Preferred Stock were issued and outstanding (evidenced by
4,000,000 depositary shares, each of which represents a 1/10 interest in a
share of Parent Series R Preferred Stock); (xii) 500,000 shares of Parent
Series U Preferred Stock were issued and outstanding (evidenced by
5,000,000 depositary shares, each of which represents a 1/10 interest in a
share of Parent Series U Preferred Stock); (xiii) 250,000 shares of Parent
Series V Preferred Stock were issued and outstanding (evidenced by
2,500,000 depositary shares, each of which represents a 1/10 interest in a
share of Parent Series V Preferred Stock); (xiv) 5,000 shares of Parent
Series Y Preferred Stock were issued and outstanding; (xv) 987 shares of
Parent Series YY Preferred Stock were issued and outstanding; (xvi)
approximately 867 million shares of Parent Common Stock were reserved for
issuance pursuant to the stock-based plans identified in Section 3.4(c) of
the Parent Disclosure Schedule (such plans, collectively, the "Parent Stock
Plans"), of which approximately 393.5 million shares are subject to
outstanding employee stock options or other rights to purchase or receive
Parent Common Stock granted under the Parent Stock Plans (collectively,
"Parent Employee Stock Options"); (xvii) 1,116,701 shares of Parent Common
Stock are reserved for issuance pursuant to convertible securities; and
(xviii) other than as set forth above, no other shares of Parent Authorized
Preferred Stock have been designated or issued. All outstanding shares of
capital stock of Parent are, and all shares thereof which may be issued
pursuant to this Agreement or otherwise 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 3.2(c) and except
for changes since August 7, 2000 resulting from the issuance of shares of
Parent Common Stock pursuant to the Parent Stock Plans, Parent Employee
Stock Options or Parent Convertible Securities and other rights referred to
in this Section 3.2(c), as of the date hereof, (x) there are not issued,
reserved for issuance or outstanding (A) any shares of capital stock or
other
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voting securities of Parent, (B) any securities of Parent or any Parent
subsidiary convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of Parent, (C) any warrants, calls,
options or other rights to acquire from Parent or any Parent subsidiary,
and any obligation of Parent or any Parent subsidiary to issue, any capital
stock, voting securities or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of Parent or other
ownership interests of Parent, and (y) there are no outstanding obligations
of Parent or any Parent 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. As of the date hereof,
there are no outstanding (A) securities of Parent or any Parent subsidiary
convertible into or exchangeable or exercisable for shares of capital stock
or other voting securities or other ownership interests in any Parent
subsidiary, (B) warrants, calls, options or other rights to acquire from
Parent or any Parent subsidiary, and any obligation of Parent or any Parent
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 Parent subsidiary or (C) obligations of Parent or any
Parent subsidiary to repurchase, redeem or otherwise acquire any such
outstanding securities of Parent subsidiaries or to issue, deliver or sell,
or cause to be issued, delivered or sold, any such securities. To Parent's
knowledge, neither Parent nor any Parent subsidiary is a party to any
agreement restricting the transfer of, relating to the voting of, requiring
registration of, or granting any preemptive or, except as provided by the
terms of Parent Stock Plans, Parent Employee Stock Options and Parent
Convertible Securities, antidilutive rights with respect to, any securities
of the type referred to in the two preceding sentences.
(d) Authority; Noncontravention. Parent has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of
this Agreement by Parent and the consummation by Parent of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly
executed and delivered by Parent and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and
binding obligation of Parent, enforceable against Parent in accordance with
its terms. The execution and delivery of this Agreement do 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 Parent or any of its subsidiaries under, (i) the certificate of
incorporation or by-laws of Parent, (ii) the certificate of incorporation
or by-laws of the comparable organizational documents of any of its
significant subsidiaries, (iii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to
Parent or any of its subsidiaries or their respective properties or assets
or (iv) 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 Parent or any of its
subsidiaries or their respective properties or assets, other than, in the
case of clauses (ii), (iii) and (iv), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate
would not (x) have a material adverse effect on Parent or (y) reasonably be
expected to impair or delay the ability of Parent to perform its
obligations under this Agreement. To the knowledge of Parent, 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 or with respect to Parent or any of its subsidiaries in
connection with the execution and delivery of this Agreement by Parent or
the consummation by Parent of the transactions contemplated by this
Agreement, except for (1) the filing of a pre-merger notification and
report form by Parent under the HSR Act; (2) the filing with the SEC of (A)
the Form S-4 and (B) 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 by this Agreement; (3) the
filing of the Certificate of Merger with the Secretary of State of Delaware
and such filings with Governmental Entities to satisfy the applicable
requirements of the laws of states in which Parent and its subsidiaries are
qualified or licensed to do business or state securities or "blue sky"
laws; (4) such filings with and
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consents and approvals of the Commissioners of Insurance or similar
regulatory authorities having jurisdiction over the insurance business, (5)
such filings with and approvals of the NYSE and the Pacific Stock Exchange
(the "PSE") to permit the shares of Parent Common Stock to be issued in the
Merger and under the Company Stock Plan to be listed on the NYSE and PSE;
(6) filings in respect of, and approvals and authorizations of, any
Governmental Entity having jurisdiction over the consumer lending, banking,
insurance or other financial services businesses; and (7) 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 Parent or (y) reasonably be expected to materially impair
or delay he ability of Parent to perform its obligations under this
Agreement.
(e) SEC Documents; Undisclosed Liabilities. Since January 1, 1997,
Parent has filed all required reports, schedules, forms, statements and
other documents (including exhibits and all other information incorporated
therein) with the SEC (the "Parent SEC Documents"). As of their respective
dates, the Parent 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 Parent SEC Documents, and none of the Parent SEC Documents when
filed (as amended and restated and as supplemented by subsequently filed
Parent SEC Documents) 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. The financial statements of
Parent included in the Parent SEC Documents complied 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 GAAP (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 Parent 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
year-end audit adjustments). Except (i) as reflected in such financial
statements or in the notes thereto or (ii) for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby,
neither Parent 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 Parent.
(f) Information Supplied. None of the information supplied or to be
supplied by Parent 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 Proxy Statement
will, at the date it is first mailed to the Company's stockholders or at
the time of the Company 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
will comply as to form in all material respects with the requirements of
the Securities Act and the rules and regulations thereunder, except that no
representation or warranty is made by Parent with respect to statements
made or incorporated by reference therein based on information supplied by
the Company specifically for inclusion or incorporation by reference in the
Form S-4.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby or as disclosed in any Parent SEC Document filed and publicly
available prior to the date hereof (as amended to the date hereof, the
"Parent Filed SEC Documents"), and except as permitted by Section 4.1(b),
since January 1, 2000, Parent and its subsidiaries have conducted their
business only in the ordinary course, and there has not been (i) any
material adverse change in Parent, including, but not limited to, any
material adverse change arising from or relating to fraudulent or
unauthorized activity, (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property)
with respect to any of Parent's capital stock, other than regular quarterly
cash dividends on the Parent Common Stock and dividends payable on
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Parent's preferred stock in accordance with their terms, (iii) as of the
date hereof, any split, combination or reclassification of any of Parent'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
Parent's capital stock, except for issuances of Parent Common Stock upon
exercise of Parent Employee Stock Options, upon conversion of Parent
Convertible Securities or in accordance with the terms of the Parent Stock
Plans, (iv) as of the date hereof, except insofar as may have been
disclosed in Parent Filed SEC Documents or required by a change in GAAP,
any change in accounting methods, principles or practices by Parent
materially affecting its assets, liabilities or business or (v) as of the
date hereof, any tax election by Parent or its subsidiaries or any
settlement or compromise of any income tax liability by Parent or its
subsidiaries except as would not be required to be disclosed in the Parent
SEC Documents.
(h) Compliance with Applicable Laws; Litigation.
(i) Parent, 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 Parent and its subsidiaries (the "Parent Permits"), except
where the failure to have any such Parent Permits individually or in the
aggregate would not have a material adverse effect on Parent. Parent and
its subsidiaries are in compliance in all respects with the terms of the
Parent 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 Parent. As of
the date of this Agreement, except as disclosed in Parent Filed SEC
Documents, no action, demand, requirement or investigation by any
Governmental Entity and no suit, action, proceeding or arbitration by
any person or Governmental Entity, in each case with respect to Parent
or any of its subsidiaries or any of their respective properties, is
pending or, to the knowledge of Parent, threatened, other than, in each
case, those the outcome of which, individually or in the aggregate,
would not (i) have a material adverse effect on Parent or (ii)
reasonably be expected to impair the ability of Parent to perform its
obligations under this Agreement or prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
(ii) Except as otherwise applicable to similarly situated companies
generally, neither Parent 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, except
as would not have a material adverse effect on Parent, 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,
except as would not have a material adverse effect on Parent, that in
any manner relates to its capital adequacy, its policies, its management
or its business (each, a "Parent Regulatory Agreement"), nor has Parent
or any of its subsidiaries or affiliates (A) been advised since January
1, 2000 by any Governmental Entity that it is considering issuing or
requesting any such Parent Regulatory Agreement or (B) have knowledge of
any pending or threatened regulatory investigation.
(i) Absence of Changes in Benefit Plans. For purposes of this
Agreement, "Parent Benefit Plan" shall mean each collective bargaining
agreement, employment agreement, consulting agreement, severance 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 Parent or any of its wholly owned subsidiaries. Since January 1, 2000,
there has not been any material change in any actuarial or other
assumptions used to calculate funding obligations with respect to any
Parent pension plans or post-retirement benefit plans, or any change in the
manner in which contributions to any Parent pension plans or
post-retirement benefit plans are made or in the basis on which such
contributions are determined which, individually or in the aggregate, would
result in a material increase of Parent's or its subsidiaries' liabilities
thereunder.
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(j) ERISA Compliance.
(i) With respect to Parent Benefit Plans, no event has occurred and
there exists no condition or set of circumstances, in connection with
which Parent or any of its subsidiaries could be subject to any
liability that individually or in the aggregate would have a material
adverse effect on Parent under ERISA, the Code or any other applicable
law.
(ii) Except as any of the following either individually or in the
aggregate would not have a material adverse effect on Parent, (x)
neither Parent nor any trade or business, whether or not incorporated
(an "ERISA Affiliate"), which together with Parent would be deemed to be
a "single employer" within the meaning of Section 4001(b) of ERISA, has
incurred any unsatisfied liability under Title IV of ERISA in connection
with any Parent Benefit Plan and no condition exists that could
reasonably be expected to present a risk to Parent or any ERISA
Affiliate of Parent of incurring any such liability (other than
liability for premiums to the Pension Benefit Guaranty Corporation
arising in the ordinary course), and (y) no Parent 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.
(iii) Section 3.2(j)(iii) of the Parent Disclosure Schedule
contains a true and complete list of each Parent Benefit Plan that is
subject to Title IV of ERISA and indicates each such plan that is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(k) Taxes. (i) Except as would not have a material adverse effect on
Parent, (A) each of Parent and its subsidiaries has filed all tax returns
and reports required to be filed by it and (B) all such tax returns and
reports are complete and correct in all respects, or requests for
extensions to file such returns or reports have been timely filed, granted
and have not expired. Parent and each of its subsidiaries has paid (or
Parent has paid on its behalf) all taxes due and payable, except as would
not have a material adverse effect on Parent, and the most recent financial
statements contained in the Parent Filed SEC Documents reflect an adequate
reserve in accordance with GAAP for all taxes payable by Parent and its
subsidiaries for all taxable periods and portions thereof accrued through
the date of such financial statements.
(ii) No material deficiencies for any taxes have been proposed,
asserted or assessed against Parent or any of its subsidiaries that are
not adequately reserved for. The federal income tax returns of Parent
and each of its subsidiaries for tax years identified in Section
3.2(k)(ii) of the Parent Disclosure Schedule have closed by virtue of
the applicable statute of limitations.
(iii) Neither Parent 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) Accounting Matters. Parent 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, Parent, based on
advice from its independent public accountants, believes that the Merger
will qualify for "pooling of interest" accounting.
(m) Brokers. Except for Salomon Smith Barney Inc., 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 Parent.
(n) Ownership of Company Capital Stock. Except for shares owned by
Parent Benefit Plans or shares held or managed for the account of another
person or as to which Parent is required to act as a fiduciary or in a
similar capacity or as otherwise disclosed in the Parent SEC Documents, as
of the date hereof, neither Parent nor, to its knowledge without
independent investigation, any of its affiliates who are not directors or
executive officers of Parent, (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
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the purpose of acquiring, holding, voting or disposing of, in each case,
shares of capital stock of the Company, other, in each case, than the
shares of the Company's capital stock held directly or indirectly, in trust
accounts, managed accounts or the like or held for the account of another
person.
(o) Voting Requirements. Assuming the accuracy of the Company's
representation and warranty contained in Section 3.1(c), no vote of the
holders of Parent Common Stock or Parent's preferred stock is necessary to
authorize the issuance of Parent Common Stock pursuant to the Merger or
otherwise in connection with the transactions contemplated by this
Agreement, including the stock exchange listings contemplated by Section
5.11.
(p) Environmental Liability. Except as set forth in the Parent Filed
SEC Documents and except as would not have a material adverse effect on
Parent, there are no legal, administrative, arbitral or other proceedings,
claims, actions, causes of action, private environmental investigations or
rededication activities or governmental investigations of any nature
seeking to impose on Parent or any of its subsidiaries, or that reasonably
could be expected to result in the imposition on Parent or any of its
subsidiaries of, any liability or obligation arising under applicable
Environmental Laws, pending or, to the knowledge of Parent, threatened,
against Parent or any of its subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business. (a) Conduct of Business by the
Company. Except as set forth in Section 4.1(a) of the Company Disclosure
Schedule, except as otherwise expressly contemplated by this Agreement or except
as consented to by Parent in writing, such consent not to be unreasonably
withheld or delayed, during the period from the date of this Agreement to the
Effective Time, the Company 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, 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, senior officers of Parent and the Company shall meet on a regular
basis to review the financial and operational affairs of the Company and its
subsidiaries. Such review shall be conducted in accordance with applicable law
and shall not cover current or future pricing of specific products, marketing or
strategic plans, specific breakdowns of sales by customers, or plans to
introduce new competitive products and shall in no event be deemed to constitute
control of the Company by Parent. 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, the Company shall not, and shall not
permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or indirect
wholly owned subsidiary of the Company to its parent, or by a subsidiary
that is partially owned by the Company or any of its subsidiaries, provided
that the Company or any such subsidiary receives or is to receive its
proportionate share thereof, (x) declare, set aside or pay any dividends
on, make any other distributions in respect of, or enter into any agreement
with respect to the voting of, any of its capital stock (except for regular
quarterly cash dividends on the Company Common 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 upon the exercise of Company Stock
Options that are, in each case, outstanding as of the date hereof in
accordance with their present terms, or (z) purchase, redeem or otherwise
acquire any shares of capital stock of the Company 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 the issuance of Company
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Common Stock upon the exercise of Company Stock Options that are, in each
case, outstanding as of the date hereof in accordance with their present
terms);
(iii) amend its certificate of incorporation, by-laws or other
comparable organizational documents;
(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, other than acquisitions in the ordinary
course of finance receivables in an aggregate principal amount not to
exceed $2.5 billion and other than acquisitions (not of the type
contemplated above) in the ordinary course with a value not to exceed $25
million; provided any such acquisitions shall be for cash consideration;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets that is
material in relation to the Company and its subsidiaries taken as a whole
(including securitizations), other than in the ordinary course of business
so long as Parent's prior written approval, which shall not be unreasonably
withheld or delayed, is obtained;
(vi) except for borrowings under existing credit facilities or lines
of credit or refinancing of indebtedness outstanding on the date hereof,
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or other wise become responsible for the
obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any person other than its wholly owned
subsidiaries, except in the ordinary course of business consistent with
past practice or except as attributable to the execution of this Agreement
and the transactions contemplated hereby;
(vii) other than changes which are not known to the Chief Financial
Officer of the Company and are not significant and are in the ordinary
course of business consistent with past practices, change its accounting
methods (or underlying assumptions), principles or practices affecting its
assets, liabilities or business, including without limitation, any
reserving, renewal or residual method, practice or policy, in each case, in
effect at December 31, 1999, except as required by changes in GAAP or SAP,
or change any of its methods of reporting income and deductions for federal
income tax purposes from those employed in the preparation of the federal
income tax returns of the Company for the taxable year ending December 31,
1999, except as required by changes in law or regulation;
(viii) change in any material respects its investment or risk
management or other similar policies of the Company or any of its
subsidiaries (other than the Company Insurance Subsidiaries, the conduct of
which is addressed in subsection (ix) below);
(ix) change in any material respects its actuarial, reserving,
investment or risk management or other similar policies of the Company
Insurance Subsidiaries;
(x) create, renew or amend any agreement or contract or other binding
obligation of the Company or its subsidiaries containing (A) any
restriction on the ability of the Company or its subsidiaries to conduct
its business as it is presently being con ducted or (B) any restriction on
the Company or its subsidiaries engaging in any type or activity or
business;
(xi) (A) grant to any current or former director, executive officer or
other key employee of the Company or its subsidiaries any increase in
compensation, bonus or other benefits, except for increases in the ordinary
course of business (including, without limitation, for new hires in the
ordinary course of business), (B) grant to any such current or former
director, executive officer or other key employee of the Company any
increase in severance or termination pay, (C) enter into, or amend, any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director,
executive officer or key employee, (D) grant to any employees of the
Company or its subsidiaries any award under the LTPP and/or the SIB with a
performance period that commences on or after January 1, 2001;
(xii) except pursuant to agreements or arrangements in effect on the
date hereof and previously provided to Parent, pay, loan or advance any
amount to, or sell, transfer or lease any properties or assets (real,
personal or mixed, tangible or intangible) to, or enter into any agreement
or arrangement with, any of its officers or directors or any affiliate or
the immediate family members or associates of any of its
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officers or directors other than compensation in the ordinary course of
business consistent with past practice;
(xiii) make any material tax elections (unless required by applicable
law or made in the ordinary course of business consistent with past
practices);
(xiv) agree or consent to any material agreements or material
modifications of existing agreements with any Governmental Entity in
respect of the operations of its business, except (i) as required by law to
renew Permits or agreements in the ordinary course consistent with past
practice, or (ii) to effect the consummation of the transactions
contemplated hereby;
(xv) pay, discharge, settle, compromise or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), including taking any action to settle or
compromise any litigation, in each case, material to the Company and its
subsidiaries taken as a whole, other than the payment, discharge,
settlement, compromise or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of the
Company Filed SEC Documents filed prior to the date hereof, or incurred
since June 30, 2000 in the ordinary course of business consistent with past
practice; or
(xvi) authorize, or commit or agree to take, any of the foregoing
actions;
provided that the limitations set forth in this Section 4.1(a) (other than
clause (iii)) shall not apply to any transaction between the Company and any
wholly owned subsidiary or between any wholly owned subsidiaries of the Company.
Prior to the Closing, the Company shall terminate any and all repurchase
programs and plans conducted by the Company for Company Common Stock.
(b) Conduct of Business by Parent. Except as set forth in Section 4.1(b)
of the Parent Disclosure Schedule, except as otherwise expressly contemplated by
this Section 4.1(b) or otherwise expressly contemplated by this Agreement or
except as consented to by the Company in writing, such consent not to be
unreasonably withheld or delayed, during the period from the date of this
Agreement to the Effective Time, Parent shall, and shall cause its subsidiaries
to carry on their respective businesses in compliance in all material respects
with all applicable laws and regulations and use all reasonable efforts to
preserve intact their current business organizations, use 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, Parent shall not, and shall not permit
any of its subsidiaries to:
(i) other than pursuant to Adjustment Events and other than dividends
and distributions by a direct or indirect wholly owned subsidiary of Parent
to its parent, or by a subsidiary that is partially owned by Parent or any
of its subsidiaries, provided that Parent or any such subsidiary receives
or is to receive its proportionate share thereof, (x) declare, set aside or
pay any dividends on or make any other distributions in respect of any of
its capital stock (except (A) for regular quarterly cash dividends (which
may be increased by Parent in amounts generally consistent with past
practice) on the Parent Common Stock and (B) for regular quarterly cash
dividends on the Parent Authorized Preferred Stock) or (y) other than
pursuant to an Adjustment Event, 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 in connection with the exercise of shares subject to employee
and non-employee director stock options;
(ii) except as contemplated hereby, amend its certificate of
incorporation (other than in connection with the issuance of a new class or
series of Parent Authorized Preferred Stock); provided, however, that this
Section 4.1(b)(ii) shall not apply to Parent's subsidiaries;
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(iii) enter into any agreement to acquire all or substantially all of
the capital stock or assets of any other person or business unless such
transaction would not reasonably be expected to materially delay or impede
the consummation of the Merger; or
(iv) authorize, or commit or agree to take, any of the foregoing
actions;
provided that the limitations set forth in this Section 4.1(b) shall not apply
to any transaction between Parent and any wholly owned subsidiary or between any
wholly owned subsidiaries of Parent.
(c) Other Actions. Except as required by law, the Company and Parent shall
not, and shall not permit any of their respective subsidiaries to, voluntarily
take any action that would, or that could reasonably be expected to, result in
(i) any of the representations and warranties of such party set forth in this
Agreement that are qualified as to materiality becoming untrue at the Effective
Time, (ii) any of such representations and warranties that are not so qualified
becoming untrue in any material respect at the Effective Time, or (iii) any of
the conditions to the Merger set forth in Article VI not being satisfied.
(d) Advice of Changes. Except to the extent prohibited by applicable law
or regulation, the Company and Parent shall promptly advise the other party
orally and in writing to the extent it has knowledge of (i) any representation
or warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement and
(iii) any change or event having, or which, insofar as can reasonably be
foreseen, could 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 4.2 No Solicitation by the Company. (a) The Company shall not,
nor shall it permit any of its subsidiaries to, nor shall it authorize or permit
any of its or any of its subsidiaries' 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 a
Company Takeover Proposal (as defined below) or (ii) participate in any
discussions or negotiations regarding any Company Takeover Proposal; provided,
however, that the Company and its Board of Directors, in response to any bona
fide Company Takeover Proposal which was not solicited by it and which did not
otherwise result from a breach of this Section 4.2(a), and subject to providing
prior written notice of its decision to take such action to Parent as
contemplated herein and in compliance with this Section 4.2(a) and Section
4.2(c), shall be permitted to:
(A) effect a Change in the Company Recommendation (as defined below),
or
(B) furnish information with respect to the Company and its
subsidiaries to any person making a Company Takeover Proposal pursuant to a
customary confidentiality agreement (as determined by the Company based
upon the advice of its outside counsel) and participate in discussions or
negotiations regarding such Company Takeover Proposal,
if and only to the extent that (i) the Company's Stockholders Meeting shall not
have occurred, (ii) the Board of Directors of the Company 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 the Company's
stockholders under applicable law and (iii) (x) in the case of clause (A) only,
the Company's Board of Directors concludes in good faith that such Company
Takeover Proposal constitutes a Company Superior Proposal, provided that at
least three business days prior to making such conclusion, the Company's Board
of Directors provides Parent written notice advising Parent that the Company's
Board of Directors is prepared to conclude that such Company Takeover Proposal
constitutes a Superior Proposal and during such three business day period the
Company and its advisors shall have negotiated in good faith with Parent to make
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adjustments in the terms and conditions of this Agreement such that such Company
Takeover Proposal would no longer constitute a Company Superior Proposal and (y)
in the case of clause (B) only, the Company's Board of Directors concludes in
good faith that such Company Takeover Proposal is reasonably likely to result in
a Company Superior Proposal. The Company, its subsidiaries and their
representatives immediately shall cease and cause to be terminated any existing
activities, discussions or negotiations with any parties with respect to any
Company Takeover Proposal.
For purposes of this Agreement, "Company Takeover Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of a business that constitutes 30% or more of the net
revenues, net income or assets of the Company and its subsidiaries, taken as a
whole, or 30% or more of any class of equity securities of the Company, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 30% or more of any class of any equity securities of the
Company, or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company (or any
Company subsidiary whose business constitutes 30% or more of the net revenues,
net income or assets of the Company and its subsidiaries, taken as a whole),
other than the transactions contemplated by this Agreement. For purposes of this
Agreement, a "Company Superior Proposal" means any proposal made by a third
party (I) 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 the Company's capital stock then
outstanding or all or substantially all the assets of the Company and (II) which
is otherwise on terms which the Board of Directors of the Company determines in
its good faith judgment (after consultation with (i) either Goldman, Sachs & Co.
or another nationally recognized investment banking firm and (ii) outside
counsel), taking into account, among other things, all legal, financial,
regulatory and other aspects of the proposal and the person making the proposal,
that the proposal, (i) if consummated would result in a transaction that is more
favorable to the Company's stockholders from a financial point of view than the
Merger and (ii) is reasonably capable of being completed, including to the
extent required, financing which is then committed or which, in the good faith
judgment of the Board of Directors of the Company, is reasonably capable of
being obtained by such third party.
(b) Except as expressly permitted by this Section 4.2, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw, modify or
qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse
to Parent, the approval of the Agreement, the Merger and the other transaction
contemplated hereby or the Company Recommendation (as defined in Section 5.1(b))
or take any action or make any statement in connection with the Company
Stockholders Meeting inconsistent with such approval or Company Recommendation
(collectively, a "Change in the Company Recommendation"), (ii) approve or
recommend, or propose publicly to approve or recommend, any Company Takeover
Proposal, or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
a "Company Acquisition Agreement") related to any Company Takeover Proposal. For
purposes of this Agreement, a Change in the Company Recommendation shall include
any approval or recommendation (or public proposal to approve or recommend), by
the Company Board of a Company Takeover Proposal, or any failure by the Company
Board to recommend against a Company Takeover Proposal. Notwithstanding the
foregoing, the Board of Directors of the Company, to the extent that it
determines in good faith, after consultation with outside counsel, that in light
of a Company Superior Proposal it is necessary to do so in order to act in a
manner consistent with its fiduciary duties to the Company's stockholders under
applicable law, may terminate this Agreement solely in order to concurrently
enter into a Company Acquisition Agreement with respect to any Company Superior
Proposal, but only at a time that is after the third business day following
Parent's receipt of written notice advising Parent that the Board of Directors
of the Company is prepared to accept a Company Superior Proposal, specifying the
material terms and conditions of such Company Superior Proposal and identifying
the person making such Company Superior Proposal, all of which information will
be kept confidential by Parent in accordance with the terms of the
Confidentiality Agreement.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.2, the Company shall immediately advise Parent
orally and in writing of any request for information or of any
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Company Takeover Proposal, the material terms and conditions of such request or
Company Takeover Proposal and the identity of the person making such request or
Company Takeover Proposal. The Company will keep Parent reasonably informed of
the status and details (including amendments or proposed amendments) of any such
request or Company Takeover Proposal, including without limitation informing
Parent upon delivery of information in response to any such request for
information.
(d) Nothing contained in this Section 4.2 shall prohibit the Company 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 (and
such disclosure shall not be deemed to be a Change in the Company Recommendation
unless it is an explicit Change in the Company Recommendation) if, in the good
faith judgment of the Board of Directors of the Company, after consultation with
outside counsel, failure so to disclose would be inconsistent with its
obligations under applicable law; provided, however, any such disclosure
relating to a Company Takeover Proposal shall be deemed to be a Change in the
Company Recommendation unless the Board of Directors of the Company reaffirms
the Company Recommendation in such disclosure.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4 and the Proxy Statement;
Stockholders Meeting. (a) As soon as practicable following the date of this
Agreement, the Company and Parent shall prepare and file with the SEC the Proxy
Statement and Parent shall prepare and file with the SEC the Form S-4, in which
the Proxy Statement will be included as a prospectus. Each of the Company and
Parent shall use best efforts to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after such filing. The Company will
use all best efforts to cause the Proxy Statement to be mailed to the holders of
Company Common Stock as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. Parent 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 or foreign securities laws in connection with
the issuance of the Parent Common Stock in the Merger and the Company shall
furnish all information concerning the Company and the holders of Company Common
Stock as may be reasonably requested in connection with any such action. No
filing of, or amendment or supplement to, the Form S-4 or the Proxy Statement
will be made by Parent or the Company without providing the other with the
opportunity to review and comment thereon. Parent will advise the Company,
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 Parent 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 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 the Company or Parent, or any of their respective affiliates, officers or
directors, should be discovered by the Company or Parent which should be set
forth in an amendment or supplement to any of the Form S-4 or the 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 the Company.
(b) The Company shall, as promptly as practicable after the Form S-4 is
declared effective under the Securities Act, duly call, give notice of, convene
and hold a meeting of its stockholders (the "Company Stockholders Meeting") in
accordance with the DGCL for the purpose of obtaining the Company Stockholder
Approval and, subject to Section 4.2, the Board of Directors of the Company
shall recommend to the Company's stockholders the approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby (the
"Company Recommendation"). Without limiting the generality of the foregoing, the
Company agrees that its obligations pursuant to the first sentence of this
Section 5.1(b) shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company of any
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Company Takeover Proposal. Notwithstanding any Change in the Company
Recommendation, this Agreement and the Merger shall be submitted to the
stockholders of the Company at the Company's Stockholders Meeting for the
purpose of approving the Agreement and the Merger and nothing contained herein
shall be deemed to relieve the Company of such obligation.
SECTION 5.2 Letters of the Company's Accountants. (a) The Company shall
use all commercially reasonable efforts to cause to be delivered to Parent two
letters from the Company'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 Parent, in form and substance reasonably satisfactory to Parent 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) The Company shall use all commercially reasonable efforts to cause to
be delivered to Parent and Parent's independent accountants two letters (the
"Company Pooling Letters") from the Company's independent accountants addressed
to the Company, one dated as of the date the Form S-4 is declared 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 as contemplated by this Agreement.
SECTION 5.3 Letters of Parent's Accountants. (a) Parent shall use all
commercially reasonable efforts to cause to be delivered to the Company two
letters from Parent'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 the Company, in form and substance reasonably satisfactory to the
Company 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) Parent shall use all commercially reasonable efforts to cause to be
delivered to the Company and the Company's independent accountants two letters
(the "Parent Pooling Letters") from Parent's independent accountants addressed
to Parent, one dated as of the date the Form S-4 is declared 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 as contemplated by this Agreement.
SECTION 5.4 Access to Information; Confidentiality. Subject to the
Confidentiality Agreement, dated August 31, 2000, between Parent and the Company
(the "Confidentiality Agreement"), and subject to the restrictions contained in
confidentiality agreements to which such party is subject (which such party will
use its reasonable best efforts to have waived) and applicable law, each of the
Company and Parent 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 the Company
and Parent shall, and shall cause each of their 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. In addition, the Company will deliver, or
cause to be delivered, to Parent the internal or external reports reasonably
required by Parent promptly after such reports are made available to the
Company's personnel. No review pursuant to this Section 5.4 shall affect any
representation or warranty given by either party hereto to the other party. Each
of the Company and Parent 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 5.5 Best Efforts. (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 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
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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 by this Agreement, 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 5.5(a) will limit or affect actions permitted to be taken pursuant to
Section 4.2.
(b) In connection with and without limiting the foregoing, the Company and
Parent shall (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to this
Agreement or the Merger or any of the other transactions contemplated hereby or
thereby and (ii) if any state takeover statute or similar statute or regulation
becomes applicable to this Agreement or the Merger or any other transaction
contemplated hereby or thereby, take all action necessary to ensure that the
Merger and the other transactions contemplated by this Agreement 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 the Company and Parent shall cooperate with each other in
obtaining opinions of Simpson Thacher & Bartlett, counsel to the Company, and
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Parent, dated as of the
Effective Time, 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 Parent and the Company shall deliver to Simpson Thacher & Bartlett and
Skadden, Arps, Slate, Meagher & Flom LLP customary representation letters
substantially in the form set forth in Schedule 5.5(c) (the representation
letters referred to in this sentence are collectively referred to as the "Tax
Certificates").
(d) The Company shall use its best efforts to assist Parent 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 Parent 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 the Company 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 the Company shall take all other action
necessary to allow Parent 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.
SECTION 5.6 Employee Stock Options, Incentive and Benefit Plans. (a) As
of the Effective Time, (i) each outstanding Company Stock Option shall be
converted into an option (an "Adjusted Option") to purchase the number of shares
of Parent Common Stock (rounded to the nearest whole number of shares of Parent
Common Stock) equal to the number of shares of Company Common Stock subject to
such Company Stock Option immediately prior to the Effective Time multiplied by
the Exchange Ratio, at an exercise price per share (rounded to the nearest whole
cent) equal to the exercise price for each such share of Company Common Stock
subject to such option divided by the Exchange Ratio, and all references in each
such option to the Company shall be deemed to refer to Parent, 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 effected in a manner consistent with the requirements of Section 424(a)
of the Code, and (ii) Parent shall assume the obligations of the Company under
the Company Stock Plan. The other terms of each such option, and the plans under
which they were issued, shall continue to apply in accordance with their terms.
(b) As of the Effective Time, (i) each outstanding Company Award other than
Company Stock Options (including restricted stock, stock appreciation rights,
deferred stock, phantom stock, stock equivalents and
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stock units) (each a "Company Award") under the Company Stock Plan shall be
converted into the same instrument of Parent, in each case with such adjustments
(and no other adjustments) to the terms of such Company Awards as are necessary
to preserve the value inherent in such Company Awards with no detrimental or
beneficial effects on the holder thereof and (ii) Parent shall assume the
obligations of the Company under the Company Awards. The other terms of each
such Company Award, and the plans or agreements under which they were issued,
shall continue to apply in accordance with their terms.
(c) The Company and Parent agree that the Company Stock Plan and Parent
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 Company Common Stock held or to be awarded or paid
pursuant to such benefit plans, programs or arrangements into shares of Parent
Common Stock on a basis consistent with the transactions contemplated by this
Agreement.
(d) Parent shall (i) reserve for issuance the number of shares of Parent
Common Stock that will become subject to the benefit plans, programs and
arrangements referred to in this Section 5.6 and (ii) issue or cause to be
issued the appropriate number of shares of Parent 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, Parent shall prepare and file with
the SEC a registration statement on Form S-8 (or other appropriate form)
registering a number of shares of Parent Common Stock necessary to fulfill
Parent's obligations under this Section 5.6. 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 Company Awards
remain outstanding.
(e) As soon as practicable after the Effective Time, Parent shall deliver
to the holders of Company Stock Options and Company Awards appropriate notices
setting forth such holders' rights pursuant to the Company Stock Plan and the
agreements evidencing the grants of such Company Stock Options and Company
Awards and that such Company Stock Options and Company Awards and the related
agreements shall be assumed by Parent and shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section 5.6
after giving effect to the Merger).
(f) Following the Effective Time, the Surviving Corporation shall comply
with the Company's obligations under Company Benefit Plans and similar
arrangements existing on the date hereof and disclosed to Parent; provided,
however, that the foregoing shall not prevent the Surviving Corporation from
amending or terminating any Company Benefit Plan or similar arrangement in
accordance with its terms.
SECTION 5.7 Indemnification, Exculpation and Insurance. (a) Parent agrees
that all rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time now existing in favor of
the current or former directors or officers of the Company and its subsidiaries
as provided in their respective certificates of incorporation or by-laws (or
comparable organizational documents) and any indemnification agreements or
arrangements of the Company shall survive the Merger and shall continue in full
force and effect in accordance with their terms. The Surviving Corporation shall
pay any expenses of any indemnified person under this Section 5.7 in advance of
the final disposition of any action, proceeding or claim relating to any such
act or omission to the fullest extent permitted under the DGCL upon receipt from
the applicable indemnified person to whom advances are to be advanced of any
undertaking to repay such advances required under the DGCL. The Surviving
Corporation shall cooperate in the defense of any such matter. In addition, from
and after the Effective Time, directors or officers of the Company who become
directors or officers of the Surviving Corporation or its affiliates will be
entitled to the same indemnity rights and protections as are afforded to other
directors and officers of the Surviving Corporation.
(b) In the event that the Surviving Corporation 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) 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 the Surviving Corporation will assume the
obligations thereof set forth in this Section 5.7.
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(c) The provisions of this Section 5.7 (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.
(d) For six years after the Effective Time, the Surviving Corporation shall
maintain in effect the Company'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 the Company's directors'
and officers' liability insurance policy on terms with respect to such coverage
and amount no less favorable to the Company's directors and officers currently
covered by such insurance than those of such policy in effect on the date
hereof; provided that the Surviving Corporation may substitute therefor policies
of Parent 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 the Surviving Corporation be required to pay aggregate
premiums for insurance under this Section 5.7(d) in excess of 200% of the
aggregate premiums paid by the Company in 2000 on an annualized basis for such
purpose.
SECTION 5.8 Fees and Expenses. (a) Except as provided in this Section
5.8, all fees and expenses incurred in connection with the Merger, this
Agreement, and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated.
(b) (i) In the event that this Agreement is terminated by Parent pursuant
to Section 7.1(c), then, promptly, but in no event later than two business days
after such termination, the Company shall pay Parent a fee equal to $400 million
by wire transfer of same day funds.
(ii) In the event that (A) a Pre-Termination Takeover Proposal Event
(as defined below) shall occur after the date of this Agreement and
thereafter this Agreement is terminated by either Parent or the Company
pursuant to Section 7.1(b)(i) or 7.1(b)(ii) and (B) prior to the date that
is 18 months after the date of such termination the Company enters into a
Company Acquisition Agreement, then the Company shall promptly, but in no
event later than two business days after the date such Company Acquisition
Agreement is entered into, pay Parent a fee equal to $400 million by wire
transfer of same day funds.
(iii) In the event that this Agreement is terminated by the Company
pursuant to Section 7.1(d), then concurrently with such termination, the
Company shall pay to Parent a fee equal to $400 million by wire transfer of
same day funds.
(iv) In the event that (A) a Pre-Termination Takeover Proposal Event
shall occur after the date of this Agreement, (B) the Company Board of
Directors has effected a Change in the Company Recommendation, and (C) this
Agreement is terminated by either Parent or Company for any reason provided
for under Section 7.1, then, promptly, but in no event later than two
business days after such termination, the Company shall pay Parent a fee
equal to $400 million by wire transfer of same day funds.
(v) In no event shall the Company be required to pay more than $400
million pursuant to this Section 5.8.
(vi) For purposes of this Section 5.8(b), a "Pre-Termination Takeover
Proposal Event" shall be deemed to occur if a Company Takeover Proposal
shall have been made known to the Company or any of its subsidiaries or has
been made directly to its stockholders generally or any person shall have
publicly announced an intention (whether or not conditional) to make a
Company Takeover Proposal. The Company acknowledges that the agreements
contained in this Section 5.8(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent
would not enter into this Agreement; accordingly, if the Company fails
promptly to pay the amount due pursuant to this Section 5.8(b), and, in
order to obtain such payment, Parent commences a suit which results in a
judgment against the Company for the fee set forth in this Section 5.8(b),
the Company shall pay to Parent its costs and expenses (including
attorneys' fees and expenses) in connection with such suit,
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together with interest on the amount of the fee at the rate on six-month
U.S. Treasury obligations plus 300 basis points in effect on the date such
payment was required to be made.
SECTION 5.9 Public Announcements. Parent and the Company will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with and use reasonable efforts to agree on, any
press release or other public statements and any internal communications 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 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) To the extent practicable, concurrently with
the execution of this Agreement (or to the extent not practicable, as soon as
practicable and in any event within 10 business days after the date hereof), the
Company shall deliver to Parent a written agreement substantially in the form
attached as Exhibit 5.10(a) hereto of all of the persons who are "affiliates" of
the Company for purposes of Rule 145 under the Securities Act or for purposes of
qualifying the Merger for pooling of interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations; all of such affiliates, who are affiliates as of the date of this
Agreement, are identified in Section 5.10 of the Company Disclosure Schedule.
Section 5.10 of the Company Disclosure Schedule shall be updated by the Company
as necessary to reflect changes from the date hereof and the Company shall use
best efforts to cause each person added to such schedule after the date hereof
to deliver a similar agreement. Parent shall cause all persons who are
affiliates of Parent for purposes of qualifying the Merger for pooling of
interests accounting treatment under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations to comply with the fourth
paragraph of Exhibit 5.10(a) hereto.
(b) The Surviving Corporation shall publish combined sales and net income
figures as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135 no later than 30 days after the end of the first fiscal
quarter ending after the Closing in which there was at least 30 days of
post-Merger combined operations. This Section 5.10(b) is intended to be for the
benefit of affiliates of the Company.
SECTION 5.11 Stock Exchange Listing. Parent shall use best efforts to
cause the Parent Common Stock issuable (i) under Article II or (ii) upon
exercise of the Adjusted Options pursuant to Section 5.6 to be approved for
issuance on the NYSE and the PSE, in each case 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 the Company and Parent shall
give the other the reasonable opportunity to participate in the defense of any
stockholder litigation against the Company or Parent, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
SECTION 5.13 Tax Treatment. Each of Parent and the Company shall use best
efforts to cause the Merger to qualify as a reorganization under the provisions
of Section 368 of the Code and to obtain the opinions of counsel referred to in
Sections 6.2(c) and 6.3(c).
SECTION 5.14 Pooling of Interests. Each of the Company and Parent shall
use 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 the SEC, and each
of the Company and Parent agrees that, except as required by applicable law or
regulation, it shall take no action that would cause such accounting treatment
not to be obtained.
SECTION 5.15 Standstill Agreements; Confidentiality Agreements. During
the period from the date of this Agreement through the Effective Time, the
Company shall not 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. During such period, the Company 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
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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 5.16 Conveyance Taxes. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees or any similar taxes which become payable
in connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time. Parent shall
pay, and the Company shall pay on behalf of their respective stockholders,
without deduction or withholding from any amount payable to the holders of
Company Common Stock, any such taxes or fees imposed by any Governmental Entity
which become payable in connection with the transactions contemplated by this
Agreement for which such stockholders are primarily liable.
SECTION 5.17 Payment of Dividends. From the date hereof until the
Effective Time, Parent and the Company will coordinate with each other regarding
the declaration of dividends in respect of the shares of Parent Common Stock and
the shares of the Company Common Stock and the record dates and payment dates
relating thereto (it being the intention of the parties that such record dates
and payment dates be as consistent as practicable with past practice), it being
the intention of the parties that holders of shares of Company Common Stock will
not receive two dividends, or fail to receive one dividend, for any single
calendar quarter with respect to their shares of Company Common Stock and the
shares of Parent Common Stock any holder of shares of Company Common Stock
receives in exchange therefor in connection with the Merger.
SECTION 5.18 Section 16 Matters. Prior to the Effective Time, Parent and
Company shall take all such steps as may be required to cause any dispositions
of Company Common Stock (including derivative securities with respect to Company
Common Stock) or acquisitions of Parent Common Stock (including derivative
securities with respect to Parent Common Stock) resulting from the transactions
contemplated by Article I or Article II of this Agreement by each individual who
is subject to the reporting requirements of Section 16(a) of the Exchange Act
with respect to the Company, to be exempt under Rule 16b-3 promulgated under the
Exchange Act, such steps to be taken in accordance with the No-Action Letter
dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher &
Flom LLP.
SECTION 5.19 Employee Benefit Review. Commencing promptly following the
date hereof, Parent's and the Company's human resource managers shall conduct a
review of the Company Benefit Plans and other Company compensation arrangements
in order to coordinate the benefits to be provided after the Closing to persons
who are employees of the Company or its subsidiaries immediately prior to the
Closing ("Affected Employees") and to ensure an orderly transition and the
appropriate retention of employees. Specifically this review shall include the
following:
(a) With respect to any Company Benefit Plan that is a retiree medical
or other retiree welfare plan, to the extent the costs of providing
benefits thereunder are adequately accrued, the Surviving Corporation shall
not amend or terminate such plan following the Effective Time in any manner
which results in the benefits available thereunder to fail to be
substantially similar to those provided on the date hereof or the increase
in costs, other than any co-payment and cost-sharing increases (which may
be continued in the same proportion to Company provided portions of cost)
to any former Company employee (and his or her eligible dependents) who is
receiving such benefits thereunder as of the Effective Date, or any
Affected Employee (and his or her eligible dependents) who would be
eligible for such benefits if he or she retired on the Effective Date (or
who, as of the Effective Date, is within three years of being able to
retire and receive benefits thereunder).
(b) Prior service credit will be granted for eligibility, vesting and
participation in, and eligibility to retire under, the Surviving
Corporation's benefit programs.
(c) Pre-existing condition exclusions will be waived for Affected
Employees to the extent possible. Appropriate consideration for past
deductibles, or out-of-pocket expenses toward the medical or dental
programs will be evaluated for operational feasibility and strived for
whenever possible.
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(d) A reasonable period of time will be allowed for the Affected
Employees to utilize accrued, paid time off, within reasonable limits and
allowing for the effective operation of the business.
(e) The Company will determine and announce in the ordinary course
(prior to the Effective Date), but will not pay, the fiscal year 2000 bonus
amounts for senior executives (approximately 205 individuals), and the
Surviving Corporation shall pay to such senior executives the bonus amounts
so announced on or as soon as reasonably practicable after March 1, 2001.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 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 by each of Parent and the Company on or prior to
the Closing Date of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval shall have
been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) Governmental and Regulatory Approvals. Other than the filing
provided for under Section 1.3 and filings pursuant to the HSR Act (which
are addressed in Section 6.1(b)), all consents, approvals and actions of,
filings with and notices to any Governmental Entity required of the
Company, Parent or any of their subsidiaries to consummate the Merger and
the other transactions contemplated hereby, the failure of which to be
obtained or made is reasonably expected to have a material adverse effect
on Parent and its subsidiaries and prospective subsidiaries, taken as a
whole, shall have been obtained or made.
(d) 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, or (ii) which otherwise is reasonably likely to have a material
adverse effect on the Company or Parent, 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.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and no stop order or proceedings seeking a stop order shall
have been entered or be pending by the SEC.
(f) Stock Exchange Listings. The shares of Parent Common Stock
issuable to the Company's stockholders (i) as contemplated by Article II or
(ii) upon exercise of the Adjusted Options pursuant to Section 5.6 shall
have been approved for listing on the NYSE and the PSE, subject to official
notice of issuance.
(g) Pooling Letters. Parent and the Company shall have received the
Parent Pooling Letters and the Company Pooling Letters and they shall not
have been withdrawn or modified in any material respect.
SECTION 6.2 Conditions to Obligations of Parent. The obligation of Parent
to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth herein (i) that are qualified as to
materiality 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), and
(ii) that are not qualified as to materiality 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) in all material respects.
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(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it at or prior to the Closing Date under this Agreement.
(c) Tax Opinion. Parent shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to Parent, an opinion 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 Parent and the
Company will each be a party to such reorganization within the meaning of
Section 368(b) of the Code. In rendering such opinion, counsel for Parent
may require delivery of and rely on the Tax Certificates.
(d) Regulatory Condition. No condition or requirement has been
imposed by one or more Governmental Entities in connection with any
required approval by them of the Merger relating to the transactions
contemplated hereunder which, either alone or together with all such other
conditions or requirements requires the Company or its subsidiaries to be
operated in a manner which is materially different from industry standards
in effect on the date hereof and which materially adversely affects the
business, financial condition, results of operations or prospects of the
Company and its subsidiaries, taken as a whole, or their businesses, other
than their commercial finance businesses, taken as a whole.
SECTION 6.3 Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent set forth herein (i) that are qualified as to
materiality 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), and
(ii) that are not qualified as to materiality 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) in all material respects.
(b) Performance of Obligations of Parent. Parent shall have performed
in all material respects all obligations required to be performed by it at
or prior to the Closing Date under this Agreement.
(c) Tax Opinions. The Company shall have received from Simpson
Thacher & Bartlett, counsel to the Company, an opinion 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 Parent and the Company will each
be a party to such reorganization within the meaning of Section 368(b) of
the Code. In rendering such opinion, counsel for the Company may require
delivery of and rely on the Tax Certificates.
SECTION 6.4 Frustration of Closing Conditions. Neither Parent nor the
Company may rely on the failure of any condition set forth in Section 6.1, 6.2
or 6.3, 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 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, and whether before or after the Company Stockholder
Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by April 1, 2001,
provided, however, that the right to terminate this Agreement pursuant
to this Section 7.1(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; provided,
however, that this Agreement may be extended not more than 30 days by
either party by written notice to the other party if the Merger shall
not
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have been consummated solely as a result of the condition set forth in
Section 6.1(c) failing to have been satisfied and the extending party
reasonably believes that the relevant approvals will be obtained during
such extension period;
(ii) if the Company Stockholder Approval shall not have been
obtained at the Company Stockholders Meeting duly convened therefor or
at any adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects set forth in
Section 6.1(d) shall be in effect and shall have become final and
nonappealable; provided, that the party seeking to terminate this
Agreement pursuant to this Section 7.1(b)(iii) shall have used best
efforts to prevent the entry of and to remove such Restraint;
(c) by Parent, if the Company shall have failed to make the Company
Recommendation in the Proxy Statement or effected a Change in the Company
Recommendation (or resolved to take any such action), whether or not
permitted by the terms hereof, or shall have breached its obligations under
this Agreement by reason of a failure to call or convene the Company
Stockholders Meeting in accordance with Section 5.1(b); or
(d) by the Company in accordance with Section 4.2(b); provided that,
in order for the termination of this Agreement pursuant to this paragraph
(d) to be deemed effective, the Company shall have complied with all
provisions of Section 4.2, including the notice provisions therein, and
with applicable requirements, including the payment of the fee referred to
in paragraph (b)(iii) of Section 5.8.
The party desiring to terminate this Agreement pursuant to clause (b), (c)
or (d) of this Section 7.1 shall give written notice of such termination to the
other party in accordance with Section 8.2, specifying the provision hereof
pursuant to which such termination is effected.
SECTION 7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent or the Company, other than the provisions of
Section 3.1(o), Section 3.2(m), the last sentence of Section 5.4, Section 5.8,
this Section 7.2 and Article VIII, which provisions survive such termination,
provided, however, that nothing herein (including the payment of any amounts
pursuant to Section 5.8 hereof) shall relieve any party from any liability for
any willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties at
any time before or after the Company Stockholder Approval; provided, however,
that after such approval, there shall not be made any amendment that by law
requires further approval by the stockholders of the Company without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties.
SECTION 7.4 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
7.3, 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 7.5 Procedure for Termination. A termination of this Agreement
pursuant to Section 7.1 shall, in order to be effective, require, in the case of
Parent or the Company, action by its Board of Directors.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 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 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 8.2 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 Parent, to
Citigroup Inc.
Corporate Law Department
425 Park Avenue, Second Floor
New York, New York 10043
Telecopy No.: (212) 793-4401
Attention: Assistant General Counsel, M&A Unit
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telecopy No.: (212) 735-2000
Attention: Kenneth J. Bialkin and Eric J. Friedman
(b) if to the Company, to
250 East Carpenter Freeway
Irving, Texas 75062
Telecopy No.: (972) 652-5798
Attention: General Counsel
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Telecopy No.: (212) 455-2502
Attention: David J. Sorkin and Alan D. Schnitzer
SECTION 8.3 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;
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(b) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, 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 constituting or relating to (i) the
economy or financial markets of the United States or any other region, (ii)
this Agreement or the transactions contemplated hereby or the announcement
thereof and (iii) the financial services industry in general and, in the
case of the Company, not specifically relating to the Company or its
subsidiaries, and in the case of Parent, not specifically relating to
Parent or its subsidiaries.
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, 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 a
subsidiary of such person; and
(e) "knowledge" of any person which is not an individual means the
actual knowledge of such person's executive officers.
SECTION 8.4 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
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 8.5 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 8.6 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, between the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Article II, Sections 5.6, 5.7 and 5.10(b), are not intended to
confer upon any person other than the parties any rights or remedies.
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SECTION 8.7 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 8.8 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 any of the parties hereto without the
prior written consent of the other parties. 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 8.9 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.
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
CITIGROUP INC.
By /s/ SANFORD I. WEILL
------------------------------------
Name: Sanford I. Weill
Title: Chairman and Chief Executive
Officer
ASSOCIATES FIRST CAPITAL CORPORATION
By /s/ KEITH W. HUGHES
------------------------------------
Name: Keith W. Hughes
Title: Chairman and Chief Executive
Officer
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EXHIBIT 5.10(a)
Citigroup Inc.
Corporate Law Department
425 Park Avenue, Second Floor
New York, New York 10043
Attention: Assistant General Counsel, M&A Unit
Ladies and Gentlemen:
The undersigned, a holder of shares of Class A Common Stock, par value $.01
per share ("Company Common Stock"), of Associates First Capital Corporation, a
Delaware corporation (the "Company"), is entitled to receive in connection with
the merger (the "Merger") of the Company with and into Citigroup Inc., a
Delaware corporation ("Parent"), shares of common stock, par value $.01 per
share ("Parent Common Stock"), of Parent. The undersigned acknowledges that the
undersigned may be deemed an "affiliate" of the Company within the meaning of
Rule 145 ("Rule 145") promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), by the Securities and Exchange Commission (the "SEC")
and may be deemed an "affiliate" of the Company for purposes of qualifying the
Merger for pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations, although
nothing contained herein should be construed as an admission of either such
fact.
If, in fact, the undersigned were such an affiliate under the Securities
Act, the undersigned's ability to sell, assign or transfer the shares of Parent
Common Stock received by the undersigned in the Merger may be restricted unless
such transaction is registered under the Securities Act or an exemption from
such registration is available. The undersigned under stands that such
exemptions are limited and, to the extent the undersigned felt or feels
necessary, the undersigned has obtained or will obtain advice of counsel as to
the nature and conditions of such exemptions, including information with respect
to the applicability to the sale of such securities of Rules 144 and 145(d)
promulgated under the Securities Act. The undersigned understands that Parent is
under no obligation to register Parent Common Stock for sale, transfer or other
disposition by the undersigned or take any action (other than as provided in the
penultimate paragraph of this letter) to make compliance with an exemption from
registration available to the undersigned.
The undersigned hereby represents to and covenants with Parent that the
undersigned will not sell, assign, transfer or otherwise dispose any of the
Parent Common Stock received (including through a cashless exercise of stock
options) by the undersigned in the Merger except (i) pursuant to an effective
registration statement under the Securities Act, (ii) in conformity with the
volume and other limitations of Rule 145 or (iii) in a transaction which, in the
opinion of the general counsel of Parent, Simpson Thacher & Bartlett, or other
counsel reasonably satisfactory to Parent or as described in a "no-action" or
interpretive letter from the Staff of the SEC specifically issued with respect
to a transaction to be engaged in by the undersigned, is not required to be
registered under the Securities Act.
The undersigned hereby further represents to and covenants with Parent that
from the date that is 30 days prior to the Effective Time (as defined in the
Agreement and Plan of Merger, dated as of September 5, 2000, among the Company
and Parent), the undersigned will not sell, transfer or otherwise dispose of any
shares of Company Common Stock held by the undersigned and that the undersigned
will not sell, transfer or otherwise dispose of any shares of Parent Common
Stock received by the undersigned in the Merger or other shares of Parent Common
Stock held by the undersigned until after such time as results covering at least
30 days of post-Merger combined operations of the Company and Parent have been
published by Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the SEC, a report to the SEC on Form 10-K,
10-Q or 8-K, or any other public filing or announcement which includes such
combined results of operations.
In the event of a sale or other disposition by the undersigned of Parent
Common Stock pursuant to Rule 145, the undersigned will supply Parent with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto and, to the extent required by the second preceding paragraph,
the opinion
<PAGE> 110
of counsel or no-action letter referred to in such paragraph. The undersigned
understands that Parent may instruct its transfer agent to withhold the transfer
of any shares of Parent Common Stock disposed of by the undersigned, but that
(provided such transfer is not prohibited by any other provision of this letter
agreement) upon receipt of such evidence of compliance, Parent shall cause the
transfer agent to effectuate the transfer of the Parent Common Stock sold as
indicated in such letter. Notwithstanding the foregoing, Parent shall revoke the
stop transfer instructions with respect to any shares of Parent Common Stock
held by the undersigned or a transferee of the undersigned as to which the
legend referred to below has been removed.
The undersigned acknowledges and agrees that the legend set forth below
will be placed on certificates representing any Parent Common Stock received by
the undersigned in connection with the Merger or held by a transferee thereof,
which legend will be removed by delivery of substitute certificates (A) upon the
transfer by the undersigned of Parent Common Stock in a sale made in conformity
within the provisions of Rule 145(d) or pursuant to an effective registration
statement under the Securities Act or (B) upon receipt of an opinion in form and
substance reasonably satisfactory to Parent from independent counsel (which may
be Simpson Thacher & Bartlett) reasonably satisfactory to Parent to the effect
that such legends are no longer required for purposes of the Securities Act.
There will be placed on the certificates for Parent Common Stock issued to
the undersigned, or, except as otherwise provided herein, any substitutions
therefor, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is being accounted for as a pooling of
interests, in a transaction to which Rule 145 promulgated under the
Securities Act of 1933, as amended, applies. The shares have not been
acquired by the holder with a view to, or for resale in connection with,
any distribution thereof within the meaning of the Securities Act of 1933,
as amended. The shares may not be sold, pledged or otherwise disposed of
(i) until such time as Parent shall have published financial results
covering at least 30 days of combined operations after the Effective Time
and (ii) except pursuant to a registration statement under, or in
accordance with an exemption from the registration requirements of, the
Securities Act of 1933."
For so long as and to the extent necessary to permit the undersigned to
sell the Parent Common Shares pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Securities Act, Parent shall take all such
actions as reasonably available to file, on a timely basis, all reports and data
required to be filed with the Securities and Exchange Commission by it pursuant
to Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), furnish to the undersigned upon request a written statement as to whether
Parent has complied with such reporting requirements during the 12 months
preceding any proposed sale under Rule 145 and otherwise take all such actions
as reasonably available to permit such sales pursuant to Rule 145 and Rule 144.
Parent has filed, on a timely basis, all reports required to be filed with the
Securities and Exchange Commission under Section 13 of the Exchange Act during
the preceding 12 months.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of shares of Company
Common Stock and Parent Common Stock and (ii) the receipt by Parent of this
letter is an inducement to Parent's obligations to consummate the Merger.
Very truly yours,
[NAME]
Dated: ____________, ________
2
<PAGE> 111
ANNEX I
[DATE]
[NAME]
On ________, the undersigned sold ________ shares of common stock (the
"Parent Common Stock") of Citigroup Inc. ("Parent") which were received by the
undersigned in connection with the merger of a subsidiary of Parent with and
into Associates First Capital Corporation.
Based upon the most recent report or statement filed by Parent with the
Securities and Exchange Commission, the shares of Parent Common Stock sold by
the undersigned were within the prescribed limitations set forth in paragraph
(e) of Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
The undersigned hereby represents that the shares of Parent Common Stock
were sold in "brokers' transactions" within the meaning of Section 4(4) of the
Securities Act or in transactions directly with a "market maker" as that term is
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended.
The undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Parent Common Stock, and that
the undersigned has not made any payment in connection with the offer or sale of
the Parent Common Stock to any person other than to the broker who executed the
order in respect of such sale.
Very truly yours,
<PAGE> 112
ANNEX B
PERSONAL AND CONFIDENTIAL
Board of Directors
Associates First Capital Corporation
250 East Carpenter Freeway
Irving, TX 75062
September 5, 2000
Gentlemen and Madame:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Class A Common Stock, par value
$0.01 per share (the "Shares"), of Associates First Capital Corporation (the
"Company") of the exchange ratio of 0.7334 shares of Common Stock, par value
$0.01 per share (the "Citigroup Common Stock"), of Citigroup Inc. ("Citigroup")
to be received for each Share (the "Exchange Ratio") pursuant to the Agreement
and Plan of Merger, dated as of September 5, 2000, between Citigroup and the
Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company, having provided certain investment banking services
to the Company from time to time, including having acted as lead manager for the
initial public offering of 59,950,000 Shares in May 1996, a follow-on offering
of 15,000,000 Shares in November 1998, and having acted as the financial advisor
to the Company in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We are also familiar with Citigroup and
its affiliates having acted as co-manager in various preferred stock and debt
offerings of Citigroup and its affiliates and having acted as co-financial
advisor to Citicorp in its acquisition of AT&T Universal Card Services in
December 1997 and as financial advisor to Citigroup in its acquisition of JP
Morgan's Global Trust business in June 1998. Eric Dobkin, a former General
Partner and Managing Director of Goldman, Sachs & Co. and a current Advisory
Director and Chairman Emeritus of Equity Capital Markets of Goldman, Sachs &
Co., is a director of the Company. Goldman, Sachs & Co. provides a full range of
financial advisory and securities services and, in the course of its normal
trading activities, may from time to time effect transactions and hold
securities, including derivative instruments, of the Company or Citigroup for
its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and Citigroup for the five years ended December 31, 1999; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of the
Company and Citigroup; certain other communications from the Company and
Citigroup to their respective stockholders; certain internal financial analyses
and forecasts for the Company prepared by its management; and certain cost
savings and operating synergies projected by the managements of the Company and
Citigroup to result from the transaction contemplated by the Agreement. We also
have held discussions with members of the senior management of the Company and
Citigroup regarding their assessment of the strategic rationale for, and the
potential benefits of, the transaction contemplated by the Agreement and the
past and current business operations, financial condition and future prospects
of their respective companies. In addition, we have reviewed the reported price
and trading activity for the Shares and the Citigroup Common Stock, compared
certain financial and stock market information for the Company and Citigroup
with similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the banking and finance industries specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. As you are
aware, Citigroup did not make available to us its projections of expected future
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<PAGE> 113
performance. Accordingly, our review with respect to such information was
limited to discussions with 'management of Citigroup of the estimates of
research analysts. In addition, we have not made an independent evaluation or
appraisal of the assets and liabilities of the Company or Citigroup or any of
their subsidiaries (including any derivative or off-balance-sheet assets or
liabilities or loss and loss adjustment expense reserves) and we have not been
furnished with any such evaluation or appraisal. We are not actuaries and our
services did not include actuarial determinations or evaluations by us or any
attempt to evaluate actuarial assumptions and, in that regard, we have assumed
the adequacy of the loss and loss adjustment expense reserves of Citigroup. In
addition, we are not experts in the evaluation of loan portfolios for purposes
of assessing the adequacy of the allowances for losses with respect thereto and
have assumed, with your consent, that such allowances for Citigroup are in the
aggregate adequate to cover all such losses. We were not requested to and did
not solicit from third parties indications of interest in acquiring all or part
of the Company or in engaging in a business combination or any other strategic
transaction with the Company. We also have assumed with your consent that the
transaction contemplated by the Agreement will be accounted for as a pooling-of-
interests under generally accepted accounting principles. We also have assumed
that all material governmental, regulatory or other consents and approvals
necessary for the consummation of the transaction contemplated by the Agreement
will be obtained without any adverse effect on the Company or Citigroup or on
the contemplated benefits of the transaction contemplated by the Agreement. Our
advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of Shares should vote with respect thereto.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Agreement is fair from a financial point of view
to holders of Shares.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
--------------------------------------
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<PAGE> 114
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware, or DGCL, empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interest of the corporation, and with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation, and except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
Subsection (d) of Section 145 of the DGCL provides that any indemnification
under subsections (a) and (b) of Section 145 (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer,
employee or agent is proper in the circumstances because the person has met the
applicable standard of conduct set forth in subsections (a) and (b) of Section
145. Such determination shall be made, with respect to a person who is a
director or officer at the time of such determination, (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors designated by
the majority vote of such directors, even though less than a quorum or (3) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders.
Section 145 of the DGCL further provides that to the extent a present or
former director or officer of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith and that such expenses may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in Section 145 of the DGCL; that
any indemnification and
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<PAGE> 115
advancement of expenses provided by, or granted pursuant to Section 145 shall
not be deemed exclusive of any other rights to which the indemnified party may
be entitled; that indemnification provided by, or granted pursuant to Section
145 shall, unless otherwise provided when authorized and ratified, continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of such person's heirs, executors and administrators;
and empowers the corporation to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145. Section Four of Article IV of Citigroup's
By-Laws provides that Citigroup shall indemnify its directors and officers to
the fullest extent permitted by the DGCL.
Citigroup also provides liability insurance for its directors and officers
which provides for coverage against loss from claims made against directors and
officers in their capacity as such, including, subject to certain exceptions,
liabilities under the federal securities laws.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
Article Tenth of Citigroup's Restated Certificate of Incorporation limits the
liability of directors to the fullest extent permitted by Section 102(b)(7).
The directors and officers of Citigroup are covered by insurance policies
indemnifying them against certain liabilities, including certain liabilities
arising under the Securities Act, which might be incurred by them in such
capacities and against which they cannot be indemnified by Citigroup. Any
agents, dealers or underwriters who execute any underwriting or distribution
agreement relating to securities offered pursuant to this Registration Statement
will agree to indemnify Citigroup's directors and their officers who signed the
Registration Statement against certain liabilities that may arise under the
Securities Act with respect to information furnished to Citigroup by or on
behalf of such indemnifying party.
For the undertaking with respect to indemnification, see Item 17 herein.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not Applicable.
(c) Opinion of Goldman, Sachs & Co. (included as Annex B to this proxy
statement-prospectus which is a part of this registration statement).
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration
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<PAGE> 116
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to the information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement will be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time will be deemed to be the initial bona fide offering thereof.
(c)(1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c)(1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3)of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415, will be
filed a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
will be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time will be deemed
to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
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<PAGE> 117
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE> 118
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Citigroup Inc.
has duly caused this registration statement or amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on September 20, 2000.
CITIGROUP INC.
By: /s/ TODD S. THOMSON
------------------------------------
Name: Todd S. Thomson
Title: Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed by the following
persons in the capacities indicated on September 20, 2000.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ SANFORD I. WEILL Chairman, Chief Executive Officer
-------------------------------------------------------- (Principal Executive Officer) and Director
Sanford I. Weill
/s/ TODD S. THOMSON Chief Financial Officer (Principal Financial
-------------------------------------------------------- Officer)
Todd S. Thomson
/s/ IRWIN ETTINGER Chief Accounting Officer (Principal
-------------------------------------------------------- Accounting Officer)
Irwin Ettinger
/s/ ROGER W. TRUPIN Controller (Principal Accounting Officer)
--------------------------------------------------------
Roger W. Trupin
* Director
--------------------------------------------------------
C. Michael Armstrong
* Director
--------------------------------------------------------
Alain J.P. Belda
* Director
--------------------------------------------------------
Kenneth J. Bialkin
* Director
--------------------------------------------------------
Kenneth T. Derr
* Director
--------------------------------------------------------
John M. Deutch
* Director
--------------------------------------------------------
Ann Dibble Jordan
</TABLE>
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<PAGE> 119
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
* Director
--------------------------------------------------------
Robert I. Lipp
* Director
--------------------------------------------------------
Reuben Mark
* Director
--------------------------------------------------------
Michael T. Masin
* Director
--------------------------------------------------------
Dudley C. Mecum
* Director
--------------------------------------------------------
Richard D. Parsons
* Director
--------------------------------------------------------
Andrall E. Pearson
* Director
--------------------------------------------------------
Robert E. Rubin
* Director
--------------------------------------------------------
Franklin A. Thomas
* Director
--------------------------------------------------------
Arthur Zankel
*By: /s/ STEPHANIE B. MUDICK
---------------------------------------------------
Stephanie B. Mudick
Attorney-in-Fact
</TABLE>
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<PAGE> 120
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of September 5, 2000
(attached as Annex A to the proxy statement-prospectus)
*5.1 Form of Opinion of [Skadden, Arps, Slate, Meagher & Flom
LLP] as to the legality of the shares of Citigroup common
stock to be issued in the merger
*8.1 Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
as to tax matters
*8.2 Form of Opinion of Simpson Thacher & Bartlett as to tax
matters
23.1 Consent of KPMG LLP
23.2 Consent of Ernst & Young LLP
*23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibits 5.1 and 8.1)
*23.4 Consent of Simpson Thacher & Bartlett (included in Exhibit
8.2)
23.5 Consent of Goldman Sachs & Co.
24.1 Powers of Attorney
*99.1 Form of Proxy Card of Associates First Capital Corporation
99.2 Opinion of Goldman, Sachs & Co. (attached as Annex B to the
proxy statement-prospectus)
99.3 Consent of Keith W. Hughes
</TABLE>
---------------
* To be filed by amendment.
